INTRODUCTION TO LINER TRADE

This introduction is made to offer the basic understanding of the nature and the scope of Liner Shipping
Business. It covers the origin and the history of growth of Liner Business as we could see it today from the
earlier days of sea bourne trade. The revolution in the shipping industry and its commitment to various
traders dealing world wide sitting in their territory entrusting their responsibilities on the shipping professional
to move either their raw material from a different country to their point of production and their finished goods
to the required point of consumption is discussed in detail in the sessions to come.

Liner shipping has seen the dramatic changes in the last phase of the 20th century. By the beginning of this
century the changeover had completed with Containerization supported in some areas by Roll-on/Roll-off
services accounting for almost all international movement of manufactured and semi manufactured goods.

HISTORY OF LINERS

From the day when people identified and designed a craft that can be floated on the sea, people started
moving to different places from one place to another and whenever they had to move, they moved along with
their necessaries. As this could have been the very beginning of either men or material started moving in the
sea with a craft, in the later stages, whenever people could think of having more comforts while in crafts,
redesigned a better craft to accommodate more persons and also more commodity / goods, the same have
been carried between two places and slowly between ports across the world.

Arab dhows have for centuries engaged in the trade between the Arabian Gulf and East Africa mainly
depending upon winds that blow them either northeast or southwest across the Indian Ocean.

In the initial stages when people started trading in the other place/country leaving their own place/country,
they started carrying goods that can be traded in the different part of the world, in the ships. In most of the
cases, the Merchant happened to be the owner of the ship and he carried his own goods to Trade. As the
Trader was performing more roles one as the owner of the ship and another as the trader, he had one
another important role to play that was of the Captain of the Ship also to monitor the crew and control the
ship’s activity and ship’s up keeping. As the Captain he would seek out primly his own cargo to trade for his
profits and the concentration on various activities of managing the ship as in the position of a Captain as well
as performing the Trade was felt to be a difficult task and this tough task laid the way for the trader or the
vessel owner to appoint personnel to take care of the ship activity and to manage it technically. This was the
first ever step by the vessel owner to appoint personnel to run the ship on his behalf under his instructions.
Though the Merchant had good comfort of engaging professional to run the ship and to upkeep the ship, till
the invention of steam power in 1820s, the ships had to fully depend on the wind flow and based on the
directions of wind flow only the Merchants were trading.

The success of the business and the business profits were entirely based on the fortune of Wind Flow and
the successful completion of voyage and hence there was absolutely no fixed sailing of the ships.

During 1820s for the first time, ships have become independent of the wind. When the ships could sail on
their own without the influence of weather conditions and the wind flows, Merchants could fix certain
timetable for the vessels to sail from one port.

After 4 decades, during 1860s, when the steam power has become more reliable, larger size vessels were
put in operation and this was enabling the vessel owners to offer regular scheduled services in main trade
routes.

Keeping the above to be the beginning of Liner Service, the seaborne trade was carried out in many forms
based on the type of ship. There could be no interchangeability of the cargo from one vessel to another
unless both the vessels are of same nature. When container ships can carry all types of cargo in enclosed
containers, specific ships were used to carry products like Grain, Ores and Liquid nature. Ro-ro ships and
ferries were used to carry cargo on trucks or other wheeled vehicles.

Most of the seaborne trade, say about 90%, is of bulk cargo and homogenous in nature. This consists iron
ore, manganese ore, coal, forest products, bauxite, phosphates and grains. Since these type of commodity
are traded in bulk in huge volume and one vessel is capable of carrying only one type of cargo (unless and
otherwise specific designs are made to carry more than one cargo), the vessels engaged to carry these type
of products are called ‘BULK CARRIERS’. The size of the ship vary from few hundred tones cargo carrying
capacity to a maximum of over 0.3 million tones.

Apart from Bulk Carriers, other large group of vessels are designed to carry liquid Cargoes and/or Gas and
called “TANKERS”. These vessels are specially designed to meet the demands of the type of cargo they will
have to carry.

After the containerization and the change of packing style to accommodate cargo in containers to ship-out
from one port to another, the volume of growth in container traffic got increased and today many a bulk
commodity which were traded on bulk basis now being traded in containers.
In total, moving goods by sea or waterways is found to be the most economic method of transport in terms of
the cost per ton-mile base. It is estimated that 90% of the world’s trade is carried by sea and that this
represents some 20 trillion ton miles. Statistics shows that the volume of goods carried by sea has
increased nine-fold in the last 50 years.

Review Questions:

1. Explain the path the sea-borne trade undergone to reach its present level. Also indicate
the factors that influenced the growth of seaborne trade.
UNIT 1.2

CHARECTERISTICS OF LINER SERVICES

We have seen in the introduction session the necessity and the development of Liner Services. In this
session we shall discuss about the characteristics of Liner Services.

Before we get into the steps of understanding the characteristics of Liner Services, it is essential for us know
the evolvement of such a system and its contribution in the development of world economy and the off-
setting supply and demand of one commodity from one country to another and the reverse process.

Not all the lands in the world are fertile capable of growing all type of crops. Not all the countries are
technologically developed and to manufacture electronic goods. The climatic conditions of the countries are
not the same to encourage few manufacturing process.

Hence where one particular item can be manufactured at a better economical cost, after meeting the demand
in the local area, the surplus has to necessarily be supplied to the demanding country in order to exchange it
with the requirement of the supplying country. Though the barter sale system cannot be followed for all type
of supplies from one country to exchange it with a different commodity, exchanging of value using currency
adopted to exchange the commodity for a fixed currency.

When a price is given to get something, as a matter of fact, the conditions too get attached with the price
while placing order to receive commodity and while supplying commodity also conditions are placed.

Any supply of goods in exchange for its value using an accepted convertible currency, in order to gain the
real value the exchange should take place in a mutually acceptable way for both the supplier and the
receiver or user. The mutual acceptance of supply and the payment of value should be in a clearly
understandable terms for both the supplier and the receiver / buyer. The word of mouth transactions are
possible only when the meeting of both the parties to the transaction takes place. As we have noticed from
the introductory notes for this subject, in earlier days, the merchant himself owned a craft and taken care of
the movement of goods and the buyers upon seeing the goods offered the value equivalent upon mutual
discussions.
At a later stage, when the communication facilities evolved, the thinking and the requirement got reduced in
writing and this formed the basic agreements between parties for the supply and exchange of goods /
equivalent value currency.

This started with the following few of the important expectations from both the buyer and seller side:

a) Order Placing by the buyer on seller

b) Indicative time of requirement of commodity
c) The value offered by the buyer
d) The acceptance by the buyer for the value
e) The acceptance by the buyer for supply of commodity at the expected time
f) The style of packing and
g) Other commercial terms

When the trade has grown and the parties could project their requirement with the help of effective planning,
the planning at both their end began to make out the trade, and sale / purchase a successful one. The
planning began for the shipments to be made available in a specific place when the usage of steam power
was contributing ships to schedule the activities. Before the development of Liner Services, as and when a
merchant had the cargo ready for shipment to another country, he used to engage a ship only to carry his
cargo for transporting it from his port to the next port.

Generally dry bulk and liquid cargoes were moved in the vessels called Tramp Ships. Tramp Service means
that the ship tramps or goes from place to place wherever the cargo opportunities direct without any forward
geographical planned route. This may be understood thinking a tramp vessel as a taxi which is hired to go
from place to another, having completed that journey it has to find its next employment. This does not imply
in any way that the ships are not well maintained or in any other way sub-standard, on the contrary some of
the most modern and sophisticated vessels afloat operate in tramp trades. In nutshell, tramp service is a
service that is available to any trader or merchant as when there is requirement to carry cargo from one port
to another. Like a liner trade, tramp service does not have a fixed sailing route, fixed schedule or regularity
of service. As mentioned in the beginning dry bulk and liquid cargo is moved in tramp vessels.

The merchants needs and their commercial transactions coupled with the execution of the same laid a way
and demanded the ship operators to have few common features and slowly this developed to the current
modern system of liner operations. When tramp services could be availed only for specific type of cargo and
for huge volume only, the liner services, with the help of containerization could address the movement of
small quantum of cargo from one port to another.
The present Liner Services have the following ingredients in it:

COMMON CARRIER

Common carrier is a carrier who holds himself ready to carry from place to another the goods of any person
for a hire or reward. One type of such a carrier is a ship that offers the regular scheduled service is called a
cargo Liner. A vessel engaged in transporting goods for reward and offering space to all who wish to take
advantage of offer, then it is called a liner service. A vessel is operating as a common carrier in a regular
scheduled route and in regular schedule of time, it is said to be in a Liner Service.

Until the demise of Sea Passenger Services in the 1960s, many Liners provided a combined service with
Cargo, Passengers and Mail.

As the Liner faced few a problems since it happened to have a dual functioning, it got divided into functional
types – namely The Passenger Ships and Cargo Vessels. While the passenger ships carried limited
quantities of mail also, cargo vessels were not allowed to carry passengers.

The main requirements to recognize a service, as a Liner Service will have to have the following:

FIXED SCHEDULE:

A vessel should have a fixed sailing schedule. If a vessel is expected to be available in a port either for
loading or discharge, it has to be made available irrespective of the cargo availability. For example if the
ETA of the vessel is made as 01-02-008, the vessel has to call on that particular port as scheduled.

Depending upon weather conditions and unexpected technical faults of the ship, the variance of arrival date
to a particular port will not affect the basic and basis of liner shipping function, since the delay is beyond the
control of the vessel operator.

Every Liner used to give regular advertisement announcing its arrival and departure schedule enabling the
merchants as well as their agents to plan for the shipments and to make the cargo available in the port in
order to ensure loading of the cargo in the vessel.
Any cargo moved towards the port before the window / gate opening of the particular vessel, shall have to
wait till the gate is opened enabling the port to receive the cargo / container in the respective yard.

FIXED ROUTE:
Fixed Schedule goes with fixed route. A vessel expected to cover various ports will have to have a fixed time
schedule to call at the respective port. No deviation from the route will be allowed because of non-availability
of cargo at any one of the ports in the trade route fixed already.

To summarize, Liners Services sail on scheduled dates, ply on a regular scheduled service between groups
of Ports, irrespective of Cargo availability.

REGULARITY

Liner Service as seen above, it is a Common carrier having fixed trade route and a fixed schedule. With all
these, regularity in service is also one of the main characteristics of a Liner Service.

Regularity means, operating in a trade route as per schedule and just any one or trial service in the region
and calling off the service from the route. Any trial service in a route may be an ad-hoc service and this
cannot be recognized as a Liner Service.

Review Questions:

1. What is a Tramp Service?

2. Explain the characteristics of Liner Service. Can you recognize an operator who does not
call few ports in the return voyage as a Liner Service Operator?
3. Differentiate between Tramp Service & Liner Service.
UNIT 1.3

LINER TRADE ROUTES

After having understood the characteristics of Liner Services, it becomes easy to have an idea about the
trade routes in which generally the Liner Services are made available or operational.

The main ingredient of a Liner Service being the common carrier operating in a fixed schedule and in a fixed
route, the trade routes of the liner companies are basically depending upon the potential in the proposed
trade route and the economics of scale.

Fixed schedule at a fixed route is justified not only on the potential of the market and the economics of scale
of operation but also on the strength of the operator to penetrate the market and to obtain his share of cargo
in order to make the vessel operation viable.

Penetration of market and capturing of cargo to the vessel is though based on offering of direct services and
better transit time, this alone cannot fetch the cargo and hence enough of consideration being given on the
pricing also.

The Liner freight rate structure and economics are discussed in detail in the ensuing sessions. The prime
Liner Routes in which the shipping companies operate are outlined for the basic understanding.

It is essential for the students to know how the shipping companies operate in the open sea covering the
entire globe sector wise and the availability of various trade routes.

Until about 50 years ago, the important Liner Trade routes were predominantly those, which connected the
European powers with their colonial empires and the USA. The geographical routes were mainly in the
North / South orientation. After the Second World War, a number of important political and economic
changes occurred which eventually altered this trading pattern completely.

Trade routes developed with gradual colonization of the continents of the world. When the wind power was
relied and no timetable was there, the Mediterranean saw the movement of Roman fleets, while Chinese
junks carried goods around the coasts of Eastern Asia.

The major sailing ship routes were as below, just prior to the advent of steam power. When sailing ships
were built in larger size, trading patterns and different routes were established.
A large proportion of the cargoes exported from Europe were manufactured goods except for coal
transported in bulk.

Cargoes imported into Europe were mainly raw materials, for example –

Europe / Australasia - Wool

Europe / India - Sisal, Cotton, Tea

Europe / Far East - Rice

Europe / North & South America & Canada - Timber, Meat, Paper Pulp

Europe / Africa - Sisal, Timber, Coffee

Europe / Mediterranean - Fruits & Vegetables

The above trade was totally dependent upon wind power and as an effect of the same, there was no time
fixed for voyages and the voyages varied considerably in length.

The steam power utilization during the last century contributed for the massive development of trade routes
and paved way for the timed voyages.

In 1850, the world fleet comprised about 7 million tons of shipping, of which 90% was wind powered. By
1900, the tonnage had risen to 29 million tones, with 75% powered by machinery.

Many manufacturers required frequency of deliveries and regularity of contact with a wide area of markets
and this allowed relatively even smaller quantities of high value goods to be delivered on pre-determined
dates, which was not possible in tramp ship services.

Cargo liners were developed to meet the requirement of merchants and traders and they offered ships,
offering regular service. The first Liner service appeared in the most active sea route, the NORTH
ATLANTIC. In 1916, the American Black Ball Line started to operate and established a regular service
between New York and Liverpool and sooner this service got expanded offering weekly sailings to Liverpool
and also to London, Le Havre and other continental ports.
The most used liner trade routes are –

TRANS PACIFIC

The trade routes covered under the Pacific Ocean falls under this category. This route covers the ports
between Far East / South East Asia and the North America especially the west coast of UNITED STATES
OF AMERICA and CANADA.

It is suggested to refer the Atlas to know the Ports falling under Far East / South East Asia and North
America.

NORTH ATLANTIC

The ports covered under this route will fall between North America and North West Europe.

EUROPE / FAR EAST

This covers the ports between North West Europe and Far East and South East Asia.

The above trade routes mostly concerned with finished manufactured goods and consumer goods in both the
directions

There are secondary trade routes in which one-way raw material is carried in one direction and in another
way with manufactured goods. Trade between the Far East and South America and Africa plays an important
role and these routes do have lot of future potential

There are new routes between Far East and Australasia or Indian sub Continent and Arabian Gulf to Africa.

One of the most important areas of Liner activity is in the Intra Asia trade, which are greater in size than the
transpacific trade. Though it is of Short distance because of inaccessibility or lack of infrastructure, these
tend to be liner routes in their own right operated by lift on / lift off container ships.

There are about 350 Ports in the world handling regular container traffic and for the understanding few of the
major ports in the main trade routes are given below:

Hong Kong
Busan
Shanghai
Port Klang
Tokyo
Bremen
Algeciras
Durban
Singapore
Kaoshiung
Hamburg
Dubai
Manila
Gioia Tauro
Yokohama
Colombo
Melbourne
Las Angeles
Rotterdam
Antwerp
New York
Felixstowe

Based on the volume of TEUs handled, the above ports are listed above which are in the main trade route.

Review Questions:

1. Mention the major sea trade routes with commodity traded in that route
2. Mention any 20 major ports available in the world, country wise.
UNIT 1.4

LINER SHIPPING OPERATORS

Out of worlds Liner cargo, 80% being carried by containers. Based on available statistics in the year 2003,
total container movement worldwide crossed 200 Million teus. More focus is made on Container Liner
Services in our ensuing lessons. In order to know the basic concepts of other shipping business activities, a
brief outline is given in this chapter. There are various types of Liner Shipping Operators. Based on the
industry and the ports they serve, they are known with different names

FEEDER OPERATOR

Every continent has lot of ports. Trading of commodities are not restricted any specific region or to a
specific port from one country or port. In the present day of technological development, every country has its
own potential and excess of production and necessarily the excess of production beyond their consumption
are being shipped out to a different country where the need is felt or where there is a demand and dearth of
production.

With the advent of steam power, though the scheduling of vessels have become possible it is not possible for
the vessels to cater to the requirement of small ports where the available potential alone cannot be met with
the requirement of filling the vessels to economize the cost of operation of vessel.

Though the trade may be interested to any one in specific point to pay a premium to meet with the schedule
of shipment, every time it may not be possible for the merchants to bear the cost of bringing the vessel to
their port to fill up a small quantum of shipment.

When the vessel operator to deploy a direct vessel routing through a particular port identifies the potential,
the vessel operator has to consider other elements also before deploying such a direct vessel into service.

The main consideration of commercial viability to operate in the particular sector, calling a specific port will
have an equal amount of importance in inbound as well as outbound traffic through that port.

Once the commercial viability is justified, the next limiting factor would be the infrastructure of the port.

Infrastructure of the port would include the draft restrictions, gate restrictions, equipment facility to operate
and also the availability of space to accommodate the containers.
All the ports may not have enough of draft availability to accommodate bigger vessels and in such case
necessarily the cargo has to be carried in smaller size vessels from the port of shipment to the hub port
where the main line vessel calls.

The movement of cargo from one gateway port to the hub port is known, as Feeder Service and the
operators of such service will collect the containers from/to the hub port to/from the gateway port.

Feeder Operator undertake the movement of containers from the Gateway Port to the Hub Port where main
line vessel report and perform the only activity of providing shuttle service between the Gateway Port and the
Hub Port.

MAIN LINE OPERATOR

a) Container Ship Operator

b) Break Bulk Vessel Operator

CONTAINER SHIP OPERATOR

Unlike the feeder operator where the activities of vessel operation is being limited between the gateway port
and hub port, the mainline operator operates the vessel not limiting the services just to the gateway port and
the hub port.
The choice of selection of trade route is vested with the vessel operator and upon satisfactory analysis on the
revenue generation and the viability of operation of vessel in the particular sector the direct vessel covering
the selected ports will be put in service.

For the understanding, given below are few of the examples for Feeder Service and Main Line Service:

M/s Bengal Tiger Lines

Operating between

Chennai to Vizag/Penang, Port Klang & Singapore

Chennai to Colombo and back to Chennai
M/s Sea consortium

Operating between

Chennai to Singapore and back to Chennai

Chennai to Colombo and back to Chennai

MAIN LINE OPERATORS:

The following mainline Direct Services are provided by the Main Line Operators

INDFX2 – China Sector

From Chennai to Vizag, Port Klang, Singapore, Pasir Gudang, Hongkong, Dalian, Xingang, Yantian,
Qingdao.

TCX – Thailand & Vietnam

From Chennai to Port Klang, Singapore, Bangkok, Laem Chabang, Ho Chi Minh
NCC – North China

From Chennai to Port Klang, Singapore, Hong Kong, Qingdao, Lianyungang, Shanghai

MECL – 2 – US East Coast

From Chennai to Colombo, Salalah, Jeddah, Algeciras, Savannah, Newark, Norfolk

ACS – Korea & China

From Chennai to Port Klang, Singapore, Ulsan, Busan, Shanghai, Chiwan

WAF – West Africa

From Chennai to Durban, Lagos, Abidjan, Pointe Noire, Tema

NEMO – WEST – Meditarranean & Europe

From Chennai to Colombo, Djibouti, Jeddah, Damietta, Malta, La Spezia, Tilbury, Hamburg, Rotterdam, Le
Havre

NEMO – East – Mediterranean & Europe

From Chennai to Port Klang, Jakarta, Brisbane, Sydney, Melbourne, Adelaide, Lyttleton

(The above are few of the examples given keeping Chennai Port and the operators existing at the time of
preparation of this material, as the main consideration for the purpose of better understanding of the
students)

Review Questions:

1. What do you understand by Feeder Operator?

2. Differentiate between Feeder Operator / Main Liner Operator giving examples of any one
region.
Unit 1.5

BREAKBULK VESSEL OPERATOR

Break bulk vessel operation differs from the Container Trade and its coverage of ports with the help of feeder
service.

Break bulk vessel is put in service in a sector where there is an assured potential for cargo and the
availability of infrastructure in port to call on the required port.

Break bulk vessels are used where the commodity cannot be containerized. Examples of cargo that cannot
be in total containerized may include the following:

a) Wind Mills and Blades

b) Project Cargo – Single Point handling preference
c) Project Cargo – Heavy Weight and huge in Dimension
d) Steel Structures, etc.

Unlike the container vessels, break bulk vessels do not call at many ports at the time of voyage because of
its nature of carrying different nature of cargo.

The voyage frequency is very less as compared to container vessels.

For bulk consignments, in practice, the merchants prefer engaging a separate vessel fitted with required
gears for a given shipment in order to avoid multiple handling and also to ensure safe reaching of cargo from
the port of loading to the port of destination.

NVOCC – NON VESSEL OPERATING/OWING CONTAINER CARRIER

As the name indicates, NVOCC operators do not own a vessel. Their function is that of principal to the
shipper and they ultimately become the customer for a Liner who carries their box. Few of them may have
own containers and they will be issuing their own Bill of Lading and they will be having a wide network in the
sector they operate.

They issue their House Bill of Lading to the Shippers and they upon handing over the container to the Liner,
get Liner Bill of Lading. This Original Bill of Lading will be forwarded to the counter party of the NVOCC
operator at the destination end and they surrender this to the Liner.
Alternatively, to avoid the delay in sending the original document to the destination end, the same will be
surrendered at the load port Liner / agents office itself. The Liner / Agent at the load port will send a
electronic message to the discharge port about the surrendering of original bill of lading at the load port and
to release the delivery order based on the endorsement of the freight forwarder / NVOCC operator itself.

NVOCC Operators issue House-to-House Bill of Lading or Combined Transport Document to the shipper
since they undertake the movement from the Shippers ware house and taking the responsibility of reaching
the cargo till the buyers warehouse. It is not the same pattern of working for all the operators but in the
present days, the amount of significance given to Logistics Providers are of immense importance and this
type of functioning is gaining greater acceptance among the shippers as well as buyers since the entire
activity is under single point control.

Few other operators’ just function as freight forwarders and their role of play are limited to the extent of they
contacting the shippers and booking the cargo through a particular Liner. They will have a contracted freight
charges with the Liner and depending upon their strength to offer volume of business to a particular line and
to a particular sector, they enjoy good discounts on the tariff. When they get the rates based on a
committed volume, they hunt around shippers and they book the cargo through them to a Liner wherein they
have a better freight charges. The difference in booking the price would be their profit i.e., the difference
between the buying rate and the selling rate to the customer. In this case, the bill of lading will directly be
given to the customer from the Liner office and there is no involvement of house bill of lading and the related
surrendering formalities at the destination counter.

NVOCC Operators issue Bill of Lading in any one of the following patterns:

LCL /LCL

Defines the movement of cargo packed in and unpacked from containers by the carrier on behalf of the
shipper / consignee. LCL means Less than Container Load

This means, the operator collects cargo from various shippers either from their Warehouse or advise them to
move it one common place; generally a CFS or an ICD. Upon the cargo reaching at the CFS / ICD, the
operator undertakes the responsibility of unloading the cargo from the trucks, warehousing till customs
inspection, completion of customs formalities and stowing the cargo into the container.

The operator brings in the required container and stows the cargo into it. There is no restriction on the
maximum amount of shippers and the consignees. The only caution, which needs to be taken by the
operator, would be that similar nature of cargo to get stuffed in one container to avoid any possible damage
to the cargo while in transit.

Once the cargo is stowed in the container and upon completion of customs formalities, the NVOCC operator
issues the house bill of lading to the shippers. In turn, upon handling over of the container to the vessel
operator, he gets a Liner Bill of Lading and forwards the same to his counter part enabling the consignees to
take the delivery order upon surrendering the house bill of lading only.

FCL / FCL

Defines the movement of cargo packed by the shipper or shipper’s agent and unpacked by the consignee or
consignee’s agent. “FCL” means Full Container Load.

In this type of activity, it is not the Liner / NVOCC operators’ responsibility for the cargo as long as the ONE
TIME SEAL fixed in the container is intact. This is mainly because the shipper undertakes the movement of
Empty Container to the Factory Premises or to a CFS / ICD and undertakes the responsibility of all other
formalities right from the unloading of cargo till off loading the container at the CY of the port upon completion
of customs and other related formalities.

FCL/LCL

Defines the movement of cargo packed by this shipper or shipper’s agent and unpacked by the consignee or
consignee’s agent.

This type of transaction is very rare. This happens only when a shipper wishes to supply more than one
consignee. In this case, the shipper undertakes the activity like that of FCL / FCL, moves the Empty
Container to his premises stow the quantity into the container, meant for various consignees.

In this transaction, it is the shipper’s responsibility to distribute the right quantity to the consignees at the
discharge port and generally he indemnifies the Liner, if there are no exact quantities available for each of
the different consignees.

LCL/FCL

Defines the movement of cargo packed by the carrier and unpacked by the consignee or consignee's agent.
'LCL' means Less than Container Load. 'FCL' means Full Load.
Few Liners offer LCL services and not all Liners. When the cargo shipped through a line that does not offer
LCL services, it goes through a consolidating agent or a NVOCC. The procedure is same but the only
difference of handing over the cargo to a Liner who offer LCL service and handing over the cargo to an
NVOCC would that be from the point view of Bill of Lading i.e., whether it is a House Bill of Lading issued by
a NVOCC or a Liner Bill of Lading.

When the liner receives the cargo, he issues Line’s Bill of Lading and when a NVOCC receives the cargo, he
issues a House Bill of Lading.

House Bill of Lading is also accepted under a documentary credit as per the UCP 500 publication.

The movement of LCL/FCL shipments commences from the movement of cargo by the shipper to the
designated depot (ICD / CFS) by the Liner / NVOCC and getting completed once the container is de-vanned
the exact quantity and is given to the consignees at the discharge port.

Here the Liner / NVOCC’s responsibility will be same as Break-Bulk cargo shipment. The Line / NVOCC
carries responsibility for each and every package and at discharge port has to take the goods out from the
container and hand over to the respective consignee.

BULK SERVICES

Bulk shipments are effected for a few of the specific cargoes like coal, ores, grains, fertilizers, minerals and
etc. When the cargoes are shipped out in loose from with out any packing, it can be called as bulk shipment.

COAL

Coal is an energy source, used to produce power and also it is a heat generating material. As the power
generation grows up day to day and more number of coal based new power generating plants coming up in
the territory where the consumption is more and the supply has to be met out, in these regions essentially the
coal has to be consumed. The movement of coal will be in bulk and bulk carriers are used. As the basic
price of the coal is low, no other mode of packing and transporting in a different fashion would make the cost
of production of power viable. This is one of the main reasons for bulk shipment of coal.

ORES
Metals are produced from smelting mineral ores. There are many Mineral ores like Bauxite, Iron Ore and
etc. Iron Ore is the single largest product to manufacture iron and steel. As per the records, in the year 2001
about 450 million tons of iron ore were moved in ships.

Ores are normally loaded and discharged at specialized terminals. An Ore Terminal will have deep water
alongside enabling a bulk carrier to get loaded and with enough of stocking area to facilitate high volume of
cargo feeding into the ship through conveyors. Specialized Gantry type grab fitted cranes will be usually
engaged to carry out the activity of discharging with cargo being removed from the quay by conveyor belts to
the respective storage area.

GRAINS

Grains are generally traded in bulk are for human or animal consumption. This will include wheat, Soya, rice
and the seeds of such crops as sunflower, flax and cotton. Based on the available records it is estimated
that some 220 million tones are being moved in bulk carriers every year worldwide.

Loading of grains is usually by grain elevators from shore silos. Discharging facilities vary from Port to Port.
Pneumatic Suction systems are in use at most of the world’s major grain importing Ports. Other few methods
of unloading include mechanical bucket or screw elevator or simply with grabbing shore cranes.

OTHER DRY BULK CARGOES

Apart from Coal, Ore and Grains, few other commodities are also moved by sea. This will include Fertilizers,
Building materials, Timber, Steel, and Minerals and other Manufactured goods and so on.

Few of the products may require specialized ship such as refrigerated carriers to carry cargo that of
perishable in nature like fruit, vegetables, fruit juices and meat products. These ships will have insulated
holds equipped with refrigeration equipment to keep the cargo at the exactly required temperature range.
They are also designed to for a relatively high speed enabling the produces to get delivered quickly and in
good condition.

TYPES OF VESSELS USED

Depending upon the Ports facility to load and discharge, vessels will be nominated to carry shipments
between two ports. Either the vessel themselves should have necessary Cranes to discharge or the shore
cranes will have to be engaged for the purpose of discharging from the vessel. While the discharge
operation is considered more with the cranes, loading is usually by conveyor from the Shore.
Bulk carriers are generally classified into three types based on their capacity to carry cargo and they are
known as:

a) CAPESIZE VESSELS - Over 80,000 Deadweight Tons

b) PANAMAX VESSELS - 60,000 TO 80,000 MT
c) HANDYMAX VESSELS - 30,000 TO 35,000 MT

NATURE OF BULK TRADE

Bulk vessels are scheduled based on the cargo availability only. There is neither a fixed sailing schedule
nor fixed routes. Wherever and whenever there is an availability of cargo, cargo owner gets in touch with the
vessel owner or their agents and the time is fixed to make the vessel available in one specific port.

ROLE OF AGENTS & BROKERS

There is a big role played by the Brokers in bulk trade in fixing the vessel and they as middlemen bring the
vessel owner and the proposed chatterer together to come to common line of understanding to carry out the
activity. They take their remuneration in the form of commission for such fixing of the vessels from the vessel
owner.

The role of the brokers and their network is inevitable in the bulk carrier business. They become the point of
contact on behalf of the shipper directly or through some other middleman in between them. Sometimes the
number of middlemen involvement in finalizing one shipment may go beyond two/three and in such
occasions, the parties share their commission as per their understanding and the role played by each one of
them.

Students are advised to refer the books on Chartering and Bulk Vessel Operations to understand more about
the nature of vessels fixing and the responsibility of various parties involved in finalizing a vessel to a
particular voyage or for a particular time.

To summarize the bulk trade, bulk carriers do not provide Liner Services and they are known as Tramp
Services. They will be undertaking the voyage based on the cargo availability between any two or more
ports as per the terms of the charter party and according to the ports facility available for the vessel to call at
the port. The term of chartering may be for any one particular voyage or for more number of voyages or for
some specified period of time.
Review Questions:

1. Explain the nature of Bulk Trade with example. Can you term the bulk shipping activity
as liner activity? Justify your answer with suitable examples.

2. What is the difference between Bulk & Break Bulk trade

3. What do you understand by the term NVOCC? Explain the role of NVOCC in the Liner
Shipping Trade.

4. Brief the terms – LCL/LCL, LCL/FCL

UNIT 1.6

ROLL ON / OFF LINER SERVICES

Worldwide much different type of commodities is traded. Every single commodity has got its own packing
style to protect its safe reaching from the point of shipment till the point of destination.

Many of the commodities are sensitive in nature this may require minimal amount of handling.
Containerization though found a solution for many of the bulk commodities to get shipped in boxes with
better packing ensuring safety and avoidable direct multiple handling on cargo, yet certain items cannot be
shipped out in containers or in break bulk / con bulk carriers.

The avoidance of multiple handling gets reduced while using Ro-Ro vessels.

Cars and other cargoes, which can be loaded on to the trailers fitted with moveable wheels, may get loaded
on these types of vessels just by driving the units into the vessels. In the same way unloading (driving off)
from the vessel also takes place.

These types of vessels are not many in numbers.

To handle these vessels, port should have adequate infrastructure. There should be enough of space to
accommodate the entire shipment quantity nearer the wharf to feed the vessel immediately upon her
berthing.

Roll-on / roll-off ships are designed to carry wheeled cargo such as automobiles, trailers or railroad cars. This
is in contrast to lo-lo vessels, which use a crane to load and unload cargo.

Ro-ro vessels have built-in ramps, which allow the cargo to be efficiently “rolled on” and “rolled off” the vessel
when in port. While smaller ferries that operate across rivers and other short distances still often have built in
ramps, the terms RORO is generally reserved for larger ocean-going vessels.

TYPES:

Various types of RORO vessels include ferries, cruiseferries, cargo ships and barges. A true RORO’s ramps
can serve all of the vessel’s decks; otherwise it is a hybrid type. New automobiles that are transported by
ship around the world are often moved on a large type of RORO called a Pure Car Carrier (PCC) or Pure Car
Truck Carrier (PCTC).

Unlike in the shipping industry where cargo is measured by the metric tonne, RORO cargo will typically be
measured in the more convenient unit of lanes in metres (LIMs). This is calculated by multiplying cargo
length in metres by its width in lanes (lane width differs from vessel to vessel and there are a number of
industry standards). Aboard PCCs cargo capacity is measured in RT or RT 43 units which is based on a
1966 Toyota or by car equivalent units (CEU).

The largest RORO barges in the world operate between the Unitd States and Pureto Rico carrying highway
trailers, shipping containers on Chassis, new and used cars, and oversized cargoes on three decks. These
barges are towed by ocean-going tugs.

In 1957, the US military issued a contract to the Sun Shipbuilding and Dry Dock company in Chester, PA for
the construction of a new type of motorized vehicle carrier. The ship, Comet, had a stern ramp as well as
interior ramps which allowed cars to drive directly from the dock, on the ship, and into place. Loading and
unloading was speeded dramatically. Comet also had an adjustable chocking system for locking cars on to
the decks, and a ventilation system to remove any exhaust gases that accumulated during vehicle loading.

CAR CARRIERS :

Since 1970 the market for exporting and importing cars has increased dramatically and the number and type
of Ro/Ros has increased also. In 1973, Japan’s K Line built the European Highway, the first Pure Car
Carrier, which carried 4,200 automobiles. Today’s pure car carriers and their close cousins, the Pure Car /
Truck Carrier are distinctive looking ships with a box-like superstructure running the entire length and breadth
of the bull, fully enclosing and protecting the cargo. They typically have a stern ramp and a side ramp for
dual loading of many thousands of vehicles, as well as extensive automatic fire control system.

At first, wheeled vehicles carried as cargo on oceangoing ships were treated like any other cargo.
Automobiles had their gas tanks emptied and their batteries disconnected before being hoisted into the ship’s
hold, where they were chocked and secured. This process was tedious and difficult, vehicles were subject to
damage, and could not be used for routine travel.

Roll-on/roll-off (RORO or ro-ro) ships are designed to carry wheeled cargo such as automobiles, trailers or
railroad cars. This is in contrast to lo-lo (lift on-lift off) vessels, which use a crane to load and unload cargo.
RORO vessels have built-in ramps, which allow the cargo to be efficiently "rolled on" and "rolled off" the
vessel when in port. While smaller ferries that operate across rivers and other short distances still often have
built-in ramps, the term RORO is generally reserved for larger ocean-going vessels.

The modern roll-on / roll – off ship can trace its origins back more than one hundred years to the early days
of the steam train. Ships were specially designed to take trains across rivers which were too wide for
bridges; the ships were equipped with rails, and the trains simply rolled straight on to the ship, which sailed
across the river to another rail berth where the train would roll off again.

An example is the Firth of Forth ferry in Scotland, which began operations in 1851.

The principle was applied to merchant ships in the late 1940s and early 1950s. It proved to be extremely
popular, especially on short sea ferry routes, encouraged by technical developments on land as well as sea,
notably the increase in road transport.

For the merchants, the RO-RO ship offered a number of advantages over traditional ships, especially speed.
Cars and lorries can drive straight on to a RO-RO a ship at one port and off at the port of destination.

RO-RO ships also integrate well with other transport development, such as containers and the use of
Customs-sealed units has enabled frontiers to be crossed with the minimum of delay, thereby further
increasing the efficiency of the vessel as well as the shipper.

RO-ROs have also proved extremely popular with holidaymakers and private car owners and have
significantly contributed to the growth of tourism. Until the early 1950s, someone wishing to take his car from
one country to another by seas had to get it loaded into the ship’s hold by crane, a time consuming and
expensive process. The development of the Ro-Ro car ferry changed all that and many ports boomed as a
result.

In the United Kingdom, Dover’s first paid of drive-on berth was opened in 1953. Until then the port had
handled only 10,000 crane-loaded cars each year and forecasts that the berths would enable the port to
handle ten times that many must have seemed decidedly optimistic. But the 100,000 figures were exceeded
in the first and by 1985 Dover was handling over 2.5 million vehicles and units through nine Ro-Ro berths.
By 1994 the total had risen to more than 4.5 million.

During the year 194, 4,600 RO-RO ships were in operation around the world. They are particularly popular
in Europe and trading patterns reflect this. RO-RO operates primarily between Europe and North America
and Europe and the Middle East, although there is an important trade between North America and the
Caribbean.

The world RO-RO fleet can be subdivided into a number of different types. They include ships designed to
carry freight vehicles only; to carry a combination of containers and freight vehicles and to transport cars
without passengers. There are various other types and freight only RO-RO ships from about two thirds of the
world RO-RO fleet at present.

The best known RO-RO ships are ferries designed to transport commercial vehicles and private cars,
together with large numbers of passengers, usually on short voyages.

Despite their commercial advantages, the roll-on/roll-off ship concept has not been without problems. In
particular, the huge open deck and the presence of doors near the water line presents points of weakness
that need to be carefully considered. While the characteristics of seagoing RORO car ferries have inherent
risks, there are benefits to be seaworthiness. For example, the car carrier Cougar Ace listed 80 degrees to
its port side in 2006 but did not sink, since its high-enclosed sides prevented water from entering.

Review Questions:

1. Explain the Ro-Ro service and its importance in the present global scenario. Can this be
a replacement for any one specific liner service activity?
UNIT 1.7

CONTAINER LINER SERVICES

CONTAINERISATION:

The method of cargo handling remained same for many years together. Cargoes packed as bales, pallets,
cases, barrels and bundles were handled individually. Cargo was carried or hand trucked from quay side to
ship’s hold and stowed manually in place and the reverse of operation performed at the destination side.
The use of cranes and other devices for lifting many items at a time required lot of labour force to perform
and complete the activities. Organizing such a labour force and completion of task of receiving and stowing
the cargo was involving huge amount of time resulting in poor productivity of port area as well as huge idling
of vessel. Vessels were to wait in the berth till the discharge and completion of loading cargo at both the
discharge and loading end.

In 1950s and early 1960s, attempts were made to unitize cargo on pallets or strapped into larger bundles so
as to speed up the cargo handling and this with the development of fork lift trucks created some saving of
effort but these improved conventional handling systems were still slow and highly labour intensive.

Cargo liners were spending three or four weeks in port at each end of a voyage, discharging and loading
cargo. This delay affected not only the shipper’s financial transaction but also caused severe income loss to
the ship owner.

This led the way for the introduction of containers in the 1960, which are now used for nearly all general
cargo movements. The first major trade routes to be containerized outside USA coastal areas were the
trades between Europe and Australasia, and Europe and the Far East in the late 1960s.

CHARACTERISTICS OF CONTAINERIZATION:

Containerization is a system in which cargo of any nature, which is unitized, or grouped together into unit, is
loaded into a box of specific dimensions, and then transported by sea, rail or air. As compared to the
conventional system of loading cargo into a general cargo ship in un-unitised packages, the advantages of
containerization are as detailed in the subsequent sessions.
STANDARDISATION OF CONTAINERS:

The General Purpose containers are of standard in size having standard width and height and vary only in
length. The length of the containers used in trade generally is of 20’, 40’ and 45’.

According to the requirement of cargo, special types of containers are also used.

ELIMINATES MULTIPLE HANDLING OF CARGO

Cargo once stowed in container need not be handled time and again directly. Once the legal and statutory
compliance are strictly adhered to, the container can be handled with designed equipment and helps
avoiding multiple handling of cargo directly.

RELAYING

As the cargo is in container, after discharge at the port of destination, the cargo need not be de-stuffed from
it and the container can be placed on a trailer and till the point of consumption i.e., till the factory site,
containers can be moved.

This not only eliminates multiple handling but also ensures safety, security and speed.

MORE SAILING OPPORTUNITY

Unlike in the bulk trade, where specific type of vessel is required for specific type of cargo and either the non
availability of cargo or vessel will have impact on the trade and on the merchants.

When the cargo is containerized, it provides more sailing opportunity. The delay in reaching the container to
the port beyond the control of the shipper can be made good by connecting the cargo in some other feeder
vessel, which may have the connectivity to the earlier scheduled mother vessel.

LCL CARGOES

Containerization enabled even a small merchant to venture into international business by providing
consolidation / co loading system. Through this, a small parcel received from the merchant will get loaded
along with others cargo and reaches the port of destination without much of multiple handling, ensuring
safety, security and time commitment.
Review Questions:

1. “Containerization has affected the bulk shipping trade” Do you agree with this
statement? Justify your arguments for and against this statement.

2. Explain the concept of containerization and its advantages.

UNIT 1.9

Common Shipping Terminology

So far we have seen the Characteristics of Liner Services, Liner Trade Routes, Types of Liner Shipping
Operators and Passenger / Cruise Liner Services. In this Unit, it is essential for us to know and understand
the most commonly used few of the shipping terminology. The understanding on the same will help in
understanding the future units as in many places only the abbreviations will be used repeatedly. Most of
these are quite common in Liner Shipping especially in Container Liner Shipping business.

AD VALOREM FREIGHT

Bill of lading freight charged on goods of very high value at so much percent on the declared value of the
goods. This can be understood well when we cover the topic on Liner Freight Structure.

ADVICE OF SHIPMENT

The exporter, usually upon completion of the shipment and on obtaining the Bill of Lading and other relevant
documents, sends a notice to the foreign buyer / agent advising that the shipment is effected and sends the
relevant documents of packing, routing, etc. A copy of the invoice and the Certificate of Origin is usually
enclosed, along with the copy of bill of lading.

CONTRACT OF AFFREIGHTMENT

It is an agreement between the shipping company and the exporter / merchant / their agents to provide
space on a vessel at a specified time, at a specified price to carry their goods / containers, between specific
ports.

ACCESSORIAL SERVICE

Service provided by the shipping company, addition to usual liner service, like packing, loading, storage, etc.
These types of services are usually offered with some additional cost when the Liners are providing Door-to-
door services to their customers.

ALL COMMODITY RATE

After the concept of containerization, most of the Liners are offering the freight rates irrespective of the
commodity carried, with certain restrictions. Freight rate charged by the Liner irrespective of the commodity
is known as All Commodity Rate.

ALL INCLUSIVE RATE

Shipping Line quoting the Freight rate to the customer, which includes, all other additional elements such
CAF, BAF, THC, etc. I

ALSO NOTIFY PARTY

As required by the Exporter, the shipping company generally includes on party as the Notify Party to whom
the shipping lines sends the details about cargo arrival. In addition to the Notify Party, the exporter or the
importer may want to notify a second party also by the shipping company and to send its arrival notice
advising of goods coming forward for delivery.

