Vous êtes sur la page 1sur 203

HMC-ICS Greek Branch Course Notes

SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS

LESSON 1 THE BUSINESS ENTITY

Shipping is a derived demand a link between buyer and seller. It is a business.

Cruise ships excepted, it is a means to an end and not an end in itself

Elements of a business entity:


THE SOLE TRADER

Person in business on his own account with own capital,
working in it and taking profit as reward.
Independent. Own decisions. Quick implementation. Low overhead.
No reporting. No revealing of cash situation except for taxation.
Effective, if specialised

Unlimited liability. Personal responsibility for debts
Insolvency might lead to a total loss of assets.
Long hours. Problem if sick.
Inability to expand for any opportunity as little capital
Can expand by taking partner, borrowing, - loss of independence and privacy

May / may not need a licence, registration


PARTNERSHIP

Firm owned by partners. Shared responsibility. Wider access to capital, to experience.
Remains a private venture.

Partners liable for debts, partners have to agree decisions.
A partners death will collapse partnership unless a special provision is agreed
Partners can not sell their partnership.

Choice of forming a Partnership or a Limited Liability Company usually depends on
extent of corporate tax liability


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2

LIMITED LIABILITY COMPANY (LLC)

Minimum 2 share holders required

Ltd. Limited company
PLC Public limited company

National laws vary.

Great attraction is limitation of liability to share holding

But a Limited Company has its own corporate existence
Owners die company goes on
Remains till formally wound up.

Companys documents establishing its existence are the:-
- Memorandum of Agreement
- Articles of Association
State specific company provisions

Company has a Board of Directors
Directors need not be share holders
Shareholders need not be directors
Shareholders can sell their shares as they wish

See Saloman V Saloman
The shareholder (the individual / the debenture holder) is legally separate from the
Company. The Company has its own Corporate Entity.

LLCompanies owned by shareholders.
Shareholders liable for company debts to value of shareholding

LLCompanies have accounts audited so shareholders know status
Accounts checked by professional independent accountants
Two accounts required
Profit and Loss
Balance Sheet assets and liabilities

Accounts distributed to Share holders,
Taxation and
Registrar of Companies with public access for a fee

Many accounts can be misleading

Capital Cash to run the business
Shareholders usually raise the capital buying shares



HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3

Shareholders rewarded by Shares increasing in value
Dividends

Capital Fixed assets (ships, offices etc)
Working capital (pay wages, rents etc.)

PLC Public Liability Company
Any member of public may buy shares
Quoted on a Stock Exchange

Ltd Private company shares not offered to public.
Shares usually held by original owners / family or a PLC.

Conglomerate - a business involving several LLCs within one parent company
owning subsidiaries and offering them common services
policy, accounting, office space, HR, It, training etc.

AGM Annual General Meeting .
Composition of the Board of Directors
Raising capital bank loans / new shares

Par Value of shares on being initially offered

Study company performances through share price movements






HORIZONTAL & VERTICAL INTEGRATION

HI collection of companies involved in different activities.
Accumulated through opportunity and prospects, need for new capital

VI Top to bottom in same industry (oil majors)


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
4

COMPANY ORGANISATION & MANAGEMENT

Secretariat Compliance with legal requirements taxes, company registrar
Departments can include HR., Personnel etc..

Accounts Manage cash flow
Reckoning money due and money owed
Recording cash transactions

Credit Control Interest rates
Debt chasing
Granting credit
Debt control
Bank borrowings banks as money shops

Management Accounts
Produced by accounts department
Includes payment of overheads reckon overheads carefully
The true costs
Marginal Costing making use of spare capacity
staff, space, equipment

Budgetary Control - Some expenses are predictable, others need estimating
Experience
Check variances of budget from reality
May be market vagaries or misjudgement

Statutory Accounts
Done / verified by professional accountants
Profit and Loss Account result of each years trading
(called Trading Account or Expenditure Account)
Income from trading, investments, sale of assets etc.
Expenses includes interests paid on borrowings
Net profit is balance after taxes
Corporation tax, profit tax, income tax. VAT.

Dividend Interim mid year pay out to shareholders
Final end of year pay out based on annual results

Share holding Ordinary have voting rights
Preference prior claim on profits, no voting rights
Debentures fixed interest, related to Coys fixed assets
First claim on any proceeds
Interest is a priority over dividends

Profits Can be distributed as dividends
or retained to provide development / working capital
as reserves to investments
as termination payments to staff
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
5
Balance Sheet for a fixed date
Records what is owned and owed (to and by the company)

Assets Companys owned material
Fixed Assets tangible assets like a car can be sold to raise money
value needs adjusting yearly depreciation

Physical Assets - such as freehold land in use

Overvaluing give poorer company results
Undervaluing might leave a company exposed to take over.

Current Assets
Cash in bank
Stock work in progress
Debtors money owed including uncollectable bad debts

Liabilities
Owed by the company to others
Borrowings Loan Capital
Money / Debts to Creditors

Company can raise money by
Borrowing banks like security
Issuing more shares

Gearing - Companies may be assessed by balance of
Loans / overdrafts to share capital this termed gearing

Highly geared more loans than capital

Creditors to whom the company owes money
Debtors people who owe the company money

Cash Flow funds to cover requirements
Critical for remaining in business

So Current Assets should exceed Current Liabilities
Creditors should not be much if any more than Debtors

Contingent Liabilities
Prospective expenses that might or might not exist
(Legal fees, increase in price of bunkers)

Balance Sheet
Assets minus Current Liabilities
i.e. consider Shareholders Funds
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
6

QUALITY MANAGEMENT

TQM (Total Quality Management) - error prevention
- better service
- avoidance of mistakes
Business / staff is organised
Procedures established
Methods documented
Audits verify compliance procedures followed.
Management reviews

Accreditation to national body for external verification
ISM uses quality control approach to safety management
(ISO 9000 standard)

Quality requires procedures to be developed and written
Prepare quality manual
All involved to follow requirements
Assess compliance
Secure independent specialist approval (Classification)
Regular re-assessment yearly external audits

Users of QA claim:
Increased competitiveness, customer satisfaction,
more profit, improved communications,
less wastage, effort and mistakes

Not easy to implement
Business may be awkward for QA compliance
Problems can include
Expense inspection, training
Management / staff time involved
Staff view point
Change in culture

QA can fail unless companys management and staff committed
Training
Review - updating








Course Notes HMC-ICS Greek Branch
SHIPPING BUSINESS

Prepared by Capt. Malcolm MacKenzie FICS

Abbreviations

AB American Bureau of Shipping

AGM Annual General Meeting

AP Additional premium

ASBA USA Association of Ship Brokers and Agents

BIFA British International Freight Association

BIMCO Baltic and International Maritime Council

B/L Bill of Lading

BV Bureau Veritas

BWAD Brakish Water Arrival Draft

CoA Contract of Affreightment

CoC Chambers of Commerce

C/P Charter Party

D/Ac Disbursement Account

Dwt Ships carrying capacity Deadweight

ECASBA European Community Association of Shipbrokers and Agents

ET Estimated Time

FCL Full Container Load

FIATA International Federation of Forwarding Agents Associations

FICS Fellow of the Institute of Chartered Shipbrokers

FIO Free in and out cargo handling terms

FoC Flag of Convenience

FONSABA Federation of National Associations of Ship Brokers and Agents

FOW First Open Water

FWAD Fresh Water Arrival Draft

Course Notes HMC-ICS Greek Branch
SHIPPING BUSINESS

Prepared by Capt. Malcolm MacKenzie FICS

GL Germanischer Lloyd

GRT Gross Registered Tonnage

HR Hellenic Register of Shipping

HR Human Resources

IACS International Association of Classification Societies

ICC International Chambers of Commerce

ICS International Chamber of Shipping

IMB International Maritime Bureau

IMO International Maritime Organisation

INTERCARGO International Association of Dry Cargo Ship Owners

INTERTANKO International Association of Independent Tanker Owners

IRR Internal Rate of Return

ISF International Shipping Federation

ISM International Safety Management Code

ISO International Standards Organisation

IT Information Technology

ITF International Transport Workers Federation

ITU International Telecommunications Union

LASH Lighter Aboard Ship

LCL Less than a full Container Load

LLC Limited Liability Company

LOA Length Overall

LOOP Louisiana offshore Oil port

LR Lloyds Register of Shipping

MEPC Marine Environment Protection Committee

Course Notes HMC-ICS Greek Branch
SHIPPING BUSINESS

Prepared by Capt. Malcolm MacKenzie FICS

MICS Member of the Institute of Chartered Shipbrokers

MoA Memorandum of Agreement

MSC Marine Safety Committee

NAABSA Not Always Afloat but Safely Aground

NK Nippon Kaiji Kyokai

N/N Non negotiable

NoR Notice of Readiness

NPV Net Present Value

NRT Net Registered Tonnage

NV Det Norske Veritas

NYPE New York Produce Exchange

PLC Public Liability Company

PoA Power of Attorney

PSC Port State Control

QA Quality Assurance (QM Quality Management)

Reefer Refrigerate cargo ship

RI Registrano Italiano Navale

RoB Remaining on Board

SHIPLOC Ship Location service through ICC

SoF Statement of Facts

SWAD Salt Water Arrival Draft

T/C Time Charter

TQM Total Quality Management

TRS Tropical Revolving Storm

UKCS United Kingdom Chamber of Shipping

Course Notes HMC-ICS Greek Branch
SHIPPING BUSINESS

Prepared by Capt. Malcolm MacKenzie FICS

V/C/P Voyage Charter

WCO World Customs Organisation

WNA Winter North Atlantic

WS World Scale tanker rates




























HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS

LESSON 2 THE PRACTIONERS IN THE SHIPPING BUSINESS

Lessons 2,3 and 4 cover 6 main divisions of interest.

Lesson 2 Dry Cargo Chartering & Tanker Chartering

Lesson 3 Sale and Purchase & Ship Management

Lesson 4 Port Agency & Liner Trades

THE MERCHANT

Firstly though - the demand for shipping is a derived demand

Merchants are international traders buyers and sellers of goods.

Demand for shipping reflects level of merchants activity.

Shipping is known as the Merchant Service an industry to serve merchants.

The challenges, problems and opportunities of merchants regulate shipping
activity.

Shipping agents should / must follow / understand the activities of merchants


DRY CARGO CHARTERING

Mostly involves bulk raw materials
with many exceptions for finished and part finished goods

Contract to carry goods may be a
Contract of Carriage or a Contract of Affreightment

Contracts of Carriage reflect market forces usually free market forces
It is subject to the laws of supply and demand

Most contracts based on a standard C/P form
varied to suit circumstances and trade



HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2

THE CHARTER PARTY

Taken from old French - Cartes meaning a Charter and partir to tear apart.
Thus contracts of carriage from early times were made, signed and then torn into the
number of pieces of those involved. Each party retained his piece. If ever a contract
dispute had to be settled, the contractors or their descendants assembled and refitted
their pieces to form the whole by way of proof that they had been one of the initial
contractors.

Standard forms usually used because they
Reflect the terms for the contract of sale of the goods
Charterers of goods, having the trade continuity, have greater influence
so demand their form of contract

Many trades dominated by one or few charterers

If Charterers ever adopt unfair CP forms / terms they may be
challenged by the international shipping agencies such as the
United Kingdom Chamber of Shipping
Baltic and International Maritime Council the BIMCO
With this support, ship owners can challenge unfair charterers
practices

Thus fair contracts of standard terms have developed
BIMCO has been leader
BIMCO contracts usually have the words CON
such as GENCON to show their origin.

So, many ships fixed on basic terms and then as per GENCON
A general C/P for any trade where no existing C/P form
predominates

This has stood the test of time including legal challenges

It is essential to use unambiguous wording to avoid disputes.
Hence the widespread use of standard BIMCO C/P forms

Extra clauses can
Confuse the initial wording
Create dispute

Comments of C/P Forms
Gencon of BIMCO biased in owners favour
diminished by charterers clauses
Multiform of FONSABA (The Federation of National Association of
Shipbrokers and Agents) - more even handed but little known / used


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3

VOYAGE CHARTER

A contract to carry and deliver cargo.

The shipowner pays all the ships management and voyage expenses.

The charterer pays the freight and gets his goods delivered.

Charters may be for a single voyage / cargo but charters may want
commercial protection of many voyages fixed over a period of time so
enter into a CONTRACT OF AFFREIGHTMENT. This contract
may provide for full or part cargoes over many months with different
ships performing. The owner may use various ships in his fleet or just
charter in.

Charterers may dislike being confined to one ship owner and so resort
to TIME CHARTERING hiring his own ships to meet his needs
varying schedules, deadweights and ship types to meet his needs

ANATOMY

See GENCON form.

Notice box style form in Part I salient detail seen at a glance.
Printed clauses in Part II

Remember C/P negotiated between Charterer and Owner each through
one or more brokers.

Results in changes to standard format and use of additional clauses to
reflect particular circumstances of business to hand,

Negotiations tend to concentrate on

freight level,

range of dates for loading

times allowed to work cargo

and any other details






HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
4

ANATOMY OF C/P (continued)

Particular boxes give details of the
1. Brokers names(s) and address(es)
2. Date and Place of fixture (identifies contract)
3 Name of charterers and place of business
4. Name of Owner and place of business
5. Ships Name
6. Ships tonnages
7. Ships Deadweight
8. Ships present position
9. Ships ET readiness to load
10. Loading ports
11. Discharging ports
12. Cargo type and quantity and margins
13. Freight
14. Payment terms
15. Cargo handling gear
16. Laytime loading, discharging, total
17. Shippers place of business
18. Agents loading
19. Agents discharging
20. Demurrage
21. Cancelling date
22. General Average
23 Freight taxes
24 Brokerage commission
25 Law and arbitration
26 Any additional clauses
Signatures

Commonly used expressions
Trimming levelling cargo on loading in the hold usually by
loading device or bulldozer
Dunnage Timber planks to protect ship / cargo
Tallying Checking counting cargo packages
Stevedores Cargo workers
Agents Usually charterers agents
(Owners agents look after Owners business)
Lien Clause Seizure of cargo for non payment of freight, demurrage
Cancelling clause if ship is late.
General Average York Antwerp Rules extra ordinary expenses
Brokerage Brokers fee





HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
5

TIME CHARTER

A contract to hire a ship

Shipowner manages and operates the vessel. He employs the crew and
pays the ship management expenses including insurances.

Commercial direction rests with charters for employment, cargoes,
ports, schedules and fuel. The charter pays the voyage expenses
cargo handling, fuel, port charges.

Time charters may be for one voyage or for several years. They are
often made and extended or re-newed. Time charterers may even sub
let the ship.

Time charters are used by Liner companies with insufficient ships to
meet their schedule commitments. This often happens in the container
trades.

Again there are standard C/P forms. Common forms are

NYPE Form often called the Produce 46 (1946)
Asbatime (Ship brokers 1981 revision of the NYPE form)
BIMCOs Baltime now unusual

Remember under a T/C responsibilities are shared
commercial with the charterer
technical with the owner

Considering the Asbatime, notice:

Ships particulars include speed and fuel consumption
(fuel is an expensive element)
Duration of contract
Areas of delivery and re-delivery
Exclusions for ports, trading areas
And for certain cargoes
Payment for fuel on delivery and redelivery
Daily rate of hire payable semi-monthly in advance
Right of withdrawal of ship for non-payment of hire
Technicality clause to guard against bank delay
Laydays / cancelling for delivery clause
Off-hire clauses
Break down or overhaul
Brokers commissions

Master to take charterers instructions regarding employment
War clauses
Charterers right to re-paint the funnel
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
6

BARE BOAT CHARTER

Another contract to hire a ship but a bare ship (or Demise Charter) so
the charterer must provide the crew, manage and operate the ship and
contract for the ships employment.

The charterer might well even decide on the ships flag.

So this charter is like a lease. It means the charterer can gain control of
a ship without having to finance the ships capital value.

THE DRY CARGO MARKET AT WORK

London dominates international market traditional

Good position to serve Orient in morning, USA in afternoon

Electronic communication / internet
rather than face-to-face on the floor of the Baltic Exchange

Participants in brokerage negotiations vary:

Charterers employees (grain houses)

Ship owners employees

Exclusive brokers working for charterers or owners

Competitive Broker independents

Intermediate broker between owners and charterers brokers

















HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
7

THE TANKER MARKET

A separate market carefully subdivided by specialisation into cargo types

Cargo type reflects position of the oil refineries.
If refinery in the producing country, oil exporter controls production and sells
refined products.

This business failed as producing countries didnt look after the refineries
(i.e. Abadan 1951).

So refineries tend to be in importing countries
Corinth, Volos, Fawley better control

Smaller refineries are being closed for economies of scale
(Isle of Grain, Shellhaven).

Thus crude is usually a long haul cargo
whereas products are short haul cargoes.

CRUDE OIL

The prominent market biggest, politically volatile
Uses big ships = threat of big problems (pollution)

Size of tankers reached 550,000 dwt but were then restricted by
Draft being too deep for English Channel
Threat of pollution
Fear of structural problems
Doubt about continued economies of scale
Fear of implications of such big cargo contracts.

PETROLEUM PRODUCTS

This is the refined products

CLEAN products petrol, kerosene, naptha, lub oils etc.
DIRTY products fuel, diesel, gas oil

CHEMICAL

Unfamiliar names of cargoes as technology is complex.
Include slovents, feedstocks, vegetable oils and wines

Some more dangerous than others

High standard required for operation, cleanliness,

Attention to cargo coatings to protect steel work.
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
8

GAS TANKERS

LNG methane and liquid natural gases
LPG butane, propane and liquid petroleum gases

TANKER CHARTER PARTIES

Voyage charters (single and consecutive)
Time charterers
Contracts of Affreightment
Demise Charters

Standard forms evolved by:
larger charterers the oil majors (Shell, BP)
independent bodies (ASBA and Intertanko)

Tanker c/p forms have much in common with dry cargo c/p forms.

As cargoes are usually hauled between charterers depots and
refineries, charterers have more control, so time for loading and
discharging clauses tend to be simpler.

Nor is labour required for cargo handling and pumping never ceases.

However tanker c/p freights differ from the dry cargo market using
US$ per metric ton.

Tanker market uses WORLD SCALE rates.
This is an oil industry forum setting standard freights for standard
tankers in all trades in US$ per m/t. These rates are under constant
review. They are confidential to the organisation accessible by
subscribers.

So charterers and owners fix on a Worldscale rate confident that it will
be fair and can be fairly adjusted for ranges of loading and discharging
ports so much a feature of tanker operations.

Worldscale rates are usually quoted as a percentage i.e.
WORLDSCALE 90 = 90% of the applicable world scale rate.

THE TANKER MARKET AT WORK

Dominated by tanker majors (Exxon, Shell, BP)
Oil majors have their own tanker fleets owned and time chartered

Oil companies have their own chartering staff so negotiations often feature
only an owners broker dealing with the oil major staff.

Tanker brokerage tends to be specialised.
Class Essay Group 2 HMC ICS GREEK BRANCH
Shipping Business_Chapter 2
Prepared by Mr. C. Bitounis, MICS




ESSAY QUESTIONS: Choose one of the following questions.

1. The Tanker Market can justifiably be described as specialized and is clearly
different from dry cargo markets. Analyse the main differences between those
two markets and comment on the sub-divisions which exist within the tanker
market itself.

2. Taking the two following, explain the main business functions associated with
those operating in these specialized sectors and in each case comment upon
the practitioner / principal relationship :
! Dry Cargo Chartering|
! Tanker Chartering
Class Essay Group 1 HMC ICS Greek Branch
Shipping Business _ Chapter 2
!
Prepared by Mr. Vasilis Chakos, FICS



!
! "#$%&'(#! )*#! +%),&$! '-.,/.#0! '-! )*#! )+-1#&! %*+&)#&'-2! 3+&1#)4! 5*6! '$! )*#!
)+-1#&!3+&1#)!%,-$'0#&#0!),!(#!3,&#!7$8#%'+/'9#0:!)*+-!)*#!0&6!(;/1!3+&1#)<!
=$!)*'$!%,&&#%)<!
!!
! >'.#!)*#!3+'-!?#+);&#$!,?!+!>@ABCA!DEEF!B*+&)#&8+&)64!5*+)!'$!/+6)'3#<!!
!
! 5*+)! '$! )*#! 0'??#&#-%#! (#)G##-! +! .,6+2#! +-0! +! )'3#! %*+&)#&<! "#$%&'(#! )*#!
3+'-!?#+);&#$!,?!)'3#!B*+&)#&8+&)'#$4!!
!
!
Class Essay Group 4 HMC ICS GREEK BRANCH
Shipping Business_Chapter 2 &3
Introduction to Shipping Chapter 7

Prepared for Mr. Simon Ward, FICS




Please write the following question.

Explain the role of either a dry cargo chartering broker or a ship agent
describing their responsibilities and the skills required.























HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 1
SHIPPING BUSINESS

LESSON 3 PRACTIONERS IN THE SHIPPING BUSINESS (CONTINUED)


SHIP SALE & PURCHASE

Reflects a permanent change of status.

Chartering is usually a short-term change

Market in three sectors Scrapping (Demolition)
New buildings
Second hand

Second Hand is much the biggest

Selling motivated by
Freight market
Age of ship increased maintenance, survey, less reliability
Change of features out of date
Increased insurance premiums on cargo and ship

SCRAPPING

`` Uneconomical to trade reflects Freight market
Age of ship

In a market collapse (tankers 1980)
New tankers straight into lay up
After ten years laid up, without prospects, scrapped
Exceptional

An owner may be reluctant to sell his ships for scrap as he may
Loose a tax shelter
Provide a competitor with a cheap ship to compete
(Sale and charter back)

Other serious concerns are
Sale of spare shaft and propeller
Scrap market prices
Cost of delivering ship to scrap yard (Suez Canal)
Environmental condition of ship (asbestos)


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 2

NEWBUILDINGS

Huge cost
Uncertain result especially from a new shipyard

Stages General specification and price
Detailed Specification
Tank-test / engine room pipe model.
Final price
Mortgage negotiations
2nd Mortgage negotiations
Contract

Usually standard ships at advantages of
Fixed prices
Shared development cost
Known result
Known financing
Fixed contract
Brokers not so often involved in new ships using builder to owner direct or
through trading house to arrange finance and guarantee performance

SECOND HAND TONNAGE

Usual activity for S&P Market

Much depends on brokers connections with sellers, buyers, other brokers

Brokers circulate For sale sheets with ship data

Data is computerized to allow selective examination of market

Sales follow a pattern:

Buyer establishes requirement
- Age, deadweight, draft, cargo gear, machinery, length etc.
- Plans to buyers
- Condition per class records
- Trading certificates reviewed
- Inspection of ship
- Provisional offer made
- Provisional acceptance
- Determination of condition in dry dock, shaft seals
Norwegian sale form clause condition and cost
- Free of mortgage,
- Free of any flag state restriction

Sale contract is usually called the Memorandum of Agreement
Features:
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 3

SALE MoA usually Norwegian Shipbrokers Association form

Preamble names of buyers, sellers, the ship and description
Price and time of payment
- usually 10 % deposit on signing MoA
- balance within 3 days and prior delivery
Condition of sale, time and place of delivery
Drydocking clause
Clauses for bunkers and stores RoB (remaining on board)
Exclusion of hired items radios, container lashings
All plans, certificates to be handed over
Ship at Sellers Risk till sold
Seller relieved of faults unknown to buyer (caveat emptor)
Default clauses seller retains deposit
Ship lost prior sale deposit refunded
Change name and funnel mark on sale
Arbitration clause
Commission to broker(s)

Sale is made by sellers execution and delivery of the Bill of Sale
and by buyers letter to release deposit and purchase price funds.

Delivery often coincides with present insurance period and working
hours of bankers, mortgagors, underwriters, registrars etc.

Delivery requires combined meetings / phone calls on party lines to
achieve all transfers together

Certification to hand over includes certificates of
Registry
Load Line
De-rat
Safety Construction
Safety Radio
Safety Equipment
Class
Plans

Registration requires
Bill of Sale
Declaration of Ownership
Declaration of Management
Articles of Association
Certificate of Incorporation
Appointment of registering officer (PoA)
Power of Attorney

Bill of Sale may have to be notarized by buyers flag consul
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 4
FINANCING A NEW SHIP

Out of buyers cash reserves (not so uncommon in Greece)
Increase in share capital through stock exchange
Through mortgage or bank loan

Mortgage in the ship is usual.

Mortgaging bank requirements:

Ship can repay the mortgage with its interest on time
Ships trading prospects,
Managements commercial and technical competence

New ships are paid for in installments usually equal when:
On signing contract
Laying the keel (first block)
Floating the ship
Delivering to buyers

Often financing can be arranged by ship builder through national government
Such financing usually 80% of contract price.

Easy financing gives an incentive to the less stable to build ships and distort
the market with over tonnaging.

Many conflicting elements
Builders must keep yards busy
Governments just finance ships to keep yards busy
Some buyers will take ships in belief things will go well
Bankers may provide finance to use available funds
So a freight recession can be created through over optimism

Trading house can be instrumental in acting as an intermediate contractor to
provide confidence, guarantees of performance by builder and buyer and to
arrange financing.

VALUATIONS

Some S&P Brokers find work as ship valuers useful for
Law cases and arbitration
General average claims
Salvage awards
Insurance claims
Government dealing
Revaluing an owners assets

Value can fluctuate widely / wildly with market circumstances

Valuation assumes ship is in a sound trading condition.
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 5

SHIP MANAGERS

Usually found as a department in the ship owners office

Often owners ship managers and independent ship managers are separate
legal organizations to protect principals from liability for negligence claims

Some owners ship management departments exclude ship operations (leaving
it to the chartering department) to concentrate in ship management and offer
the service to others as a commercial activity.

Scale of service required by a ship manager varies

Time charter management,

Chartering

Sale and purchase

Crewing only

Technical only


TOTAL MANAGEMENT

Contract ship manager takes over entire management including all operational,
technical, legal and commercial affairs.

It is unusual for an owner to contract out commercial management and, if he
does, it is usually only briefly. .

All ship management activities have to be highly co-ordinated to avoid
muddle and loss. This requires discipline and firm control.

Ship management arrangements vary with companys circumstances, ship
managers experience, staff abilities etc.

Otherwise main ship management activities are







HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 6

CREWING

Scale of ship managers / crew suppliers services vary

Quality of crew matters

Owners usually (should) interview / select individuals for employment

Most owners now sub contract crewing

Key to crewing is usually - Cost and Effectiveness

Kurdish shepherds might be cheap and ineffective
German seaman might be effective and expensive
Strike the balance with seamen from:
Former USSR (Ukraine) or Filipinos

Wages paid to Ukrainian and Filipino seaman are attractive rates in
their countries

Crew supply can be a serious invisible export for a poor country.

Crew managers and ship managers strive to retain men by offering
regular re-employment.

High wage / well unionized large national crews in westernized (affluent)
countries make their ships uncompetitive and eliminate them from the
international shipping scene.

Westernised owners are forced to leave the business or re-flag (flagging out)
their ships to FoC (Flag of Convenience) registers and use foreign crews.

FoC registers consider, for example, Isle of Man avoids social security
payments and British taxes.

Inferior wages are generally discouraged by:

Charterers / shippers keeping clear of poorly managed ships

Port State Control might interfere

ITF (International Transport Workers Federation) supervises wages
and conditions of employment. It can exert pressure with the support of
local labour unions

A prime duty for crewing managers is to ensure all supplied crew have the
correct documentation before leaving home (employment contracts, training
courses, certification with flag state endorsements, passports, seamens books
passports etc).
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 7

TECHNICAL

Attention to maintenance, repairs, overhauls condition of the ship

Supply of spares and stores

Supervision of technical performance world wide

Compliance with regulations including classification and all surveys and
inspections

Department manned by technical and marine superintendents.

OPERATIONS

Implements the performance of the ships commercial employment

Establish features of ship

Check commercial requirements reflect ships capability

Instruct masters and agents

Operators in ship owners offices might include commercial responsibilities to
arrange the ships employment by negotiating charter parties through brokers.
Requires knowledge of running costs and experience of voyaging estimating

Operations co-ordinates ships programme with Technical Dept. regarding
repairs, fuel, stores etc

ADMINISTRATION

Insurance and (cargo) claims might be in Operations or separate

Local ship management staff employment

Local legal responsibilities

Budgeting and Accounting

SHIP MANAGEMENT CONTRACT

Usually private letters of agreement

BIMCO Contract form SHIPMAN 1998 may be used.
It covers the essential points

Remember shipmanagers act as agent for the owner in some respects
(arranging cargoes) but as principal (employing the crew) in others.
Class Essay Group 2 HMC ICS GREEK BRANCH
Shipping Business_Chapter 3

Prepared by Capt. MacKenzie, FICS

Class Essay Group 1 HMC ICS Greek Branch
Shipping Business _ Chapter 3

Prepared by Mr. Vasilis Chakos, FICS




! Pow many secLors do we flnd ln Lhe S& markeL? uescrlbe some of Lhe maln
feaLures of Lhe newbulldlngs secLor.

