Freight forwarder

A freight forwarder, forwarder, or forwarding agent, is a person or company that organizes

shipments for individuals or corporations to get goods from the manufacturer or producer to a
market, customer or final point of distribution. Forwarders contract with a carrier to move the
goods. A forwarder does not move the goods but acts as an expert in supply chain management. A
forwarder contracts with carriers to move cargo ranging from raw agricultural products to
manufactured goods. Freight can be booked on a variety of shipping providers, including ships,
airplanes, trucks, and railroads. It is not unusual for a single shipment to move on multiple carrier
types. 'International freight forwarders" typically handle international shipments. International
freight forwarders have additional expertise in preparing and processing customs and other
documentation and performing activities pertaining to international shipments.
Information typically reviewed by a freight forwarder includes the commercial invoice, shipper's
export declaration, bill of lading and other documents required by the carrier or country of export,
import, and/or transhipment. Much of this information is now processed in a paperless
environment.
The FIATA shorthand description of the freight forwarder as the 'Architect of Transport' illustrates
the commercial position of the forwarder relative to his client. In Europe, some forwarders specialize
in 'niche' areas such as rail-freight, and collection and deliveries around a large port.
Lloyd's Loading List is the freight forwarding industrys' journal of record, first published 160 years
ago as a UK export directory today it provides details of forwarders, nvoccs, shipping lines/agents
who serve over 10,000 ports globally.
Some forwarders handle domestic shipments only.
International Freight Forwarders, NVOCC's and customs brokers often charge for transferring
documents to another transportation company at destination. This fee is a part of the ocean freight
charges, being paid by the importer at the port of discharge in the incoterm FOB (free on board), and
by the exporter at the origin in the incoterms CFR (cost and freight) and CIF (cost, insurance and
freight). This fee is separate from documentation fees charged by carriers and NVOCCs as part of the
freight charges on a bill of lading and is separate from other fees for document preparation or for
release of cargo. Some companies call this an administration fee, document fee, document transfer
fee, but it exists in some form in most destinations and is well known to most shippers. Steamship
carriers do not have this fee.

Customs house agent
In India, a customs house agent (CHA) is licensed to act as an agent for transaction of any business
relating to the entry or departure of conveyances or the import or export of goods at a customs
station. CHAs maintain detailed, itemized and up-to-date accounts. A CHA license may be temporary
or permanent.
CHA licensing regulations, 1984
1. No ceiling on the number of CHAs who may be appointed in a customs house
2. A regular licence is preceded by a temporary licence.
3. Criteria of experience and financial soundness must be met.
4. A regular licence is subject to passing an examination, a minimum volume of business and
compliance with Regulation No. 14.
5. Changes in the constitution of a partnership or firm do not affect the operations of a CHA.
6. Prescribed fees prevent overbilling by CHAs.
Qualifications
An applicant should:
Be a graduate of a recognized university.
Hold a pass in Form 'G' as an employee of the firm or company.
Should have three years of experience in customs-clearance work.
Should have bank-certified assets of Rs.1 lakhs or Rs.50,000.
If there are more applicants than licenses, the Commissioner selects by seniority of holding a
G pass. If two people have equal seniority, the older person will be preferred.[1]
An applicant needs to possess a pass in Form G for only one year with written authorisation from the
Commissioner.
Clarifications
1. A diploma in Customs clearance and freight forwarding offered by the University of Mumbai
is not considered as "graduation" for the purpose of eligibility.
2. An employee, partner or director of a CHA licensee authorized for examination under
Regulation 9(5) may take three examinations in two years from the date of application by the
licensee for examination.
3. The level of knowledge of the local language must be determined by the Commissioners; the
Regulations have no requirement. Knowledge of the local language by an authorized representative
is considered sufficient. Proficiency in Hindi is desirable.
4. A person passing an examination under Regulation 9(5) may apply for a CHA license when
applications are requested, subject to other qualifications.
5. Persons granted CHA licenses before the 1997 amendment requiring graduation would
continue to qualify for renewal.
Multimodal transport operators as CHAs
Multimodal transport operators (MTOs) are appointed under the Multimodal Goods Transportation
Act, 1993 by the Ministry of Surface Transport. Their work involves carrying goods by more than one
mode of transport between India and abroad. This does not confer a right on them to obtain an
appointment as steamer agents or CHAs unless they are otherwise qualified for the appointment.
Licence types
Temporary
After accepting an application, a one-year temporary licence is granted under Regulation 8 in Form
B. Before receiving a temporary (or regular) licence, the applicant must execute a bond on Forms D
and E. For major ports, the surety amount is Rs.25000/; for other ports, Rs.10000/. Surety may also
be given in the form of National Savings Certificates or postal security, which should be pledged in
the name of the Commissioner. Since a regular licence-holder is allowed to work in more than one
Customs station, separate bond and surety must be posted for each customs station.
Regular
An application for regular licence may be made on Form C by a person who has passed the
examinations. Forms A and C are nearly identical, except that while the former is issued under
Regulation 5, the latter form is issued under Regulation 10. A regular licence is requested on Form D.
The applicant must satisfy the following conditions:
1. Quantity or value norms of cargo cleared from the customs house (as determined by the
Commissioner)
2. Applicant conduct during the temporary-licence period; no complaints of non-compliance
with Regulation 14
A regular licence is non-transferable and its term is ten years.
Disqualifications
Regulation 10(1) specifies that only a person who qualifies in the examination can apply for a regular
licence. Sub-regulation 3 provides that the Commissioner may reject the application of a person who
fails the examination. If performance criteria are not satisfied regarding quantity and value of
clearances or conduct, the application may be rejected. An appeal may be made of an order of
rejection within 30 days to the Chief Commissioner, who is also empowered to review regular
licence grants within one year.16915032
Record-keeping
Accounts should reflect all financial transactions entered into as a CHA. A copy of all documents filed
(such as shipping bills, bills of entry and transshipment applications) must be maintained for at least
five years and should be available for inspection by departmental officers.
Duties
Authorised clearances only against authorization: A CHA is required to clear goods for import
or export with specific authorization from the principal, which must be produced whenever required
by the Deputy or Assistant Commissioner.
Personal clearance: The CHA must personally clear the goods or clear them through an
employee designated by the Commissioner. All documents should list the CHA's name at the top.
The CHA should not attempt to influence the conduct of customs officers in matters pending before
him or his subordinates; there should be no threats, false accusations or duress against such officers,
and no promise of advantage, benefit or gift should be made or bestowed on such officers. The
CHA's duties should be discharged expeditiously, and he cannot charge more than the rates
approved by the Commissioner.
Conflicts of interest: If the CHA is a former officer of a department, he cannot represent any
matter before a customs officer which he had considered as an officer. He cannot use facts which
came to his knowledge as an officer.
Correct advice: The CHA must advise the client to comply with the provisions of the Act and
the regulations, diligently ensuring the imparting of correct, relevant information to the client for
clearance of cargo or baggage. If there is non-compliance by a client, the CHA must bring it to the
attention of the deputy or assistant commissioner. This regulation requires the CHA to provide
information to the department.
Fiscal accountability: The CHA must promptly pay the government all monies received from
the client for duties and taxes. Any money received from the client or from the government should
be promptly and fully accounted to the client.
Record-keeping: A CHA should not attempt to gather information from government records if they
are not provided by the appropriate officer. Access to records should not be denied, removed or
concealed when sought by the Commissioner. Records and accounts must be maintained as directed
by the Deputy or Assistant Commissioner, and available for inspection. All documents must be
prepared in accordance with rules and orders.
If the licence granted to a CHA is lost, the loss should be promptly reported to the Commissioner. If
there is failure in compliance with obligations under Regulation 14, the Commissioner may prohibit a
person from acting as a CHA.
Handling changes
Any change in partners or directors should be referred to the Commissioner. If there is a change in
the constitution of the firm or company, an application for temporary and regular licences should be
made within 30 days of the change. If there are no adverse findings against the firm or company, the
Commissioner will grant a licence in the previous category held by the firm or company. In the
meantime, the firm may continue as a CHA with application to the Commissioner.
If the CHA is not a firm or company, the Commissioner will grant permission to continue as a CHA if
there is any change in the constitution of the concern. If the change is due to the death of a licenced
CHA, his legal heir (assisting him in his work as CHA under Regulation 20) may be granted a licence
subject to no adverse findings and passage of the examination. Changes in the qualified person
acting on behalf of the firm or company should be immediately provided to the Deputy or Assistant
Commissioner.
Information technology
The National Informatics Centre (NIC) has developed basic software to create and file shipping bills
(Customs documents) on the Indian Customs website. The software is free to download with IceGate
(Indian Customs) registration.
NVOCC
NVOCC = Non-Vessel Operating Common Carrier is ALMOST the same as a Freight
Forwarder in terms of his activities.. However there are some differences which separate
these two entities..
The NVOCC can and sometimes do own and operate their own or leased containers
whereas a Freight Forwarder does not..
In certain countries like USA, the NVOCC operators are required to file their tariffs
with the government regulatory bodies and create a public tariff..
NVOCC is in certain areas accorded the status of a virtual carrier and in certain
cases accepts all liabilities of a carrier
A Freight Forwarding company can act as an agent/partner for a NVOCC