ARRIVAL NOTICE

This is an act done by the carrier to ensure smooth delivery and there is no obligation by carrier to do so. The
responsibility to monitor transit and present himself to take timely delivery rests with the consignee. Advice
that carrier sends to consignee advising of goods coming forward for delivery is known as Cargo Arrival
Notice. Information such as BL number, container number and total charges due from consignee, etc are
included and sent to consignee prior to vessel arrival.

B/L MASTER

This is generally known as Bill of Lading instructions. The shipper submits a document to the Liner after
handing over the cargo to the carrier detailing the carrier how the B/L should be raised.

BASIC FREIGHT

Ocean freight excludes all charges. This is contra to the All Inclusive Freight Rate. On the Basic Freight the
Liner will also collect some other charges like BAF, CAF, THC and etc.
B/L

Bill of Lading – An official legal document issued by the Liner which has the functions of representing
ownership of cargo; negotiability receive cargo; contract for cargo between shipper and carrier.

BONDED WAREHOUSE

A warehouse bonded by customs authorities for storage of bonded goods prior to cargo being cleared for
home consumption. The goods in it are secured under customs custody. The payment of duties and taxes
are only payable before the goods are removed from the Warehouse.

BOOKING NUMBER

A reference number given by the Shipping Company to the Exporter / Agents at the time of booking the
request and confirming that the request made by them is registered.

BOOKING STATUS

The facility provided by the Shipping / Liner Company to update the Shippers / agents, on the status of
booking made by them. Depending upon the practice of the Shipping Company and their software support,
the following are the various stages which an exporter / agent can get to know:

 Cancelled

 Confirmed

 Confirmed subject to space availability: acknowledged acceptance of booking subject to

confirmation in agreed time frame;

 Pending: acknowledged receipt of booking yet subject to approval for acceptance.

BOX

Common term used for an ocean going freight container.

BREAK-BULK CARGO
Goods shipped in loose form in the vessel’s hold. Example of goods shipped in this form is Coal, Iron Ore,
Fertilizers, and etc.

BROKEN STOWAGE

The loss of space caused by irregularity in the shape of packages; any void or empty space in a container
not occupied by cargo.

BROKERAGE

It is fee paid to the freight forwarder by the carrier for services performed, i.e., the business offered to the
shipping company by booking the containers through that shipping company.

BULK CARRIERS

A vessel carrying dry, liquid, grain, not packaged, bundled or bottled cargo, and is loaded without marks &
number or count.

BULL RINGS

Cargo-securing devices mounted in the floor of containers enabling lashing to secure the cargo.

BUNKER SURCHARGE (BAF, BSC)

Bunker Adjustment factor (BAF), or Bunker Surcharge (BSC) are surcharges assessed by carrier on freight
rates to avoid any possible negative impact on the freight rates because of any possible variance of the cost
of bunker as compared to the current cost of bunker at the time of booking the cargo.

BUNKERS

Heavy oil used as fuel for ocean vessel.

C.A.F.

It is known as Currency Adjustment Factor. To protect the interest of the Shipping Company, they charge
some Percentage on the basic freight rate, by which the rate is either increased or decreased in response to
fluctuating exchange rates.
C.B.M.

Cubic meter. A measure of cargo volume

C.F.

Cubic feet.

C.I.

Cost and insurance – The exporter uses this pattern of invoicing charging the amount of insurance over and
above to the cost of goods. The freight amount will be payable by the importer / consignee at the named
point of destination.

C.O.G.S.A.

Carriage of Goods by Sea Act

CFR

"Cost and Freight" means that the seller pays the freight for the carriage of cargo from the port of origin to the
port of destination.

CIF

"Cost, Insurance and Freight" means that the seller pays the freight for the carriage of goods and also covers
the insurance for the cargo.

CIP

"Carriage and Insurance paid to..."means that the seller delivers the goods to the carrier nominated by him,
but the seller must pay the cost of carriage necessary to bring the goods to the named destination. This
means that the buyer bears all risks and any additional costs occurring after the goods have been so
delivered. However, in CIP the seller also has to procure insurance against the buyer's risk of loss of or
damage to the goods during the carriage.
CPT

"Carriage paid to..." means that the seller delivers the goods to the carrier nominated by him but the seller
must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means
that the buyer bears risks and any costs occurring after the goods have been so delivered.

CY

Container Yard. Point at which carrier hands over to or receive laden containers from the vessel.

CY/CY

Cargo loaded by shipper in a full container at origin and delivered to carrier's terminal at destination for pick
up intact by consignee.

CARNET

Any of various customs documents required for crossing some international borders.

CARRIER'S LIEN

Right of the carrier to retain property in his possession till the due charges are paid by the consignee /
importer

CELLULAR VESSEL

A vessel designed with internal ribbing to permit the support of stacked containers.

CERTIFICATE OF ORIGIN

Document certifying the country of origin of goods, which is normally issued or signed by a Chamber of
Commerce.

CHARTER PARTY
It is a written contract between the owner of a vessel and the person desiring to employ the vessel
(charterer). It coves the entire terms of the arrangement such as freight rate and ports involved in the trip.

CHARTERED SHIP

It is a ship under lease by its owners, to others.

CHARTERER

The person, to whom the ship is given for a specified time, for transportation of goods / passenger.

CHOCK

A piece of wood or other material placed at the side of cargo to prevent it from rolling or moving sideways.

CLEAN BILL OF LADING

A bill of lading which states that the goods have been shipped in apparent good order and condition without
any qualification or remarks.

COLLECTING BANK

A bank that acts as an agent to the seller's bank (the presenting bank). The collecting bank assumes no
responsibility for either the documents or the merchandise.

COMBINED TRANSPORT

It means Carriage of goods using more than one mode of transport, against one contract of carriage.

CTD

Combined Transport Document – A document issued by the carrier to the shipper when the carriage of
goods is made using more than one mode of transport.

COMMERCIAL INVOICE
A document giving details of transaction between exporter and importer with regard to the goods sold, like
the description, quantity, unit price, total value, etc., and also mentioning the shipment details.

COMMON CARRIER

A transportation company operating under a Certificate of Convenience and Necessity; provides service to
the general public at published rates.

COMMON TARIFF

A tariff published by or for two or more transportation lines.

CONFERENCE

An association of ship owners, operating in the same trade route operating under collective conditions and
agree on tariff rates.

CONFERENCE RATE

Freight rates arrived at by a conference of carriers, generally water carriers.

CONFIRMED LETTER OF CREDIT

A letter of credit issued by a foreign bank, whose validity has been confirmed by a domestic bank. An
exporter with a confirmed letter of credit is assured of payment even if the foreign buyer or the foreign bank
defaults.

CONFIRMING BANK

The bank that adds its confirmation to another bank's (the issuing bank's) letter of credit and promises to pay
the beneficiary upon presentation of documents in compliance with the letter of credit.

CONSIGNEE

A person or company, to whom the shipment of commodities is to be consigned.

CONSIGNOR

The persons who consigns the goods and shown on the bill of lading as Shipper.

CONSOLIDATED CARGO

Cargo containing of shipments of two or more shippers, usually shipped by a firm called a consolidator. The
consolidator takes advantage of lower F.C.L. rates, and savings are passed on to shippers.

CONSOLIDATION

The combination of many small shipments into one container.

CONSOLIDATOR

A person or firm performing a consolidation service for others.

CONSORTIUM

An arrangement between groups of carriers pooling resources in a trade lane to maximize their resources
efficiently.

CFS

Container freight station, a public user facility having yard, warehouse for storing import/ export cargo,
providing packing & unpacking services / consolidation services

CLP

Container load plan - A document prepared to show all details of cargo loaded in a container, e.g. weight
(individual and total), measurement, markings, shippers, consignees, the origin & destination of goods, and
location of cargo within the container.

CONTAINER SEAL NUMBER

The number of high security seal provided by the shipping company

CONTAINER SIZE

The length of a container - i.e. 20'', 40'' and 45'' (foot).

CONTAINERIZABLE CARGO

Cargo that will fit into a container and result in an economical shipment, consistent with delivery
requirements.

CONTAINERSHIP

An ocean vessel specifically designed to carry ocean cargo containers. It is fitted with vertical cells for
maximum capacity.

CORNER CASTINGS

A fitting on top and bottom of container corner posts; designed for handling and securing a container.

CORNER POSTS

Vertical frame components fitted at the corners of the container, integral to the corner fittings and connecting
the roof and floor structures.

CORRECTION MEMO

A kind of internal document, which registers amendment to bill of lading and/or manifest after bill of lading, is
issued to shipper.

CREDIT AGREEMENT

An agreement between the carrier and shipper, to release the cargo with a promise to pay ocean freight
within specific time.

CUSTOM HOUSE

A country Treasury Department office where duties, etc., on foreign shipments are handled.
CUSTOMHOUSE BROKER

A person or firm, licensed to engage in entering and clearing goods through customs and/or the government
office (Custom house) where duties and/or tolls are placed on imports or exports. The duties of a broker
include preparing the entry blank and filing it; advising the importer on duties to be paid; advancing duties
and other costs; and, arranging for delivery to his client, his trucking firm, or other carrier.

CUT-OFF TIME

Latest possible time by which the cargo may be delivered to vessel or designated point.

D.W.

Dead Weight. The number of tons a ship can transport of cargo, stores and bunker fuel.
.
DAF

"Delivered at Frontier" means that the seller delivers when the goods are placed at the disposal of the buyer
on the arriving means of transport not unloaded, cleared for export but not cleared for import at the named
point and place at the frontier, but before the customs border of the adjoining country.

DDC

Destination Delivery Charges. A charge assessed by the carrier for handling / positioning of a full container.

DDP

"Delivery duty paid" means that the seller delivers the goods to the buyer, cleared for import, and not
unloaded from any arriving means of transport at the named place of destination. The seller has to bear all
the costs and risks involved in bringing the goods thereto including where applicable, any "duty"(which term
includes the responsibility for and the risk of the carrying out of customs formalities and the payment of
formalities, customs duties, taxes and other charges) for import in the country of destination.

DDU
"Delivery duty unpaid" means that the seller delivers the goods to the buyer, not cleared for import, and not
unloaded from any arriving means of transport at the named place of destination. The seller has to bear the
costs and risks involved in bringing the goods thereto, other than, where applicable, any "duty" (which term
includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of
formalities, customs duties, taxes and other charges) for import in the country of destination. Such "duty" has
to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in
time.

DEQ

"Delivered Ex Quay" means that the seller delivers when the goods are placed at the disposal of the buyer
not cleared for import on the quay (wharf) at the named port of destination. The seller has to bear costs and
risks involved in bringing the goods to the named port of destination and discharging the goods on the quay
(wharf). The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties,
taxes and other charges upon import.

DES

"Delivered Ex Ship" means that the seller delivers when the goods are placed at the disposal of the buyer on
board the ship not cleared for import at the named port of destination. The seller has to bear all the costs and
risks involved in bringing the goods to the named port of destination before discharging. If the parties wish
the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used.

DANGEROUS GOODS

The term used by I.M.C.O. for hazardous materials, which are capable of posing a significant risk to health,
safety or property while being transported.

DEAD SPACE

Space in a vessel that is not utilized

Deadweight Tonnage (D/W)

The number of total weight tons that a vessel can transport of cargo, stores and bunker fuel. It is the
difference between the number of tons of water a vessel displaces "light" and the number of tons it displaces
when submerged to the "load line."
DELIVERY ORDER

A document authorizing delivery to a nominated party of goods in the care of a third party. Can be issued by
a carrier on surrender of a bill of lading and then used by merchant to transfer title by endorsement.

DEMURRAGE

Charge raised for detaining FCL container/trailer at a terminal/CY for longer period than provided in a tariff.

CONTAINER DEPOT

Container freight station or a designated area where empty containers can be picked up or dropped off.

DETENTION

Charges raised for detaining container/trailer at customer’s premises for longer period than provided in Tariff.

DEVANNING

The removal of cargo from a container. Also known as destuffing, unstuffing, unloading or stripping.

DIFFERENTIAL RATE

An amount added or deducted from base rate to make a rate to or from some other point or via another
route.

DISTRIBUTION

The process of storing, transporting goods between the end of the production line and the final customer. It
involves set of activities that demands the goods are delivered in desired quality, quantity, place & time.

DIVERSION

A change made in the route of a shipment in transit

DOCK
 The water alongside a pier or wharf.
 Loading or unloading platform at an industrial location or carrier terminal.

DOCK RECEIPT

A form used to acknowledge receipt of cargo at a steamship pier. When delivery of a foreign shipment is
completed, the dock receipt is surrendered to the vessel operator or the operator's agent and serves as basis
for preparation of the ocean bill of lading.

DOCUMENTARY CREDIT

The basis of international trade by means of which payment is made against surrender of specified
documents.

DOOR-TO-DOOR

Through transportation of a container and its contents from consignor's premises to consignee's premises.

Dry Cargo

Cargo that does not require temperature control.

DRY DOCK

An enclosed basin into which a ship is taken for underwater cleaning and repairing. It is fitted with watertight
entrance gates which when closed permit the dock to be pumped dry.

DOCK RECEIPT

A form used to acknowledge receipt of cargo at a steamship pier. When delivery of a foreign shipment is
completed, the dock receipt is surrendered to the vessel operator or the operator's agent and serves as basis
for preparation of the ocean bill of lading.

DOCKAGE

Charge for use of a dock

DOCUMENTARY CREDIT

The basis of international trade by means of which payment is made against surrender of specified
documents.

DUNNAGE

Lumber or other material used to brace material in carrier's equipment.

DWELL TIME

It is expressed in term of number of days that a container changed from one status to another e.g. from
under inbound load to empty available to under outbound load. The shortest the dwell time, the more efficient
of the container utilization will be.

ETA

Estimated time of arrival.

ETD

Estimated time of departure.

EXW

"Ex works" means that the seller delivers when he places the goods at the disposal of the buyer at the
seller's premises or another named place (i.e. works, factory, warehouse, etc) not cleared for export and not
loaded on any collecting vehicle.

EXPIRY DATE

The final date on which the draft and documents must be presented to the negotiating, accepting, paying or
issuing bank to effect payment.

EXPORT
Shipment of goods to a foreign country.

F.A.K.

Freight All Kind. System whereby freight is charged per container, irrespective of nature of goods, and not
according to a Tariff. (Please also refer to All Commodity Rate)

F.C.L.

Full Container load. Arrangement whereby shipper utilizes all the space in a container which he packs
himself.

F.E.U.

Forty-foot Equivalent Unit. (40’' or 2 Teus)

F.I.O.

Free In and Out.

F.O.B.

Stands for Free On Board which is a mercantile expression used in sale contracts denoting that goods have
to be delivered by the shippers on board the vessel at a particular place, free of charges.

FAS

"Free Alongside Ship" means that the seller delivers when the goods are placed alongside the vessel at the
named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the
goods from that moment.

FCA

"Free Carrier" means that the seller delivers the goods, cleared for export, to the carrier nominated by the
buyer at the named place. It should be noted that the chosen place of delivery has an impact on the
obligations of loading and unloading the goods at that place. If delivery occurs at the seller's premises, the
seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for
unloading.

FMC

Federal Maritime Commission. US Government Agency responsible for regulatory aspects of all maritime
activities.

FOB

"Free on board" means that the seller delivers when the goods pass the ship's rail at the named port of
shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from
that point. The FOB term requires the seller to clear the goods for export. This term can be used only for or
inland waterway transport. If the parties do not intend to deliver the goods across the ships' rail, the FCA
terms should be used.

FEEDER SERVICE

Sea transportation as performed by feeder operator.

FEEDER VESSEL

Vessel employed in normally short sea routes to fetch or carry goods and containers to and from ocean
going vessels.

FLASH POINT

The temperature reaching which for certain inflammable cargo will trigger spontaneous ignition. It is an IMCO
standard information requirement for dangerous goods.

FORWARDER

He is neither a consignor nor a carrier. Known also as Freight Forwarder, Foreign Freight Forwarder. It’s an
individual or business that dispatches shipments by land, air, or sea, or it may specialize for exporters and for
a fee. Usually it handles all the services in the collection, consolidation, shipping and distribution of goods
connected with an export shipment; preparation of documents, booking cargo space, warehouse, pier
delivery and export clearance. The firm may also handle banking and insurance services on behalf of a
client.

FREE TRADE ZONE

Sometimes called "customs free zones" or "duty free zones". It is a generic term referring to special
commercial and industrial areas. At which by special customs procedures it allows the importation of non-
prohibited foreign goods (including raw materials, components, and finished goods) without the requirement
that duties be paid immediately. If the merchandise is later exported, duty free treatment is given to re-
exports.

The zones are usually located in or near ports of entry. Merchandise brought into these zones may be
stored, assembled, processed or used in manufacture prior to re-export or entry into the national customs
territory.

When manufacturing activity occurs in free trade zones, it usually involves a combination of foreign and
domestic merchandise, and usually requires special governmental authority.

FREIGHT

The price paid to the carrier for the transportation of goods or merchandise by sea from one place to another.

Freight is also used to denote goods, which are in the process of being transported from one place to
another.

FUMIGATION

Treatment with a pesticide active ingredient that is a gas under treatment conditions.

GATT

General Agreement on Tariff and Trade. An international multilateral agreement embodying a code of
practice for fair trading in international commerce.

GATEWAY

Port at which container is discharged from ocean vessel to start the inland or intermodal part of its journey.
GENERAL AVERAGE

General average is an unwritten, non-statutory, international maritime law that is universally recognized and
applied. It is founded on the principle that vessel and goods are parties to the same venture and share
exposure to the same perils, which may require sacrifice or the incurring of extraordinary expense on the part
of one for the benefit of the whole venture.

GROSS TONNAGE

Applies to vessels, not to cargo. Determined by dividing by 100 the contents, in cubic feet, of the vessel's
closed-in spaces. A vessel ton is 100 cubic feet.

GROSS WEIGHT

Entire weight of goods, packaging and container, ready for shipment.

GROUPAGE

A consolidation service, putting small shipments into containers for shipment.

HAGUE RULES

1924 International Convention on Carriage of Goods by Sea. These rules govern liability for loss or damage
to goods carried by sea under a bill of lading.

HAGUE-VISBY RULES

1968 Revision of Hague Rules.

HAMBURG RULES

In March 1978 an international conference in Hamburg adopted a new set of rules (The Hamburg Rules),
which radically alter the liability that ship owners have to bear for loss or damage to goods in the courts of
those nations where the rules apply.

HARMONIZED COMMODITY DESCRIPTION AND CODING SYSTEM

A multi-purpose international goods-classification for manufacturers. Transporters, exporters, importers,
customs officials, statisticians, and others in classifying goods moving in international trade under a single
commodity code. Developed under the auspices of the Customs Cooperations Council (CCC), an
international customs organization in Brussels, this code is a hierarchically structured product nomenclature
containing approximately 5,000 headings and subheadings describing the articles moving in international
trade. It is organized into 99 chapters arranged in 22 sections.

HATCH

The opening in the deck of a vessel; gives access to the cargo hold.

HEAVY LIFT

Articles too heavy to be lifted by a ship's tackle.

HEAVY-LIFT CHARGE

A charge made for lifting articles too heavy to be lifted by a ship's tackle.

HIGH CUBE
Any container, which exceeds 8 feet 6 inches (102 inches) in height, usually 9 feet 6 inches.

HOUSE B/L

Bill of lading issued by forwarder.

HUB

A facility in the infrastructure where transport-related services (collection & distribution) and commercial
activities are performed, and it focuses on logistics-centre management, facilities management, maintenance
and supply chain.

HULL

The body of a vessel exclusive of masts, yards, sails, rigging, machinery and equipment.
HULL UNDERWRITER

The person with whom the ship’s hull, machinery apparel, and tackle is insured.

I.M.C.O.

International Maritime Consultative Organization. A forum in which most major maritime nations participate
and through which recommendations for the carriage of dangerous goods, bulk commodities and maritime
regulations become internationally acceptable.

IMDG CODE

International Maritime Dangerous Goods Code. The IMO recommendations for the carriage of dangerous
goods by sea.

ISPS

International Shipping & Port Security. International anti-terrorist legislation organized by IMO.

IMPORT

Shipment of goods from a foreign country.

IMPORT LICENSE

A document required and issued by some national governments authorizing the importation of goods into
their individual countries.

IMPORT PERMIT

Usually required for items that might affect the public health, morals, animal life, vegetation, etc. Examples
include foodstuffs, feedstuffs, pharmaceuticals (human and veterinary), medical equipment, seeds, plants
and various written material (including tapes, cassettes, movies, TV tapes or TV movies). In some countries
an import permit is the same as an import license.
INCOTERMS

International Commercial Terms is a universally recognized set of definitions of International trade terms,
such as FOB, CFR and CIF developed by the International Chamber of Commerce (ICC) in Paris, France. It
defines the trade contract responsibilities and liabilities between buyer and seller. It is invaluable and a cost-
saving tool. The exporter and the importer need not undergo a lengthy negotiation about the conditions of
each transaction. Once they have agreed on a commercial term like FOB, they can sell and buy at FOB
without discussing who will be responsible for the freight, cargo insurance and other costs and risks. Under
the INCOTERMS 2000, the international commercial terms are grouped into E, F, C and D, designated by
the first letter of them.

INSURANCE

An insurance policy or certificate normally covers the shipments of merchandise from the time they leave the
warehouse at the shipping point until they reach the destination point named in the policy or certificate.

INSURANCE CERTIFICATE

Where the seller provides ocean marine insurance, it is necessary to furnish insurance certificates, usually in
duplicate. The certificates are negotiable documents and must be endorsed before submitting them to the
bank. The seller can arrange to obtain an open cargo policy that the freight forwarder maintains.

INSURANCE WITH AVERAGE-CLAUSE

This type of clause covers merchandise if the damage amounts to 3 percent or more of the insured value of
the package or cargo. If the vessel burns, sinks, collides, or gets sunk, all losses are fully covered. In marine
insurance the word average describes partial damage or partial loss.

INSURANCE, ALL-RISK

This type of insurance offers the shipper the broadest coverage available, covering against all losses that
may occur in transit.

INSURANCE, PARTICULAR-AVERAGE
A Marine insurance term to refer to partial loss on an individual shipment from one of the perils insured
against, regardless of the balance of the cargo (in this way it differs from general-average insurance).
Particular-average insurance can usually be obtained, but the loss must be in excess of a certain percentage
of the insured value of the shipment, usually 3 to 5 percent, before a claim will be allowed by the company.

INTERCHANGE

Transfer of a container from one party to another.

INTERMODAL TRANSPORT

Moving ocean freight containers by various transportation modes. The fact that the containers are of the
same size and have common handling characteristics permits them to be transferred from truck to railroad to
air carrier to ocean carrier.

ISSUING BANK

The bank that has issued or opened a letter of credit. Also known as Opening Bank.

KNOT

A unit of speed. The term "knot" means velocity in nautical miles per hour whether of a vessel or current.
One nautical mile is roughly equivalent to 1.15 statute miles or 1.85 kilometres.

LETTER OF CREDIT – Very important

Back-to-Back: A secondary letter of credit issued to a beneficiary on the strength of a primary credit

Clean: A letter of credit that requires the beneficiary to present only a draft or a receipt for specified funds
before receiving payment

Confirmed: A letter of credit which is confirmed either by the issuing bank or by the advising bank or any
other confirming bank as per the arrangement with the issuing bank, that permits the exporter to realize the
money upon complying with the terms stipulated in it
Deferred payment: A letter of credit issued for the purchase and financing of merchandise, similar to
acceptance-type letter of credit, except that it requires presentation of sight drafts payable on an installment
basis

Irrevocable: An instrument that, once established, cannot be modified or cancelled without the agreement of
all parties concerned

Restricted: A condition within the letter of credit, which restricts its negotiation to a named bank

Revocable: An instrument that can be modified or cancelled at any moment without notice to and agreement
of the beneficiary, but customarily includes a clause in the credit to the effect that any draft negotiated by a
bank prior to the receipt of a notice of revocation or amendment will be honored by the issuing bank

Revolving: An irrevocable letter issued for a specific amount; renews itself for the same amount over a given
period;

Straight: A letter of credit that contains a limited engagement clause addressed to the beneficiary; state that
the issuing bank promises to pay upon presentation of the required documents at its counters or the counters
of the named bank

Transferable: A letter of credit that allows the beneficiary to transfer in whole or in part any amount of the
credit to one or more third parties provided that the aggregate of such transfers does not exceed the amount
of the credit

Unconfirmed: A letter of credit forwarded to the beneficiary by the advising bank without engagement on the
part of the advising bank

LETTER OF INDEMNITY

Guarantee from shipper or consignee to indemnity carrier for costs and/or loss, if any, in order to obtain
favorable action by carrier, e.g. sometimes, it is used to allow consignee to take delivery of goods without
surrendering B/L which has been delayed

LIEN

A legal claim upon goods for the satisfaction of some debt or duty.
LINER TERMS – Very important term

They define the condition / responsibility of cost under which a carrier has had at port of loading to port of
discharge. As such they also determine the freight / charges payable for loading & discharging the cargo
from the vessel in their quotation, according to the customs of the port and it is not internationally
codified.

Carrier cost responsibility under respective Liner Terms:

Liner In Liner Out (CY to CY) - Carrier bears the costs for loading at loading port, sea voyage up to cargo
discharged at discharging port.

Liner In Hook Out (CY to Hook) - Carrier bears the costs for loading at loading port, sea voyage up to cargo
alongside cargo hook at discharging port.

Hook In Liner Out (Hook to CY) - Carrier bears the costs for cargo alongside cargo hook at loading port,
sea voyage up to cargo discharged at discharging port.

Liner In Free Out (CY to Free Out, LIFO) - Carrier bears the costs for loading at loading port, sea voyage
and exclude costs for cargo at discharging port.

Free In Liner Out (Free in to CY, FILO) - Carrier bears the costs for sea voyage and costs for cargo
discharged at discharging port.

Hook to Hook - Carrier bears the costs for sea voyage and costs for cargo alongside at loading port & at
discharging port.

Hook to Free Out - Carrier bears the costs for cargo alongside cargo hook at loading port, sea voyage and
exclude cost at discharging port.

Free In to Hook - Carrier bears the costs for sea voyage and costs for cargo alongside cargo hook at
discharging port.

Free In Free Out (FIFO) - Carrier bears the costs for sea voyage and exclude costs at loading port &
discharging port.
LLOYDS' REGISTRY

An organization maintained for the surveying and classing of ships so that insurance underwriters and others
may know the quality and condition of the vessels offered for insurance or employment.

LO/LO

Lift On, Lift Off

LOW-BED

A trailer or semi-trailer with no sides and with the floor of the unit close to the ground.

M/V

Motor Vessel

MALPRACTICE

A carrier, to attract cargo, offering special preference to a customer. This can take the form of a rebate;
using lower figures that actual for the assessment of freight charges (undercubing); mis-declaration of the
commodity shipped to allow the assessment of a lower tariff rate; waiving published tariff charges for
demurrage, CFS handling or equalization; providing specialized equipment disproportionately to a shipper to
the detriment of other shippers, etc.

MANIFEST

Document that lists in detail all the bills of lading issued by a vessel or its agent or master, i.e., a detailed
summary of the total cargo of a vessel. Used principally for customs purposes. It is also called summary of
Bills of lading.

MARITIME

Business pertaining to commerce or navigation transacted upon the sea or in seaports in such matters as the
court of admiralty has jurisdiction over.
MARKS & NOS.

Marks & Numbers placed on packages for export for identification purposes; generally a triangle, square,
circle, diamond, or cross with letters and/or numbers and port discharge.

MATE'S RECEIPT

A receipt signed by a mate of the vessel, acknowledging receipt of cargo by the vessel. The individual in
possession of the mate's receipt is entitled to the bill of lading, which in due course is issued in exchange for
that receipt.

MAXIMUM PAYLOAD

Maximum cargo that can be loaded into a container either by weight or volume.

MICROBRIDGE

A land-bridge movement in which, cargo originating/destined to an inland point is railed or trucked to/from the
water port for a shipment to/from a foreign country. The carrier is responsible for cargo and costs from origin
to destination.

NEGOTIABLE B/L

Original bill of lading endorsed by shipper that is used for negotiating with banks.

NEGOTIATING BANK
A bank named in the credit; examines the documents and certifies to the issuing bank that the terms are
complied with.

NVOCC

Non-vessel Owning / Operating Common Carrier - A cargo consolidator of small shipments in ocean trade,
generally soliciting business and arranging for or performing containerization functions at the port.
And also means a carrier issuing Bs/L for carriage of goods on vessel, which he neither owns nor operates.

OBL

Original Bill of lading

ON BOARD

Means that cargo has been loaded on board a combined transport mode of conveyance. Used to satisfy the
requirements of a letter of credit, in the absence of an express requirement to the contrary.

ON BOARD B/L

A B/L in which a carrier acknowledges that goods have been placed on board a certain vessel.

ON DECK

A special stowage instruction to confine the cargo stowage must be on deck rather than under deck.

OPEN-TOP CONTAINER

A container fitted with a solid removable roof or with a tarpaulin roof that can be loaded or unloaded from the
top.

ORIGIN

Location where shipment begins its movement

OVERHEIGHT CARGO

Cargo stowed in an open-top container; projects above the uppermost level of the roof struts.

OVERWIDTH

A container with goods protruding beyond the sides of the container/flat rack onto which they are packed.
P&I

Protection and Indemnity, an insurance term.

P.O.D.

Port of Discharge where cargo is discharged from vessel. In case of transshipment is needed, there can be a
number of PODS during the course of shipment until it reaches the final POD.

PTI

Pre-trip Inspection - A procedure of checking the ability of a reefer to maintain temperature control. The
inspection normally focuses on the operation of the refrigeration and heating equipment, as well as the
physical condition of the refrigeration plant and the insulated container shell. Such inspections are normally
performed prior to each loading of a reefer.

PALLET

A platform, with or without sides, on which a number of packages or pieces may be loaded to facilitate
handling by a lift truck.

PARTIAL SHIPMENTS

Under letters of credit, one or more shipments are allowed by the phrase "partial shipments permitted." In
bulk shipments a tolerance of 3 percent is allowed.

PIER

The structure to which a vessel is secured for the purpose of loading and unloading cargo.

PILOT

A person whose office or occupation is to steer ships, particularly along a coast or into and out of a harbor.

PLACE OF DELIVERY
Final Destination of the cargo
PLACE OF RECEIPT

Location where cargo enters the care and custody of carrier.

PORT OF CALL

Port where a steamer discharges or receives traffic.

PORT OF DISCHARGE

Port where cargo is unloaded from vessel.

PORT OF ENTRY

Port where cargo actually enters a country where the cargo is not part of its commerce.

PORT OF LOADING

A Port where cargo is loaded onto the vessel.

PORT OF ARRIVAL

A port, where imported merchandise is off loaded from the importing vessel.

PRE-COOLING

A process employed in the shipment of citrus fruits and other perishable commodities. The fruit is packed
and placed in a cold room from which the heat is gradually extracted. The boxes of fruit are packed in
containers that have been thoroughly cooled and transported through to destination without opening the
doors.

PREPAID

One of the payment status where freight and charges are required to be paid by shipper. Prepaid means the
exporter pays the freight amount and a stamp to this effect will be made in the bill of lading showing – Freight
Prepaid
QUARANTINE

The period during which a vessel is detained in isolation until free from any contagious disease among the
passengers or crew. The word is now applied to the sanitary regulations, which are the modern substitute for
quarantine. During the quarantine period, the Q flag is hoisted.

RAILHEAD

Rail terminal where containers are either loaded or discharged from train. (A railhead is a CY)

RECEIPT FOR SHIPMENT B/L

A term used in contradistinction to shipped bill of lading, which is the standard document. Some bankers
object to such bill of lading on the ground that the security they offer is imperfect. This kind of bill of lading is
normally issued to acknowledge receipt of shipment before cargo loading or before official original bill of
lading is issued. Nowadays, not many shippers ask for this kind of bill of lading.

REEFER

It is the generic name for a temperature-controlled container. The containers, which are insulated, are
specially designed to allow temperature controlled air circulated within the container. A refrigeration plant is
built into the rear of the container.
R/T

Revenue ton - The greater weight or measurement of goods where 1 ton is either 1000 kilos or 1 cubic metre
(for metric system). Also known as bill of lading ton or freight ton. It is used to calculate freight charge.

Ro/Ro

Roll on Roll Off - A feature designed in a specially constructed vessel in both the loading and discharging
ports.

ROUTE

The manner in which a shipment moves, i.e., the carriers handling it and the points via which they handle it.
STC

Said to Contain. A standard clause used to protect carrier for cargo stuffed by shipper or its agents.

SALVAGE LOSS

A loss, which it is presumed would, but for certain services rendered, has become a total loss. The charges
incurred are "salvage charges". The property salved is the "salvage". When referring to goods a salvage loss
is one resulting from shipwreck or from a situation where, by the peril of the sea, the vessel is prevented from
proceeding on her voyage and the cargo, or the part that is saved is obliged to be sold at a place short of the
port of destination. The term is used in marine insurance when at a point short of destination, it can be shown
that it would cost more to forward damaged goods to their destination than the goods would realized on the
spot. The underwriters usually pay the difference between the total insured value and the net proceeds of the
goods, such a settlement being known as a "salvage loss".

SEAL

Metal strip and lead fastener used for locking freight car or truck doors. Seals are numbered for record
purposes.

SEAL RECORD

A record of the number, condition and marks of identification on seals made at various times and places,
referring to the movement of the container between origin and destination.

SERVICE CONTRACT

As provided in the Shipping Act of 1984, a contract between a shipper and an ocean common carrier in
which the shipper makes a commitment to provide a certain minimum quantity of cargo or freight revenue
over a fixed time period, and the ocean common carrier or conference commits to a certain rate or rate
schedule as well as a defined service level. The contract may also specify provisions in the event of
nonperformance on the part of either party.

SHIP CHANDLER

An individual or company selling equipment and supplies for ships.

SHIP OWNER

One of the persons in whom is vested the title of property of a ship or ships.

SHIPPED BILL OF LADING

A bill of lading issued only after the goods have actually been shipped on board the vessel, as distinguished
from the received for shipment bill of lading.

SHIPPED ON BOARD

An Endorsement made on a bill of lading confirming loading of goods on vessel.

SHIPPER

The person for whom the owners of a ship agree to carry goods to a specified destination and at a specified
price. Also called consignor. The conditions under which the transportation is effected are stipulated in the
bill of lading.

SHIPPER OWNED CONTAINER

The container used for cargo shipment is owned by shipper.

SHIPPER'S LOAD & COUNT

Shipments loaded and sealed by shippers and not checked or verified by the carriers.

SHIPPING PERMIT

Issued by a shipping or carrier company; authorizes the receiving clerk at pier, dock, warehouse, airport or
on board to receive a stipulated amount of goods or materials from a specified firm.

SLOT
Space on board a vessel occupied by a container.

SPREADER
A piece of equipment designed to lift containers by their corner castings.
STABILITY

The force that holds a vessel upright or returns it to upright if keeled over. Weights on the lower hold increase
stability. A vessel is stiff if it has high stability, tender if it has low stability.

STEVEDORE

Terminal operator who is designated to facilitate the operation of loading and discharging vessels and
various terminal activities.

STOWAGE

A marine term referring to loading freight into ships' holds

STRADDLE CARRIER

Mobile truck equipment with the capacity for lifting a container within its own framework.

STUFFING

The loading of a container.

T.E.U.

Twenty-foot Equivalent Unit. (20') TEU.

THC

Terminal Handling Charge. A charge assessed by the terminal for handling FCLs at ocean terminals.

TANK CONTAINER

A specially constructed container for transporting liquids and gases in bulk.

TERMINAL

An assigned area in which containers are prepared for loading into a vessel or are stacked immediately after
discharge from the vessel.

THROUGH RATE

The total rate from the point of origin to final destination.

TRAMP

A freighter vessel that does not run in any regular line but takes cargo wherever the shippers desire.

TRANSIT CARGO

Goods onboard, which upon their arrival at a certain port are not to be discharged at that port.

TRANSIT PORT

A port where goods received are merely en route and from which they have to be transferred and dispatched
to their ultimate destination by coasters, barge and so on. Also called transshipment port.

TURNAROUND

In water transportation, the time it takes between the arrival of a vessel and its departure.

TWIST LOCKS

A set of four keys used as part of a spreader to pick up a container or as part of a chassis to secure the
containers.

UCPDC

Uniform Customs and Practice on Documentary Credit.

UN
United Nations.

UNCTAD

United Nations Conference on Trade and Development.

UNIT LOAD

Packages loaded on a pallet in a crate or any other way that enables them to be handled at one time as a
unit.

UNITIZATION

The consolidation of a quantity of individual items into one large shipping unit for easier handling; Loading
one or more large items of cargo onto a single piece of equipment, such as a pallet.

VANNING

A term sometimes used for stowing cargo in a container.

VENTILATED CONTAINER

A container designed with openings in the side and/or end walls to permit the ingress of outside air when the
doors are closed.

VESSEL'S MANIFEST

Statement of a vessel's cargo

VOYAGE NUMBER

The numeric identification of a round trip sailing of a vessel on a fixed trade lane.

WAYBILL
A document prepared by a transportation line at the point of a shipment; shows the point of the origin,
destination, route, consignor, consignee, description of shipment and amount charged for the transportation
service. A waybill is forwarded with the shipment or sent by mail to the agent at the transfer point or waybill
destination. Abbreviation is WB. Unlike a bill of lading, a waybill is not a document of title.

WHARFAGE

Charge assessed by a pier or dock owner against freight handled over the pier or dock or against a
steamship company using the pier or dock.

Summary

As the students have noticed from the foregoing sessions, the transportation of commodity worldwide, mainly
carried by ships using the natural resource of sea. From the advent of power, the developments and
technological changes have brought up the sea going trade up to its present level. The containerization has
changed the pattern of trade from bulk to containers and now most of the commodities that have been dealt
only in bulk have taken a new change into containerization. The trade of break-bulk is mainly to transport
cargoes like project cargo, machinery and others that cannot be containerized. The Ro-Ro vessels that are
put in service provide easy transport solutions for carriage of commodities like cars at an economical cost
and assuring safety transportation. Choosing the right mode of transportation for any one commodity
between ports have become an important decision to economize the cost, ensuring safe and also making the
cargo available in the right place and also in right time. All this can be achieved by understanding the
business pattern of Liner Shipping.
BLOCK II

Organization structure of a containerized Liner Shipping Company – Operations, Technical & Commercial
Functions – Marketing of Liner Services – Appointment & Management of Liner agencies – Standard Liner
Agency Agreement

Structure
Overview
Learning Objectives

Upon capturing the contents of these units, the students will be in a position to understand the following:

Introduction – Organization structure

Functions of a Liner Shipping Company – Role of Marketing Manager
Functions of Documentation Manager – Import
Functions of Documentation Manager - Export
Functions of Operations Manager
Functions of Accounts Manager
Functions of EDP Manager
Appointment & Management of Liner Agencies

Overview

This unit covers the practical aspects of a container shipping company. The organization structure and the
roles of the Department Managers are discussed in detail. The role of every Manager – Documentation,
Operations, Accounts and EDP is interlinked with the centralized data available in the system of the
company. At every stage, the amount of co-ordination work involved between departmental managers may
be understood well by studying all the units under this chapter. The system that is presently in existence on
availing the agency services and the guidelines given by the Standard Liner Agency Agreement is also
outlined.

Summary
Review Questions

Unit 2.1
ORGANISATION STRUCTURE

INTRODUCTION

Like any other company having their own structure and system of functioning, Liner Shipping Companies do
have their own system and structure of their organization. According to the size and ownership of the Liner
Shipping companies, it will vary very significantly. As per the business entity, even it may a sole
proprietorship, a firm or a Limited Company. It may be even a subsidiary of a foreign company having its
functioning in other countries. The size and ownership of a company will have impact on the way in which it
is structured and managed.

Though there may be significant variance in organization, there are large numbers of areas of activity that
are common to all liner companies.

Ship Management and Operation aspects of ship owning organization is not considered for our scope of
study in Liner Shipping Organization Structure. However, the commercial aspects of liner business and the
common structure used to deliver the services are focused in this session.

Every company has got their own key divisions of responsibility. While the responsibilities are allocated,
generally it is ensured to the extent possible, any overlapping is avoided.

Liner Shipping companies vary significantly in terms of their overall size and ownership. There could be lot
of subsidiary companies for a larger multinational organization. The size and ownership of a liner shipping
company will have some bearing on the way in which it is structured and managed.

In most liner companies there are some key divisions having individual responsibility and the framing of
divisions and their activities will have more focus to minimize the overlaps and potential duplication of effort
or clashing of responsibility within the divisions of the company.

MANAGEMENT POLICY

The company will generally have Board of Directors and the Chairman or Managing Director will be heading
the company’s activities. It is the board’s decision that will demark the maximum powers of the Managing
Director. The following will be few of the areas that will be generally decided by the top management.

 The company’s strategy on Logistics

 The routes on which the company will be operating
 The type and size of the vessels to be deployed in the route
 Membership of any conference
 Consortium arrangements
 Marketing and pricing
 Financial performance – Overall Budgeting & Monitoring & Corrective measures in case of
any deviations

Once the above broad policy is established, the management will delegate the powers to down the line
authorities for effective management.

The basic decision of acquisition of vessels or long term chartering will again subject to the policy and the
financial strength of the shipping company.

Once the decision is taken to buy the ship on outright basis, the company may use its resources or obtain a
loan or mortgage secured on the vessel. Except for largest companies who have their own architects and
design team to create the type and size for a new vessel, others may take the services of a Ship Sale &
Purchase broker to obtain a vessel.

The Shipping Companies which do not have sufficient borrowing capacity for all the ships it want to deploy in
service may prefer long term chartering arrangements. Companies that are operating in short sea trades
may time charter suitable vessel from ship owning companies who specialize in container ships or Ro-Ro
ships.

The shipping companies next focus upon purchasing the vessel would be that of to run the vessels with
proper crew and this services are either outsourced either in total or in partial or managed engaging own
crew and the decision will be based on the size and the policy of the company.

Ships require constant supervision and monitoring of their structure and their machinery. The requirement of
periodical maintenance to ensure the seaworthiness of the ship is an important function. MARINE AND
ENGINEERING department of the company is vested with the responsibility to ensure the seaworthiness of
the ship. This may also be outsourced.

The purchase of Ship and the maintenance of the ship is a different function from that of the commercial
activities of running the business having ships. The day to day affairs of the shipping company after the
establishment of the business will be discussed in detail in this lesson that will include the commercial &
operation functions of a shipping company after the establishment of the liner operations. The generally
followed trade practice on the appointment of agencies to take care of the requirements of the Principal and
the terms on which it is finalized is outlined in the session Standard Liner Agency Agreement.