! WhaL are some of Lhe deLalls lncluded ln Lhe MCA ln Lhe S& of second-hand
Lowage?

! uescrlbe Lhe maln sLeps ln a negoLlaLlon of a second-hand shlp sale. WhaL ls a
8lll of Sale?

! uescrlbe Lhe servlces whlch may be provlded by Shlp Managers Lo Cwners.
Why may crewlng be conLracLed ouL by an Cwner Lo a Shlp Manager?
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS-LESSON 4
PRACTIONERS IN THE SHIPPING BUSINESS (CONTINUED)

PORT AGENTS

Agents duty is to look after ships, her owners /managers and her crews needs
whilst at their port.

Agent always has a principal. Disburses funds. Funds come from the principal.

Principal is usually the owner.

If ship is time chartered, principal is the disponent owner (the time charterer)

If owner time charterers his ship and needs:

little done in port, the time charterers agent attend without a fee.

much done in port (overhaul), he may appoint his own agent to arrange

Often two agents needed to avoid a conflict of interest

Charterers agents are agents nominated by the charterer and paid by time
charterer or owner.

Charterers, if nominating the agent, will usually demand a slice of the agents
fee from the timer charterer (disponent owner)

Port agent always works for the time charterer disponent owner (or actual
owner).

Charterers like to nominate agents to ensure :-
Their interests will be well handled by agents experienced and familiar
to port and trade.
Confidentiality of the business
(Charterers agents often a part of charterers organisation)

If the time charterer is unhappy with the charterers nominated agent to protect
his interest, he can appoint another agent as Protecting Agent (or
Supervisory Agent) to supervise and ensure correct handling of the agency.

Protecting Agent (or Supervisory Agent) will now handle the owners /
time charterers exclusive requirements

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2

AGENTS FEE

Agency fees agreed on nomination well in advance of ships call.

Scale of fees usually related to a national institute scale.

But national fees unacceptable in law as hinders competition (USA, UK, EU).

Agents have tariffs of fees for ship sizes, trades, employment.

Agents fees will be basic with a surcharge for expenses -
messages, phone, cars,


AGENTS DUTIES


PRIOR ARRIVAL

Acknowledge appointment

Check who pays for the ships port disbursements

Provide principal with pro forma disbursement account broken down
into main charges and including agency fee and charges

Determine berth with cargo interests / port

Have labour ready - pilots, line men, tugs, stevedores, surveyors etc

Determine owners special needs on arrival cash to master

Obtain ETA from ship. Inform concerned people ashore

Inform ship, charterers and owners of her port ETA and prospects.


ON ARRIVAL

Meet the ship board when in free pratique and cleared by customs

Discuss requirements cargo, ship, crew, repairs, deliver cash, mail

Complete formalities customs, port.

Tender Notice of Readiness

Report to managers arrival details and prospects. Keep informed.

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3

ON DEPARTURE

Complete record of events, progress, details of weather, stoppages,
delays, strikes etc.

Complete Statement of Facts and have it signed
By master and shippers/receivers

Arrange pilots, tugs, linemen,

Inform managers and next port


AFTER DEPARTURE

Despatch port papers Notice of Readiness. Statement of Facts.
.
Prepare invoices. Collect vouchers. Complete disbursement account.

Settle account.


HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
4
LINER AGENCY

Takes team work many skills involved to deal with the ship:

THE SHIP

Attend to health, customs, port authorities, stevedores

List booked cargo.

Arrange and book suitable berth

OUTWARD CARGO MARKETING - Finding the cargo:

Inform shippers / forwarding agents of schedule

Advertise schedule

Organise sale of ships capacity salesmen canvassers

Consideration of conflicts of interest

Collate cargo bookings

Arrange delivery to correct berth by correct date

Calculate freights per tariff

Separate dangerous cargo

OUTWARD CARGO DOCUMENTATION (Break bulk)

Prepare Dangerous Goods Note

Mate Receipt
- description of goods as on board

Bill of Lading serves
- evidence of contract of affreightment
- state of goods on loading
- receipt of goods /document of title

Manifest
- cargo list

Freight Account
- statement of freight

Much simplified by computerisation
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
5

OUTWARD CARGO CONTAINERS

Accept cargo booking

Arrange container

Co-ordinate supply of container through Container Control

Arrange movement of container through Transport Control

Arrange LCL (Less than container load) at Container Depot

Prepare container packing lists.

INWARD CARGO

Notify receivers from manifest

Bills of Lading (B/L) presented to agent

Collect freight if due on delivery

Issue Delivery Order in exchange for B/L

Arrange unloading / depot - storage space

Recovery of empty container.

Container survey repair

Cargo claims

PRINCIPAL

Financial reckoning

Ships disbursements

Cargo charges stevedoring, tallying, depot charges,
local trucking, surveys, container repairs

Remittance of the balance of the freight income

INLAND LINER AGENT

Liner company with a sales organisation inland

Serves as a booking agent on commission

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
6

AGENCY CONTRACT

Tramp agency one telex line contract

Liner agency detailed agreement (MoA)

FONASBA has a General Agency Agreement form

Clauses act as a guideline


}{ELLEN C MANAGEME {T CE .{TRE
} ST TUTE oF CF R EREDJF PBRO ERS
_
coURSE NOTES
S { P NG BUS \ ESS
-
CH PT R 4
CL SS ESS Y
To assist you to prepare y u for the exam, please write this essay.
t should be of about l%to | z pages in length - the amount you can write and check in
the 25 to 30 minutes allowed in the exam. Let us say 500 i6 0 w rds
-
at the m st.
ssays should be hand written as this is the examination practice
Strive to answer every point raised in the essay questi n.
Essay subje t (taken fr m an a tual exam paper):
'Describe the full range of services which a Liner Agency company
may be required to provide to its prin ipal and comment on the terms
f the contract which might cover their business relationship,
Before w iting, please nsider that the question requires y u to:
1. Desoribe the full range of servt es.
and
2, C mment on the terms of the ontra t.
So there are t\ /o elements. Describe... . and C mment
Make a habit of referring to the initial w rds of the questlon in writlng your
ans\i/ers. Then you give: - more direct and complete answer and
.
You help the examiner t f llow your ans\ /er
-t
I
-l
lcy
I
i
!
I
,-]

I

-J
No
Question
wording Wording f the answer
Des ribe the full range of
services.
The full range of services, which a lin r agency
sh uld provide to its prin ipal, are.
2 Comment on the terms of the
ontract.
The terms f the agency contra t must cover
Please bring your essay to your next class Ma colm Ma enzie
Class Essay Group 4 HMC ICS GREEK BRANCH
Shipping Business_Chapter 4

Prepared by Mr. Chakos, FICS



lease wrlLe Lhe followlng quesLlons:

1. Why ls Lhe appolnLmenL of a porL agenL lmporLanL for a prlnclpal - shlpowner
or charLerer?

2. Who ls Lhe agenL's prlnclpal" and why may Lhls presenL a problem?


3. WhaL are Lhe agenLs' duLles afLer hls/her appolnLmenL?


4. uescrlbe Lhe lmporLanL aspecLs of Llner Agency.
Model Answer_ Essay HMC ICS GREEK BRANCH
Shipping Business Chapter 4

Prepared by Capt. MacKenzie

CLASS ESSAY MODEL ESSAY ANSWER

Describe the full range of services which a Liner Agency
company may be required to provide its principal and comment on
the terms of the contract which might cover their business
relationship.

The liner agent must supply his principal with all the services expected of the tramp
agent. Thus the liner agent must attend to all the port and official formalities including
pilotage, towing, berthing, quarantine, immigration, customs, stevedoring and clearing
outwards. He must attend to the ship masters and managers requirements for
messages, support and local services. And he must keep his principals and the next
port closely informed about the ships prospects.

However the liner agent must do much more depending on his negotiated liner agency
agreement with his principal. It would be normal for the liner agent to have to source
the cargo. Thus he needs a team of salesmen cargo canvassers to constantly visit
all the importers and exporters of cargoes on his principals trade routes. These
salesmen would quote rates and discounts, services and sailing dates and terms of
carriage to secure business. The sales force might have to be based in cities and ports
throughout the agents region of activity to adequately cover the market.

As most liner agency work involves containerisation, the agent would have to provide
a complete computer service fully integrated with his principals to control container
movements and their hire. The agent would have to provide a container storage yard
with secure repair, cleaning and survey facilities. And he would have to provide
trucks and experienced reliable drivers to deliver and to collect the containers to and
from the customers.

The agent would have to arrange berthage and stevedoring for his principals ships
with contracts for these and other services including towage and pilotage to ensure
port calls were tightly controlled. Then a container freight station might be an
essential where part container loads can be received or distributed from a secure
warehouse with its own container packing and unpacking facilities and staff. Then
special provisions might have to be made for handling dangerous goods with the
appropriate documentation and secure storage.

Then the agent would have to arrange the computerized documentation of the cargoes
he handles with freight collection and claims settling services. Collected freights must
be remitted to the principal without delay but fully accounted for.

The principal and his agent would have to collaborate on a marketing and sales
strategy to cover the market with salesmens visits, advertising, circulars, e-mails,
promotions and entertainments.

The agents contract with his principal might be a one off negotiated agreement or it
might use a standard FONASBA form for a Standard Liner Agency Agreement.
Certainty the agreement must set out the agents duties and responsibilities with
Model Answer_ Essay HMC ICS GREEK BRANCH
Shipping Business Chapter 4

Prepared by Capt. MacKenzie

details of the commission structure with which he is to be rewarded. Details must be
included for the sharing of expenses, if any, and activities. The agent must always be
controlled by quotas per ship for cargo volumes, dates and destinations and these
quotas must be met but not exceeded and these must be identified. Then the contract
must specify its duration and re-newal as a liner agency agreement needs to be of an
enduring nature to secure the business and testify to its reliability

Words 510

COMMENT

I hope this script cover the two requirements of the question

1. to describe the. services
2. to comment on the terms of the contract.


Malcolm MacKenzie
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS

LESSON 5 BUSINESS ETHICS


ETHICS

A Greek word

Differences between Good and Evil
Right and wrong
Virtue and vice

What you get found out not complying with

Do as you would be done by

Ethics change with time - practices change

Bribery often condoned

Usually reflects standards of the business community

ETHICS IN SHIPPING

Law covers crime, tort and breaches of contracts

Unwritten law covers keeps business going
Principals trust brokers and agents
Brokers trust each other

Principal works through broker who first mentioned the business

Baltic pursues ethical behaviour

Promoted by brokers daily contact

Supported by Baltics governing board discipline

Baltic has a written Code of Ethics
Breach risks expulsion / loss of reputation

Similar but unwritten Codes apply throughout shipping

OUR WORD OUR BOND





HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2
MARITIME FRAUD

Serious problem

As industry depends on trust, it is vulnerable to short term fraud.


INSURANCE FRAUD

In shipping can and does happen

Over insurance of a ship or cargo with an arranged loss

Changing ships names to deceive who to deceive?

Insurance investigates

Mis-paid false claims burden entire industry


DOCUMENTARY FRAUD

Mis-use of Bills of Lading and Letters of Credit


OTHER FRAUDS

Small frauds accumulate to cause great loss

Shippers can under measure liner general cargoes

Letter of Indemnity for unclean cargoes



OTHER CRIMINAL ACTIVITIES

Smuggling contraband, arms, drugs

Illegal immigration

Piracy see work on International Maritime Bureau in KL








HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3
DETECTING & AVOIDING FRAUD

Victims often unaware until too late

Victims often reluctant to admit their carelessness


Often frauds only come to light after event

i.e. Freight prepaid /freight collect


Established frauds can be readily perpetrated on others
in different trades or nations

Pursuit of criminals both difficult and expensive


Checks can made through

Private agencies
Banks
Business directories
Chambers of Commerce
International Maritime Bureau
BIMCO
Insurance companies

Customs, police and revenue alert












S { P NG BUS NESS
C i PT R 5
CL SS ESS Y
_
MODEL ESSAY NSW R
'The
incidence
of maritime fraud undermines confidence in the shipping
industry
and p ses
a s rious th eat to the wider international
shipping
.-
c mmunity.
. dentify
t].re most signifi ant
a as of maritime fraud and conside what
rnethods
can be ad pted to deter or prevent
rimina activity in intemationa|
maritime
trade'.
he identity of the most srgnifi ant areas f maritime fraud may be traced t th se
lnv lved in the mishandling
of d cumentati n
and cash transfers as biils of lading and
bi 1s ofex hange are transferred and negotiated n a world wide i tematl na1
basis. Then
there is appreciable f}aud in the insurance market with fa se declarations and laims: this
business is plagued
by the onviction ofmany ofthe insured that thev have a dutv. even a
right, to claim more than they pay in premiums
striving to tum the rndustry to on" g,u,ng
them a regular profit.
Fraud covers as many acti itles are the e are opportun1sts who see the
prospe t
of
gain
by breaking the rules and laws. his comprtses unethi a] beha iour,
thi al behaviour invo es abiding by the regulations, rules and laws, codes of
onduct and standards ofs und behaviour as wldely practi ed, he dividing line between
ethrcal and unethlcal behaviour, also the dividing line between good behaviour and fraud,
is usually we]l-established
and defined by long tradition and practi e,
But there are
marginal cases which may ha e to be resol ed in cou! or at irbit ation,
Fraud an be extended to include ther il1egal activities such as extortion throu{ h
kidnap r seizure. The a t of seizure often involves pira y
as me chant shJps an be
detained by pirates
and put
up for au tion or offered back to their legitimaie owners and
managers or a ransom, Thts practice
has be ome establlshed in S mali and adjacent
waters: following the loss oftheir fishe ies to Far Eastem depredators, Somalii have
taken to seizing and ransoming merchant ships. This process,
having been found to
su ceed, is being practi ed
in other waters
_
offWest f ica and in Malaysia.
Methods to adopt t deter or even prevent these pra tices
are difficult, Victtms l
fraud are ften ashamed to admrt their gullibility
so fail to reg1ste r announce their loss
fearing the loss oftheir reputation S the fraudsters an more readily expand their
act1vities, t is imp rtant that the authorities are made aware of loss and theft' Pr se ution
and recovery are often difficult be ause intemational laws are obscure and national
concems often hinder the due process
ofthe 1aw.
Those who practice
1iaud must be identified, B MCO 1ists those who steal and fail
to pay their bills in its international publicatrons
depending on reports from their
members for information, The rrtemational Maritime Bureau
( MB)
in Kua1a Lumpur is
a ti ely pursuing
al forms of maritime fraud and publi izing ]nStances reported to them
The MB acti ely c perates with national po1l e for es and intematlona1 po1ice
ooperatives in an effort to f llow up and report ases in an effo t to detect and re eal the
dishonest. The MB has been espe ially active in detecting and revealing instan es of
world wide piracy through its Piracy Repo!ing Centre'
nternational c -ope ation between the po1i e
and researchers is assisted by
internati nal and satel1ite communications but these fa lllties are als used by those who
mm t raud' hus ship managers have satellite ship tracking facilities to m nito the
Se ur1ty and pfogress
oftheir shlps but it is thought that the Somali pirates use the same
echniques lo de ec shlps seize,
concem is current that many governments
behave illegally by lncarcerating
and
detaining masters and ships, wat h ofEcers f llowing a polluti n
or smuggling incident
in order to keep the witnesses to hand in order to secure a prosecution.
Some fthe
world,s most prominent govemments
have ondu ted su h practices in luding those of
the US , Norway and Gree e who should be more iamiliar with their own 1aws and
internationa1 pra ti es.
END oF ESS Y
Thrs essay requires candidateas to:
denti$l the m st Sign1ficant areas f maritime fraud
and
C nstder what metlrods an be adopted to deter or prevent criminal activity ln
internationa maritime trade,.
So start the first parag aph
with the words
.The
identity of the most si lfi ant areas of marrtime fraud may be traced to
and c ntinue in the e ond ha1f with
.Methods
t adopt to dete r e en prevent these practi es are dlfficult,
Such a practice
helps t keep the candidate on track with the question and helps the
examiner to keep track ofthe andidate,S progress,
These are valuable benefits
Ma colm MacKenzie
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 1
SHIPPING BUSINESS- Lesson 6 & INTRODUCTION TO SHIPPING- Lesson 8


SHIPPING BUSINESS:
LESSON 6 THE GEOGRAPHY OF TRADE

Shipping is global

Transport of materials in world trade

Use a maritime atlas

Know the oceans, continents, countries, ports and waterways


SEABORNE TRADE

Introduction

Sea transport is economical

95% world trade is by sea

Increased 9 fold in last 50 years

Ship efficiency greatly improved

Biggest commodities are crude oil, coal, ores and grains



CARGOES

Oil Crude oil is largest single commodity in world trade

Oil for transport, power, heating, manufacturing

Demand for oil rises yearly - in 2001 = 1,600 million tons
with 400 million tons carried by sea

Natural product loaded from Arabian Gulf, Caspian Sea, West Africa,
Caribbean, Americas, North Sea
for North America, Europe, Far East

Carried by largest of ships for economy of scale.

Ship sizes limited by Port, channel and canal depths
Commercial restrictions of handling so much oil.

Notice off shore ports LOOP
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 2
Transfer at sea

Coal Energy (electricity), industry (steel making)

Demand for coal rises yearly - in 2001 = 4,000 million tons
with 560 million tons carried by sea

Carried in bulk ships colliers

Usually Handymax (40,000 dwt)
Panamax (60,000 dwt)
Capers (170,000 dwt)

Loaded by shutes, discharged by shore grabs

Loaded in USA, Australia, South Africa, Venezuela, W. Canada
for China, Japan, Europe

Ores Manufacturing for industry to make metals

Some 450 million tons carried by sea

Usually in ordinary bulk carriers

Very heavy cargo stows 14 cu ft per ton (coal is 50)

Loaded by conveyors, discharged by grabbing cranes

Loaded in Australia, Brazil, South Africa, E. Canada
for Europe, North America, China and Japan


Grains Human and animal feed

Includes wheat, sorghums, soya, rice, seeds, (rape, sunflower, flax, cotton)

Carried as pellets for production of meal

Annual carrying some 200 million tons

Needs self trimming ships or to be over-stowed with bagged grain

Loaded by elevators / pipes. Discharged by pneumatic suction, grab,
screw elevators

Loaded in Australia, Canada, USA, Argentina for Europe, India etc

Affected by harvests

Other dry bulk cargoes
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 3

Annual carrying some 890 million tons

Steel, minerals, fertilizers, timber etc.

Special ships may be used reefers with insulation and a good speed,

Also consider vehicle carriers and live stock ships


Unitised cargoes containers

Includes cargo units pallets, jumbo bags, pre-slung cargoes, lighters and
barges

And 20 and 40 foot containers standardised multi modal cargo systems

Door to door services

Most competitive

Containerisation is a big capital investment
ships, feeder ships, containers, cranes, quays, storage, inland handling, depots

Hub-and-Spoke services and North-South and Around-the-World


PORTS

Developed with growth of local communities

Often started with a natural harbour

Development of a basic commodity

Factors to consider Water depths tides
Protection from weather
Space for storage of cargoes
Infrastructure road / rail connections
Labour

Consider port development
Liverpool (faces the wrong way) and
Felixstowe (no National Dock Labour Board)

Port categories
Entreport Transfer of goods ship-to-ship. Rotterdam
Naval Plymouth
Ferry Dover
Out ports Developed in deeper water down river Europort
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 4
Fishing Close to fishing grounds and market - Fleetwood
Goods/cargo Imports / exports - Rotterdam
Free Zone Customs duties exempt

Ports and Harbours

Harbour for protection of shipping (shelter during a storm),
Also repairs, stores and fuel

Natural harbours Piraeus, Sydney

Artificial harbours Cherbourg, Le Havre, Long Beach

Breakwaters, dredged channels

Most harbours are natural and then enhanced artificially

Port usually a commercial harbour developed for trade

Include sea ports, river ports, canal ports, artificial and natural ports

Place to transfer cargoes and passengers to / from sea ships


Function of Ports

Traditional functions A link in a transport chain.
Place of storage for cargoes
Location of an industry requiring transport

Transport functions Transhipment of cargoes sea mode to land mode
Includes storage and manufacturing / blending

Industrial functions Processing raw materials
Major investment long term

Network functions Hub and spoke ports
Containerisation
Exploit economies of scale
Hub port mainline. Feeder port secondary
Hubs may be far from industry Malta. Algeciras

Port restrictions

LOA Length overall (Rouen)

Beam Locks (Avonmouth)

Draft All ports

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 5
Airdraft Clear height under bridges, cables, airports

SWAD Salt Water Arrival Draft maximum permitted

FWAD Fresh Water Arrival Draft as above

BWAD Brackish Water Arrival Draft - as above

SG Of fresh water is 1,000 ounces per cu ft or 1 cubic meter

Of salt water is 1,025 ounces per cu ft or 1.025 cubic meters

Bar Draft Sea entrance to a river Mersey

NAABSA Not Always Afloat but Safely Aground

And many other factors including weather, ice, war (extra insurance)


Ports vary and most are combinations of some of:

Anchorage LOOP,

Sea Off Houston, California

Barge All cargo in and out of barges Tanga

Shelter Sounion

Artificial Cherbourg,

Single cargo Itea



WATERWAYS

Natural waterways

Rivers London as lowest ford for crossing the Thames at low tide and
as highest point of navigation for medieval ships at high tides

Natural inlets Southampton

Man made waterways Rotterdam, and canals Amsterdam

Man made canals can affect local drainage systems

As Manchester Ship Canal

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 6
And Rideau Canal (Ottawa)

St Lawrence Seaway

Links St Lawrence Estuary to Upper Great Lakes

Limits Draft 26 ft in FW, LOA 730 ft (222.5m), Beam 76 (23.16 m)

Restricts ship sizes and ships need special mooring fittings

Panama

Links Atlantic to Pacific across Central America

Limits lengths (274.3 m) and beam (32,3)

Draft reflects rainfall (water availability)

Suez Canal

Links Atlantic (Mediterranean) to Indian Oceans (Red Sea)

No locks

Restrictions constantly being lifted


Political Restrictions - Israel and Arab World, North Cyprus ands Greek ports


Trade union disputes - ITF blacking a ship, strong in Scandinavia and Australia



NATURAL PHENOMENA

TIDES Effect of gravity of moon and sun

At New and Full Moon, sun and moon pull together

= Very high and very low tides Spring tides

At Half Moon, sun and moon pull at right angles

= Low high and high low water tides Neap tides

Constant variations owing to moons and earths orbit

Tides matter for port entry, departure and remaining afloat

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 7
Used for docks to reduce chance of stranding

Locks unsuitable for bigger ships as too expensive

So bigger ships berth in lower rivers and to seaward in deeper water

Locks allow canals to rise over hills (Panama)

Currents

Ocean currents regular and predictable

Tides currents (streams) change at every tide and can be very strong

Sea currents are created by

Wind (main cause of ocean currents)

Distribution of waters masses with varying temperatures, salinity, density

Tidal currents

Differing currents at differing depths but seamen mostly interested in surface currents

Ocean currents can have great impact

Northern Europe enjoys warmth of Gulf Stream and the North Atlantic Drift.

Narvik is ice-free year around

but Hokkaido is cold and often frozen though well south

Sea fogs due to:

Warm moist winds blowing over cold currents / cold sea

Newfoundland
The meeting place of North Atlantic Drift and Labrador Current
Worst in May to September
And see California, Bering Sea, Baltic, and Hudsons Bay

Tropical Revolving Storms TRS

Can cause astonishing damage New Orleans

In Northern Hemisphere, cyclonic winds circulate anti clockwise
(Southern Hemisphere clockwise)

TRS named:

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 8
Hurricanes West N Atlantic, East N Pacific, S Pacific
Especially Jun-Nov in West Indies / Caribbean

Typhoons West N Pacific (July-Oct)

Cyclones Indian Ocean with Bay or Bengal & Arabian Sea
(Jun-Aug)

Willy-Willie N W Australia (Jan-Apr)

But unknown in South Atlantic

Exceptional winds

Monsoons South China Sea (Nov-Mar)

West Indian Ocean (Jun-Oct)
(Heavy rain in West India)

Hurricanes North Atlantic depressions

Roaring Forties Southern Ocean

Beaufort Scale Measure of wind speed
Force 0 calm.
Force 12 at 70 knots with seas of 15 metres

Ships speeds reduced by high winds with sea / swell from ahead
(Beaufort force 4 to 5 and over)

Exceptional seas Douglas Sea State Scale measures wave heights



ICE Icebergs Carried by cold polar currents (Labrador) to shipping lanes

Formed by the calving of land glaciers extending over the sea

Seven eights of an ice berg are under water

Combination fog / ice makes summer navigation a concern
off Newfoundland

Ice navigation

Hinders navigation, berthing, cargo handling, inland transport, labour

Slows operations steel can fracture, diesels refuse to start

FOW First Open Water - after winter closure for ice when entry may be
HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 9
made with relative safety

Some ports freeze up in winter Nov-Mar
North and East Baltic
North Black Sea

St Lawrence River /Seaway Dec-Apr
St Lawrence Seaway closed about 15
th
Dec to 1
st
Apr

Hudson River. New York State Port of Albany

Hudson Bay. East Canada Port of Churchill

East cost ports of Russia, North China and North Korea

Icebreaker

Ship to break ice to keep ports open Baltic and St Lawrence
Sophisticated technology

Ice forecast and reports

By BIMCO and local government agencies
Greatly assists masters and ice pilots

Notice difference between One-year ice Baltic, Black Sea, St. Lawrence
And Multi year ice Arctic and Antarctic

Institute Warranty Limits

London Insurance Institute measures insurance premium against risks
May be raised for ice or war by additional premium (AP)






OCEANS

Cover over 70% of our globe

Saltwater salinity remarkably constant at 1.025 M/T per Cu M

May be influenced by:

Fresh water discharges (rivers Amazon, ice - Arctic)

Evaporation (Red Sea)

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 10
Circulation strong currents (tides)

WEATHER ROUTING

Providing masters with weather advice and routeing suggestions from ashore

(Usually Met office or private forecasters)

Leads to disputes between time charterers and owners

Involves exchanges of radio messages with masters informing weather centre
of current speed and conditions and weather centre replying with guidance for
course and speed.

May be used in speed claims

Masters assisted by satellite forecasts


LOAD LINES

To IMO Convention to:

Mark ships sides to show minimum allowed freeboard

Varies for zones (Summer, Winter, Tropical, WNA)

Divides worlds oceans into areas with season variations by dates

Regulation must be observed

Influences voyage planning, cargo deadweight, bunkering


















HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 11


INTRODUCTION TO SHIPPING:
LESSON 8 MARITIME GEOGRAPHY

GEOGRAPHY

Know oceans and continents

Understand

Latitude - parallels starting from equator 0 to poles 90

Longitude - meridians east / west from Greenwich to 180

Charts to Mercators projection
(as a paper cylinder wrapped around the Earth at the Equator)

Gives Correct courses

Distances on Equator for longitude

Distances for latitude on the latitude scale at the latitude

TIME

Earth revolves once every 24 hours through 360 degrees (15 degrees / hour)

So 1 minute = 1 mile of latitude and 1 mile of longitude on Equator

1 nautical mile per hour is a speed of 1 knot

(never knots per hour as knots are measurement of speed)

International Date Line runs almost down 180 longitude

Crossed going west - miss a day and
east repeat a day

Zone time used for local times

Varied for economy by Daylight Saving Times

(Spring forward, fall back)

Ships navigate to GMT

HMC ICS GREEK BRANCH Course Notes
SHIPPING BUSINESS & INTRODUCTION TO SHIPPING
Prepared by Capt. Malcolm MacKenzie FICS 12

CHARTERING

Considerations include

Distances of ballast passages

Depths of ports, canals, sea passages

Size and depths of locks and docks

Times and heights of tides

Weather

Politics

Port costs

Time in port berthing delays, cargo working time

Port facilities repairs, fuel, stores,

Duration of next passage

Competence of agents, stevedores, charterers

} ELLEN C M N G MENT CENTRE
NST TUTE oF CF RTERED SF PBRO ERS
_
coURSE NOTES
S - P G B JS IESS
_
C { TER 6. CL SS ESS Y
To assist to prepare you for the exam, please write this essay. t sh uld be of about 1 }.1t
l'zi pages in length - the amount you a r write and check in 25 to 30 minutes allowed in
the exam. Let us say 500 /600 words
-
at the most.
Essays sh uld be hand written as this is the examination pra tice.
Strive t answer very point raised in the essay question.
Essay
Question
(taken from an actual exam paper):
.Many
ffaditional ports around the w rld have developed in line with
the comm mities and industrialhinterlands they serve, although, in
order t survive, have found it ne essary t adapt and diversiflz
.Sele ting
a major port aS an xample, discuss the factors which have
influen ed its devel pmont and c mment on its future pr Sp cts,'
Before writing please onsider:
This question is in not a history test
t must be written as an essay. The question requires you t
l. Se e ting a major p rt as an example,
2. Discuss the frct rs whi h have influenced its development and
3, Comment on i future prospects'.
Make a habit of refe!ing t the inital words of the questi n in writing your
answers. Then you give: - A more dire t and c mplete answer and
- You help your examiner t fo l \ / where you have got to
o
Questi n
w rding Wording to start the ans\ /er
1 Sele ting a major p rt aS an
example,
sele t Piraeus, the port f Athens in Gre
2 Discuss the fa tors which have
influenced its development
Fa t rs leading t its glo\ /th are the deman
of its neighb ur ity Athens . . . ..
3 Comm nt on its future prospects The future pr Spects f r Piraeus are g d.

