Terms of shipment

International shipping (IS) is transportation of goods, cargoes, passengers between countries. The characteristic feature of IS is that he cargo has to cross borders of at least 2 countries. IS is the kind of service & form of foreign business. Numerous international conventions, contracts, bilateral agreements are the legal base for regulating relations between countries & also between cargo owners & carriers.

The major parties of IS are: cargowners, consigner, carrier & consignee. Consigner & consignee are not necessarily the contracting parties. They can act as the intermediaries of the cargowner. The company must decide which mean of transport to use to carry it’s goods. Forms of transport available Means of transportation

Advantages Disadvantages Sea Covers long distances, high carriage capacity, possibilities of container transportation, low costs. Low speed Rail Independent from climatic conditions, possibility of container transportation, comparatively low costs Difficulties in maintenance of access roads Road “door-to-door” delivery Law carriage capacity, limited dead-weight of cars, requirements for road maintenance, accidents Air High speed, high level of cargo, safety

Law carriage capacity, dependence of weather conditions Pipelines High automatization High capital investments, one way moving of cargo SEA transport is the most common nowadays in international trade. There are 70,000 merchant ships in the world. Some of these are general cargo ships. Others are specialized and are used for carrying one kind of cargo such as oil or bananas while others

may be used for passengers or holiday cruises. But because people travel mostly by air nowadays the old passenger liners have gone out of service. However it is still possible to travel by sea on a cargo boat (freighter), which has passenger accommodation. Also, speaking on this topic, I’d like to define what the freight market is & give the classification of the freight market. The freight market is not a uniform market.

It doesn’t have a homogenous connection with a specific geographical area but with ships that can carry similar types of cargoes. The dry cargo market It is the most diversified market, and may be divided into the following: Bulk and “tweendecker”, container, ro/ro ,liner, feeder and special. 1. Important bulk cargoes are steel, cement, coal, grain, fertilizers and cars. Modern bulk carriers with technically sophisticated equipment can also be used for the transportation

of the unitised cargoes of various kinds, like paper, pulp & also for containers. The most important employment possibilities for “tweendeckers” are on the one hand, shipment of all kinds of bagged commodities (rice, sugar, cement), and on the other hand, employment as supplementary or “extra” vessels for the regular lines. 2. The container market The market for container ships is limited. They are used in

Traffic between highly industrialized arrears with a technically advanced inland transportation system in both the exporting and the importing areas. The traffic requires large investments in specially equipped vessels, port installations and terminal equipment. 3. The Ro/Ro market Ro/Ro ships can carry all types of commodities (industrial products, machinery, building materials) placed on wheeled platforms or flats which may be handled by fork-lifts trucks

and which do not require any port installation. 4. The liner market Liner traffic a firmly controlled activity where remuneration is fixed well in advanced. 5. The feeder market is represented with shipping companies carrying on independent trading with vessels of smaller sizes. 6. Special market Heavy –lifts carriers built with the special demands on stability and constructional strength. Barges and pontoons used for transport of heavy material (drilling rigs

or floating quays) in short-sea traffic, as well as discharging platforms between an ocean-going ship and the quay. Tugs and barge carriers. Barges with loaded cargo are towed up to and loaded into an ocean-going vessel and again launched and towed, e.g. up a river, to the final place, at the port of destination. The tanker market There is a small number of big charters: the large oil companies, and the small number of oil areas. The are also special carriers: solvent and parcel tankers for transporting liquid chemicals,

the gas tankers form a special class, and the vessels are called LPG (liquefied petroleum gas) & LNG (liquefied natural gas). The Reefer market The reefer ships are employed in contract trading to a large extent but there is also an important sport market (for bananas, fish and meat). They also can be used in the dry cargo market. The passenger market

The big liner ships have disappeared now. Most passenger ships are operated in short-distance trade and have a capacity for rolling goods. There are different ways of making arrangements between shippers & shipping companies. There are also different shipping services. Chartered Vessels. They do not follow fixed routes but go wherever they are needed. A company wanting to charter a ship will apply to one of the world markets for shipping such a

Baltic Exchange in London. A broker who acts as a charter’s agent works for the company looking for a ship. His job is to find the right kind of the ship at the lowest price as possible. The ship-owners who want to charter their vessel also apply to brokers in the Baltic. The broker’s job is to charter vessels out for their owners at the highest price. These brokers negotiate the price and terms of the charter.