Review Questions:

1. Draw an organization chart of a Liner Shipping Company.

Unit 2.2

FUNCTIONS OF A LINER SHIPPING COMPANY

Liner Shipping Company has got various functions. Each and every company split the activities according to
their policy and controllable strength. While few a companies would like to have their branches established
at every location where and all they serve, few other companies may prefer appointing agents at the
selective location to function on behalf of the company. The role of agents need not be same at all the
locations and the company may prefer outsourcing very few activities through the agent and the rest can be
controlled by the company itself. When the Chairman / Managing Director is the person to take the decisions
and to implement policies and strategies, there is an immediate team consisting of various persons having
skill in their particular discipline is a must for the execution of job as desired by the Chairman / Managing
Director. The possible divisions in a liner shipping company would be headed by a Manager in their
respective functions of Marketing, Documentation, Operations, Finance and EDP. A modal of the various
functions of the Managers in a liner shipping company is as below:

MARKETING MANAGER

For any organization, Marketing and Sales functions are very important since this is the point where the
customer contact is made and from thereon revenue generated for the company.

The prime responsibility of a Marketing Manager would be as below:

PRIMARY CONTACT WITH THE SHIPPER / CONSIGNEE / FORWARDERS

Marketing Manager is the first person in an organization to understand the customers’ requirements and to
analyze the possible solutions that are available and selection of a suitable one that can be offered to the
customer and to make the customer to use the shipping company’s services.

Either on the basis of primary data availability or on the secondary data availability, the Marketing Manager
first reaches the customer. The customer may be an Importer / Exporter or a Forwarder or a consolidating
agent, who will be taking the services from a Liner Operator. Upon fixing up the place and time of the
meeting, the Marketing Manager establishes the personal relationship with the customer. At this point the
exchange of thoughts of the Liner Shipping Company and the Customer takes place. After understanding
the customer’s requirement, explaining about the Shipping Company’s strengths and the available services,
the Marketing Manager stars analyzing a possible way to serve the customer.
After identifying the real requirement of the customer, Marketing Manager works out a strategy to attract the
customer to avail the services offered by the shipping company. The point of attraction for the customer
depends upon the present situation and the necessity for a change. While for a few customers, price comes
last (as the amount of freight will not have a major percentage on the cost of goods) and the level service
and the commitment for reaching the cargo in time at the destination point becomes an important factor. For
set of other customers, where the product value is of very less and the cost of freight would be as much as
the cost of goods or a major element (for example, products like a mineral – Feldspar, Iron Ore when
exported in Container, etc.), the freight plays a major role as compared to other facilities offered or available
with the Liner Operator.

Marketing Manager’s prime responsibility is to be in touch with the customer and to understand the
customers’ expectation then to provide a solution to customer’s problem or highlighting the advantages of
better comforts that can be enjoyed by the Customer by utilizing the services through the particular Liner
Service Operator.

When commercial transactions are finalized by offering effective freight rates based on volume and other
payment modes, the generally offered services are listed as below.

CUSTOMER SERVICE

Regularly meeting the customer and keeping him posted of the present trends and the available schedules
and the expected changes enabling the customer to plan for his activity. There is no end to list out few
activities to cover under the customer service. It depends upon the expected level of the customer and the
affordable limit of the Service Provider.

However, few main things which would be possible for a liner to inform the customer includes –

LINER SCHEDULES

When a customer plans for effecting a shipment, the customer has to consider the various factors to meet
out the shipment date. This includes primly the validity of the Letter of Credit that a customer has in his
hands and the production plan to complete the order and upon completion of production the time that
required for movement of cargo / stuffed container to the CFS / ICD and the time required by the authorized
clearing agent for completion of customs formalities then to move the container to the port.
It is the information provided by the shipping company that will help out a shipper to plan for effecting the
shipment. It is useful for the shipper to calculate back the date on which the cargo should be dispatched
from his works, depending upon the available last shipment date, to comply with the requirement of the
purchase order or the letter of credit provided by the importer.

From this the importance of communicating the schedules to the shipper by the Liner may be understood.
.
TRANS SHIPMENT ADVICES

Wherever the liner shipping companies are offering service between long distanced ports, other than the
companies that operate direct vessels, essentially there will be a trans shipment of container before it
reaching the final destination through a trans shipment port.

The trans shipment advise provided by the liner will help the importer to plan for production activity in case
the cargo is of raw material or semi finished one and in the case of a finished goods, it will help the importer
to plan for distribution and sales arrangements.

This is one of the important functions that will have to be provided by the Marketing Manager / his
department of a Liner shipping company.

ADVICE ON CARGO ARRIVAL

Though sending of cargo arrival notice to the consignee or importer or any notify party as mentioned in the
bill of lading is not legally required to be issued by the Liner; but in practice most of the liners are following
the pattern of sending the cargo arrival notice to the party mentioned in the bill of lading. Many a customers
act upon receipt of cargo arrival notice. When the shipment takes place between two ports where the transit
time is very less, getting the documents through the banking channel and having the follow-up with the liner
office to get the information takes a lot of time and this may result in a delay in clearing the consignment. To
avoid such delay because of not knowing the arrival details and to provide the customer with timely
information on arrival of cargo at the port of destination, such cargo arrival notice is sent. When the
Marketing Manager undertakes the import Marketing of the Liner shipping company, based on the assurance
given to the customer, the marketing manager has to plan the activities with load port and with other
departments within the office to ensure proper communication is sent to the customer about the reaching of
the cargo at the required destination port.

PREPARATION AND SENDING OF FREIGHT CERTIFICATES, ETC.

Few of the liner shipping companies have the practice of mentioning the freight amount in the bill of lading
itself while others follow a different pattern of issuing a separate certificate mentioning the freight amount.

Issuance of freight certificate will be based on the requirement of customer i.e., when few prefer taking only
one amount – all inclusive freight, few certificate may give the break up of freight, CAF, BAF and congestion
surcharge, if any in addition to the various break-up involved.

The shipper may want to know the freight amount involved. The contract entered into may be on CIF / CFR
basis and the invoice may contain a total amount without showing any break-up. If the bill of lading contains
the freight amount, the buyer may workout the cost of goods eliminating the freight amount. To have a better
control on the costing the shipper may like to take a separate freight certificate. The marketing division of a
Liner Company generally provides this service.

When the Marketing Managers prime role is to provide services to the customers on a day-to-day basis, it is
just not limited only with providing services to the customers. They have to interact with other departments
and provide information to them enable them to plan and execute their activities. In the following sessions we
can understand the role performed by other department managers. Once the independent roles of the
Managers are understood, the amount of interaction that required at every level will be known automatically.

Review Questions:

1. Explain the various functions that are involved in a Liner Shipping Company. Enumerate
the functions of a Marketing Manager of a Liner Shipping Company.
Unit 2.3

FUNCTIONS OF DOCUMENTATION MANAGER

Irrespective of the nature of the business, every company should have proper documents in place for each
and every transactions performed. In shipping industry, the amount of importance to have the transactions
documented is a very high and any omission of such recording will end up in lot of operational inconvenience
coupled with monetary loss. Since the transactions are more and there is different type of procedures to be
completed for inbound and outbound cargo, functions of a Documentation Manager is split in two folds. The
activities related to Exports are handled by different team-members and the activities of Imports are handled
by another set of team members working under the guidance of the Documentation Manager.

The prime activities of a documentation manager is listed as below:

EXPORT

FILING EXPORT GENERAL MANIFEST

It is the responsibility of every liner company to file such a document with the Local Customs Authorities
giving details of the shipment effected i.e., the details of cargo carried by them from the local Port to another.

RELEASING OF BILL OF LADING

The releasing of Bill of Lading to the customer is an important function. The Bill of Lading has got three
important functions:

 It is a title document
 It is an evidence of contract of carriage
 It is a receipt for having received the goods

Bill of lading is an important document that transfers the title of goods from the seller to the buyer and hence
enough care and caution need to be exercised before releasing such a document by the shipping company. `

It has to be ensured that the customs authorities have authorized the cargo / container to move out of the
port through proper endorsement in the shipping bill and other relevant documents.
Upon verification of the export order given by the customs authorities a document called Mate Receipt will be
signed by the Captain or the agent of the shipping line upon loading the cargo / container on the ship.

The bill of lading will generally be released by the shipping companies, upon exchange of the Mate Receipt
produced by the shipper or his agent. After having loaded the container in their ship, they will have to issue a
document called Bill of Lading to their Exporters or their authorized agents.

A detailed procedure with reference to Export Documentation is given below considering the practical
aspects of the work involved in the Export Department of a Liner Company and that is followed generally by
most of the Liner Companies.

THE ROLE OF EXPORT DOCUMENTATION DEPARTMENT IN LINER SHIPPING COMPANY:

As we have noticed from the foregoing paragraphs, the documentation department plays a very vital role in
the successful functioning of a Liner shipping Company and even a small lapse or a mistake done by this
department will affect the entire activities of the shipment. This will not only affect the shipping line’s other
department’s regular activity but also the merchants at both ends i.e., the seller and the buyer. Hence
extreme care is taken at every stage of documentation.

For the purpose of understanding, the activities performed by a typical liner company is listed below:

Every company has got its own system and procedures in place and the responsibility is vested with the
concerned Manager of the department. Based on the company’s policies, the Manager will be delegating
certain responsibilities to his subordinates and the Manager or a responsible person will directly do the co-
ordination under the supervision of the Manager between various departments. The system / procedure
detailed below may not be common with all the shipping companies and it is only a guideline, how the
documentation department of a shipping company can perform its activities in a better way.

The Outbound Documentation (Export Documentation) Department Head / Manager will be responsible for
the adherence of the system laid down by the Management by all Outbound-Documentation personnel.

The documentation department will be getting the advise from the Finance Department about the Rate of
Exchange to be adopted. Since the freight amount and other related charges will be in foreign currency, to
answer to customer queries and to update them on the amount to be paid by them, the exchange rate
adopted by the company should be made known to the documentation personnel.
To know the details about vessel arrival and to pass on the details to the parties, the Export department
personnel will check one or more of the following:

 Through the system, browsing the Vessel Schedule

 Checking with Operations Department
 Checking with Vessel Operator

It is essential for the export department personnel to know the vessel schedule for them to apply the Rate of
exchange applicable to that particular vessel. Generally the rate of exchange will be varying day to day and
depending upon the policy of the company for few of the feeder service vessel they may keep the same for 2
days and for other vessel services, the validity of the rate may be kept as either 7 or 5 days prior to the
vessels arrival.

BILL OF LADING – DRAFT CREATION & FINAL B/L RELEASING

The next important function of any export department will be creating a Bill of Lading. The following are the
guidelines to prepare a B/L.

The Export Department Head is responsible for adhering the s procedure laid down by the company, by all
his / her department personnel.

Upon receipt of copy of Shipping Instruction from the customer, they should check and review the information
with their available data. If any clarification is required from Shipper, they should ask for the same.

When Shipper requests a destination that is not a port of call of the shipping line, they must decline such
requests, or consult their Department Manager. The customer will have to be informed about the port of
calls of the shipping company and the suitable one as accepted by the customer to be finalized.

In case of Shipper provides an address of Notify Party who is not located in the same country as the B/L
Place of Delivery, they should ensure that Shipper also provides a contact party and address at Final
Destination and should be marked in ‘Also Notify Party’.

Shipper has to provide the piece count for each container, weight, seal number and the export department
should check all these information.
They should ensure that no special or detrimental clause is contained in the Shipping Instruction. If Shipper
raises the special request to include it in B/L, approval of the Manager should be obtained. The Manager
may approve the same after consulting the Top Management and explaining the possible outcome of
including such information in the Bill of Lading.

Container number on Shipping Instruction should match the shipment details under relevant booking number.
The booking number is recorded on the Shipping Instruction given by the customer generally.

Once the details are checked the B/L will be created and saved in draft status. Before the Original Bill of
Lading is taken out, the following are checked:

 Bill type
 Number of originals and copies
 Date
 Parties: The Name of Shipper, The Consignee, Notify Party and Also Notify Party
 Cargo: Number and type of packages and description of goods
 In case of Dangerous Cargo - the UN number, Class number and Flash point
 Equipment: Container number(s) and Seal number(s).

After the complete checking of BL data, the export department personnel of the respective location must
issue the draft copy along with the proforma invoice to the customer.

RELEASING BILL OF LADING

On receiving any change request from the Shipper or Forwarder, the changes should be made and the same
be resent to the customer either through mail or by fax. Upon acceptance of the draft by the Shipper /
Forwarder the Bills of lading should be made available for final printing.

On collection of all the B/L charges from the customer in the prescribed form, the export department may
issue the Original B/L to the customer.

RECEIVED FOR SHIPMENT BL

At the time of Final BL release, if the customer request for Received for Shipment BL, due to date issue
based on the Letter of Credit (LC) stipulation or other reason like container shut out, after checking that the
container is in the port prior to the BL date and if the shipping bill is handed over by the customer, with the
stamp “Received for Shipment” or the clause as per local requirement in the body of the Original Bill of
Lading, Received for Shipment Bill can be released.

In normal practice, the shipping instruction is submitted to the shipping company within 2/3 days from the
date of vessel sailing. Due to circumstances beyond the control of the shipper, there may be some delay in
submitting the shipping instructions to the shipping line. The shipping Line can prepare and release the Bill
of Lading only upon receipt of the shipping instructions. Any delay in providing the shipping instruction will
delay the bill of lading release. In case of late receipt of shipping instruction, generally the follow-up with the
Shipper / Agent will be made.

Documents like Non-negotiable B/L, Shipping Instruction and any waiver details will be kept in the office for
future references.

The process will be in total complete, if there is no request for amendment is received by the shipping Line.
But in normal course, a shipper may seek amendments in the bill of lading for various reasons. To list out
few of the reasons, the actual consignee might be not in a position to take delivery of cargo and in such
circumstances; the shipper could have identified an alternate buyer. In this case, the amendment may be for
the change of consignee. After releasing the original bill of lading, the shipper may be asking for a different
port of destination based on the request made by the consignee / importer. Had the documents not
negotiated with the bank, it becomes essential for the shipper to get an amendment. After negotiating the
documents, for the reason mentioned in the beginning, there may be a different system followed by the
shipping companies. Instead of amending it on the original bill of lading, a communication be sent from load
port to the destination port using email / fax.

Each and every company has got set of procedures in entertaining the customer request for amendment.

The Export Documentation Department Head will be responsible for the amendments and he should take
enough of caution before issuing any amendments to the Bill of Lading that has been released already. The
amendments may have to be given either on request made by the customer and based on the internal
request made by the department because of their mistakes.

When an amendment to be issued due to Customers Request, the following need to be checked:

 There should be a request in writing from the customer, which is the important requirement
before proceeding with any amendment.
 If shipment has arrived at discharge port – consult with discharge office whether the
amendment can be made and if any additional charges will apply and / or relevant parties will accept
changed payment terms.

 When the amendments can be made and additional charges will apply, the customer must
confirm in writing their agreement to pay all additional charges and if required surrender full set of Original
bills of lading before changes are processed.

 Once the necessary written acceptance is received and full set of Original bills of lading
surrendered, subject to payment of any charges, either an amendment be made or another set of Original Bill
of Lading be issued. In the absence of full set of Original bills of lading, there should be no issue of any new
set of Original bill of lading to customer.

AMENDMENT REQUESTED BY INTERNAL DEPARTMENT PERSONNEL:

When there is an internal request for a change, the documentation department should identify the reason for
the amendments and record such requests. Upon identification and if End of Voyage is declared, they must
consult with the discharge end offices whether that change can be made. If disport gives their no objection, it
can be amended and immediately upon amending the same, it should be communicated to all concerned.

All copies of amendment requests in hardcopy will be kept in the Vessel/Voyage file for a reasonable time
that the management think fit to be kept. All soft copy of the amendment received on email should also be
preserved for a reasonable time.

HANDLING SWITCH BILL OF LADING:

Switch B/L request usually arises when the buyer who is the title holder of the full set of Original B/L re-sells
the cargo to an ultimate buyer in a triangular transaction. Due to commercial needs, the original buyer does
not wish to disclose to the seller (shipper) the ultimate buyer information and also not to the ultimate buyer
the seller’s information.

When B/L is switched, only the name & address of the shipper, consignee, notify party are allowed to be
changed on the new B/L.

If Change of Destination is required, they should follow set of guidelines given by the Management and this
varies company to company.
For Switch B/L change of destination, the original/actual Place of Receipt and Port of Loading must not be
changed. Only the new Port of Discharge and/or the Final Destination allowed to be changed on the new
B/L.

Purpose and the issuance of Switch Bill of Lading is a commercial practice followed by shipping companies
to ensure that the actual buyer and seller are not coming to know about each other and to protect the
secrecy of commercial transactions, a merchant trader is using this system of switch bill of lading. When the
importance is so high, a shipping company, before issuing an amendment, should take the proper care. The
shipping companies generally scrutinize the following.

B/L requestor’s identity as rightful title owner

On receipt of customer request for Switch B/L, they must verify the requestor’s identity as to whether he/she
is the title-holder.

They should request the customer to surrender the full set of Original B/L duly signed/stamped along with a
letter in the customer’s company letter-head clearly specifying:

 The B/L number,

 Request for Switch B/L,

 The name & address of the new shipper, consignee and notify party

 Acceptance of additional costs incurred, if any.

Upon receipt of full set of Original B/L, the export documentation department personnel must check the
endorsement at the back of the B/L is completed, and also ensure that the chain of endorsement is not
broken.

It should also be ensured that the requestor is the last title-holder, signed and stamped the full set of Original
B/L surrendered.

If any endorsement is broken, or the requestor being the last title-holder did not sign/stamp the full set of
surrendered Original B/L, a request is placed with the customer to complete all endorsement. If the
requestor is unable to comply, the shipping company can decline Switch B/L request.
If the loading ports are in other regions, all money receivable in India must follow the guidelines of
Management for realizing the payments. If payment is realized and the request / requestor is a genuine one,
they can issue a new set of Original B/L from system.

All charges incurred and Change of Destination costs if it is involved, will be collected before release of the
new set of Original B/L to the customer, unless the shipping company has extended some credit facility to the
customer.

The full set of Original B/L for issuing switch BL, is preserved with copy of new set of Switch B/L in the Switch
B/L file kept in the office issuing the same for a reasonable time.

HANDLING OF SEAWAY BILL

The practice of seaway bill is in existence, where the buyer and seller have got a better relationship and the
money transfer is not an issue between the parties. In the case of Bill of Lading, as we have seen in the
earlier session, it has got an important function known as “Document of Title”. Before the consignee takes
delivery of cargo from the shipping line custody, the consignee has to surrender the bill of lading with due
and proper endorsements. The bill of lading can be obtained from the banker of the importer only upon
payment of due amount towards the value of the consignment or in the case of credit arrangements, with a
due undertaking to settle the payment on due date. Immediately upon shipment, the exporter has to make
arrangements for submission of documents to the importers bank through their bank. The time taken by the
exporter to submit the documents to the bank depends upon the conditions laid down in the letter of credit or
in the purchase order in case of transactions not covered by a letter of credit.

When the distance between the port of loading and the port of discharge is more and the transit time is also
more, there will be no much of delay in the importer getting the documents. Whereas in the case of short
distanced route, the vessel will report earlier and the documents may come late. In these circumstances, to
avoid the delay in getting the consignment, the exporter and importer may prefer using a Seaway Bill.

The shipping company, to meet customers’ request for a speedy release of cargo at destination, issues Sea
Way bill. The generally followed procedure in case of seaway bill transaction is given as below:

 Shipping company, upon receiving the request from customer for Sea Waybill, must request
the customer to submit the Shipper's Letter of Indemnity, in the prescribed format.

 During documentation process, they should ensure the following in documentation system:
1. If the freight and related dues are collected from the customer already, “Sea Waybill”
can be issued.

2. Seaway bill can be issued only to straight consignment and not “To Order”
consignments. Sea Waybill should show proper remark “SEA WAYBILL NON NEGOTIABLE”

The more important thing in case of releasing seaway bill is that the shipping company informing the other
end about the issuance of seaway bill.

The all relevant documents of the transaction – Shippers request for seaway bill, copy of seaway bill, letter of
indemnity and other relevant communications exchanged into between the shipping company and the
customer should be kept in the shipping lines office till the transaction is completely closed i.e., till at the
other end the party taking delivery and after taking delivery for a reasonable time.

HANDLING LOST BILL OF LADING

In the course of transit, there may be a possibility that the documents sent might get lost. In such events, the
consignee should not face losses because of not taking delivery in the absence of Original Bill of Lading. At
the same point of time, if the documents are lost before negotiation, the exporter / shipper cannot negotiate
the documents and realize the money. To avoid this problem, shipping companies will be in a position to
offer some solutions to the parties. The procedure may vary between the companies to companies and the
focus is given hereunder on the general areas where the care need to be taken to protect the interest of the
shipping company.

The shipper should make a request to the Liner in writing for issuance of Replacement Bill of Lading against
the Lost Original Bill of Lading. Such request should be accompanied with a Letter of Indemnity from the
shipper as prescribed by the Shipping Company. The Bond will be executed duly endorsed by the banker to
the effect of indemnifying the vessel owner, carrier and their agents for issuing such second set of original bill
of lading.

Before issuing the second set of original bill of lading, the load port agents / liner export department should
check with the discharge port whether the Cargo is released or the delivery order is issued for the cargo
against which the second set of original bill of lading is sought for. A communication should be sent to the
discharge port about the lost bill of lading. Once the port of discharge confirms that the cargo is not
delivered / the delivery order is not released, process for issuing the second set of original bill of lading can
be commenced.
Once the clearance is obtained from the Head of the department to issue a second set of original bill of
lading, such release of second set of original bill of lading should contain a text similar to that mentioned
stating “SECOND SET OF OBL ISSUED IN PLACE OF LOST B/L” or the same. The following will be
generally in practice in case of second set of original bill of lading:

 Goods are to be delivered against the reissued set of original b/l, provided the goods have
not been delivered against the first set of original b/l, which declared lost by shipper.

 Had the goods already been delivered against the first set of original bill of lading, the
reissued set of original bill of lading will automatically be considered null and void.

 In case the first set of original bill of lading presented after the goods have been delivered
against this reissued set of original bill of lading, the first issued set of original bill of lading will be considered
null and void.

The load port office should send a communication to the port of discharge/destination and concerned parties
stating that the cargo be released against the replacement set of Original Bills of Lading.

The office that issues the replacement bill of lading will keep the concerned records in their file for a
reasonable time. The records will include the Indemnity Bond, Request Letter, OBL copy, Replacement bill
of lading copy, communication sent to discharge port and other relevant communications and documents of
the transaction.

CHANGE OF DESTINATION

Whenever there is a request from the shipper to change the port of destination after loading the cargo
onboard vessel, shipping company may accept such request. In case of accepting such requests, the
process will start with the letter of request from the shipper asking for such a change of destination. Once
the letter is received, the additional charges will be collected from the shipper and the bill of lading will be
released.

The change of destination request along with the details of charges collected will be in record for a
reasonable time.

RELEASE OF CARGO WITHOUT PRODUCTION OF OBL

As we have noticed in the Seaway bill chapter, many times based on the situational requirement and
relationship maintained between the shipper and consignee, shipper and the shipping company, consignee
and shipping company, there may be a situation where the disport office may have to release the cargo in
the absence of producing the original bill of lading. In such situations, there should be a set of procedure
would generally be followed.

To release the cargo to the consignee, disport will ask the shipper to surrender the Original Bill of Lading.
When shipper or shipper’s agent requests for cargo release to consignee at destination without presentation
of an Original B/L, a full set of duly endorsed Original B/L by shipper must be surrendered at the load port
itself. If the shipper had not collected the OBL, they will have to issue a Cargo Release Request
letter printed on their letterhead.

On receipt of such letter from the shippers, the shipping company will send a communication to the discharge
port to effect the delivery to the consignee without insisting for the original bill of lading. But before sending
such a message, they will ensure that all related charges are collected from the shipper.

After receipt of full set of duly endorsed Original B/L, or Shippers letter if Original B/L are not collected, the
shipping company will request the shipper to put in writing specifying to whom the cargo should be released
to at destination, if shipment is consigned “to order”. For direct consignment, cargo must be released to the
named consignee on the Bills of Lading.

The Original B/L together with shipper’s request letter and other relevant documents will be kept in the office
sending such release message for a reasonable period.

Review Questions:

1. Explain the functions of a bill of lading.

2. Write a short note on handling the following:
a) Seaway bill of lading
b) Switch bill of lading
c) Changing of Destination
d) Lost bill of lading & procedures to be followed
Unit 2.4

IMPORT

FILING OF IMPORT GENERAL MANIFEST

Every shipping company will have to file a document with customs authorities giving details about the
shipment and such a document is known as Import General Manifest. This is an important document
containing the entire details about the shipment and acts as a controlling document right from the time of
arrival of cargo / container in a port till it moves out of charge of a liner.

This document generally contains the following information:

 Name of the shipping line / agent

 Name of the ship
 Port where the report is made
 Nationality of the ship
 Name of the Master
 Port of Loading
 Line No.
 Bill of Lading Number & Date
 No & Kind of packages – cases, cartons, bales, pieces, etc.
 Marks & Numbers
 Gross Weight
 Description of Goods
 Names of Consignee / Importer
 Date of presentation of Bill of Entry
 Name of Customs House Agent
 Rotation Number

Most of the relevant information will have to be filled by the Liner / Agent and the document will be filed with
Customs Authorities.
This document is very essential for the customs authorities to cross verify the information produced by the
agents in the bill of entry to keep control on un-cleared cargo by the respective party.

SENDING CARGO ARRIVAL NOTICE

Though sending the cargo arrival notice is not the legal responsibility of the liner, generally by virtue of
practice, most of the companies follow the system of sending the cargo arrival notice to the consignees /
notify parties. While the preparation of these notice are in the scope of import division, as mentioned earlier,
the Marketing Division sends the notice to the consignee.

As compared to the functions of export department, the functions of import department will be in reverse to
that of the process for export. While for exports, the details need to be filed with Customs upon completion
of shipment and the bill of lading released to the parties after receiving the cargo at port / loading it on board
the vessel, sending shipment advice / trans shipment advice after vessel sailing, in Imports the notice of
arrival is sent generally before the vessels arrival indicating the tentative date of arrival of vessel, the
documents with Customs filed in advance and the Delivery Order issued only upon the importer / their agents
surrendering the original bill of lading with due endorsements.

The entire functions of the import department cannot be detailed in total since many of the functions will get
added to the core functions of the department in case of requirement in special circumstances. The general
scope of work that is followed by the Liner Companies is outlined below:

RATE OF EXCHANGE (ROE)

Like we have seen in the export activities, in import division also the Rate of Exchange has to be maintained
and the relevant conversion rate will be given by the finance department. The Rate of Exchange will be
maintained for few days ranging between 3 to 5 days or more depending upon company’s policy. In order to
apply the right rate of exchange, the inbound department should get updated on the vessels arrival. This
updating would be possible as in the case of export, in the following ways.

 Through the computer system by Browsing the Vessel Schedule

 Checking with the Operations Department
 Checking with the Vessel Operator
 Through other sources like local shipping news daily, etc.
The inbound department should send notice of arrival of cargo to all the customers and to comply with other
declaration formalities with Custom department. To give proper declaration to Govt. authorities and to keep
the customers updated on the vessel details the import department will have to check the following:

 Vessel / voyage
 Last Discharge port

The import department personnel should search for all B/Ls in the system to know the containers expected to
arrive in a vessel and all the bill of lading numbers are appearing. In case of any excess / shortage of bill of
lading particulars or any excess / shortage of containers with out bill of lading details, they should check with
the load port and get the right information.

Once the details are in total available, the next step will be to submit the data:

To submit Import manifest to Customs

To file details meant for local ICD port.

The Inbound Documentation personnel will extract the Inbound Manifest from the system. The status of the
containers will be checked to know whether it is a FCL or LCL shipment.

In case of LCL consignments and the cargo are consigned in the name of freight forwarder, the import
department should get the house bill of lading copies.

For all other shipments, to check with all partners who have loaded the containers in the vessel and to take
the details of shipment arriving in the respective ship. After getting all the information, the IGM has to be filed
with Customs department.

The Import Advance List should be forwarded to the Operations Department enabling them to forward the
same to Port and plan for their operation activities.

Generally the Import advance list will contain the following details:

 Local Container showing Container Freight Station (CFS) code

 Inland Container showing Inland Container Depot (ICD) Code
 Hazardous Container showing IMCO class
 Reefer container stating Temperature to be maintained
The import department should check the details in the onboard list received from Trans-shipment port or
Local Feeder Operator with the systems data. If any discrepancy found in the onboard list and the system
data, immediately information to be given to the Trans-shipment Port or Local Feeder Operator to clarify the
discrepancy. In order to complete the IGM, the import department should get information like Item Number
and Line Number from other partners who have loaded their cargo in the same vessel.

In case of the Liner getting their containers through the feeder operator, the inbound documentation
personnel will send the Customs Manifest to the Local Public Feeder Operator through e-mail for submission
to the Customs. They may also forward the Import Advance List to local Public Feeder Operator through e-
mail.

For cargo belonging to other vessel sharing partners or slot operators, the Inbound Documentation personnel
should forward the Container list with the proper ITEM number allotted to the respective vessel sharing
partners or slot operators.

Printed copies of Customs Manifest must be filed in the IGM file records and need to be maintained in the
liner’s office for a reasonable time. Import Advance list file also must be maintained. Printed copies of Sub
Manifest / Trans-shipment permit should also be maintained in the local office of the liner.
After submission of Manifest to Customs, at times there may be a request from consignee seeking an
amendment in the same. After checking with the load port and upon receiving the confirmation from the
respective parties they will issue Amendment form/ NOC letter to shipper’s agent to get the amendment done
in Customs.

When the customer approaches for delivery of cargo, the inbound personnel collect the customs approved
copy of the Amendment form and check the amendments and collect all the applicable charges before
releasing the delivery order.

Customs approved letter/Amendment form copy/ NOC letter and Original Bills of Lading should be in the
respective file of the vessel.

Apart from the documentation work related to Customs and Customers, the follow-up with customer in
respect of charges collection is also vested with the Import Documentation Department.

On a weekly basis, import department personnel will download details from system and also the list of bills of
lading with Outstanding Billable Detention. They should review the list of Billable Detention and ensure that
all Customer extended free time arrangements are correctly applied to the shipments.
RELEASE / DELIVERY ORDER FOR INBOUND SHIPMENTS

The consignee / importer / their agents can take delivery of cargo only against the submission of Delivery
Order to the concerned custodian of cargo. Before releasing the delivery order, generally the following
precautions will be taken by the import department personnel:

 Ensure Original Bills of Lading presented

 The respective containers discharged from the vessel and reached the respective CFS / ICD

 The freight Invoice is issued to the customer

 When the Customer or the Customer’s agent comes to the counter to collect Release /
Delivery orders, personnel at the counter must ensure a duly signed & stamped OBL, without broken
endorsement.

 In case of Telex Release, personnel at the counter verify the copy of the B/L brought by the
consignee for Release / Delivery orders, with the telex message details.

If no OBL is presented, Release/Delivery orders must not be issued, except under following conditions: -

 Prior arrangement has been made, with confirmed shippers consent for presentation of
Letter of Indemnity for Direct consignment, or Letter of Indemnity with Bank Guarantee for TO ORDER
consignment.

 Load Port / Origin Office has confirmed surrender of full set of OBL at loading end.

 Sea Waybill – the Customer or the Customer’s agent must present a copy of the Seaway
Bill.

Inbound Documentation Personnel at the counter must verify the OBL or the Sea Waybill, as presented.

In the case of an Original Bill of Lading must ascertain the following:

“TO ORDER” BILL OF LADING

Import documentation personnel should ensure that the shipper has duly stamped and signed the reverse
side of the Bill of Lading.

In case of an “Endorsement in blank," where the shipper directs the carrier to deliver the cargo to the Holder
of the Original Bill of Lading, the party taking delivery of the cargo needs to identify themselves by either of
the following means:

a) Endorsing the reverse side of the Bill of Lading or

b) Producing a Letter of Authority from shipper

In case of an “Endorsement with condition” Bill of Lading, where an endorsee is named, it must be ensured
that the endorsements are not broken, and cargo must be released to the last named endorsee or its
authorized agent. All endorsees including the last named endorsee must: Endorse the reverse side of the
Bill of Lading

“STRAIGHT CONSIGNED” BILL OF LADING

A Straight Consigned B/L is not negotiable and the cargo is deliverable only to the named Customer or to
their authorized agent.

Import department personnel to check the named Customer has duly stamped and signed the B/L. If it is
suspected that there is a discrepancy and this may be due to an error on the part of Liner, as a load port
manifest error, then they should send an enquiry to the load port and/or Bill of Lading issuing office for
clarification. Following action needs to be taken depending on the response:

If there be a Liner mistake, an amendment should be issued by the load-port. Once the amendment is
obtained from the load-port, they may ask the customer the mode of Delivery and accordingly collect the
bond with appropriate name along with respective charges.

BOND COLLECTION / CANCELLATION

The Liners containers are used to carry the cargo of the shippers. While the Delivery Order is issued
mentioning the container number enabling the consignee to take delivery of cargo in the respective
container, the Liner should ensure that the empty container after devanning the cargo is reaching their
Depot.
At the time of releasing the Delivery order, the Personnel at the counter should also collect a Bond or an
undertaking from the customer saying that the customer would take all the responsibility for safe reaching the
empty container at the depot and for any damage to the container, the customer will take the responsibility to
make the loss good to the Liner, towards the repairing cost. In normal practice, a cheque will also be
collected from the agents towards the safe receipt of empty container.

Once the importer / agents deliver the container at the nominated depot and produces and acknowledgement
towards that, the bond may be cancelled. For any damages in the container due to the fault of the importer /
agent, the liner may collect the payment separately or the cheque received while delivering the container will
be filled with due amount and presented to the bank.

BILLING TO CUSTOMERS

Before releasing the delivery orders, it has to be ensured that the freight and all other relevant charges are
collected. If any other additional charges are to be collected, the customer should be contacted and a
confirmation be obtained. Upon getting the confirmation invoice be raised and charges collected.

FOLLOW UP ON EMPTY CONTAINER

Timely follow-up be made with the customers for delivering empty containers in the respective yard.

FOLLOW UP ON LADEN CONTAINERS NOT TAKEN DELIVERY

If laden container is not taken delivery from the CFS or ICD, to have a control on the same, import
documentation personnel do regular generation of reports. Few of the reports generated by the Liner will
include:

 Overdue Containers at various Locations

 Against the containers for which Delivery orders are released

Based on the reports generated, follow-up with the customer will made to know the plans of the customer.

If the Customer or notify party does not take delivery of the containers within the stipulated time, the inbound
documentation personnel may inform sales team to follow-it up with the customers and for the recovery of all
related charges. After all the efforts, if the consignee does not turn up for taking delivery, the container may
be brought in for action by the custodian.

HANDLING OF ABANDONED CARGO

A Reminder Notice be sent to the Customer, giving details of shipment in the first place, notifying about the
un-cleared cargo and inform them to clear the cargo before end of 60 days period. This notice will generally
be sent by Registered Post. After sending the notice, if no response is received in a reasonable time, the
Import Department will have to inform the Load-port to contact shipper and the Local Import Sales personnel
about the situation.

If the cargo still remains un-cleared, Customs Department may bring the cargo for auction. To prevent this,
the imports department should send reminder notices to the parties mentioned in the bill of lading. Such
communication may be effected through Registered Post.

Based on the feedback received from the shipper / importer / agents, the process of abandoning may get
prolonged. If Customer does not take delivery or respond to the reminder, then they will have to inform Load-
port to contact shipper and inform about the situation, and alert them on the Shipper's liability according to
the bill of lading terms when cargo is abandoned.

The Load-port can request the shipper to settle the outstanding collect charge and demurrage and inform
shipper on those amounts. The Imports Division may also check with the shipper to see if they want the
cargo to be returned, diverted to another location and / or to change to a new Customer if they prove still hold
the ownership of cargo by title and have in possession OB/L issued against shipment unless covered by Sea
Waybill or Express B/L.

Based on the input from the Origin, if shipper wants cargo to be shipped back to them, and they will pay the
outstanding freight / charges as well as the additional freight/charges of the returned shipment, the liner
should make arrangements to send back the consignment after collecting necessary charges through the
load-port, without delay and inform the Customer on the decision of shipper to return cargo. The import
documentation personnel will do the entire documentation and co-ordination functions.

CARGO HELD BY CUSTOMS / GOVERNMENT AUTHORITIES

On receiving the letter from the CFS, informing the Inbound documents department about the Custom’s
decision of the auctioning the Cargo, they will contact and send a registered letter to the consignee or the
notify party to approach the customs to resolve the issue at the earliest.

If the consignee or the notify party is not traceable: –

The liner should inform the load port to get in touch with the shipper and inform them of the situation. They
will also inform the Origin of the projected expenses/ cost / delays and decision of the Customs authority.
They should handover the below mentioned documents to the Operations team for their further process or for
any potential claims:

 Full correspondence in hard copy

 Bill of Lading copy
 Copy of Register Letter sent to Customer
 Registration copy
 Copy of reminder Letters sent via fax / email

Review Questions:

1. Explain the role of Import Documentation Manager.

2. How will you handle the following? Explain the caution to be taken while handling these.

1. ‘To Order” Bill of Lading

2. Straight Bill of Lading

3. Explain the procedures that need to be followed in case of confiscation of cargo by

Customs / Government authorities.
UNIT 2.5

FUNCTIONS OF OPERATIONS MANAGER

The role of Operations Manager is split into two –

1. Vessel Operations / husbandry

2. Executive

VESSEL OPERATIONS:

BEFORE ARRIVAL OF THE SHIP

This is a crucial function of a shipping company. Unless the statutory requirements are complied with the
vessel cannot arrive into berth. Any delay in berthing the vessel will result in huge loss to the vessel owner /
operator.

The functions of the operations manager include the pre-intimation to the terminal to organize for a berth to
accommodate the vessel immediately upon arrival apart from the other usual requirements.

Operations Manager has to discuss with the terminal operator / stevedore agent about the cargo handling
programme and the berth allotment planning by the terminal operator.

It is the responsibility of the operations department to organize for the pilot and tugs.

He has to organize for the Customs and Immigration attendance. Whenever there is a crew sign on or off,
he has to co-ordinate and arrange for a government official or consular to be present for the same.

The health of the personnel working in the ship is very important and the responsibility of arranging a doctor
to attend for routine matters or in respect of illness of any personnel of the ship is vested with the operations
department. The operations department will take the help of the administration department of the shipping
liner company for executing this function.

Though it is not specific to one department, the liner company has to arrange for the delivery of food, water,
bunkers and stores of all kinds as required by the ship captain.
Preparation of Inward and outward clearance, light and Port Dues is an important function of the shipping
company. While the documentation department prepares the basic documents, the operations executive
completes the formalities through proper co-ordination with various authorities involved.

When the vessel moves from a port, depending upon the distance involved to reach the port, the crew will
not have any connectivity with the port / shore except through the available communication facilities. Upon
ship’s leaving from a port, if anything need to be reached to the ship’s crew, generally a mail / parcel will be
sent by the local office / agent to the agent / office at the next port of call. Thus collecting mail for the ship
ready to be taken on board is an important and very vital function.

Apart from the all above, the arrangement of transportation to and from the airports and railways station for
the crew arriving and leaving is also the responsibility of the operations department.

ON ARRIVAL

 Arranging for cash to be brought on board for disbursement to the crew

 Arranging for medical or dental treatment to the needy crew personnel

 To discuss and provide precise details concerning cargo work for livestock, hazardous
goods, heavy lifts and valuable cargoes, if any.

 To report to the principal the details concerning insurance and General Average Claims, if
any.

 To arrange for surveyors either cargo related or ship damage or both.

DURING SHIP’S CALL

 To liaise with ships personnel on a daily basis

 To arrange for the signing of Mate’s receipts and Bill of Lading

 Payment of bills / invoices for goods and services supplied to ship

 Regular communication with Principal, informing them on ship’s progress and sailing
prospects.

ON DEPARTURE

Getting details from the Captain of the ship about the ETA of the vessel at the next port and the ship’s
requirements on arrival there and to communicate the same to the office / agent at the next port of call.

AFTER DEPARTURE

 To inform the office / agent of the next port the ETA and the requirements of the ship on
arrival.

 To inform the office / agent on any other related information as required by the ship’s
personnel – any special medical or crew welfare needs.

The above are the common functions of the shipping companies and the procedure may vary between
companies to company. A typical liner shipping company’s operation procedure is given in detail for the
purpose of better understanding

This procedure covers the following topics

 Arrival of Vessel

 Declaration of arrival status in Port meeting

 Vessel Operations

Operation Manager must ensure that the timely monitoring is made on the arrival and departure of the
vessel. The Personnel must be in continuous touch with Port Control department and monitor the timely
berthing of the vessel as per the schedule given by Port Authority department. They will ensure to declare
the status of the vessel in the Daily Port Meeting held at the Port.

They must ensure smooth vessel operations by being in constant touch with the Port Authority department,
Chief Officer of the vessel, Health Officer and the Customs department.

HUSBANDING OF VESSELS:

It is handled by the Operations Department.

The Master of the vessel will inform by E-mail the Estimated Time of Arrival (ETA) of the vessel to the
Operations Personnel. The Operations Personnel will inform ETA to the approved Husbandry vendor (this
activity is outsourced mostly by the shipping companies).

The Operations Personnel must ensure the following documents, as required by the various
government/port/health authorities are handed over to the Husbandry vendor.

 Boarding request letter

 Immigration report

 Port Health Officer (PHO) declaration

 Master declaration form

 Foreign Currency declaration

 Same Bottom Cargo declaration

 Arrival Report

 Opium drug declaration

 Crews Effects declaration

 Ship Stores declaration

 Dangerous Drugs declaration

 Application for Entry Inward

 Application for Entry Outward

 Master certificate for Income Tax

 Departure report of the ship

 Customs NOC for Departure

 Immigration NOC for Shore pass

 Police NOC for Departure

 Master declaration to Police

 Vessel store list

The Operations Personnel will personally check with the Husbanding vendor if the Customs Officer, Port
Heath Officer and Immigration Department have been informed about the vessel arrival schedule.

After vessel berth, the Operations Personnel will personally monitor the Husbanding vendor and ensure that
all the jobs are performed in timely and cost efficient manner.
The husbanding vendor will ensure that all above documents duly signed by Master of the vessel and
Customs Officer, are handed over to respective authorities i.e. Customs, Port Health Officer, and Immigration
Department etc. The husbanding vendors will handover a set of Documents consisting of Arrival Report,
Master Certificate along with a Crew List to F&A Department for income Tax purpose.

For any problems encountered during husbanding operation, the Marine Operations Personnel will be
informed of the same and it will be communicated to the Operations Manager for immediate action and
resolving.

SHIP PLANNING

Operations Manager is responsible for the activity of Ship Planning. It covers the Planning of the vessel after
receiving import and export BAY PLAN.

The Operations Personnel must co-ordinate with Port Authority and Chief Officer of the vessel to ensure that
vessel is planned to discharge/load boxes to the satisfaction of both Port Authority as well as Chief Officer of
the vessel.

