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Definition: Exclusive Patronage Agreements
Under Exclusive Patronage Agreements, a shipper agrees to use only member liner firms of a carrier in return for a 10-15% reduction in rate. A firm which pledges to ship its goods aboard conference vessels is called as a Contract Shipper. Exclusive Patronage Agreements are most commonly used in the steamship industry.
Similarly, firms which do not sign such Exclusive Patronage Agreements are called as Non Contract Shippers and they receive a higher non-contract rate. A contract shipper who violates the terms of the Patronage Agreements by shipping goods aboard non-conference vessels is subject to economic penalties which are enforced.
Exclusive Patronage Agreements are authorized by the Shipping Act of 1916.
Exclusive Patronage Agreements are similar to loyalty agreements. However, loyalty agreements do not have the 100% loyalty clause unlike Exclusive Patronage Agreements. Still, the two terms are used virtually synonymously since loyalty agreements in the United States of America do not provide a commitment of anything less than 100% of the cargo from a merchant.
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