Total Sea borne trade of the world in one year: 6200 million tones (92% of the world trade)

General Cargo Manufactured or Semi manufactured goods

Dry bulk cargo 40%

liquid bulk cargo 60%

2/3rd of Total Quantity 1/3rd of Total quantity, 40% by value

Air cargo characteristics are as follows: 1. 2. 3. 4. Time sensitive cargo Precious cargo (ad valorem = according to value freight) Perishable goods. Light cargo

Type of shipping services: 1. Liner services 2. Tramp, Chartered ship, Bulk carrier, tankers. Q. Explain the difference between liner and tramp? A. Characteristics of liner service are as follows: 1. Regularity of sailing 2. Fixed routes. 3. Fixed ports of call 4. Fixed freight rates 5. Can accept consignments without limitations of quantity or size. 6. It is a common carrier (Service provided without discrimination of users)

Characteristics of Tramp: 1. Tramp vessels are to be fixed in advance then only it will come. 2. Charter hire of freight is fixed on the basis of supply and demand. 3. A tramp ship will call at one or two ports for loading and one or tow ports for discharging. (In contrast the liner vessel will call at 5/6 ports for loading and discharging) 4. The sailing program of tramp ships are fixed on basis of C/P agreed between ship owner & charterer. Liner service: Stability I freight rates which will not change for a long time.

Q. Explain why Liner shipping is of utmost use to users?

A. Liner conferences: Conference is an association of shipping companies normally belonging to different countries which are serving the general cargo trade within a defined geographical region such as India-Europe, IndiaAustralia, India-far East Asia etc. There are two types of conferences: 1. Closed conference: Exists all over the world except in USA. 2. Open conference: Exists only in USA.

Q. Define freight and explain how freight rates are fixed in liner conferences?

A. Fright is consideration for carrying goods from one place to another. In liner conference before fixing the freight rates take in to account 27 factors some examples of them are: a) b) c) d) e) f) Volume of cargo Value of cargo Nature of cargo Packing Relationship between weights to measurement. Parity of rates with other modes of transportation.

Freight tariff is a catalogue of freight rates fixed by conference for various commodities between different ports. As & when changes are made these changes are incorporated in the tariff. If the commodity the shipper wants to ship is not there in the tariffs, he will be charged the general cargo rate which will be slightly higher than the normal rate. Liner shipping companies belonging to conferences change freight rates according to the tariff. When a shipper wants to fix a freight rate, he has to fill in a questionnaire giving all information, about his product. The conference fright committee will examine these information from 27 angles and tentatively propose freight rate, (e.g. US 20$ per m3/MT). A sub committee will then discuss with the shipper his reaction with the proposed rate. This is done to find out what the tariff can bear and then finalize the rate mutually suitable. If the shipper finds the proposed rate too high, again the committee will discuss with him what rate he can afford and sometimes conference will fix the rate below the brake even level thus incurring a loss by transporting the commodity. This is done under principle of cross subsidization by which the loss incurred is made good from the profits made from other commodities. Shipping line has to do it on the principal of helping the shipper to promote international trade. Shipping is a derived demand and prosperity of shipping depends on prosperity of international trade.

Components of liner freight:

1. Basic trade: This is to adjust fuel costs at the time of shipment compared to the earlier cost when the freight was fixed long ago. 2. CAF: Currency adjustment factor = + or as % of the basic rate (The purpose of CAF is to protest ship owner from loosing money because of exchange rate fluctuations by correcting freights.) 3. BAF: Bunker adjustment factor = + or - % of the basic rate. 4. Port congestion surcharge = + or - % of the basic rate. When berths are not available and ship has to wait many days, ships suffer huge financial loss because of standing charges incurred every day. With a view to make up this loss conference impose port congestion surcharge as a percentage of basic rate. However presently because of oppositions from government shippers organizations and port authorities conferences are unable to impose this surcharge. Freight constitutes all the above four components. Because of these surcharges if the shipper finds freight is too high then he can request the conference for re-adjustments of freights. On merits of the case conference will give relief to shipper by reducing suitably the basic rate.