How to reduce airfreight charges
What to
look for
What it means How to use it to reduce cost?
MAWB or
HAWB?
If it is MAWB which means shipment will be
moved directly by airline in next available
flight. HAWB means it will be consolidated with
other shipment and may not leave
immediately. It is cheaper but many forwarder
will quote for direct flight and send by consol
Clarify with agent to ensure shipment
moves on direct flight. If you can wait for
couple of days get quote for indirect flight
whcih is cheaper
Which
airline?
Not all airline have same air freight rate.
When you take price quote ask your
forwarder to specify airline.
CAF & CC
Fee
Both Charges collect (CC) and Currency
adjustment factory (CAF) are charged at by
agent and can be negotiated.
Negotiate the percentage of CC and CAF.
Both are charged on freight part only if
agent has charged it on entire amount get
a refund/charge back
Weight or
Volume?
If cargo is density per CBM is over 175 Kilos it is
considered dense cargo
Most airline give 5% to 10% discount for
dense cargo.
DO fees Delivery Order fees
Normally you should pay only actual
delivery order fee charged by airline NOT
agent's DO fee
Bulk
pricing
Cargo qualifies for bulk price at different
weight slabs of 100 /300 / 500 / 1000+ Kilos
If your cargo is over 300 or 500 Kilos you
can qualify for bulk discount prices
Location
of agent
Forwarder's quote for same airline will depend
on location of head office
Normally agent having office in country of
export can offer better price then agent
who has no physical presence. If your
home country forwader has no presence
then ask your supplier to recommend a
agent to you.

1. 1

First thing you need to do, is to make sure everything is packed well to be shipped by air
freight. (cardboard boxes, wooden boxes, trunks, etc). If you have more then 5 pieces you
should consider it to put everything on a pallet and wrap shrink foil around it. This to be sure
the shipment stays together during the transport.
Ad
2. 2
Then you should check the dimensions and weight of the shipment. Note that most
airplanes can load pallets with a maximum height of 160 cms. If you exceed the 160 cms,
you will have to ship it with a freighter (thats a plane that is only used to transport freight).
3. 3
Then you should send a request for an offer to your local freight forwarder at the country
of departure. There are many websites online, providing you a quotation service.
www.freightfly.com is one of them.) You need to provide the freight forwarder with the
following info: Inco-term, pick-up address, dimensions of the cargo, number of pieces,
weight of the cargo, destination, commodity of the goods.
4. 4
The freight forwarder will then send you his offer. It will probably consist out of a few
charges. The most common charges are explained beneath:
5. 5
Airlines charges
6. 6
Air freight (A/F): the air freight charge is a price per chargeable kg. (if you want to calculate
the chargeable weight of your shipment, then check the chargeable weight calculator at
www.freightfly.com). The air freight will be quotated per weight. With this I mean that a
shipment of 1 kg will probably be more expensive per kg than a shipment of 500 kg.
7. 7
Fuel (FUE): the fuel charge is normally the price for fuel/kg actual weight.
8. 8
Security (SCC): This is a charge for the security measures they need to take. This is normally
also charged per kg actual weight.
9. 9
Local charges
10. 10
The local charges are charges like the customs clearance, pick-up, handling, screening, etc..
If it is not clear to you how to calculate them, it is probably best to ask your freight
forwarder for a little explanation.
11. 11
If you accept his offer, you will have to send him the commercial invoice for the customs
clearance (or you do the customs clearance yourself of course ).
12.
12
The freight forwarder will then pick-up the cargo and make all the documents ready.
Kindly ask your forwarder for a copy of the AWB (air waybill).
Ad
Add your own method
Name your
1.
Save
Tips
With all the knowledge from above, you should now be able to handle air freight shipments.