PLANNING FOR INBOUND CONTAINERS:

The Operations personnel should ensure that the information is received from their counter part / Load port
by the Port Authority prior to the Vessel berthing. The Operations personnel should check the Import
advance list, if any discrepancy found, should inform the Operations Manager to contact the Head Office /
Load Port and resolve the problem immediately. Upon receiving the correct information, they should forward
the Import Advance List to the Port Authority.

PLANNING FOR OUTBOUND CONTAINERS:

The Operations personnel should forward the Export Advance List to the Port Authority before the cut off.
After cut off, the operations personnel receive the 'NOT in YARD' list from the Port authority. This list is tallied
with the Export Advance List, if any containers are found missing then the same is incorporated in the
Planned list. Before vessel berth, they should forward the Planned list containing the list of containers
present in the Port to the Operations Manager and the Port Authority.

Based on the Planned list received from the Port / Terminal authority and the BAY PLAN received from the
Central planner, the Operations personnel should plan with the Chief Officer and the Port Authority, the
actual Export loading list. If any discrepancy found between the planned list and the BAY PLAN, the
Operations personnel should inform the Operations Manager to resolve the problem immediately.

After the vessel sailing, the Operations personnel should forward the Final Load List to the transshipment
port.

The operations personnel will forward the Stowage Plan to the Head Office. The records maintained
includes, The vessel plan, Import & Export advance list and other vessel related documents are preserved in
the Vessel/Voyage file in hard copy for minimum one year in the Port Office before it could be removed to
Record Storage room.

CONTAINER MOVEMENT FOR INBOUND AND OUTBOUND

This system followed by the shipping lines for the Inbound container movement after discharge and
Outbound container movement for Load will be as below:

The Operations Manager is responsible for implementation and adherence to the procedure on container
movement.

INBOUND CONTAINER MOVEMENT (ICD & LOCAL)

In case of Inbound Inland Container Depot (ICD) containers, the Marine operations personnel will submit a
request letter/ Job order containing details like the container number, destination, weight, size, vessel/
voyage name and vessel identification advise (VIA) number with a copy of the Custom endorsed IGM and
Custom’s Sub Manifest Transshipment Permit to the Port Authority and Rail Authority / ICD Operator. This is
to request them to move the inbound containers to various Inland Container Depot (ICD).

In case of inbound local containers, the operations personnel will submit the list of local containers to be
moved to the nominated CFS, to the CFS Vendor by email.

OUTBOUND CONTAINER MOVEMENT (ICD & LOCAL)

In case of Outbound Inland Container Depot (ICD) containers, Port prescribed form containing details like the
container number, destination, weight, size, vessel/ voyage name and vessel identification advise (VIA) is to
be submitted to Port Authority. This is to request them to plan to load the containers on the respective
vessel.
CARGO CLAIMS HANDLING

Depending upon the company’s policies, it varies. Basically it covers the handling of Cargo Claims for the
respective region. All cargo Claims processing and negotiating are centralized in the Head Office.

The Regional Operations Manager will be made responsible for the claim related matter. Upon receiving the
Cargo claim in writing or e-mail from the Customer (claimant), the local Operation personnel, will scan all the
details of the claim received and send the information to the Head Office, with a copy to the Regional Head.
An Acknowledgement confirming receipt of the claim letter will be sent to the claimant by the local Operations
Department personnel.

Regional Operations Manager / local Operations personnel will then on liaise with Head Office, and take it on
case to case basis, as per instructions received from them. Any liaison required with the claimant on the
LOCAL level by the claims department team, it would be coordinated by the ROM/ local operations
personnel. All cargo claims related correspondence is generally recorded in a register maintained by the
Head Office. The hard copy documents regarding the claim will be preserved in the CLAIMS File in the local
office till the case is settled.

CREATION AND UPDATION OF VESSEL SCHEDULES

This deals with Creation and Updating of vessel schedules. The Operations Manager is the overall
responsible person for complying with the procedures / guidelines lay down by the Head Office through his
team members. Generally, the Operations Personnel will inform the Operation Manager the actual
arrival/departure schedule of the vessel. The Operations Personnel will update the same immediately after
the vessel sailing.

CARGO CUT OFF & AVAILABILITY SCHEDULE

The Operations Personnel update the Cargo cut off and availability date and time. All records of vessel
actual times of arrival, departure, cut off and availability are maintained in the local office

FEEDER OPERATIONS
With a view to protect space on Public Feeder if the main line vessels have no space or do not call a
particular port, planning will be made by the operations team. For public feeder services, the local office
operations personnel will forward the space requirement for the cargo to be loaded on Public Feeder to the
Operations personnel. The Marine Operations Manager will then check with the approved Public Feeder
operators for availability of the required space.

In case of over bookings, Operations Manager along with the Sales Manager will take the approval from the
higher authorities to load excess cargo on public feeders. This specific approval is taken generally when the
feeder services are used beyond the budgeted limits, as over usage will have heavy financial impact.

The Operations Manager should create the correct vessel schedule for the feeder vessel sufficiently prior the
vessel arrival. The local Marine Operation Personnel protects space on Public feeder vessel based on their
service/cost efficiency. Once the space is confirmed, the local Marine Operation Personnel will create the
correct vessel schedule.

FOR INBOUND CONTAINERS (LOCAL & ICD)

The Operation Personnel should submit the Import Advance List received from the local inbound
documentation personnel, to the Public Feeder Operator. In case of Inbound Inland Container Depot
containers, Operation Personnel should submit a request letter containing details like the container number,
destination, weight, size, vessel/ voyage name and vessel identification advise (VIA) number with a copy of
the Custom endorsed IGM and Custom’s Sub Manifest Transshipment Permit to the Port Authority and Rail
Authority / ICD Operator. This is to request them to move the inbound containers to various Inland Container
Depot. In case of Inbound Local containers, the Operations personnel will forward a list of containers to the
approved CFS vendor.

FOR OUTBOUND CONTAINERS (LOCAL & ICD)

The Operation Personnel should submit the Export Advance List received from the local documentation
personnel to the Public Feeder Operator. After the feeder vessel sail, the Operations Personnel should
forward the Final Load list to the transshipment ports with copy to Local documentation personnel. The local
operations personnel to ensure that the local inbound documentation personnel will forward the Import
Advance list, prior to vessel berth, by e-mail to the Public Feeder Operator. For ICD containers, the local
Operation Personnel should submit the Transshipment Application along with Port Format to the Port
authority. The Operation personnel will follow up with the Port authority for the ICD container movement to
Railhead / CONCOR for onward movement to respective ICD’s. On acceptance of the containers, CONCOR
will issue a Railway Receipt (RR) to the Operations Personnel, which will be forwarded to the respective
ICD's.

For Local containers, the inbound documentation personnel will submit the list of local containers to the local
approved Transport vendor for movement to the nominated CFS.

For Outbound Containers (Local & ICD), the local Marine operations personnel to forward the Export
Advance list generated by them to the Public Feeder Operator. All records of correspondence with Vessel
operator, Customer Service and Sales Departments will be kept in email system by the Operations for a
reasonable time and then deleted.

DANGEROUS & HAZARDOUS CARGO HANDLING

This covers the loading and discharging of Dangerous Cargo (DG) and Hazardous Cargo on board vessel.
The Operations Manager is responsible for the right handling of this cargo. For Imports, the Operations
Personnel must ensure that Import Advance List forwarded by inbound documentation personnel should be
submitted to the Port Authority in softcopy and hardcopy along with the manifest of DG containers, before the
vessel cutoff.

The Operations Personnel must ensure that the DG containers to be discharged from the vessel are with
proper DG Label and are discharged at the DG yard in the port. If no proper DG label, then operations
personnel should inform the Chief officer and the Port Authority.

For Exports, the Operations Personnel must also ensure that all DG containers entered inside the port
premises for loading on feeder vessel have been approved by feeder operator via e-mail. They must ensure
that all DG containers for export loading have entered the port premises with proper DG labels. If any DG
container entered the port premises is found to be without proper DG label, then operations personnel should
inform to the concerned customer and the Operation personnel will label the container before it is loaded on
board.

In case any DG container is loaded on board without proper DG label, the Operations Personnel must co-
ordinate with Port Authority and Chief Officer and stick the required labels before vessel sails. The special
service request (SSR) charges levied by the Port should be mentioned in the Final List to enable the
recovery of the same from the customer.

The Operations Personnel must ensure that DG export list along with a summary and manifest are submitted
to Port Authority before vessel cut off for planning. They should discuss with Chief Officer of the vessel and
Planner of Port Authority for required stowage for DG containers to be loaded on board vessel. They should
ensure that DG containers are loaded on deck of the vessel. The operations personnel must also ensure
that a set of all DG export loaded containers, summary of DG containers and Manifest with required IMO
details is handed over to the Chief Officer before the vessel sails.

The Operations Personnel must ensure that necessary remarks are incorporated in Terminal Departure
Report (TDR) against DG export loaded container loaded on board vessel, which is forwarded by them to the
transshipment port.

Hard copies of Import Advance list, Export list, DG manifest, DG declaration and other DG related
documents (if any) will be preserved in the Vessel/Voyage file for minimum one year in local Office before it
could be removed to Record storage room for 7 years after which same can be destroyed.

ABANDON CARGO HANDLING

The Operations Manager is responsible for the Abandon Cargo handling also. After receiving from inbound
documentation personnel the following documents, the local Operations Personnel will submit it to the CFS
vendor.

 Reminder Notice to the Customer

 Customer confirmation of abandon cargo
 IGM copy
 Copy of the OBL

The local Operations Personnel will follow up with the CFS operator for the devanning of the container. It is
the responsibility of the CFS operator to devan the container and to keep the cargo under their safe custody
till the cargo is brought in action by the customs department. The permission for devanning the container will
be given by the Customs department on receiving the request from the Shipping Company. Upon handing
over the custom permission the CFS operator will make arrangements to devan the container in the
presence of nominated surveyors of the Shipping Line. Once the containers are devanned, information will
be given to the inbound documents personnel and the equipment personnel. The local Operations
Personnel will forward the original invoices received from the CFS vendor to local F&A personnel for
making the necessary payments to the CFS vendor.

All correspondence had with CFS operator including a copy of the following documents in hard copy are
preserved in the Abandon Cargo file in the local Port office for minimum one year, before it could be removed
to Record Storage room.
 Reminder Notice to the Customer
 Customer confirmation of abandon cargo
 IGM copy

CONTAINER MOVEMENTS

In the foregoing paragraphs, we have seen the documentation procedure involved or followed by shipping
companies to secure back the containers from the importer / their agents. It becomes important for any
Liner Shipping Company to monitor the movements of containers enabling them to co-ordinate with the
Marketing Department to plan for outbound cargo booking. The monitoring of container movement starts for
inbound container from the time the container landing in the port till it comes back to empty yard passing
through the various stages of moving the container to the CFS / ICD, issuing delivery order, consignee taking
delivery of goods and movement of empty container back to the respective yard of the Liner.

The Operations Department will monitor the movement of containers at every stage and the generally
followed practice by operations department is detailed below:

CONTAINER MOVEMENT CAPTURING

The EQM Personnel must monitor the container movement through the Internet Equipment Information
System (IEIS) for the events submitted via Electronic Data Interchange (EDI) system by CFS / Depot
Operator. The EQM personnel should ensure that the system is updated by the concerned operator and
should have regular follow-up on this. All the records sent by the Depot Vendor should be kept in the file for a
reasonable time.

The Operations Manager will be forwarding the reports to the management for the month giving details of
stack, arrival, delivery of units for export movement, empty repositioning details, if any and other relevant
information.

We will discuss in detail about the leasing of containers in the sessions to come. For the understanding on
the operations department responsibility, the functions relevant to On-hire and Off-Hire of the Equipment is
detailed below:

ON-HIRE OF LEASED EQUIPMENT

Under tight equipment situation in the region, the respective EQM Personnel will inform the Manager about
the necessity to go in for On-Hire equipment. The Operations Manager, based on the situation and the real
requirement, after taking the approval from the Management will approve to his department personnel to On-
hire required number of units.

Upon receipt of instructions and authorization, the respective EQM Personnel will contact the leasing
company, to obtain an acceptance for the On-Hire equipment.

On obtaining the acceptance from the leasing company, the respective EQM Personnel request for the list of
container numbers and the details of the ON-Hire Empty pickup facility. Upon getting the details from the
leasing company, either they will start allotting from the leasing company’s empty container depot or they
may move the units to their own depot. The approved transport contractor will be authorized to move the
empty container from the leasing company to the nominated depot of the liner. Once the units are arrived in
the depot of the shipping company, the same will be taken into the stock of the company and the system will
get updated on the same. A report on the same will be forwarded to the Management and the Operations
Manager will maintain the necessary records of On-Hire.

TERMINATION OF EQUIPMENT

Like the Operations Manager On-hire the equipment based on necessity, after completion or expiry of time or
purpose for which the containers were On-Hired, shall have to Off-hire the units to the respective leasing
company.

The function on this account starts from identification of containers for off hiring. This can be identified from
the system or from the information provided by the Management based on the communications exchanged
between the Company and the leasing Company. Once the identification of units is made, the EQM
Department must find out where the containers are to be returned. For the Off-Hire containers, the leasing
company must be contacted to ascertain whether the container can be Off-Hired and the depot/ facility that
they must be returned to.

Upon receipt of acceptance from the leasing company, EQM Personnel will contact approved empty
transport vendor to deliver the Off-Hire container to the designated empty depot/ facility of the leasing
company.

Upon the delivery confirmation, the EQM Personnel should ensure timely submission of termination events in
the system of the company.
TERMINATION OF LEASED OUT CONTAINERS

EQM Personnel should check email advice from Head Office for leased out equipment status with leased out
return facility and contact the relevant party for an agreeable return facility/depot. Upon acceptance from
relevant party, EQM Personnel must update the leased out return facility/depot in order to terminate the
leased out equipment into the company’s system.

TERMINATION OF TOTAL LOSS CONTAINERS

In the course of movement, due to some accident or Act of God, the container may loose its shape and
becomes unfit for further usage. In such cases, the units suffering the total loss will have to be knocked out
the inventory list of the shipping company. The communication is sent from the local office to the Head Office
about the container status and the expected outflow of money that required to be spent on bringing back the
container to put in use. The Management will accord permission on the merits of the case. Upon receiving
an authorization from head office for total loss container, the EQM Personnel must terminate the container in
their system.

The hard copies of Off-Hire & On-Hire container report/email exchanges from leasing companies will be kept
in the On-Hire & Off-Hire files for a reasonable period as required by the management.

CONTROL OF EQUIPMENT INVENTORY

As noticed earlier, the success of the business is on offering the services as required by the traders. When
the off take is more, the shipping companies should be in a position to offer more number of containers. Due
to their inventory shortage, if they are not in a position to offer units to the exporters, they may have to loose
their business opportunity with the shipper not only for the time being but also for ever in case of the
competitor signing any long term agreement offering demanded service. It becomes important for the
company to have the control of equipment inventory to plan for their activities. The responsibility to ensure
adequate stock of equipment for Export and control surplus stock is generally vested with the Operations
Manager. The Operations Manager will be responsible for implementing a suitable system to ensure the
maintenance of correct level of inventory in the respective location / region.

MONITOR CONTAINER SITUATION

The Operations Manager should review the equipment stock situation regularly using their information
systems or sources:
 Internet Equipment Information System

 Equipment Reposition and Inventory System)

 Depot stock reports sent by the Depot vendors

The Operations Manager may have to liaise with all branch offices on weekly basis or at a regular interval to
determine the stock requirements and reposition stock to deficit interstate ports accordingly to meet booking
requirements. On getting information about the requirement of different locations, generally the approval for
movement of containers from one location to another location will be taken, since the movement involves lot
of costs i.e., the lift on / lift off operation and the transport movement cost.

Where there is a shortage of equipment, the local EQM personnel will have to request the Head Office
through the Operations Manager to mobilize empty equipment at the required location to meet the demand of
the market.

Movement of empties takes place generally through Rail and Road from one location to another. The mode
will be finalized based on the timely movement assurance given by the operator and the cost involved to
move. Once the mode is finalized, the movement will begin and from the load point message will be sent to
the destination point along with all the details. Upon receipt of unit at the required location, the same will be
updated in the local system for allocation of boxes.

EMPTY CONTAINER RELEASES

The local EQM personnel will have to check the equipment stock levels at the depots, terminals and other
facilities where equipment is stocked on a regular basis. They will inform the Marketing / Sales department
about the inventory status in a prescribed format. Based on this report, Marketing department will start
accept bookings and will release boxes to the customers.

EMPTY CONTAINER RETURN

EQM Personnel should inform the Inbound Documentation personnel where the empty container depot
facility is available. Based on this information, while releasing the laden container itself, the documentation
personnel include the address of the facility where the container to be returned.

MONITORING MNR ACTIVITIES

After receipt of empty container at Empty depot Facility, Depot vendor will be sending the report to EQM
Department for Good & Damaged containers. For damaged containers, EQM personnel will be asking the
MNR vendor to submit the Estimate of Repairs through the system they maintain for their approvals and to
carry out repair works. After receiving approval, the vendor will perform repair work & make the equipment
ready for release.

DAMAGED CONTAINER & CLAIMS

In the process of transportation / devanning there may be an occurrence of damage in the container. The
importer / their agents will have to pay the repairing charges to the shipping company if the damage has
occurred while the container was in their possession.

The shipping company will be intimating the details of damage to the importer / their agents based on the
advice of damage received from the vendor. EQM Personnel will collect the following information and data
regarding the damage unit, before communicating the same to the importer / their agents.

 Container details - type of unit, container number etc

 Where the damage occurred
 Description of the damage
 Ascertain if container is loaded or empty
 Any damage notification from the vessel (Master’s report).

 Any damage noticed on discharge (from the terminal)

 Any damage indication from the transport company

 Any damage notification from shipper / consignee.

The EQM Personnel will have to identify the 3rd party liable, wherever possible, for the damage and arrange
survey. If required, a joint survey with the identified 3rd party will be conducted.

An estimate for the repairs will be obtained from depot/ or MNR vendors by EQM department. An official
claim in form of E-mail along with the supporting documents like the estimate from MNR vendor, a report
from the Surveyor will be forwarded to the liable party.

Once an agreement has reached on the cost of the claim with the liable party, the EQM Personnel will place
a request with the Inbound Documentation personnel (with supporting document) to issue an invoice on the
3rd party for payment.
MISSING OR LOST CONTAINER

Upon confirmation from the responsible 3rd party for the missing/lost container, EQM Personnel will have to
inform the Management about the same. They will have to issue an initial notice of claim holding the liable
party responsible for the missing or lost container. Upon getting the confirmation on the replacement value or
depreciated value of the unit from the Management, will have to send an Official Claim to the liable 3rd party,
preferably by Registered Post.

Once the agreement is reached with the 3rd party, based on the values EQM Personnel will request Inbound
Documentation personnel to create an invoice on the liable 3rd party for payment. Upon receiving the
payment from the party, the issue will be closed once and for all and the missing container will be taken out
of the inventory books of the shipping company.

All supporting documents and email exchanged between the shipping company and the party pertaining to
the 3rd party equipment claim will have to be maintained for a reasonable time.

The Operations Manager will be responsible for finalizing the vendor and the repair tariff as per the
guidelines of the Management. He will select the vendor considering the various factors – location,
approach, equipment availability, past tract record of the vendor, market reference and on the cost factor.
The tariff agreements/Contracts will have to be retained in the Vendor Contract/Tariff file in the office by the
Operations Department Head. Any amendments on rates or term of contract will also have to be filed and
maintained by the Operations Head.

Review Questions:

1. Describe the role of Operations Manager with reference to vessel activities.

2. Explain the role of Operations Manager with reference to Equipment Control Activities.
3. State the procedure adopted by an Operations Manager in case of –
- Missing Containers
- Total Loss Containers
- Termination of Lease Containers
Unit 2.6

FUNCTIONS OF ACCOUNTS MANAGER

FREIGHT COLLECTION & REMITTANCE

The shipping companies accept the cargo for shipment between the ports, either after collecting the freight
amount well in advance or after completion of the shipment but before releasing the delivery order at the port
of destination.

Every bill of lading is stamped either Freight Collected or Freight to Pay.

It is the responsibility of the accounts / finance department to co-ordinate with the load port, to get the freight
amount and to collect it from the respective consignee or his authorized agent.

Generally most of the shipping companies will prepare an invoice and the same is given to the customers
with detailed break up of charges need to be paid before releasing the delivery order. This invoice can be
collected from the documentation department and upon payment, the finance department makes a stamp in
the invoice evidencing collection of payment, verification upon which the delivery order is generated and
given to the parties.

LIAISONING WITH BANK

The charges collected by the shipping companies will have to be repatriated to the principals / load port office
and this has to be remitted following the guidelines given by the bundes bank of the respective country.

CONTAINER DETENTION CHARGES

Now a days, attracting the business has become more difficult and depending upon the company’s policies
either a direct freight discount is offered or some other indirect facilities like container free days at the port of
destination is offered by the liner companies to the customers.

Most of the liners offer free days at the port of destination ranging from 3 days to 21 days out of which
offering 14 days free at the destination is very commonly found.

If the boxes are not returned within the free time provided, every container will be attracting some detention
charges and this has to be paid by the importer or consignee or his authorized representative.
Though there is no universal formula is available for calculation of detention charges, each and every
company have got their own policy of fixing tariff for detention of boxes.

It would be the responsibility of the finance / accounts division to keep a tract on container arrival in depot
and to collect the detention charges.

To avoid chasing the customers, generally most of the liner shipping companies follows a pattern of
validating the Delivery Order and the Empty Container Returning Bond will also have a validity date, within
which it has to be returned. If the box is not returned within the validity date, the box will not be off-loaded at
the empty container terminal and there will be an insistence for the validation of the Bond.

BROKERAGE PAYMENT

As per the terms of the agreement with the customers, the shipping company pays the brokerage amount to
the agents through whom they got the booking. It is the responsibility of the finance department to co-
ordinate with operations and documentation team to ascertain the right broker and the amount to be paid to
him.

REPORTS TO PRINCIPALS

At the later part of this unit, we may understand the terms and conditions on which the agency agreement
functions. Every activity that is expected from the agent will be mentioned clearly in the agreement entered
into. As such, for the activities performed on behalf of the principal, the agent is entitled to receive
commission or fee or any other additional remuneration if not covered under the agreement’s scope of work.
It is the responsibility of the finance department to monitor the outflow of funds on behalf of the principal and
to make proper reimbursement claim and to send required reports to them.

VENDOR & PORT PAYMENTS

Monitoring this is the responsibility of the finance department. Whenever the vessel reports and the
containers off-loaded / loaded, there are various charges payable to the Terminal Operator. While few of the
charges are collectable from the consignees directly, few of the other charges will have to be collected from
the Principals. Charges like Terminal Handling will be paid by the Liner on a monthly basis based on the
invoice raised by the terminal operator and the same will subsequently be collected from the consignees
while releasing the delivery order. Any Port Ground charges incurred due to delayed clearance by the
consignee will also have to be borne by the consignee at the time of taking the delivery order but in the first
place, the liner will have to pay the charges to the terminal as per the tariff of the terminal operator. Other
Port Dues that are payable will have to be recorded and the collection of it from the Principal is the
responsibility of the Finance Department.

The other charges payable to the repairing contractors and other service vendors will be paid by the agency
and the same will have to be reimbursed by the Principals. It is the responsibility of the Finance Department
to submit the proper reports and to collect the same from the Principal.

AUDIT / INTERNAL ADMINISTRATION

Finance department responsibility is to ensure that the statutory compliances are met with and the books of
accounts are maintained in a proper way. The co-ordination with the Auditors / Local Administrators on
related issues will be the responsibility of the Finance Department.

The receivables and payables will have to be very properly maintained for the transactions performed and
the remuneration account be updated and reviewed for any balance payment at regularly intervals.

Review Questions:

1. List out the various activities that are performed by an Accounts Manager of a Liner
shipping Company.
UNIT 2.7

EDP MANAGER

Presently, almost every business is focusing on paper less trading. Shipping industry is not an exception to
this and because of the cumbersome procedure involved, the utilization of system in this industry has
become an inevitable one. The usage of computer applications not only reduced the manpower
requirements but also provides very accurate data in time. The repetition of work is in total eliminated and
effective usage of reports generated by system helps in a lot of way to the management to review the
progress and to forecast its activity for the next couple of years. Thus the EDP Manager of a shipping
company is vested with lot of responsibilities and few of the key functions are mentioned below:

COMMUNICATION

EDP Manager has to ensure proper communication is made between the departments within the company
and also between the load ports and disport. Before the usage of systems, there were lot of mails sent from
load port to disport and at a later stage when there was a system of facsimile transmission (fax), the details
used to be sent by using this system. This was not only a costly affair but also very time consuming. The
data so received will have to be converted in different forms as required by the Management and by statutory
authorities like Customs and Port. As per the customs requirement the details will have to be submitted and
this was possible by redoing the same job with different tables to comply with various requirements.

After the development of EDP system, the most of the work once done can be made useful to various
departments of a shipping company. The contents noticed in the functions of different department managers
of a shipping company may require very common data for them to function. Keeping one centralized data,
based on the required data, each and every department can modify and filter the information to the extent of
their requirement.

The load-port now days need not send the details either by mail or by fax. Once they upload the information
in the common website or in the prescribed restricted site of their use, the same information can be
downloaded at the disport and the same will get fit into the required formats enabling the documentation and
operations manager to comply with the requirement of customs and port. This not only reduces the time and
cost but also increases the work efficiency of the department staff and managers and to concentrate on other
areas of activities upon quick completion of their desk work.

CUSTOMER REPORTS
The shipping companies maintain the entire transactions in system. According to the requirement, the
information can be sorted out, format modified and secret information be filtered (which need not be known to
the customers) and the details be given to the customer at the quickest possible time.

It helps as a tool for the marketing department to impress upon the customer by giving required information
in time and to strengthen the relationship, which will ultimately result in getting more volume of business.

Liaisoning with vendors, etc.

We have noticed the various amount of communications and the approval methods followed in shipping
companies. In the role of operations manager, it was detailed how the vendor is reporting to the operations
department and communicates on MNR activities and taking the approvals.

While few a small shipping companies are yet to fully convert their functioning style with EDP system, major
players are already into this. To take for example, earlier, the depot vendor of a shipping company will have
to first send the EIR with survey estimate in hard copy to the local office of a shipping company. The
Operations Manager, within his power approve amount and beyond his authority he will have to forward the
same either by fax or other communication pattern along with original photograph of the equipment submitted
by the vendor. The Head office will approve the same to the local office and the local office in turn will have
to communicate the vendor to perform the repair activities. This type of time delay and communication cost
is reduced now after the usage of EDP system. For the same referred example, now the vendor is provided
with company website address and the user password. The vendor himself would be in a position to update
the information in the shipping companies website and just in few minutes / hours the approval is taken and
the repair activity performed.

To summarize the importance of EDP development and the usage of it in shipping companies, it can be
mentioned that in the current fast approach of the traders and the other service providers, to see the real
success of the business the system of EDP and its usage will be an inevitable one.

The scope of EDP Manager mentioned above is only an illustrative and not an exhaustive one.

Review Questions:

1. Explain the role of EDP Manager with examples of few of the reports generated by him.
UNIT 2.8

APPOINTMENT & MANAGEMENT OF LINER AGENCIES

The managing of shipping business requires essential office & other infrastructure along with Man Power
specialized to take care of each and every division of activity. This is not only essential at the origin point /
where the Head Office is situated but also in every location where and the company has got its business.

The establishment of branches at every location is a very expensive affair and till such time the business
volume and reasonable profit is assured, any promoters will be looking at an alternate way to run the
business at an economical way as compared spending too a huge money in the beginning itself.

As the activity of the shipping company which offers their services worldwide requires their offices at every
port the ship is calling, rather than establishing their own set-up, shipping companies prefer keeping few of
the most important centers in their direct control engaging their manpower to run show; rest of the locations
will be managed by engaging agents to take care of the business.

Where there is no branch, the shipping companies will be appointing agents to take care of the business
activity. An agent thus appointed by the shipping company may be for any one of the below mentioned
activity or a combination of more than one or all.

AGENT APPOINTED TO LOOK AFTER THE SHIP WHILE IN PORT

The activities that will have to be performed by the agent will be same as the functions we have noticed in
the ‘Functions of Operations Manager’ in the earlier lessons. The agent appointed purely for this purpose
will not have any responsibility for any sales function to bring the cargo.

A SALES AGENT

The shipping company in the required locations will appoint a sales agent. Such location may be a port town
or a hinterland. The ICDs situated away from the port may require a sales agent to get the cargo to fill the
ship’s cargo carrying space. In this category, the sales agents function is basically to stay in touch with the
merchants / traders and to assure the volume of business to the ship.

PORT & SALES AGENT

The role of such an agent is not only limited to the extent of taking care of the activities while a ship is in port
but also cover the selling ship’s space and to bring cargo to the ship.

GENERAL AGENT

General Agent undertakes additional responsibility to supervise the work of other agents within given region
apart from their usual activities.

The appointment of agents to undertake the given responsibility is a long process. The role to be played by
the agent to be discussed in detail and the agreement to be followed with other terms including the
remuneration offered by the principal to the agent for undertaking the given responsibility as well as covering
the jurisdiction of the agent along with the validity period.

The terms and conditions of the agreement may vary very widely between companies to company and to
provide some common guidelines, FONASBA – The Federation of National Associations of Ship Brokers and
Agents have published a Standard Format which is known as SLAA – Standard Liner Agency Agreement,
enabling the players to cover the scope of activity in a generally accepted most common way.

FONASBA has also published a standard form for Liner Sub Agency Agreement enabling the Agents to use
this format when they are planning to appoint a sub agent in a particular area.

STANDARD LINER AGENCY AGREEMENT

This covers the duties and responsibilities that need to be undertaken by an agent when appointed by the
principal. It is suggested to the students in order to have a better understanding on the clauses covered
under this format, the website of FONASBA be accessed and the print out be taken and studied well.

The details that are covered in SLAA is given below:

 The name of the Principal

 The name of the Agent
 Date of Agreement
 Territory – The trade route for which the agent is appointed
 The date of commencement of agency
 The validity of the agency period
 Termination clause – Notice period
The other terms of the agreement covers the scope of work of the agency – whether Port and / or inland
agency work within the territory. SLAA restricts the agent from accepting the agency from any other shipping
company in the same territory or acting as an NVOCC or undertaking any freight forwarding agency activity
that is a direct competition to the principal appointing the agent in a territory. When the agent is being
restricted from accepting the business from another principal, the principal is also restricted from engaging
another agent in the same territory for the activities covered under the agreement. SLAAA prescribes that
the agent should treat all the aspects of the Principals business in a total confidentiality and the files and
records pertaining to the business are the property of the principal.

Clause 3.00 of SLAA defines the duties of the Agent as below:

 To represent the principal in the Territory

 To appoint sub-agent if required, with the consent of the principal
 To appoint with the consent of the principal, Stevedores, Watchmen, Tallymen, Terminal
Operator and all other kinds of suppliers, if needed
 The agent will be responsible for the negligent act of the sub-agent
 The agent should always observe the shipping laws and regulations of the country and will
have to indemnify the principal for any fines, penalties that may arise because of the agent willfully failing to
comply with the laws or regulations.

Marketing & Sales functions of an agent is detailed in 3.10 of SLAA

The Agent will have to provide the marketing sales activities in the Territory in accordance with general
guidelines laid down by the Principal, to canvass and book cargo, to publicize the services and to maintain
contact with shippers, consignees, forwarding agents, port and other authorities and trade organization.
They will have to provide statistics and information and to report on cargo bookings and use of space
allotments. They will have to announce the sailing and arrival details to the trade and also give details about
the freight rate.

Marketing & Sales will be successful having better public relations work. The agent may spend money
towards advertising, press release and other related schedule publications of the vessels expected arrival
and departure time, within agreed budged of the principal. The agent may have to attend any conference
relating to the industry if required so on behalf of the principal and he may get the expenses reimbursed by
the principal for attending such conferences.

The important function of the agent will be to issue the Principal’s bill of lading and Manifest, Delivery Orders,
Certificates and such other documents as may be required reasonably.
SLAA – 3.20 covers the Port Agency function. This covers the role of the agent from arranging a berth for
the vessel, loading and discharging the cargo and to co-ordinate with terminal operators and related other
agencies like Stevedores and Tallymen and other contractors. The husbanding work, bunkering, repairs and
any medical assistance that need to be provided by the agent is listed in this clause. Apart from the above,
the claims handling, P & I matters, Insurance and General Average, appointment of Surveyors will be in the
scope of the agent. The documentation work related to all the above functions will have to be ensured by the
agent. To summarize the scope of the agent under this clause, it can be stated right from the organizing of
vessels berthing, till the vessel sailing from the port and preparation of Statement of Facts will have to be
undertaken by the Agent.

Clause 3.30 of SLAA covers the container and Ro/ro traffic and the related functions of the agent under this.
The agents will have to arrange for the booking of units on the vessel. The LCL units will also have to be
monitored by the agents if required. The documentation and equipment control is the responsibility of the
agent. Since the documentation is in the scope of the agent, he has to comply with the requirement of
customs and have proper records and keep it with him. To have an effective control over the equipment,
Seal, Labels, etc., he has to maintain proper records. Whenever there be a requirement, the agent will have
to on-hire / off-hire the equipment and the haulage work also will be have to be undertaken by him. The most
important function would be to keep the equipment in good condition and to ensure this, coordination with the
MNR contractors and approving the repair estimates.

Accounting and Finance function is covered under 3.40 of SLAA. The agent will have to prepare periodic
financial statements as may be required by the Principal. The agent should provide the appropriate records
of the Principal’s financial position. For every voyage, the agent should receive the accounts for distribution
of money and vouch for the transactions. The Agent should inform the principal about any change of port
tariff or any other related charges, once they come to know about the change. The agent should collect
freight and related accounts and remit the same to the Principal at such periodic intervals as the principal
may require. The agent can debit the Principal for all the bank charges. Before granting any credit to the
customers, the agent may take the approval from the Principal stating the financial worthiness of the
customer. If agents grants any credit without the knowledge and consent of the principal, he will be held
responsible for the collection of outstanding. The agent will have the right to retain the freight amount to
cover the past and present disbursements by providing regular cash position statements to the principal.

SLAA clause No.4.00 covers the Principal’s duties. The Principal will have to provide necessary documents
to the agents to comply with the statutory requirement in the area where the agent is functioning. The
Principal will have to give full and timely information to the agents on vessel’s schedules, ports of call and the
line policy insofar as it affects the port and sales agency activities. The Principal will have to provide
necessary fund support to the agent by way of advance to cover any advance disbursement. The agent will
have to be indemnified by the Principal against any claims, charges, losses, damages and expenses, which
the Agent may incur in connection with the fulfillment of his duties under the agreement. At times, the agent
may have to execute some bonds / guarantees to the Customs authorities for the movement of goods from
port to CFS / ICD and in such cases, if there be any claims, the Principal will have to make the loss good to
the agent, as long as the agent performs his activities without any willful misconduct.

Remuneration – This is covered under clause 5.00 of SLAA. The principal agrees to pay the Agent and the
Agent accepts, as consideration for the services rendered, the commissions and fees set forth on the
schedule attached to the agreement. The fee so fixed will be reviewed every 12 months and if necessary
adjusted in accordance with such recognized cost of living index as is published in the country of the Agent.
Depending upon the role played by the Agent, if he undertakes any additional responsibility of claims
processing and settlement, he will be paid additional remuneration commensurate with the work involved.
The remuneration specified in the schedule will be in respect of the ordinary and anticipated duties of the
agent within the scope of the agreement. If the agent is asked to perform any other activities not covered
under the agreement, he will be entitled for additional remuneration. If the tariff currency varies in value
against the local currency by more than 10% after consideration of any currency adjustment factor existing in
the trade, the basis for calculation of remunerations shall be adjusted accordingly.

The remuneration to the agent is based on various factors. The suggested remuneration pattern as per
SLAA is as below:

A. Commission payable –

Services Outward - _______%

Services Inward - _______%

B. ________% for cargo when only booking is involved

C. ________% for cargo when only handling is involved

D. In respect of movements of cargo outside the Agent’s Territory _____% of the gross
total freight is payable in cases where only collection of freight is involved.

E. An additional fee for containers and / or units entering or leaving the inventory control
system of the Agent, a fee of ______ per unit.

II A. _____% for cargo loaded on board in bulk.

B. _____% for cargo discharged in bulk.
III Where the agent provides only the services as non-port agent the remuneration
shall be –

When actually booked / originating from his area –

A. Services outward - _______%
B. Services Inward - ______ %

An additional fee for containers and / or units entering or leaving the inventory control system of the Agent, a
fee of _______% per unit.

IV Where the agent provides only the services as non-port agent, the
remuneration shall be :

A. ______% for cargo loaded on board in bulk

B. ______% for cargo discharged in bulk.

V. Clearance and Ship’s husbandry fee shall be as agreed.

VI. A Commission of ___% shall be paid on all ancillary charges collected by the Agent on
behalf of the Principal such as Depot Charges, Container Demurrage, etc.

VII. Communications – The principal will either pay actual communication expenses on a
cost plus basis or pay a lump sum monthly on an average cost plus basis, to be reviewable.

VIII. Traveling expenses – When the Agent is requested by the Principal to undertake
journeys of any significant distance and / or duration, all travel expenses including accommodation and other
expenses will be for the Principal’s account.

IX. Documentary and Administrative charges – such charges to be levied as appropriate by

the Agent to cargo interests.

The above are the remuneration pattern suggested by FONASBA in the SLAA.

Duration - Clause 6.00 of SLAA covers this. As per the agreement, the duration of the agency will be in
force unless any termination of notice is sent by registered mail. If for any reason, the principal withdraws or
suspends the service, the agent may withdraw from his agreement forthwith, without prejudice to its claim for
compensation. The Agent shall have a general lien on amounts payable to the Principal in respect of any
undisputed sums due and owing to the Agent including but not limited to commissions, disbursements and
duties.

Clause 7.00 of the SLAA talks about the Jurisdiction.

The SLAA is only a standard format suggested by FONASBA and the shipping companies may include or
delete any few words or adopt a different agreement in total based on the mutual consent of the principal and
agent.

Review Questions

1. Explain the necessity of appointing an agent by a shipping company.

2. “The Agent can be appointed by the shipping for any one particular function” – justify
3. What do you understand by the term “SLAA”? State the terms and conditions that are
suggested by SLAA.
Summary

In the first unit of this book, the development of shipping business and particularly the container trade and the
liners characteristics were discussed. In continuation of this, in the II unit, an outline about the organization
structure was given and the various departments that are functioning in a shipping liner industry is covered.
The functions and the responsibilities of Marketing Manager, Documentation Manager, Operations Manager,
Accounts Manager and EDP Manager are discussed in detailed. Every one activity that is performed by the
department manager is very important and any one skip at one desk will put other functional departments in
great difficulty either in the form of time delay, loss of business or loss of profit. The documentation
department undertakes the function of the entire documentation work that is involved in the liner shipping
business right from getting information from the load port, filing the IGM, dealing with customs, giving delivery
order on Import Cycle and the reversal of process in the case of Export Cycle – i.e., Releasing Bill of Lading,
Sending information to Disport, Filing EGM and related functions. The Marketing Manager is not just limited
with that the function of getting clients but also involves a wide range of co-ordination between the
Operations Department, Documentation Department and other relevant areas. The success of the business
can be seen only upon execution of activities as required by the customer. The prime function of
establishing the relationship between the customer and the shipping company is the responsibility of
Marketing Manager. Once this is done, the Marketing Manger depending upon the company policy also
undertakes the rest of the co-ordination and the customer needs. But beyond one point, it is in the hands of
the functional department i.e., the Operations Department to ensure that the business activities are taken
care in a proper way. While the main functions are related to the vessels’ activities split into various folds i.e,
before vessel’s berthing, during ship’s call, upon departure, etc., the role of operations manager extends with
co-ordination with central planner, making out the ship plan, coordinating with the vendors for keeping the
boxes, moving empty containers, and also deal with leasing companies for timely on hire and off-hire
activities. Ultimately a business cycle comes to a close, once the money for the services performed is
realized. The role of the Accounts Manager is very important and his role is to co-ordinate with other
departments to raise the invoice on the customer for all the services provided and to realize the money. The
statutory compliance on tax angle is also to the scope of Accounts Manager apart from managing day to day
affairs of business like – treasury management, fund flow projections, budgeting and etc. The role of EDP
Manager has got a very greater importance. In shipping industry, every one activity has to be performed in
time and with the development of computer system, the work environment itself is changed in shipping
industry and minimized the physical movement of persons from one office to another. While the EDP
systems and e-commerce applications are covered in the last unit of this book, to complete the summary, it
can be said that the role play and the response of EDP department is very essential for the total success of
the shipping business.
BLOCK III

Handling of Liner Cargo – Liner Cargo Stevedoring – Types of Cranes used for handling Liner cargo –
Unitization of Cargo & Evolution of containerization – Types of Containers & Their Features, applications –
World Container Fleet & Methods of container acquisition viz., Purchasing, Leasing.

Structure
Overview
Learning Objectives

Introduction to handling of liner cargo

Liner Cargo Stevedoring
Type of Cranes Used For Container Handling
Unitization of Cargo & Evolution of Containerization
Types of Containers & their Features
Container Acquisition & Leasing

Summary
Review Questions

Overview

Liner Shipping Industry is engaged in the business of transportation of cargo / containers from one port to
another across the globe. The essentials of this business while the cargo is placed in the ship, it becomes
the scope of the ship Captain to ensure that the cargo is safely transported to the required port of destination.
The other activities that are involved till such time the cargo is handed over to the Ship Captain is detailed in
this unit. The shipping companies scope is right from the stage of getting containers that is suitable to carry
particular cargo and ends with the delivery of cargo to the rightful consignee. The various operations in
between the accepting of cargo and delivery require lot of cross function between various agencies.
Depending upon the shipping company and its management policy, the procuring of containers or leasing the
containers from the leasing companies, co-ordination with port / terminal agencies for stevedoring, engaging
stevedoring agents in case of break-bulk / bulk cargo and the operations involved at every stage is covered
in this unit. For the understanding of the students the various types of cranes that are deployed in the port
and the stages of movements from the wharf till the container yard is also covered. It is advised that the
students study this unit in total to understand the nature of operations and selection of containers for different
cargo.
UNIT 3.1

INTRODUCTION

HANDLING OF LINER CARGO

Handling of Liner Cargo involves lot of planning & co-ordination activities right from the time of cargo booking
till its safe reaching at the required port of destination.

As we had seen earlier, Liner cargo means not only the container cargo but also the break bulk cargo, where
the bulk vessels are placed in Liner Service to carry break bulk and project cargo.

Handling of liner cargo takes place at the break bulk warehouses, container freight stations, container
terminals, quaysides and between the berth and vessels.