I
i
*---_--l
e e.
I
I

I
---l dsl
_____"1
di
_-__-- l
lease bring your essay to your next class. Mal lm Mac enzie
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS

LESSON 7 INTERNATIONAL TRADE AND FINANCE AND
INTERNATIONAL TERMS OF TRADE

INTRODUCTION

ACRONYMS

B/L Bill of Lading

ICS International Chamber of Commerce (Institute of Ch Shipbrokers)

INCO terms International Chamber of Commerces international sales terms

DDP Delivery Duty Paid Sale at buyers door

EXW Ex-Works Sale at point of origin

FCA Free carrier

FAS Free Alongside Ship

FOB Free on Board

CFR (C&F) Cost and Freight

CIF Cost, Insurance, Freight

CPT Carriage Paid to.

CIP Carriage and Insurance Paid to.

DAF Delivered at Frontier

DES Delivery ex Ship

DEQ Delivery Ex Quay

DDU Delivery Duty Unpaid

DDP Delivery Duty Paid

UN United Nations






HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2
7.1 INTRODUCTION

For an understanding of shipping, ship managers must understand
international trading especially from the standpoint of the merchant shipper,
receiver, trader.

Complex matter:
- number of commodities and routes
- number of contracts for
carriage of cargoes, hire of ships (charter parties),
affreightment
agency
employment
sale of goods

First element of international trade contract of sale
Sale, purchase, insurances, payment
Moment of transfer of risk and title in the goods


7.2 THE BASIC CONTRACT

For every contract there are 4 elements
- Offer
- Acceptance must be in: Time
Identical terms to the offer
If terms of acceptance differ from Offer, it becomes a Counter-Offer
- Consideration the price
- Intention to create a legal relationship with legal consequences

So everey contract for the sale of goods involves 3 points

- The time or circumstances when ownership of the goods changes
- When payment is due
- When the risk of damage or loss changes hands

Essential for seller and buyer to offer and accept on common terms
otherwise there is no acceptance of identical terms

The form to use to eliminate doubt is the ICSs INCO TERMS


7.3 GOODS

There are two types of goods

Specific goods readily identifiable at time of contract

Unascertained goods goods awaiting manufacture
or in a large common stockpile
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3
7.4 PROPERTY

Property means ownership. Property passes = ownership changes

Possession is not ownership. Possession is physical control.
It may be without ownership

Passing of property involves consequences:

- Buyer must pay seller
(passing of property and payment are a usually common act.

- The risk passes from seller to buyer

- Seller might be legally protected if buyer fails

When does the property pass? Depends on distinction between:

- Specific goods property - may pass hands
when goods are contracted / payment is made

- Unascertained goods can not pass when contract is made
The goods to be sold must be appropriated / specified

But buyer and seller can delay moment of passing of property
as is common in international trade.



7.5 RISK

Risk is the danger of damage to or the loss of goods

Whoever bears the risk in the goods,
bears the loss caused by any damage or loss.

This is crucial to placing insurance cover

So the times of the passing of the property and the passing of the risk matter.











HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
4
7.6 INTERNATIONAL CONTRACTS OF SALE (INCO TERMS).

Many contracts used for international sales many variations too

To facilitate trade, the International Chamber of Commerce (ICS) prepared
international contractual terms for buying and selling

ICS terms Regular use
Well understood
ICS issued a set of definitions to ensure understanding of terms

If INCO terms are to apply, contractors must declare their wish to be so bound

Decision concerning contract involves experience and practice
- Type of goods
- Form of transport
- Method of payment
- State of the market

Business practices always changing and also reflect transport system,
communications, changes in supply and demand, laws, etc.

As practices change, INCO modifies / updates its terms
after consultation with market and traders

Thus exchanges by electronic data (e-mail) are now commonplace.

See list of Acronyms

Terms fall into categories:

E Seller provides goods at his premises

F Seller provides goods to carrier named by buyer

C Seller arranges the carriage at Buyers risk

D Seller bears all costs and risks till delivery.

So INCO Terms define duties / obligations of buyers and sellers throughout
operation with details for transfer of risk and payment.

Terms to be understood:

FAS Free Alongside

Usually includes name of the port
Buyer nominates port and berth with date of delivery
Sellers obligation cease
when the goods arrive at berth alongside the ship on time
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
5
Then property and risk pass to buyer. Duty to be paid falls due.

FOB Free on Board

Very common
Seller delivers goods to named port and berth and over the ships rail
Then risk passes to buyer and freight and insurance rest with buyer
Buyer must name the ship, the port.
Identity of ship may be left open till later as is practical.
Transfer of property might be delayed if the B/L is delayed
Buyer arranges the insurance based on sellers description

Variants of FOB

Variants to be understood and agreed in advance and stated in
contract (as beyond INCO descriptions)

FOB Stowed

Seller pays for stowage on board
Risk and property pass on goods being stowed

FOB Stowed and Trimmed

Only applies to bulk cargoes
Risk & property pass on goods being stowed and trimmed
at the sellers expense

FOB with Services

Seller may have to make additional arranges
i.e. arranging shipping space

CIF (. named port of destination) Cost Insurance and Freight.

Most widely used
Seller arranges carriage of goods and insurance
to buyers named destination
Sale price includes sea freight and insurances
higher than an FOB price
Contract based on discharge port not the load port
So the buyer can buy the goods in transit whilst afloat

Seller must ship the goods to contract description
on time etc.
and arrange suitable insurance
with a suitable invoice

with documentation arranged
Invoice, B/L, Insurance certificate
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
6

Buyer must accept the documents, pay the price and accept the
goods unless the contract is breached

Property passes with transfer of documents
Risk passes at the moment of shipment
the goods being insured

Even if the goods are lost at sea, sale can go ahead
by the transfer of the documents

CIF contract is a
Contract for the sale of goods performed by the sale of documents

CFR Cost and Freight

Buyer arranges the insurance
Seller arranges to provide goods and shipment

Popular in countries with local laws - all goods to be locally insured
Property passes and price is payable with transfer of documents
Risk passes on shipment

DES Delivery Ex Ship (named port of destination)

Property and risk pass on delivery at buyers port
Freight and insurance for sellers account
Price payable on delivery on passing of the goods
Inappropriate for the sale of goods by documentation
Not used with a Letter of Credit sale

DEQ Delivery ex Quay (duty paid)

Like DES
Seller pays for unloading and import duties
including customs clearance and dues and taxes
seller needs a local agent

Non Maritime INCO Terms

Allows for international sales with expenses included for inland work.
- container rail and road transport etc.

EXW Ex Works

Buyer pays all transport and insurance from sellers premises
Includes loading on the buyers vehicle
Buyer pays for carriage of goods and insurance
FCA Free Carrier named point

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
7
Seller arranges delivery to the carrier at a named point
Risk passes to carrier at the point
Covered by Special INCOTERMS 2000
Usually involves special arrangements between buyer and seller

CPT Carriage Paid To ( named place of destination)

Sellers pays freight to the buyers destination
Risk passes when goods are delivered to the first carrier
(multi modal transport or not)

CIP Carriage and Insurance Paid

Like CPT except:
Seller insures goods to final destination regardless of form of transport

DAF Delivery at Frontier

Seller responsible for all costs, risk, insurance to frontier not beyond
Buyer responsible for clearance through customs
and subsequent carriage and insurance

DDU Delivered Duty Unpaid (. named place of destination)

Seller arranges delivery to named place
Seller pays all costs and takes the risk and pays all import taxes, duties.

DDP Delivered Duty Paid (. named place of destination)

Seller responsible for all costs to final destination
including import duties and taxes

AND many variations, even beyond the INCO terms.

Variations might involve import duties and taxes

In selecting the form of contract consider
Local people know their countrys regulations and charges
So these expenses better paid locally.

Experienced / large volume people know marine cargo
insurance and sea freights and shipping better and can get better
discounts / commissions so they arrange these elements

Arrangement can vary with the state of the market
thus in a buyers market, the buyer will dictate the terms

International sales of goods are a comprise negotiated as other aspects of business


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
8
7.7 REMEDIES FOR BREACH OF CONTRACT

7.7.1 REMEDIES TO THE SELLER

Problems arise if the buyer refuses to pay for or to take delivery of goods

Has the property passed? If it has passed, payment is due.

Seller can sue for value of goods + damages

The contract might specify a payment date, which has passed

If the buyer has possession of goods, it is difficult for seller to sell to another

If the property has not passed, seller may sue for damages and sell to another
which is offset against his initial claim.

7.7.2 STOPPAGE IN TRANSIT

Included in the English Sales of Goods Act

Gives the right for the seller to suspend delivery of goods and repossess them
if the buyer is insolvent and/or a danger of non-payment. Two issues arise:
1. The insolvency of the buyer
2. The goods must be in transit
This right does not apply if the buyer arranged the transport
The right is exercised by informing the carrier and enforced by a local court

If the goods are still in the sellers country, assume the courts will be more
favourable.

7.7.3 LIEN

If the seller still has the goods in his (his carriers) possession, and buyer
becomes insolvent, seller may retain the goods

7.7.4 REMEDIES OF THE BUYER

If the seller breaches the contract of sale owing to late delivery, short or non-
delivery, delivery of damaged goods, defective documents, the buyer may
reject the goods and sue for damages.

Damages will be the difference between contract price and the market price of
the goods. The buyer can always sue for a defective delivery

SPECIFIC PERFORMANCE

The buyer can sue for actual correct delivery of the goods the performance
of the contract. This is the Order for Specific Performance.
Rarely used as it should be possible to get the goods from another source
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
9

7.8 LAW AND JURISDICTION

This lesson reflects English Law

Contract should identify applicable law usually English law and arbitration.


If unspecified, law of one of the principals countries might be presumed.

Which country? The one where the contract was to have been substantially
performed

A national court can apply the law of another country though this would be
written into the contract of sale

A UN Convention on Contracts for the International Sale of Goods is under
consideration. It could be far reaching and make fundamental changes.



7.9 POSTSCRIPT

This lesson only applies to the legal relationships between sellers and buyers.

Thus this lesson does not consider the carriers legal involvement.


!"#$%"&#!'"&()#%&*$)
&"*)+!"&",$
-./00/12)345/1655)7
!"#$%&'()*%+,$'
!"#$%&'()*%+,$'("#-(.''$/&"0+'(1"2(344&/+
lnLroducLlon
A conLracL for Lhe sale of goods lles always
behlnd a conLracL for Lhe carrlage of goods.
8ecause such goods are sold, Lhe necesslLy
LhaL Lhey reach Lhe 8uyer arlses.
So, sea LransporL appears Lo caLer for Lhls.
lnLroducLlon
lnLernaLlonal sale of goods lnvolves a number
of anclllary acLlons LhaL have Lo be Laken lnLo
accounL
lnsurance
Carrlage
CusLoms
1ax
llnanclng of Lhe deal
ConLracL
Cffer
AccepLance (followlng negoLlaLlons usually)
ConslderaLlon (anyLhlng)
lnLenLlon Lo creaLe legal relaLlons
olnLs Lo conslder: asslng of properLy,
passlng of rlsk, Llme when paymenL ls due.
S1AnuA8u 1L8MS
lnvolvemenL of more counLrles and ma[or
companles compllcaLes Lhlngs.
Lach parLy Lends Lo use lLs own sLandard
Lerms, Lhus creaLlng amblgulLy ln whaL has
been agreed.
1he necesslLy Lo deal ln a safe envlronmenL
leads Lo adopLlon of unlversal sLandard Lerms.
S1AnuA8u 1L8MS
lnCC1L8MS were flrsL publlshed ln 1936 by
lnLernaLlonal Chamber of Commerce and new
verslons are lssued regularly.
1hey codlfy exlsLlng pracLlces allocaLlng Lasks
and responslblllLles Lo Lhe Seller and 8uyer of
goods.
SALL Cl CCCuS uLllnl1lCn
Sale of goods ls A conLracL Lo pass Lhe
properLy ln goods for money conslderaLlon,
Lhe prlce".
We have already examlned conLracL.
CCCuS
Speclflc and unascerLalned goods
Speclflc goods are Lhe ones LhaL are readlly
ldenLlflable aL Llme Lhe conLracL ls concluded.
unascerLalned goods are Lhe ones LhaL are noL
yeL produced or form parL of a larger
undlvlded bulk and are noL yeL apporLloned Lo
Lhe speclflc conLracL.
8CL81?
ulsLlncLlon from possesslon (physlcal conLrol)
roperLy ls Lransferred Lo 8uyer ln a sale
asslng of properLy resulLs Lo:
Clalm for Lhe prlce by Seller
8lsk passes Lo 8uyer
8uyer musL accepL goods and lf noL Seller has
cerLaln remedles
ASSlnC Cl 8CL81?
When? When parLles lnLend Lo. Powever some
guldellnes applylng mosLly ln domesLlc Lrade:
Speclflc goods: usually passes aL Llme Lhe
conLracL ls enLered lnLo, regardless of Llme of
dellvery.
unascerLalned goods: upon approprlaLlon.
1lme of Lransfer of properLy may vary accordlng
Lo parLles' wlll. lnLernaLlonal Sales ls an example.
8lSk
lL ls Lhe danger of damage Lo Lhe goods.
1he parLy whlch bears Lhe rlsk wlll suffer from
posslble damage.
ulsLlncLlon from properLy: lL ls noL always LhaL
Lhey are Lransferred LogeLher.
ln lnLernaLlonal sales properLy passes aL a
dlfferenL Llme polnL Lhan rlsk.
lnCC1L8MS
1hey are made Lo apply Lo lnLernaLlonal sales,
always sub[ecL Lo Lhe wlsh of Lhe parLles.
Powever, Lrade pracLlce found comforL ln
Lhem, Lhus lmposlng Lhelr appllcaLlon.
CLherwlse we have uncerLalnLy.
varleLy ln lnCC1L8MS Lerms reflecLs Lhe
puzzle of dlfferenL needs of Lhe parLles ln
dlfferenL sales of goods worldwlde
lnCC1L8MS
1hey are flexlble enough Lo change regularly,
lncorporaLlng laLesL evoluLlons ln carrlage
meLhods, Lrade pracLlce, elecLronlc daLa eLc.
L group: Seller makes avallable Lhe goods aL hls
premlses.
l group: Seller dellvers Lo carrler named by 8uyer
C group: Seller arranges carrlage wlLhouL
assumlng Lhe rlsk afLer loadlng.
u group: Seller dellvers Lo 8uyer's place.
lnCC1L8MS
lAS (named orL): CommodlLles dellvered
lree Alongslde named porL, whereupon rlsk
and properLy are vesLed Lo 8uyer.
lC8 (named orL): uellvery ln lree on board
sales ls concluded when Lhe goods pass over
Lhe shlp's rall. 8lsk ls Lransferred Lo 8uyer
(properLy noL necessarlly).8uyer arranges
carrlage and lnsurance.
lnCC1L8MS
lC8 varlanLs: lC8 sLowed, lC8 sLowed and
Lrlmmed, lC8 wlLh servlces
A common feaLure here ls LhaL rlsk passes
when Seller performs all hls duLles, noL merely
when goods pass Lhe shlp's rall.
ln lC8, loadlng porL ls of essence
lnCC1L8MS
Cll named desLlnaLlon porL: CosL, lnsurance,
lrelghL are arranged by Seller, Lhus prlce ls
hlgher Lo lnclude above.
8lsk passes here also when goods pass Lhe
shlp's rall.
1ransfer of documenLs (lnvolce, 8lll of Ladlng,
lnsurance ollcy, posslble oLher docs):
Lransfer of goods even when losL
lnCC1L8MS
Cll varlanLs: Cl8: lnsurance ls placed by 8uyer
(ofLen as a maLLer of sLaLe pollcy ln 8uyer's
place)
lnCC1L8MS
uLS named desLlnaLlon porL: rlsk and properLy
pass aL desLlnaLlon porL.
lnCC1L8MS 2010: 11 rules lnsLead of 13. new
rules: uA1, uA. Abollshed rules: uAl, uLS,
uLC, uuu
lnCC1L8MS
ApporLlonmenL of responslblllLles beLween
Lhe parLles depend on pracLlcal lssues,
negoLlaLlng power, markeL Lrends.
88LACP Cl 1PL CCn18AC1
8reach by 8uyer:
8efusal Lo accepL Lhe goods
non paymenL of prlce
lf properLy has passed: rlce ls due and Seller
can sue for lL. uamages: Lhe enLlre conLracL
CerLaln day paymenL: Lapse of Lhe daLe
wlLhouL paymenL glves rlse Lo rlghL Lo sue for
Lhe prlce
88LACP Cl 1PL CCn18AC1
lf properLy has noL passed: Seller sues for non-
accepLance of Lhe goods.
Pe can sLlll Lrade wlLh Lhem, and hls damage
ls Lhe dlfference beLween conLracL prlce and
prlce agreed wlLh a Lhlrd parLy.
MlLlgaLlon
88LACP Cl 1PL CCn18AC1
SLoppage ln LranslL: 1he rlghL of a seller Lo
prevenL Lhe dellvery of goods Lo a buyer afLer
such goods have been dellvered Lo a common
carrler for shlpmenL.
Appllcable provlded LhaL goods are sLlll under
carrler's cusLody.
1o apply, (1) 8uyer musL be lnsolvenL and
(2) goods should noL have been dellvered.
88LACP Cl 1PL CCn18AC1
lL ls exerclsed by mere declaraLlon Lo carrler,
who may noL requesL proof.
lrelghL ls pald by Seller.
lC8 conLracLs, alLhough lnvolvlng carrlage
arranged by 8uyer, presenL a pecullarlLy as
carrler can be consldered as 8uyer's agenL and
Lhus goods dellvered Lo 8uyer. Powever, for
Lhe purposes of sLoppage ln LranslL, carrler ls
deemed Lo be lndependenL conLracLor.
88LACP Cl 1PL CCn18AC1
SLoppage ln LranslL ls slmllar Lo llen buL
applles when Seller has parLed wlLh
possesslon.
Llen ls exerclsed when 8uyer ls lnsolvenL buL
goods sLlll aL Lhe possesslon of Seller.
88LACP Cl 1PL CCn18AC1
8reach by Seller:
LaLe dellvery
ShorL dellvery
uellvery of goods noL ln Lhe agreed
condlLlon/quallLy
non dellvery
1ender of defecLlve documenLs
88LACP Cl 1PL CCn18AC1
8emedles for 8uyer:
8e[ecLlon of goods
8e[ecLlon of documenLs
uamages for non dellvery of Lhe goods: Lhe
dlfference beLween Lhe conLracL prlce and
prlce of markeL aL Lle goods should be
dellvered.
88LACP Cl 1PL CCn18AC1
uamages for defecLlve dellvery: 1he
dlfference beLween value of goods as
(quallLy/quanLlLy) and when dellvered and
markeL value of goods properly dellvered (ln
agreed quanLlLy/quallLy/on Llme)
8lghL Lo sue for speclflc performance: 8uyer
requesLs LhaL conLracL be performed from Lhe
parL of 8uyer. noL ofLen appllcable for
pracLlcal reasons.
Law and [urlsdlcLlon
Law of Lhe [urlsdlcLlon LhaL ls closesL Lo Lhe
conLracL of sale applles.
Cf course, parLles can opL Lo submlL Lhemselves
Lo speclflc [urlsdlcLlon, courLs, arblLraLlon eLc.
un ConvenLlon on ConLracLs for Lhe lnLernaLlonal
Sale of Coods: 1he ClSC applles Lo !"#$%&!$'
beLween companles locaLed ln dlfferenL
counLrles. Cver Lwo-Lhlrds of Lhe world's
counLrles have adopLed Lhls agreemenL.
Law and [urlsdlcLlon
ClSC ls an lnLernaLlonal Lrade agreemenL
adopLed ln 1980 aL Lhe vlenna ConvenLlon for
Lhe lnLernaLlonal Sale of Coods. lLs purpose ls
Lo ellmlnaLe any amblgulLy caused by
dlfferenL domesLlc laws concernlng Lhe
lnLernaLlonal sales of goods. 1hrough Lhls
agreemenL, lnLernaLlonal Lrade becomes
lncreaslngly hassle-free, and Lhe poLenLlal for
dlspuLes ls reduced.
1hank you for your paLlence!
Manolls Lglezos
!"#$%"&#'("&)*#$%+,*(-*,&)$
!"#$%"&#'("&)*#%&.$*&".*-'"&"/$
01$*2&,'/*/("#%&/#
3(%+&#'("*(-*#1$*/("#%&/#
45%'"6*#1$*+&7'"6*(-*#1$*/("#%&/#*/(",'.$%&#'("*
,1(5).*2$*6'8$"*&#*#1%$$*'+9(%#&"#*9('"#,:
;< =#*>1&#*#'+$*(%*5".$%*>1'/1*/'%/5+,#&"/$,*.($,*
#1$*(>"$%,1'9*(-*6((.,*9&,,$,*-%(+*#1$*,$))$%*#(*
#1$*25?$%<
@< A1$"*9&?+$"#*',*.5$B
C< A1(*2$&%,*#1$*%',7*(-*.&+&6$B*01$*,$))$%*(%*#1$*
25?$%B*=#*>1&#*,#&6$B
3(%+&#'("*(-*#1$*/("#%&/#
!"#$%&'$(")%*+(%$,-$.',)/$0+1'2
!#*',*/(++("*-(%*("$*9&%#?*#(*+&7$*&"*(--$%*("*1',*
(>"*,#&".&%.*#$%+,*&".*-(%*#1$*(#1$%*9&%#?*#(*
&//$9#*#1&#*(--$%*("*1',*(>"*,#&".&%.*#$%+,<
D$8$%#1$)$,,E*'#*',*1'61)?*)'7$)?*#1&#*#1$*(--$%*+&?*
"(#*2$*&//$9#$.*("*#1$*,&+$*F*'.$"#'/&)*#$%+,<*!-*
#1',*',*#1$*/&,$E*#1$"*#1$%$*',*"(*8&)'.*/("#%&/#<*
3(%+&#'("*(-*#1$*/("#%&/#
!"*(%.$%*#(*&8('.*#1',*7'".*(-*9%(2)$+*&".*2%'"6*
5"'-(%+'#?E*#1$*&.(9#'("*(-*&"*'"#$%"&#'("&))?*
%$/(6"',$.*,$#*(-*,#&".&%.*#$%+,*>&,*"$/$,,&%?<*
!DGH0IJKL*:*01$*!"#$%"&#'("&)*G1&+2$%*(-*
G(++$%/$*9%(.5/$.*&*>'.$)?*5,$.*-(%+*(-*,5/1*
#$%+,*#1$*95%9(,$*(-*>1'/1*',*#(*$",5%$*#1&#*&M*
2(#1*9&%#'$,*&%$*'"*&6%$$+$"#*&,*#(*#1$*#$%+,*
/("#&'"$.*'"*#1$'%*/("#%&/#*&".*2M*#1$%$*',*&*8&)'.*
/("#%&/#*&".*2(#1*9&%#'$,*&%$*&>&%$*(-*#1$'%*
(2)'6&#'(",<*
3(%+&#'("*(-*#1$*/("#%&/#
N".$%*I"6)',1*O&>E*&*,&)$*(-*6((.,*',*.$-'"$.*&,*P &*
/("#%&/#*#(*9&,,*#1$*9%(9$%#?*'"*6((., -(%*&*
+("$? /(",'.$%&#'("E*#1$*9%'/$Q<
0>(*&%$*#1$*$)$+$"#,*'"*#1$*,&)$*(-*6((.,:
;< R((.,
@< S%(9$%#?
3(%+&#'("*(-*#1$*/("#%&/#
R((.,*+&?*#&7$*$'#1$%*#1$*-(%+*(-*P,9$/'-'/*
6((.,Q (%*P5"&,/$%#&'"$.*6((.,Q<
! P,9$/'-'/*6((.,Q :*&,*#1$*"&+$*,566$,#,*#1(,$*
6((.,*&%$*%$&.')?*'.$"#'-'&2)$*&#*#1$*#'+$*#1$*
/("#%&/#*',*+&.$<
! P5"&,/$%#&'"$.*6((.,Q:*/&"*2$*.$-'"$.*&,*#1$*
6((.,*#1&#*1&8$*$'#1$%*"(#*2$$"*9%(.5/$.*(%*(%*
9&%#*(-*&*)&%6$%*25)7<
3(%+&#'("*(-*#1$*/("#%&/#
S%(9$%#?*',*#1$*$T5'8&)$"#*(-*(>"$%,1'9<*U$"/$E*
>1$"*9%(9$%#?*9&,,$,E*#1$*%'61#*(-*(>"$%,1'9*',*
#%&",-$%%$.*#(*#1$*25?$%<
DV<*V$*/&%$-5)*#(*.',#'"65',1*9%(9$%#?*-%(+*
9(,,$,,'("<
3(%+&#'("*(-*#1$*/("#%&/#W9&,,'"6*(-*
#1$*9%(9$%#?
3(%+&#'("*(-*#1$*/("#%&/#
A1$"*.($,*9%(9$%#?*9&,,B
N".$%*#1$*I"6)',1*L&)$*(-*R((.,*=/#E*9%(9$%#?*
9&,,$,*>1$"*#1$*9&%#'$,*'"#$".*'#*#(<
o L9$/'-'/*6((.,*X 9%(9$%#?*9&,,$,*&,*,(("*&,*#1$*
/("#%&/#*',*/("/)5.$.<
o N"&,/$%#&'"$.*6((.,*X -(%*#1$*9%(9$%#?*#(*9&,,*
#1$%$*+5,#*2$*P&99%(9%'&#'("QE*'"*(#1$%*>(%.,*&*
9&%/$)*(-*6((.,*+5,#*2$*,9$/'-'$.<*H"/$*
,9$/'-'$.E*9%(9$%#?*>'))*9&,,<
3(%+&#'("*(-*#1$*/("#%&/#
A1$"*%',7*&##&/1$,B
A1$"*9%(9$%#?*9&,,$,E*,(*.($,*#1$*%',7<
J',7*.$-'"$.*:*01$*.&"6$%*(-*.&+&6$*#(*#1$*6((.,<*
DV<*I8$"*#1(561*%',7*9&,,$,*&#*#1$*,&+$*#'+$*&,*
9%(9$%#?E*#1',*',*"(#*&)>&?,*#1$*/&,$<*J',7*+&?*
&##&/1*2$-(%$*#1$*9&,,'"6*(-*9%(9$%#?Y
J$+$.'$,*-(%*2%$&/1*(-*/("#%&/#
! J$+$.'$,*(-*#1$*,$))$%
!"*/&,$*(-*25?$%Z,*-&')5%$*#(*9&?*-(%*#1$*6((.,*(%*'"*
/&,$*(-*1',*%$-5,&)*#(*&//$9#*#1$+*#1$%$*&%$*
/$%#&'"*%$+$.'$,*&8&')&2)$*#(*#1$*,$))$%<*
U(>$8$%E*'#*&))*.$9$".,*59("*>1$#1$%*#1$*
9%(9$%#?*1&,*9&,,$.*(%*"(#<*U$"/$:
W !-*9%(9$%#?*1&,*9&,,$.*#1$*,$))$%*/&"*,5$*-(%*#1$*
9%'/$*(-*#1$*6((.,<*01$*.&+&6$,*1$*>'))*%$/$'8$*
>'))*2$*#1$*>1()$*/("#%&/#*9%'/$<
J$+$.'$,*-(%*2%$&/1*(-*/("#%&/#
W !-*9%(9$%#?*1&,*"(#*9&,,$. #1$*,$))$%*/&"*,5$*-(%*
"("W &//$9#&"/$*(-*6((.,<*!"*#1',*/&,$E*#1$*
.&+&6$,*%$/(8$%&2)$*>'))*2$*#1$*.'--$%$"/$*
2$#>$$"*#1$*/("#%&/#*9%'/$*&".*#1$*9%'/$*&#*
>1'/1*1$*>'))*,$))*#1$*6((.,*#(*&*#1'%.*9&%#?<*L(E*
#1$*,$))$%*,1(5).*+'#'6&#$*F*+'"'+',$*1',*)(,,$,*
2?*,$))'"6*#1$*6((.,*$),$>1$%$<*
J$+$.'$,*-(%*2%$&/1*(-*/("#%&/#
01$*,$))$%*+&?*'"*&..'#'("*$[$%/',$:
&M*L#(99&6$*'"*#%&",'#*X #1',*%'61#*',*/("-$%%$.*#(*
#1$*,$))$%*2?*#1$*I"6)',1*L&)$*(-*R((.,*=/#<*L(*
#1&#*#1$*,$))$%*/&"*$[$%/',$*#1',*%'61#E*#1$*25?$%*
+5,#*2$*'",()8$"#*&".*#1$*6((.,*,1(5).*"(#*
1&8$*2$$"*.$)'8$%$.*#(*#1$*25?$%<
2M*O'$"*X '-*#1$*25?$%*2$/(+$*'",()8$"#E*#1$*
,$))$%*+&?*%$#&'"*#1$*6((.,<
J$+$.'$,*-(%*2%$&/1*(-*/("#%&/#
! J$+$.'$,*(-*#1$*25?$%
V5?$%,Z %$+$.'$,*>'))*.$9$".*59("*>1$#1$%*1$*1&,*
%$\$/#$.*#1$*6((.,*(%*1&,*#&7$"*.$)'8$%?*(-*,&+$*
$8$"*'"*&*.&+&6$.*/(".'#'("<*
J$+$.'$,*-(%*2%$&/1*(-*/("#%&/#
U$"/$*#1$*(9#'(",*&8&')&2)$*#(*#1$*25?$%*&%$*:
;<0(*%$\$/#*#1$*6((.,*&".*,5$*-(%*.&+&6$,<*L5/1*
.&+&6$,*>'))*2$*#1$*.'--$%$"/$*2$#>$$"*#1$*
/("#%&/#*9%'/$*&".*#1$*+&%7$#*9%'/$*(-*#1$*6((.,*
&#*#1$*#'+$*#1$*6((.,*(561#*#(*1&8$*2$$"*
.$)'8$%$.<
@<0(*&//$9#*#1$*6((.,*&".*,5$*-(%*.$-$/#'8$*
.$)'8$%?*'"*>1'/1*/&,$*#1$*.&+&6$,*>'))*2$*#1$*
.'--$%$"/$*2$#>$$"*#1$*8&)5$*(-*#1$*6((.,*>1$"*
.$)'8$%$.*&".*#1$*+&%7$#*8&)5$*(-*#1$,$*6((.,*'-*
#1$?*1&.*2$$"*/(%%$/#)?*.$)'8$%$.<***
!"#$%"&#'("&)*/("#%&/#,*(-*,&)$*W
!DGH0IJKL
! =%$*&"*&6%$$.*,$#*(-*.$-'"'#'(",*#1&#*&%$*5,$.*
>(%).>'.$E*'"*'"#$%"&#'("&)*&".*.(+$,#'/*
/("#%&/#,*-(%*#1$*,&)$*(-*6((.,<*01$?*9%(8'.$*
'"#$%"&#'("&))?*&//$9#$.*.$-'"'#'(",*&".*%5)$,*
(-*'"#$%9%$#&#'("*-(%*+(,#*/(++("*/(++$%/'&)*
#$%+,<
!"#$%"&#'("&)*/("#%&/#,*(-*,&)$*W
!DGH0IJKL
G)&,,'-'/&#'("*(-*!"/(#$%+%5)$,
;< JNOIL*3HJ*=D]*KH4I*HJ*KH4IL*H3*
0J=DLSHJ0
I^A I^*AHJ_L
3G= 3JII*G=JJ!IJ
GS0 G=JJ!=RI*S=!4*0H
G!S* G=JJ!=RI*`!DLNJ=DGI*S=!4*0H
4=3 4IO!aIJI4*=0*3JHD0!IJ
44N 4IO!aIJ]*4N0]*NDS=!4
44S 4IO!aIJ]*4N0]*S=!4
!"#$%"&#'("&)*/("#%&/#,*(-*,&)$*W
!DGH0IJKL
@< JNOIL*3HJ*LI=*=D4*!DO=D4*A=0IJA=]*
0J=DLSHJ0
3=L 3JII*=OHDRL!4I*LU!S*
3HV 3JII*HD*VH=J4
G3J GHL0`3JI!RU0
G!3 GHL0*!DLNJ=DGI*`3JI!RU0
4IL 4IO!aIJI4*I^*LU!S
4Ib 4IO!aIJI4*I^*bN=]
!"#$%"&#'("&)*/("#%&/#,*(-*,&)$*W
!DGH0IJKL
N".$%*$&/1*(-*#1$,$*#$%+,E*!"/(#$%+,*.$-'"$*
&M#1$*.5#'$,*(-*2(#1*#1$*V5?$%*&".*#1$*
L$))$%*'"*%$,9$/#*(-*$8$%?*,#&6$*'"*#1$*
#%&",9(%#*/1&'"E*2M*#1$*.'8','("*(-*/(,#,*
&".*#1$*,#&6$*&#*>1'/1*9&?+$"#*+5,#*2$*
+&.$E*/M*>1$"*9%(9$%#?*9&,,$,*&".*%',7*',*
#%&",-$%%$.*-%(+*("$*#(*&"(#1$%<*
!"#$%9%$#&#'("*(-*%5)$,
! 3HV*X 3%$$*("*V(&%.
H"$*(-*#1$*+(,#*9(95)&%*!"#$%"&#'("&)*L&)$,*
/("#%&/#*-(%+,<
N".$%*#1',*#?9$*(-*/("#%&/#*,$))$%Z,*+$%$*
%$,9(",'2')'#?*',*#(*2%'"6*#1$*6((.,*#(*#1$*"&+$.*
9(%#*&".*)(&.*#1$+*(8$%*#1$*,1'9Z,*%&')<
!"#$%9%$#&#'("*(-*%5)$,
3HV*X 3%$$*("*V(&%.
3%$'61#*&".*'",5%&"/$*&%$*#1$"*)?'"6*("*25?$%,Z
,1(5).$%,*>1(*',*%$,9(",'2)$*-(%:
;< 4$"(#'"6*&"*$--$/#'8$*8$,,$)<
@< !".'/&#'"6*>$))*'"*&.8&"/$*&*9(%#*c3HV*
J(##$%.&+M<*01',*',*(-*9&%#'/5)&%*'+9(%#&"/$*#(*
#1$*,$))$%*,(*#1&#*1$*',*'"*#1$*9(,'#'("*#(*/&)/5)&#$*
#1$*/(,#*(-*.$)'8$%'"6*#1$*6((.,*&".*)(&.'"6*
#1$+*'"*#1$*,1'9Z,*%&')<
C< =%%&"6'"6*1',*(>"*'",5%&"/$<
!"#$%9%$#&#'("*(-*%5)$,
DV<*01$*%',7*>'))*9&,,*&,*,(("*&,*#1$*6((.,*/%(,,*
#1$*,1'9Z,*%&')<*01$*9%'/$*',*#1$"*2$/(+'"6*
9&?&2)$<*D(#>'#1,#&".'"6*#1$*&-(%$+$"#'("$.E*
#1$*9&,,'"6*(-*9%(9$%#?*+&?*2$*.$)&?$.*'-*#1$*
#%&",-$%*(-*#1$*V'))*(-*O&.'"6*',*.$)&?$.<
01$%$*&%$*(-#$"*+(.'-'/&#'(",*#(*#1$*,'+9)$*3HV*
-(%+&#*&,*.$,/%'2$.*&".*&".*',*1'61)?*)'7$)?*#1&#*
#1$*9&,,'"6*(-*9%(9$%#?*',*.$)&?$.<**dI[<*3HV*
,#(>$.E*3HV*,#(>$.*&".*#%'++$.E*3HV*>'#1*
,$%8'/$,e<*
!"#$%9%$#&#'("*(-*%5)$,
! G!3*X G(,#E*!",5%&"/$*&".*3%$'61#
G&"*2$*/(",'.$%$.*&,*#1$*-(%+*>'#1*#1$*>'.$%*
5,&6$<*
!"*#1',*#?9$*(-*/("#%&/#E*#1$*25)7*(-*%$,9(",'2')'#'$,*
%$,#,*>'#1*#1$*,$))$%<*
!"#$%9%$#&#'("*(-*%5)$,
G!3*X G(,#E*!",5%&"/$*&".*3%$'61#
01$*2&,'/*/1&%&/#$%',#'/,*(-*&*G!3*/("#%&/#*&%$:*
W 01$*,$))$%*',*%$,9(",'2)$*-(%*,1'99'"6*6((.,*'"*
)'"$*>'#1*#1$*/("#%&/#*.$,/%'9#'("*&".*&"?*(#1$%*
-5%#1$%*,#'95)&#'(",*>'#1*%$6&%.,*#(*#'+$E*9)&/$*
$#/<
W 01$*,$))$%*',*%$,9(",'2)$*-(%*&%%&"6'"6*#1$*
/&%%'&6$*&".*#1$*'",5%&"/$*(-*#1$*6((.,<*
!"#$%9%$#&#'("*(-*%5)$,
W U$*,1(5).*#1$"*&//(5"#*-(%:
&M ="*&,,'6"&2)$*'",5%&"/$
2M01$*9%$9&%&#'("*(-*&"*'"8('/$*-(%*6((.,
/M 0$".$%'"6*&))*%$)$8&"#*.(/5+$"#,*#(*#1$*25?$%
H"*%$/$'9#*(-*.(/5+$"#,E*#1$*25?$%*',*%$,9(",'2)$*
-(%*9&?'"6*#1$*9%'/$E*1(>$8$%E*1$*+&?*%$-5,$*#(*
&//$9#*#1$*.(/5+$"#,*'-*#1$?*&%$*"(#*'"*
&//(%.&"/$*>'#1*#1$*/("#&/#<
DV<*S%(9$%#?*9&,,$,*>1$"*#1$*.(/5+$"#,*&%$*
#%&",-$%%$.*25#*%',7*',*.$$+$.*#(*1&8$*9&,,$.*&#*
#1$*+(+$"#*(-*,1'9+$"#<
Class Essay Group 1 HMC ICS GREEK BRANCH
Shipping Business Chapter 7