To ensure you are getting a good and fair price, it's best to get at least three separate
quotes.
If you have the AWB number, you can track the shipment at www.freightfly.com
I wish you a lot of success.
PHYSICAL DISTRIBUTION



Photo by: Acik
Physical distribution is the set of activities concerned with efficient movement of finished
goods from the end of the production operation to the consumer. Physical distribution takes
place within numerous wholesaling and retailing distribution channels, and includes such
important decision areas as customer service, inventory control, materials handling,
protective packaging, order procession, transportation, warehouse site selection, and
warehousing. Physical distribution is part of a larger process called "distribution," which
includes wholesale and retail marketing, as well the physical movement of products.
Physical distribution activities have recently received increasing attention from business
managers, including small business owners. This is due in large part to the fact that these
functions often represent almost half of the total marketing costs of a product. In fact,
research studies indicate that physical distribution costs nationally amount to approximately
20 percent of the country's total gross national product (GNP). These findings have led many
small businesses to expand their cost-cutting efforts beyond their historical focus on
production to encompass physical distribution activities. The importance of physical
distribution is also based on its relevance to customer satisfaction. By storing goods in
convenient locations for shipment to wholesalers and retailers, and by creating fast, reliable
means of moving the goods, small business owners can help assure continued success in a
rapidly changing, competitive global market.
A SYSTEM APPROACH
Physical distribution can be viewed as a system of components linked together for the
efficient movement of products. Small business owners can ask the following questions in
addressing these components:
Customer serviceWhat level of customer service should be provided?
TransportationHow will the products be shipped?
WarehousingWhere will the goods be located? How many warehouses should be utilized?
Order processingHow should the orders be handled?
Inventory controlHow much inventory should be maintained at each location?
Protective packaging and materials handlingHow can efficient methods be developed for
handling goods in the factory, warehouse, and transport terminals?
These components are interrelated: decisions made in one area affect the relative efficiency
of others. For example, a small business that provides customized personal computers may
transport finished products by air rather than by truck, as faster delivery times may allow
lower inventory costs, which would more than offset the higher cost of air transport. Viewing
physical distribution from a systems perspective can be the key to providing a defined level
of customer service at the lowest possible cost.
CUSTOMER SERVICE
Customer service is a precisely-defined standard of customer satisfaction which a small
business owner intends to provide for its customers. For example, a customer service
standard for the above-mentioned provider of customized computers might be that 60 percent
of all PCS reach the customer within 48 hours of ordering. It might further set a standard of
delivering 90 percent of all of its units within 72 hours, and all 100 percent of its units within
96 hours. A physical distribution system is then set up to reach this goal at the lowest possible
cost. In today's fast-paced, technologically advanced business environment, such systems
often involve the use of specialized software that allows the owner to track inventory while
simultaneously analyzing all the routes and transportation modes available to determine the
fastest, most cost-effective way to delivery goods on time.
TRANSPORTATION
The United States' transportation system has long been a government-regulated industry,
much like its telephone and electrical utilities. But in 1977 the deregulation of transportation
began with the removal of federal regulations for cargo air carriers not engaged in passenger
transportation. The deregulation movement has since expanded in ways that have
fundamentally altered the transportation landscape for small business owners, large
conglomerates and, ultimately, the consumer.
Transportation costs are largely based on the rates charged by carriers. There are two basic
types of transportation rates: class and commodity. The class rate, which is the higher of the
two rates, is the standard rate for every commodity moving between any two destinations.
The commodity rate is sometimes called a special rate, since it is given by carriers to shippers
as a reward for either regular use or large-quantity shipments. Unfortunately, many small
business owners do not have the volume of shipping needed to take advantage of commodity
rates. However, small businesses are increasingly utilizing a third type of rate that has
emerged in recent years. This rate is known as a negotiated or contract rate. Popularized in
the 1980s following transportation deregulation, contract rates allow a shipper and carrier to
negotiate a rate for a particular service, with the terms of the rate, service, and other variables
finalized in a contract between the two parties. Transportation costs vary by mode of
shipping, as discussed below.
TRUCKINGFLEXIBLE AND GROWING The shipping method most favored by small
business (and many large enterprises as well) is trucking. Carrying primarily manufactured
products (as opposed to bulk materials), trucks offer fast, frequent, and economic delivery to
more destinations in the country than any other mode. Trucks are particularly useful for
short-distance shipments, and they offer relatively fast, consistent service for both large and
small shipments.
AIR FREIGHTFAST BUT EXPENSIVE Because of the relatively high cost of air transport,
small businesses typically use air only for the movement of valuable or highly-perishable
products. However, goods that qualify for this treatment do represent a significant share of
the small business market. Owners can sometimes offset the high cost of air transportation
with reduced inventory-holding costs and the increased business that may accompany faster
customer service.
WATER CARRIERSSLOW BUT INEXPENSIVE
There are two basic types of water carriers: inland or barge lines, and oceangoing deep-water
ships. Barge lines are efficient transporters of bulky, low-unit-value commodities such as
grain, gravel, lumber, sand, and steel. Barge lines typically do not serve small businesses.
Oceangoing ships, on the other hand, operate in the Great Lakes, transporting goods among
port cities, and in international commerce. Sea shipments are an important part of foreign
trade, and thus are of vital importance to small businesses seeking an international market
share.
RAILROADSLONG DISTANCE SHIPPING Railroads continue to present an efficient mode for
the movement of bulky commodities over long distances. These commodities include coal,
chemicals, grain, non-metallic minerals, and lumber and wood products.
PIPELINESSPECIALIZED TRANSPORTERS
Pipelines are utilized to efficiently transport natural gas and oil products from mining sites to
refineries and other destinations. In addition, so-called slurry pipelines transport products
such as coal, which is ground to a powder, mixed with water, and moved as a suspension
through the pipes.
INTERMODAL SERVICES Small business owners often take advantage of multi-mode deals
offered by shipping companies. Under these arrangements, business owners can utilize a
given transportation mode in the section of the trip in which it is most cost efficient, and use
other modes for other segments of the transport. Overall costs are often significantly lower
under this arrangement than with single-mode transport.
Of vital importance to small businesses are transporters specializing in small shipments.
These include bus freight services, United Parcel Service, Federal Express,
DHLInternational, the United States Postal Service, and others. Since small businesses can be
virtually paralyzed by transportation strikes or other disruptions in small shipment service,
many owners choose to diversify to include numerous shippers, thus maintaining an
established relationship with an alternate shipper should disruptions occur. Additionally,
small businesses often rely on freight forwarders who act as transportation intermediaries:
these firms consolidate shipments from numerous customers to provide lower rates than are
available without consolidation. Freight forwarding not only provides cost savings to small
businesses, it provides entrepreneurial opportunities for start-up businesses as well.
WAREHOUSING
Small business owners who require warehousing facilities must decide whether to maintain
their own strategically located depot(s), or resort to holding their goods in public warehouses.
And those entrepreneurs who go with non-public warehousing must further decide between
storage or distribution facilities. A storage warehouse holds products for moderate to long-
term periods in an attempt to balance supply and demand for producers and purchasers. They
are most often used by small businesses whose products' supply and demand are seasonal. On
the other hand, a distribution warehouse assembles and redistributes products quickly,
keeping them on the move as much as possible. Many distribution warehouses physically
store goods for fewer than 24 hours before shipping them on to customers.
In contrast to the older, multi-story structures that dot cities around the country, modern
warehouses are long, one-story buildings located in suburban and semi-rural settings where
land costs are substantially less. These facilities are often located so that their users have easy
access to major highways or other transportation options. Single-story construction eliminates
the need for installing and maintaining freight elevators, and for accommodating floor load
limits. Furthermore, the internal flow of stock runs a straight course rather than up and down
multiple levels. The efficient movement of goods involves entry on one side of the building,
central storage, and departure out the other end.
Computer technology for automating warehouses is dropping in price, and thus is
increasingly available for small business applications. Sophisticated software translates
orders into bar codes and determines the most efficient inventory picking sequence. Order
information is keyboarded only once, while labels, bills, and shipping documents are
generated automatically. Information reaches hand-held scanners, which warehouse staff
members use to fill orders. The advantages of automation include low inventory error rates
and high processing speeds.
INVENTORY CONTROL
Inventory control can be a major component of a small business physical distribution system.
Costs include funds invested in inventory, depreciation, and possible obsolescence of the
goods. Experts agree that small business inventory costs have dropped dramatically due to
deregulation of the transportation industry.
Inventory control analysts have developed a number of techniques which can help small
businesses control inventory effectively. The most basic is the Economic Order Quantity
(EOQ) model. This involves a trade-off between the two fundamental components of an
inventory control cost: inventory-carrying cost (which increases with the addition of more
inventory), and order-processing cost (which decreases as the quantity ordered increases).
These two cost items are traded off in determining the optimal warehouse inventory quantity
to maintain for each product. The EOQ point is the one at which total cost is minimized. By
maintaining product inventories as close to the EOQ point as possible, small business owners
can minimize their inventory costs.
ORDER PROCESSING
The small business owner is concerned with order processinganother physical distribution
functionbecause it directly affects the ability to meet the customer service standards
defined by the owner. If the order processing system is efficient, the owner can avoid the
costs of premium transportation or high inventory levels. Order processing varies by industry,
but often consists of four major activities: a credit check; recording of the sale, such as
crediting a sales representative's commission account; making the appropriate accounting
entries; and locating the item, shipping, and adjusting inventory records.
Technological innovations, such as increased use of the Universal Product Code, are
contributing to greater efficiency in order processing. Bar code systems give small businesses
the ability to route customer orders efficiently and reduce the need for manual handling. The
coded information includes all the data necessary to generate customer invoices, thus
eliminating the need for repeated keypunching.
Another technological innovation affecting order processing is Electronic Data Interchange.
EDI allows computers at two different locations to exchange business documents in machine-
readable format, employing strictly-defined industry standards. Purchase orders, invoices,
remittance slips, and the like are exchanged electronically, thereby eliminating duplication of
data entry, dramatic reductions in data entry errors, and increased speed in procurement
cycles.
PROTECTIVE PACKAGING AND MATERIALS HANDLING
Another important component of a small business physical distribution system is material
handling. This comprises all of the activities associated with moving products within a
production facility, warehouse, and transportation terminals. One important innovation is
known as unitizingcombining as many packages as possible into one load, preferably on a
pallet. Unitizing is accomplished with steel bands or shrink wrapping to hold the unit in
place. Advantages of this material handling methodology include reduced labor, rapid
movement, and minimized damage and pilferage.
A second innovation is containerizationthe combining of several unitized loads into one
box. Containers that are presented in this manner are often unloaded in fewer than 24 hours,
whereas the task could otherwise take days or weeks. This speed allows small export
businesses adequate delivery schedules in competitive international markets. In-transit
damage is also reduced because individual packages are not handled en route to the
purchaser.