Freighting of containerized cargo are of 3 types: 1. Commodity Box Rae (CBR): Basis of freighting is 20 containers stuffed with one or allied cargoes (e.g. tobacco and allied products) for transportation from one port to another. If commodities change freight will be different. Ship owner prefers this rate mostly because it is based on commodities. This is called CBR. 2. FAK Rates (Freight all kind): Here the ship owner is not concerned what commodities are transported in containers so far as they are legally permissible cargo. Ship owner will quote a rate for e.g. 1300$ for transporting the container from one place to another. The rate is arrived on the basis of average cost incurred by ship owner in handling & transporting the container. With a view to attract shippers for cargo support in competition with commodity box rate. 3. Conventional tariff rate for LCL cargo US$ _ FCL. This is based on containers taken by shippers to their factories where thy stuff the cargo, get them sealed by customs. Shipper presents the container to the shipping company with CBR. FCL moves from door to door. Premises of shipper to premises of consignee. Consignee opens the container and de stuff the cargo. Here expenses of stuffing and de stuffing are borne by shipper and consignee respectively. According to customs if a container irrespective of what it contains is cosigned to one party only it is 'FCL. LCL= When a shipper does not have enough to fill a container he gives the cargo to ship owner who issues B/L to him quoting conventional tariff rate (US$ _ per m3/MT). Ship owner thus collects numerous consignments, for the out destination wise & stuff them in the container. At destination ship owners agent will open the container and de stuff the cargo & deliver the cargo to respective consignees. Here as ship owner is stuffing cargo at port of shipment and his agent is de stuffing the cargo at destination the expenses of stuffing & destuffing are borne by the ship owner. According to customs if a container of many consignments meant for many consignees it is LCL.

Freighting of bulk cargoes: Freight & charter hire:

Freight is paid under voyage charter or bareboat charter. In chartering either freight or charter hire is always fixed on the basis of supply & demand at the time of the fixture.

Q. What are the responsibilities of the carrier under Hague rules or Carriage of Goods by sea act? Explain the role of B/L? What are immunities of the carrier, why they are required? What is the limitation of time for filing suit against the ship owner in respect of lost/damage goods? What is the limitations of liability per package or unit under Hague Rules as amended by Hague Visy Rules?

ANS. The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to: 1. Make the ship seaworthy. 2. Properly manned, equipped, and supply the ship. 3. Make the holds, refrigerating or cool chambers and all other parts of the ship in which the goods are carried fit and safe for their reception, carriage and preservation. Seaworthiness: A Ship is seaworthy if she is fit in design, condition & equipments to commence the voyage and to encounter the ordinary perils of the particular voyage, thus the standard varies with each voyage. The understanding of the ship owner relates merely to the ordinary perils likely to be encountered on such a voyage with the cargo agreed upon. The obligation to provide a sea worthy ship dies not means that the ship owner guarantees to provide a perfect ship which will withstand any weather however stormy and rough. M.S. Act Section 334: According to this act the ship is seaworthy when: a) the material of which she is made, b) her construction, c) the qualification of master, d) the no, description and qualifications of the crew including officers, e) the weight and description, stowage of the cargo and ballast, f) condition of the hull, equipments, boilers and machinery are not such as to render her in every respect fit for the purpose of the voyage of service. According to court judgments from time to time the following points are to be noted: 1. 2. 3. 4. Ship must be fit in all respects to encounter ordinary perils of the sea. It must carry all certificates as required. It has holds cargo worthy that fit enough to carry the cargo which is intended to be carried. It must also have equipments to protect the cargo, e.g. magazines to carry weapons or trays to carry eggs. 5. If the ship is on voyage calling at different ports ship must be sea worthy before sailing from each port,(if required provide necessary equipments). 6. The crew and officers must be skillful and knowledgeable about their job. 7. A ship owner is liable if a ship is proved unseaworthy.