Prepared by Mr. C. Bitounis, MICS





Please write the following question:

Define and explain FOUR of the following terms and comment upon their application
in international trade.

(a) EXW
(b) FOB
(c) FAS
(d) CPT
(e) CIF
(f) DES
(g) DDP

Class Essay Group 4 HMC ICS GREEK BRANCH
Shipping Business - Chapter 7

Prepared by Mr. Chakos, FICS




Please find below, questions for essay-answer practice:

1. Define the difference between common law systems and civil law systems? What is
the structure of the Civil Courts in England?

2. What is Arbitration?

3. What are the essential requirements for the formation of a contract? What are the
remedies for breach of contract?

4. What is a tort? Describe some torts which may be encountered in many instances in
the business of shipping.

5. What is a Bill of Lading and what are the 3 functions of a Bill of Lading?

6. What are the Hague and Hague/Visby Rules and what are the relevant enactments
in English law. What are some of the provisions set out in the H and H/V Rules?

7. How is an Agency relationship formed and what are the rights and duties impored
on Agent and Principal?

8. What is meant by the term breach of warranty of authority?






Note: the above questions are addressed to Chapter 10 of Introduction to
Shipping and Chapter 7 of Shipping Business.
Class Essay Group 3 HMC ICS GREEK BRANCH
Shipping Business_ Chapter 7

Prepared by Mr. Egglezos



Please choose one of the following questions:

1. Explain the differences between FOB and CIF with particular reference to the
obligations of the parties.

2. Imagine you intend to buy from abroad will you prefer to buy FOB or CIF? Give your
reasons.
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 1
SHIPPING BUSINESS

LESSON 8 FINANCE IN INTERNATIONAL TRADE


ACRONYMS

AA Average Adjuster

B/E Bill of Exchange

BFI Baltic Freight Index

BIFFEX Baltic International Freight Futures and Options Exchange

B/L Bill of Lading

CIF Cost, insurance and freight

CofC Chamber of Commerce

C/P Charter Party

FFA Forward Freight Agreement

FOB Free on board

GA General Average

ICC International Chamber of Commerce

L/C Documentary Letter of Credit

PA Particular Average

UCP Uniform Customs and Practice for Documentary Credits

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 2
8.1 INTRODUCTION

Seller / buyer relations in international trade may be hampered by distance,

time scale, currency, language culture and even perception.

Many international buyer / seller relations are repetitive and enduring

following an established pattern and work well.

But conflicts are possible. Experience teaches us that they can be eased.

Buyer wants correct delivery (quality, quantity, time, place) at least cost

Seller wants secure best payment at least delay

Both sellers and buyers watch their cash flows

A third element between seller and buyer is transport

Involves - Correct preparation and presentation of documents

- Adherence to shipment and delivery dates

- Any transport restrictions

This lesson addresses

- Payments in international trade

- Risks involved

- Means of parties protecting their interests
(or limit exposure)

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 3
8.2 METHODS OF PAYMENT

Involves consideration of:

- Security of payment with safe, correct delivery of goods

- Implications for those in transport (shipping).

Method of payment - negotiated between seller and buyer.

Reflects - Mutual trust

- Financial standing of the buyer


Relations of seller to buyer reflects status of market

If sales are sluggish, buyer can obtain better terms

If sales are dynamic, seller gets better terms.

Remember every form of payment involves invoices and receipts (and bank
charges, exchange rates, communications) and administrative fees and costs

Many different payment procedures:

Cash with Order

- Advantageous to seller = payment in advance
(aka an Advance Payment with a Pro-forma Invoice)

- Disadvantageous to buyer as he is giving credit
and has no redress if goods are wrong or late
Buyers often have to send a deposit with order

Open Account

- Advantageous to Buyer

- Buyer orders when Seller packs and delivers to Buyer

- Seller awaits payment

- Credit period may be a month or more

- Used by companies known to each other
but is less common in international trade

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 4
Bill of Exchange (B/E)

- Requires mutual trust
- Like to a bank cheque stipulating an advance payment
- Buyer has a measure of credit
- Allows Buyer to sell goods on before paying for them.
- So Buyer may order more as strain on cash flow is low
- Seller may then be able to sell more!
- B/E is negotiable so seller can cash it at a bank
- Buyer may pay interest on credit as stipulated in B/E
- Buyer may pay part of the sale price on receipt of goods
- B/E signed by Buyer, sent to Seller on receipt of goods

Documentary Letter of Credit (L/C)

- Common use, good compromise
- Flexible form of payment
- Offers security to Buyer / Seller = safe payment
- L/C issued by a bank to allow seller to be paid against
presentation of sound documents within a time limit

Procedure L/C:

1. Buyer instructs his Issuing bank to pay Seller
(Beneficiary) a fixed amount within agreed dates against
presentation of agreed documents

2. Issuing Bank arranges Buyers payment to be made through
a bank Paying bank in Sellers country

3. Thus a L/C involves 4 parties

(i) The buyer as applicant for credit

(ii) The Seller as the beneficiary

(iii) The buyers bank as the issuing bank

(iv) The sellers bank as the paying bank

- L/C cannot be interpreted. Must be strictly followed

- Guidelines set by ICC as the UCP.

- L/C may have Sight Draft for Seller to present to bank





HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 5
8.3 DOCUMENTS

8.3.1 INVOICE (Commercial Invoice)

Evidence of a contract between Seller and Buyer
Includes quantity and quality of goods, unit and price
May have to be certified by CofC or local Consul
Consular Invoice may be required in addition to Commercial Invoice

8.3.2 Insurance

Documents seller might have to produce to paying bank might include
invoices for goods in transit and for value of freight

8.3.3 Bill of Lading (B/L)

Seen as the ultimate security for condition and despatch of the goods
Slightest deviation in the preparation of B/L voids the L/C payment
Need for a clean B/L is self-evident.

8.3.4 Other documents

Certificate of Origin

Phytosanitary Certificate

Certificate of Analysis

Or other inspection bodys certificate of quality and / or quantity

So the Buyer seeks confidence that he is now paying for the goods he thinks
he is paying for at the time of shipment


8.4 CONFIRMING HOUSES (Exporting Houses)

Serve as intermediary between the Seller and the Buyer as an Agent / Principal
Accepts responsibility for payment to Seller and sound goods to Buyer
So Confirming House becomes a Principal to the Seller, Buyer and Carrier
Confirming Houses common I Europe but best seen in Tokyo Trading Houses


8.5 INTERNATIONAL TRADING

There are many risks in international trading
An awareness of these risks matters
- Handling goods
- Transporting goods
- Fluctuations in transport costs
- Fluctuations in rates of exchange
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 6
8.6 FOREIGN EXCHANGE FLUCTUATIONS

Involves buying and selling currencies for the purchased goods

Rates of currency exchange fluctuate

Merchants can buy / sell currency on the spot market
and take the risk on the rate of exchange themselves

May be unacceptable for huge sums of money or sales with tight margins

Then banks can offer a hedging against the prospective currency loss

Hedging involves Forward Exchange Contracts
or Foreign Currency Options

Involves a contract to buy / sell at a future date at a fixed rate

And many companies, with regular liabilities in foreign currencies,
- buy suitable amounts of the foreign currency at their banks
(in effect transferring their risk to their bankers)

8.6.1 SPOT RATE

Todays exchange rate

Quoted in newspapers and at currency exchange bureaux

Quotes cover banks selling and buying prices reflecting the banks fees

8.6.2 FORWARD EXCHANGE CONTRACTS

Contracts usually made with banks that charge a stated % commission the
commission increases with contract duration.

The contract rates are defined when the contract is agreed.

Usually made for a limited but defined period (3 months is usual).

Extension options for fixed periods can be drafted into the initial contract.

Usually such contracts are binding.

The banks always buy and sell currencies at the rates most advantageous to the
banks at the beginning and end of any optional periods.

The bank is a business a money shop.



HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 7
8.6.3 FOREIGN CURRENCY OPTIONS

A form of Forward Currency Contract that is optional in the clients favour.

The client has right but not the obligation to buy the currency

If the client is negotiating the business (i.e. a time charter or a new building)
and he finds that he might need a sum of foreign currency, if the negotiations
go through, he can take an Option Contract to provide the cash in the foreign
currency at a fixed rate.

There are two types of Option Contract

(1) European - Fixed option (strike) date for operating the option

(2) American - Option can be taken on any day till the contract expiry date

Banks charge a % commission (premium) for these Option Contracts

If the foreign exchange market moves in the clients favour, he can ignore his
Option Contract and take market rates or he can exercise his option and sell
the currency on the exchange market.

If the market moves against the client, he can uses his Option Contract(s).

Many international companies have foreign exchange bank accounts and hold
various currencies to avoid using a particular currency at an unfavourable rate.

Sometimes there are government restrictions on holdings of foreign currencies
and governmental permission might be required for some transactions.


8.6.4 TRANSACTION COSTS IN INTERNATIONAL TRADE

International business is a complication

Adverse currency movements

Fluctuations in essential purchases overseas in overseas currencies

Freight earned in foreign currency

Basis policy is - have companys income in the same currency as its expenses

An alterative is to arrange the Companys income by trading in Freight
Futures (or Forward Freight Agreements - FFAs)

This is known as trading in Futures on Futures markets reported in the
international press.

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 8
Futures markets bet on future prices of commodities materials & freights.

Every commodity in world trade has its sellers and buyers - each with a
critical interest in how the commodity price might change

Commodity prices can fluctuate dramatically with accidents, weather, fashion
etc. The Futures market may offer a measure of protection

So buyers and sellers can agree a forward price and so they both gamble on
how the price movers so one will benefit and the other will lose.

The Baltic Exchange operates Freight Futures market for sea freights. In 1985,
the Exchange created the Baltic Freight Index to provide a day-by-day current
assessment of world dry cargo freight rates in more important trades.

Selected BFI trade routes are constantly revised and weighted and the final
index reflects a combination of lesser indices for ships of differing sizes
(Cape, Panamax, Handy etc).

The BFI reflects the daily input of 10 leading worldwide shipbrokers with a
BFI committee discarding any extreme inputs and averaging the remainder

To facilitate freight futures trading, the Baltic hosted BIFFEX (a freight
futures and options exchange) to provide the basis for trading.

Thus charterers or owners, with a cargo or ship to fix, can find an owner or
charterer and fix a forward contract at a predetermined rate.

Then when the charterer or owners actually fixes their cargo or ship in the
future at a profit or loss, it might be off set by the loss or profit on the futures
market. Thus a mechanism is provided to stabilise business

The BFI is used as the basis for such market futures fixtures

Thus the futures market might be used to hedge the risk of an unsettled
market especially one that might fluctuate.

Many speculators take futures contracts without ships or cargoes and do so
just as plain gamblers on the future takes experience, skill and luck.

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 9
8.7 INSURANCE

Provides a more secure basis for business.

The more uncertain the risk, the greater may be the insurance contribution.

If insurance is not available, businesses have to self-insure; by providing their
own capital reserves.

8.7.1 INSURABLE INTEREST

Insurance is open to any with an interest in the venture ship, goods or
freight.

If there is a mishap and loss, the insured must be exposed to a loss.

If any do not stand to lose, they may not exercise due care so cannot insure

Feature of an insurable interest are:

- Actual object exposed to marine peril
- Insure to have legal relationship with the exposed object
to benefit by its preservation or
to suffer by its loss
- Insured to have an insurable interest at the time of loss though
this interest may not exist when the insurance is placed

Types of insurable interest tend to fall into categories:

- Owner of ship or cargo
- Buyer if goods sold FOB or CIF
despite having the right to reject non-conforming goods
- Seller including goods rejected or stopped in transit by buyer
and for goods until the buyers payment is received
- Carrier for liability to cargo owner
- Shipper for freight paid in advance
- Charterer for liabilities to ships owner
for a breach of safer berth condition or harmless cargo
- Time charterer for hired ships damage
- Insurer for underwritten insurance risks so re-insure
- Agents commission/brokerage on C/P hire, freight etc.
- Brokers exposure to error professional indemnity insurances


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 10
8.8 TRADE TERMS IN EXPORT SALES


Cargo insurances arranged by seller or buyer of goods per contract of sale

Responsibility for placing / paying insurance is clear in Incoterms contracts.

Under FOB terms are at exporters risk to crossing the ships rail

Under CIF terms up to discharge


8.9 WARRANTIES

Warranty (insurance) undertaking by insured to observe various conditions

Specified in Marine Insurance Act

A warranty is a condition which must be exactly complied with

Whether it is material to the risk or not

If breached, the insured is discharged of liability

Examples

If any insured goods are improperly packed to insurance requirements,
any loss (regardless of cause) disallowed

Two types of Warranty

(1) Express

Warranty written into the contract of insurance

Failure to comply may void the policy

(2) Implied

Warranty not expressed in contract but in law

So that the insured ship must be

- on a legal voyage

- seaworthy / fit for the proposed voyage
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 11

8.10 TYPES OF POLICY FOR CARGO

8.10.1 FACULTATIVE INSURANCE

Insurance placed for a specific or named risk

Exceptional and complex process as most insurances are repetitive

8.10.2 OPEN CONTRACTS

Standardised insurance practice - handled with standard terms/fixed premiums

Enables exporters to quote CIF sale terms - costs (including insurance) known

Now standard practice

8.10.3 FLOATING POLICIES

Placed to provide insurance up to a certain value of goods

Used to covered repeat shipments over a period of time

Policy prescribes the value and the quantity with description of goods and
ships to be employed declared in advance of each shipment

On reaching the policys value, insurance terms (rates) to be re-negotiated.

Each shipment is accompanied by the underwriters Certificate of Insurance

So sales made basis accompanying Certificates and Policies of Insurance.

Premium paid as an initial premium deposit (related to total value of the
policy) with an average premium adjusted to size / value of each shipment.

8.10.4 OPEN COVERS

Automatic insurance coverage for a period

Maybe for a year or so or even permanently until notice is given by either side

Premium rates fixed and the underwriter ensures all shippers shipments

Provides flexibility and stability

Often policy specifies a limit of value per shipment or per storage place

Floating Policies can be combined with Open Covers
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 12
8.10.5 OPEN POLICIES

Form of Open Cover but may not be time limited but remain till cancelled

Often used for multi-modal (i.e. container) transport

Methods and procedure drafted to serve the needs of the insured.

Assists brokers and underwriters as such policies can cover a huge value,
which can be covered in a standard /routine manner

Open Policies have advantages:

- Continuous automatic cargo coverage

- Relieves shipper of need to declare every shipment
(saves being un-insured following an oversight to declare)

- Insurance charge known in advance (assists cargo sales as value fixed)

- Annual / huge volumes attract preferential premiums

- Underwriters better disposed to a commercial settlement
following any claims even questionable claims


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 13
8.11 EFFECTING INSURANCE

As insurance claims matter, the insurance must be properly arranged

Care is needed especially under an Open Cover

Any weaknesses in an insurance cover may only appear after a claim

Insurance coverages must serve particular business / be comprehensive

8.11.1 THE ASSESSING OF A RISK

Underwriters will need some detailed information

before quoting an insurance rate or taking on an insurance such as for:

Cargo and Packing Details of goods and packing

If containerised, detail of packing in container

Method of Shipment Containerised? Door-to-door? Groupage?

Any transhipment? Multi modal transport?

Liner or chartered ship?

Voyage Length of voyage (time / distance)

Discharge port

War Risk, Piracy and Strikes Insurances
Shore storage / Onward ashore transport

Basis of Valuation

The insured, following any loss, should be covered by insurance to recover the
financial position he would have been had the loss not been incurred and the
premium is adjusted to reflect this

Goods in international trade often sold and resold at sea

Values may alter with each sale

Valued Policy Value of gods fixed in contract

May include expenses, profits

Unvalued Policy Requires proof of value of goods lost in
the event of a claim

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 14
8.12 CONDITIONS OF INSURANCE

Conditions of insurance indicate level of cover

Marine policies (unlike standard home or car insurances)
tend to be individual contracts

The most popular policies are Institute Cargo Clauses (A), (B), (C).

8.12.1 INSTITUTE CARGO CLAUSES (C)

Covers losses arising from fire, explosion, stranding, sinking, capsize,
derailment (ashore), collision, contact, discharging at a port of distress, GA.

No theft

8.12.2 INSTITUTE CARGO CLAUSES (B)

CLAUSES (C) with additional perils earthquake, volcano, lightening, entry
of water, loss overboard including on loading and discharging,

Excluded theft, malicious damage

8.12.3 INSTITUTE CARGO CLAUSES (A)

Most widely used

Against all risks of loss or damage to the subject matter insured

Excluded ordinary leakage, losses by weight or volume, wear and tear,
inherent vice and delay.

8.12.4 CONDITIONS COMMON TO INSTITUTE CARGO CLAUSES (A),(B),(C)

Packing Excluded claims
for insufficient, unsuitable packaging / preparation

Insolvency Insolvency, financial default of owners, managers, charterers,
operators of ship being used.

(Cargo policies do not guarantee performance of third parties
so shippers should use good carriers = conference lines)

Atomic weapons - Misuse or accidental misuse of non-warlike use of an
atomic weapon

Terrorist Damage by terrorists / persons acting from a political motive.

May be a problem with inland transits.

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 15
8.12.5 INSTITUTE WAR CLAUSES

Covers loss or damage caused by hostilities, war like operations, civil war,
revolution, insurrections.

Excludes losses - before loading / after discharging whilst ashore and
- caused by atomic nuclear weaponry.


8.12.6 INSTITUTE STRIKES, RIOTS & CIVIL COMMOTIONS CLAUSES

Provision made to cover the exposures of:
- theft / loss in delays though the risks are enhanced


Additional cover required for perishable cargoes that cant tolerate delay.




8.13 PREMIUMS

Insurance premiums reflect the experience with each customer

Underwriters will consider:

- Commodity at risk

- Coverage / conditions of insurance required

- Adequacy of packaging

- Attention to shippers arrangements (carriers competence)

- Destination(s)

- Exporters claims record

Customers of insurance can strive to keep claims down for lower premiums.



HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 16
8.14 CLAIMS PROCEDURE

Insurance claims to be settled promptly, payments to be made without delay.

Claims to be well / correctly presented / handled

For any claim, insured should:

- Inform underwriters of a potential claim at first opportunity

- Assist underwriters with surveys by Lloyds Agents

- Carrier must be promptly given written notice of claim

Underwriters may pay the assureds claim and then the
underwriters may proceed against the carrier for recovery


- Clean receipts should never be used for damaged goods

- Insurers will need documentation
- Insurance Certificate
- Commercial Invoice
- Bill of Lading / Consignment Note
- Delivery Receipt
- Correspondence with carriers / ship owners
- Repairers Estimates
- Surveyors Report

Marine insurance claims settled in the currency stated in the policy.