Read more: http://www.referenceforbusiness.com/small/Op-Qu/Physical-
Distribution.html#ixzz2xbmHYyW3
Tramp trade
A ship engaged in the tramp trade is one which does not have a fixed schedule or published ports of
call. As opposed to freight liners, tramp ships trade on the spot market with no fixed schedule or
itinerary/ports-of-call(s). A steamship engaged in the tramp trade is sometimes called a tramp
steamer; the similar terms tramp freighter and tramper are also used. Chartering is done chiefly on
London, New York, Singapore shipbroking exchanges. The Baltic Exchange serves as a type of stock
market index for the trade.

The term tramper is derived from the British meaning of "tramp" as itinerant beggar or vagrant; in
this context it is first documented in the 1880s, along with "ocean tramp" (at the time many sailing
vessels engaged in irregular trade as well).
Tramp charters
The tramp ship is a contract carrier. Unlike a liner, often called a common carrier, which has
a fixed schedule and a published tariff, the ideal tramp can carry anything to anywhere, and
freight rates are influenced by supply and demand. To generate business, a contract to lease
the vessel known as a charter party is drawn up between the ship owner and the charterer.
There are three types of charters, voyage, time and demise.
Voyage charter
Voyage charter: The voyage charter is the most common charter in tramp shipping, according
to Schiels. The owner of the tramp is obligated to provide a seaworthy ship while the
charterer is obligated to provide a full load of cargo. This type of charter is the most lucrative,
but can be the riskiest due to lack of new charterers. During a voyage charter a part or all of a
vessel is leased to the charterer for a voyage to a port or a set of different ports. There are two
types of voyage charter net form and gross form. Under the net form, the cargo a tramp ship
carries is loaded, discharged, and trimmed at the charterer's expense. Under the gross form
the expense of cargo loading, discharging and trimming is on the owner. The charterer is only
responsible to provide the cargo at a specified port and to accept it at the destination port.
Time becomes an issue in the voyage charter if the tramp ship is late in her schedule or
loading or discharging are delayed. If a tramp ship is delayed the charterer pays demurrage,
which is a penalty, to the ship owner. The number of days a tramp ship is chartered for is
called lay days.
Time charter
Time charter: In a time charter the owner provides a vessel that is fully manned and
equipped. The owner provides the crew, but the crew takes orders from the charterer. The
owner is also responsible for insuring the vessel, repairs the vessel may need, engine parts,
and food for ships personnel. The charterer is responsible for everything else. The main
advantage of the time charter is that it diverts the costs of running a ship to the charterer.
Demise charter / Bare boat Charter
Demise charter: The demise charter is the least used in the tramp trade because it heavily
favors the owner. The ship owner only provides a ship devoid of any crew, stores, or fuel. It
is the Charterer's responsibility to provide everything the ship will need. The ship owner must
provide a seaworthy vessel, but once the charterer accepts the vessel, the responsibility of
seaworthiness is the charterer's. The charterer crews the vessel, but the owner can make
recommendations. There are no standardized forms in a demise charter, contracts can vary
greatly, and are written up to meet the needs of the charterer.
A bareboat charter is an arrangement for the chartering or hiring of a ship or boat, whereby
no crew or provisions are included as part of the agreement; instead, the people who rent the
vessel from the owner are responsible for taking care of such things.
There are legal differences between a bareboat charter and other types of charter
arrangements, commonly called time or voyage charters. In a voyage or time charter, the
charterer charters the ship (or part of it) for a particular voyage or for a set period of time. In
these charters the charterer can direct where the ship will go but the owner of the ship retains
possession of the ship through its employment of the master and crew. In a bare-boat or
demise charter, on the other hand, the owner gives possession of the ship to the charterer and
the charterer hires its own master and crew. The bare-boat charterer is sometimes called a
"disponent owner". The giving up of possession of the ship by the owner is the defining
characteristic of a bareboat or demise charter.
In a bareboat charter no administration or technical maintenance is included as part of the
agreement. The charterer obtains possession and full control of the vessel along with the legal
and financial responsibility for it. The charterer pays for all operating expenses, including
fuel, crew, port expenses and P&I and hull insurance.
A demise charter is a form of bareboat charter in which the charter period may last for many
years; and may end with the charterer acquiring title (ownership) of the ship. In this case, a
demise charter is a form of hire-purchase from the owners, who may well have been the
shipbuilders. Demise chartering is common for tankers and bulk-carriers.