Warranty of sea worthiness (As per marine insurance act, 1963), 1. In a voyage policy there is an implied warranty that at the commencement of voyage a ship shall be sea worthy for the purpose of the particular voyage. 2. Where the policy attaches while the ship is in port, there is also and implied warranty that she shall at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port. 3. Where the policy relates to the voyage which is performed at different stages during which a ship requires different kinds of or further preparation or equipments there is and implied warranty that at the commencement of each voyage the ship is seaworthy in respect of such preparation or equipment for the purpose of that stage. 4. A ship is deemed to be sea worthy when she is reasonably fit in all respect for encountering ordinary perils of the seas of the adventure insured. 5. In a time policy there is no implied warranty that the ship shall be sea worthy at any stage of the adventure but where with the priority of the assured, the ship is sent to sea in and un seaworthy state, the insurer is not liable for any loss attributable to un seaworthiness. Q. What are the reasons for the emergence of Hague Visby rules?

ANS: In the Hague Visby rules 1924, the limitation of liability of the carrier was 100 sterling pounds per pkg. unit. Package meaning, ordinary packages (cases, drums etc), When container came 1960s ship owners initially considering container as package only and limiting the liability to 100 sterling pounds per package, This was not acceptable because container consists of many packages. With a view to resolve this problem in 1968, according to Brussels protocol, container, if it is mentioned how many packages it contains, each package is to be considered as a package of LOL purposes. If the no. of packages inside container is not mentioned then total weight of container -. tare wt of container = gross wt of cargo. LOL is limited to each kilo of gross wt. Hague Visby rules came in to being based on Brussels Protocol and hence accordingly, the LOL will be SDR 666.67 per pkg/unit. Or SDR 2 per kilo of gross wt. of goods whichever is higher.

Q. Explain the purpose of Hamburg rules why it came in to being?

Q. Why ship owners of leading countries have not accepted Hamburg Rules?

ANS: Hamburg rules by provision have increased the liability of ship owner considerably hence ship owners have not accepted Hamburg rules. If accepted, ship owner have increase the insurance liability cover paying more premium hence need for increase in freight rate which will affect trade.

Q. Differentiate between Hague, Hague Visby and Hamburg Rules?

Q. Explain role of Bill of Lading in export/import?

ANS: B/L is a most important document. Exporters/Importers can negotiate B/L through the bank & realize value of the cargo. It is also evidence of contract.

Q. What are functions of B/L?

ANS: Following are the functions of the B/L: 1. It is the final receipt for the cargo received on board the ship. When the cargo is loaded on board a ship, chief officer issues mates receipt which is a temp. receipt which the shipper has to surrender to the shipping company and the shipping company issues to the shipper B/L. Hence B/L above forms the final receipt for the cargo shipped. 2. It is negotiable document to the bank. According to B/L act 1855 UK, 1856 India when the holder of B/L endorses the B/L in favor of the bank, the property mentioned in the B/L, and rights thereon are legally passed on to the endorsee i.e. the bank. Hence bank becomes possessory custodian of cargo against the security of which the bank releases the value of cargo to shipper. According to letter of credit importer also instructs the bank to release value of cargo to shipper only if he submits original clean B/L, invoice packing list, insurance policy, duly endorsed to the bank then only bank has to release the value of the cargo to the shipper. 3. It is a document of title. When B/L is endorsed by shipper to another party, the property mentioned in B/L, and rights thereon are legally passed on to the endorsee. Hence the endorsee gets rights of the goods and when the endorsee surrenders to the ship owner the B/L duly discharged, the ship owner releases the cargo to the endorsee.

4. It is an evidence of contract between carrier and shipper. In an exclusive contract like charter party both parties ship owner & charterer have to sign. If any mistake occurs it can be corrected where both parties have to initial. But in evidence of contract like B/L only ship owner signs and shipper does not sign. Hence in case of any omission/mistake it can be corrected and signed by ship owner only. Hence a B/L has been kept as an evidence of contract only as in course of thousands of shipment there may be a mistake which can be corrected by the ship owner only.