The final price and terms depend on the market. Such contract is called a charter party. Cargo liner companies run regular services on fixed routes all over the world. They are called conferences because they hold meetings to agree to routes, timetables and freight rates. They need to do this to make sure too many ships do not arrive and sail from a port at the same time. They also have to decide on the right prices to charge exporters for sending their goods by sea (freight

rates). In fact this is the main purpose of conferences. Most ship-owners provide transport services to exporters and importers. But some traders, notably the oil companies, have their own ships for carrying their goods. This makes sense economically where the company is dealing in bulk cargoes over long periods of time. Another kind of ship-owner is the state. Several countries have government-owned shipping services

which compete against the conference and tramp shipping companies. It is known, that ownerships, manning and commercial employment of the vessel may be in different hands, so called management agreement. One of the factor for distinguishing different types of charter agreements is to use of the ship from a capacity point of view. If the charter has a full control of the vessel, this may be called chartering in full.

If the owner cannot find a charter for the whole vessel, he may divide the space between several charterers (a space charter). From a functional point of view an important distinction is made between voyage charter, time charter and bareboat charter. Voyage charter – may cover a single voyage. It is typical within a tramp traffic (free). The owner retains the operational control of the vessel and is responsible for all expenses such as port charges, bunkers, extra insurances, taxes.

The time charter – under which the owner puts the vessel at the disposal of the charter for a certain period of time. The owner only is responsible for employing the crew and maintenance of the vessel and supervision of the cargo. The bareboat charter (Demise)- means that the vessel is put at the disposal of the charterer for a certain period of time, but here the charterer takes over virtually the entire responsibility for the operation of the vessel and all expenses except the capital investments.

Contract of Affreightment. It generally covers a longer period of time than ordinary voyage charter-parties. They may also be made up within the framework of liner operations. The owner promises to carry for the charter during a specified period of time a large quantity of goods between certain ports. The owner may employ several vessels on continuous basis. (similar to liner traffic). The owner’s strict duty is to put at the charterer’s disposal a vessel that is suitable for the actual

transport, but he is at liberty to choose tonnage. Management agreements. Shipping Companies may sell “know-how” and services by management agreements. It is not a chartering agreement ,where the manager is entrusted with the duty of operating and finding employment for the vessel as if he were the owner and for account of the actual owner. The world shipping problems can be seen from some points of view.

First of all there are two kinds of problems for trader’s: Increasing costs. Freight is just one of the expenses which traders have to cost into the price of the goods. Increasing freights lead to increasing prices which decrease sales. Inefficient services. Traders have to pay demurrage for the time goods are delayed and their customer may get tired of waiting and buy goods elsewhere. Ship-owners often complain of poor facilities at ports.

Delays keep expensive ships waiting and waste money. Port congestion and world recessions are also bad for ship-owners. For developing countries modernization makes more problems. Containerization means unemployment for thousands of stevedores. Containerization involves huge investments which it is difficult to afford.

Sometimes a special situation on the market (monopoly) means no competition, and the customers have no choice when they want to buy smth. Such situation exits in shipping services. It can be either a private monopoly or state. And of course, it’s impossible not to mention the documental part of this problem. Export documents are numerous because there are so mane organizations involved in export transactions. We can divide them into 5 main groups.

These are as follows : document of dispatch (inside the country), shipping documents (from one country to another), customers forms and official invoices (required by the importing country) and bank documents concerned with payments. Every mode of transport has its own specific document which remains the same irrespective of the methods of transportation. For air transport it is the bill air waybill, referred to as the AWB, while for sea transport it is the bill of lading shortened frequently to the

B/L . For international road freight, the consignment note completed by the haulier is the CMR note. B/L used to be issued either by shipping liners or by freight forwarders and also by the International Federation of Freight Forwarders Association (FIATA). First function of the B/L is to act as a receipt for goods, as it will include full details of the number of packages at the description of the goods.

The B/L is also the evidence of a contract of carriage between the shipper and the shipping line. The bill is completed after the ship has left the port, as only then can the shipping line complete the parts of the bill regarding the name of the vessel and the sailing date. The third function of the B/L is as a document of title. This means that anyone who presents the B/L can take delivery of goods.

The CMR is normally completed by the haulier and available for signature by the sender when the goods are collected. The CMR will contain all the relevant information about the load and the details of the trailer and the carrier. The first copy of the CMR remains with the sender, the second accompanies the goods and the third is retained by the carrier. Upon the charge of the goods, the consignee will be asked to sign the CMR. There is space on the CMR for the exporter (or importer) to add any information

which might assist the haulier. The air waybill is used for all airfreight; it is completed either by the airline or the airfreight forwarder who will establish the document. Unlike the bill of lading, the air waybill is not a document of title; it acts as a consignment note. The number in the top right-hand corner is unique and is used to identify the goods at all stages of their journey as well as when they are collected by the consignee, so it is important to let your customer

have the air waybill number as soon as possible. The waybill is also used as an accounting document with charges added as the goods move through various stages of their journey.