Brokerage
Tramp ship owners and tramp ship charterers rely on brokers to find cargoes for their ships to
carry. A broker understands international trade conditions, the movements of goods, market
prices, and the availability of the owner's ships.
The Baltic Exchange, in London, is the physical headquarters for tramp ship brokerage. The
Baltic Exchange works like an organized market, and provides a meeting place for ship
owners, brokers, and charterers. It also provides easy access to information on market
fluctuations, and commodity prices to all the parties involved. Brokers can use it to quickly
match a cargo to a ship or ship to a cargo depending on whom they are working for. A
committee of owners, brokers, and charterers are elected to manage the exchange to ensure
everyone's interests are represented. With the speed of today's communications the floor of
the Baltic Exchange is not nearly as populated as it once was, but the information and
networking the exchange provides is still an asset to the tramp trade.

Freight rate
A freight rate (historically and in ship chartering simply freight) is a price at which a certain
cargo is delivered from one point to another. The price depends on the form of the cargo, the
mode of transport (truck, ship, train, aircraft), the weight of the cargo, and the distance to the
delivery destination. Many shipping services, especially air carriers, use dimensional weight
for calculating the price, which takes into account both weight and volume of the cargo.
For example, bulk coal long-distance rates in America are approximately 1 cent/ton-mile. So
a 100 car train, each carrying 100 tons, over a distance of 1000 miles, would cost $100,000.
In ship chartering, freight is the price which a charterer pays a shipowner for the use of a ship
in a voyage charter.
Freight Rate, the cost of transporting goods is reflective of a number of factors aside from
your normal transportation costs. The main determining factors of freight rate are: mode of
transportation (truck, ship, train, air craft) weight, size, distance, points of pickup and
delivery, and the actual goods being shipped. One of the earliest forms of freight
transportation was by water. Many of the earliest settlements were built along or near
seacoasts and navigable inland waterways. As these settlements grew, roads and later
railroads and pipelines had to be built to transport freight to and from the navigable
waterways, thus connecting the inland points of pickup and delivery which could not be
reached by navigable waterways. The development of roads, railroads, and even pipelines
allowed for the expansion of settlements inland and away from water ways. Transportation by
ships is very limited in nature. If there are no navigable waterways close to the pickup point
and destination then a good will not be transported by a ship. Rarely is any good transported
solely by ship, usually goods coming into ports by ship must be unloaded and transferred
onto another mode of transportation i.e. truck or railcar for transportation to its final
destination. With the expansion of railroad systems and the development of more efficient
trucks, the transportation of freight by ships became less cost effective. Networks, of roads
and train tracks which once carried freight from coastal and inland waterway ports to
destinations which were not accessible by means of marine transportation, greatly expanded
making freight transportation from port to port overland more efficient and more affordable
than the marine transportation of freight.
The cost which a shipper (the consumer or business providing goods for shipment) or
consignee (the person or company to whom commodities are shipped) is charged for the
transportation of goods is determined by a number of factors. The main factors in
determining the freight rate are: mode of transportation, weight, size, distance, points of
pickup and delivery, and the actual goods being shipped. All of these factors play their own
independent role in determining the price or rate at which the freight will be transported but
they are also all interconnected. When determining which mode of transportation will be used
to deliver the freight to its destination there are many things which need to be taken into
consideration which will all have an effect on the freight rate. Federal, State, and Local
authorities all have their own laws and regulations with regards to the size, weight, and type
of freight which can be transported on their roads. Transportation of freight by Rail, Water, or
air craft all have their own regulations which take into account Federal, State, and Local
regulations as well as safety concerns which contribute to the rate at which freight is
transported. In general, the more freight you transport, the cheaper it is. This is an important
factor in the rate charged to people or companies shipping freight. There are many businesses
out there whose sole purpose is to make the transportation of freight cheaper and easier for
small businesses and individuals who need to move freight.
Consolidators: a firm which groups together shipments from different companies into a single
shipment. Customs Broker: A person or firm, licensed by the treasury department of their
country when required, engaged in entering and clearing goods through Customs for a client
(importer). Freight Forwarder: A person whose business is to act as an agent on behalf of the
shipper to arrange transportation services. A freight forwarder frequently makes the booking
reservation. In the United States freight forwarders are licensed by the FMC as Ocean
Transportation Intermediaries and are only designated freight forwarders for export
shipments. Non-Vessel-Operating Common Carrier (NVOCC): A cargo consolidator in ocean
trades that will buy space from a carrier and re-sell it to smaller shippers. The NVOCC issues
bills of lading, publishes tariffs and otherwise conducts itself as an ocean common carrier,
except that it will not provide the actual ocean or intermodal service Most of the freight
shipped within the United States travels by truck or railcar, but many of the people and
businesses shipping freight do not have enough of a good to fill a whole truck or rail car
every time they need something shipped.
Consolidators, customs brokers, freight forwarders, and NVOCCs can be a factor in
determining freight rate because of their experience, business relationships, and the volume at
which they operate. These factors help keep the freight rate down for small businesses and
the individual with a shipping need. In the commercial trucking industry, many shippers
tender loads to freight brokers whose job it is to find qualified carriers to move the freight at
an acceptable price for all parties. Brokers have access to a suite of technological tools to
help determine the most cost-effective way to move cargo, including access to load boards.
The best load boards provide rate analysis tools based on actual transactions on every lane in
North America, since their databases hold a wealth of pricing information. For example,
DAToffers Rate View for carriers, brokers and shippers, providing access to shippers
contract rates and spot market (broker buy) rates. This allows brokers to analyze market
demand and capacity to assure competitive pricing.
Sea freight is the most economic form of transportation by which goods are moved between
countires in the export process. What is more, the use of containerisation for packing and
carrying goods has greatly increased the volumes of cargo moved by sea, the speed of
transit and the safety of the cargo in question.
The following factors should be taken into account when considering the transit times for
goods being carried by sea. These are:


The frequency of sailing
The actual sailing time between the port of loading and the port of discharge
If the sailing is a direct sailing or a transshipment sailing; that is to say will the vessel sail
directly to the port of discharge or will the cargo be placed on a second vessel and then
delivered to a final port of discharge
Is the sailing an inducement sailing, the vessel will only call the port of loading or discharge if
there is sufficient cargo to load or discharge
Types of shipping companies
There are three types of shipping companies servicing South African ports they are:
Liner operators - vessels that carry containers (6 and 12 metre containers) these sail on fixed
dates and to predetermined ports
Charter operators - vessels that are utilised for a specific voyage
Tanker and dry bulk operators - vessels that carry bulk cargo such as oil and grains
Conference vs non-conference
Liner operators in turn can be divided into two further categories, namely:
Conference operators
Independent or non-conference operators
Conference services
A conference line is a group of two or more shipping lines, which enter into an agreement to
adopt the use of a common freight rate. They provide regular scheduled sailings on specific
routes. The advantages of the conference lines are regular scheduled services even when
volumes of cargoes are low, conference lines will call the port of loading and or the discharge
port. The other major benefit of using a conference vessel is; should you miss the sailing of
one conference vessel, then you can slot your cargo onto the next available vessel, provided
that the vessel is a member of the same conference.
Independent or non-conference operators
Independent or non-conference operators, operate within their own rate structures and sailing
schedules. They are not contractually bound into a conference agreement. The advantage of
the independent lines is that they are generally more competitive in their freight rate
structures. The independent operators however do not have the same obligations as
conference lines and are entitled to change their services to suit market conditions. There are
however successful independent operators that quote competitive rates and provide regular
sailings.
Types of ships operating in international trade
A visit to any harbour around the world will highlight the many different types of ships that
one finds plying international waters. We have listed the msot common types of ships
operating in international waters below:
Cellular or multipurpose - ships that are built to carry containerised cargo and also break
bulk cargoes
Conventional break-bulk - ships that carry only breakbulk, non-containerised cargo. "Cellular
or multipurpose" these vessels are largely replacing break bulk vessels
Most cellular vessels are able to accommodate break bulk/non containerised cargo on the
upper most stack of the vessel
Ro-Ro - ships that are multipurpose, with the addition of a stern ramp, to the quayside, by
which cargoes are received and dispatched
Reefer vessels" - these are vessel dedicated to carrying refrigerated cargoes
Lo-Lo - vessels have their own gantry or crane on board, these vessels can load and
discharge their own cargoes
Introduction
Seafreight calculations can broadly be divided into two main components; breakbulk and
containerised. In this section we deal with how you should calculate the freight costs of both
of these two types of seafreight.

Break bulk cargo calculations
Break bulk cargo, is cargo that is unitised, palletised or strapped. This cargo is measured
along the greatest length, width and height of the entire shipment. The cargo is also weighed.
Shipping lines quote break bulk cargo per "freight ton", which is either 1 metric ton or 1
cubic metre, which ever yields the greatest revenue.
Example:
A case has a gross mass of 2 Mt.
The dimensions of the cargo are:
2.5 X 1 X 2 metres
The tariff rate quoted by the shipping line is: USD 110.00 weight or measure (freight ton)
Step 1
Multiply the metres 2.5 X 1 X 2 = 5 metres Compare to the mass = 2 Mt.
Step 2
Calculate the freight with the greater amount either the mass or the dimension. 5 X USD
110.00 = USD 550.00
Freight would be paid on the measurement and not the weight. All shipping lines carrying
cargo in a break-bulk form insist on payment based on a minimum freight charge which is
equivalent to one freight ton, one cubic metre or one metric ton.

Full Container load calculations and surcharges
Freight rates for containers are based on the container as a unit of freight irrespective of the
commodity or commodities loaded therein, (FAK) Freight All Kinds. The shipping lines
quote per box (container) either a six or twelve metre container. From time to time, abnormal
or exceptional costs arise in respect of which no provision has been made in the tariffs. For
example a shipping line cannot predict the movement of the US Dollar or the sudden increase
of the international oil price. These increases have to be taken into account by the shipping
line in order to ensure that the shipping line continues to operate at a profit. These increases
are called surcharges. All shipping lines accordingly retain the right to impose an adjustment
factor upon their rates taking into account these fluctuations. All surcharges are expressed as
a percentage of the basic freight rate. Surcharges are regularly reviewed in the light of
unforeseen circumstances, which may arise and bring cause for a surcharge increase.
Bunker Adjustment Factor (BAF)
"Bunkers" is the generic name given to fuels and lubricants that provide energy to power
ships. The cost of bunker oil fluctuates continually and with comparatively little warning.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ BAF 5.2%
US Dollar 1 250.00 X 5.2% = US Dollar 65.00
Add the two amounts together
Freight rate: U S Dollar 1 315.00
Currency Adjustment Factor (CAF)
The currency adjustment factor is a mechanism for taking into account fluctuations in
exchange rates, these fluctuations occur when expenses are paid in one currency and monies
earned in another by a shipping company. The currency adjustment factor is a mechanism for
taking into account these exchange rate fluctuations. It is always expressed as a percentage of
the basic freight and is subject to regular review.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ CAF 6.3%
US Dollar 1 250.00 X 6.3% = US Dollar 78.75
Add the two amounts together
Freight rate: U S Dollar 1 328.75