If claims are to be paid in a local currency:

- the policy must specify it and

- the premium must be collected in that currency

Surveyors fees / expenses may form an admissible part of a claim


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS 17
8.15 THE PRINCIPLE OF AVERAGE

An Average is a loss

8.15.1 PARTICULAR AVERAGE (PA)

Accidental loss or damage where only one partys property is damaged

May be for a ship or her cargo

Results in a claim under the insureds policy

8.15.2 GENERAL AVERAGE (GA)

A partial loss, involving the loss of an individuals property, that can
be claimed against all in the venture as they have benefited by this loss

Must involve:

- Sacrifice - Deliberate sacrifice of property of value
- Success - Recovery of part of venture ship/cargo
- Peril - There must have been a real danger

Examples:
- part of cargo being dumped overboard
- part of the ship (the main engine) is overworked o
- cost unloading / reloading the cargo of a stranded ship
- cargo damaged by fire fighting water
- cargo consumed as fuel in heavy weather

Parties benefiting from a sacrifice, to save part of venture, must contribute.

All contributions are made in proportion to the value of the salved property

GA is handled by an approved and licensed Average Adjuster (AA)

AA - Receives notice of potential GA Act

- Estimates values of loss incurred,

- Estimates value of the remaining ship, cargo and fuel

- Calculates amount (GA fund) each saved property shall
pay to compensate those who lost their property

- Collects payments / insurance guarantees of payment to
cover GA fund before cargo is delivered to consignees
(Average Bond or Average Guarantee)

- GA is a complex, time consuming, expensive matter
1
Risks in International Trade
Stelios Panagiotou
2
Risks faced by importer/exporters
Currency Risk
Commodity price risk
Transportation cost risk
Counter-party risk
Operations related risk (warehouse
fire, strikes etc)
2
3
Risks faced by ship-owners
Currency Risk
Bunkers price risk
Revenue (freight) risk
Interest rate risk
Counter party risk
Operation risk (vessel accident)
4
Risks faced by ship-financiers
Credit risk (counterparty risk)
Liquidity risk
Interest rate risk
Operational risk
3
5
The role of risk
Risk increases the uncertainty
Revenues
Costs
Provisions
Pricing of product
Profit volatility may have an impact
on companys share price
sharehodlers satisfaction
6
How to minimize risk
Insurance
Financial products
Natural hedge
Diversification
4
Exchange Rate Risk
8
Setting the framework
Example A: A German based exporter
selling products to the USA in USD
Example B: A Greek ship-owner
having its headquarters in Athens,
Greece
Example C: A Greek Omega Watches
importer (importing watches from
Switzerland)
5
9
Mismatch
There is a mismatch between:
The currency of revenues and
German Exporter: USD
Greek Shipowner: USD
Greek Importer: EUR
The Currenyc of expenses
German Exporter: EUR
Greek Shipowner: EUR (on HQ expenses)
Greek Importer: CHF
10
EURO vs USD flunctuation
Source: ECB
6
11
Example
7/6/2010: 1.1959 USD per 1EUR
4/5/2011: 1.4882 USD per 1EUR
7/6/2011: 1.4652 USD per 1EUR
21/10/2011: 1.3798 USD per 1EUR
100USD would have been Valued:
7/6/2010: 83.62EUR
4/5/2011: 67.20EUR
7/6/2011: 68.25EUR
21/10/2011: 72.481EUR
12
Hedging
Protection against risk (minimise your
loss) or
Alleviate the risk
7
13
Forward Exchange Contract
A agreement (usually with your bank)
to buy or sell a predetermined predetermined
amount of currency at a
predetermined predetermined price on a
predetermined predetermined point in time (i.e. to
sell 5ml USD on the 31/12/2011 at a
rate of 1EUR = 1.3530 USD)
14
Example
A German exporter expects to receive
from his US client 5ml USD on the
31/12/2011. He decides to protect
himself against the exchange rate
risk. So, he signs a forward rate
agreement with his bank at 1EUR =
1.3530 USD.
8
15
Example
On the 31/12/2011, the German exporter
receives the 5ml USD
Because of the forward agreement
irrespective of the USD/EUR spot rate he
receives 3.695ml EUR.
If the USD/EUR spot rate was 1.40, he would
have received: 3.571ml EUR. (potential gain =
124 thousand EUR)
If the USD/EUR spot rate was 1.30, he would
have received: 3.846ml EUR. (potential loss =
151 thousand EUR)
16
Quick Reminder
The bank sells currency, when you
give out national money
The bank buys currency, when you
give out foreign currency
9
17
How forward rates are quoted
As a premium or discount over the
current (todays) spot rate
Thus, the actual forward rates are
(deduct)
Note: Against the GBP
18
How forward rates are quotes
As a premium or discount over the
current (todays) spot rate
Thus, the actual forward rates are
(add)
Note: Against the GBP
10
19
Some point to remember
In theory, the differential between the spot and the
forward rate depicts the interest rate differentials
between the two currencies (countries).
If USD lower interest than GBP, then at premium
(USD appreciates)
If USD higher interest than GBP, then at discount
(USD depreciates)
The bank buys high
The bank sells low
A discount is added to spot rate
A premium is deducted from the spot rate
Counterparty risk (i.e. Lehman Brothers)
requirement for a collateral by the bank
20
Other form of Forwards
Option dated forward contract
As a typical forward, but with an option
on the date (within a specific time
period)
11
21
Home-made Forwards
5ml USD =
Principal &
Interest
Loan =
4.878 ml USD
2.5% p.a.
Spot market=
1.36USD/EUR
Term Deposit =
3.587 ml EUR
5% p.a.
3.766ml EUR
Effective Forward rate = 1.3277
22
Futures Contracts
A standardised contract traded at an organised
market obligating the holder to buy or sell at a
predetermined date and price.
Futures exchange markets around the world (i.e. CME
Group)
Example: CME Group EUR/USD future
Contract size: 125.000euros
Months: (Mar, Jun, Sep, Dec) last day
Example: NYSE Euronext LIFFE
Contract size: 20.000USD
Months: (Mar, Jun, Sep, Dec) Third Friday of the
delivery month
12
23
Futures example US importer
Buy 1 contract for 125,000EUR at 1.36
with maturity on 16/12/2011
Assume that initial margin is at
5,000USD per contract
Also, margin call when the margin
account less than 3,500USD
24
Mark-to-market: Day 1
25/10: Buy 1 contract at 1.36USD/EUR
(170,000USD)
End of day price has gone to
1.37USD/EUR (171,250USD)
Thus, Profit of 1c per EUR or
0.01 x 125,000EUR = 1,250
Margin Account= 5,000 + 1,250 =
6,250USD
13
25
Mark-to-market: Day 2
26/10: End of day price has gone to
1.38USD/EUR (172,500USD)
Thus, Gain another 1c per EUR or
0.01c x 125,000EUR = 1,250
Margin Account= 6,250 + 1,250 =
7,500USD
26
Mark-to-market: Day 3
27/10: End of day price has gone to
1.35USD/EUR (168,750USD)
Thus, Loss of 3c per EUR or
0.03 x 125,000EUR = 3,750
Margin Account= 7,500 - 3,750 =
3,750USD
14
27
Mark-to-market: Last Day
16/12: End of day price has gone to
1.40USD/EUR (175,000USD)
Thus, Gain of 5c per EUR or
0.05 x 125,000EUR = 6,250
Margin Account= 3,750 + 6,250 =
10,000USD
28
Re-conciliation
Futures Trading (paper trading)
Margin Account: 10,000
Minus Initial Margin + Margin call: 5,000
Net Profit: 10.0-5.0 = 5,000USD
Spot Trading (actual market)
Requirement of 125,000EUR
The importer pays (at 1.40USD/EUR) = 175,000USD
Target price at 1.36 or 170,000USD
Net Loss:170-175 = 5,000USD
Net Position
Futures Profit = 5,000USD
Spot Market Loss = 5,000USD
Total = 0 (zero)
15
29
Advantages & Disadvantages
Traded on
organised markets
Lack of
counterparty risk
Standardised on
contract values
Specific dates
Margin call (as
there is the
marking to market)
30
Options
It is contract that provides you with the
option (not obligation) to buy/sell on the
exercise date (strike date) at a
predetermined price (exerices price), by
paying upfront a premium.
American option: Any time until the strike
date
European option: On the strike date
Premium: Depends on the exercise price,
the duration of the option and the amount
16
31
Example
A German exporter expects to receive
from his US client 5ml USD on the
31/12/2011. He decides to protect
himself against the exchange rate
risk. So, he buys an option with a
strike price of 1EUR = 1.3530 USD
and he pays the respective premium
32
Example
On the 31/12/2011, the German exporter
receives the 5ml USD. If he exercises the
option, he would receive 3.695ml EUR
If the USD/EUR spot rate was 1.40, he would
have received: 3.571ml EUR. EXERCISE THE
OPTION and FORGET SPOT MARKET.
If the USD/EUR spot rate was 1.3530, he would
have received: 3.365ml EUR. INDIFFERENT.
If the USD/EUR spot rate was 1.30, he would
have received: 3.846ml EUR. DO NOT EXERCISE
THE OPTION and USE SPOT MARKET.
17
33
Things to remember
Usually available at foreign exchange
markets, so standardised.
Gives you the right not the obligation
More advanced foreign exchange
options, also available as Over-The-
Counter (i.e. with your bank).
Financial Engineering has increased
the variety of options available.
Transportation Cost
(Revenue) Risk
18
35
Freight rates
Freight rates represent cost of an
importer/forwarder
Freight rates represent revenues of a
shipowner
36
Stages of a shipping cycle
19
37
Source: Maritime Economics (1997) - Stopford
38
Baltic Dry Index (BDI) and
Baltic Dirty Tanker Index (BDTI)
(Monthly Data)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
BDI
0
500
1,000
1,500
2,000
2,500
BDTI BDI (left axis)
BDTI (right axis)
20
39
Strategy
The forwarder who wishes to hedge
his transport cost will buy future
contracts
The shipowner who wishes to hedge
his revenues will sell future contract
Settlement shall be based on an
index calculated by the Baltic
Exchange
40
A bit of history
1985: BIFFEX (Baltic International
Freight Futures Exchange) based on
BFI cash settlement
FFA (Forward Freight Agreements)
based on any or a basket of routes
constituting the indices prepared by
the Baltic Exchange cash settlement
21
41
Forward Freight Agreements
What is a Forward Freight Agreement?
Forward Freight Agreements (FFAs) offer
shipowners and operators, charterers and
traders a means of protecting themselves
against the volatility of freight rates.
Broadly defined, it is taking a position in a
futures (paper) market as a substitute for a
forward cash (physical) transaction.
Source: Baltic Exchange
42
Forward Freight Agreements
Forward Freight Agreements (FFAs) are 'over the counter' products made on a
principal-to-principal basis. As such, they are flexible and not traded on any
exchange.
Contracts traded will normally be based on the terms and conditions of the
FFABA standard contracts amended as agreed between the principals.
The main terms of an agreement cover:
(a) The agreed route.
(b) The day, month and year of settlement.
(c) Contract quantity.
(d) The contract rate at which differences will be settled.
Settlement is between counter parties in cash within five days following the
settlement date. Commissions will be agreed between principal and broker.
The broker, acting as intermediary only, is not responsible for the
performance of the contract.
Source: Baltic Exchange
22
43
Example
Owner operates a 65,000dwt panamax
vessel currently under T/C until the end of
Dec. 2011
He wants to secure revenues in the 1
st
semester (1
st
and 2
nd
quarter of 2012).
He contacts an FFA broker and he sells
contracts based on the four TC average of
the BPI (Baltic Panamax Index) as follows:
Q1 2012: 21,750 USD/day
Q2 - 2012: 20,750 USD/day
44
Baltic Panamax Index
Source: Baltic Exchange
23
45
Scenario: Operates in T/C market
Fixes his vessel for 6 months at 15,500$/day
Closes (unwind) the contract at 16,250 $/day and
15,500 $/day respectively (1
st
& 2
nd
quarter)
FFA market:
1
st
Quarter: 21,750-16,250 = 5,500 $/day
2
nd
Quarter: 20,750-15,500 = 5,250 $/day
Physical market:
1
st
& 2
nd
quarter: 15,500 $/day
Total (FFA & Physical market)
1
st
Quarter: 5,500 + 15,500 = 21,000 $/day
2
nd
Quarter: 5,250 + 15,500 = 20,750 $/day
Example from: Nomikos N. & A. Alizadeh (2010) Ch. 26 Managing Freight rate risk using freight
derivatives: an overview of the empirical evidence in Grammenos C. Th. (2010) The handbook of
maritime economics & business, 2
nd
edition, London, Lloyds List-Informa
46
Effectiveness of hedging strategy
depends on:
Timing mismatch between FFA
market and actual market
Basis risk: The route described in the
FFA does not match the vessels
actual route
Size of vessel mismatch
Liquidity of the FFA market in either
fixing or unwinding a contract
24
47
Indicative Trading Platforms
Baltex: An FSA approved Multilateral
Trading Facility for dry freight
derivatives.
Imarex:Marex Spectron
Bunkering Cost
25
49
Bunkering (Fuel cost)
Bunkers represent a major expense for the
shipping company operating in the spot
market
Futures and Options on crude oil and on
products
Traded on organised markets (i.e. NYMEX
or ICE)
Contract Specification example of NYMEX
Contract size: 1.000 bbl
Price quotation: USD
Termination: on the 15
th
day prior to the first
day of the delivery month
Derivatives on Commodities
26
51
Available Futures & Options on:
Coffee
Sugar
Cotton
Barley
Frozen Orange Juice
Corn
Soybeans/Oil/Meal
Wheat
etc
(see www.cmegroup.com , www.theice.com
Shipping Finance
27
53
Investors & Lenders
Investors
Funds in return for
a share in profits
Investors
Risk taker
Interested on the
upside
Lenders
Funds for defined
period in return of
interest
Repayment of Debt
Risk Averse
Interested on the
downside
54
28
55
Ways of financing the purchase of ships
Private Funds
Own Funds
Private placements
Debt financing
Loans (mortgage-backed, corporate)
Shipyard credit
Mezzanine Finance
Private placement
Capital Markets
IPOs
Bonds
Special Types
Leasing
Partnerships (German KGs, Norwegian K/S)
56
Self Assessment & Test Questions
29
57
Previous years exam papers
April 2010
58
Suggested Structure
Define the term Hedging (p. 83)
Present a describe the main risks a principal is faced:
Currency (Exchange rate flunctuation)
Transaction & Transportation cost
Raw material cost
Factors to engage on hedging (p. 83, 85, 86)
Limiting risk of adverse market movements
Securing profit margin (esp. in a low profit margin
sector)
Major characteristics of the available hedging products
L
c
o
n
o
m
|
c
s

o
f

S
e
a

1
r
a
n
s
p
o
r
t

&

I
n
t
e
r
n
a
t
|
o
n
a
|

1
r
a
d
e


S
.

a
p
a
g
e
o
r
g
l
o
u

u
e
c
.

2
0
1
1

C
h
.

#

8

S
h
|
p
p
|
n
g

8
u
s
|
n
e
s
s

1

8
.
1

I
n
t
r
o
d
u
c
t
|
o
n

l



S
e
|
|
e
r


8
u
y
e
r


D
|
s
t
a
n
c
e


1
|
m
e


!
"
#
$
%
&
'
(
)
*
+
,
,
&
-
.
+
(
&
)
*
(
/
"
)
&
*
0
"
1
*
+
*
)
%
"
"
(
/
*
(
1
+
'
)
+
#
(
.
"
'
2

2

8
.
1

I
n
t
r
o
d
u
c
t
|
o
n


3
+
!
!
.
(
.
"
'
+
,
4
*
I
n
c
o
t
e
r
m
s

r
u
l
e
s

o
r

I
n
t
e
r
n
a
t
|
o
n
a
|

C
o
m
m
e
r
c
|
a
|

t
e
r
m
s

a
r
e

a

s
e
r
l
e
s

o
f

p
r
e
-
d
e
f
l
n
e
d

c
o
m
m
e
r
c
l
a
l

L
e
r
m
s

p
u
b
l
l
s
h
e
d

b
y

L
h
e

!
"
#
$
%
"
&
#
'
(
"
&
)
*
+
,
&
-
.
$
%
*
(
/
*
+
(
-
-
$
%
0
$
*
(
l
C
C
)

w
l
d
e
l
y

u
s
e
d

l
n

l
n
L
e
r
n
a
L
l
o
n
a
l

c
o
m
m
e
r
c
l
a
l

L
r
a
n
s
a
c
L
l
o
n
s
.


1
h
e
s
e

L
e
r
m
s

a
r
e

a
c
c
e
p
L
e
d

b
y

g
o
v
e
r
n
m
e
n
L
s
,

l
e
g
a
l

a
u
L
h
o
r
l
L
l
e
s

a
n
d

b
u
s
l
n
e
s
s

p
r
a
c
L
l
L
l
o
n
e
r
s

w
o
r
l
d
w
l
d
e

a
n
d

a
r
e

l
n
L
e
n
d
e
d

L
o

r
e
d
u
c
e

o
r

r
e
m
o
v
e

a
l
L
o
g
e
L
h
e
r

u
n
c
e
r
L
a
l
n
L
l
e
s

a
r
l
s
l
n
g

f
r
o
m

d
l
f
f
e
r
e
n
L

l
n
L
e
r
p
r
e
L
a
L
l
o
n

o
f

L
h
e

r
u
l
e
s

l
n

d
l
f
f
e
r
e
n
L

c
o
u
n
L
r
l
e
s
.



5
$
,
&
)
*
0
"
1
*
6
'
7
*
8
"
!
&
*
"
0
*
9
1
+
'
)
:
"
1
(

L
k
W


L
x

W
o
r
k
s





I
C
A


I
r
e
e

C
a
r
r
|
e
r



C

1

-

C
a
r
r
|
a
g
e

a
|
d

1
o



C
I


C
a
r
r
|
a
g
e

a
n
d

I
n
s
u
r
a
n
c
e

a
|
d

t
o



D
A
1


D
e
|
|
v
e
r
e
d

a
t

1
e
r
m
|
n
a
|





D
A


D
e
|
|
v
e
r
e
d

a
t

|
a
c
e



D
D


D
e
|
|
v
e
r
e
d

D
u
t
y

a
|
d



5
$
,
&
)
*
0
"
1
*
;
&
+
*
+
'
!
*
<
'
,
+
'
!
*
=
+
(
&
1
>
+
7
*
9
1
+
'
)
:
"
1
(
*
I
A
S


I
r
e
e

A
|
o
n
g
s
|
d
e

S
h
|
p



I
C
8


I
r
e
e

o
n

8
o
a
r
d




C
I
k


C
o
s
t

a
n
d

I
r
e
|
g
h
t




C
I
I


C
o
s
t
,

I
n
s
u
r
a
n
c
e

a
n
d

I
r
e
|
g
h
t



;
&
&
*
+
,
)
"
*
6
:
:
&
'
!
.
?
*
@
A
B
*
.
'
*
(
&
?
(
C
"
"
D
E
*
+
'
!
*
F
(
/
&
1
*
)
"
$
1
#
&
E
*
'
"
(
*
.
'
*
(
&
?
(
C
"
"
D
*
3



L
o
a
d
|
n
g

o
n

t
r
u
c
k

L
x
p
o
r
t
-
C
u
s
t
o
m
s

C
a
r
r
|
a
g
e

L
x
p
o
r
t

p
o
r
t

1
r
u
c
k

U
n
|
o
a
d

L
o
a
d
|
n
g

C
o
s
t
s

|
n

L
x
p
o
r
t

p
o
r
t

M
o
d
e

o
f

1
r
a
n
s
p
o
r
t

(
V
e
s
s
e
|
)

D
|
s
c
h
a
r
g
e

C
o
s
t
s

|
n

I
m
p
o
r
t

p
o
r
t

1
r
u
c
k

L
o
a
d
|
n
g

C
a
r
r
|
a
g
e

t
o

d
e
s
t
|
n
a
t
|
o
n

I
n
s
u
r
a
n
c
e

I
m
p
o
r
t

c
u
s
t
o
m
s

I
m
p
o
r
t

t
a
x
e
s


L
k
W

8

8

8

8

8

8

8

8

8

8

8

8

8ULk
I
C
A

S

S

S

8

8

8

8

8

8

8

8

8

I
A
S

S

S

S

S

8

8

8

8

8

8

8

8

I
C
8

S

S

S

S

S

8

8

8

8

8

8

8

C
I
k

S

S

S

S

S

S

8

8

8

8

8

8

C
I
I

S

S

S

S

S

S

8

8

8

S

8

8

D
A
1

S

S

S

S

S

S

S

8

8

8

8

8

D
A


S

S

S

S

S

S

S

S

S

8

8

8

C

1

S

S

S

S

S

S

S

S

S

8

8

8

C
I


S

S

S

S

S

S

S

S

S

S

8

8

D
D


S

S

S

S

S

S

S

S

S

8

S

S



S
L
L
L
L
k


G
"
(
&
H
*
F
(
/
&
1
*
)
"
$
1
#
&
E
*
'
"
(
*
.
'
*
(
&
?
(
C
"
"
D
*
4

8
.
1

I
n
t
r
o
d
u
c
t
|
o
n


3
+
!
!
.
(
.
"
'
+
,
4
*
8
.
2

M
e
t
h
o
d
s

o
f

a
y
m
e
n
t



A
.
-


S
e
c
u
r
l
L
y

o
f

p
a
y
m
e
n
L


-


S
a
f
e

a
n
d

C
o
r
r
e
c
L

d
e
l
l
v
e
r
y

o
f

C
o
o
d
s


8
.
-

l
m
p
l
l
c
a
L
l
o
n
s

o
f


v
a
r
l
o
u
s

p
a
y
m
e
n
L

m
e
L
h
o
d
s


-

l
l
n
a
n
c
l
n
g

l
n

l
n
L
e
r
n
a
L
l
o
n
a
l

1
r
a
d
e

I
+
)
/
*
>
.
(
/
*
F
1
!
&
1
*
*
1
&
2
3
2
&
2
*
4
5
6
&
"
0
$
*
7
&
8
-
$
"
#
*
&
9
&
'
"
:
#
*
7
%
(
/
(
%
-
&
;
*

F
:
&
'
*
6
#
#
"
$
'
(
*

J
.
,
,
*
"
0
*
K
?
#
/
+
'
L
&
*

M
"
#
$
%
&
'
(
+
1
7
*
N
&
(
(
&
1
*
"
0
*
I
1
&
!
.
(
*
3

8
u
y
e
r

S
e
|
|
e
r

8
.
2

M
e
t
h
o
d
s

o
f

a
y
m
e
n
t


M
"
#
$
%
&
'
(
+
1
7
*
N
&
(
(
&
1
*
"
0
*
I
1
&
!
.
(
*
*



C
r
o
s
s

b
o
r
d
e
r

8
a
n
k
s
,

f
o
r

p
u
r
p
o
s
e
s

o
f

:
<
$
$
5
,

:
'
-
<
)
'
0
'
#
8
=
*
>
"
'
/
(
%
-
'
#
8
*
a
n
d

:
&
/
$
#
8
=


u
C



9

1


9


l
r
r
e
v
o
c
a
b
l
e

9


1
l
m
e

o
f

p
a
y
m
e
n
L

v
l
s
.

a

v
l
s

u
e
l
l
v
e
r
y

9


C
o
n
f
l
r
m
e
d


9


L
l
s
L

o
f

d
o
c
u
m
e
n
L
s

L
o

b
e

p
r
e
s
e
n
L
e
d

9


a
n
d

o
L
h
e
r

C
u
a
l
l
L
a
L
l
v
e

&

C
u
a
n
L
l
L
a
L
l
v
e

L
e
r
m
s

p
e
r
L
l
n
e
n
L

L
o

L
h
e

s
h
l
p
m
e
n
L
/
c
a
r
g
o



5

*
6

8
.
2

M
e
t
h
o
d
s

o
f

a
y
m
e
n
t


M
"
#
$
%
&
'
(
+
1
7
*
N
&
(
(
&
1
*
"
0
*
I
1
&
!
.
(
*
6
:
:
,
.
#
+
(
.
"
'
*
7

G
"
(
&
H
*
F
(
/
&
1
*
)
"
$
1
#
&
E
*
'
"
(
*
.
'
*
(
&
?
(
C
"
"
D
*
8
.
2

M
e
t
h
o
d
s

o
f

a
y
m
e
n
t


M
"
#
$
%
&
'
(
+
1
7
*
I
1
&
!
.
(
*
O
1
"
#
&
!
$
1
&
*
9
&
?
(
C
"
"
D
*
6
:
:
&
'
!
.
?
*
@
A
A
*
8

A
d
v
|
s
|
n
g
]

C
o
n
f
|
r
m
|
n
g

a
y
|
n
g

8
a
n
k

^


8
e
n
e
f
|
c
|
a
r
y

S
e
|
|
e
r

A
p
p
|
|
c
a
n
t

8
u
y
e
r

I
s
s
u
|
n
g

8
a
n
k

^


8
.
3

D
o
c
u
m
e
n
t
s

8
.
3
.
1

I
n
v
o
|
c
e


1
:
$
$
*
.
$
)
(
?
*
&
"
5
*
&
<
<
$
"
5
'
@
*
A
B
C
*
'
"
*
#
$
@
#
.
(
(
3
;
*
8
.
3
.
2

I
n
s
u
r
a
n
c
e

1
:
$
$
*
&
<
<
$
"
5
'
@
*
A
B
D
*
'
"
*
#
$
@
#
.
(
(
3
;


8
.
3
.
3

8
|
|
|

o
f

L
a
d
|
n
g

1
:
$
$
*
.
$
)
(
?
*
&
"
5
*
&
<
<
$
"
5
'
@
*
A
B
E
*
'
"
*
#
$
@
#
.
(
(
3
;


8
.
3
.
4

C
t
h
e
r

D
o
c
u
m
e
n
t
s


-

a
c
k
|
n
g

L
|
s
t


-

C
e
r
t
|
f
|
c
a
t
e

o
f

o
r
|
g
|
n


-


A
n
y

o
t
h
e
r

u
a
|
|
t
a
t
|
v
e

a
n
d
]
o
r

u
a
n
t
|
t
a
t
|
v
e

c
e
r
t
|
f
|
c
a
t
e
s


a
g
r
e
e
d

b
e
t
w
e
e
n

8
u
y
e
r

&

S
e
|
|
e
r


(
l
.
e
.

S
.
C
.
S
.
)
*


A
l
l

c
a
r
g
o

L
r
a
n
s
p
o
r
L
e
d

b
y

a
n
y

m
e
a
n
s
,

a
l
r
,

s
e
a
,

r
a
l
l
,

L
r
u
c
k
,

e
L
c
,

l
s

a
c
c
o
m
p
a
n
l
e
d

b
y

a

s
e
L

o
f

d
o
c
u
m
e
n
L
s
,


w
h
l
c
h

a
b
o
v
e

a
l
l

g
l
v
e

L
l
L
l
e

L
o

L
h
e

b
e
a
r
e
r
,

d
e
s
l
g
n
a
L
e

L
h
e

q
u
a
n
L
l
L
y

&

q
u
a
l
l
L
y

s
h
l
p
p
e
d
,

e
L
c
.

a
n
d

s
p
e
c
l
a
l
l
y

w
h
e
n

d
e
a
l
l
n
g

w
l
L
h

u
o
c
u
m
.

C
r
e
d
l
L
s
.


l
n

s
e
a

L
r
a
n
s
p
o
r
L
,

L
h
e

L
y
p
l
c
a
l

d
o
c
u
m
e
n
L
s

a
r
e
:



9

8
.
3

D
o
c
u
m
e
n
t
s


8
.
3
.
1
.

C
o
m
m
e
r
c
|
a
|

L
x
p
o
r
t

I
n
v
o
|
c
e

1
.

L
x
p
o
r
L
e
r





1
F
$
)
)
$
%
;
*
2
.

C
o
n
s
l
g
n
e
e


1
G
>
8
$
%
;
*
3
.

l
n
L
e
r
m
e
d
l
a
L
e

C
o
n
s
l
g
n
e
e

4
.

l
o
r
w
a
r
d
l
n
g

A
g
e
n
L

3
.

C
o
m
m
e
r
c
l
a
l

l
n
v
o
l
c
e

n
o
.

6
.

C
u
s
L
o
m
e
r

u
r
c
h
a
s
e

C
r
d
e
r

7
.

8
l
l
l

o
f

L
a
d
l
n
g

n
o
.

8
.

C
o
u
n
L
r
y

o
f

C
r
l
g
l
n

9
.

u
a
L
e

o
f

L
x
p
o
r
L

1
0
.

1
e
r
m
s

o
f

a
y
m
e
n
L

1
1
.

L
x
p
o
r
L

8
e
f
e
r
e
n
c
e
s

(
n
o
L
e
s
)

1
2
.

o
r
L

o
f

L
o
a
d
l
n
g

1
3
.

C
a
r
r
l
e
r
/
8
o
u
L
e

1
4
.

a
c
k
a
g
e
s

1
3
.