Cargo is stuffed / destuffed to/from the containers at CFS and break – bulk cargo is load / unloaded from / to
trucks at the warehouses. Containers are moved to the container yard (in the quay) for loading onto the
vessel. Break Bulk cargoes are moved to the quayside (berth) for loading onto the vessel. Cargo and
containers are loaded from the berth to the vessel.

One who is employed in loading or unloading of ships is called ‘Stevedore’.

Loading or unloading of ships require knowledge of the operation of loading equipments, the proper
techniques for lifting and stowing cargo and correct handling of hazardous materials, in addition the workers
must be physically strong and able to follow orders.

In earlier days men who load or unload ships had to tie down cargoes with a rope. This method of securely
tying up parcel of goods is called ‘Stevedore’ lashing. While loading general cargo vessel they use dunnage,
which are pieces of wood or inflatable bags, set to keep the cargo out of shifting during a voyage. This
process is part of stevedoring’

In the case of container vessels containers arrive at a port by truck, rail or ship and are stacked in the port’s
storage area. When the ship arrives at the port to load / discharge containers, those containers will be loaded
on board by cranes. The jobs involved include the crane operators, the workers who connect them to ship,
the truck drivers who transport the container from the dock and storage area, the workers who track the
container in the storage area and various supervisors. Those workers at the port, who handles and moves
containers, to be considered as stevedores and the process to be considered as stevedoring.

Lashing and securing of cargo and containers on board are called on-board stevedoring.

Currently a commercial stevedoring company also may contract with a terminal owner to manage all terminal
operations. Many large container ship operators have established in-house stevedoring operations to handle
cargo at their own terminals and provide stevedoring services to other container carriers.
Unit 3.2

LINER CARGO STEVEDORING

Loading the cargo from the wharf to the vessel or Unloading the cargo from the vessels to the wharf is called
Stevedoring. The handling of cargo between berth and the ship is traditionally called ‘Stevedoring’.
Stevedoring is to load or unload the cargo of a ship or to engage in the process of loading or unloading such
a vessel.

Loading and unloading ships requires knowledge of the operation of loading equipment, the proper
techniques for lifting and stowing cargo and correct handling of hazardous materials. In addition, workers
must be physically strong and be able to follow orders.

In earlier days, men who load and unload ships had to tie down cargoes with rope. A type of stopper knot is
called the stevedore knot. The methods of securely tying up parcels of goods is called stevedore lashing or
stevedore knotting. While loading a general cargo vessel, they use dunnage, which are pieces of wood (or
nowadays sometimes strong inflatable bags) set down to keep the cargo out of any water that might be lying
in the hold or are placed as shims between cargo crates to keep them from shifting during a voyage.

Today, the vast majority of non-bulk cargo is transported in shipping containers. The containers arrive at a
port by truck, rail or another ship and are stacked in the port's storage area. When the ship that will be
transporting them arrives, the containers that it is offloading are unloaded by a crane. The containers either
leave the port by truck or rail or are put in the storage area until they are put on another ship. Once the ship
is offloaded, the containers it is leaving with are brought to the dock by truck. A crane lifts the containers
from the trucks into the ship. As the containers pile up in the ship, the workers connect them to the ship and
to each other. The jobs involved include the crane operators, the workers who connect the containers to the
ship and each other, the truck drivers that transport the containers from the dock and storage area, the
workers who track the containers in the storage area and as they are loaded and unloaded, as well as
various supervisors. Those workers at the port who handle and move the containers are likely to be
considered stevedores or longshoremen.

Because they work outdoors in all types of weather, these workers adopted a type of cap that has a snug fit,
is warm, and is easily put away in a pocket. These are a type of beanie or watch cap called variously
stevedore’s cap or stevedore’s hat. Before containerization, freight was often handled with a longshoreman’s
hook, a tool which became emblematic of the profession (at least in the United States).
The process of containerization has made the operations comparatively easier as compared to handling of
bulk cargo and reducing the waiting time of the vessels at the ports to discharge the cargo and to load the
cargo meant for the next port.

Containerization has simplified the stevedoring function to a greater extent since almost all the ports handling
containers have got the uniform infrastructure to receive and load the cargo to the ships. Uniform
infrastructure does not mean that all the ports are having same type of equipment and same number of
equipment put in operation. It is the basic requirement for a container terminal operator to provide the Quay
Crane for vessels discharge, deploying inter-carting vehicles to move the containers from the Quay area to
the Container yard and using Rubber Tire Gantry Crane or similar type of equipment to lift the container from
the trailer and then to off load in the container yard.

Container Terminal Operation is different from that of bulk vessel handling.

In a modern container terminal, there may be thousands of container movements in a day. The activities of
receiving the containers for feeding to the vessel and receiving the containers from the vessel for onward
transportation to the Railhead / ICD / CFS or within the terminal to the designated yard takes place.

Lot of equipment giant in size will be deployed for performing the activity of handling from / to the vessel as
well as to receive and effect delivery from the yard of the terminal.

The Liner Stevedoring does not end with off-loading or loading the boxes from / to the vessel but it has got lot
of allied functions to be completed prior to vessel arriving as well as vessel sailing after discharge.

These functions are important to keep the terminal ready to serve to the next vessel. The various functions
and the equipment involved in this activity are discussed in the ensuing lessons to come. Before we get into
the operations and various methods involved, it is very much important for us to know the various
components of a port and its related function.

THE CONTAINER TERMINAL:

Container Terminal is a demarked area within the Port premises where the entire activities relevant to
container shipping are undertaken. Containers and container ships need special equipment for them to
operate at maximum efficiency. The original concept of containerization arose out of the need to speed up
expensive ship’s time in port. Conventional ships in the mid 1960s were taking up to three weeks to load /
discharge 10,000 tonnes of general cargo. Container ships in the mid 1970s could undertake the same task
in 24 hours. Admittedly it still took many man-hours to pack / unpack containers but this could be done in a
number of different locations many miles away from a port and without the ship being present. In order to
achieve quick dispatches, port operators had to install specifically designed container-handling equipment.
The Container Terminal’s responsibility is to discharge the containers arrived in a vessel and to feed the
containers to the vessel and this act of loading onto vessel and discharging from the vessel is known as the
stevedoring function of container vessels. From the time of discharge of the containers till delivery and for
the outbound units from the time of receiving till loading onto the vessel, it is the terminal’s responsibility to
ensure smooth and proper scheduling of activities. It requires lot of co-ordination and planning.

The Container Terminal is consisting of demarked places to receive the boxes from the vessel and to feed
the vessel.

Based on the yard size and the available berths, the container terminal plans for berthing the vessel and to
discharge and stack the containers in separate slots enabling them to deliver the units as and when the
Customs clearance is taken by the respective consignee / his agents.

The various activity of the terminal includes the following:

 Co ordination with the shipping companies and to know about their planning to reach the
vessel at the port in a given certain day.

 Conducting regular meeting with the Shipping lines to know the changes if any in the
scheduled arrival of the vessel

 Allotment of berth for the vessel calling on that day

THE QUAY:

A quay, pronounced 'key', is a wharf or bank where ships and other vessels are loaded. A quay is
constructed parallel to the bank of a waterway. The word is commonly used in United Kingdom, Ireland,
Canada, Australia and New Zealand.

This is the important facility of any terminal called QUAY at which the vessels are berthed to discharge and
load the containers / cargo. The length and the depth of water should be the determining the factor for
accommodating a vessel in the berth.
Based on the availability of the draft and the quay length, the shipping companies deploy their vessel in a
route to cover up the various ports in the scheduled route to optimize the vessel usage and economize their
activity and as such the depth of water and the quay length play a very vital role in attracting different type
and size of vessels.

The length of the quay should be wide enough to accommodate the large quayside gantry cranes that are
used to load and off-load the boxes from the terminal. There should be enough of space to receive
containers that will be landed from the vessel. There should be space to position the equipment to pick up
and drop the containers. Quay should have space to stack the containers on temporary basis to service to
the ship hatches.

Generally the typical quay would be of 50-75 meters wide from the quay wall to the edge of the container
storage yard. It should be kept clear to allow free movement of equipment.

CONTAINER YARD:

This is situated behind the quay. This is an extensive area having huge stacking capacity. The size of the
yard is depending upon the port and its available area demarked to handle specific cargo handling or
container vessels. The container yard will generally be of 65 – 75% of the total space of the terminal. The
container yard is mainly used to stack the containers received from the vessel for effecting delivery to the
customers and to receive the containers from the customers for onward feeding to a vessel.

A large terminal will have a space to stack about 10,000 TEUs at any given point of time. The total yard will
be divided into well-marked and numbered blocks with proper allocation for roads for equipment and trailer
movement. The present computerized system is so helpful to the Terminal Operator to find out the location
of a container just in a fraction of seconds from the moment the container number is just fed into the system
searching for the address of the container.

The yard allocation is made separately for Exports and Imports. Some stacking areas allotted for Special
Containers like Refrigerated containers, Flat Racks, Containers carrying hazardous cargo, etc. There will be
a separate area allocation only to receive and store empty containers.

THE GATE

Movement of containers to / from the Terminal is controlled through a gate facility. At this point, the terminal
officers inspect and verify the document. Usually the Terminal Operator will be publishing the schedule of
Gate Opening and Cut-off enabling the Port users to plan their activity according to the Gate schedule in
order to avoid any possible additional charges to accommodate the box in the last minute and also to avoid
missing of the scheduled vessel.

The Gate will be opened generally 24 -72 hours prior to the vessel arrival and will be closed once the vessel
is berthed. Based on the Terminal strength to accommodate more number of cargos in their CY and the
space allocation that can be made for different vessels at the simultaneous time, every terminal operator has
got their own system of opening Gate. For the short route feeder vessel the Gate opening may be available
24 – 30 hours prior to vessel berthing and for the main line vessels it may be ranging between 3 days to 5
days prior to berthing of the vessel.

Terminal Operator plans for the Gate Opening and Cut-off based on the information provided by the shipping
line operators. There may be lot of operators functioning in a trade route through various terminals. Every
Line has got their schedule of activity and based on the schedule, they intimate the Terminal Operator and
enter into an agreement for immediate berthing of the vessel upon arrival.

A port may have limited berths only and if all the operators are bringing their vessel at the same point of time,
it may not be possible for the terminal operator to accommodate all the vessels. Based on the number of
berths available and the quay length, the terminal operator enters into an agreement with the shipping lines
to allot the berth during a particular point of time.

For example, if a feeder operator rendering service between Chennai and Colombo engages two vessels in
service, he has to inform the terminal well in advance the likely time of vessel arrival to the port enabling the
terminal operator to plan for allocation of berth and to avoid any delay in berthing the vessel.

Assuming to complete one voyage between the Gateway Port and the Hub port it is going to take about 7
days, the feeder operator may plan and inform the terminal operator that every Sunday by 1800 Hrs his
vessel will be reporting at the port, for example Chennai.

The Terminal Operator in Chennai will be allotting a window for the vessel to take berth during that particular
time, if it has not entered into agreement with other shipping lines for the same time. Subject to operation
facility available, i.e., the number of berths available to accommodate the vessels, the terminal operator
aligns the activity accordingly and enters into an agreement for allotting the berth to a particular vessel at the
particular point of time.

When the window is allotted, it is the responsibility of the shipping line to ensure that the vessel is reporting
at the port as scheduled. If the vessel does not report in time, the terminal operator need not have to keep
the berth vacant and he will accommodate the available vessel in the berth and subject to other vessels’
operation completion, he may accommodate the vessel which has reported late in any one of early available
berth.

Thus, the Gate operation of the Terminal depends upon the vessels arriving and the contract entered into
with the shipping lines.

Wherever there is a contract entered into scheduling the vessels reporting at one specific time, for example,
every Monday, 1300 Hours, the operator will open the Gate for the respective vessel prior to ranging
between 30 – 72 hours and the Gate may remain open in case of mother vessel calling prior 3 to 5 days also.

Usually, the terminal operator is in touch with the shipping lines on a daily basis to get the update information
on the vessels arrival. Based on the information provided by the shipping line operators, the terminal will
plan for the gate scheduling accordingly.

Depending upon the practice and the type of cargo, the terminal operator may decide to receive the cargo
until 6 hours from the time of vessel berthing or in special circumstances for commodity like garments and
other related light weighted container, even the box will be accepted to connect a vessel even just before
completion of the loading or before just sailing of the vessel.

In this type of circumstances, at the gate the formalities of inspection and seal verification will get completed
and the truck will be permitted to the Quay area directly without offloading in the CY enabling the Quay
Crane to just lift the box directly from the truck and to place it on to the vessel.

THE RAILHEAD – ICD

A port will be serving to the hinterland in and around the port. While the approach from the nearest
hinterland will be through the road, wherever the rail line connectivity is available, through ICD, port is getting
connected through the railway lines. Terminals are equipped with the railhead just at the terminal gate where
administrative facilities are provided with for onward transportation of containers to the next ICD station from
the Port.

Both for Import and Export Cargo, the Railhead of the terminal is very important for the growth of the
terminal. Not only a railhead benefits the terminal, but also the trade is getting immense advantage of using
the railhead.
The importance of Railhead inside the terminal plays a very vital role in the present days. A port, which is
less congested having the railhead and connectivity to various major ICDs, will be in a position to attract
more business volume.

For us to understand the importance of Railhead facilities offered by a Terminal let us try to take the practical
example of the day-to-day activities of any one of the ports in the country.

India has got 12 major Ports. In the western coast, Mumbai and Nhavasheva handle about 52% of the
throughput of the country (based on the available statistics as at the year end 2007). Whenever the Port is
congested in peak seasons, the Northern Part of the country may prefer using Chennai Port for their Import &
Export of commodity. The uncertainty and the delay in connecting the vessels can be avoided by a better
planning of moving the boxes to a terminal that is less congested having railhead facility.

Though there could be a marginal cost variance, this can be forgone by the merchant taking into
consideration of the possible order missing by routing through a port that has got some uncertainty and
having no time limitations for the delay. To facilitate the trade,
ICDs need to be situated close to major areas of cargo generation. These will tend to be the major industrial
areas. Such locations will minimize the costs of local collection and delivery of FCL container and LCL
cargo. They will also make the service attractive to customers in that area who wish to make their own local
haulage arrangements. Site of ICD to be well connected to good road networks both for long hauls to and
from the terminal, and for local deliveries. Clearly, sitting in areas of traffic congestion to be avoided. In
those countries with viable rail networks, ICDs should be close to a rail facility where containers can be
loaded / unloaded. Ideally a rail siding with container loading facilities should be within the ICD itself to cut
down the costs and the restrictions caused by road regulations in transferring containers between the
railhead and the ICD. In determining the number and location of ICDs, it must be remembered that each ICD
will have a significant fixed cost, so large numbers of small ICSs should be avoided. Also if rail trunking to
and from the terminal is to be used, economies of scale through use of regular block trains can only be
achieved if there is a regular volume throughput. On the other hand, a large network of ICDs will reduce
costs on local haulage. Also the facility can be used for storing empty containers after import cargo has been
unloaded, with the container subsequently allocated for export loading in the same area. This will reduce the
cost of hauling empty containers to and from depots remote from the area where import and export
customers are located. To obtain the full benefits of using an ICD, it needs to have facilities for Customer
clearance, and therefore the arrangements for locating ICDs need to be agreed with the customs authorities.

GATE SCHEDULING FOR ICD MOVEMENTS

We have noticed in the earlier paragraphs how the terminal is scheduling for the Gate opening for the
vessels. ICD operations are slightly varying from the above road movement activities.

The shipping companies boxes will be handed over to the ICD operator upon completion of required custom
formalities and the reverse of operations in the case of inbound boxes. The ICD operator upon loading of
containers in a train, sends a message to the terminal operator giving details of the container number, size,
shipping company and other relevant particulars.

The terminal operator, upon receipt of this information, sends a message to the local shipping company
asking for nomination of box, vessel wise and in turn the local shipping companies give the nomination to the
terminal operator.

Based on the information received, the terminal operator will plan for their yard activities and generally the
boxes will directly be sent to the respective slot in the Yard immediately upon unloading i.e., the trailer will be
placed to carry the container to the slot directly to avoid the multiple operations.

Wherever this direct movement from the train to the respective slot is not possible, the container will be
grounded then it will be moved to the respective slot for onward feeding to the planned vessel.

Since the rail movements take place from a far off distance, the exact scheduling of Gate may not be
possible. An allowance of time is in built in the activities of the terminal and when it is within the limit to
accommodate without affecting their planned activities, the terminal accepts the containers arriving through a
particular train and load the container in the planned vessel.

When the train brings the units before the gate opening and / or reports slightly late upon closing of the Gate,
it will be accepted by the terminal and the boxes will be either stacked in the Rail-head itself if the slot is not
allotted for any particular vessel and in the case of slot allotment the box will get moved to the respective
slot.

THE CFS

In a container terminal there may be a Container Freight Station also. Not all the Port Terminals are having a
CFS facility inside the port.

A CFS is public user facility and it has a covered area or a big shed for the purpose of keeping the cargo de-
stuffed from a container, inside the godown and also to keep the cargo meant for export.
A CFS is not only situated inside the Port but also in a Port Town. CFSs are generally known as an
extension of Port and provide the facility to the Port.

A port to grow much and to achieve the maximum capacity utilization, it requires lot of supporting service
providers like CFS and ICD operators. Port may be handling lot of vessels and at any given point of time if a
port has got 4 berths, it may have to plan for off loading from all the 4 vessels and to feed to all the 4 vessels.

Unless the gate activity is planned, it may not be possible for the port to receive the boxes meant for export.
If the slot is allotted for the vessels, as we have seen it in the foregoing paragraphs, a time limit ranging 30
hours to 72 hours and until 5 days are also provided.

To understand the importance of CFS & ICDs, and the role played them in the development of the Terminal
growth, an illustration is given below:

No of berths available in a port : 4

No of vessels that can be accommodated : 4 (assumed all have nominal length)

Aprx. Time taken to complete operations : 24 Hours per vessel – discharge &
Loading
Average TEUs handled in a vessel : 500 TEUs export
500 TEUs import

If the Gate is opened in 5 days advance, the average number of TEUs that need to be received in the CY
will be : 4 vessels x 5 days x 500 TEUs
10,000 Teus

for 4 days in advance gate opening : 4 vessels x 4 days x 500 TEUs

8,000 Teus

Like this, the lesser the number of days for Gate Opening for a vessel, the terminal will receive lesser the
number of TEUs to be fed to the vessels. When the terminal has this constraint in accommodating all the
boxes five days in advance, the merchants situated in a long distance, may not be in a position to plan for the
reaching of the container within the stipulated time. When the planning to send the container from his works
may be well within the control of the merchants, the transportation of container to the terminal and the
completion of customs formalities will have necessarily be dependent on the outside agencies. Any natural
cause like heavy rain or any similar or other act of God may affect the transportation movement that will end
up in a days’ delay and as a result the merchant may not be in a position to load the cargo in the planned
vessel. The terms of the Letter of Credit might have restricted the Bill of Lading date stating prior to one
particular date and this delay in transportation will affect the entire business of the merchant. Unless the
cargo is handed over in the terminal yard, it cannot be possible for the terminal to load in the vessel. Unless
the container is loaded, the Captain of the vessel will not issue Mate Receipt. Bill of Lading can be issued
only in exchange of the Mate Receipt and in the absence of the Mate Receipt, obtaining the Bill of Lading
does not arise. No bill of Lading means no negotiation of documents. Non-negotiation results in blocking of
funds. Blocking of funds will affect the business.

While this is the situation of export movements, relative amount of importance is played by the import of
containers also. If the trade directly takes the containers from the port to their works, till such time they
complete the customs formalities, the terminal will have to keep their imported containers.

As we have seen in the above example for the Export Containers that will have to be stacked in the yard
after the Gate opening till feeding to the vessel, in the case of import right from the time of discharge, till the
delivery to the importers, all the boxes will have to be kept in the yard.

Taking the same figures as in the above example, if the importer takes on an average of 5 days to clear the
import containers, the terminal may require the yard to accommodate the following number of containers:

5 days x 4 vessels x 500 TEUs of import means, 10,000 TEUs stacking capacity in the yard.

If 5 days average is taken, a terminal will have to have the yard space to accommodate in total 20,000 TEUs
at any given point of time. The more and more the number of containers stacked in the yard, will certainly
affect the productivity of the terminal operator because of the unlimited shifting involved in delivering the
boxes.

To avoid all this, the CFSs and the ICDs help out the trade as well the Terminal to function in the best
possible and efficient way.

THE FUNCTIONS OF THE CFS AND ICDS

As we have noticed earlier, the CFS and ICDs are public user facility having the facilities to handle import
and export cargo. ICD is generally situated in the hinterland and having the connectivity to the port by way
of road and train, whereas the CFS is situated in the Port Town itself.

The ICD will have the service to the multiple ports whereas the CFS will be connected with only one port.
The ICD will have the full fledged custom facility wherein the Custom Brokers can file the documents,
assess, pay duty, examine and take delivery of cargo from the same premises, the CFS provides the custom
facility only for the purpose of examining of the cargo. The customs broker will have to file the documents in
the customs house and after assessment and payment of duty, he reports at the CFS only for the purpose of
examination, to take out of charge of customs and to take delivery of cargo.

Other than the above functions, the ICD / CFSs have the following infrastructure:

 Yard to receive and stack the import laden containers from the terminal
 A separate yard meant for the purpose of customs examination
 Warehouse to keep the cargo meant for export as well import separately
 Bonded Warehouse – to allow importers to warehouse the cargo under customs custody till
payment of duty
 Sufficient Equipment to off-load and re-load the containers from / onto the trailer
 Sufficient Equipment like Fork lift to destuff / stuff the cargo
 Weighbridge for ascertaining the weight – Customer as well as Customs need
 Apart from the above, based on the shipping lines request, provision to handle empty
container – storage & repair
 Specific services on requirement – Fumigation & related other services

Since the ICDs / CFSs are having all the above facilities, they are directly linked with the performance of the
terminal.

The terminal moves the inbound laden containers to the ICDs / CFSs and as a result, the terminal is in a
position to make use of their space in a better way.

As in the case of imports, in exports also, the ICDs / CFSs perform the Stuffing activity and when the Gate is
opened, the movement of containers is taking place from the ICD / CFS to the port.

These activities avoid to a major extent, the unwanted port congestion. Nowadays, most of the terminal
operators are connected with the ICD / CFS operators and the terminal advise the ICD / CFS operators to
control the movement in a specific time that will enable the terminal to perform better.

TERMINAL OPERATIONS:
Operations Centre in a Container Terminal will usually co-ordinate and control the operations of a terminal.
There will be a documentation center which will co-ordinate with the operations center for the receiving and
delivering of containers from / to the vessel.

Once the vessel feeding and receiving from the vessel is over, the documentation and operation team will
have to work together for effecting delivery / receiving a particular container.

OPERATIONAL SYSTEM

There are four main operational systems in a container terminal:

THE SHIP OPERATIONS:

This refers to the movement of containers between the quay and the vessel. For the containers meant for
discharge in a port (import or inbound), the operation commences from the Quay Crane picking up the
containers from the ship and loading it on directly in a vehicle (usually a trailer) that will be on the quay. This
trailer will directly receive the container from the Quay Crane and carry the same from the quay to the
container yard. For the containers meant for export (outbound) the operations are reverse i.e., the vehicle
will come under the Quay Crane on the Quay. The quay crane will lift the container from the trailer and
places the same in a specific location in the ship.

QUAY TRANSFER OPERATION

This consists of the movement of containers between the quayside and the container yard. Inbound / Import
container activities commence from the Quayside and upon Quay Crane loading the container on the trailer,
the trailer with the laden container will report at the Container Yard where the same will get off loaded by the
Rubber Tire Gantry Crane - RTG. The operation in reverse will happen for Export / Outbound containers.

CONTAINER YARD OPERATION

It is concerned with container storage – receipt – storage & delivery of containers. The safety and security of
the containers till its delivery either to the vessel or the customer is vested with terminal operator. The
Rubber Tire Gantry is used for stacking and delivery operations in the yard.

Whenever a container arrives, it is inspected for any sign of damage, the intactness of seal on the doors. A
document known as EIR – Equipment Interchange Receipt is prepared giving details of container’s arrival
and other required information about the container and its condition.
EIR is issued as a receipt of the container to the carrier – the trailer driver. If a container is moving out of the
terminal by road or rail, the same EIR is made out to document and acknowledge the container’s transfer to
the driver or railway’s care.

Before effecting delivery, the necessary documents are scrutinized by the terminal documentation center and
upon scrutiny the EIR is being cut and the trailer operator is allowed inside the yard to take delivery of the
container for which the EIR is prepared.

RISK INVOLVEMENT IN TERMINAL OPERATIONS:

The container terminal operations involve many high-risk activities like Operating Heavy Equipment, Working
at Heights, Working under heavy loads, Pedestrians movement in the yard under the Crane area and the
contractors working inside the terminal area for various activities.

Apart from the risks of working with heavy cranes, a terminal is responsible for safe handling and safe and
correct delivery of cargo to the rightful owner.

Every container that is delivered from the terminal should have a proper authorization from the Liner /
Shipping Company. Depending upon the practice of each and every terminal the nature of document vary in
nature. While few terminals may be insisting for a delivery order for delivery of container, few may ask a
prescribed other document before effecting delivery.

The delivery from a terminal is of two types. After the customs clearance, the terminal may effect delivery of
cargo to the importer / consignee or their authorized agency. Few terminals do not have much of yard space
to keep the stack for a longer time and to effect delivery. In such a case, based on customs authorization,
the terminal will allow movement of containers under customs approval to any customs notified CFS / ICD.
In both direct and delivery through the ICD / CFS, terminal will have to inspect and verify the documents
thoroughly before effecting delivery. For any wrong delivery, the terminal will be held responsible to make
the loss good the actual importer / consignee and over and above to this they will have to face lot of
consequences which may arise from legal angle through the customs authorities.

Review Questions:

1. Explain the term ‘Stevedoring’

2. What is a Container Terminal? Connect the relationship between the Quay and CY.
3. What do you mean by CFS & ICD? Explain the role played by CFS & ICD in the
development of Port.
4. What do you understand by the term ‘Gate Scheduling’? What is the importance of Gate
Scheduling?
UNIT 3.3

TYPE OF CRANES USED FOR CONTAINER HANDLING

QUAY CRANE

Quay crane is used to discharge the containers from the vessel as well as to load the containers in the ship.
Up to three quay cranes can work at a large container ship at the same time. They are large structures on
rails parallel to the length of the ship with a reach of at-least the breadth of the ship. Container Quay Crane
can lift the containers with a piece of equipment known as spreader. This is a rectangular frame with twisting
keys that lock into the holes at the top corners of each container. Upon release, the keys are unlocked and
the spreader is removed. The twisting / locking mechanism is operated by the crane operator so that the
entire operation can be performed in a lesser time say less than a minute. The spreaders are extendable to
handle 40’ container also. The cranes have to be strong enough to lift the hatch covers (up to 40 tonnes) off
ships in order to load / discharge containers under deck. Of the 1,000 or so quay cranes in use around the
world the lifting capacities can be categorized with about one third each in the ranges; upto 30 tonnes; 35-40
tonnes; and over 40 tonnes.

RAIL MOUNTED CONTAINER CRANE

Rail mounted container crane is known as Container Gantry Crane or Portainer. This type of crane is used
to load or off load container to / from the ship. This Rail Mounted Gantry Crane lifts the container vertically
with the help of a spreader, which locks into the four corners of the container. Cell guides fitted in the ship
guide the containers into the holds of the ship. This Type of crane can handle about 15 - 30 containers per
hour. The spreader of this crane is adjustable to handle 20’ or a 40’ based upon the need.

RUBBER TYRE MOUNTED GANTRY CRANE:

This crane is known as Transtainer. They are used in the storage yard for receiving, stacking and delivering
the containers from / to the trailers. These cranes can stack the containers until the fourth high and normally
used to stack until the third high. The storage area is arranged in long rows so that the crane can move along
a large volume of stacked containers. This crane has a facility to turn its wheels to move on the next area.

STRADDLE CARRIER

The Straddle Carriers have wheels at each corner, and the driver sits at the top of the structure. These
machines move containers around the stacking area, to and from the ship side gantry, and, of / off road
 vehicles. The Straddle Carrier operates by lifting the container vertically between its wheels and moving with
it. It can move containers at high speed. It delivers containers to the container crane from the storage yard
and picks up the containers from container crane area to the storage area. It is directed by the radio to the
address of a container. The yard is arranged in long rows with the containers placed end to end and stacked
3 high.

MOVEMENT OF CONTAINERS

Inbound containers are moved to the container storage yard immediately after discharge from the vessel.
Outbound containers are moved from the container storage yard to the quay area for feeding to the ship.
Trailers are used inside the terminal for movement to / from the Quay to / from CY

Review Questions:

Mention any three different types of cranes that are engaged in container terminal operations. Explain the
advantages and disadvantages of using them in a container terminal.
Unit 3.4

UNITISATION OF CARGO & EVOLUTION OF CONTAINERIZATION:

CONTAINERISATION – INTRODUCTION

In 1920s, British Rail and Pickfords who designed container which by means of crane and winch could be
transferred between lorry and rail wagons. There was also an attempt by an American Household removal
company (The Bouling Green Storage and Van co) with their international service between the US and
Europe before the First World War. These attempts fulfilled the minimum criteria, but it was not until
container started to be stacked on top of each other that we can really claim that the container age had
begun.

In 1950s, an American Company Matson Navigation Incorporated developed the corner casting system.
This was a means whereby hooks could be inserted into standard measurement holes in the four corners of
top of the container so that the container could be lifted onto another, resting on these slightly raised
castings.

Matson also developed the cell guide principle where containers could be slotted on top of one another
without the need for further securing. This double innovation was tried out on their conventional ship service
between Hawaii and the West Coast of the USA. The cell guides were built on the deck of the ship and
enabled a semi container, semi conventional service to be operated.

SEALAND

On the East Coast of the USA the owner of a trucking company, Malcolm Maclean, started to develop the
coastal trade between the American Gulf and New York. He bought a number of ex World War II Liberty
ships and converted them to take containers. Because speed was paramount in his service, he also began
to develop the port / inland relationship whereby containers could be transferred quickly from the ship to one
of his trucks, in a matter of hours rather than days as had been the case with conventional transfer.

Using this as a base, he extended his service to parts of the east coast of South America and by the early
1960s, to the west coast of North and South America.

The problem which faced Maclean (whose shipping company, appropriately, was named Sealand) was that
while he had a certain amount of influence within the USA with his ship/truck inter-relationship; he had no
such influence at the other end of the US major trading routes; much of the advantage of his service in terms
of speed of handling was lost when the container had to be handled conventionally at the non American Port.

Maclean got round this by two methods. Firstly, he negotiated a contract with two major ports in Europe –
Bremerhaven and Rotterdam – whereby he leased space for his own equipment, ringing in purpose built
container cranes and trailers to operate at these ports.

Second, he negotiated service contracts with a number of European haulage companies whereby he would
be guaranteed speedy delivery using his containers and trailers.

Sealand’s cause was also considerably helped when the US Government gave the company virtually its
entire service contract for the supply of arms/provisions/equipment, etc, for the Vietnam War. This enabled
Sealand to start a Pacific service; again the reason behind this was their better speed of handling than the
conventional operators.

The credit for the development of full intermodal containerization can be given to Sealand as they proved that
a major trade could be containerized much to the alarm of the major conventional operators who began to
see their freight tonnages slip towards Sealand.

CONTAINERISATION

Scheduled trading began during 1960s. An Australian company, Associated Steamship, in 1964, for their
Melbourne-Fremantle trade built a fully cellular ship named Kooringa, Until that that time all the ships
carrying containers had been converted conventional ships.

In 1965s a number of shipping companies in the Atlantic trade began to experiment along the lines of
Sealand so that at the beginning of 1966 about 20 fully cellular container ships were operating.

In 1968, a British Company, Manchester Liners, built the world’s first gearless ships, relying entirely on the
Port cranes, which by then, had started to be purpose built container cranes, with standard sizes of lifting
equipment and twist-locks for lifting the containers on and off the ships.

STANDARDISATION

One problem with cellular ships and standard container cranes was that everyone had to recognize the
standards used. In 1950s, Sealand and Matson had different sized containers; both had started as the
initiator and then found themselves caught out by the standardization.
In was as early as 1959 that the Van Container Sub Committee of the MK 5 Sectional committee (par of the
American Standards Association) recommended sizes of eight feet by eight feet for the width and height and
12, 17, 20, 24, 35 and 40 feet for the lengths. The 12, 17, 24 and 35 feet lengths were all concessions to
various trailer regulations in USA and Europe.

Within the space of 12 months, the various regulatory bodies in USA and Europe agreed to drop their
standards, and allow the sub committee to adopt 10, 20 and 40 feet lengths. These were subsequently
adopted internationally much to the dismay of Matson and Sealand, who had settled on 24 ft and 35 ft
respectively. Both suffered large financial losses in altering their ships and container stocks to the standard
measurement.

THE DEVELOPMENT OF CONTAINERATION:

The first generation (from 1965) of cellular container ships had their own gantry cranes, a capacity of 300 –
500 twenty foot equivalent units (TEUs) and a speed of about 12 knots.

Two British Shipping Companies – OCL and ACT – developed the second phase of containerization. To
achieve the full economics of scale, second generation gearless ships were required (1500 TEUS capacity
with speed of 21 knots) with full back up facilities at the ports and the arrival of a new concept, inland
clearance depots for the packing and unpacking of containers nearer to the industrial centers of the country.

A complete trade – US-Australia was containerized overnight.

Thereafter all deep-sea trades were subjected to this total package treatment.

Third generation ships were built for the Europe-Far East trade having a capacity of 2600 TEU. The oil crisis
of 1973 and the resulting increase in fuel prices brought about the demise of the steam turbine in favour of
the slower but more efficient diesel engine; many ships were converted to slower use the late 1970s.
Malcolm Maclean initiated the fourth generation of container ships in the guide of 4400 TEU ships linking
USA, Europe, Middle East and Far East. This service involves the most extreme use of a select number of
major ports around the world with a number of feeder ships servicing the mother ship. This enables the
mother ships to spend the maximum time at sea thereby reducing the round voyage time and the number of
ships required to carry a given level of tonnage.
We have seen the evolution of containerization and the concept of unitization. To summarize the need for
such an evolution and containerization, the following are placed in favour of the same.

Unitization – the act of packing cargo into unit loads have led the way for the development of
containerization.

Cartons, palletized cargoes, crates, bundles, rolls etc are common unit loads.

Prior 1970’s most of the shipping had taken place as bulk or break-bulk.

Due to inheritant deficiencies of conventional shipping such as delay, uncertainty, damage etc, the trade had
started looking for alternatives.

In conventional shipping most of the handling was carried by human labor or by crude lifting techniques

The packing of the cargo was not ideal for mechanical handling like forklifts.

For efficient and quick handling of cargo the trade wanted improvements in packing, which led to unitization
and palletisation. These unitized or palletized cargoes can be handled by mechanical means.

Most effective method of unitization is containers. The shipping had evolved to containerization as an
alternative to conventional cargo

While the above process was on towards the unitization of cargo, the developmental activity was
simultaneous for building the ships carrying such unitized cargo.
Ships were built to handle multi-port loading & discharge

Liner shipping trade remained constant until 1960 and the development took place subsequently

Change in conventional method felt – mainly due to

The length of port time

More time spent in port rather than at sea
Handling stowage of individual item was difficult
Handling small single item was labour intensive
Slow delivery of cargo did not contribute to the rapid port stay
In order to reduce the cost of sea transport, new techniques – changing ship design and cargo unitization
was introduced

The first step of containerization was the assembly of packages onto ‘PALLETS’ capable of handled by
mechanical means I.e., through FORKLIFT TRUCKS

Such pallets were found suitable for stowage in traditional liner ships

In conventional ships only a few containers could be carried. In order to achieve cheap and rapid handling,
ships were designed to carry containers and such ships are called CONTAINER SHIPS

1965 – First Generation Cellular Ships - 300 – 500 TEU capacity & a speed of 12 knots.

1969 – Second Generation Cellular Ships – known as Encounter Bay Class - about 1200 TEUs - 21 knots.

1971 – Third Generation Cellular Ships – known as Liverpool Bay class - 2600 TEUs 27 knots.

Fourth Generation Cellular Ships - 14 years of time taken for the fourth generation of ships - 4400 TEUs

Now the ships are built even to carry about 10000 TEUs (2005-06)

We have seen the vessels that were put in use from 1965 and the development in the size and the related
speed. Now containerization has come into almost all the commodities and the only exception is the product
that cannot be containerized at all that only is left over. For the successful functioning of this
containerization, a terminal should have the following:
 Space to accommodate more number of containers
Sufficient quay length to accommodate more number of ships
Adequate loading & discharging equipment
Facilities for documentation with Customs, Excise and Port Health requirements
Facilities for foot and car passengers awaiting transit
Necessary means to deal with emergencies

Review Questions

1. Explain the term ‘Containerization’ and its development. List few of the motivating factors that led to the
development of containerization.

What is the use of Containerization?

Unit 3.5

TYPES OF CONTAINERS

The development of through transport systems enabled shipping companies to provide standard containers
that can cater to the majority of general dry cargo.

The design of intermodal containers varies depending on source of manufacture. However, all types have
the following features:

• Metal frames surrounding the container floor with cross beams providing support

• The floor or deck is usually timber and may incorporate lashing points to attach ropes or
other cargo securing devices

• At each corner of the container floor are corner castings constructed to specifications laid
down by the International Standards Organization which allow the container to be secured by locking
devices, permitting the containers to be secured to rail wagons, road vehicles or ships.

• The locking devices can only enter the corner casting when in a particular position; once
turned to another position the device is locked into the casting.

• Strong side and top rails are provided to frame the doors of the container.

• Corner castings are provided at each of the top corners thereby permitting containers to be
secured one to another.

The sidewall construction can be corrugated steel sheet, which is relatively cheap and easy to repair. Early
containers were often of aluminium construction. Recently they tend to be steel sided, the lifetime cost of
which is cheaper than aluminium particularly when repairs / maintenance are taken into account.

TYPES OF CONTAINERS

1.GP or Dry 20’ STD (8’ 6”)

2.GP or Dry 20’ HC (9’ 6”)
3.GP or Dry 40’ STD (8’ 6”)
4.GP or Dry 45’ (9’ 6”)
5.GP or Dry 40’ HC (9’ 6”)
6.Flat Rack (FR) or Flat Bed
7.Bulk Container
8.Tank Container (Tank Tainers)
9.Flexi Tank
10.Open Top Container
11.Open Side Container
12.Half Height Container
13.Reefer Container

20 ft / 40 ft GENERAL PURPOSE CONTAINER

These containers are the most commonly available and used for a wide variety of cargoes. The operating
cost of this type of container is generally cheap since majority of cargoes can be carried in. Identification of
potential cargo is easily possible and the empty movement is minimized.

This type of container is enclosed on all four sides with doors at one end and hence reduces the risk of
damage to the cargo from external sources.

Specifications for few type of general purpose container is given below:

Dimensions Of General Purpose Containers

20 GP Standard

Cubic capacity : 33.2 M³ / 1172 Ft³

Max Gross Weight : 24000 Kg / 52910 lb
Tare Weight : 2220 Kg / 4890 lb
Max Pay load : 21780Kg / 48020 lb

Measurements Internal Door Opening

Length 5698mm/19’.4” Same
Width 2352mm/7’.9” 2340mm/7’.8”
Height 2393 / 7’.10” 2280mm/7’.6”

20’ GP / Heavy Duty

Cubic capacity and measurements same as above

Max gross weight : 30480 Kg / 67200lb
Tare Weight : 2300Kg / 5070 lb
Max Payload : 28180 Kg / 62130 lb

40’ GP

Cubic capacity : 67.7M³ / 2392Ft³

Max Gross Weight : 32500 Kg / 71650 lb
Tare weight : 3850 Kg / 8270 lb
Max Pay Load : 28750 Kg / 63380 lb
•
Measurements Internal Door Opening
Length 12032mm/39’ 6” Same
Width 2352mm / 7’ 9” 2340mm / 7’ 8”
Height 2393mm / 7’ 10” 2280mm / 7’ 6”

40’ HC

Cubic capacity : 76.4M³ / 2696Ft³

Max Gross Weight : 32500 Kg / 71650 lb
Tare Weight : 3940Kg / 8640 lb
Max Tare Load : 28560Kg / 26960 lb

Measurements Internal Door Opening

Length 12032mm / 39’ 6” Same
Width 2352mm /7’ 9” 2340mm / 7’ 8”
Height 2698mm / 8’ 10” 2585mm / 8’ 6”

45’ HC

Cubic capacity : 86.0M³ / 3038Ft³

Max Gross Weight : 32500 Kg / 71650 lb
Tare weight : 4820 Kg / 10630 lb
Max Pay Load : 27860 Kg / 61420 lb

Measurements Internal Door Opening

Length 13566mm/44’ 6” Same
Width 2352mm / 7’ 9” 2340mm / 7’ 8”
Height 2698mm / 8’ 10” 2585mm / 8’ 6”

20 ft / 40 ft OPEN TOP CONTAINER

This type of containers satisfies a demand from many shippers to top load the container. For example, many
shippers of machinery have overhead gantries in their premises to load cargo in this type of container.
Cargoes that cannot be loaded in a General Purpose Container will get loaded in this type of container. This
container enables shipment of cargo in excess of 8.5 ft high. This makes the container an out of gauge
shipment that may be more difficult to operate in an intermodal system.

This type of container is engaged in shipment for a particular market segment. It does attract higher
operating costs for the container operator, due to the higher initial cost of the container, the need to replace
tilts and their support rods from time to time and the risk of an imperfect weather seal making it more difficult
to identify suitable back load cargo.

20 ft / 40 ft HALF HEIGHT CONTAINER

This type of containers specifically designed to carry high dense cargos like steel pipes and steel tubes.
They are the cut down version of 20 ft / 40 ft open top containers. They are only 4 ft / 4.5 ft in height. When
high dense cargo is moved in a full height container, the weight limit of the container will be reached before
the volume limit. To avoid this, half height containers are used.
However, this has got a limited usage i.e., only particular heavy commodities are suitable for these type of
containers making it difficult to identify return loads.

20 ft / 40 ft FLAT RACK CONTAINERS

This type of container is designed to facilitate the movement of cargo in excess of the dimensions available
in a General Purpose or Open Top container.

This has got a flat loading platform, with corner posts. Some containers have fixed end and some have
open ends enabling over dimension cargo to get loaded. Cargo can be loaded from the side as well as from
the top.

20 ft BULK CONTAINERS

This has got loading hatches in the roof and a floor level discharge hatch. Full height doors are also fitted,
permitting its use as a general-purpose container.

This type of container is designed to carry granular or dry powder commodity that can be carried in loose
form. This reduces the customers packing and handling costs, although the cost of providing the container to
the container operator is consequently greater, as these containers are more expensive than the standard
general-purpose container.

