Discounts and Rebates

Posted by Mark Franklin, Deputy Managing Director, DA-Desk on 09-Sep-2018 16:23:38
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It is common business practice to offer rebates or discounts in return for volumes, loyalty or quality. In tramp shipping, it can be challenging to benefit from these, due to the unpredictable nature of trading patterns, as well as the complexity (and visibility) of the available discounts.

The most common reductions are based on the frequency of calls. Many ports will offer a discount or rebate after a certain number of calls or cargo throughput is attained. While this is most prevalent in the liner trades, there are many other discounts available which even tramp shipping companies can profit from. Nevertheless, knowing if the vessel is applicable for a discount and when/where it applies remains ambiguous at best and can be difficult to track.

Frequency discounts can be difficult to obtain, especially if the historical rotation of a newly-chartered ship is unknown. One of the biggest reductions possible – yet still not uniformly applied for – is the Suez Canal rebate. The basic criterion is to prove you can save money by not using the canal and have an alternative route. The rebate is subject to multiple conditions such as freight rates, charter rates and bunker prices, but ultimately worth the effort, with the potential to reduce a USD 300,000 transit cost to USD 150,000.

Then there are multiple ‘environmental’ discounts available, based on the ship’s emissions. Some are self-certified, some are paid-for services with annual fees. Not all port authorities have signed up, and those that have apply the discounts in different ways. The Green Award rewards high safety and environmental standards with discounts that can vary from 3% to 25%. As in the case of port costs, the discounts are applicable on numerous (and diverse) items, from a 5% discount on Drug and Alcohol Testing in Greece to a 12-month extended warranty on cameras in the Netherlands!

In a selection of ports, the Environmental Shipping Index (ESI) applies with a (self-declared) rating granted using a formula consisting of NOX, SOX and CO2 outputs. Often, the discount is paid out retroactively and only upon request. In Rotterdam, the discount is given at the end of each quarter, and only when the port authority determines which vessels are eligible for the discount. Further to these, there are more locally-based associations, such as the Clean Shipping Index, giving access specifically to rebates on Swedish fairway dues.

Preferential flag discounts have been around for a while and are usually established by trade deals between specific countries. For example, in 2016, Liberian flag vessels were added to the list of preferential flags for vessels calling in China, where a saving of 28% is achieved on the tonnage dues.

There are also many one-off complex and very specific rules. In Aqaba, where a vessel coming from North of the Suez Canal and carrying wheat, for discharge only, is granted a 10% rebate in Canal Dues.

Fortunately for our customers, they do not have to remember all these rules. Using historical vessel movements, up to date vessel particulars and certificates, we ensure any applicable discounts are applied. Moreover, we have already extracted the information and set up rules to alert pro-actively when there is a potential discount to apply.