C
u
a
n
L
l
L
y

G
"
(
&
H
*
F
(
/
&
1
*
)
"
$
1
#
&
E
*
'
"
(
*
.
'
*
(
&
?
(
C
"
"
D
*
1
0

1
1

8
.
3

D
o
c
u
m
e
n
t
s


8
.
3
.
3

8
|
|
|

o
f

L
a
d
|
n
g

G
"
(
&
H
*
F
(
/
&
1
*
)
"
$
1
#
&
E
*
'
"
(
*
.
'
*
(
&
?
(
C
"
"
D
*
8
.
4

C
o
n
f
|
r
m
|
n
g

n
o
u
s
e
s

C
o
n
f
l
r
m
l
n
g

h
o
u
s
e
s

a
r
e

A
g
e
n
L
s

s
p
e
c
l
a
l
l
z
e
d

l
n

a

v
a
r
l
e
L
y

o
f

g
o
o
d
s

f
o
r

l
m
p
o
r
L


L
x
p
o
r
L
.

l
o
r

a

f
l
x
e
d

f
e
e

o
r

p
e
r
c
e
n
L
a
g
e

o
f

L
h
e

L
r
a
n
s
a
c
L
l
o
n

L
h
e
l
r

u
s
u
a
l

f
u
n
c
L
l
o
n
s

a
r
e

:

u
r
c
h
a
s
e
s

a
n
d

a
r
r
a
n
g
e
m
e
n
L
s

o
f

l
m
p
o
r
L
s
/
L
x
p
o
r
L
s

o
f

g
o
o
d
s

o
n

b
e
h
a
l
f

o
f

o
v
e
r
s
e
a
s

c
u
s
L
o
m
e
r
s
.


l
l
n
a
n
c
e

L
h
e

m
o
v
e
m
e
n
L

o
f

g
o
o
d
s

l
n
L
o
/
f
r
o
m

L
h
e

c
o
u
n
L
r
y

b
y

o
f
f
e
r
l
n
g

s
h
o
r
L
-
L
e
r
m

c
r
e
d
l
L

L
o

l
m
p
o
r
L
e
r
s
/
L
x
p
o
r
L
e
r
s
.


C
u
a
r
a
n
L
e
e
,

c
o
n
f
l
r
m

o
r

p
a
y

L
o

L
h
e

c
o
u
n
L
e
r
p
a
r
L
y

o
w
n

c
u
r
r
e
n
c
y
.



u
s
u
a
l
l
y

n
e
g
o
L
l
a
L
e

L
h
e

p
r
l
c
e

w
l
L
h

L
h
e

s
u
p
p
l
l
e
r
s
,

s
h
l
p
s
,

l
n
s
u
r
e
s
,

e
L
c
.


C
l
e
a
r

C
u
s
L
o
m
s

H
(
#
$
I
*
J
'
#
,
*
#
,
$
*
&
5
6
$
"
#
*
(
/
*
9
)
(
.
&
)
'
K
&
#
'
(
"
L
'
"
#
$
%
"
$
#
=
*
#
,
'
:
*
/
>
"
0
#
'
(
"
*
,
&
:
*
.
$
$
"
*
#
&
3
$
"
*
#
(
*
:
(
-
$
*
5
$
9
%
$
$
*
.
8
*
J
A
J
*

4
)
'
.
&
.
&
2
0
(
-

M
%
&
5
$
3
$
8
2
0
(
-



*
1
2

8
.
S

k
|
s
k
s

|
n

I
n
t
e
r
n
a
t
|
o
n
a
|

1
r
a
d
|
n
g

!
"
#
$
%
"
&
#
'
(
"
&
)
*
M
%
&
5
$
*
&
<
&
%
#
*
(
/
*
#
,
$
*
9
%
$
&
#
*
5
'
:
#
&
"
0
$
:
*
&
"
5
*
6
&
%
'
$
5
*
0
>
)
#
>
%
$
:
*
&
"
5
*
'
"
5
'
6
'
5
>
&
)
:
*
$
"
9
&
9
$
5
=
*
'
"
6
(
)
6
$
:
*
&
*
-
8
%
'
&
5
*
(
/
*
'
"
,
$
%
$
"
#
*
%
'
:
3
:
*
&
"
5
*
6
&
%
'
&
.
)
$
:
=
*
&
<
&
%
#
*
(
/
*
?
$
&
#
,
$
%
*
<
,
$
"
(
-
$
"
&
=
*
"
&
#
>
%
&
)
*
<
$
%
'
)
:
=
*
$
#
0
2
*
* N
/
*
<
&
%
#
'
0
>
)
&
%
*
'
"
#
$
%
$
:
#
*
&
%
$
*
>
"
/
(
%
$
:
$
$
"
*
/
)
>
0
#
>
&
#
'
(
"
:
*
'
"
*
#
%
&
"
:
<
(
%
#
*
0
(
:
#
:
*
&
"
5
*
0
>
%
%
$
"
0
'
$
:
2
*
1
3

8
.
6

I
o
r
e
|
g
n

L
x
c
h
a
n
g
e

I
|
u
c
t
u
a
t
|
o
n
s

8
U

L
k

(
I
m
p
o
r
t
e
r
)

S
L
L
L
L
k

(
L
x
p
o
r
t
e
r
)

A
t

t
|
m
e

o
f

C
r
d
e
r





5
6
.
0
0
0














A
t

D
e
|
|
v
e
r
y

+

9
0

d
a
y
s
*

5
6
.
0
0
0













1
h
e
r
e

a
r
e

b
a
s
l
c
a
l
l
y

L
w
o

o
p
L
l
o
n
s

f
o
r

L
h
e

8
u
y
e
r

/

S
e
l
l
e
r

L
o

r
o
L
e
c
L

L
h
e
m
s
e
l
v
e
s
:

* *
F
:
(
.
"
'
*
6
2
*
*
*
*
*
*
*
*
*
*
M
"
*
G
"
(
/
.
'
L
*
*
*
*
F
:
(
.
"
'
*
J
2
*
*
*
*
*
*
*
*
*
P
&
!
L
&
*
(
/
&
.
1
*
O
"
)
.
(
.
"
'
*
*
*
*
*
*
*
*
*
*
*
*
1
'
2
(
2
?
2
*
G
>
8
*
(
%
*
*
F
$
)
)
*
#
,
$
*
0
>
%
%
$
"
0
8
*
'
"
#
(
*
#
,
$
*
O
>
#
>
%
$
;
*
1
4

8
.
6
.
2

I
o
r
w
a
r
d

L
x
c
h
a
n
g
e

C
o
n
t
r
a
c
t
s

C
p
t
|
o
n

8



l
o
r
w
a
r
d

8
a
L
e

f
o
r

a

l
l
x
e
d

1
l
m
e

A
h
e
a
d

o
r


l
o
r
w
a
r
d

8
a
L
e

f
o
r

a

l
u
L
u
r
e

p
e
r
l
o
d

o
f

1
l
m
e


C
n
c
e

e
n
L
e
r
e
d

l
n
L
o

a

l
o
r
w
a
r
d

C
o
n
L
r
a
c
L
,

y
o
u

a
r
e

o
b
l
l
g
e
d

L
o

e
x
e
r
c
l
s
e

l
L

a
L

L
h
e

s
L
l
p
u
l
a
L
e
d

d
a
L
e
.

l
o
r
w
a
r
d

r
a
L
e
s

a
r
e

c
a
l
c
u
l
a
L
e
d

o
v
e
r

a

O
1
&
%
.
$
%

o
r

M
.
)
#
"
$
'
(

o
n

L
h
e

;
:
"
(
*
5
+
(
&
*
1
3

l
o
r
e
l
g
n

C
u
r
r
e
n
c
y

u
S
$

8
e
c
o
m
l
n
g

;
(
1
"
'
L
&
1
*
l
o
r
e
l
g
n

C
u
r
r
e
n
c
y

u
S
$


8
e
c
o
m
l
n
g

=
&
+
D
&
1
*
S
e
|
|



8
u
y



S
e
|
|



8
u
y



S
p
o
L

8
a
L
e










1

=

$
1
,
3
0
4
0

$
1
,
3
1
2
0

S
p
o
L

8
a
L
e







$
1
,
3
0
4
0

$
1
,
3
1
2
0

1

M
o
n
L
h

$
0
,
0
0
1
0

$
0
,
0
0
0
3

*
*
7
%
$
-
'
>
-
*
1

M
o
n
L
h

$
0
,
0
0
0
3

$
0
,
0
0
0
8

*
*
P
'
:
0
(
>
"
#
*
2

M
o
n
L
h

$
0
,
0
0
1
3

$
0
,
0
0
1
2

*
*
7
%
$
-
'
>
-
*
2

M
o
n
L
h

$
0
,
0
0
1
0

$
0
,
0
0
1
3

*
*
P
'
:
0
(
>
"
#
*
3

M
o
n
L
h

$
0
,
0
0
2
3

$
0
,
0
0
1
8

*
*
7
%
$
-
'
>
-
*
3

M
o
n
L
h

$
0
,
0
0
1
7

$
0
,
0
0
2
3

*
*
P
'
:
0
(
>
"
#
*
3

M
o
.

l
o
r
w
a
r
d

8
a
L
e

3

M
o
.

l
o
r
w
a
r
d

8
a
L
e

1

M
o
n
L
h

$
1
,
3
0
3
0

$
1
,
3
1
1
3

1

M
o
n
L
h

$
1
,
3
0
4
3

$
1
,
3
1
2
8

2

M
o
n
L
h

$
1
,
3
0
2
3

$
1
,
3
1
0
8

2

M
o
n
L
h

$
1
,
3
0
3
0

$
1
,
3
1
3
3

3

M
o
n
L
h

$
1
,
3
0
1
3

$
1
,
3
1
0
2

3

M
o
n
L
h

$
1
,
3
0
3
7

$
1
,
3
1
4
3

8
.
6
.
1

S
p
o
t

k
a
t
e

N

C
p
t
|
o
n

A
.
.

n
e
l
L
h
e
r

o
f

L
h
e

p
a
r
L
l
e
s

d
e
c
l
d
e

L
o

d
o

n
o
L
h
l
n
g

1
6

n
o
L
e
:


W
h
e
n

y
o
u

J
$
7

:

L
h
e

8
a
n
k


;
&
,
,
)

L
o

y
o
u


W
h
e
n

y
o
u

;
&
,
,
*
*
H
*
L
h
e

8
a
n
k


J
$
7
)

f
r
o
m

y
o
u

I
o
r
w
a
r
d

k
a
t
e

S
p
o
t

k
a
t
e

8
.
6
.
3

I
o
r
e
|
g
n

C
u
r
r
e
n
c
y

C
p
t
|
o
n
s

1
7


l
n

c
o
n
L
r
a
s
L

L
o

l
o
r
w
a
r
d

C
o
n
L
r
a
c
L
s
,

y
o
u

a
r
e

n
o
L

o
b
l
l
g
e
d

L
o

e
x
e
r
c
l
s
e

y
o
u
r

c
o
n
L
r
a
c
L

L
h
e

f
u
L
u
r
e

d
a
L
e
,

l
L
s

[
u
s
L

a
n

C
p
L
l
o
n

!
"
:
>
%
&
"
0
$
*
7
%
$
-
'
>
-


l
f

L
h
e

M
a
r
k
e
L

m
o
v
e
s

L
o

y
o
u
r

f
a
v
o
r

y
o
u

e
x
e
r
c
l
s
e

l
L
,


1
h
e
r
e

a
r
e

L
w
o

L
y
p
e
s

o
f

C
p
L
l
o
n
s
:



L
u
r
o
p
e
a
n

S
L
y
l
e


(
e
x
e
r
c
l
s
e
d

a
L

a

f
l
x
e
d

S
L
r
l
k
e

d
a
L
e
)



A
m
e
r
l
c
a
n

S
L
y
l
e

(
e
x
e
r
c
l
s
e
d

w
l
L
h
l
n

a

c
e
r
L
a
l
n

p
e
r
l
o
d
)


1
h
e

r
e
m
l
u
m

p
r
l
c
e

l
s

a

f
u
n
c
L
l
o
n

o
f

L
h
e

v
o
l
a
L
l
l
l
L
y

e
x
p
e
c
L
e
d
,

L
h
e

s
L
r
l
k
e

p
r
l
c
e
,

L
h
e

o
p
L
l
o
n

p
e
r
l
o
d

l
n
v
o
l
v
e
d
.


1
8


U
S
5
1
.
3
S
0
.
0
0
0
,

o
r


1
.
0
0
0
.
0
0
0



a
L

B
E
Q
R
,




p
a
y
a
b
l
e

w
l
L
h
l
n

s
l
x

m
o
n
L
h
s


l
f

y
o
u

f
e
a
r

L
h
e

L
u
r
o

m
a
y

d
e
c
l
l
n
e

L
o

1
,
2
3
,

y
o
u

w
o
u
l
d

L
h
e
n

n
e
e
d

1
.
0
8
0
.
0
0
0

*



L
h
u
s

y
o
u

s
u
f
f
e
r

a

l
o
s
s

o
f

/

l
n
c
r
e
a
s
e
d

c
o
s
L

o
f






-

8
0
.
0
0
0



A
s

p
r
o
L
e
c
L
l
o
n

y
o
u

b
u
y

a

6

m
o
.


C
p
L
l
o
n

w
l
L
h

S
L
r
l
k
e

r
l
c
e

o
f

1
,
2
3

a
L

s
a
y

0
,
0
1
/
$

p
r
e
m
l
u
m




f
o
r

a

L
o
L
a
l

c
o
s
L

o
f


1
3
.
S
0
0


u
n
L
l
l

e
x
p
l
r
y

(
A
u
g
)

y
o
u

m
a
y

e
l
L
h
e
r

e
x
e
r
c
l
s
e

L
h
e

o
p
L
l
o
n

l
f

L
h
e

d
e
c
l
l
n
e

o
c
c
u
r
s

o
r

l
f

L
h
e

m
a
r
k
e
L

m
o
v
e
s

L
o

y
o
u
r

f
a
v
o
r
,

s
a
y

1
,
3
3
+
,

y
o
u

[
u
s
L

l
e
L

L
h
e

o
p
L
l
o
n

e
x
p
l
r
e
.


1
o

c
o
v
e
r

y
o
u
r

c
o
s
L
*
1

Q
R
2
C
S
S
;
*
L
h
e

e
x
c
h
a
n
g
e

h
a
s

L
o

m
o
v
e

l
o
w
e
r

L
h
a
n

1
,
3
3
.


l
n

r
e
v
e
r
s
e

l
f

L
h
e

e
x
c
h
a
n
g
e

s
L
r
e
n
g
L
h
e
n
s

m
o
r
e

L
h
a
n

1
,
3
7
,

y
o
u

a
b
s
o
r
b

L
h
e

c
o
s
L
.

l
n

a

n
u
L
s
h
e
l
l

y
o
u

l
l
m
l
L

y
o
u
r

d
o
w
n
s
l
d
e

r
l
s
k
,

w
l
L
h
o
u
L

s
a
c
r
l
f
l
c
l
n
g

L
h
e

u
p
s
l
d
e
.


N

*
8
.
6
.
3

I
o
r
e
|
g
n

C
u
r
r
e
n
c
y

C
p
t
|
o
n
s


n
o
w

|
t

W
o
r
k
s

8
.
6
.
3

I
o
r
e
|
g
n

C
u
r
r
e
n
c
y

C
p
t
|
o
n
s


n
o
w

|
t

W
o
r
k
s

1
9

1
,
3
7
+

1
,
3
3
-

G
"
(
&
H
*
I
/
+
1
(
*

*
&
?
+
%
:
,
&
*
'
"
(
*
.
'
*
(
&
?
(
C
"
"
D
*
2
0

8
.
6
.
4

1
r
a
n
s
a
c
t
|
o
n

C
o
s
t
s

|
n

I
n
t
e
r
n
a
t
|
o
n
a
|

1
r
a
d
e

S
*
9
1
+
'
)
:
"
1
(
*
I
"
)
(
)
*


M
u
c
h

l
l
k
e

l
n

C
u
r
r
e
n
c
l
e
s
,

L
h
e
r
e

a
r
e

a
v
a
l
l
a
b
l
e

f
l
n
a
n
c
l
a
l

L
o
o
l
s
,

C
p
L
l
o
n
s
,

l
u
L
u
r
e
s
,

l
n
d
e
x
e
s
,

f
o
r

m
o
s
L

c
o
m
m
o
d
l
L
l
e
s

a
n
d

f
l
n
a
n
c
l
a
l

l
n
s
L
r
u
m
e
n
L
s

a
l
l
k
e
.
,

l
.
e
.

b
u
n
k
e
r
s
,

g
r
a
l
n
s
,

l
n
L
e
r
e
s
L

r
a
L
e
s
,

s
h
l
p
p
l
n
g

f
r
e
l
g
h
L
s
,

e
L
c
.

*
P
&
!
L
.
'
L
*
*

*
;
:
&
#
$
,
+
(
.
"
'
*
*
*

*
M


l
l
A

*
!"#$%&'()*+,-,!!"#$%&!'()!*+,!-(.%/&0!('!1)2+&3()4!
1he seven rules for any mode(s) of LransporLaLlon are:

LxW Lx Works (named place of dellvery)
1he seller makes Lhe goods avallable aL lLs premlses. 1hls Lerm places Lhe maxlmum
obllgaLlon on Lhe buyer and mlnlmum obllgaLlons on Lhe seller. 1he Lx Works Lerm ls ofLen
used when maklng an lnlLlal quoLaLlon for Lhe sale of goods wlLhouL any cosLs lncluded. LxW
means LhaL a seller has Lhe goods ready for collecLlon aL hls premlses (works, facLory,
warehouse, planL) on Lhe daLe agreed upon. 1he buyer pays all LransporLaLlon cosLs and also
bears Lhe rlsks for brlnglng Lhe goods Lo Lhelr flnal desLlnaLlon. 1he seller doesn'L load Lhe
goods on collecLlng vehlcles and doesn'L clear Lhem for exporL. lf Lhe seller does load Lhe
good, he does so aL buyer's rlsk and cosL. lf parLles wlsh seller Lo be responslble for Lhe
loadlng of Lhe goods on deparLure and Lo bear Lhe rlsk and all cosLs of such loadlng, Lhls
musL be made clear by addlng expllclL wordlng Lo Lhls effecL ln Lhe conLracL of sale.

lCA lree Carrler (named place of dellvery)
1he seller hands over Lhe goods, cleared for exporL, lnLo Lhe dlsposal of Lhe flrsL carrler
(named by Lhe buyer) aL Lhe named place. 1he seller pays for carrlage Lo Lhe named polnL of
dellvery, and rlsk passes when Lhe goods are handed over Lo Lhe flrsL carrler.

C1 - Carrlage ald 1o (named place of desLlnaLlon)
1he seller pays for carrlage. 8lsk Lransfers Lo buyer upon handlng goods over Lo Lhe flrsL
carrler.

Cl Carrlage and lnsurance ald Lo (named place of desLlnaLlon)
1he conLalnerlzed LransporL/mulLlmodal equlvalenL of Cll. Seller pays for carrlage and
lnsurance Lo Lhe named desLlnaLlon polnL, buL rlsk passes when Lhe goods are handed over
Lo Lhe flrsL carrler.

uA1 uellvered aL 1ermlnal (named Lermlnal aL porL or place of desLlnaLlon)
Seller pays for carrlage Lo Lhe Lermlnal, excepL for cosLs relaLed Lo lmporL clearance, and
assumes all rlsks up Lo Lhe polnL LhaL Lhe goods are unloaded aL Lhe Lermlnal.

uA uellvered aL lace (named place of desLlnaLlon)
Seller pays for carrlage Lo Lhe named place, excepL for cosLs relaLed Lo lmporL clearance, and
assumes all rlsks prlor Lo Lhe polnL LhaL Lhe goods are ready for unloadlng by Lhe buyer.

uu uellvered uuLy ald (named place of desLlnaLlon)
Seller ls responslble for dellverlng Lhe goods Lo Lhe named place ln Lhe counLry of Lhe buyer,
and pays all cosLs ln brlnglng Lhe goods Lo Lhe desLlnaLlon lncludlng lmporL duLles and Laxes.
1hls Lerm places Lhe maxlmum obllgaLlons on Lhe seller and mlnlmum obllgaLlons on Lhe
buyer.
!"#$%&'()*+,-,!!"#$%&!'()!5%2!2+.!6+$2+.!724%)82,!1)2+&3()4!
1he four rules for lnLernaLlonal Lrade where LransporLaLlon ls enLlrely conducLed by waLer are:

lAS lree Alongslde Shlp (named porL of shlpmenL)
1he seller musL place Lhe goods alongslde Lhe shlp aL Lhe named porL. 1he seller musL clear
Lhe goods for exporL. SulLable only for marlLlme LransporL buL 9:1 for mulLlmodal sea
LransporL ln conLalners (see !"#$%&'()*+,-,, lCC publlcaLlon 713). 1hls Lerm ls Lyplcally used
for heavy-llfL or bulk cargo.

lC8 lree on 8oard (named porL of shlpmenL)
1he seller musL load Lhe goods on board Lhe vessel nomlnaLed by Lhe buyer. CosL and rlsk
are dlvlded when Lhe goods are acLually on board of Lhe vessel (Lhls rule ls new!). 1he seller
musL clear Lhe goods for exporL. 1he Lerm ls appllcable for marlLlme and lnland waLerway
LransporL only buL 9:1 for mulLlmodal sea LransporL ln conLalners (see !"#$%&'()*+,-,, lCC
publlcaLlon 713). 1he buyer musL lnsLrucL Lhe seller Lhe deLalls of Lhe vessel and Lhe porL
where Lhe goods are Lo be loaded, and Lhere ls no reference Lo, or provlslon for, Lhe use of a
carrler or forwarder. 1hls Lerm has been greaLly mlsused over Lhe lasL Lhree decades ever
slnce !"#$%&'()*-./, explalned LhaL lCA should be used for conLalner shlpmenLs.

Cl8 CosL and lrelghL (named porL of desLlnaLlon)
Seller musL pay Lhe cosLs and frelghL Lo brlng Lhe goods Lo Lhe porL of desLlnaLlon. Powever,
rlsk ls Lransferred Lo Lhe buyer once Lhe goods are loaded on Lhe vessel (Lhls rule ls new!).
MarlLlme LransporL only and lnsurance for Lhe goods ls 9:1 lncluded. 1hls Lerm ls formerly
known as Cnl (C&l).

Cll CosL, lnsurance and lrelghL (named porL of desLlnaLlon)
LxacLly Lhe same as Cl8 excepL LhaL Lhe seller musL ln addlLlon procure and pay for Lhe
lnsurance. MarlLlme LransporL only.

*./0(0"1%&2*!"#$%&'()*+,,,*
012**0&345&'&6*1%*2'$"%4&'*7"8(&6*938#&*$:*6&345&';<*
=>4)* %&'(* #8"* ?&* @)&6*A>&"*%>&* B$$6)* 8'&* %'8")9$'%&6* ?;* '843* 8"6* '$86C* =>&* )&33&'* 98;)* :$'*
%'8")9$'%8%4$"*%$*%>&*"8(&6*938#&*$:*6&345&';*8%*%>&*:'$"%4&'C*=>&*?@;&'*8''8"B&)*:$'*#@)%$()*
#3&8'8"#&* 8"6* 98;)* :$'* %'8")9$'%8%4$"* :'$(* %>&* :'$"%4&'* %$* >4)* :8#%$';C* =>&* 98))4"B* $:* '4)D*
$##@')*8%*%>&*:'$"%4&'C*
*
0EF**0&345&'&6*EG*F>49*7"8(&6*9$'%*$:*6&345&';<*
H>&'&* B$$6)* 8'&* 6&345&'&6* &G* )>49I* %>&* 98))4"B* $:* '4)D* 6$&)* "$%* $##@'* @"%43* %>&* )>49* >8)*
8''45&6*8%*%>&*"8(&6*9$'%*$:*6&)%4"8%4$"*8"6*%>&*B$$6)*(86&*858438?3&*:$'*@"3$864"B*%$*%>&*
?@;&'C* =>&* )&33&'* 98;)* %>&* )8(&* :'&4B>%* 8"6* 4")@'8"#&* #$)%)* 8)* >&* A$@36* @"6&'* 8* J!2*
8''8"B&(&"%C*K"34D&*J2L*8"6*J!2*%&'()I*%>&*)&33&'*>8)*8B'&&6*%$*?&8'*"$%*M@)%*#$)%I*?@%*83)$*
L4)D*8"6*=4%3&*@9*%$*%>&*8''4583*$:*%>&*5&))&3*8%*%>&*"8(&6*9$'%C*J$)%)*:$'*@"3$864"B*%>&*B$$6)*
3;* @)&6* %&'(* 4"* )>4994"B* ?@3D*
#$(($64%4&)I*)@#>*8)*#$83I*B'84"I*6';*#>&(4#83)* N*N*N*8"6*A>&'&*%>&*)&33&'*&4%>&'*$A")*$'*>8)*
#>8'%&'&6I*%>&4'*$A"*5&))&3C*
*
0EO**0&345&'&6*EG*O@8;*7"8(&6*9$'%*$:*6&345&';<*
=>4)* 4)* )4(438'* %$* 0EFI* ?@%* %>&* 98))4"B* $:* '4)D* 6$&)* "$%* $##@'* @"%43* %>&* B$$6)* >85&* ?&&"*
@"3$86&6*8%*%>&*9$'%*$:*6&)%4"8%4$"C*
*
00K**0&345&'&6*0@%;*K"9846*7"8(&6*938#&*$:*6&)%4"8%4$"<*
=>4)* %&'(* (&8")* %>8%* %>&* )&33&'* 6&345&')* %>&* B$$6)* %$* %>&* ?@;&'* %$* %>&* "8(&6* 938#&* $:*
6&)%4"8%4$"* 4"* %>&* #$"%'8#%* $:* )83&C* =>&* B$$6)* 8'&* "$%* #3&8'&6* :$'* 4(9$'%* $'* @"3$86&6* :'$(*
8";* :$'(* $:* %'8")9$'%* 8%* %>&* 938#&* $:*6&)%4"8%4$"C* =>&* ?@;&'* 4)* '&)9$")4?3&* :$'* %>&* #$)%)* 8"6*
'4)D)* :$'* %>&* @"3$864"BI* 6@%;* 8"6* 8";* )@?)&P@&"%* 6&345&';* ?&;$"6* %>&* 938#&* $:* 6&)%4"8%4$"C*
Q$A&5&'I* 4:* %>&* ?@;&'* A4)>&)* %>&* )&33&'* %$* ?&8'* #$)%* 8"6* '4)D)* 8))$#48%&6* A4%>* %>&* 4(9$'%*
#3&8'8"#&I* 6@%;I* @"3$864"B* 8"6* )@?)&P@&"%* 6&345&';* ?&;$"6* %>&* 938#&* $:* 6&)%4"8%4$"I* %>&"*
%>4)*833*"&&6)*%$*?&*&G934#4%3;*8B'&&6*@9$"*4"*%>&*#$"%'8#%*$:*)83&*