Cargo will usually be loaded from the top from a silo and discharged through the rear hatch. Forty foot
versions of these containers are not commonly found, as most of the dry bulk commodities would fill a
container on weight rather than volume.

20 ft TANK CONTAINER

This type of container is primarily designed to carry bulk liquid chemicals or potable spirits. Usually these
types of containers are owned by the shippers themselves for a particular commodity that they wish to
transport. The incompatible nature of many of the chemicals makes the shippers to have their own boxes
designed according to their cargo standards.

These types of containers have electric or steam heating systems to discharge liquids, which are viscous at
normal temperatures.
20 ft OPEN SIDE CONTAINERS

This type of container resembles that of a General Purpose Container except that instead of rigid sides, it
has removable curtains. It is used for cargo, which requires to be side loaded, and slightly of over-width and
requires more protection than loading in a flat rack container. It is used generally for palletized plywood.

These containers are used to carry livestock also.

20 ft VENTILATED CONTAINERS

These are designed for carriage of coffee from East Africa. They are identical to 20 ft General Purpose
containers apart from the provision of ventilation ducts along the top rails of the containers.

This allows water vapour given off by the coffee in its transit from hot most climates to a cool temperate one
to dissipate freely through passive ventilation. This removes a possible cause of cargo damage. This type of
container can be used as a 20 ft GP and therefore there are no problems in identifying back load cargo.

APPLICATIONS OF VARIOUS TYPES OF CONTAINERS

 20’ dry (24 ton) – Ideal for stuffing light and medium weight cargo. E.g. Garments,
Chemicals etc.

 20’ dry (30 ton) –ideal for stuffing heavy cargo. E.g. Rice, Wheat, Steel scrap etc.

 40’ dry (std) – ideal for loading voluminous cargo with light weight E.g. Cotton bales and
consolidated LCL cargo.

 45’ dry (HC)- ideal for stuffing voluminous, long and lightweight cargo etc. PVC pipes.

 20’ Reefer – ideal for stuffing heavy (Refrigerated) perishable cargo. E.g. chocolate - rarely
used equipments

 40’ Reefer – ideal for stuffing voluminous light / medium weight (Refrigerated) perishable
cargo. E.g. eggs/meat etc.

 Flat Rack (20’n 40’) ideal for stuffing odd sized cargo E.g. Over Dimensional machinery –
that cannot be stowed into an ordinary container.
 Open Top Container – the top is normally covered with tarpaulin ideal for stuffing cargo
through the top. E.g. Machinery needing protection from sun and water.

 Hard Top Container – Same as open top but the top is covered with iron lids that can be
opened. Cargo that needs special protection E.g. Glasses can be stuffed.
 Open Side Containers – one side is covered with tarpaulin ideal for stuffing livestock.

 Bulk Head Container – these containers are with three holes on the top to stuff bulk cargo
E.g. loose grains. There will be an opening in the front panel to remove / discharge the grains.

 Tanktainers - These containers are fitted with Tank and used for carrying fluids, E.g. fruit
juice, chemicals etc.

 Flexi tank - these are standard containers fitted with flexible bags. These bags are with a
valve kept in side the container and used for stuffing liquids E.g. Oil. These bags can be removed and use
the container as a standard container.

 Flat Bed – flat Racks without the side flat heads (collapsible or stationary) are called flat
beds; these are used for stuffing long and out of gauge cargoes E.g. bulk pressure tanks.

 Half Height Containers – the containers are 20’ length and the height will be only the half of
the normal container, these are used for very heavy cargo where the extra height is not required E.g., Steel
Pipes – Heavy Steel Plates, etc.

 Garments on Hanger Container – These Containers are with hangers inside specifically
designed for hanging garment.

Review Questions:

1. Explain any four types of containers. Also mention the containers that are used for
carrying any specific commodity with its logistical advantage.
UNIT 3.6

CONTAINER ACQUISITION

Shipping Industry is highly capital intensive and containerization requires further more capital to own
containers and handling equipments.

Containers can be either owned by the Shipping Lines or may be taken on lease from leasing companies.
The decision either to own the containers or to go in for a lease depends upon various factors and the policy
decisions of the shipping company.

In the case of acquisition of containers, generally the following costs are involved:

a) Cost of Purchase – the expenses incurred right from placing the order till getting the
container.

b) The cost of Survey – deploying the surveyor for inspection before movement and the
relevant cost toward the performance of survey.

c) Cost for fixing the Company logo is an additional expense

d) Cost of fixing the CSC Plate

e) The Cost of transportation from the manufacturers place till the depot of the shipping
company

The decision to own the container is based on few of the important following factors:

LONG TERM BUSINESS PLAN

The Shipping Company should have to decide about their long-term business plan. Once they have decided
to be there in the trade and to operate in a specific route for a longer period, they can have their own
containers.

If a shipping company plans to operate in specific location covering about 20 ports, then the shipping
company should have enough of inventory level to serve to the trade.
The decision to invest on containers will have a long-term impact on their payback period.

DEVELOPMENT OF NEW MARKET AND DEMAND AND SUPPLY

An existing operator may like to expand the activity in a different trade route and may like to ascertain the
business steadiness and the viability of operating in the particular sector. While the trade route is chosen on
trial basis, it would not be possible for the shipping company to have their own boxes to deploy in the route.

The decision of owning will have two different impacts. The additional investment of money to acquire the
boxes being the first hard decision to take the second impact would be that if the shipping company prefers
closing down their operation in a specific route, it would be impossible for them to make use of all their
inventory and it may be a difficult process for them to dispose off the boxes.

Moreover, the estimation made at the time of investing on the container purchase need not be go in the way
as estimated and it is subject to change according to the market variations, Govt. Policies, etc.,

The demand may be more in a particular place and the demand may be too less in a different place. At
some trade routes, there may just be one way traffic i.e., either there may only be export or import alone,
resulting in trade imbalance. This will force the shipping companies to reposition the Empty Containers from
the place of excess to the place of demand.

MONITORING AND CONTROLLING:

Any business will have its own core area of strength and it will try to concentrate on the same only. Though
owning of the containers adds the strength to the shipping company to operate in a more flexible way without
any dependence on leasing companies, it has got its own disadvantages also.

The monitoring, accounting and controlling of the equipment becomes very difficult and to it’s up keeping
involves huge investment of time, personnel and additional overheads towards the maintenance of the same.

To overcome from the above pitfalls, container leasing is preferred.

CONTAINER LEASING

Container leasing is a part of shipping activity. The Lessor makes supply of containers to the Lessee, Liner
Companies depending upon their requirement, for a hire.
Leasing becomes necessary to a shipping company in the following situations.

Shipping Lines require containers to carry the cargo of the importer or exporter from one port to another.
The shipping companies should, in order to retain their business, ensure that adequate number of containers
kept at the place / port, as required by the exporter to load his cargo in the container for onward movement.

Though all the lines have their own containers also, the own containers alone may not be sufficient to meet
out the requirement of the customers. While this is one reason for hiring containers, the container value is
more and keeping too many containers becomes highly capital intensive. Large investment on containers
will be too difficult for the shipping Lines due to their own financial constraints.

As like any other manufacturing company, shipping lines do have their own budgeting system and every year
they can go in for investment on containers only to the allowed limits in the budget.

As the shipping industry has some volatility in the commercial functions, though the budget is made
allocated, due to sudden increase in the demand of containers, necessarily the shipping companies will have
to hire out the containers to meet the demand of their customers.

Rather than investing very heavily on the containers where the utilization may not be all that certain for all
365 days a year, they can very well fund on ship buying.

Except for very few very bigger shipping companies, other companies are taking the boxes on lease in the
range of 40 to 60% as compared to the total trade carried by them.

The leasing is exercised by different type of shipping companies. A shipping company in the status of
MLO/MTO or a shipping company in the status of NVOCC prefers leasing of containers. For the shipping
company to be successful, they should ensure sufficient containers are stocked at every location in order to
serve to the exporters. Each shipping company will have their own system of market analyzing and keeping
the required inventory. But every time their projection need not be going good with the market requirements.
In order to meet out the market demands, a shipping company takes the decision of leasing containers.

Moreover, the availability of containers depends largely on the ratio of export and import in the particular
location for a particular shipping company. When the export of cargo is more and the import of cargo is less,
or in the reverse case, there would be a trade imbalance and this either makes the demand for the
containers or empty repositioning of containers from one location to another.

The scenario of present trend on leasing of containers is as below:

 Liner shipping companies acquire their container fleet either by purchasing / building or by
leasing from one of the major leasing companies

 Containers are manufactured in many countries but china is leading manufacturer followed
by Europe

 China manufactures 80% of the world’s marine containers

 The availability of a large and inexpensive labor force, a fall in the cost of raw materials and
abundant supply of export cargo are the major reasons for the liners and leasing companies to choose China
for building these containers

 Selling price & manufacturing costs are the other reasons to influence the liners and leasing
companies to build their containers in china

 The two leading Chinese container manufacturers are CIMC group and Singamas Container
holding

 Pacific International line have 5 own manufacturing units in china

 CIMC group operates 8 and Singamas Container holdings operate 4 of dry freight
manufacturing plants, there are approximately 30 manufacturing plants in china.

 Europe manufacturers build approximately 8% of the world’s container output.

 Approximately 45% of the world’s containers are supplied by the leasing companies.

 All the liners will have a certain percentage of their fleet as leased units.

 They have the flexibility to have the units when the cargo supply increases, and off-lease
when the cargo supply decreases

 During the cargo dull period the liners off-lease the units to save the storage and equipment
lease costs.
 The liners conduct on-line survey prior picking up units. The survey report will show the
condition of the unit at the time of on-hire. The leasing companies will do the off-hire survey at liner’s cost
while off hiring. The lessee will be liable for the damage of the equipment barring the normal wear and tear.

 The lease rent will be levied till the container is repaired and ready for use.

OFF HIRE

As noticed above, the shipping market is volatile in nature. At some times due to heavy competition or for
any other reason, the shipping company may not be interested in operating in one particular route.

Considering this route, shipping company might have hired some units of containers and when the route is
not exercised, the shipping company will have excess of boxes and they may return the boxes to the
Lessors.

Such an activity is called as OFFHIRE

ONHIRE

On the contra to the above, when the shipping companies are running short of units, they take boxes from
the lessor and such activity is called as ONHIRE.

There are various types of leasing agreements entered into by the shipping companies and leasing
companies and few of the terms are detailed below:

MASTER LEASE AGREEMENT

This is the first and essential document signed between the Lessor and Lessee to have a proper agreement
in place mentioning the terms and conditions of lease. The lessee is allowed to on hire or off hire containers
only after the MASTER LEASE AGREEMENT is signed. The containers on hired under MASTER LEASE
AGREEMENT cannot be off hired before 180 days.

ONEWAY USE

One way use is encouraged by Lessor to Lessee from surplus location to demanded location. But the
Lessee is charged for this.
ONE WAY FREE USE

One way free use is similar to one way use with the difference of Lessee not being charged. The deal has
no cost to the Lessee.

TRIP LEASE

Lessor supplies container to Lessee on the basis that Lessee has to return the equipment to the Lessor at
the place of pick-up.

SHORT TERM LEASE

Lessor supplies container to Lessee for a specific period is called as short term lease. The period is between
one to three years.

LONG TERM LEASE

Lessor supplies container to Lessee for a specific period is called as long term lease. The period is between
three to five years.

FINANCE LEASE

Lessor supplies factory units or older units on finance lease to Lessee for a certain specified period. The
Lessee claims ownership of the containers after the specified period expires and payment of all lease
charges. Lessee has the advantage of not investing huge amount on containers at one time.

LEASE RENTALS

Lessor charges lease rental to the lessee for the container on hired from them. The lease rental varies
between Lessees to Lessee. The lease rental is on per day basis and billed once in 30 days.

STORAGE & REPAIRS

Leasing companies store their containers in container depots near to the Port for easy transporting. They
appoint proper depot that can meet their standards. Container is considered as the greatest asset because it
brings revenue to the company and therefore every care is being taken to maintain the container.

ADVANTAGES OF LEASING BUSINESS

There are advantages to the Lessor as well as the Lessee in the leasing business. The same is discussed
from both their perspective:

OWNING & LEASING

After determining the number of containers required the choice is either providing them on their own or hire
them from the leasing companies. Both owning & leasing has got it’s own merits and demerits. Having
determined the number of containers which the operator wishes to operate, has the choice of providing them
by buying them from a specialist manufacturer, or leasing them from one of the many companies whose
business is to own containers fro the purpose of hiring them to operators.

MERITS OF OWNING:

 This may prove to be cheaper in long run

 The manufacturing of containers may be as per the operators’ design thus having control
over the maintenance expenses

 Having own containers always increases the value of the company.

DEMERITS OF OWNING:

 Financing is major factor and the cost of finance is a very major consideration
 The average life of a container is about 12 years. If there is no demand, the surplus
containers may have to be disposed off at a very cheaper / scrap rates.

LEASING – MERITS

 It is easier to adjust the size of fleet in accordance with the market demand
 Capital financing is reduced / avoided
 The responsibility of repair in few cases will be to the account of lessor and hence the
overheads of the lessee is limited
 On few specific lease arrangements, there will be reduction of cost if there be an imbalance
of trade.

LEASING – DEMERITS

 More expensive than owning

FROM THE LESSOR PERSPECTIVE

 Income generated from lease rentals is perpetual and it is not sale.

 Depreciation is claimed against containers in their balance sheet.

 Any fluctuation in foreign exchange will be an added advantage to the lessor.

FROM LESSEE PERSPECTIVE

 Availability of containers ensured at any time at any location.

 Cost effectiveness

 No Investment

KEY TERMS IN LEASING CONTEXT

DPP

DAMAGE PROTECTION PLAN - The DPP coverage is offered by Lessor to Lessee for repairs up to a
specified amount. Lessee has to pay the repair charges exceeding the DPP cover amount.

DOCH

DROP OFF CHARGES - This is paid by Lessee to Lessor if they off hire the containers to Lessors at the
surplus location

DOCR
DROP OFF CREDIT - This is paid by Lessor to Lessee if they off hire the containers at demanded or hot
location

PUCH

PICKUP CHARGES - This is charged by the Lessor if they pick containers from the demanded location or
hot location.

PUCR

PICK UP CREDIT - This is paid by the Lessor to Lessee if they pick up containers from the surplus location.

DOL

DROP OFF LIMIT - This is the off hire limit offered by Lessor to Lessee for a particular month.

FDS

FREE DAYS - Free days is basically an incentive offered by Lessor to Lessee and the Lessee need not have
to pay for such free days offered.

MAJOR LEASING COMPANIES IN THE WORLD

 Textainer
 Triton
 Geseaco
 Transamerica
 Gateway Container Corporation
 Capital Lease
 Bridgehead
 CATU
 Florens
 Amphicon
 Waterfront
 GOLD Containers
 CAI – Container Application International
 Cronos

Review Questions:

1. Explain the concept of container Leasing. State the advantage of Leasing of containers.

2. Explain various method of container leasing.

3. Briefly discuss:

a) Master Lease Agreement

b) Financial Lease
c) Off Hire
d) DPP
e) FDS

4. Name any five of the container leasing companies and mentioned any two leasing
companies that are in your region with some hire indications.

5. State the advantages of owning & leasing of containers both from the point view of leasing
company and users.

Summary

This unit has dealt with the handling procedure of liner cargo, stevedoring and the equipments that are used
in handling the cargo between the wharf and the vessel and vice verza. The sea transportation is not just
restricted with the transportation of cargo from one port to another. It is imperative to note that the allied and
supportive activities that are essential in loading and unloading the cargo from the vessel is an important one
that can change the system of business itself. The effectiveness of stevedoring operation and the
infrastructure of the terminal and port together can only develop the trade in a positive way. Any one
shortfall either in the length of the quay, the draft, space in the CY, the dearth of equipments to handle i.e., to
receive and feed from / to the vessels can challenge the port activity in total.

Handling of Liner Cargo – Liner Cargo Stevedoring – Types of Cranes used for handling Liner cargo –
Unitization of Cargo & Evolution of containerization – Types of Containers & Their Features, applications –
World Container Fleet & Methods of container acquisition viz., Purchasing, Leasing.
The knowledge is essential to suggest a right crane for the right cargo operation. The warehouse / space
management is a must to optimize the resources that are available in the port / terminal. After having
understood the essentials of the port operations and the usage of equipment, it would be opt to know the
development of containerization and unitization of cargo along with the various types of containers presently
in use. The different types of containers serve to different types of commodities. The best selection of right
container for the right cargo will save lot of cost and also ensure safety for the cargo. The cost of
transportation is a part of the total price of the commodity. Hence every move should be made with a view to
optimize the cost. The optimization of cost has got a direct impact on the investments made and the
inventory held. This rule is not exemption to the shipping business. Hence the various modals of shipping
business need to be practiced in order to maximize the profits. Shipping Company may have their own
vessels, their own containers and their own offices established in every part of the world. While it would be
possible for few of the very big shipping companies to have everything under their control and everything on
their own, (Example – Maersk Lines), for few of the companies it may not be possible to invest at every
requirement. The concept of outsourcing is quite common in shipping business. A shipping company may
operate only between main ports and avail the services of feeder operators to transport boxes from gateway
port to hub port. When a Shipping Company has got own vessels deployed in the main trade route, in order
to service to the customers, may charter few more vessel to deploy in service. While this is the case for
vessels, a NVOCC operator may have few containers on their own and may lease out rest of their
requirements from a leasing company. Students are advised to go through the contents of this chapter till
they understand the concept in total. Only a through understanding will help the students to perform their
roles in a better way.
Block IV

Types of Liner services – Independent Service – Consortium / Alliance Services – Direct Vs. Transshipment
services – Short Sea Feeder Services – Liner Freight Rate Structure and Economics of a typical Liner
voyage – Liner Conferences

Structure
Overview
Learning Objectives

Factors influencing shipping business

Various Liner Services – Independent / Consortium / Conference / Alliance system & Different service
options
Direct Service & Transshipment services
Short sea Feeder Services
Liner Freight Rate Structure
Economics of a typical Liner Voyage

Overview

After the students having understood the basics and characteristics of liner shipping business, in this unit it
was felt opt to explain the factors that influence the shipping business i.e., why there be a trade and how the
trade can offer business to shipping companies. The advantages that is available to the traders while using
the services of direct service & transshipment service is discussed in detail. The concept of running the
business on an independent basis and with the support of other shipping companies, the merits and demerits
of such system to the owners / shipping companies and the users are enumerated. The factors that are
influencing while fixing the freight rate is an important element to be noticed by the students as this will be
very useful for their practical applications while they take up an assignment in shipping industry or with
merchants connected with shipping activities.

Summary
Review Questions

UNIT 4.1
AN INTRODUCTION – FACTORS INFLUENCING SHIPPING BUSINESS

The movement of cargo by sea has come into practice because the seller / exporter started selling a
commodity to another party who is in need of the same and situated in a different place / country. The
activity of sale by one and the purchase by another is known as trading.

The trade will become effective when there is an advantage to the buyer and also to the seller. When the
advantages of the trade are the prime importance to the parties of the trade, the real reason for any trading
will be followed by the need / demand by one party and the surplus of some resources with another party.

Due to the uneven distribution of resources throughout the world, one part of the world has excess and
another has a shortage. For example, Great Britain has substantial reserves of coal and in fact until the late
1930s, it was a major exporter of some of the finest coal in the world, Australia has also coal and although
the two countries are more than 10,000 nautical miles apart, Australia is able to sell coal to Britain.

Before dealing with this apparent paradox, we will have to know the implications of the word ‘resources’. To
consider the theory of trade, the two expressions commonly used by economists, which need to be
mastered. The first is absolute advantage, which refers to a commodity which one country has in exportable
quantities but which another country has none. For example, bananas or coffee, which cannot be produced
in Northern Europe whilst they are in abundance in the West Indies and Brazil. Such an absolute advantage
is the result of climate. Absolute advantage may also come about through geology and an example is
copper that is mined in several parts of Southern Africa but many countries have no such mineral deposits.

Thus, in the case of absolute advantage, the resource is simply the physical availability of the commodity.
Other factors are, however, involved which lead to comparative advantage. In simplistic terms this means
where one country produces a commodity more cheaply or in a more desirable form than another.

In addition to climate and geology there are other factors of production, which create a comparative
advantage. These factors tend to fall into four categories namely Land, Labour, Capital and Enterprise. No
two countries have exactly the same resources and few, if any, can be considered as being self-sufficient.

Land incorporates climate and geology in terms of absolute advantage but it can have a profound effect also
in the case of comparative advantage. Reference was made to the fact that Australia can sell coal to Britain,
which actually still has vast reserves of coal. Where geology plays its part is in the way that coal in Australia
is much easier and therefore cheaper, to extract from the earth.
Labour takes cognizance of the fact that the cost of living in some countries is considerably lower than in
others and so they can produce certain items at a much lower cost. This has been particularly demonstrated
in the case of shipbuilding which was at one time almost exclusively carried out in northern Europe and the
USA but is now much reduced in those places but has developed enormously in countries like Japan and
South Korea.

Capital does not simply mean money but just as much the things which money has provided such as
manufacturing Equipment, Roads, Ports and all the other items which permit goods to be produced and
brought to a place from which they can conveniently be exported.

Both Labour and Capital may be involved in enterprise. Countries with high labour costs have used their skill
and knowledge to develop a high degree of automation in production that enables the same amount of work
to be carried out by far fewer people but automation demands a huge amount of money to be invested.

Land may be considered static as most mineral deposits have been located even if not yet being worked and
despite the effects of global warming the changes in weather patterns are extremely gradual.

Labour and Enterprise, however, can change radically in a relatively short time. Enterprise tends to change
by evolutionary processes through populations becoming more technologically advanced but more drastic
changes may be brought about by politics. A narrow comparative advantage favouring imports can easily be
reversed by the imposition of customs duty that would make the imported goods more expensive thus
favouring a boost to domestic production in order to reduce unemployment. The converse may be where a
government gives money to manufacturers in its own country in the form known as a subsidy. The object
here being to enable the goods so produced to be competitive in the export market. This device was
practiced for several years in UK and other European Countries in a vain attempt to retain their position as
major shipbuilders. The theory of subsidies is that it is better to use tax-prayers money to maintain
competitiveness in manufacture and earn foreign currency rather than use possibly more money paying
benefits to large numbers of unhappy unemployed workers.

Patterns of Trade influence imports and exports where politics as well as enterprise can have their effect.
Until the middle of the twentieth century, several European countries, especially Great Britain, had direct
interests in territories overseas, countries that were at one time parts of their empires. Traditional trading
patterns were, therefore, between the mother countries and these overseas nations many of which
deliberately developed items that were required in Europe. Typical of these were the farming and dairy
products (meat, butter, sugar, etc.) that are so important to such areas as Australia and New Zealand.
Latterly the economic and political links forged in Europe have brought about a reduction in the amount of
trade with former colonies. This in turn has had the effect of countries like Australia creating new trading
patterns with the Far East and in so doing finding it logical to boost its extraction of coal, iron ore and other
minerals.

An important influence upon trade and trading patterns that has little or nothing to do with the actual factors
of production has been the technological advances in ship design and production. Until the 1950s, 10000
tonnes was large for a dry-cargo ship and so called “super-tanker” carried 42,000 tonnes. Less than thirty
years later, ships ten times these sizes were commonplace. Such increases in size brought about
economies of scale. Very simply this means that one does not need a crew ten times the size for such
bigger ships. Indeed, other technological advances have had the reverse effect and crews of today’s
100,000 tonner are no more than a third of the size of those of a 1950s 10,000 tonner. Similarly one does
not need an engine burning ten times the amount of fuel to propel these big ships.

The effect of these economies of scale has been to enable quite inexpensive raw materials to move half way
round the world and still arrive at a competitive price. Not only raw materials move long distances cheaply,
one can move goods in freight containers vast distances and only add a few dollars per tonne to their price; a
small amount in the price structure of, for example, washing machines, or television sets is affected by sea
freight.

Politics can also have direct influence on trading patterns in other ways. Warlike operations in the Middle
East have caused the Suez Canal to be closed for long periods on more than one occasion. The produced
the incentive to design and build the ‘Cape-size’ tankers needed to transport crude oil round Africa instead of
via the Suez Canal and still deliver it in Europe at the same price.

The practical and political influence on trade and trading patterns are not the end of the story. Simple
preference, encouraged by clever advertising, can take advantage of the cheapness of modern sea carriage.
The USA has the biggest car producing companies in the world and yet one can encounter German, British
and many types of Japanese cars in American Streets. Supermarkets in any European country have the food
items in their shelves, from all over the world. These countries are able to produce almost all the goods that
are essential for life but here again, personal fancy is now an important part of comparative advantage. This
has led to the term ‘globalization’ being applied to the worldwide distribution of, especially, consumer goods.

From the above, we can understand what is trade and for trading the essential requirements apart from the
demand from one end and the surplus available at another end. The vital factor to be noted is that the
movement of goods / commodities / raw material from one place to another i.e., from the surplus country to
the demanded port / country is essential and inevitable.
The concept of barter sale which restricted the trade only between the two parties i.e., one party offering one
item to another in exchange of the required item, slowly got replaced and reached today’s level of
exchanging the value of goods by way of internationally accepted currency.

When the value is measured in terms of currency, not only the goods value taken into account but also the
cost attached to the goods till, the delivery of goods at the required place from the point of export.

The only transportation facility available before the invention of airlifting between two places was the
waterways apart from the usage of roads, which was meant only for the short distance transportation. The
waterways have thus helped to the trading community by offering higher contribution to economize the cost
and the relevant operations in reaching the goods from the point of sale to the point of consumption.

70% of the world’s surface is covered in water. From this we can understand only one type of service alone
cannot cater to the requirement of trade and on need base different type of services need to be put in place
to satisfy the customers and also the shipping lines to economize their activity to make money.

As the end result of a business is to make profit, any business will have to be carried out with due caution to
make the business a successful one and to make more profits. It is based on the market demand, the size of
the business can be determined but the policies as to how to run the business will have to be determined by
the owners / partners of the business entity.

Though a sizeable shipping companies are run on closely held basis, few companies are running as a limited
company. Rather than we understanding the business on the ownership entity base, we shall focus more
upon the nature of operations on which the shipping lines are functioning in present days.
Unit 4.2

TYPES OF LINER SERVICES

Having understood the characteristics of the Liner Services from the earlier sessions, it is important to know
about the various type of Liner Services available and their strengths and weaknesses.

To list the various types, it can be stated as

 Independent Service
 Conference Service
 Consortia Service
 Alliance Service

When there are operators to offer the services in either one of the above mentioned pattern, every one type
of operator has got their own advantage and disadvantage in operating in such a fashion. It is depending
upon the service type they offer to the trade and the trade route they cover. The most commonly known
services offered by liners are as below:

 End to End Service

 Round The Word Service
 Pendulum Service
 Hub & Spoke Service

END TO END SERVICE:

The Liner Operator has a choice to select any one type of service option or combination of more than one
type. One of the characteristics of the liner service is that the vessel sailed from the starting point to call on
the various loading ports to the discharging ports and then to return over the same route to its starting point.
Traditional way of serving liner trade route was to cover a range of loading ports at one end of the route and
range of discharging ports at the other. At certain trade routes, there may be some differences as to the
individual ports called because of the availability of export cargo from a particular port that may have no
demand for imports or vice-versa. Example of such route might be from Hamburg, London, Rotterdam and
Antwerp to Sharjah, Mumbai, Colombo and Chennai. The return route might add an Indian Export port such
as Visakapatnam but omit the Arabian Gulf Port.

ROUND THE WORD SERVICE (RTW)

This is an alternative to the end to end service. The ship never turns round, it just keeps sailing until it
completes a circumnavigation and returns to its starting point i.e., the ship will not have to report the ports
through which she has traveled for loading the cargo. Transatlantic, Transpacific and Far East To Europe
route are the examples of such service. The expected economy of this operation is that the vessel will have
the opportunity to carry cargo on every leg of the voyage including ports that are intermediary to the main
voyage legs. Ideally the service operates both west about and east about the world. One obvious limitation
is that such a service is restricted to using PANAMAX tonnage (the largest size of vessel that can transit the
Panama Canal). This type of services have declined in importance now day.

PENDULUM SERVICE

In its most ambitious form a pendulum service is a RTW service that omits the Panama Canal allowing the
largest size of vessel to be used. It would operate from the Eastern Seaboard of USA (ECUS) via Europe to
the Far East and vice versa. Compared with an RTW service it loses the ability to carry cargo between, for
example, ECUS and and the Far East because its transit time is too long. Pendulum differs from End to End
in that it combines two or more main trade routes.

HUB & SPOKE

It is a type of service that is offered between the hub port and the gateway port. The mainline ship will call
at key ports (hubs) on its route. From these hubs, it will operate feeder services to other local areas and
‘spoke’ services to serve other accessible trade routes. This concept is used to allow east / west service
vessels to link to north / south trades. Almost all deep sea container services today use the hub and spoke
concept to some extent and the major players support their worldwide services by this method.

After we understanding the various service options available in liner trade, let us understand the nature and
style of functioning of the Liner Service Provider from the point view of Independent / Conference /
Consortium / Alliance.

INDEPENDENT SERVICES

Independent service provider is a one who does not get into any arrangements of consortium or alliance with
other shipping line operators. He will be operating in a trade route having all necessary ingredients of a liner
service.
To be successful, the operator should not only offer good service to shippers but also a cheaper rate. In the
last three decades, much bigger operators have challenged the conference and have successfully reassured
the merchants of the seriousness of the independent lines’ endeavours. The emergence of independent
operator coupled with changing attitude to business in general and shipping in particular, provided the
impetus for the liberalization of liner shipping. This helped the shippers who wanted to negotiate the rates
and terms with the independent operators those who have been controlled by the strict conference rules.

The rising strength, service and competitive rates offered by the independent lines won substantial amounts
of business from the conference members during the 1980 – 90s. Conference members, realizing that they
were being left in behind in the pursuit of business, were forced to undercut the conference tariffs and match
these rates, thus resulting in resignation from the conference or a much more flexible pricing regime.

One result of this was that even long established lines that were historically strong supporters of the
conference system started to review their position and to look much more closely at the role of the
conference in individual trade routes. A particular major liner company may now be a staunch conference
member in one trade, and yet be the leading independent competitor to the conference on another route.

The service operated by a single liner shipping company in a particular trade route, competing with other
liners or consortia operating in the same trade route is called as Independent Service.
CHARACTERISTICS OF INDEPENDENT SERVICES

DEPLOYMENT OF OWN VESSELS

Under this pattern, a single operator deploys vessels in operation. The size of the vessels and the number of
vessels that need to be put in operation is based on the decision taken by him to cover the set of trade
routes. More and more the ports he calls and operates in various routes, the requirement of vessels will be
more.

To make out the presence in a sector, according to the requirements of the trade and the frequency expected
between the ports, he has to plan for the deployment of vessel.

Since it is a single operator, more number of vessels required for meeting frequency and the point to be kept
in mind is that he should be in a position to continue with the services and the basic requirement for this
should be the economy of scale. The income generated in the operation should be sufficient enough to
meet out the expenditure in running the service and over a period of time the returns should start coming in.

INDEPENDENT FREIGHT RATES

As the basic characteristic is to put their own vessel, there would be no sharing of resources and
infrastructure with others. Depending upon the technical expertise available with the company and its
financial strength, an independent operator may put in their own vessels in a trade route. The owning means
purchasing the ship then putting the same in the service. Alternatively, the independent operator may take
advantage over the falling time charter rates, and charter a vessel then put it in operation. This results in the
blocking of finance and continuous recurring expenditure in the monitoring and up-keeping the ship
seaworthy. The advantage of sharing the operating costs may not be available to an independent operator
as in the case of some benefits available in consortia arrangements. According to the cost in running the
service, the pricing on the customers should be made. The tariff should be attractive enough to get more
customers and at the same point of time the revenue should be good enough to run the business without
making a loss. Considering the operating cost and economics of scale based on the vessels deployed, the
independent operator will fix up a freight rate.

FLEXIBLE AND INDEPENDENT SAILING SCHEDULES

Unlike in the case of consortium / alliance arrangements, the independent service operator has got more
flexible and independent sailing opportunities. Based on the arrangement between the consortium / alliance
members, every one member will have to deploy a vessel in order to meet out the set frequency. Each and
every member will have to agree for the same and the market demand should also be there to feed for all the
voyages. In the case of Independent Service Provider, the option of fixing the sailing schedule is within the
control of the service provider based on the business forecast done considering the supply and demand
position of the market where he prefers to operate. Depending upon the trade route he prefers and the
potential of the market, the frequency can be set to meet the demand.

ADVANTAGES

 As an independent service provider he would be in a position to establish his brand name

and build up a better image with the customers. The identity of the service provider will be made well known
in the market.

 The pricing decision is independent of the service provider. Unlike the other services like
consortium / alliance, where the pricing has to be fixed taking into all the players views and suggestions, here
the independent service provider can take decisions on the price that he plans to charge on the user. Only
point where the caution to be taken is that the pricing should not put him in trouble and force him to shut the
services. No doubt, the better price attracts more volume and customers. Flexible pricing will certainly build
the volume and contribute to make the service a successful one.

 As an independent operator, based on the commercial viability, he can have more flexible
sailing schedules.

 Over and above to all, the success of business is based on the amount of confidentiality
maintained. As an independent service provider, he can keep absolute confidentiality.

DISADVANTAGES

 No collective bargaining for berthing, port / terminal tariff etc., would be available to an
Independent Operator, unless he is holding a major share of the market.

 No sharing of resources would be possible, which increases the operational cost.

 The utilization of space in the ship may be lesser at times.

 Since the independent operator will have to invest huge amount of money in deploying
larger number of ships in the trade route, the expected level frequency may not be there and this may result
in lesser sailing frequency.

EXAMPLE OF FEW CURRENT INDEPENDENT SERVICES WORLDWIDE

Ex: UAM Service - Evergreen Shipping

Operating in the route of - Colombo – Genoa – Toronto – Valencia.

Ex: MECL – 2 Service - Maersk

Operating in the route of - Chennai – Salalah – Jeddah – Algeciras – Savannah - Norfolk – Newark.
THE CONFERENCE SYSTEM

Liner Conferences are groups or associations of ship owners, which agree to combine their operations on a
given trade route, on conditions agreed by the members of the route. The term for such a grouping is a
Cartel and the effect on the customer is basically that of being faced with a monopolistic situation. Although
there are several distinct operators within the trade, there is no difference in the price and little difference in
the nature of the service; thus the choice to the consumer is limited. Such a definition, were it left without any
qualification or explanation would totally damn the whole concept of Liner Conferences. There is however,
another side to the equation in terms of the benefits, which flow from the system some of which are intrinsic
and others, which are judiciously included by the operators to counter adverse criticism.

STRUCTURE OF A LINER CONFERENCE

A Conference is, however, as the name implies, a collection of lines which have agreed to carry out some of
their activities in unison.

Each Conference, in addition to the representatives of its member lines who sit round the table from time to
time, has a permanent staff. The size of that staff is based on the size of the conference. Some of the
smaller ones have no more than a general secretary with an assistant or two. The bigger, more powerful
conferences would have a Director General as the head of a substantial number of highly qualified staff
including lawyers, economists and accountants as well as clerical workers.

The first conference set up in 1875, was the Calcutta conference. After that they spread rapidly and by the
beginning of the second World War virtually every liner trade of any importance was covered by a conference
agreement of some sort. The first conferences were exclusively British, but the idea quickly became
international.

Protectionism was the essential reason for their existence, and they are semi-monopolistic in their method of
operation. Inevitably they have been criticized for curtailing free trade and preventing other operators from
trading. Nevertheless, up to very recent times, when they started to lose their influence, there were some
270 conferences and agreements in existence covering virtually every trade route worldwide.

MONOPOLY INVESTIGATIONS IN UK AND USA

The conference system has been under attack on several occasions especially during the formative years. A
particular target for complaint was the way that the loyalty rebate system had the effect of excluding
competition from lines outside the conference agreements. The favourite system which commenced as early
as 1877 was the ‘deferred rebate’ whereby a shipper received the rebate (usually 10%) after a given period
of time provided that his loyalty to that particular conference had not wavered during the period concerned.
If, however, that shipper had consigned the smallest amount by a non-conference ship on that trade route,
no rebate would be paid on any of the conference consignments for that period (usually six months). The
system effectively tied shippers to the conference.

The steamship boom had created an excess of ships, with too many operators chasing the available cargo.
This led, at the end of the last century and early this century, to combinations and mergers such as Cunard
Line with the White Star Line on the Atlantic run and the Union Line with the Castle Line on the South Africa
route.

Some owners went out of business as a result of being excluded from a trade. With the number of owners
diminishing, conferences became tighter and more controlled, and complaints against the method of
operation of conference members grew. In 1902 questions were put to the British Parliament, and
complaints were handed to the Board of Trades. In 1904, the South African colonies, as they were thus
known, complained about the rebate system, preferential freight rates from the USA and the Continent and
secret concessions to shippers. Australia and New Zealand also complained. In 1906 a congress of the
chambers of commerce of the empire protested against the payment of rebates by steamship companies,
and in America shippers were beginning to complain. In the same year, a ‘Royal Commission on Shipping
Rings’ was set up in London and reported in 1909. In 1911, the first actions were brought in the United
States by the Department of Justice of the US Government against three conferences for violations of the
American anti-trust laws. In America, the Sherman Anti-Trust Law had been passed in 1890, to ‘prohibit
combinations, contracts and conspiracies to the restrain of trade, and to prohibit monopolies and cartels, and
attempts to monopolize trade’. The US Government has always opposed any attempt to restrict free trade.

These two investigations produced very similar conclusions. Both reported a large number of shippers
prepared to give evidence, although others had been deterred by threats of commercial retaliation. The UK
inquiry revealed the fact that on nearly every trade route some form of discrimination was in operation. The
conference method was the one most commonly employed. Even where the existence of such collaboration
was denied, there was ‘ a remarkable uniformity of rates and no trace of a trade war could be found’. The
majority in the UK inquiry produced a fairly a mild report but a dissenting minority expressed much more
critical views.

The Alexander Committee on Merchant Marine and Fisheries in the USA, using similar guidelines to those of
the Royal Commission, not surprisingly produced very similar conclusions to the UK inquiry, publishing a
summary without making a definite valuation, finding that:
1. Unrestricted competition in the Liner Trades was impossible

2. Competition amongst conference members was found to be regulated by –

 Rate agreements
 Control of sailing schedules
 Pooling and
 Good faith or performance bonds

3. That competition from outsiders was reduced by

 Agreements
 The use of conference ships placed on a berth to sail in competition with a non-
conference carrier, offering the same or lower rates than the interloper, even if the rates were below the
conference tariff. Known as ‘fighting ships’ the losses sustained would be borne by the conference.

 Binding arrangements, such as rebates and various concessionary contracts.

Following on from the Alexander Inquiry, the US Shipping Act of 1916 made, the use of ‘fighting ships’ and
the deferred rebate system illegal in US trades. Retaliation by ship owners against shippers who withdraw
their cargo by refusing them space at a later time was also made illegal.

ADVANTAGES OF THE CONFERENCE SYSTEM

 The greater regularity of sailings. Since there are many members in the conference, each
one may be interested to place their ship in trade. The more ships put in the particular trade by the members
will offer more sailing opportunity.

 The improved standard of ships made possible by greater security conferences afforded and
which gave ship owners the ability to raise funds based on future earnings, and created investment capital.
The raising of funds based on future earnings motivates lot of operators to go in for expansion of their
number of ships.

 Greater stability of rates – agreed as necessary for the future development of the system.
Unlike in the pattern of independent operator, once the members agree the rates, the minimum period to
withhold the rates in the market will be possible and this helps to make a better budget and planning for the
future activities.

 The provision of uniform rates to all shippers enables the operators to protect their income
level based on an assured rate irrespective of the shipper.

 The reduction of cost by the elimination of wasteful competition between member owners –
by rationalizing sailings and ports of call

 The ability of conference members to charge what the trade will bear – rates could be
adjusted to meet supply and demand criteria. This is one of the very major advantages available i.e., all the
members of conference can analyze the market need and the demand for their services. At times the cost
of the product will be very minimal whereas the freight amount would be having a major percentage on the
value of cargo. Based on the demand, the members can fix a tariff.

 The ability to forecast and provide for future trade

 No competition for customers as member lines did not generally carry cargo for their own
account.

 The Conference system protects the weaker members.

THE DISADVANTAGE OF THE CONFERENCE SYSTEM

 The possibility of charging excessive rates, thus giving excessive profits. Once all the
members of the conference are together taking a decision to hike up the rates, they can implement the same.

 The lack of the need to compete causing indifference to the need to care for the cargo

 The arbitrary nature of the settlement of claims

 Failure to give adequate notice of freight changes. Once the decision is taken to change the
freight rates, generally the rate revision is made known to the trade without much of notice period effecting
such freight change.
 The secrecy of conference operations, and the difficulty of obtaining tariffs (rate increases
were said to have been arbitrary, or without adequate notice, and the secrecy gave rise to suspicions that
special treatment was afforded to large shippers)

DEVELOPMENTS TO THE CONFERENCE SYSTEM

The advantages of Conference System have always been considered to outweigh the disadvantages, and
thus the system has proliferated during this century, and dominated world liner trading from the end of the
Second World War until the 1990s.

The objections to the Conference system, which persisted, were –

 A shipper, who is tied to a conference, could not take advantage of outside tonnage when
rates are low.

 A shipper of a large volume of goods could not always use superior bargaining power to
obtain favourable rates.

 Non-conference ship owners objected because it prevented them competing for the trade.

Further reviews and recommendations followed in a number of countries.

A UK ‘Imperial Shipping Committee’ sitting in 1920 – 1923 concluded that, where a regular organized service
was required, the Conference system was necessary – e.g., ships much be provided whether freight is
plentiful or not but that liner owners much have an assurance that sporadic competition would not cream off
the most lucrative traffic.

The committee recommended that shippers should be given a choice between the deferred rebate system
and a form of contract. In 1955 a British Shippers’ Council was formed to ‘further the interests of exporters
and importers in the UK in relation to the transportation of goods by sea and air’.

This led the way to an era of joint consultation between the Shippers’ Council and liner conferences. The
Council participated in the setting up of consultation machinery between ship owners and shippers, to
consider representations from a shipper or trade association, which could not be resolved by the ship owner.
In 1963 the European Shippers’ Councils and European Ship owners’ Association (CENSA) agreed a ‘note
of understanding’ to govern their consultative arrangements. As a result, a number of joining European
Committees and working groups were created.

In the UK the Rochdale Report of 1970 agreed that a Code of Practice to govern the behaviour of
conferences should be drawn up in consultation with representatives of the Government, ship owners and
shippers. A year later the Consultative Shipping Group, (members of European maritime nations plus
Japan), resolved that a Code of Practice should be agreed and prepared. This became the EUROPEAN
CODE known as the ESC / CENSA CODE.

