The major bulk commodities all present a natural field for vertically integrated operations by transnational corporations. In the case of iron ore, coal and bauxite, large capital investments are needed to develop mining sites and associated infrastructures, and it is necessary to ensure close coordination among all stages of operations, from mining right through to consumption. Even in the case of grain, where production is often in the hands of individual farmers or farming companies, capital expenditure is needed for collection, storage and port terminal facilities and a similar degree of coordination is required. Ocean transport is an important link in the chain of coordination, but it is also a profit-making activity; in fact where mineral transport involves the dedication of specific bulk carriers to specific routes over long periods, the profitability of the shipping operation is virtually guaranteed. The transnational corporations thus have a double reason for becoming involved in ocean transport.
An added, and equally important, reason is that, in vertically integrated operations, ocean transport can be used for transfer pricing with respect to freight costs by which a corporation can minimize its tax payments. Control also can be exercised through long-term charters and contracts of affreightment, and arrangements with closely related parties can easily provide (covertly, if not overtly) for participation in the profits and for advantageous transfer pricing. In fact, a transnational corporation may achieve the same results by negotiating privately with independent shipowners, especially if it uses open-registry ships whose owners reside outside the jurisdiction of the flag states and are not subject to substantial reporting requirements. It may even be to the advantage of a corporation to use an independent vessel, or one which appears to be independent, rather than a company-owned vessel, in order to avoid allegations of misuse of transfer pricing. The use of independent shipowners also gives transnational corporations greater flexibility in dealing with irregular shipments.