!"#$%&'()*+#&,-"./'0.&12-'
!
"#$%&!'()*$!+%''#,%!-!+$.//!
012!3%2%)4)5,!6#57!!!88888888!9:;<=!
!
&>.&?1?!!
!"#$%&'(%)*+,'
!
&@/#&)33%4A2#60%!
!-#./'01'2#3'4.*56$,!
!
&>/&!012!5A!BBB!
!2#3'4.*56$'78/9*.,!
!
&C?2&881881>/??!
9:++8*'2%$*,!
!
&C?"&11>//D!3,%5$)5#!
!2%$*';<5'(&%3*'01'=>?6.@,!
!
&E?"&'FGHI!6<JKL!$I<MH!*NJ<JOH!PJN:L!#:QHJR!
9A*<56<)':<+$6$8$6#<B'$93,'
!
&@/%&P2SP33!0#$%'$!4%3')A5!
!
&E/&'T!3NOQ!6FUHIL!#$V%5'!,3%%2%!!
90.5*.6<)'48+$#/*.,!
!
&ED&#IWHJ:NJH<J!'FGGXNHI!
!C*<*1636%.@B'$9<,!
!
&C>6&%P31P'Y!ZZZZLZZ!9<R!GHI!IHX<:N[H!SI\]\I^<!)J[\NOH=!
948..*<3@'D';/#8<$B'%+'%??&63%9&*'#<'%<'-0C'#.'=EFG#.H+'9%+6+,!
!
&CD#&!E_!S0P'!A3!+)5P'!
9(*.3*<$%)*'4.*56$';/#8<$'"#&*.%<3*,!
!
&@?#&3HOHN[NJW!6<JK!"H:<NXR1'()*$!
9;I%6&%9&*'G6$J'KKKC@,!
!
&@>S&!?>/!"#`'!#'!A*!610!)''P#52%!"#$%!
!2*1*..*5'(%@/*<$'2*$%6&+,!
!
&@CS&S3AV)6)$%"!!
!(%.$6%&'AJ6?/*<$+,!
!
!
&@C$&#00A(%"!
!".%<++J6?/*<$,!
!
&@@#&6P%5A'!#)3%'!SA3$L!#3,%5$)5#!
9L#%56<)'(#.$,!
!
&@@6&S)3#%P'!SA3$L!,3%%2%!
926+3J%.)*'(#.$=!
!
&@@2&ZZ1ZZ1??!
!L%$*+$'AJ6?/*<$'2%$*,!
!
&@E#&2<IW\!!SI\MFO:!"HROING:N\JL!"%0)4%3`!$%3+'&!*A6!6P%5A'!#)3%'!SA3$!)52A$%3+'!>/?/T!
9M##5+'2*+3.6?$6#<,!
!
@aT#&!2#38/*<$+'N*O86.*5,!
?T 2A++%32)#0!)54A)2%!"P0`!'),5%"!#5"!'$#+S%"L!6%#3)5,!$V%!6%5%*)2)#3`b'!'$#$%+%5$!
$V#$!$V%!)54A)2%"!#5"!'V)SS%"!,AA"'!#3%!)5!'$3)2$!2A5*A3+)$`!$A!$VA'%!'S%2)*)%"!)5!
%8SA3$!2A5$3#2$1#,3%%+%5$T!9$(A!A3),)5#0'!#5"!$(A!2AS)%'=T!
>T *P00! '%$! A*! 20%#5! A5! 6A#3"! A2%#5! 610! )''P%"! A3! %5"A3'%"! $A! $V%! A3"%3! A*! 'PS%3!
6#57L! %4)"%52)5,! 'V)S+%5$! A*! ,AA"'! *3A+! 6P%5A'! #)3%'! SA3$L! #3,%5$)5#! $A!
"%'$)5#$)A5! S)3#%P'! SA3$L! ,3%%2%L! +#37%"! b*3%),V$! S#`#60%! #$! "%'$)5#$)A5b! L! 5A$)*`!
#SS0)2#5$L! #5"! )''P%"! 6`L! #5"! %4)"%52)5,! +'2! 0)5%'! #'! 2#33)%3T! 9$(A! A3),)5#0'! #5"!
$(A!2AS)%'=T!
CT S#27)5,!0)'$!+%5$)A5)5,!$V%!2A5$%5$'L!$V%!,3A''!#5"!5%$!(%),V$!A*!,AA"'L!6%#3)5,!
6%5%*)2)#3`b'! '$#$%+%5$! $V#$! $V%! S#27)5,! )'! *)3+! #5"! 'P)$#60%! *A3! '#*%! 6`! '%#!
$3#5'SA3$#$)A5T!9$(A!A3),)5#0'!#5"!$(A!2AS)%'=T!
@T 2%3$)*)2#$%!A*!A3),)5!)''P%"!6`!2A+S%$%5$!#P$VA3)$)%'T!9A5%!A3),)5#0!#5"!A5%!2AS`=T!
ET 5A-)+A!2%3$)*)2#$%!)''P%"!6`!2A+S%$%5$!#P$VA3)$)%'T!9A5%!A3),)5#0!#5"!A5%!2AS`=T!
aT ','!'P34%`!3%SA3$!A5!'$P**)5,!1!0A#")5,!A*!2#3,AL!#'!S%3!#,3%%"!S3A*A3+#!)54A)2%T!
!
!
&@.#&!
!;556$6#<%&'4#<56$6#<+,!
?T A2%#5!*3%),V$L!()00!6%!2A4%3%"!6`!#SS0)2#5$!#22A3")5,!$A!$V%)3!'$#$%+%5$T!
>T )5'P3#52%!()00!6%!2A4%3%"!6`!#SS0)2#5$!#22A3")5,!$A!$V%)3!'$#$%+%5$T!
CT $V%!5P+6%3!#5"!"#$%!A*!$V%!012!#5"!$V%!5#+%!A*!AP3!6#57!+P'$!6%!cPA$%"!A5!#00!
"A2P+%5$'!3%cP)3%"T!
@T )5!2#'%!A*!")'23%S#52)%'!%P3!?//!()00!6%!"%"P2$%"!*3A+!%#2V!20#)+%"!#+AP5$T!
ET "A2P+%5$'! 6%#3)5,! #! "#$%! S3)A3! $A! $V%! "#$%! A*! )''P%! A*! $V%! A3),)5#0! 012! #3%! 5A$!
#22%S$#60%T!!
aT #5`!#$$#2V+%5$9'=!$A!3%cP)3%"!"A2P+%5$'!+P'$!6%!"P0`!'),5%"!6`!)''P%3T!
.T #00!6#57)5,!2V#3,%'!AP$')"%!,3%%2%!#3%!A5!6%5%*)2)#3`b'!#22AP5$T!!
dT #00! "A2P+%5$'! $A! 6%! '%5$! 6`! %8S3%''! 2AP3)%3! )5! A5%! 0A$! #$! AP3! #""3%''! 9'%%! *)%0"!
E?"=!!
DT 6)00! A*! 0#")5,! +P'$! 'VA(! 5#+%L! #""3%''! #5"! $V%! $%0%SVA5%! 5P+6%3! A*! $V%!
2#33`)5,!#,%5$!)5!S)3#%P'!,3%%2%T!
?/T $A0%3#52%! #00A(%"! )5! *)%0"! CD#T! 2A52%35)5,! A50`! cP#5$)$`! #5"! $V%3%*A3%!
3%'P0$)5,!)54A)2%!#+AP5$!6P$!5A$!P5)$!S3)2%T!
!
&@d&"A2P+%5$'! +P'$! 6%! S3%'%5$%"! ()$V)5! ?@! "#`'! #*$%3! )''P#52%! A*! $V%! $3#5'SA3$!
"A2P+%5$'!6P$!()$V)5!$V%!4#0)")$`!A*!$V)'!23%")$T!
!(*.6#5'-#.'(.*+*<$%$6#<'01'2#38/*<$+,!
!
&EC#&9$65=!
9N*6/98.+*/*<$'C%<HB'$9%,!
!
&E."&!9$65=!
!;33#8<$'G6$J'C%<HB'$9%,'
!
"C7P'"#'C*'7%/*5'
"C4P'"#'C*'4#<16./*5'
"C;P'"#'C*';5I6+*5'
!
!"#$$#%&'()*#%+** !"#$$#%&'()*#%+**
,"-$.+/'0 ,"-$.+/'0
12!3452,6 12!3452,6
Insurable Interest Insurable Interest
In the law of insurance, the insured In the law of insurance, the insured
must have an interest in the subject must have an interest in the subject
matter insured of his policy or such matter insured of his policy or such
policy will be void and policy will be void and
unenforceable. An individual unenforceable. An individual
ordinarily has an insurable interest ordinarily has an insurable interest
when he or she will obtain some when he or she will obtain some
type of financial benefit from the type of financial benefit from the
preservation of the subject matter. preservation of the subject matter.
Elements Elements
a) There must be a physical object a) There must be a physical object
exposed to marine peril. exposed to marine peril.
b) The insured must have a legal b) The insured must have a legal
relationship with the object so that relationship with the object so that
he may be benefited by its he may be benefited by its
preservation or prejudiced by its preservation or prejudiced by its
loss. loss.
Who has insurable interest? Who has insurable interest?
A buyer A buyer
The seller The seller
Carriers Carriers
The The charterer charterer
The insurer The insurer
The broker The broker
Agents Agents commission commission
Brokerage fees Brokerage fees
Trade terms in export sales Trade terms in export sales
Who is responsible for arranging insurance? Who is responsible for arranging insurance?
FOB Sale FOB Sale
Goods are at the risk of the exporter until they have crossed Goods are at the risk of the exporter until they have crossed
the ships the ships rail. After that point, the goods will be at buyers rail. After that point, the goods will be at buyers
risk who is responsible for arranging the insurance risk who is responsible for arranging the insurance
coverage. coverage.
CIF Sale CIF Sale
The seller is responsible for arranging the insurance at his own The seller is responsible for arranging the insurance at his own
cost. The form of insurance should be transferable, i.e. a cost. The form of insurance should be transferable, i.e. a
Marine Insurance Policy Marine Insurance Policy
Warranties Warranties
5%' )%7+/.-8#%&' 9:' ."+' #%*)/+7' ."-.' ;+/.-#%' ."#%&*' *"-<<' =/' *"-<< 5%' )%7+/.-8#%&' 9:' ."+' #%*)/+7' ."-.' ;+/.-#%' ."#%&*' *"-<<' =/' *"-<< %=.' 9+' %=.' 9+'
7=%+> 7=%+>
!"#$ !"#$% % &'()*+,$-- &'()*+,$--
5' ?-//-%.:' #*' -' ;=%7#.#=%' ?"#;"' @)*.' 9+' +A-;.<:' ;=@$<#+7' ?#."B' 5' ?-//-%.:' #*' -' ;=%7#.#=%' ?"#;"' @)*.' 9+' +A-;.<:' ;=@$<#+7' ?#."B'
?"+."+/' #.' 9+' @-.+/#-<' .=' ."+' /#*8' =/' %=.>' 1C' #.' 9+' %=.' *=' ;=@$< ?"+."+/' #.' 9+' @-.+/#-<' .=' ."+' /#*8' =/' %=.>' 1C' #.' 9+' %=.' *=' ;=@$<#+7' #+7'
?#."B'."+%B'*)9D+;.'.='-%:'+A$/+**'$/=E#*#=%'#%'."+'$=<#;:B'."+' ?#."B'."+%B'*)9D+;.'.='-%:'+A$/+**'$/=E#*#=%'#%'."+'$=<#;:B'."+'#%*)/+7' #%*)/+7'
#*' 7#*;"-/&+7' C/=@' <#-9#<#.:' -*' C/=@' ."+' 7-.+' =C' ."+' 9/+-;"' =C' #*' 7#*;"-/&+7' C/=@' <#-9#<#.:' -*' C/=@' ."+' 7-.+' =C' ."+' 9/+-;"' =C'
?-//-%.:B' 9).' ?#."=).' $/+D)7#;+' .=' -%:' <#-9#<#.:' #%;)//+7' 9:' "#@ ?-//-%.:B' 9).' ?#."=).' $/+D)7#;+' .=' -%:' <#-9#<#.:' #%;)//+7' 9:' "#@
9+C=/+'."-.'7-.+> 9+C=/+'."-.'7-.+>
Warranties Warranties
SPECIFIC CHARACTERISTICS: SPECIFIC CHARACTERISTICS:
A warranty inserted in a policy of A warranty inserted in a policy of
insurance must be literally and insurance must be literally and
strictly complied with. strictly complied with.
It need not be material to the risk It need not be material to the risk
There is no remedy for breach There is no remedy for breach
It is a promissory condition It is a promissory condition
precedent. precedent.
Warranties Warranties
!!! A promissory warranty has to !!! A promissory warranty has to
be differentiated from a so called be differentiated from a so called
warranty prefaced with the warranty prefaced with the
words words warranted free from warranted free from , the , the
purpose of which is to except the purpose of which is to except the
insurer from liability for a insurer from liability for a
particular loss. particular loss.
When breach of warranty is excused? ( MIA When breach of warranty is excused? ( MIA - -
Sec 34 ) Sec 34 )
1. 1.By reason of a change of circumstances By reason of a change of circumstances
to the contract to the contract
2. 2.When compliance with the warranty is When compliance with the warranty is
rendered unlawful by any subsequent law rendered unlawful by any subsequent law
3. 3.Where a warranty is broken, the assured Where a warranty is broken, the assured
cannot avail himself of the cannot avail himself of the defence defence that that
the breach has been remedied. the breach has been remedied.
4. 4.When the When the the the insurer has waived the insurer has waived the
Types of warranties : Types of warranties :
Express warranty (MIA Express warranty (MIA Sec. 35) Sec. 35)
Is a written undertaking in the contract to Is a written undertaking in the contract to
perform a certain act. Failure to comply perform a certain act. Failure to comply
exactly with the warranty may result in the exactly with the warranty may result in the
policy being avoided by the insurer. policy being avoided by the insurer.
To this effect, express warranties are : To this effect, express warranties are :
(a) (a)The warranty of neutrality The warranty of neutrality
(b) (b)The warranty of good safety The warranty of good safety
(c) (c)The classification clause The classification clause
Warranties Warranties
Types of warranties : Types of warranties :
Implied warranty Implied warranty
An implied warranty is not specifically stated or written in the An implied warranty is not specifically stated or written in the
contract, however, the law regards certain conditions as contract, however, the law regards certain conditions as
implied. implied.
Implied warranties Implied warranties that fall in this category are: that fall in this category are:
(a) (a) Warranty of seaworthiness Warranty of seaworthiness
(b) (b) Warranty of Warranty of cargoworthiness cargoworthiness
(c) (c) warranty of legality warranty of legality
Types of policies for cargo Types of policies for cargo
1. Facultative Insurance 1. Facultative Insurance
Relates to a particular Relates to a particular sending sending or or shipment. shipment.
2. Open contracts 2. Open contracts
Of great advantage to the insured due to the fact that the cost Of great advantage to the insured due to the fact that the cost
of insurance can be of insurance can be standardised standardised and particular terms of and particular terms of
trade may be agreed. trade may be agreed.
There are three types of open contracts namely; floating There are three types of open contracts namely; floating
policies, open covers, open policies. policies, open covers, open policies.
Types of policies for cargo Types of policies for cargo
Floating policies Floating policies
Covers a certain total value of goods whose particulars are Covers a certain total value of goods whose particulars are
declared prior to individual shipments. Every shipment is declared prior to individual shipments. Every shipment is
declared on special terms and the amount of the policy is declared on special terms and the amount of the policy is
reduced by the amount of that shipment. The disadvantage reduced by the amount of that shipment. The disadvantage
of this policy is the fact that the insurer will expect to be pa of this policy is the fact that the insurer will expect to be paid id
a premium deposit that will relate to the total value of the a premium deposit that will relate to the total value of the
policy. policy.
Types of policies for cargo Types of policies for cargo
Open covers Open covers
This type of policy offers automatic cover available for a This type of policy offers automatic cover available for a
period. The extent of the period varies from a year and it period. The extent of the period varies from a year and it
can be on a permanent basis whilst it may be cancelled by can be on a permanent basis whilst it may be cancelled by
either party. The insurer covers all either party. The insurer covers all sendings sendings and the and the
premium rates are fixed. premium rates are fixed.
Types of policies for cargo Types of policies for cargo
Open policies Open policies
These type of policies are tailor These type of policies are tailor- -made made
and will be formulated to meet up and will be formulated to meet up
the demands of the modern multi the demands of the modern multi- -
modal transport. They do not modal transport. They do not
necessarily relate to a time period necessarily relate to a time period
but will remain in force until but will remain in force until
cancellation. cancellation.
Advantages of open cover or open policies: Advantages of open cover or open policies:
- - The insured avoids the risk of The insured avoids the risk of
omitting to omitting to to to effect the necessary effect the necessary
insurance cover since there is a insurance cover since there is a
continuous automatic cover in force. continuous automatic cover in force.
- - The cost of obtaining insurance is The cost of obtaining insurance is
known in advance. known in advance.
Advantages of open cover or open Advantages of open cover or open
policies: policies:
- - The exporter will have the benefit of The exporter will have the benefit of
getting better terms from the insurer getting better terms from the insurer
since the latter is prepared to offer since the latter is prepared to offer
better terms by reason of an annual better terms by reason of an annual
policy arrangement. policy arrangement.
- - The insured will be in a more The insured will be in a more
favorable position when negotiating favorable position when negotiating
claims with the insurers. claims with the insurers.
Effecting Insurance Effecting Insurance- -Assessing the risk Assessing the risk
Conditions of Insurance Conditions of Insurance
!"#$%&'(&
)*+,'&)-*.%$%
Claims procedure Claims procedure
The principle of average The principle of average
Average is a technical term which relates to Average is a technical term which relates to
partial losses. Partial losses may be sub partial losses. Partial losses may be sub- -
divided in two categories: divided in two categories:
(1) Particular Average (1) Particular Average
Is a partial loss of the subject matter insured Is a partial loss of the subject matter insured
which is caused by a peril insured which is caused by a peril insured
against. Includes expenses incurred by against. Includes expenses incurred by
the insured for the preservation of the the insured for the preservation of the
subject matter insured. subject matter insured.
The principle of average The principle of average
(2) General Average (2) General Average
There is a general average act where any extraordinary There is a general average act where any extraordinary
sacrifice or expenditure is reasonably made for the sacrifice or expenditure is reasonably made for the
preservation of the property imperiled in the common preservation of the property imperiled in the common
adventure. The principle behind GA is that all the parties adventure. The principle behind GA is that all the parties
benefited from the sacrifice, should contribute to the cost of benefited from the sacrifice, should contribute to the cost of
saving the venture according to the value of their property. saving the venture according to the value of their property.
Class Essay Group 1 HMC ICS GREEK BRANCH
Shipping Business_Chapter 8


Please write one of the following questions from Chapter 8 (Course Book, Ch.8, p.98):



1. Examine the advantages and disadvantages of using a Documentary Credit
in international trading.

2. Explain the meaning of insurable interest.

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS

LESSON 9 INTERNATIONAL SHIPPING ORGANISATIONS

INTRODUCTION

Intergovernmental

Private owed by subscribers

Influential

Dynamic

Consult web sites


INTERNATIONAL CHAMBER OF SHIPPING (ICS)
www.marisec.org

Established 1921. Restyled in 1948.
Based London
Consultative membership of IMO, WCO, ITU and UNCTAD
Membership National shipowners associations
Represents 50% half of the world fleet
Objective Represents the views of the operators of merchant ships
Technical, legal, operational matters



INTERNATIONAL SHIPPING FEDERATION (ISF)
www.marisec.org

Common secretariat as ICS.
Based London
Dedicated To manpower issues.
Financed by annual subscriptions of members based on fleet size.
HR, training, welfare and employers issues

ICS/ISF includes Hellenic Chamber of Shipping
Cyprus Shipping Council
Japanese Shipowners Association
UK Chamber of Shipping
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2

INTERNATIONAL ASSOCIATION OF DRY CARGO SHIP OWNERS
(INTERCARGO)
www.intercargo.org


Established 1980.
Based London
Observer status at IMO
Membership Shipowners with dry cargo (bulk) fleets
Initiated by Chandris to follow example of INTERTANKO with tankers
Main backing Greece, Scandinavia and Hong Kong
Services To members information, advice, guidance, representation
Checks Technical and commercial issues



THE INTERNATIONAL ASSOCIATION OF INDEPENDENT
TANKER OWNERS (INTERTANKO).
www.intertanko.com

Established 1970
Based Oslo and London
Objective Declared as safe transport, cleaner seas, free competition
Represents 75% of world fleet (the independent owners control 70%)
Excludes Oil company and government owned fleets
Services Gather intelligence, dispenses information and advice
acts as pressure group, performs documentary work (draft
tanker C/Ps) tanker safety and operations.



BALTIC & INTERNATIONAL MARITIME COUNCIL (BIMCO)
www.bimco.dk

Established 1905
Based Copenhagen
Objective Serve members interests in the dry cargo bulk trades
Represents 60% of world merchant fleet
Members Shipowners, operators, agents, ship brokers, lawyers, P&I
Services Document approval (draft C/Ps and B/Ls etc.), new regulations
(impact and information), management training conferences
and education, communications (e-mail, computer)
Pursues Issues affecting members, seeks co-operation
and not confrontation.


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3

THE INSTITUTE OF CHARTERED SHIPBROKERS (ICS)
www.ics.org

Established 1911. Royal Charter granted 1920.
Based London
Objective Maintenance of standards
Represents Local associations of ship brokers
Members World wide ship brokers and agents MICS and FICS
Services Programmes of education and training



THE BALTIC EXCHANGE
www.balticexchange.com

Established 1823
Based London
Style Limited company owned by shareholders
Membership Corporations and individuals engaged in trade
Supported by Membership subscriptions, rental income from properties
Activities International Freight Market
international chartering of ships / aircraft and cargoes.
S&P market for ships and aircraft
Commodity market BIFFEX moved off in 1985
Operation Directed by Board of Governors.
Discipline members by censure, suspension, expulsion
Objective Ethical standards of trading
Services Trading floor (weekly), information, freight indices, real time
market news, a substantial data base, internet portal..


BALTIC ETHICS OUR WORD OUR BOND

Members rely on each other and principals
Contracts made verbally and subsequently confirmed in writing

Directors Guidance on Non Ethical behaviour includes

Freight contractors offering named tonnage without the
owners consent

Without holding due commissions on freight and hire

Using information from members to overseas principals to
bypass the Exchange


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
4

THE FEDERATION OF NATIONAL ASSOCIATIONS OF
SHIPBROKERS AND AGENTS (FONASBA)
www.fonasba.com

Established 1969
Based London
Consultative status at UNCTAD
Objective Authoritative comment on shipbrokers and port agents work.
Represents Agents (liner and tramper) and chartering ship brokers
Members include European shipbroker and ships agents associations
from 26 countries
Services Support members with common problems,
Strives to improve shipping contracts, documents,
Exchanges information,
Operates at an international level,
Revises / improves C/P forms AMWELSH, ASBA Multiform
Incorporates ECASBA
European Community Association of Shipbrokers and Agents



THE INTERNATIONAL FEDERATION OF FORWARDING
AGENTS ASSOCIATIONS (FIATA)
www.fiata.com

Established 1926
Based in Vienna (French language)
Objective Examine developments in sea, air, rail, truck transport
Represents Non governmental
Members include Freight forwarders and ship brokers in 150 countries
through national associations
BIFA (British International Freight Association)
Services Air freight, Customs, Multi Modal Transport, Shipping
Pursues issues Transport documentation N/N waybills, dangerous
goods declarations, B/Ls, Warehouse receipts, etc


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
5

THE INTERNATIONAL MARITIME ORGANISATION (IMO)
www.imo.org

Formerly Inter-Governmental Maritime Consultative Organisation (IMCO)
Body of the United Nations
Established 1958 (as IMCO). 1982 as IMO
Based in London
Objective Improve marine safety, prevent marine pollution
Represents
Members 132 National governments.
Services Technical organisation run by committees
MSC Marine Safety Committee
MEPC Marine Environment Protection Committee
Significant success Traffic lane routing,
ISM (International Safety Management Code)
Notice IMO makes recommendations to national governments which can
incorporate them into their law.

National governments engage Classification to
- perform surveys and
- issue of certificates
National governments undertake
PSC (Port State Control) inspections



UNITED NATIONAS COUNCIL FOR TRADE AND DEVELOPMENT
(UNCTAD)
www.unctad.org

Based in Geneva
Objective Development of 3
rd
world countries.
Represents UNO as a body of the United Nations
Services Political organisation supporting poorer countries
Pursues issues Non Mandatory Minimum Standards for Shipping Agents
Code of Practice for Liner Conferences (40-40-20)
Hamburg Rules (as an alternative to the Hague Visby Rules)
for defining ship owners liabilities
Standardising C/P terms
Consensus on any issue difficult owing to diversity of interests

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
6

CHAMBERS OF COMMERCE (CoC)
INTERNATIONAL CHAMBER OF COMMERCE (ICC)
www.iccwbo.org

Based in Paris (ICC) Every town, city nation (CoC)
Objective Members interests
Represents Local traders, merchants, manufacturers town, city, nation
Members Local businesses compulsory membership in some nations
Issues Respected Certificates of Origin
Commercial arbitration
References
Incoterms (Glossary of terms in international trade)
UCP (Uniform Customs & Practice for Documentary Credits
Sponsored IMB (International Maritime Bureau
CMC (Centre for Maritime Co-operation) open markets

Banded together as ICC (International Chambers of Commerce)




THE INTERNATIONAL MARITIME BUREAU (IMB)
www.iccwbo.org (as related to ICC)

Objective Reduce maritime fraud
Created Under the auspices of ICC
Services Finding and getting nations to prosecute the fraudulent
Authenticate B/Ls and other documents
Pass on information about marine crime
Advice and information on avoiding marine crimes
Training and help in countering marine crime
Piracy Reporting Centre in Kuala Lumpur (1992)
SHIPLOC Ship Location through satellite / internet /ICC
Issues Most fraud involves several nations a problem
Embarrassment deters victims declaring a fraud

HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
7

THE CORPORATION OF LLOYDS / LLOYDS OF LONDON
www.lloydsoflondon.co.uk

Established 1688. Act of Parliament 1871 / 1982
Based in London
Based On collection of news
Objective Insurance market. Insures everything.
A Society of Underwriters (not a company PLC / LLC`)
Society takes no liability for insured risks
Underwriters conduct the business of insurance
at personal profit and
at individual and unlimited liability.
Represents 20,000 individual members in 40 syndicates
managed by underwriting agents
Members No restriction by nationality
Only stringent financial requirements



LLOYDS AGENTS

World wide shipping intelligence system
Network of some 500 agents
Duties Reporting local news to Lloyds
Appointing local surveyors for loss and damage
Involved in non marine (aviation etc) claims



LLOYDS OF LONDON PRESS

Sold to independent investors
Collects, processes and publishes information from Lloyds Agents
Including casualties, market reports, articles of interest.
Publishes Lloyds List



HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
8
CLASSIFICATION SOCIETIES

Most famous and biggest:
Lloyds Register UK LR 1760
Bureau Veritas France BV 1828
Germanischer Lloyd Germany GL 1867
Registrano Italiano Navale Italy RI 1861
Nippon Kaiji Kyokai Japan NK 1899
Det Norske Veritas Norway NV 1864
American Bureau of Shipping USA AB 1862


INTERNATIONAL ASSOCIATION OF CLASSIFICATION
SOCIETIES (IACS)
www.iacs.org.uk

Based in London
Objective Establish / uphold acceptable rules for ship classification
Code of ethics
Income Member classification societies
Management Professional employees
Represents 10 leasing classification societies, 2 Associates and rising.
Subscribers 90% of world shipping
design, construction, through life compliance
Issue Much open to criticism
following ship losses reflecting scantling failures
inability to introduce common standards


LLOYDS REGISTER OF SHIPPING (LR)

Separate from The Corporation of Lloyds though a common origin in Edward
Lloyds London coffee house

Established 1834
Based in London
Objective Independent classification society. Non profit.
Income Fees on classification services rendered
Management General Committee
Ship owners and underwriters, engineers, steel makers
Services Standards setting and supervising organisation.
Research and technical advisory / investigation services
Technical records
Volumes of Lloyds Register
Surveys of ships Special every 4 years hull and machinery
Continuous Hull and Machinery Surveys cycles
1,500 ship surveyors world wide
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
9

INTERNATIONAL TRANSPORT WORKERS FEDERATION (ITF)

Established 1895
Based in London
Objective Strives to avoid the undermining of transport workers standards
by FoC Registers (Flags of Convenience)
Income Fines, subscriptions, penalties.
Represents . . 4 million transport workers
Members International secretariat for 400 trade unions world wide
Services Offers standard forms of employment agreements
for use if crew / employer lack unionised agreement
Widely respected / supported so can black list offending ships
Exposed to criticism of hypocrisy and mismanagement
Does good work for marine charities and seamen in trouble