Also in 1971 the United Nations Conference made liner conference proposals for Trade and Development
(UNCTAD). UNCTAD make no secret of the fact that the significant part of their name is “Development” and
so they are unashamedly on the side of the less developed nations of the world. They proposed a “Code of
Conduct for Liner Conferences” which was eventually adopted in April 1974. It contained many clauses,
which gave a clear insight into the complexities of Liner Conference trading.

The code was best remembered for one particular clause which is the ‘40/40/20 Rule’ (Article 2 Rule 4)
which in effect means that all conference liner cargo should be split three ways, 40% for the national line of
the exporting country, 40% for the national line of the importing country and the remaining 20% for third
country operators – better known as ‘cross-traders’.

The object was to enable the lines of the developing nations to have a greater influence in their countries’
trades and they saw the Liner Conference as a barrier to this end. In the debates the Code was strongly
opposed by western nations who had for many years been established in cross trading. They viewed the
Code as trade protectionism. Western countries regarded the UN Code as non-commercial competition, and
preferred the voluntary commercial principles laid down in the ESC / CENSA Code.

United Nations Codes are essentially only proposals; the United Nations Assembly cannot pass laws, being
simply an international forum. Those member nations who agree to the proposals have to cause them to be
enacted by their own governments so that they then become binding on their national citizens and
organizations. Usually their proposals include some reference to the level of support needed to turn such
proposals into international conventions.

By this time, 18 recommendations had been agreed by CENSA, as follows:

 Availability of conference tariffs and regulations

 Deferred rebate system
 Simplification of tariff rules and conditions
 Shippers loyalty contracts with conferences
 Prevention of malpractices
 Procedure for introducing freight surcharges
 Standard rules for cargo measurement
 Introduction of, and alteration to, shippers contracts and agreements
 Diversions, Co-operation and shippers
 Heavy lifts
 Long lengths
 Pallet rules
 Clausing Bills of Lading for fibreboard containers and cartons (Easily damaged when so
packed)
 Currencies – methods of dealing with rates of exchange, devaluation and revaluation.
 Standard container sizes
 Machinery for the resolution of disputes
 Period of notice for increasing freight rates
 Declaration of dangerous goods

15 European countries now had National Shippers Councils and the movement had spread widely overseas.
The European Shippers’ Councils (ESC) conferred regularly with the Council of European and Japanese
National Ship owners’ Associations in matters of mutual interest.

However, not all trades found the normal harmony experienced by the European Liner Conferences.
Government restrictions or protectionist measures at the far ends of various trades prevented universal
acceptance of the ESC / CENSA Code. All the European shipper’s councils together with a number of
conferences adopted the European Code.

American conferences have been influenced by US Government restrictions via the Federal Maritime
Commission. An example in 1979 was the legislation concerning anti-rebating.

This allows the Federal Maritime Commission to suspend up to 180 days, the tariffs of any carrier who
refuses to pass over any documents relating to a rebating inquiry. The FMC require ALL liner tariffs serving
the US whether conference or independent to be filed with them. Even a single rate change has to be notified
otherwise an offence has been committed; these FMC regulations apply to all lines regardless of through
rates, including those quoted by NVOCCs should be filed as well. This in effect, seeks to move the regulation
into the area of trying to control the price of land transport within another country’s borders.
For the UN Code to become an International Convention it required ratification by 24 states representing
25% of world liner tonnage. By 1979, 28 states representing only 5.7% of world liner tonnage had signed the
proposal, these being the smaller, less developed, nations who hoped to gain from the 40 / 40 / 20 proposal.

At the UNCTAD conference in June 1979, it was proposed that the trading partner country would have the
right to carry 40% of the cargo generated by their own trade leaving all the remainder for third flag carriers
and proposed considerable flexibility in reaching agreement on cargo shares.

At this conference a further 17 countries agreed to adopt the Code, including (with qualifications) the member
countries of the European Economic Community (EEC), Greece, USSR and China which brought total
tonnage to well over 50%, ensuring acceptance.

However the EEC Countries (through an agreement referred to as the Brussels Package) announced that
they would NOT implement the cargo sharing requirements on a national but on an EC basis and that the
40 / 40 trade sharing would NOT be implemented between EEC and other OECD (Organization of Economic
Co-Operation and Development) countries. They would not exclude developing countries for bidding for the
20%.

The compilers of the Code convinced themselves that the only root cause of the developing countries failing
to command their rightful share of their trades was the dominance of developed countries shipping in the
conference system. They overlooked the fact that the best ships were owned by those with the most money
and expertise (or most credibility with bankers). Not all of this wealth and credibility was, in fact, in the same
places as the homes of the much-maligned conferences.

Because of these beliefs, the efforts of the UN code were directed at liner conferences not liner trades so
that the burgeoning influence of non-conference lines was not taken into consideration.

In fairness, at the time of the Code’s compilation, many non-conference liners were operated by speculators
who took advantage of the lack of flexibility in the conference system. When charter rates were low, these
speculators were able to take ships (often sub-standard ships) on time charter at prices which enabled them
to undercut conference tariffs by such an amount that shippers could risk sacrificing their conference rebates.
So the idea that conference was respectable, non-conference was suspect, was a dominant influence in the
UN thinking. They would argue that critics of the code were benefiting from hindsight and whether or not this
is true could be subject for endless debate. One has to remember, however, that it was common knowledge
that such respectable owners as the Singapore Government seriously considered operating their national
line outside the conference. Further more, the largest fleet in the world that of the USSR was entering many
of the traditional trades with rates well below those of the conferences.

The Code, therefore had been unable to exercise any significant influence on the Liner Trades, and had
never achieved the control and distribution of freights that was its aim. Within a few years of the introduction
of the code, one of the strongest conferences – that of the Europe / Far East – admitted that it controlled only
60% of the trade, and this figure was still falling.

Having gone through the evolution of conference system, the difficulties experienced due to competition and
the developments, let us summarize the system of conference and the advantages of the same.

 Liner Conferences are groups or associations of ship owners, which agree to combine their
operations on a given trade route, on conditions agreed by the members of the route.

 The term for such a grouping is a CARTEL and the effect on the customer is basically that of
being with a monopolistic situation.

 In one trade, there may be several distinct operators and there could be no difference in the
price.

 Conference means a collection of lines, which have agreed to carry out some of their
activities in agreement.

 Each conference in addition to the representatives of its member lines who sit round the
table, from time to time, has a permanent staff. The size of that staff is naturally influenced by the size of the
conference itself. In small conference, there may be only a general secretary assisted by one or two.

 Bigger conferences may have a Director General as the head of a substantial number of
qualified staff members like lawyers, accountants and economics.

 Liner conferences were formed originally to protect owners already operating a service, from
outside some times unscrupulous

The Conference service has its own merits to its own members and also has provided an advantageous
situation to the shippers also. However the disadvantages of conference service have made a pathway for
different type of other services that can be offered to the trade protecting the interest of the operators. While
the development of consortia and grand alliance system can be well understood from the later lessons, an
example of Conference system that is operating in India, Pakistan, Bangladesh, Ceylon is outlined below
with the member names and few of their functions:

FROM THE WEBSITE OF IPBCC - INDIA PAKISTAN BANGLADESH CEYLON CONFERENCE

The IPBCC is generally considered to be the oldest shipping conference in the world. Founded in 1875
initially as the 'Calcutta Steam Traffic Conference'.

Founder members included P&O SN Co, British India Steam Navigation Co., Anchor Line, Clan Line, Hall
Line and City Line.

Problems back then appear rather familiar - even now. The following was a message from seniors in London
to Calcutta in 1886; “Sudden collapse of rates peculiarly disappointing. Calcutta Homeward Conferences
must adopt more effectual means for producing much better results. Endeavour obtain co-operation sailing
agents. Owners disposed lay up tonnage rather than continue present heavy losses”

As the trade developed and the political landscape changed, the Conference membership included members
from India, Pakistan, Sri Lanka and Bangladesh as well as representatives from many European and other
nations.

In the mid 1970's for example there were 25 members representing 16 countries.

Liner shipping has changed dramaticaly in recent years with amalgamations and revised trading patterns,
however the volumes of cargo carried by IPBCC have continued to grow and the current 18 members carried
600,000 TEU in 2002, 250,000 TEU Eastbound and 350,000 TEU Westbound.
Members of IPBCC Conference

ANL
CMA-CGM
Hamburg Sud
Hapag Lloyd
Maersk
K Line
MISC Berhad
CSAV Norasia Liner Services
PNSL
Rickmers Line
Safemarine
The Shipping Corporation of India
UASC
Yangming
Zim Integrated Shipping Services Ltd
CONSORTIA OR ALLIANCES

The conference schemes or the mergers and takeover by the big shipping groups could NOT supply the
required solution to the problems arisen out of container revolution. The high cost of new ships was one of
the factors which influenced the move towards containers but container ships themselves with their 21/2 suits
of boxes were much more expensive than the conventional ships they were supplanting and to this had to be
added the cost of equipment ashore to handle the containers.

So the problem of no one owner being able to supply a regular / frequent service by itself was made even
greater. Part of the sales-talk convince shippers and consignees of the advantage of containers was the way
that a steady steam of containers would enable buyers to have a dependable ‘pipeline’ and so keep their
inventory of stock to a minimum.

The lines had to provide a regular and frequent service, which they could sell as being geared to taking the
goods from manufacturers ‘off the end of their production line’. Economy demanded the largest ship
possible; frequency demanded several such ships but if there were several owners in the same trade, each
of them ever fill such large ships was in question. This led to the scheme of consortia.

The consortia arrangements were varying in nature and few of such consortia are as under:

 Shareholder Consortia
 Tonnage Pool Consortia

SHAREHOLDER CONSORTIA

The need for a solution was clearly seen by the pioneers of containerization in Europe and when the decision
to containerize the UK / Australia service in 1967 the lines involved had decided that the best course of
action would be to form a single jointly owned company. The result was that P & O, Alfred Hold (Blue Funnel
Line), British & Commonwealth (Union Castle Line / Clan Lines) and Furness Withy jointly created Overseas
Container Lines Limited (OCL) and so the first container consortium company was born.

OCL committed themselves to the container revolution by building six ships which in conventional term would
be 29,000 tonnes DWAT but now the new way of describing general cargo ships came into vogue and these
new ships were referred to as having a capacity of 1200 to 1500 TEU. That new fleet effectively replaced
more than 25 conventional general cargo liners.
This type of consortium, a new, joint venture ship owning company, is only one example of grouping, which is
loosely described as consortia. OCL (which incidentally and paradoxically is now wholly absorbed into P & O
Nedlloyd – now a part of Maersk – taken over by Maersk) worked on the principle of the member lines being
simply shareholders with the joint venture company being the actual owner or charterer of the ships and
having its own sales and marketing departments quite separate from those of the component companies.

TONNAGE POOL CONSORTIA

One element in commerce that is often overlooked by those only on the fringe of the study of economics is
the need to inspire confidence. When two or more entities are marketing an identical product or service at an
identical price the level of its confidence in the supplier influences the buyers’ choice. Such confidence may
simply be the nationality of the supplier or even something more remote like its ‘personality’, which convinces
the buyer that the particular supplier offers a better service. This somewhat intangible element had been well
known to those engaging freight salesmen in conference lines for decades before containers had even been
thought of.

Applying this concept to a container consortium meant finding a way for a group of ship owners to pool their
ships but not to lose their respective identities. Some such groupings, from several different countries,
solved this problem by forming consortium in a particular trade with each participating owner ‘contributing’
one or more ships to the group. Generally each participant’s contribution will determine the proportion of
each sailing, which will constitute that owner’s share. Each owner is then committed to pay an agreed sum
per slot whether it is used or not.

Perhaps a word here about the term ‘slot,’ which will often crop up in container talk. Any ship with some
degree of dedication to the container trade, whether it is no more than a series of strategically placed eye-
bolts to lash containers down or it is a fully cellular purpose-built container carrier, will have a pre-determined
plan of how containers may be loaded and the total number. Although there will be provision for 20 foot and
for 40 foot containers the total maximum container capacity is almost always referred to as a total number of
TEUs and each space for one TEU is colloquially referred to as a slot.

Each participating owner in such a consortium undertakes to pay so much per slot – even in that owner’s
own ship – into the common fund and each owner is able to charge to the same common fund certain costs
to the general pool such as port expenses, tugs,
Stevedoring, etc. but not expenses directly relating to the ship such as repairs and crew costs. The group
will agree how bunkers and similar consumables are paid for because decisions may have to be made at
short notice by the group to reduce or increase speed to maintain schedules, and port congestion may be the
luck of the draw.

Each such consortium has various joint committee(s) to deal with such day to day things as vessel
scheduling, or on the other hand future strategy including the number of vessels and new members. There
are also more tactical subjects such as how to ensure an equitable sharing of the limited number of slots that
may be allocated to hazardous cargo or whether to leave cargo unshipped in order to avoid delay through a
strike. Each participating owner, as was mentioned earlier, has a share in each ship relating to the number /
size of ship(s) contributed to the consortium’s fleet and this can be a problem as well as a blessing because
the slots have to be paid for whether they are used or not. This problem is partly offset by consortia usually
writing into their agreements a procedure for selling surplus slots to fellow members, or buying slots from
them if they have more cargo than expected.

This type of consortium operates on the basis of each participant marketing its own allocation of slots and
operates its own inland organization so it competes just as much with other members of the same
consortium, as well as with other consortia and lines.

REVENUE SHARING CONSORTIA

Many of the early tonnage pool consortia also operated a sharing of revenue / contribution. The implications
of this included revenue pooling gradually moving from a being a conference to a consortium function. Such
consortia could loosely be looked upon as ‘profit pools’ where a line’s own bottom line was a share of the
combined bottom line of the group. An individual line had no control over the competence or effectiveness of
the other member lines.

SINGLE MARKETING IN CONSORTIA

In another case the owners, perhaps seeing the success of OCL, apparently decided that the members of
the consortium competing against each other as well as the rest of the conference was wasteful. They were
not, however, prepared to be simply shareholders in a new company so went halfway between the two by
‘contributing’ their own ships but forming a separate marketing company to ‘sell’ the cargo space;
SANDUTCH was a classic example of this system.

GROWTH AND MATURITY OF CONSORTIA

Very soon the pressures of scale caused further refinement of Consortia operations. By the very early 1970s
shareholder Consortia such as OCL were already combining with other lines or groups to form larger
consortia. The process of merger and acquisition among the longer established companies continued during
the 1970s and into the 1980s, but there were also important newcomers entering the scene from Korea and
Taiwan as well as South East Asia and in Europe new aggressive independents such as MSC and Norasia
or longer established companies such as Sealand or Maersk taking a new look at their future in the container
trades.

Despite all these changes, albeit against a background of ever changing membership the consortium
concept survived for more than twenty years well into the 1990s. By this time not only was the concept of
Consortia operation well established and understood by the merchants, but Governments, Customs, Ports,
Terminals as well as the banking and insurance communities had co-operated in making changes to their
rules to accommodate the concepts. For example, Customs in many countries would accept separate
manifests from each of the lines with cargo slots on a vessel instead of insisting on a consolidated manifest.
This helped protect the confidentiality of commercial information. The success of the consortia was such that
in some major trades the consortium was able to offer more than one service on a particular route. These
have become known as ‘strings’. Thus a consortium may have two sailings a week from Europe to the Far
East, one of which might proceed to South East Asia via Suez, sailing on to Taiwan or Japan, while the
second string might sail first to Japan via Panama then to Korea before sailing further south. The
Consortium’s customers benefit from faster services to key ports.

The conference system successfully coped with consortia but not without some problems. One example had
been that of cargo shares. Within a conference it was usual for each line to negotiate not only the number of
ships it would put into the trade concerned, which in effect agreed that line’s share of the available cargo, but
also agreed the countries within the range served by that conference. For example, a line owned in Korea
might not normally expect to negotiate the right to canvass for cargo to, say, Malaysia. But the tendency has
been for all lines in a consortium arguing in favour of each member having the same rights.

It is probably true that another factor that has led to the demise of the traditional liner conference is the
development of the consortium system, with its need within itself to be competitive both in price and service,
having created what might be termed a ‘mini-conference’.

To summarize the consortia service it can be stated that Consortia is a group of shipping lines, who agree to
rationalize sailing in a particular trade route and carry each other’s containers.

In 1992, liner shipping was in distress, where many liners wanted to offer a globe service network to their
customers. Investment requirement was huge and it was not affordable to many lines.
At the time many like-minded carriers came up with the idea of forming a strategy alliance with other
international carriers to establish a global service network. The world’s first global alliance came into
existence in 1994.

1992-93 transpacific trade saw solid, double digit cargo growth in Asia trades. Major trans – pacific carriers
looked at this growth as great future, at the same time they were being offered highly concessionary terms
from ship yards looking to fill their order books. Many trans – pacific shipping lines decided to acquire new
vessels.

1996 – 97 saw a dramatic increase in new container capacity in the pacific, when the cargo demand was
beginning to level off. The pressure to fill ships in both directions and hold into market share caused rates to
fall substantially i.e., 30 to 50% drop over 18 months.

Looking at the benefits of consortium and drop in cargo volumes, majority of carriers followed the suit,
favoring similar alliances. Major advantage of consortium is that carrier continues to deal with their loyal
customers and maintain corporate identity.

ADVANTAGES OF CONSORTIA

 Rationalization of freight rates amongst consortia members. Irrespective of the number of

members, every one will have to follow same rate.
 Container shipping services & operations by sharing all resources
 Improvement in the quality of service
 Better sailing frequency & better transit time
 Appropriate joint use of vessel fleets
 Reduced operating costs such as feeder / port / terminal costs
 Maintain corporate identity while using the fleets of other carriers
 Maintain fair competitive conditions among its members
 Greater sales coverage
 Through the sharing of vessel space, terminals and equipment, participating shipping
companies can achieve cost reduction derived from economics of scale.

DEVELOPMENT OF ALLIANCE SERVICES

The consortia concept lasted well into the 1990s but members found they were facing increasing problems
largely because of a change in the requirements of their customers, especially the manufacturing exporters.
The difficulties between consortia partners arose in the main from differing marketing philosophies and the
introduction of total logistics thinking, because of this they impacted initially on the pooled consortia;
Scandutch, ACL, SAECS & ANZECS. But the others were not immune and substantial rationalization by
acquisition followed. P & O for example initially acquiring all its OCL and ACT group partners shareholdings
and subsequently merging with Nedlloyd.

This emergence of the mega- carriers led to super alliances and an attempt by the carriers to meet the new
customer demands which themselves arise from the global market place which themselves arise from the
global market place which at its lowest denominator might be described as “McDonald and Coke for all”. A
large number of new phrases have entered the international transportation vocabulary: -

 Just in time
 Channel flow management
 Supply chains
 Global logistics

And most of these are driven by the needs of the manufacturing and retailing industries, which are in turn
driven by Information Technology (IT).

These needs are to:

 Reduce the number of suppliers used globally

 Buy an integrated service covering transportation, storage, distribution, documentation, etc
from a single supplier (one stop shopping)
 Concentrate on core activities with outsourced service provision (that is buying service
activities from external contractors instead of handling them in-house)
 Achieve minimum inventory stocks
 Know the whereabouts of goods in transit.

In meeting these needs carriers much offer the widest possible geographic cover, fast, frequent services, and
reliable sophisticated tracking and reporting. The major international manufacturing companies want to deal
with just two or three suppliers who will no longer be shipping lines or even multimodal operators but which
provide a total package from factory to retailer. This is the underlying rationale behind the ‘Alliances’ of the
late 1990s.
They did suffer from an inherent instability, which was seen within the first year in the lives of the ‘Grand
Alliance’ and the ‘Global Alliance’. The Alliances came into being at the same time as the search for further
rationalization by the bigger (as well as a number of the smaller) lines. Both the P & OCL / Nedlloyd and
NOL / APL mergers required a restructuring of the Alliances of which they were members, and other mergers
will follow.

MEGA CARRIERS AND SUPER ALLIANCES

There is already evidence that the most successful of the Alliances will comprise one lead member, carrying
out a significant role in the operation and policy making of the Alliance with the other, usually smaller
members, being associates rather than equal partners. Further mergers will continue, leading to major deep
sea containership operation being concentrated into less than 20 companies worldwide by 2010 with a
further reduction to follow. By 1998 eight carriers operated about one third of world containership capacity.

There is a danger that the niche or independent operator will be left only with the feeder or short distance
legs that do no provide enough volume for economy of scale. Recent years have seen the growth in all parts
of the world of the deep sea line controlled feeder service on the more attractive routes who have then
entered the market for domestic cargo. This places pressure on the traditional short sea operator.

While shippers are going to benefit from ease of access to global individual carriers, this could mean the
growth of quasi monopolies. The rate pressure of recent years has already reduced the number of active
smaller independent lines to a point where they are unable to compete fully in the main trades. As this trend
continues the shipper will be faced with negotiation with a few ‘majors’, which may suit the multinationals but
will leave the smaller shippers in a disadvantaged position.

Alliances could return to single marketing or even the ‘one stop shop’. The individual mega carriers do just
that, it may well be that the smaller carriers in alliance will need to reinvestigate the ACL / Scandutch concept
in order to be considered by the large customers.

GRAND ALLIANCE MEMBERS

 Hapag-Lloyd
 M.I.S.C.
 N.Y.K. Line
 Orient Overseas Container Line (OOCL)
The Grand Alliance is comprised of trades in the transatlantic, transpacific and Europe-Far East. MISC
participates only in the Europe-Far East Trade.
Few of the worldwide Liner Services are tabled below:
Name of theTrade
Service
Lane Tonnage deployed
Port rotation

Europe – Asia - Europe 6 vessels 37,038

Southampton
TEU - Amsterdam - Hamburg - Le Havre -
Singapore - Kobe - Tokyo - Singapore –
Southampton

Asia – Europe – Mediterranean 8– vessels

Middle East
60,207
–
Kaohsiung
TEU – Shekou – Yantian - Hong Kong -
Singapore (PSA) - Le Havre – Amsterdam – Hamburg
– Antwerp – Southampton - Gioia Tauro – Jeddah -
Jebel Ali (Dubai) - Singapore (PSA) – Kaohsiung

Europe – Asia - Europe 8 vessels 68,610

Southampton
TEU – Hamburg – Rotterdam - Port Klang -
Singapore (PSA) – Shekou - Hong Kong – Ningbo –
Shanghai – Xiamen – Yantian - Hong Kong -
Singapore (PSA) – Southampton

Europe – Asia – Middle East – Europe

9 vessels 74,638
Rotterdam
TEU – Hamburg – Southampton - Singapore
(PSA) – Kaohsiung – Busan – Dalian - Xingang –
Qingdao – Busan – Shanghai – Ningbo - Singapore
(PSA) - Port Klang – Jeddah - Rotterdam

Mediterranean – Asia – Mediterranean

9 vessels 57,197
Genoa
TEU – Barcelona - Fos (Marseilles) – Damietta -
Singapore (PSA) - Hong Kong – Busan – Shanghai –
Ningbo – Shekou - Hong Kong - Singapore (PSA) –
Port Kelang – Damietta – Genoa

Asia – Indian Sub Continent - Middle

7 vessels
East39,002
- Laem TEUChabang - Singapore (PSA) – Colombo –
Mediterranean – North America - MediterraneanJeddah
- - Gioia Tauro – Halifax - New York (New
Middle East - Indian Sub Continent – Asia York/New Jersey) – Savannah - Norfolk (Virginia) -
New York (New York/New Jersey) – Halifax - Gioia
Tauro – Jeddah – Colombo - Singapore (PSA) - Laem
Chabang

Europe – Middle East – Asia - Indian Sub Slot charter with New World Alliance
Continent – Europe
Asia - North America - Asia 10 vessels 52,095
LaemTEUChabang - Singapore (PSA) – Kaohsiung - Los
Angeles - Oakland – Tokyo – Kaohsiung – Shekou -
Laem Chabang

Asia - North America - Asia 5 vessels 40,315

Xiamen
TEU – Shekou – Yantian - Hong Kong - Long
Beach – Kaohsiung - Hong Kong – Xiamen

Asia - North America - Asia 4 vessels 12,210

Dalian
TEU– Xingang – Qingdao – Busan - Los Angeles –
Oakland – Busan – Dalian

Asia - North America - Asia 6 vessels 15,254

Shanghai
TEU – Kobe - Nagoya - Tokyo - Sendai –
Oakland - Los Angeles – Kobe – Shanghai

New World Alliance Members

 APL Ltd
 Hyundai Merchant Marine Co Ltd
 Mitsui OSK Lines Ltd
Geographic Scope

Europe - Far East, Transpacific and Transatlantic trades.

Profile

The New World Alliance (APL, MOL, HMM) covers the transpacific, Asia/Europe and Asia/Mediterranean
trades, co-operating with Yangming in the latter. APL and MOL were members of the Global Alliance until the
replacement New World Alliance was formed in 1997. The NWA additionally has a slot charter agreement
with Maersk Line & Evergreen Line.

Liner Services

Service Name Capacity deployed

Ports of call
Asia – Central America – North 11 vessels
America
(49,838
Chiwan
– TEU)- Hong Kong – Kaohsiung – Busan –
Europe – North America – Central AmericaKobe – – Tokyo – Balboa - Puerto Manzanillo –
North America – Asia Miami – Savannah – Charleston - New York
(New York/New Jersey) – Rotterdam -
(Round trip transit time: 84 days) Bremerhaven (Bremen / Bremerhaven) –
Felixstowe - New York (New York / New
Jersey) – Norfolk (Virginia) – Charleston -
Puerto Manzanillo – Los Angeles – Oakland –
Tokyo – Kobe - Chiwan
Asia – Central America – North 7 vessels
America
(34,019– TEU)
Central America - Asia

Asia – North America - Asia 1 vessel (4,389 TEU)

Asia – North America - Asia
Asia – North America - Asia
Asia – North America - Asia
Asia – North America - Asia
Asia – North America - Asia
Asia – North America - Asia
Asia – North America - Asia
ESX (SAX) Asia – North America - Asia
3 vessels (13,953 TEU)
5 vessels (32,395 TEU)
4 vessels (21,614 TEU)
4 vessels (20,432 TEU)
2 vessels (9,551 TEU)
5 vessels (27,884 TEU)
5 vessels (26,502 TEU)
7 vessels (36,628 TEU)

Europe - Asia – Europe 8 vessels (50,956 TEU)

Asia – Europe - Asia 8 vessels (54,400 TEU)

 Asia – Indian Sub Continent –Europe
8 vessels–(45,822
Middle TEU)
East – Asia

North America – Europe – North

Operated
America by Maersk Line. NWA
is a slot charterer.

Europe – Asia – Middle East -Europe

7 vessels (39,074 TEU)

ATN (TA3) North America – Central America

Operated–byNorth
Maersk Line. NWA
America –Europe – North America
is a slot charterer.
–Central
America – North America – Asia – North America

Review Questions

1. What do you understand by the term ‘Hub & Spoke’? How this is different from RTW or End to End service?

2. Differentiate – Independent Service & Conference Services

3. What do you understand by the term ‘Consortium Service’? Explain the same with suitable example that
exists in your region.

4. State the developments of Alliance Services? What are the advantage and disadvantages of such a system
to the trade?
5. Unit 4.3

DIRECT VS TRANSHIPMENT SERVICES

After we having understood the characteristics of the Liners Services, it would have become very obvious for
the students to easily calculate how many number of ships need to be put in service in order to offer a
regular service. No need to say that the ships put in operation should carry the cargo to its maximum
capacity in order to economize the cost and to ensure continuous service in the trade route. Before looking
into other operations cost, the prime factor that needs to be considered would be the calculating the market
requirement, the demand and the cargo generation.

Depending upon the services offered in between the ports, based on the port stay time, voyage time and
other related factors to complete one voyage from the port of starting and reaching back the same port, the
number of vessels have to be put in service.

Since the international trade is carried and the values exchanged through bankers on faith as well as through
Letter of Credit and or other arrangements based on the relationship of parties, certain conditions needs to
be complied with by the seller and a proof is generally submitted to the buyer for having complied with such
requirements of the buyer. Even a days delay, will affect the transaction of the seller and the seller will have
take the maximum possible care in effecting the shipments in time as required by the buyer. Despite all the
care taken, at times due to some unforeseen circumstances like strike, act of God, etc., unavoidable delay
may happen which has to be set right finding out a way to complete the shipment and realize the money.

Let us take out an example, where it would be required to put in a Far East Service from Chennai Port; it may
take about 35/36 days to complete the total voyage. If there is only one such a service offered by one
operator, the next voyage will be possible only after 35/36 days. A merchant cannot wait for 36 days, if he is
unable to reach the cargo for the scheduled vessel. As the production of cargo also depending upon various
circumstances and mainly on the labour force co-operation and upon completion of the production on the
weather conditions to move from the place of production till the Port of Loading, there could be lot of
uncertain events which may delay the movement thus resulting in a failure to connect the cargo to the
required vessel. It may not be possible for the shipping lines also to put in many / more number of vessels in
a trade route, unless there is sufficient amount of cargo. When the cargo is available, this alone cannot be
the deciding factor for the lines to put in their direct service vessel in a port since the decision will get
influenced on the infrastructure availability of the port also. Hence the decision of the shipping line to offer
direct service or a trans shipment service to the merchants will be based on numerous technical and
commercial factors. However, the merchants not to loose their order and to perform the shipments there are
ways to plan for their export of cargo and the same can be understood in detail by going through the
concepts of Direct and Trans Shipment Services.
DIRECT SERVICE

An independent or alliance shipping line, operating services from one port to another port or group of ports,
without transshipping is called direct service.

In other words, Direct Service means a service under which a vessel operator carries the container / cargo
from the Loading Port to the Final Port of Destination with out off loading the container in any trans shipment
ports enroute.

For example, Services offered by Maersk Lines to US West Coast from Chennai Port. In this, the container
once loaded into the main vessel will not be off loaded in any ports enroute and will get discharged only at
the required port of destination.

Few examples of Direct Services are as below:

RCL service ( Chennai - S.East Asia Svc)

Chennai – Pkl – Sin – Bkk - Hochi

DAL (Deutshe Africa-Linien)

(Chennai-Med/Europe Service)
Chennai - Damieta – Macta – Lasyozia - Le Harve.

TCX Service
Samudera / Nyk / Rcl
Chennai – Pkl – Sin – Bkk – Vietnam

TRANS SHIPMENT SERVICE

An independent or alliance shipping line operating services connecting only hub ports from the port of
loading and trans shipping the containers to smaller market ports, through feeder vessels are called trans
shipment services.

In other words, Transshipment services means a service through which the container/cargo is carried by a
feeder vessel from the Gateway Port and delivered at the final port of destination undergoing trans shipment
in different hub / hub ports. In the first leg of voyage, the container will be carried from the port of loading to
the transshipment hub. There the container will be off loaded from the vessel and will be loaded in the
mother vessel, then carried by the mother vessel and off loaded in the required port of destination.

For example, Cargo carried by APL Lines, accepting cargo at Chennai Port till Colombo in their feeder vessel
and in Colombo off loading the container and reloading the container in their mother vessel for onward
carriage to US East Coast Port.

Few examples of Trans Shipment Services are as below:

H&H Lines Service

3rd party feeder- Chennai- Colombo (transhipment)
Own vessel -Colombo-Karachi-Jebelali- Bandarabbas-

ADVANTAGES & DISADVANTAGES OF USING DIRECT VESSEL

Advantages of loading the cargo in a direct vessel from the Shipment Port to the Destination Port offers lot
advantages to both the seller and the buyer. The common features are listed below:

Advantages:

 No Trans Shipment costs

 Containers reach destination swiftly
 No problem of roll-over at Trans Shipment ports i.e., the probable delay due to the mother
vessel calling the hub port with no space or any possible skipping of mother vessel calling the hub-port

Disadvantage

 Need more vessel deployment.

 Utilization of space may not be adequate.
 Port coverage may be lesser.

The advantages from merchants angle is detailed as below:

SAVING IN TRANSIT TIME:

Direct vessel offers reduced transit time as compared to a shipment effected on a trans shipment basis. The
amount of time saved will be based on the Port of Shipment and the Port of Destination and the Trans-
shipment ports used in the absence of Direct Vessel operating in the route.

For the immediate understanding the following route is taken to explain the time saving:

Example – 1

Port of Loading - Chennai

Port of Discharge - Savannah, US East Coast Port

Transit time if a direct vessel is used - 24 days

(MECL 2 Maersk WESTBOUND)

Transit time if a direct vessel is not used -

Chennai to Colombo - 2.0 days (APL Lines)

Vessel : LUMPHUN NAVEE 124 (taken from APL website)

ETD Chennai - 15-04-2007

ETA Colombo - 17-04-2007

Transit days - 2 days

Waiting time connect mother vessel - 2 days (18 & 19-04-2007)
Connecting Mother Vessel - New Delhi Express 716

ETD Colombo - 20-04-2007

ETA New York - 12-05-2007

Total transit days - From 15-04-2007 to 12-05-2007

29 days as against 24 days of transit time of a direct
vessel.

Example – 2

Imports –
Shipment from Yangon to Chennai

Direct vessel Transit Time - 6/7 days

Trans shipment Vessel

From Yangon to Singapore / Port Klang - 4 days

Waiting time to get the connecting vessel - 4 days
Singapore / Port Klang to Chennai - 4 days

Total transit time from the time of booking cargo in Yangon till arrival of cargo into Chennai – 12 days (aprx).

From the above examples, we can understand that Direct Vessel Services Contribute to the trade lot of Time
Saving by offering lesser Transit Time.

REDUCED FREIGHT COST

When Direct Vessels are used to Export or Import, there will be an advantage of Savings on Ocean Freight
Rate. The reasons for difference in freight rate may vary from Operator to Operator but the following will
have an impact for such consideration of lowest freight rates.

An operator serving Direct Vessel may deploy a higher capacity vessel in between the potential ports and the
trade may prefer using their services because of lesser transit time. The fixed expenditure of a bigger
capacity vessel will more or less be same or will have very marginal impact as compared to operating a
lesser capacity vessel. Except for the Capital deployment on a bigger vessel, other expenses will certainly
have a better amount of saving in a higher capacity vessel. The expenditure may not be high on a pro rata
basis and the formula of variable expenses and the fixed charges will have a wide variance when a bigger
capacity vessel is operated as compared to a smaller capacity vessel. This cost saving is one of the reasons
for the Direct Vessel Operator to offer a lower Freight Rate.

Lesser transit time attracts more number of Trading communities to avail the services and this helps the
operator to fill their vessel from the point of loading itself to the maximum possible capacity. Maximum
utilization of space in the vessel with cargo assures the maximum income to the Operator. The economics
or the costing done by the Operator will change when the utility of the vessel is optimum. The fixed cost
expenditure at the load port and discharge port may not have any impact whether the vessel goes full of
partly loaded. To save cost on the fixed expenditure, a marginal costing system may be deployed by the
vessel operator and to ensure the fullest loading in the vessel. Moreover, when the direct vessels are
operated in a long trade route, the vessel will fully be engaged in the voyage and the waiting time at the port
will be minimal. The amount of waiting time includes the time taken to berth, waiting time to get a berth,
before and after tugging time, etc. A feeder service operating between Chennai and Colombo will take about
7/8 days for completion of one voyage out of which 4 days will be in sea voyage and about 3 or 4 days will be
spent only in the berthing process and in the berths. For the direct vessels idle time is restricted and
efficiency utilization is more because of not wasting time in the berthing process and in berths. When huge
amount of boxes are carried in a Direct Vessel, more number of Cranes are deployed simultaneously and the
discharge and loading rate from and into the vessel will be more and faster which will increase the
turnaround time of the vessel better. This may help the Direct Vessel Operator to pass on some benefit to
the trade by way of reduced freight rate as compared to the freight, which will involve in a trans shipment.

When the advantages of capacity utilization and increased turnaround helps the operator to offer attractive
rates, one another factor of cost elimination in transshipment port towards the Terminal Handling at the time
of off-loading from feeder vessel and re-loading to the connecting Mother Vessel will have direct impact on
the freight rates. One another important point to be noted would be the amount of port rentals payable
beyond the free days in the transshipment points because of roll-overs / non-availability of space in the
mother vessel. In case of special equipment like refrigerated containers, the cost of power would be
extremely huge which could be avoided if the box is booked in a mother vessel.

RELIABILITY AT THE PLANNING AND EXECUTION STAGE OF CUSTOMER ORDERS

Direct Vessels availability from One Port to another Port is not having more frequency or in plenty.
Wherever there is no Direct Vessel connectivity between ports, Feeder services are used from the Gateway
Port to the Transshipment Port. Depending upon the mother vessel availability planning has to be done well
in advance. Any slight delay in feeder vessel sailing schedule will delay the process of reaching the cargo in
the transshipment port and by the time the feeder vessel calls at the port, mother vessel might have sailed.
When one connection is lost, based on the arrangement between the players, the cargo has to wait for the
next vessel to get loaded. Generally the time gap between the two sailings would be a week and this will
delay will have a major impact on the commercial business viability of the traders. Another reason for delay
could be that the mother vessel might be arriving at the transshipment port with limited space (since she is
already booked full) and may not be in a position to accept the cargo. This type of uncertain circumstances
can be overcome by booking the cargo through Direct Vessels.

INVENTORY CONTROL AND COST REDUCTION

The time effectiveness of the Direct Vessels help the Trading community to plan for their production and at
the other end for the stock and sellers to keep the optimum level of inventory to cater to the requirement of
the ultimate point of consumers. In the cases of bigger projects commissioning, fear of late arrivals of few
important spares in time force the project executors to order for their entire requirement in one lot. Reliability
in Direct vessels help the project executors to plan for their activity and to book or to ship out the specified
item of cargo in different shipments and at right time. This not only helps the inventory control but also
avoids the confusion at every level because of having too many spares that will not be required to be kept in
one place. The optimum level of inventory control will enable them to plan for optimum size warehouse that
will in turn again save cost to the project.

INCREASED SHELF LIFE

Another important point to be remembered while planning to avail direct vessel service would include the
‘increased shelf life’ of the product because of faster transit time. This will be of immense use to the traders
dealing in perishable nature commodity or some sensitive commodity like life saving drugs, etc.
TRANS SHIPMENT – FEEDERING

ADVANTAGES:

In smaller Ports, where there are restrictions on Draft and dearth of Handling Equipment, smaller vessel can
call on these ports overcoming the above deficiencies.

Where there is only limited cargo availability, but to be carried to a main port, the mother vessel calling at
these ports will not be economically viable; whereas smaller vessels can be deployed in these ports in order
to pick up the boxes to the hub port and vice-verza.

When a mother vessel is deployed, generally it is calling many ports and to complete one voyage, it may take
not less than 35/40 days depending upon the route in which it is deployed. Only a limited number of vessels
can be put in operation since the cost of the vessel is too huge and there may be a probability that every time
the mother vessel may not be full with laden boxes. Since the schedule is restricted, say, for example, the
mother vessel from Chennai Port to US may be once in a week. On that particular day, if the manufacturer
is not in a position to connect his cargo in the vessel, cargo has to be off – loaded in the terminal and only in
the next mother vessel, after a weeks’ time only the cargo can be shipped on board. This one-week delay
may cause lot of commercial inconvenience to the shipper. Few of them may be

 The Letter of Credit validity for shipment may get lapsed and the shipper will have to get the
amendment.

 Every amendment requires lot of follow-up and delay in amendment will certainly delay the
shipment further.

 Every amendment will cost the purchaser and this cost will be passed on to the shipper,
since the shipper has not complied with the terms of the Letter of credit i.e., Delay in effecting the shipment.

 The major disadvantage would be that the shipper might not be in a position to get a Bill of
Lading to negotiate with the Bank and get the money.

The all above disadvantages may be overcome by using the Trans Shipment Services. To conclude the
benefits of the Trans Shipment Services, it can be said that the advantages of trans shipment services are
the disadvantages of direct services.
While using the services of a feeder vessel, even one feeder vessel is missed, in the next immediate vessel
cargo can be shipped and this will enable the shipper to get the mother vessel connection as planned.

Review Questions:

1. Explain Direct Service with practical example. State the advantages and disadvantages
of Direct Service.

2. “Transshipment helps in the growth of the trade” – justify the statement

Unit 4.4

SHORTSEA FEEDER SERVICES

A feeder vessel normally used for carriage of export containers from small market ports to hub port and vice
versa. At hub port main line vessel loads these containers and transport the same to final destination

Many main line carriers shuttle own short sea feeders between hub ports and smaller ports, to move their
containers quickly to final destination.

A 3rd party common carrier feeder vessel allocates slot space to many users who book the slot with such
operator. Such 3rd party feeder vessel is a neutral operator and may not have any direct competition with
their users, as they do not offer space or freight to the end user.

Many carriers book slots with such operators on a ‘block slot’ basis, where they have to pay the feeder
operators ‘used or unused basis’. Main line operators, NVOCCS and freight forwarders are their users.

These feeder operators charge their users on the basis of slot usage.

Advantages of 3rd party feeder services:

 The operating costs and resources shared by many users.

 The user need to pay only for the slot used hence there is no pressure on individual user for
filling the vessel.
 Better frequency & transit of vessels.
 Healthy relationship of user and operator as the service is neutral.

Disadvantage of 3rd Party services:

 No competitive advantage for carriers on sailing.

 Can carry cargo only to the extent of their slot allocation.
 May not be able to comply their service contract requirements.
 No control over slot costs.

Example of Captive feeder

MSC Service
Chennai-Colombo VSL: MSC TERESA

Example of 3rd party Feeders

Bengal Tiger Lines

Weekly service to Colombo (Chennai – Colombo) Vsl TIGER CLIFF

Weekly service (Chennai-Png-pkl-Sin) Vsl TIGER BRIDGE / TIGER SHARK

Sea Consortium

Weekly service to Colombo Vsl LADY FATIMA

Review Questions

1. Explain the concept of short sea feeder services with suitable example.
UNIT 4.5

LINER FREIGHT RATE STRUCTURE

Irrespective of the type of shipment whether it is a break bulk or in containers, the rates charged have to
reflect the law of supply and demand. The major factor in shipping industry today is the competition.
Shipping conferences were introduced to stabilize freight rates, and to reduce the possibility of under-cutting
of rates by an over supply of operators.

Although with the development of FAK (Freight all kinds) and ‘Box’ rates the accepted form of freight tariff
has fallen into disuse in many trades, it is important to have an understanding of the structure and
background of the traditional tariff which remained in common use until very recent times. A Tariff in the liner
world is a published list of charges applicable to the types of cargo normally carried on the trade concerned.
The charges are based either on the weight carried, for heavy (dense) cargo, or on the volume taken up, for
light cargo. The cubic metre is now the standard unit having replaced 40 cubic foot, which was the common
measure. If the cargo occupies less than 1 cu.m. per tonne weight, the charge will be based on weight, or
deadweight. If more than 1 cu.m then the charge is based on the volume used.

The Liner Conferences set the amounts that members would charge shippers for carrying their cargo from
port to port or door to door in the case of containers. Generally, other than normal market forces, there is
little outside interference, however some Governments require consultation and approval before permitting
any rate increases while the USA continues to require rates to be filed with the FMC. In Europe the
competition authority disputes the right of conferences to fix rates for inland movement.

