Mastering Ocean Freight Contracts: A Shipper’s Guide to Contract Season

The annual ocean freight contract season is a critical period for shippers. It's a time of intense negotiation and strategic planning. With fluctuating market rates, evolving carrier strategies and increasing regulatory demands, navigating this complex landscape can be daunting.

This guide offers key strategies to equip shippers with knowledge and tools to help prepare for and achieve successful contract negotiations year after year.

What is ocean contract season?

Ocean contract season is a critical period for shippers when carriers and freight forwarders negotiate annual contracts for ocean freight services. This typically occurs in the first quarter of each year, with peak negotiation activity concentrated in March and April. During this time, shippers and carriers assess market conditions, discuss rate structures and finalise service level agreements.

Why is bid season important?

Ocean contract season is of paramount importance to shippers as it directly affects their supply chain costs and operational efficiency. By securing favourable contracts, shippers can mitigate the risk of fluctuating spot rates, ensure reliable service levels and optimise overall logistics strategies. Effective negotiation and strategic planning during this period are essential to achieving a competitive advantage in the global market.

5 strategies to secure optimal ocean freight contracts during bid season

1. Understand your unique delivery profile

To navigate the complexities of ocean bid season effectively, it's crucial to have a deep understanding of your specific delivery profile. Consider the following factors:

Identify delivering volume and frequency

Evaluate how much and how often your business needs to deliver. This information will help you to identify potential economies of scale to negotiate more favourable rates.

Analyse trade lane usage

Know what trade lanes you utilise, make sure that you understand the specific factors affecting each one—from market dynamics and carrier competition to port congestion. This will enable you to tailor your negotiation strategy to each trade lane.

Understand the characteristics of your cargo

The type of cargo you deliver can also affect your contract conditions. Transporting perishables, hazardous goods, oversized items and other goods requiring special handling can mean additional insurance costs and port fees. Knowing your cargo’s specific needs will help you to select the most suitable carrier and service level while keeping your budget on track. 

2. Conduct in-depth market research and analysis

To help keep your rates competitive, perform a market analysis of your negotiated rates versus market ocean freight rates. A successful analysis combines real-time data, historical analysis and competitive intelligence to help you to make more informed decisions.

Analyse historical trends

Study historical rate trends to understand seasonal fluctuations, cyclical patterns and long-term market dynamics. 

Monitor real-time rates

Stay updated on current market trends by tracking real-time ocean freight rates. Utilise reliable data sources and tools to gain insights into fluctuating rates, capacity availability and carrier pricing strategies. 

Benchmark your rates

Use the real-time rate information to compare your negotiated rates against prevailing market rates and assess their competitiveness. Identify areas where you may have opportunities to negotiate for better terms. 

Conduct competitor research

If possible, gather information about your competitors' rates and strategies. This intelligence can provide valuable insights into industry standards and help you to position yourself effectively during negotiations.

3. Carefully consider terms and conditions

The terms and conditions of your ocean freight contract are crucial in determining your overall delivery costs and service quality. When negotiating your contract, pay close attention to the following factors to protect your interests and secure a contract that aligns with your business objectives.

Determine contract length

Short-term contracts offer more flexibility with the ability to adjust rates more often. But they can also lead to inconsistent service, especially during peak delivering seasons. Long-term contracts are more common and provide greater stability as well as potential rate advantages during periods of high demand. However, they can be difficult to maintain during periods of rate volatility.

Set service-level agreements (SLAs)

Clearly define service expectations, including transit times, equipment availability and cargo handling. Include specific performance metrics and penalties for non-compliance to ensure carrier accountability. 

Consider renegotiation terms

Make sure that you consider renewal options and negotiate flexible terms that allow you to adjust your contract as market conditions change. 

4. Mitigate risk

To safeguard your deliveries and minimise potential losses, it's essential to implement robust risk mitigation strategies during your bid process. 

Conduct contingency planning

Develop comprehensive contingency plans to address potential market disruptions, such as labour strikes, port congestion, natural disasters or geopolitical events. Identify alternative delivery routes, carriers and warehousing options to maintain supply chain resilience.

Know your cargo insurance options

Invest in comprehensive cargo insurance coverage to better protect the value of your goods against loss, damage and theft. Ensure your policy adequately covers the value of your goods and includes appropriate exclusions and limitations. Incorporate force majeure clauses into your contracts to allocate risk and liability in case of unforeseen and unavoidable circumstances beyond your control.

Maintain regulatory compliance

Stay informed about international delivery regulations, including the International Convention of for the Safety of Life at Sea (SOLAS), a maritime treaty outlining minimum safety standards for merchant ships; the IMDG code, which affects dangerous goods handling; and Incoterms^®, the rules of trading terms and conditions. 

5. Master the art of negotiation

After completing the steps above, prepare for negotiations. Effective negotiation is a critical skill in securing favourable ocean freight contracts. 

Plan early

While the traditional contract season is March through April, planning can start as early as January each year. Begin planning your contract negotiations well in advance, especially for perishable goods, which should be negotiated at a minimum four to six months prior to the upcoming season. This allows you to secure capacity and negotiate optimal rates.

Leverage freight volumes

Utilise your delivery volume to negotiate better rates and terms. Higher volumes can lead to significant discounts and priority service. 

Consider working with a 3PL

A 3PL can consolidate deliveries to gain better negotiating power. By leveraging strong carrier relationships and industry expertise, 3PLs can help to secure more favourable rates and contract terms, even when faced with changing market conditions.

Focus on value, not just price

While price is important, prioritise service quality, reliability and on-time delivery. You might have to give a little to get a little. After all, a slightly higher rate may be justified if it ensures your cargo reaches its destination on time. 

Build strong relationships

Carriers and 3PLs deserve trust, transparency and mutual respect. Strong relationships built on clear communication can lead to priority service, flexible solutions and long-term cost-savings opportunities.

Continuous improvement: The key to ocean freight excellence

As the ocean freight landscape continues to evolve, it's essential to maintain a proactive approach to contract management. Keep a close eye on market trends, carrier performance and regulatory changes all year long to confirm standards are being met. Market conditions can change quickly. If your terms allow, consider renegotiating terms to adapt to shifting market dynamics. 

Keep in mind, successful contract negotiations require synergy between price, quality and risk. Being equipped with the right data and staying well-informed will translate into ocean freight contracts that better meet all your needs.

Connect with a C.H. Robinson expert to see how our ocean services can optimise your supply chain strategy—during bid season and beyond.