!"#$%"&#!'"&()
*+!,,!"-)
'%-&"!*&#!'"*
*./00/12)345/1655)7
!"#$%&'()*%+,$'
!"#$%&'()*%+,$'("#-(.''$/&"0+'(1"2(344&/+
lnLroducLlon
1he lndusLry of shlpplng has many forces
whlch need Lo communlcaLe and exerclse
Lhelr lnfluence ln Lhelr fleld of lnLeresL.
lnLergovernmenLal or prlvaLe.
SPlCWnL8S' C8CAnlSA1lCnS
lnLernaLlonal Chamber of Shlpplng (1921)
Shlp-owners' assoclaLlons and shlpplng companles
are members of lL.
CollecLlve vlews of lnLernaLlonal merchanL shlp
operaLors.
Llnked wlLh lMC, World CusLoms CrganlsaLlon,
lnLernaLlonal 1elecommunlcaLlons unlon, unC1Au.
London based, shares a secreLarlaL wlLh lSl (shlpplng
employers' organlsaLlon)
SPlCWnL8S' C8CAnlSA1lCnS
lnLercargo (1980)
ury cargo shlpowners assoclaLlon
uedlcaLes Lo lssues of LhaL parL of Lhe lndusLry
of a govenmenLal or commerclal naLure
romoLes and proLecLs Lhe lnLeresLs of
prlvaLe, lndependenL owners of Lhe dry bulk
secLor.
lnformaLlon, guldance, advlce, represenLaLlon
are servlces offered Lo members.
SPlCWnL8S' C8CAnlSA1lCnS
lnLerLanko (1970)
lndependenL Lanker owners assoclaLlon (70
of world Lonnage, ouL of whom 73
parLlclpaLe ln lnLerLanko).
Safe LransporL, cleaner seas, free
compeLlLlon".
lnformaLlon, documenLaLlon drafLlng, (Lanker
charLerlng forms), safeLy.
SPlCWnL8S' C8CAnlSA1lCnS
8lMCC (1903), Copenhagen
lnlLlally founded by Cwners engaglng ln 8alLlc
and 8lack Sea Lrade, buL adopLed a wlder
ouLlook.
lnLernaLlonal membershlp lncludlng owners,
operaLors, brokers, agenLs, lawyers, +l Clubs.
60 of world fleeL
uocumenLaLlon drafLlng, one day courses
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
lnsLlLuLe of CharLered Shlpbrokers (1911)
lormed by dlfferenL provlnclal assoclaLlons of
shlpbrokers almlng Lo malnLaln Lhe same eLhlcal
sLandards for whlch Lhe 8alLlc was famous. 1hls
led Lo Lhe Lralnlng programs.
M(ember)lCS when successfully passlng Lhe
exams.
l(ellow)lCS when aLLalnlng poslLlon of lnfluence
ln Lhe lndusLry. now boLh can be lnLernaLlonal.
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
1he 8alLlc Lxchange
CorporaLe and lndlvldual members.
AcLlvlLy ls mosLly ln Lhe lnLernaLlonal lrelghL MarkeL,
buL also ln S+, and alrcrafL charLer and s+p.
MosL members are brokers
luLures MarkeL (An aucLlon markeL ln whlch
parLlclpanLs buy and sell commodlLy/fuLure
conLracLs for dellvery on a speclfled fuLure daLe),
8alLlc lnLernaLlonal lrelghL luLures Lxchange
(8lllLx) launched 1983
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
Lxchange members are uk esLabllshed companles or
lndlvlduals.
8oard of 13 dlrecLors, Lwelve from shareholders,
Lhree from members.
8rokers LeLLer ls slgned by brokers LhaL are members
of Lhe Lxchange, underLaklng noL Lo acL as prlnclpals.
1hey operaLe separaLe bank accounLs for Lhelr
cllenLs and musL lnsure Lhemselves for llablllLy
arlslng ouL of Lhelr broker acLlvlLy
SecreLary acLs as chlef execuLlve
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
LLhlcs: Cur word our bond"
AcLlons noL wlLhln eLhlcs of Lhe Lxchange:
lrelghL conLracLors (speculaLors) offerlng named
Lonnage agalnsL Lenders wlLhouL auLhorlLy of
Cwners
WlLhholdlng of commlsslons when due for frelghL
earned and pald
uslng Lxchange lnformaLlon Lo bypass lL and Lrade
dlrecLly wlLh overseas prlnclpals or brokers
lrelghL lndlces are generaLed by Lhe Lxchange
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
lCnAS8A (1969) lederaLlon of naLlonal
AssoclaLlons of Shlp 8rokers and AgenLs
Luropean assoclaLlons represenLlng Llner and
1ramp AgenLs as well as charLerlng brokers.
lL supporLs lLs members when Lhelr lnLeresLs
are ln quesLlon
uocumenLaLlon drafLlng
Lnsures exchange of lnformaLlon
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
CooperaLes wlLh Lrade parLners (owners,
cargo lnLeresLs, charLerers)
ConLrlbuLes Lo documenLaLlon revlslon
LCAS8A (wlLhln Lhe Lu)
88CkL8S'/ACLn1S'
C8CAnlSA1lCnS
llA1A (lnLernaLlonal lederaLlon of lorwardlng
AgenLs AssoclaLlons) 1926
lrelghL forwarders (naLlonal AssoclaLlons and
lndlvldual members)
Also ln AlrfrelghL, CusLoms, MulLlmodal 1ransporL
Lxamlnes developmenLs ln sea, alr, rall LransporL
uocumenLaLlon drafLlng
un C8CAnlSA1lCnS
lMC (1938)
1he flrsL lnLernaLlonal body dedlcaLed Lo
marlLlme maLLers.
lmprovemenL of marlLlme safeLy
revenLlon of marlne polluLlon
SCLAS (SafeLy of llfe aL sea): lncludes
machlnery and elecLrlcal lnsLallaLlons, safeLy
of navlgaLlon, dangerous goods, nuclear shlps.
un C8CAnlSA1lCnS
Assembly ls lLs governlng body (convenes every Lwo
years). 132 member sLaLes and one assoclaLe
member
Councll (32 member governmenLs elecLed by Lhe
Assembly)
CommlLLees and sub-commlLLees conducL mosL of
lMC work (MarlLlme SafeLy CommlLLee, Marlne
LnvlronmenL roLecLlon CommlLLee). AdopLlon of
convenLlons, proLocols, codes ls credlLed Lo Lhem.
1rafflc separaLlon schemes by lMC reduced colllslons
un C8CAnlSA1lCnS
lSM CCuL (lnLernaLlonal SafeLy ManagemenL Code)
lSS CCuL (lnLernaLlonal Shlp and orL laclllLles
SecurlLy Code) alms Lo address Lhe concerns on
securlLy and Lerrorlsm, plracy and sLowaways.
CperaLes ln shlps and ln porLs.
8ecognlzed SecurlLy CrganlzaLlons are appolnLed by
CovernmenLs Lo porLs.
Shlps and porLs should be sub[ecLed Lo rlsk
assessmenL, followlng whlch a securlLy plan ls drawn,
revlewed by 8SC and a cerLlflcaLe ls lssued.
un C8CAnlSA1lCnS
1hree sLage securlLy alerL
lMC convenLlons come lnLo force when
adopLed by Lhe flag sLaLes.
CerLlflcaLes of compllance are lssued by
classlflcaLlon socleLles.
lnspecLlon and enforcemenL are underLaken
by orL SLaLe conLrol
un C8CAnlSA1lCnS
unC1Au (un Councll for 1rade and
uevelopmenL)
ollLlcal raLher Lhan Lechnlcal
CerLaln acLlvlLles of lL were welcome by Lhe
lnLernaLlonal communlLy (Shlpplng AgenLs
sLandards, Lralnlng programmes)
CLher efforLs were noL successful (Llner
Lradlng regulaLlon)
un C8CAnlSA1lCnS
Pamburg 8ules: lmprovlng poslLlon of cargo
lnLeresLs. noL adopLed by Lrade ln general.
lnLervenLlon ln charLerparLles' clauses: noL
successful slnce exlsLlng drafLs are approved
by Lrade.
C1PL8 8LLA1Lu 8CulLS
lnLernaLlonal Chamber of Commerce.
lncoLerms are lLs creaLlon.
unlform CusLoms and racLlce for
uocumenLary CredlLs (uC) are also ln broad
use.
C1PL8 8LLA1Lu 8CulLS
lnLernaLlonal MarlLlme 8ureau:
Almlng Lo reduce marlLlme fraud
ecullarlLles of marlLlme fraud: erpeLraLors
ln dlfferenL [urlsdlcLlons, vlcLlms embarrassed
Lo admlL Lhey had been fooled.
LfforLs Lo overcome [urlsdlcLlon problem, as
many counLrles alm Lo prosecuLe for crlmes
wlLhln Lhelr LerrlLory.
C1PL8 8LLA1Lu 8CulLS
lM8 conLrlbuLes ln lnformaLlon dlssemlnaLlon,
keeplng alerL and offers advlce, Lralnlng,
ralses awareness.
lracy reporLlng cenLre (kuala Lumpur).
SPlLCCk: SaLelllLe Lracklng sysLem
C1PL8 8LLA1Lu 8CulLS
Lloyd's of London (1871)
lnsurance markeL, noL a company buL a
socleLy of underwrlLers lnsurlng everyLhlng
wlLh personal llablllLy.
Lloyd's members acL ln syndlcaLes, managed
by underwrlLlng agenL who ls responslble for
appolnLlng a professlonal underwrlLer for
each maln class of buslness.
C1PL8 8LLA1Lu 8CulLS
Lloyd's agenLs: Worldwlde neLwork provldlng news
relaLlng Lo Lhelr area of operaLlon.
AppolnL surveyors when needed, asslsL ln lssues
arlslng ln Lhelr areas.
1he flrsL was appolnLed ln 1811 ln Madelra, and 300
are appolnLed Loday, many counLlng more Lhan 100
years ln Lhls posL.
Lloyds of London ress: LdlLlons publlshlng
developmenLs and lnformaLlon on Lhe lssues of
lnLeresL
C1PL8 8LLA1Lu 8CulLS
ClasslflcaLlon socleLles
Lloyd's reglsLer of shlpplng: lndependenL from
Lloyds CorporaLlon, shares Lhe same orlgln and
was meanL lnlLlally Lo asslsL underwrlLers Lo
Lhelr assessmenLs by provldlng lnformaLlon on
vessels.
1he flrsL reglsLer was publlshed 1760.
non-proflL maklng. SubscrlpLlons and surveyors
fees are lLs lncome
C1PL8 8LLA1Lu 8CulLS
rovldes Lechnlcal advlce
AlmosL all marlLlme naLlons ln Lhe world have
Lhelr own classlflcaLlon socleLy.
Speclal survey every four years for hull and
machlnery lnspecLlon.
Lloyd's has broadened lLs scope Lo lnclude
approval of naval archlLecLs plans Llll audlLlng
of lSC sysLems.
C1PL8 8LLA1Lu 8CulLS
lACS (lnLernaLlonal AssoclaLlon of
ClasslflcaLlon SocleLles)
Ma[or ClasslflcaLlon socleLles formed lACS
seLLlng sLrlcL crlLerla, adopLlng unlform
pracLlces and promoLlng code of eLhlcs and
Lransparency.
90 of lnLernaLlonal Lonnage ls classed wlLh
lACS socleLles.
C1PL8 8LLA1Lu 8CulLS
l1l (lnLernaLlonal 1ransporL Workers lederaLlon)
More Lhan 400 labour unlons are lLs members,
comlng from more Lhan 100 counLrles and
represenLlng more Lhan 4.000.000 LransporL
workers.
llags of convenlence adopLlon caused Lhe
reacLlon of l1l, requlrlng owners Lo adhere Lo Lo
mlnlmum employmenL condlLlons, oLherwlse
boycoLL would apply
C1PL8 8LLA1Lu 8CulLS
A vessel whose crew ls noL covered by a
properly negoLlaLed agreemenL, ls boycoLLed by
l1l (vlenna congress 1971).
1hls means LhaL local unlons, belng afflllaLed Lo
l1l, wlll refuse from Lowlng, dlscharglng eLc Lhe
black-llsLed vessel.
now ln many porLs Lhere are permanenL l1l
offlclals Laklng care of crew's lnLeresLs.
lnLelllgence reporLlng of l1l ls flrsL class
1hank you for your paLlence!
Manolls Lglezos
!"#$$#%&' !"#$$#%&'
()!#%*!! ()!#%*!!
#%+*,%-+#.%-/' #%+*,%-+#.%-/'
!"#$$#%&' !"#$$#%&'
.,&-%#!-+#.%! .,&-%#!-+#.%!
0"-$+*,'1 0"-$+*,'1
INTERNATIONAL SHIPPING ORGANISATIONS INTERNATIONAL SHIPPING ORGANISATIONS
! ! Four distinctive categories namely: Four distinctive categories namely:
1. 1. Ship Ship- -owners owners organisations organisations
2. 2. Brokers Brokers and Agents and Agents organisations organisations
3. 3. United Nations United Nations organisations organisations
4. 4. Other shipping related bodies Other shipping related bodies
SHIPOWNERS SHIPOWNERS ORGANISATIONS ORGANISATIONS
1. 1. International Chamber of Shipping International Chamber of Shipping - - It is composed It is composed
of national ship of national ship- -owners owners and shipping and shipping
companies and is involved in a variety of areas companies and is involved in a variety of areas
including technical, legal, operational matters. including technical, legal, operational matters.
2. 2. Intercargo Intercargo - - Represents, promotes and protects Represents, promotes and protects
the interests of the the interests of the shipowners shipowners in the dry cargo in the dry cargo
sector. sector.
3. 3. Intertanko Intertanko is the Association of the is the Association of the
Independent Tanker Owners. It is not only an Independent Tanker Owners. It is not only an
intelligence centre for members but has done intelligence centre for members but has done
several documentary work due to the publishing several documentary work due to the publishing
of forms for all types of tanker chartering. of forms for all types of tanker chartering.
4. 4. Baltic and International Maritime Council (BIMCO) Baltic and International Maritime Council (BIMCO)
International character and membership. Its International character and membership. Its
BROKERS BROKERS AND AGENTS AND AGENTS ORGANISATIONS ORGANISATIONS
1. 1. The Institute of Chartered Shipbrokers The Institute of Chartered Shipbrokers
shipbrokers shipbrokers Association formed the ICS in Association formed the ICS in
1911. Primary objective the maintenance of 1911. Primary objective the maintenance of
standards and ethics in a standards and ethics in a programme programme of of
education and training. education and training.
2. 2. The Baltic Exchange The Baltic Exchange the majority of the the majority of the
members are brokers whose largest activity is members are brokers whose largest activity is
the Freight Market with the chartering of the the Freight Market with the chartering of the
vessels of all flags as well as sale and vessels of all flags as well as sale and
purchase. purchase. Motto Motto our word our bond. our word our bond.
3. 3. The Federation of National Associations of The Federation of National Associations of
Shipbrokers and Agents (FONASBA) Shipbrokers and Agents (FONASBA) formed in formed in
1969to represent the interests of the Liner 1969to represent the interests of the Liner
Agent. The Committee has issued forms of Agent. The Committee has issued forms of
Liner and Agency Agreements. Liner and Agency Agreements.
4. 4. The International Federation of Forwarding The International Federation of Forwarding
Agents Agents Associations (FIATA) Associations (FIATA) an industry an industry
UNITED NATIONS ORGANISATIONS UNITED NATIONS ORGANISATIONS
1. 1. The International Maritime The International Maritime Organisation Organisation (IMO) (IMO)
the 1 the 1
st st
international body devoted to international body devoted to
maritime matters which aims to improve maritime matters which aims to improve
maritime safety and the prevention of maritime safety and the prevention of
marine pollution. Most important IMO marine pollution. Most important IMO
treaties are SOLAS and ISPS Code. treaties are SOLAS and ISPS Code.
2. 2. United Nations Council for Trade and United Nations Council for Trade and
Development (UNCTAD) Development (UNCTAD) more of a political more of a political
character which is dedicated to trade and character which is dedicated to trade and
development of developing nations. development of developing nations.
Important Conventions were the Code of Important Conventions were the Code of
Practice for Liner Conferences and the Practice for Liner Conferences and the
OTHER SHIPPING RELATED BODIES OTHER SHIPPING RELATED BODIES
1. 1. The International Chamber of Commerce The International Chamber of Commerce forms forms
a group of traders, manufacturers and a group of traders, manufacturers and
merchants who come together to deal with merchants who come together to deal with
problems that they affect them. problems that they affect them.
2. 2. The International Maritime Bureau The International Maritime Bureau- - the main the main
purpose is to reduce Maritime fraud and purpose is to reduce Maritime fraud and
amongst other things to authenticate suspect amongst other things to authenticate suspect
bills of lading and other documents. bills of lading and other documents.
3. 3. The Corporation of Lloyds (Lloyd The Corporation of Lloyds (Lloyd s of London) s of London)
is a unique market, a society of underwriters is a unique market, a society of underwriters
who accept insurance risks for their personal who accept insurance risks for their personal
profit or loss. profit or loss.
4. 4. Lloyds Lloyds Agents Agents is a shipping intelligence is a shipping intelligence
CLASSIFICATION SOCIETIES CLASSIFICATION SOCIETIES
1. 1. Lloyd Lloyd s Register of Shipping s Register of Shipping - - non non- - profit profit
organisation organisation who obtains funds from fees who obtains funds from fees
charged for the services of its surveyors. charged for the services of its surveyors.
Provides technical advices in relation to Provides technical advices in relation to
vessel vessel s machinery failure and imposes s machinery failure and imposes
requirements that vessels undergo a requirements that vessels undergo a
special survey every four years in order for special survey every four years in order for
the Hull and Machinery to be inspected. the Hull and Machinery to be inspected.
2. 2. International Association of Classification International Association of Classification
Societies (IACS) Societies (IACS) - - is comprised of the 10 is comprised of the 10
principal classification societies. They are principal classification societies. They are
devoted in upholding standards for the devoted in upholding standards for the
classification of ships so that criteria on classification of ships so that criteria on
THE INTERNATIONAL TRANSPORT WORKERS THE INTERNATIONAL TRANSPORT WORKERS FEDERATION (ITF) FEDERATION (ITF)
! ! The International Transport Workers' Federation (ITF) The International Transport Workers' Federation (ITF)
represents transport workers around the world and represents transport workers around the world and
promotes their interests through global campaigning promotes their interests through global campaigning
and solidarity. and solidarity.
! ! Objectives: Objectives:
1. 1. To promote respect for trade union and human rights To promote respect for trade union and human rights
worldwide worldwide
2. 2. To work for peace based on social justice and To work for peace based on social justice and
economic progress economic progress
3. 3. To help its affiliated unions defend the interests of To help its affiliated unions defend the interests of
their members, to provide research and information their members, to provide research and information
services to its affiliates as well as general assistance services to its affiliates as well as general assistance
to transport workers in difficulty. to transport workers in difficulty.
Essay HMC ICS GREEK BRANCH
Shipping Business Chapter 9

Prepared by Capt. Malcolm MacKenzie FICS 1

To assist to prepare you for the exam, please write this essay.

It should be of about 1! to 1" pages in length - the amount you can write and check in
25 to 30 minutes allowed in the exam. Let us say 500 / 600 words at the most.

Essays should be hand written as this is the examination practice.

Strive to answer every point raised in the essay question.

This essay is an original exam question

Essay Question (taken from an actual exam paper):

The ITF is widely known for supporting member unions and
defending the interests of transport workers worldwide.

Describe, in detail, the role structure of the ITF and discuss the ways
in which it achieves its objectives.

Before writing, please consider that the question is in two parts:

1 Describe.. the role structure of..
2 Discuss the ways in which it achieves.

So you have two duties, to describe and to discuss. These are separate functions so
your answer most fall into two halves




Model Answer_ Essay HMC ICS GREEK BRANCH
Shipping Business Chapter 9

Prepared by Capt. MacKenzie


CLASS ESSAY MODEL ESSAY ANSWER

The ITF is widely known for supporting member unions and defending
the interests of transport workers worldwide.

Describe, in detail, the role and structure of the ITF and discuss the ways
in which it achieves its objectives.

The role of the International Transport-Workers Federation (ITF) is to serve as a
trades union for employees of transport businesses whilst they are out of their
countries. Thus it is always working in a foreign country capacity. It has been most
closely involved with the recruitment and employment of unlicenced merchant
seamen (ratings). This is a difficult sector as seamen ratings are not the most
intelligent of people and as they are often for away from home when trouble strikes.

The structure of the ITF is rarely seen or discussed. It is managed by its secretary Mr.
David Cockroft who maintains quite a low profile wearing noticeably aged clothes
and driving an even older car. He is guided by a committee of directors from transport
workers unions. Then the ITF has senior managers for financial and administrative
affairs with a support staff. However the number of staff is low less than a dozen.
The ITF has its own office within the headquarters of the British seamens union.

The ITF strives to achieve its objectives by ensuring that all seafarer ratings,
regardless of domicile, have sound and enforceable contracts of employment that pay
adequate wages in acceptable conditions. And when seamen, regardless of rank, are
abandoned in foreign ports whilst unpaid and / or underfed by ship owners who no
longer care or who no longer have the resources, the ITF can be activated, by a call to
a local unionized transport worker, to attempt to recover the arrears of wages, for the
improvement of living conditions on board and, if need be, the seamans repatriation.

The ITF has developed relationships with an impressive number of transport workers
unions especially those established in foreign ports to take an interest in the terms of
employment for local seamen in international trade. Whenever the ITF finds a crew in
trouble through lack of pay or victuals or in need of accommodation and repatriation,
the ITF directly approaches the ship owner through its appointed local representative
to reach an acceptable settlement. If this is not possible, the ITF can ask the local
unions to black the ship to prevent her working or being repaired or even sailing.
Once the ship is immobilized in this way, the ITF strives to have the owner
reconsider. If this fails, the ITF asks for the local court to intervene by having the ship
sold with the funds going to assist the deprived seamen. This is an effective procedure
albeit one of last resort.

The ITF is also active in supporting seamens charities on a regular basis. In March
2011, it opened a seamens mission at an Indian port in cooperation with the British
Sailors Society. Then the ITF delves into irregularities in the industry which need to
be addressed. The ITF had the wreck of the cape size bulk carrier DERBYSHIRE
found after she sank in very deepwater without any explanation. Subsequently the
weaknesses in her design were fully identified. Then the ITF exposed a racket in
Panama whereby ship masters unrestricted licences could be bought for cash, without
any training, experience or qualification in defiance of the IMOs STCW.
Model Answer_ Essay HMC ICS GREEK BRANCH
Shipping Business Chapter 9

Prepared by Capt. MacKenzie



So the ITF is managed with a certain flair and sense of mission in an original manner.

COMMENT

540 words

Paragraph
number

First Describe.. the role.of

The role of the ITF is
Second Describe.. the structure of..

The structure of the ITF is
Third Discuss the ways in which it
achieves its objectives
The ITF strives to achieve its
objectives by.

Thus I have attempted to relate my answer to the question no more and no less.


Malcolm MacKenzie



HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
1
SHIPPING BUSINESS

LESSON 10 COMMUNICATION IN BUSINESS



INTRODUCTION


Transmitting and receiving information

2 or more parties

Shipping is communication intensive

Communication skills are vital

Shipping uses English


BASIC PRINCIPLES OF BUSINESS COMMUNICATION


1. Prime consideration is the receiver (of your communication)

2. Keep your communication short and simple

(This is a business not a literary society)

Only use understood jargon (words and abbreviations)

3. Find the best medium (fax, phone, e-mail, telex)

and the best style (vernacular, formal)

4. Consider time zones

5. Prepare to communicate becomes a habit.






HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
2

MODES OF COMMUNICATION


SPOKEN WORD

Face-to-face

Telephone

Requirements are sincerity and self-confidence
Resist strong accents, jargon.
Bad telephone connections to be recognised


FORMAL MEETING

Have an Agenda (purpose).

Ensure there is a meeting Chairman to discipline meeting
Secretary to keep the minutes

Recognise the need for a purpose to the meeting:
To get a decision(s)
Deliver new information / procedure
Exchange ideas to develop a matter
Needs preparation
Agenda for several subjects
Series of meetings - then
Distribute minutes of last meeting

Informal meetings can just lead to meaningless discussion / gossip.
Only one person to talk at a time
Keep the meeting to the point
Hear everyone who wishes to speak
Avoid wasting time

Meetings take time money.

Keeping the minutes: Record date, place time, attended by
Identify speakers with their ideas
Record - names of individuals to take listed actions
- decisions
- any voting


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
3

COMMITTEE MEMBERS

After every meeting Check minutes verify any actions to be taken
Ensure accuracy of minutes
Verify against own notes

Prior every meeting Check agenda be prepared
Check previous minutes
List points you wish to make
Amend as meeting progresses
Remain cool reserved, polite.
Do not interrupt other speakers
Listen well follow the discussion / argument
Address your remarks to chairman
Ask the chairman if you can interject.

CHAIRMAN

Calling a meeting Instruct secretary.
Prepare agenda. Include new / outstanding ideas
Set time, date, place.
Plan duration
Review previous minutes


Running a meeting Check a quorum present for a decision
Exclude those who ought not be there
Open meeting by:
Naming those who have apologised for absence
Seeking meeting authority to sign minutes
Call on speakers for each agenda item
Allow others to speak if they wish
Prevent long dissertations
In a long meeting, interrupt to sum up results so far
At the end, sum up results
If a vote is required, ensure the question is clear.
Arrange a proposer and a seconder
Record vote
Allow secretary time to write down the data
If 50/50 vote, chairman usually has the casting ballot

PUBLIC SPEAKING / BROADCASTING

Often worries people fearing an audience
Fear can make a poor speaker convincing
Avoid reading speeches
Speak from notes or memory
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
4

TELEPHONE

For business calls:
Be well prepared Notes. Word processor information ready
Record details immediately after the call in your desk dairy
Use phone to keep in touch especially with shipmasters, agents etc.
Project interest, enthusiasm, co-operation.


THE WRITTEN WORD

Avoid excessive formality
Use correct English
Write in a friendly helpful manner
Try to retain your personality and style
Consider your readers situation and write accordingly.
Write briefly if they are busy avoid telling them what they know
Be informative and brief.
Two-page business letters are probably never read
Use a report if you have much to write about with a covering letter

Write simple letter
Short and concise
Avoid long (unfamiliar) words, long sentences, long paragraphs.
Avoid spelling mistakes,
splitting the infinitive,
ending sentences with a proposition
excessive use of hyphens
leaving out question marks
misuse of apostrophes
uncharacteristic styles
using unnecessary capitals master, manager
Check punctuation for the meaning of a sentence
Remember use of commas and semi-colons.
Read what you have written
Check that it conveys your point
Ensure it is readily understood.
Then reading it out aloud in private often helps.

REPORTS

Writing good reports is an art.
Reader will be busy

Write logically - use
- subject, introduction, data, development, conclusion, recommendations
- headings (in capitals / underlined), short sentences, short paragraphs
- cross references use numbered paragraphs
- tabular reports for data
HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
5

MARKET REPORTS

Sub divide into areas of interest
Use headings and sub headings
For long reports follow a pattern
- subject matter, dates, firms, people, places, purposes
- summary of conclusions
- reasoning
- data
- recommendations / conclusions in detail
- tables of data as appendices


LETTERS

Reflects on you, the writer your ability, respect, competence.
2 types of letters
- a business communication
- a family, friendly letter
Keep the two separate they serve different purposes

Business letters write:
Date and transmission method (mail, fax, e-mail)
Company, address of person letter is intended for
Attention: individuals name, rank / position
Subject
Receivers reference number and own reference number
Follow measure of formality to reflect company style
Start Dear Sir (Madam),
Finish Yours faithfully,

If a measure of familiarity / friendship exists the letter can be varied
Date and transmission method (mail, fax, e-mail)
Individuals name, rank / position
Company, address of person letter is intended for
Subject
Receivers reference number and own reference number
Follow measure of formality to reflect company style
Start Dear Mrs,
Finish Yours sincerely,
At the conclusion, usually insert the companys name

Avoiding emphasising me with I, I, I tend more on You, the reader
In business, keep it short and simple
Using a standard style and layout be consistent.


HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
6

WRITING FOR THE MEDIA

Adopt the existing style already familiar to the journal
(Check back numbers to verify the pattern)



PRESS RELEASE

Avoids expense of advertising
Often much favoured by editors
Ensure the release has genuine news
words of development, change, progress
Use journal special issues to advise of relevant material
A really arresting headline helps
Get an initial impact in the opening paragraph
Type any release with double spacing of lines
Provide the telephone number and name of contact person



MEMORANDA (MEMOS)

Internal communications
Written.
Brief dated, addressed, subject, message, signed
Re-read to ensure it is as brief as possible to serve purpose



LEGAL / PARLIAMENTARY MATERIAL

Uses specialist language special training required
Use professional guidance
Legal rules apply
Writing major and unfamiliar contracts
take legal advice having first drafted the contract yourself.
Commercial relationships can create unexpected legal liabilities
again take legal advice
Never sign any letter / document unless you feel you understand it
take legal advice






HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
7

VISUAL COMMUNICATIONS

Use pictures if it helps in any report drawings, photos, maps
Have cameras on your ships

GRAPHS
- imprecise
- demonstrate trends
- use bottom line for time, side for change to be illustrated

CHARTS
- Pie diagrams can help shows proportions as slices
- To get pie right multiply the percentages by 3.6 for degrees

BAR CHARTS
- Presenting statistical information

TABLES
More accurate
Less easily understood but easier than the date written down in script


COMMUNICATION BY COMPUTER

Familiarity is essential unavoidable

FACSIMILE
Transmission of photocopies or scanned images
(contracts, pictures, handwriting)

ELECTRONIC MAIL
Standard form of business communication
Cheap, easy, fast, almost instantaneous
Allow re-transmission of messages
Killing off the telex
Encourages informality of style now acceptable

E-mail problems
- uncertainty of delivery
- computers can crash
- not altogether secure
- messages lost in the mass of junk e-mails (spam)
So fax is often preferred





HMC-ICS Greek Branch Course Notes
SHIPPING BUSINESS
Prepared by Capt. Malcolm MacKenzie FICS
8

ELECTRONIC DATA INTERCHANGE

Transmission of data between computers
Efficient fast and cheap.
Used in container transport business


DATA STORAGE / RETREIVAL

Computer saves information and permits quick retrieval
Used extensively by brokers especially selective retrieval
External access available to major sources of information (LR)


INTERNET & E-COMMERCE

World wide web (WWW) offers access to virtually all information
Web sites available for showcase of own business
Shopping and payment through the world wide web is common
Chartering is still not done through www web not yet as too complex.

Vous aimerez peut-être aussi