Essentially the laws of supply and demand fix the rates. The criteria for this was based partly on the principle
of “charge what the trade can bear” that is the rates are pushed upwards until shippers begin to look for
cheaper rates elsewhere. The lower end of the rate spectrum is, of course, governed by the need to ensure
an operating surplus.

In reality, whereas all conferences were able to set their own rates, they were all constrained by the rates
being set by non-conference operators.

Freight charge is the consideration paid by the shippers or consignees to carrier for moving their cargo
(transportation from one location to an other location) for using vessel space of liners. The allocation of
space to accommodate the cargo and to transport it from the port of loading till the discharge port has got
different type of expenses to the liner and the income out of such transporting should be more than the cost
of such movement. The freight rates are set after taking into consideration of various factors as detailed
below:

FACTORS CONSIDERED WHILE FIXING FREIGHT RATE

 The weight and the measurement of the commodity being shipped

 The value of the commodity
 The distance.
 Efficiency of the port of origin and port of destination.
 Maintenance cost of the containers
 Port charges including tug hire, pilotage, port dues, lighterage etc.
 Cargo handling expenses (cranage etc)
 Various taxes
 Freight forwarding, cargo brokers commission.
 Nature of the cargo
 Fuel / bunker costs & fuel efficiency of the ship.
 Canal dues.
 Cargo availability at the ports of call.
 Charter market demand & supply of ships.
 Equipment repositioning cost.
 Vessel frequencies and speed of the vessel and transit time.
 Value added service.
 Other ports located in the same region.

Two most important parameters of cargo are weight and measurement. Break bulk or LCL cargo freight rates
are quoted in revenue ton basis i.e. weight ton or measurement ton whichever is higher. FCL rates are
quoted based on the size and type of the container.

In the case of ad-valorem B/L the value of the cargo will be mentioned in the B/L. In such case the carrier
Limitations of liability will be the stated value. Because of increased liability the carrier recovers higher freight
(advalorem basis eg 5% of the declared value on high value cargo such as gold and silver)

Many shippers do not mention value of the cargo in the B/L to avoid higher freight. Even carriers do not
prefer such declaration, as they have no means of checking. Not only the question of checking the value of
the cargo, but also the risk of their liability in case of loss / damage to the cargo.
When we have noticed the various elements that need to be considered from port related angle as seen
above while fixing the tariff, from the operators angle the following few other considerations to be looked into:

FIXED AND VARIABLE COSTS

Any operator must take into account his fixed and variable costs. The operator will have to consider whether
the cost can be recovered against each leg.

FREIGHT VOLUME

Like in any other business, shipping also has got a consideration on the volume. When the volume is
assured, it has an impact on the pricing and tariff structure. The volume of freight moving between ports
must be considered to offer a tariff. A large amount of cargo will facilitate a regular operation and maximum
use of ships and port facilities. Ships to earn revenue should always be moving with maximum cargo.

The assured volumes of cargo that need to be moved between ports play a vital role in fixing the freight rate.
The movement of cargo and the volume with certain schedules will enable the operators to plan for their
voyages and to offer an attractive freight rate.

THE COMPETITION

Whenever there is volume availability, it attracts numerous players to offer their services in the region. Every
player will become a competitor to the existing or present service provider and will be anxious to obtain a
market share. The business policy of the competitors and their efforts to penetrate the market will influence
the freight rates.

ECONOMY OF SCALE

This comes into effect with large, regular operations. Depending upon the size of business major players like
Maersk can afford to employ their own specialist in their roles to open up their own office in many of the
ports. This may not be possible for the small operators who will in turn try to avail agency services. It
depends upon the potential opportunity and the availability of cargo for movement, which enables an
operator to take a decision whether to operate with own branches or to engage agencies. At times, when the
business volume is more but the establishment expenses may be over and above to the expected
contribution from the business of that particular sector, an operator may prefer engaging an agency to take
care of the business in that particular region.
OPERATING COSTS

This will be a major consideration in fixing a tariff. Any business is to make a profit and the profit will be a
result of deducting costs from the income. The costs will be various in nature and the following few are
having a significant consideration:

 Crew wages and other costs

 Bunker, Water and Stores cost
 Repair and Maintenance Cost
 Port Dues and Charges – Pilotage, Tugs and agency cost
 Insurance and P & I club costs
 Container Supply and Repair Costs
 Depreciation Costs

Unless the above costs are recovered, the business cannot survive.

SURCHARGES

The tariff will have to include a surcharge or additional cost to cover additional expenses to which the carrier
will be liable. Most of the carriers charge base ocean freight for the transportation of the cargo based on this
factor affecting the freight and levy surcharges for the fluctuations in above costs. Since such fluctuations are
temporary carriers prefer to apply freight surcharges rather than tariff amendment. These surcharges are
subject to increase or decrease or abolished from time to time. If such scenario exists for a longer time then it
will influence the tariff amendment. Few of the cost under this category will be as below:

 Currency Adjustment Factor – This is charged as a percentage of the tariff rate and is
referred as CAF. This is charged to safeguard the likely loss due to Currency fluctuations, which causes the
rate against the carriers’ currency.

 Bunker Surcharges – This occur for similar reasons like CAF and charged on the trade.
This is known as Bunker Adjustment Factor or Fuel Adjustment Factor (FAF)

 Canal Dues – Any variation in canal dues will have an impact on the tariff rates offered.

 War Risks – This cause rises to Insurance Premiums and will have a direct impact on the
tariff offered.
 Port Congestion / Strikes: The vessel operators calculate and fix a tariff considering
various aspects like aprx. time spent in voyage, the time spent in berth and the waiting at the outer
anchorage before berthing of the vessel and the aprx. estimation on discharge and loading of cargo. Due to
port labours strike or due to any other natural calamity or ports inefficiency to handle the vessel within the
prescribed time limit, will force the operators to incur additional cost. This cost will be recovered from the
Trade to avoid the losses and generally this will be known as CONGESTION SURCHARGE.

 Peak season surcharge – Seldom applied

 Winter surcharge – Seldom applied

The applications of such surcharges are jointly decided by all carriers in the same trade route and will be
published.

NATURE OF CARGO

Rates are adopted in a different way for carrying livestock, dangerous, heavy or over dimensional cargo or
valuable cargo to accommodate the extra expense of handling these commodities.

THE COMMODITY BASED TARIFF

Though the above various factors are considered while fixing a tariff, the final and important element in fixing
the tariff would be based on “What the traffic will stand” which has the effect when commodity based tariffs
are used.

GRI (GENERAL RATE INCREASE)

When there is a sudden change in the factors affecting the freight especially the cost escalation the
conference or alliance will have a consensus in increasing the freight and it is applicable to all their cargo in a
particular trade route, effective from a declared date. Normally all carriers involved publish such notice of
increase in leading shipping dailies, etc. jointly.

MRA (MINIMUM RATE ACCEPTABLE)

Based on the factors affecting the freight rates the carriers arrive at minimum rate acceptable between two
ports. This MRA need not be the tariff rate. The MRA will be communicated to the agents and they cannot
charge less than MRA without the approval from the carrier. (The line accepts such requests in exceptional
cases)

Review Questions

List out the factors that influence the Liner freight rate.
1. What is the purpose of collecting various surcharges over and above to the basic freight
rates?
Unit 4.6

ECONOMICS OF A TYPICAL LINER VOYAGE

Economics of liner voyage depends on various factors. The costs may be broadly classified into Capital
Related Costs, Direct Operating Costs & Voyage Related Costs. There are specific factors that may affect
the relationship between costs and the shipping output. To list a few of such nature, it may include the
cargo load factor, vessel speed at sea, voyage distance (lesser the voyage time more time spent at port),
cargo handling rates and related other factors.

Economies of scale exist in two principal areas of shipping. The ship itself, and port facilities, such as
container terminals. Economies of scale are of two broad types. Those, which are enjoyed by a single firm
through that firm’s individual policy, these are known as internal economies. There are external economies,
which result from the expansion in scale of the whole industry or a number of firms within the industry and
cause a decline in costs to all the firms in the industry.

Professor E A G Robinson classified internal economies under five convenient headings:

 Managerial
 Commercial
 Financial
 Risk Bearing and
 Technical

MANAGERIAL ECONOMIES

These are concerned with the control of the organization. For example, a small shipping firm with only one or
two ships may find it cheaper and more efficient to have their ships managed by a specialist management
company instead of employing its own staff. Thus the small ship owner will benefit from the economies of
scale gained by a large management company

COMMERCIAL ECONOMIES

This at times referred to as marketing economies. Large production allows bulk buying at a discount. In
selling the marketing cost per unit of output and advertising is cheaper in larger volumes. The ship owner or
operator can achieve economies of scale by placing regular orders in respect of say maintenance or
bunkering.
FINANCIAL ECONOMIES

Companies large in size have advantages in raising finance for expansion either by going to the public
through the sale of shares or through banks. This may not be all that easily possible for a small company to
convince their lenders. The premium may be high as compared to the cost at which larger companies raise
funds through banks.

RISK BEARING ECONOMICS

This is classified in to three types.

a) The risk that can be insured against - there is a fixed cost of insuring by way of paying
premiums. It depends upon the policy of the company whether to cover each and element that can be
insured. While it will be a very small amount for very large businesses it is a subject matter of compromising
on the profitability for small business units

b) The risk that can be borne by the companies – this is possible in case of large businesses,
say for example by introducing a new commodity. For small companies once lost something may put an
end for the business itself.

c) The risk that cannot be easily insured i.e., usually uncertainties

TECHNICAL ECONOMIES

These are concerned basically with the nature of production; in the present context the production of
shipping services and what some authors refer to in a limiting way as the economies of ship’s size. For
example, the increase in the size of the ship will result in increase in the total construction cost, but these
increases will be less than the proportionate increase in size.

When the internal economies are as listed above, the external economies vary in nature depending upon the
market served and on the pattern of trade from time to time.

In any business the profit is arrived comparing the revenue and the outflow. In Liner Voyages, the revenue
stream and the costs are outlined below. The below mentioned few items are only illustrative and not
exhaustive.
REVENUE & RECOVERIES

 Freight revenue – less commission / rebates

 Surcharges
 Terminal handling charges recovery
 Inland haulage recovery
 Stuffing / Stripping charges recovery

Direct Costs.

 Bunker charges
 Charter hire (If chartered vessel)
 Feeder costs
 Port charges
 Terminal handling charges
 Inland haulage costs
 Stuffing / stripping costs
 Equipment repositioning costs

Indirect Expenses

 Vessel depreciation maintenance (if owned vessel)

 Insurance
 Crew wages
 Office overhead (salaries & allowances, office rent, communication, conference charges etc)
 Container storage
 Container repair and maintenance
 Container leasing costs
 Depreciation on own containers
 Financial costs on own containers (e.g. Interest)

The above clearly indicates the pattern of revenue and expenditure in liner shipping activity.

GENERAL PRINCIPLE OF COST ACCOUNTING OF A CONTAINER SERVICE

In a container service, many of containers / terminal / inland costs are assessed by the shipping agents,
leasing company and terminal operators against current month, in monthly accounts, and not in the usual
conventional way against ship’s call and voyage number, because such expenses can not be linked to a
specific voyage / call (indirect expenses). All direct costs (costs directly incurred for the voyage) will be
debited through vessel disbursement account.

STRUCTURE OF ACCOUNTS SHOWING OPERATING RESULTS

 Expenses debited monthly basis will be added in a 12 months basis

 Vessel disbursements of all voyages performed during the year will be added

 Similar method will be followed for earnings (including detention revenue)

This will provide the operating results.

Since the voyage duration will be unequal between different types of services, it may be necessary to make
prorata allocation of revenue and expenses based on the number of voyage days in each year to the total
voyage days of each such voyage.

GENERAL PRINCIPLE OF COST ACCOUNTING OF A BREAK – BULK SERVICE

The financial results of break – bulk in service have traditionally been issued on the basis of individual vessel
/ voyages. It is based on following.

 Freight revenue less commission per round voyage

 Ship’s daily costs (Amortization, interest, crew provisions, hull insurance, etc.) For
chartered vessel this is daily charter hire. The expenses under this item of the voyage is calculated by the
number of days of the round voyage

 Port expenses, bunker costs of the round voyage, cargo expenses such as stevedoring,
tally etc per round voyage

 General expenses: (shore staff salaries, office rent, communication, other office
expenses etc.)
Most of the break bulk liner companies add the grand total of all these expenses for one year and divide this
by the total voyage days in a year to obtain cost per voyage day. It is normally expressed as a percentage
(e.g. 7-10%) of the sum of ship’s cost.

Review Questions

1. Explain the different economies that need to be considered while starting a shipping
business.

2. State the factors that affect or influence the economics of a liner voyage.

Summary

Types of Liner services – Independent Service – Consortium / Alliance Services – Direct Vs. Transshipment
services – Short Sea Feeder Services – Liner Freight Rate Structure and Economics of a typical Liner
voyage – Liner Conferences
In this unit, we have discussed the type of services that are offered by the shipping companies – hub &
spoke, pendulum, end to end & round the world services. From the point view of business policy, it was
discussed in detail about the nature and the advantages available to a shipping company if it operates as an
independent operator / conference / consortium / alliance member. The development and evolution of
conference system and conversion to consortium and then to alliance system has been enumerated for the
purpose of better understanding and for practical application in order to choose the best possible one system
in case of starting a new business. The factors that need to be considered while fixing the liner freight and
the various economies that affect the liner voyage is discussed. Students are advised to understand the
concepts of each and every item that is covered in this unit to obtain a better knowledge that will help to
discharge their duties in a better way while engaging themselves in shipping profession.
BLOCK V

E-Commerce applications in Liner Companies – Internet Portals – Electronic Direct Interchange (EDI) data
by Liner Companies with Terminals, Liner Agents – Equipment Control Systems – Container Interchange
Services

Structure
Overview
Learning Objectives
5.1 Introduction to E-Commerce Applications
5.2 E-Services available with Shipping Companies
5.3 EDI Process – Exchanging of information within the organization
5.4 EDI Process – Liner Shipping Company and its customers
5.5 EDI Process – Liner Shipping Companies & Customs / Port / Terminal Operators

Summary
Review Questions

Overview

The use of computer systems and its development is inevitable in the present world. As we have noticed
from the earlier sessions, the shipping business requires lot of information and the same need to be
exchanged between various parties right from the seller till the buyer taking delivery. This unit will outline the
activities that are performed with the usage of EDI systems and the amount of manpower and time saving on
this account.

Unit 5.1

INTRODUCTION

Except for the activities that can be performed only with the physical presence of Men / Women, more or less
all other activities have been tuned or developed focusing the computer system and taking the advantage
over it in the day to day and minute-to-minute activities.

Computer based data processing systems now have a place in almost all types of businesses irrespective of
the size and nature of the business unit. Right from vegetable market, small coffee shop till the highly
sophisticated office, the computer and its services have become inevitable in the commercial world. Not only
with reference to commercial activities it has become an inevitable one but also in the education system,
medical system, astrology and in astronomy too. Shipping Industry is not an exception to this, and the
shipping industry is one of the most favoured industries with the usage of computer systems and the growth
of shipping industry has got a direct link with the growth and development of new system in the IT field. The
choice of computer hardware today is greater than ever before, both in the range of manufacturers and in the
choice of types of systems, i.e., large central processors, or a number of separate systems on mini or
personal computers.

Like in any business, the computer applications in shipping business also can be divided into the following
broad categories:

INFORMATION STORAGE AND RETRIEVAL APPLICATIONS:

In any business the amount of transactions will be huge. Unlike the olden days, where the entire
transactions were just kept in book form resulting in enormous delay in tracing the details, the present day
computer system gives the best possible solution to the business executives. The usage of computer to
store the information and to retrieve as and when required is made easy to the users.

MANAGEMENT INFORMATION SYSTEM:

In the present competitive world, the success of the management is highly depending on the information
availability in time and taking suitable corrective actions to upkeep the business. Using the computer to
summarize the data and to extract on an exceptional basis, using logical functions is an important support to
the business executives.

PLANNING AND MODELLING SYSTEM

The basic success of any business lies the better planning of that organization. Usage of computers to test
various alternatives in the course of planning the operation and management of the business has become an
inevitable one.

CALCULATION APPLICATION:

Computers are used as mathematical tool. The manual calculations takes more time and every time this has
to be done for the same unit. The usage of computers stores the data and saves a lot of time in
calculations.
ADVANTAGES OF COMPUTERISATION IN LINER BUSINESS:

HANDLING OF LARGE DATA VOLUMES:

The movement of goods in international trade is always associated with the need to record significant
volumes of data. Most of the data are repetitive in nature. For example, container number will have to be
recorded many times in the course of its journey from origin to destination. The use of computer stored data
will avoid the need for data to be copied, thus reducing the clerical workload and avoiding the risk of
inaccuracies.

OPPORTUNITIES FOR DATA VALIDATION

The use of information stored on the computer can improve accuracy, as it does not have to be manually
recopied each time when it is used. Various logical checks can be applied to data on input, to avoid
capturing spurious data. For example, information on container movements can be checked against the
previous recorded position and status of the container, to check that one follows on from another.

DATA TRANSFER

The business of shipping involves lot of procedures and requires a lot of documentation work. The exporting
country should have to transfer the information to the importing country and the Liner operators are vested
with the responsibility to provide the necessary information about the cargo carried in their vessel to the
customs authorities. As we have seen in the earlier chapters, there is lot of documents involved and the
information on such documents will have to be exchanged between the load port and destination port.

We shall recapture few of the important documents involved and the transfer of information using through
computers in the subsequent sessions.

The usage of E-Commerce applications in Liner Companies is very huge and to realize its importance, one
should basically know the various operational activities in the shipping business.

The responsibility of the shipping company commences depending upon the type of services they offer to
their customers. While few a shipping companies offer only transportation of cargo between ports, few other
accept cargo from the warehouse of the manufacturer till the delivery of cargo at the buyers warehouse. The
application and usage of computer and its related system vary based on the level of information that needs to
be provided to the customers. The providing of information not only helps the customer to know the status
 of their shipment but also it helps the shipping companies to plan for further action and to align their other
services in time.

Review Questions:

6. Summarise the advantages of computer system and EDI Applications with reference to Shipping Business.
Unit 5.2

E-SERVICES OFFERED BY SHIPPING COMPANIES

The amount of services that are offered by liner shipping companies through EDI and website can not just be
listed out in total since every company vary in the nature of services that they render to their customers. The
most commonly available features are discussed in this chapter to get an outline of usage of computer and
EDI systems. We shall explore the application of EDI and e-commerce applications in the following areas:

 Liner Shipping Companies – Load Port & Disport

 Liner Shipping Companies – Inter Departmental usage – Documentation, Operations,
Marketing & Finance
 Liner Shipping Company & and its Customers
 Liner Shipping Companies & Customs Department / Port / Terminal Operators

EDI PROCESS – LOAD PORT & DISPORT

As we have noticed from the earlier lessons, the amount of documentation work involved in shipping activity
is huge. From the statutory angle, filing the Manifest in time with customs and also to the port is an
important one. Before the usage of computer system, manual preparations were on and the necessary
copies will be made separately and each one was to be submitted to customs, port and one copy would be
kept in the office for future reference. Getting the documents copy by fax for the short distance sea
transactions and getting it through courier / mail itself was not only a time consuming but also a very costly
affair. After getting the information from the load port, then converting the same to match the module of IGM
prescribed by the customs, modifying the same to suit the requirement of Port was again a time bound
process and also required different specific skills to complete the activity in time.

Now days, with the advent of computer system, once the vessel sails out of the port, the load port can
transfer the entire details about the shipment to the discharge port through system. Most of the shipping
companies feed the bill of lading information in the system and the same is mostly system generated. The
transferring of bill of lading information through the system has become very easy and common now rather
than faxing the documents from the load port to the disport for their further documentation. Once the data
available in the office of the load port is transferred through EDI, the shipping company’s office at disport will
have to just down load the information sent by the load port. Only few additions / modifications in the fields
may have to be made in the system like the mentioning of a particular CFS / ICD code, direct delivery, etc. by
the disport office to comply with their local custom / port formalities. Once the data is downloaded and further
required information is fed in, no requirement of manual copies (unless very specifically required for as per
the requirement of company policy / customs advise, etc) and the data may be converted in the form a CD
may be handed over to the Customs as well as to the Terminal / Port. This system of EDI has the following
advantages:

 Paper less office

 Efficient usage of time
 Avoidance of multiple / duplicate / repetitive work

Review Questions

1. List out the usage of E-services / EDI application in the day-to-day activities of a shipping
company.
Unit 5.3

EDI PROCESS - LINER SHIPPING COMPANIES – INTER DEPARTMENTAL USAGE –

DOCUMENTATION, OPERATIONS, MARKETING & FINANCE

We have seen in the earlier lessons the responsibility of various departmental managers. In Liner Shipping,
the interaction between various departmental managers is a continuous one. Once the Documentation
Department gets the information from the load port about the loading status / tentative arrival of containers
into the disport, based on the one time down loading of information through their system, other departments
will be in a position to have an access and to plan for their activities. While documentation department will
be starting their activities to comply with statutory requirements, marketing department may start sending
cargo arrival notices to customers and make out a tentative projection on equipment turnaround and start
taking future bookings. While Operations Department may plan to segregate the units to move it to their
nominated CFSs / ICD and plan for empty repositioning to their designated depots, finance department may
update their module with container landing date, gate out date of the container from terminal and other
relevant fields, upon getting reports from terminal about container landing and gate out data.

For all the above various departments, only one centralized importation of data from the load port is sufficient
to start their activities and to tune it to their further requirements. While Operations department monitor the
movements from the terminal through the EDI report received from the terminal, the same report will be used
by the finance / documentation department to find out the storage charges involved for the containers over
dwelled in the terminal beyond the free days. The automatic updation (depending upon the shipping
company’s software provisions) ensures right billing on the customers.

In nutshell, the usage of EDI / Computerized record maintenance is of immense help to the liner shipping
companies in handling various departments by having one common data that is very repetitively used by
various departments for their further processing and future planning. No doubt, to a greater extent,
duplication, storing of paper documents, time delay in searching or retrieval of information is avoided /
minimized with the usage of computerized environment.
Review Questions

1. Explain how the EDI is useful within the organization.

Unit 5.4

EDI PROCESS - LINER SHIPPING COMPANY AND ITS CUSTOMERS

Each and every company has got their own system of exchanging information and based on their business
coverage, they develop their web system enabling the customers to know about the activity of the company
to avail the services. The most commonly available services through the web system covers the following:

BOOKING REQUEST AND CONFIRMATION

Before the development of computer system and e-mail bookings, the shipper either directly or through his
logistics provider will check with the shipping line for making a booking for transportation of cargo between
the load port and disport. A booking request will be manually prepared and sent giving the details of
shipment. Shipping company will confirm separately about the booking to the shipper / their agents. The
mailing / couriering the booking request and the line confirming the status itself will take not less than 2/3
days depending upon the distance between the shippers place and the shipping line’s office.

Now with the development of computer system, the booking can be made ON LINE through the EDI facility
available with the Liner. There should be a proper interface between the customer office and the liner office
for availing the best possible results. The shipper can send the Booking request, which can be accepted
and confirmed by the liner office in few minutes by a mail.

BILL OF LADING INFORMATION

Earlier the system was such that the manual draft preparation of bill of lading would be checked by the
shipper or his agent and upon their confirming the details; original bill of lading will be typed. This was not
only a time consuming process but also require lot of paper documents to be kept in the file thus occupying
huge space even after completion of shipment. With the EDI facility, the template once created can be saved
and only if any corrections / additions / modifications required, the same be done by the shipper / their agents
and sent to the liner office. Liner office can prepare the Original Bill of Lading without spending much of time
and keeping the templates received from shipper does not require much of space to store. This eliminates
the paper handling to a greater extent.

INVOICING

Liner office can send in their invoice through system for their services. This ensures that the invoice is
reaching the concerned person in the shipper’s office in time.

ELECTRONIC FUNDS TRANSFER

This system facilitates the fund transfer from the shipper for the services rendered by the Liner office through
EDI system upon receipt of invoice, as per the agreed terms and conditions. This reduces the paper travel
from one office to another office, approaching the banker for preparation of DD and other relevant exercises.

ARRIVAL NOTICE INFORMATION

Every shipper would be closely monitoring the arrival status of the cargo. One of the functions of the shipping
company is to send cargo arrival notices and trans shipment advices. The EDI facility reduces the work load
of taking independent notices and produces a set of notices for the data imported through EDI from the load
port / trans shipment hub.

The development of web based up-dation enables the shipping company to concentrate in their activities
rather than answering to customer queries on a regularly basis. Most of the shipping companies update their
website wherein the details of shipment is captured from the time of loading till the arrival of cargo in the
disport. When the details are getting updated in the web site of the liners, based on the relationship
established between the customer and the liner office, through this EDI facility, directly the liner office can
reach the arrival information to the customer’s office.

SHIPMENT STATUS INFORMATION

With any one of the available information like container number, bill of lading number, the shipment status
can be viewed from the website of the liner shipping company. The importer/ consignee can get the
information about their shipment sitting in their place at any point of time.

BENEFITS OF EDI SYSTEM

 It offers better communication process between the shipper and the shipping line

 It eliminates keying in the data once again and thus eliminates errors and rechecking of the
information

 It eliminates paper handling and the document storage

 It improves the accuracy of data

 It eliminates the need for using some other mode of communication of information like
faxing, etc.

Few of the information / services that are commonly available to the customers under e-business / web
system of the shipping lines are indicated as below:

RATES & TARIFFS

Before the development of web and computer systems, a shipper will have to approach the liner to get the
tariff / rates over phone and then the same will be taken on paper for the purpose of comparison of rates
quoted by various lines and the decision was arrived at to prefer a shipping line. Now, most of the liners
have their tariff available in their web-systems. The rates / tariff will get updated by the company on a
periodical basis and this may be with few companies on a daily basis / twice a day basis. The shippers can
just by keying in the load port, disport, commodity information (along with other as required by the system),
can have the freight rates. By taking the information from various shipping lines web site, the shipper can
discuss with any one specific liner to get any special rate or bulk discount based on the volume. This tariff
information on web helps the traders to have access to the rates at any time, at any place and without
spending much of time and efforts. Only requirement should be that the shipper to have an Internet
connectivity to access the available data.

SCHEDULES

We have seen in the earlier sessions that one of the characteristics of the liner shipping is to publish the
schedules. Though the schedules are being published by most of the shipping companies in the local dailies
(shipping related), the information available and updated in their website helps the trader to have the
information immediately on their table just at the click of the mouse.

B/L INSTRUCTIONS

We have noticed the booking and the booking confirmation can be had through using systems connected
with proper interface between the shipper’s office and the liner office. In international trade, the seller and
the buyer are situated in far off places and endorsing the title document, called bill of lading, the seller
transfers the ownership of goods. The transaction of sale and payments is though possible under various
modes like advance payment, documents against sight / acceptance, most of the traders prefer trading,
under a letter of credit. A letter of credit is a document that ensures the payment to the seller through the
buyer’s bank, upon complying with the terms and conditions stipulated with. One of the conditions in the
letter of credit, normally would be about the bill of lading and the shipper / consignee / notify party clauses in
addition to other usual clauses as below:

We have seen earlier the functions of a Bill of Lading –

 It is a receipt for the goods

 It provides evidence of a contract of carriage
 It is a document of title

Hence the information available in the bill of lading should be clear and unambiguous. A bill of lading will
have normally the following details.

 The name of the operator: The bill of lading should be signed by the operator issuing the bill
or by his agent.

 The parties to the transaction: The name of the shipper, the consignee, any agents acting
for the shipper or consignee and notify party details. If the consignee is shown as “To Order”, the bill of
lading can be endorsed by the shipper to a named third party, or by means of a general endorsement, in
exactly the same way as a cheque can be endorsed to a third party.

 Description of goods – The number of packages, marks & numbers, weight and
measurement, commodity description, the container number and seal number in case of FCL shipment.

 Origin and Destination of Goods: A bill of lading will contain the details about the name of
the vessel that will carry the goods and the port of loading and the port of discharge. In case of multimodal
transport system, the place of delivery will also be included.

 Type of Service & Freight Payment:

 The service provided by the operator will be mentioned in the bill of lading showing FCL or
LCL, place of receipt and place of delivery, the freight payment details, etc.

 The place and Date of issue - A bill of lading cannot be issued before the goods have been
received by the carrier and should contain the details about the place and date of issue.
On Board bill of lading can be issued only upon receipt of cargo on board the vessel and in exchange of
mate receipt. Any discrepancy in the bill of lading will result in amendments and in time delay. This can be
avoided by using EDI / system facility of the liner shipping company. A template of bill of lading instructions
can be sent and the draft bill of lading can be viewed. Any additions / corrections / modifications can be
made by the shipper and sent to the liner office and the liner can finalize the bill of lading. This facility
reduces a lot of time in the process.

E BILL OF LADING – PRINT

Few a shipping companies have the facility of E-Bill of Lading. Though technically it has lot of problems as
of now and the acceptance has not come with most of the traders, with top ranking shipping companies, E
bill of lading facility is available. The shipper can take a print out (with due digital signature) at any time and
at any place.

DIVERSION REQUEST

With few liner shipping companies, a request for diversion of shipment from port of destination to another
port of destination can be placed with using the EDI system. Though lot of formalities is subsequently
involved, placing the request is enabled without spending much of time

Review Question

1. List out the e-services that are generally available in a shipping company.
2. What are the advantages available to the customers by using the e-services offered by
the shipping companies?
Unit 5.5

EDI PROCESS - LINER SHIPPING COMPANIES & CUSTOMS / PORT / TERMINAL OPERATORS

The technological improvement in IT not only gives solutions to Liner shipping industry but also to other
related statutory authorities and relevant agencies. The different types of business units are broadly
classified for us to understand and to relate the usage of EDI system. When the nature of business unit is
different from that of each other, every liner will have to complete the custom and port formalities as required
by the customs / port authorities.

In Import Cycle and in Export Cycle, the cargo is classified as –

 Break Bulk
 Dry Bulk / Liquid
 Containers

We shall consider the Import Cycle of handling containers.

The activity starts with sending vessel profile to the Port. After that the Voyage registration will have to be
made by the agent and the necessary information will have to be sent to the Port. Upon receipt of this, Port
allots the VIA No. to the vessel.

After this process, the IGM has to be filed by the Steamer Agent with the Port and Customs. Request for
Inward Entry has to be made by Steamer Agent to Custom. On receipt of such request, the Customs will
grant Entry Inward to Steamer agent and Port. While this process is on the following activity will be on:

Steamer agent submits the following to Port:

 Berthing / Pilot Application, giving the vessel dimensions and cargo details.

 Cargo details & Hazardous Cargo Declaration

 Along with the declaration, the instructions regarding handling of Hazardous cargo

 Stowage Plan

 Advance Container List

 PHO Certificate

 Plant Quarantine Certificate

 Immigration Certificate

Upon receipt of all above, the Port allots berth to the vessel and provides the resources for handling the
vessel.

While the unloading operation is on, at every stage, for the cargo unloaded, there is a tally report made and
the same has to be given by the Port to steamer agent and also to customs. The surveyors of the steamer
agent will also get the tally report. If there is no excess or short landing, there is no much of formalities
involved. When there is an excess cargo landing, the details will have to be sent by port to customs. The
steamer agent will have to file a supplement IGM with customs and port for such excess landing.

When there is no excess landing, the further process begins. We shall discuss about the container trade for
our understanding on the EDI system usage in effecting delivery of box from the terminal. Depending upon
the practice of the port, after the consignee / their agents completing the custom formalities, port allows
delivery in any one of the following ways –

 Direct Delivery of containers will be given to the consignees upon they submitting the
necessary documents for having completed the customs formalities.

 Cargo can be destuffed from the containers and the cargo will be delivered against valid
documents.

 Neither there is a facility of effecting direct delivery to the consignees nor any facility to
devan the containers and to effect delivery of cargo alone. In this case the amount of formalities involved in
transferring the containers from the terminal to the CFS / ICD and the documentation process involved in
getting the permission is a time consuming one and the necessary papers of such request will have to move
from table to table from one office to another.

 While the above three different practice exist with few of the ports, in few other ports there is
a combination in the style of effecting delivery of containers. Some portion of containers belonging to
consignees enjoying better rating with customs (RMS) may get delivered directly to the consignees and the
rest will be moved to the CFS. Whenever the container is moving out of the port, the same has to be
updated and maintaining manual record is not at all possible where the throughput is about a million TEUs in
a container terminal. While the containers are delivered from port, necessarily there has to be a gate pass
and the preparation of gate pass on manual basis is not possible, where system only can contribute
efficiency and time saving in the activities.

Let us see the e-process application in the above area i.e., the permission formalities to move the container
from the terminal to a CFS.

COMPUTER SYSTEM & MOVEMENT OF CONTAINERS FROM TERMINAL TO CFS

We shall discuss the formalities involved in movement of containers from the port to the CFS in the first
place. Once we understand the procedure, it will make us to understand the facilities of EDI / COMPUTER
application system:

 The Shipping company will have to file the IGM with Customs and Container Terminal – This
gives the details of containers / cargo carried in a particular vessel. (For the details available in IGM, refer
earlier chapters)

 Apart from this IGM, giving almost the same information as below, shipping line submits one
document called Import Advance List to the terminal operator

o Container number
o Size
o Weight
o Description
o Load port
o Vessel Name – Voyage No and etc.

Though most of this information is available in the IGM, filing of such documents is in practice with few
terminals (even after the development of software systems that are specially designed to take care of the
requirement of shipping industry, there is one such duplicate document)

 Along with the IGM Vessel Application will have to be filed – This contains the details of
container number, size and other relevant information. The container that carried the cargo has to be
exported out of the country of import, since it is used to carry cargo only and no duty is levied on the value of
the container to keep it in the importing country. Generally, a bond will be executed by the shipping line
undertaking to re-export the containers from the importing country within the specified time limit granted by
customs. If the container is not sent back within the time limit granted by customs, the agents will have to
pay the duty on the container value to customs or will have to seek extension of time limit for moving the
container out of the country. Once the container is moved out of the country either with export cargo or in
empty status, there is a procedure for canceling the earlier bond submitted to customs. Though at few ports,
there is an integrated system available, i.e., automatic updation and cancellation of bonds filed at the time of
importation of containers, in few a ports, a separate application has to be filed with customs for such
cancellation.

 The shipping company will have to send intimation to the CFS operator for the number of
boxes they will have to move from their terminal to their CFS giving details like the container number, size,
vessel name, voyage number, consignee name, description of cargo, net weight, gross weight, etc.

 The nomination of the CFS should be communicated to the terminal also

 Upon receipt of the information, the ICD / CFS operator will prepare an application called
Trans shipment application in case of ICD and in case of local movement to CFS, an application as
prescribed by the Customs

 Customs will co-relate the information available on the application with their system
information and will give permission.

 Before giving such permission, Customs will ensure that the Bond executed by the CFS
operator has got sufficient value and then only allow. Once the bond is registered with Customs, the bond
value will get entered in the system and as when permission for movement is granted, the bond value will get
reduced to the extent of permission granted for movement of containers from the port to CFS. The basic
purpose of this bond is to ensure that the CFS operator moves the container safely from the terminal and
reaches the same in the customs notified placed i.e., the respective CFS.

 At every document, required value will get debited in the bond account of the CFS operator

 After debiting the bond account, the permission will be given by the Customs authorities for
movement

 CFS operator, then carry that permission and hand over the same to the terminal enabling
them to allow delivery and hands over a copy to their respective transporter along with the prescribed
authority form (example – delivery order / form 13 as practiced by chennai container terminal)
 Container terminal receives the customs permission and allows delivery to the CFS operator

 The truck upon reaching the CFS will submit the same to CFS operations Manager, who in
turn submits the same to the Customs authorities in the CFS and takes an endorsement in the document for
the safe reaching of container

 After obtaining the endorsement, the CFS operator will have to surrender the same to the
Customs Department for getting the necessary credit in their running bond account

 Customs authorities after verifying the endorsement made in their permission copy by the
respective CFS customs officer, credits the amount in the CFS operators bond account

 This cycle starts again and getting completed in the above mentioned process for each and
every movement of container.

Now, having undergone the process, let us understand the usage of EDI in the above process.

EDI ensures,

 Generation of required number of copies for submission to customs and other relevant
agencies

 No paper generation and printing involved and the data travels through the system

 No time consuming process and just at a click of mouse, transmission of data from one
place to another / other places are possible

 Allows the other agencies to filter / modify the information provided through the system for
their further monitoring.

Like this there is a lot to list out, but the future scope of EDI in respect of the above process may take the
below shape or even a better shape when the days goes off:

 Steamer Agents will be sending a request for movement of containers to their nominated
CFS to Customs Authorities through EDI and the copies will be marked to the respective CFS operator and
Terminal
 Customs authorities will be debiting the bond account of the CFS operator and will send the
permission to the CFS operator with copies marked to the Port Gate Officer, Terminal and the Steamer
Agents

 CFS Operator may have to just take a print of the permission and then to send the same to
the terminal through the vehicle operator

 Terminal may verify the same and load the unit onto the trailer

 Port Gate Custom Officer will verify the data and permit the movement

 Upon reaching the container in the CFS, the Customs Officer of the CFS may have to just
enter the details of arrival container and such up-dation of data in EDI will reflect in the customs division
where the permission was granted and the bond account of the CFS operator may get updated automatically

From the above we can understand the value of EDI and the necessity for moving to the usage of
computerized environment.

We have noticed the statutory requirement of filing of IGM with customs and other relevant documents to port
/ terminal authorities. The reproduction of same type of document or a similar document with very few
changes / additions is inevitable in shipping business. The manual process which was demanding more man
power, specialized skills, huge time and other related factors are now challenged with the usage of EDI and
computerized environment.

Terminal operations with reference to getting information and uploading in their system have become easy
since the data is received in e-form. With the advance software technological information, the data
submitted by the shipping company is converted or get fitted in to the operational system of the terminal.

Thus, once the data is fed into the system, say for example the load port enters the entire information with
reference to the containers loaded in a particular vessel, the data may just get transferred from the load port
to the disport and the disport makes the necessary inclusion / modifications as required by the customs / port
and submits the same using EDI facilities.

The information available in system thus useful to various authorities:

CUSTOMS:
 To filter out the information on un-cleared cargo at any point of time
 To know the status of clearing documents filed with customs (e.g., bill of entry)
 To sort out of information on cargo description
 To sort out the data to capture the information on specific commodity loaded from any
specific country
 And other information as may be required from time to time

TERMINAL:

 To know the arrival of containers in a particular vessel

 To know the status of containers delivered
 To know the status of containers available in the yard at any point of time

SHIPPING LINES:

 To identify the containers against the delivery order already issued

 To identify the containers which have not been reported at the empty depot after issuing
delivery order
 To identify for the containers the delivery is yet to be released

While the above just deal with specific routine work, the e-commerce application provides lot of benefits to
the shipping trade. The usage of EDI and e-applications in the shipping industry is still under the
development stage. EDI data between Liner Companies and Terminal is yet to undergo lot of changes /
modifications and the simplification in the usage of the same need to be reviewed at every stage of
operations.

Electronic Direct Interchange (EDI) data – between the Terminal and Liner Companies is helping out the
shipping companies in a greater way. The email system converted to EDI reduces the time and the details
are getting uploaded in the shipping lines system automatically (whoever have such interface facility). To
name few of the reports that are sent by terminal to liners include the following, apart from damage reports
and other relevant reports:

 Import Discharge Report - This contains the information on containers got discharged from
a particular vessel giving the date and time of discharge
 Load Report – Export – This gives details of containers loaded on a specific vessel, date
and time

 Gate in – Export Boxes reported – This report gives the details of containers reported for
export and to connect a particular vessel – whether the container is empty or laden

 Gate Out – Import boxes moved out of the terminal will be covered under this report

Getting information in right time is very essential in performing any task. Getting reports are the base
information of the shipping companies and they will have to process further based on these type of reports.

To cover a few, terminal handling charges and the storage charges for the boxes stayed beyond the free
days will have to be collected by the terminal from the shipping companies, who in turn will have to collect
the same from the consignees / their agents. While few shipping companies have got a direct connectivity
with the systems of the terminal, few others yet get the report from the terminal, download the same and fits
it in their system. When the auto updating is available, when the terminal keys in the data, the same will get
up loaded in the shipping companies system.

While there could be no variance in the THC charges for a standard size of container, the storage charges
vary based on the dwell time of the box in the terminal. To collect the same, data like the date of landing
and gate out has to be checked and the storage days to be calculated based on the terminal slab. In the
same way, it is important for the shipping company to know the same and to update in their system for
generation of bill on their customers.

The scope of EDI connecting the Liners, Terminal, CFS Operator and Customs Department is seen above.
The development of EDI and website updating has reduced the duplication of work and manpower
requirement to communicate the same data using various middlemen / agency offices. Few a liner shipping
companies maintain their inventory system and repair and maintenance activity and approvals through EDI.
The depot operator of the line has to just update in the website of the liner on the arrival and delivery
information of boxes that they have handled on that particular day. In fraction of seconds, the line would be
in a position to see the same in the web and plan for their activities. Earlier system of sending survey
reports for damages have gone and now it has come in such a way that the depot operator will take
photograph for major damages and upload the photo in the liner web and in other small damages the details
of damages will be fed in. The approving authority sitting in a remote and far off place can view the reports
and give clearance through web itself.

Summary
To summarize, the E-Commerce applications in the shipping industry is an inevitable one undergoing a lot of
changes on a day to day basis and by the time this print comes out, most of the items listed above might
have become obsolete and new systems could have been put in use. The E-applications have helped a lot
in the growth of the trade and in economizing the cost as well as the economizing of the resources of
shipping companies and the users too. At every stage, the information flow is very essential and this helps
the traders / merchants to plan for their activities. The services that are offered by the shipping companies
right from booking the container through the system and getting information on arrival through the system
eliminates any possible delay in communications as well as performing the act. The concept of maintaining
a register and ticking for the arrival of container, making another tick for delivery or rounding off the container
number with different colour pens has been replaced with the development of EDI system. The success of a
business has got a formula of getting the right information and in right time. Though manual systems were
also producing to the extent possible right information, the amount of time consumed for preparation of such
reports could really be better utilized now with the help of systems. The duplication of work is eliminated
through the system usage and the sharing of common information with slight modifications / additions are
producing reports that are required by various agencies and functional heads in the shortest possible time.
The most important factor that need to be primarily considered in today’s world is to minimize the paper work
and possible cost reduction in storing the data. This is ensured by the computer system and adds enough of
value to the users and the customers.

Review Questions:

1. List of the reports that are exchanged between the terminal and shipping company.
Also mention how effectively EDI is used in exchanging such information.

2. “EDI system helps the Terminal and Shipping Lines to optimize their resources” –
comment on this statement and justify your views.