Exclusive Patronage Agreements
Exclusive patronage agreements are an arrangement between a shipper and a conference of liner firms in which the shipper agrees to use only the conference’s member liner firms in return for a 10 to 15 percent rate reduction. The purpose of these agreements is to encourage shippers to use the conference’s member carriers, which helps the conference maintain its shipping rates.
Exclusive patronage agreements are most common in the ocean shipping industry, but they can also be found in other logistics sectors, such as airfreight. These agreements are typically used for high-volume shipments or for shipments that require special handling.
There are some disadvantages to using an exclusive patronage agreement:
- First, the shipper is locked into using only the conference’s member carriers. This can limit their choices and make it more difficult to find the best possible rates.
- Second, these agreements can be inflexible, and the shipper may be required to pay a penalty if they need to cancel or change their shipping arrangements.
- Finally, exclusive patronage agreements can be complex and difficult to understand.
For these reasons, it is important to consult with a logistics professional before signing one of these agreements. In general, an exclusive patronage agreement will last for a minimum of one year. The agreement may be renewed after that point, but the shipper is not obligated to do so. If the shipper decides to use a different carrier, they may be required to pay a penalty.