Vessel-sharing agreements in shipping are legal contracts between various shipping companies or carriers that foster collaboration in the maritime industry. Every shipping company, big or small, has its resources, including machines, vehicles, equipment, and laborers. While some companies have limited or scarce resources, others have sufficient or abundant resources. VSA allows companies to share their resources to offer an enhanced shipping service to shippers. The primary role of a vessel-sharing agreement is to allow companies to share vessel spaces to ship their goods using the vessel of the partner shipping company. Let us learn more about vessel-sharing contracts in shipping and their role in enhancing operational efficiency in maritime.  

What is a vessel-sharing agreement? 

Shipping companies operating in the maritime industry own their vessels and take contracts from exporters or 3PL and 4PL service providers. Depending on the size of the port, major or minor, shipping companies operate different sizes of containerships. Most shipping vessels are quite large and can accommodate many shipping containers to ship in one trip. A vessel-sharing alliance is formulated when shipping companies sailing vessels on international waters do not have enough shipments to generate a good ROI.  

In simple words, when there are a few shipping orders lined up, it is possible that the scheduled shipping containers do not occupy the entire space of the vessel. When a significant amount of vessel space is empty, sailing the ship will lead to economic losses for the shipping company since significant investments are made to carry out voyages across the sea.  

In such conditions, a collaborative agreement known as a vessel sharing agreement is signed between two or more shipping companies or ocean carriers to parallel load their shipments into the same vessel for voyage to the same or nearby destination ports. Vessel-sharing agreements allow shipping companies or ocean carriers to pool resources and vessel spaces. For this, shipping companies also sell and lease standard shipping containers that can fit into containerships of various sizes based on the TEU and FEU of containers. Using VSA, companies and carriers can expand their global network and allow cost-effective shipping. 

Role of vessel sharing agreement 

In the maritime industry, collaboration and entering into a vessel-sharing contract are widespread among shipping companies and ocean carriers. This crucial agreement helps the companies involved in maritime shipping by sharing vessel spaces and trade lanes. 

1. Allows fair competition in shipping – There are various big and small shipping companies in maritime shipping. While few companies operate a large number of vessels, others only own a few. A vessel-sharing agreement allows shipping companies of various capacities to contract to share their resources irrespective of their market value. The space available to each partner company may vary. 
2. Access to specific trade lanes – While big shipping companies operate vessels from significant ports, small shipping companies operate vessels from local ports. The big vessels cannot berth on smaller ports, disabling shipping companies to ship goods to remote ports. The trade lanes are different, and more prominent shipping companies don’t need access to optimized navigational routes. VSA helps in offering access to specific trade lanes that shipping companies require. 
3. Authorizing exchange – VSA is a legal document based on which shipping companies can demand access to resources, vessel space, and trade lanes agreed upon during the sharing alliance. Partners can exchange resources and trade lanes by giving early information about their shipping needs. 
4. Cost savings – By signing a VSA, all partners are authorized to share the resources and space noted in the agreement. This way, every shipping company or carrier would not have to invest significantly in acquiring resources and catering to the shipper’s needs. Resource pooling is an effective way to save costs in maritime shipping. 
5. Promotes global business – Through VSA, shipping companies can expand their consumer base in the global market. Shippers can get a more extensive and reliable list of shipping companies to choose from when placing shipping orders. VSA fosters a diverse shipping network, allowing companies to generate more revenue. 

Benefits of vessel sharing agreement 

The advantages of vessel sharing agreement are as follows – 

1. Vessel space utilization – VSA is an effective way to optimize vessel capacity by sharing vessel space with various companies and carriers. It helps minimize empty spaces on ships during sailing and maximize space utilization. 
2. Cost-effective – By using up the entire vessel space, shipping companies can recover the amount invested in fuel consumption, port fees, and other operational expenses. Cargo consolidation on the same vessel is also an effective way of minimizing shipping rates. Otherwise, operating multiple ships that sail only partially loaded will require a significant investment. 
3. Efficient services – Companies pool their resources to allow their partners with a shortage or lack of resources to use them and offer better customer services. Since the resources are readily available, this also improves the frequency of services. It allows timely and reliable transportation across borders. 
4. Mitigating risks – Market demands for shipping fluctuate based on seasonal changes and geopolitical events in shipping. In a low shipping season, smaller shipping companies could risk going bankrupt if not for vessel shipping agreements. By partnering, the demand gets distributed, and while smaller companies may get lesser ROI, they still would not run out of orders. VSA helps prepare shipping companies for volatile fluctuations in the shipping industry and adapt to market trends. 
5. Environmental sustainability – Since multiple partners share the vessel space, fewer ships sail the international waters instead of every shipping company sending its vessel abroad to deliver shipments. It helps lower the rate of shipping emissions and promotes green shipping in maritime. 

What is the difference between a shipping alliance and a vessel-sharing agreement? 

Shipping alliances and vessel-sharing agreements are collaborative arrangements between shipping lines or ocean carriers. Regardless of this common ground, both are different as they serve different roles in maritime shipping. Let us learn more about the differences between shipping alliances and vessel-sharing agreements.  

1. Coverage of contract – A shipping alliance is a comprehensive border contract, as this form of collaboration involves multiple shipping companies or carriers coming together to work with each other in various maritime activities. On the other hand, a vessel-sharing agreement is a more specific type of alliance where the partner companies are focused on sharing vessel spaces in particular. 
2. Working – A shipping alliance involves collaborative planning and coordinating maritime activities to optimize routes, schedules, ports and operational strategies. In a VSA, shipping companies address the challenge of sharing vessel spaces that are going empty during voyages to decrease shipping emissions and economic losses for a shipping company. 
3. Networking – While shipping alliances focus on global trade lanes and aim at sharing them with their alliances to improve global shipping, VSA’s focus on only specific trade lanes and primarily aims to share vessel spaces with only one or relatively few shipping routes in mind. 
4. Sharing – In addition to shipping lanes, shipping alliances share resources, port infrastructures, and operational expertise. This alliance is deeply rooted and continues to involve more aspects of shipping operations. VSA lies on the surface, where companies can operate more independently regarding shipping strategies and management. They only pool resources and use the specified trade lanes apart from sharing vessel spaces. 

The vessel sharing agreements aim to offer greater flexibility and operational efficiency to all shipping companies and carriers by strengthening them, pooling maritime resources and trade lanes, and utilizing vessel space. 

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