War Surcharge
The outbreak of hostilities between nations can have a serious effect upon carriers servicing
international trade even though they may sail under a neutral flag. Carriers sailing within the
vicinity of a war zone may impose a war surcharge on freight to compensate for the higher
risks involved and the higher levels of insurance premium, which they may be obliged to

pay.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ WAR 5%
US Dollar 1 250.00 X 5% = US Dollar 62.50
Add the two amounts together
Freight rate: U S Dollar 1 35.50
All of the above surcharges may be applied to a single freight rate.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ BAF 5.2%
+ CAF 6.3%
+ WAR 5%
Total amount of surcharge 16.5%
US Dollar 1 250.00 X 16.5% = US Dollar 206.25
(add to freight rate)
US Dollar 1 456.25
Port Congestion Surcharge
Congestion in a port for a period of time can involve considerable idle time for vessels
serving that port. When a ship lies idle, this creates a huge amount of loss for the ship's
owner. Shipping lines therefore have the right to impose a surcharge on the freight to recover
revenue lost. Another factor which influences port congestion surcharge would be labour
disputes. Port congestion surcharges are calculated as a percentage of the freight rate as
expressed in the previous examples.
Consolidation services
The consolidator or groupage operator hires a container from a shipping line and then sells
that space to his clients/exporters. The benefit for the exporter is that small quantities which,
would not fill a full container load, can be shipped by sea freight in a shipping container as an
alternative to air freighting the goods. The consolidator would charge per metric ton or cubic
metre, which ever yields the greatest. Example: US Dollar 89.00 Weight or Measure. The
shipping line would have a contract of carriage with the consolidator and in turn the
consolidator would have a contract of carriage with the exporter. The consolidator would be
issued with an combined through bill of lading from the shipping line and then present the
exporter with a house bill of lading (See bill of lading below)
The bill of lading
The bill of lading performs the following functions:
A contract of carriage between the shipper of the cargo and the carrying shipping
company.
The name of the shipper and the receiver of the goods the consignee.
The contents of the packages as declared by the shipper.
Shipping details such as: port of loading and the port of discharge.
The bill of lading is a freight invoice and indicates if the freight costs have been
prepaid by the exporter or will be paid by the importer, "freight collect".
The bill of lading states the number of packages, weight and dimension of the
shipment.
It is a document of title to the goods stated thereon.
Every original bill of lading signed by or on behalf of the shipping company is a document of
title to the underlying goods. This special function of a bill of lading is achieved by a form of
words which state: "In witness whereof the undersigned on behalf of the shipping company
has signed three bills of lading all of this tenor and date, one of which being accomplished the
others to stand void". "Accomplishing" the bill of lading requires the surrender to the
shipping line or its agents in the port or place of destination one of the signed original bills of
lading duly endorsed by the consignee/importer. Unless and until one of the original bills of
lading as described above is surrendered, the shipping line will not release the cargo to the
consignee/importer. Upon surrender of any one of the originals the other originals bills of
lading become void.
Endorsed Bills of Lading
Bills of lading can only be issued with the words "shipped on board", if the cargo has actually
been loaded onto the named vessel at the port of loading. By insisting that the exporter
supplies the importer with a "shipped on board" bill of lading, the importer obtains
conclusive evidence that the goods have been loaded on board the intended vessel.
Some importers insist that the exporter presents "shipped on board" bills as a condition for
payment. "Received for shipment", bills of lading can be issued as soon as the goods have
been delivered into the custody of the carrying shipping company or its agent either at the
point of receipt or at the port of loading. Thus, a 'received for shipment", bill of lading will
only indicate the ship in which the cargo is intended to be loaded on. The risk remains that
the loading may, for many reasons delayed or the cargo may not be loaded at all.
Banks responsible for the payment of funds in payment for goods under letters of credit will
not release the funds if the bill of lading has been endorsed "received for shipment".
Sea freight payment terms
Liner terms
Liner operators quote their freight rates on a liner term basis. A series of highly specialised
operations are required in the process of loading cargoes efficiently into a ship, and securing
those cargoes in the ship's hold for safe transportation to the port of destination. Another
series of equally highly specialised operations must take place in order to extract the cargo
from the ship's hold and place them safely on the quayside at the port of destination. All these
costs are collectively known as terminal handling charges - THC.
Payment of freight
The word "freight" has two alternative meanings: it may be used to refer to the movement of
the cargo; by road, rail sea or air, or it may be used to denote the charge raised by the carrier
for the service of transportation.
Freight currency
In the context of international carriage by sea, the "tariff currency", is the United States
Dollar. It is common practice in the shipping industry that freight is payable as the
consignment/cargo is loaded on board the intended vessel.
Immediately the cargo has been placed on board, the shipping company is entitled to full
payment, even though the ship may sink along the quayside at the loading berth. The amount
of freight due is paid either at the port of loading in exchange for the issuance of the original
bills of lading, or at the port of discharge in exchange for the release of the consignment from
the shipping company's custody. When freight is paid in any currency other than the "tariff
currency", the amount due in that "tariff currency", will be converted at the rate applicable on
the date of shipment or such other date as agreed upon by the carrier.
Air freight
The first consignment of cargo carried by air was transported between London and Paris in
1924. Since this first cargo flight the carrying capacity and efficiency of aircraft has
developed and increased dramatically. The movement of cargo by air is a highly specialised
business, which is, in many respects, very different from moving cargo by sea or overland. It
is subject to restrictions that arise from the nature of the aircraft itself.
Increasing importance of airfreight
Two major changes have taken place over recent years in many manufacturing industries and
it is due to these changes that air freight is becoming a popular choice for transporting
products internationally. The reason for this increase is:
The growing volume of technology-based products, these products are becoming
lighter and smaller while their value is becoming greater justifying the expense of air
freight
The second is the rapidly increasing trend in many industries towards "just-in-time"
(JIT) inventories JIT is most effective where the goods in question can be moved by
air. The benefits of JIT ordering are:
o A substantial reduction in capital requirements
o A substantial reduction in stockholding
Loading and stowing of cargo
Air cargo has to be specially prepared or modified to enable the cargo to fit into the aircraft.
The upper and lower deck configuration, mass and dimension limitations, pressure and air
temperature variations and the floor load factors must be taken into consideration by the
shipper of the cargo. All aircraft have limited carrying capacity, and loading beyond the
safety limit in terms of the mass and volume of the cargo is not permitted. The actual
limitations vary from one type of aircraft to another.
To facilitate quicker and safer loading, airline personnel group all air cargo into larger units
on pallets or containers. These are collectively known as Unit Load Devices or ULD's. ULD's
play an important part in the loading and discharging of aircraft. The floor of an aircraft is
equipped with roller beds for ease of movement of the ULD's. Since the introduction of Unit
Load Devices into the air freight industry, cargo is discharged quicker and theft and damages
have been greatly reduced.
Airlines that are members of the International Air Transport Association (IATA) are bound
by their membership to comply with tariffs issued by IATA. However since 11th
September 2002, airfreight rates are now extremely negotiable. Airfreight rates cover
transportation from the airport of loading to the airport of discharge.
These rates do not include the following:
Collection of air cargo from the consignor's/exporters premises
Delivery of cargo from the airport of destination to the consignee's premises
Storage of cargo before or after loading
Customs clearance in the country of destination
Any duties and taxes that may have to be paid
Insurance
Chargeable/volumetric weight
Airline freight rates are based on a "chargeable weight", because the volume or weight that
can be loaded into an aircraft is limited. The chargeable weight of a shipment will be either
the "actual gross mass" or the "volumetric weight", whichever is the highest. The
chargeable weight is calculated as follows: 1 metric ton = 6 cubic metres. In order to
establish if the cargo will be a weight or volumetric based shipment.


Step 1
Measure the parcel/cargo along the greatest length, width and height of that parcel. For
example; 100 cm (L) X 100 cm (W) X 100 cm (H) = 1 000 000 cm3. Next, weigh the parcel;
assume it weighs 150kg.
Step 2
Now divide the 1 000 000 cm3 by 6 000 = 166,66 kg. You have now converted the
centimeters (cm) into kilograms (kg)
Step 3
Now compare the weight to the volume. If the weight is 150 kg then the airline would base
the freight on the higher amount being: 166,66 kg
Air freight calculations
The airline calculates freight based on weight or volume, which ever yields the greatest
amount. Airlines quote freight rates based on the following rate structures:
A basic minimum charge per shipment.
General cargo rates quoted for per kilogram. This rate applies without reference to the
nature or description of the parcel, which is to be freighted.
Specific commodity rates apply to certain goods of specific descriptions, such as fresh
produce. These rates are lower than the general cargo rate, and they provide breakpoints at
which the level of the rate reduces further.
Example:
0 - 50 Kg @ R22.00/per kg
50 - 100 Kg @ R19.00 per kg
100 - 150 Kg @ R17.00 per kg
Unit Load Device charges
These rates are charged per container/ULD without reference to the commodity loaded
therein. Calculation of freight rates:
Let us assume the following figures:
The freight rate is R18.00 per kg
The weight of the parcel is 300 kg
The dimensions are: 114,6 cm X 120,4cm X 132,5 cm (round the cm's up or down)
Therefore: 115 cm X 120 X 133 cm = 1 835 400 divide by 6 000 = 305.9 kg (having
converted cm's to kg's now round up the kg's to the next half a kilogram = 306 kg.
As the freight rate quoted by the airline is R18.00 per kg, we calculate the price as follows:
306 kg X R18/kg = R5 508.00
The freight rate will not be calculated on the actual mass 300 kg X R18.00 = R5 400.00 as the
airline will always use the greater amount either the kg, or volumetric weight.
Consolidation
Consolidation is an economical method of moving cargo by employing a consolidator. The
consolidator receives cargo from a number of suppliers/shippers and then combines these
cargoes into one consignment by packing the goods into a Unit Load Device. The
consolidator then books the Unit Load Device with an airline. The supplier/shipper would
have a contract of carriage with the consolidator of the cargo and in turn the airline would
have a contract of carriage with the consolidator. The airline would issue an air waybill to the
consolidator when accepting the Unit Load Device and in turn the consolidator would issue
the supplier/shipper with a house air waybill.
The air waybill
The air waybill, unlike the ocean bill of lading is not a document of title to the goods
described therein, however it does perform several similar functions these are:
It is a receipt for the goods
It is evidence of the contract of carriage between the exporter and the carrier
It incorporates full details of the consignor/shipper, the consignee/receiver and the
consignment/goods
It is an invoice showing the full freight amount
It must be produced, be it in an electronic format, at the airport of discharge for clearing
purposes
All copies of the air waybill, together with the commercial invoice, packing list, certificate of
origin and any other document which may be necessary for clearing the goods through
customs, these documents are carried in the flight captain's bag.

Multimodal transport
Multimodal transport (also known as combined transport) is the transportation of goods under
a single contract, but performed with at least two different means of transport; the carrier is
liable (in a legal sense) for the entire carriage, even though it is performed by several
different modes of transport (by rail, sea and road, for example). The carrier does not have to
possess all the means of transport, and in practice usually does not; the carriage is often
performed by sub-carriers (referred to in legal language as "actual carriers"). The carrier
responsible for the entire carriage is referred to as a multimodal transport operator, or MTO.

Article 1.1. of the United Nations Multimodal Convention (which has not yet, and may never
enter into force) defines multimodal transport as follows: "'International multimodal
transport' means the carriage of goods by at least two different modes of transport on the
basis of a multimodal transport contract from a place in one country at which the goods are
taken in charge by the multimodal transport operator to a place designated for delivery
situated in a different country.
In practice, freight forwarders have become important MTOs; they have moved away from
their traditional role as agents for the sender, accepting a greater liability as carriers. Large
sea carriers have also evolved into MTOs; they provide customers with so-called door-to-
door service. The sea carrier offers transport from the sender's premises (usually located
inland) to the receiver's premises (also usually situated inland), rather than offering traditional
tackle-to-tackle or pier-to-pier service. MTOs not in the possession of a sea vessel (even
though the transport includes a sea leg) are referred to as Non-Vessel Operating Carriers
(NVOC) in common law countries (especially the United States).
Multimodal transport developed in connection with the "container revolution" of the 1960s
and 70s; as of 2011, containerized transports are by far the most important multimodal
consignments. However, it is important to remember that multimodal transport is not
equivalent to container transport; multimodal transport is feasible without any form of
container. The MTO works on behalf of the supplier; it assures the supplier (and the buyer)
that their goods will be effectively managed and supplied.
Research
Multimodal transport research is being conducted across a wide range of government,
commercial and academic centers. The Research and Innovative Technology Administration
(RITA) within the U.S. Department of Transportation (USDOT) chairs an inter-agency
Research, Development and Technology (RD&T) Planning Team. The University
Transportation Center (UTC) program, which consists of more than 100 universities
nationwide conducts multi-modal research and education programs.
[2]
The European
Commission's Freight Transport Logistics Action Plan has placed special emphasis on
researching and developing multimodal freight transport networks in Europe, leading to
focused research efforts such as e-Freight
[3][4]
and FLAGSHIP.
[5][6]

Legal aspects
From a legal standpoint, multimodal transport creates several problems. Unimodal transports
are currently governed by different, often-mandatory international conventions. These
conventions stipulate different bases for liability, and different limitations of liability for the
carrier. As of 2011, the solution to this problem has been the so-called network principle.
According to the network principle, the different conventions coexist unchanged; the carriers
liability is defined according to where the breach of contract has occurred (where the goods
have been damaged during transport, for example). However, problems arise if the breach of
contract is systemic (not localized).