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International Business
Prof. V. P. Arora
Associate Profesor
Manufacturer
Cargo by Sea
Port of Destination
Carriage of Cargo on A General ship In case of a General ship, the shipping line advertises its
voyage through the newspaper and their freight
brokers. This advertisement announces the dates of
arrival and departure of the ship from a particular
port, final port of destination, ports of call enroute
etc.
The shipper books the cargo through his C & F
Agent/freight broker, who prepares the Bill of lading,
gets it signed by the representative of the shipping
line, and loads the cargo on board the ship
Responsibilities and Liabilities The Shipping Line
The shipping line, by virtue of being the custodian of the
cargo has tremendous responsibility towards the
shipper. To fulfill such responsibility adequately the
3.
Bill of Lading is the document of title, which means that anyone in the
possession has the title to the goods. Bill of Lading is a negotiable or
transferable document. An endorsement in favour of the buyer passes
the title of the goods to him.
2.
Clean bill of lading :- is a bill of lading where the carrier has noted that
the merchandise has been received in apparent good condition (no
apparent damage, loss etc.)
3.
4.
5.
6.
7.
Straight bill of lading :- indicates that the shipper will deliver the goods
to the consignee. The document itself does not give title to the goods.
The consignee has to only identify himself to claim the goods. A straight
bill of lading is often used when payment for the goods has been made in
advance.
Through bill of lading :- is a single bill of lading covering receipt of the
cargo at the point of origin for delivery to the ultimate consignee using
two or more modes of transportation.
Charter party bill of lading :- is issued by a charter party. They are not
accepted by the banks under letters of credit unless they are specifically
authorised in the credit
CHARTER PARTY
Voyage Charter Party :- In this case the shipper books a particular ship
for a designated voyage to one or more destinations. In this contract the
ship owner has to declare the condition capacity and other details of the
ship. The owner has to guarantee the sea worthiness of the vessel.
The ship should be sea worthy for a particular cargo and for a particular
voyage. The ship also had to compete the voyage in a reasonable time
frame. The deviation from the route can be made only in case of
emergency.
2.
Time charter party :- As the name suggests the ship is booked for a fixed
period of time in this case. Here the ship owner under an agreement
provides the ship to the shipper for a fixed duration, which is mutually
agreed. The agreement also mentions size, capacity and speed of the
ship along with ports is the responsibility of the ship owner to arrange for
the crew and pay crews wages. Also ships insurance, fuel, dock charges
loading and unloading charges of the cargo are the responsibility of the
ship owner.
3.
4.
The main difference between the charter party and bill of lading is that
bill of lading represents the title of the goods. By endorsing the Bill of
lading the ownership of the goods can be transferred from one party to
another. Charter party on the other hand is only a contract of
affreightment for the carriage of goods between the shipper and ship
owner.
2.
3.
Contract of Affreightment
Binding agreement which sets forth the obligations
and rights of the owner of a vessel (aircraft or ship)
and a merchant. The vessel owner undertakes to
provide cargo-space (at a specified time, and for a
specified freight) to the merchant who is liable
for payment whether or not the cargo is ready for
shipment. This contract addresses issues associated
specifically with a vessel, its crew, and the routes on
which it will be plied. Also called contract of
freightment.
Hague-Visby rules
These rules came into effect in 1968 as a result of some amendments in the
Hague rules. These rules were mainly concerning the maximum liability in
case of loss or damage. Hague-Visby rules were applicable to all bills of
lading, where the port of shipment is in a ratifying nation.
Hamburg rules
The Hamburg rules were adopted in March 1978 in an international
conference. The major features of the Hamburg rules are as follows :1.The carrier is responsible for loss, damage or delay to the goods unless he
proves that all the precautions to avoid the occurrence had been taken by
him, his servants or his agents.
2.If the goods are delivered at the port of discharge within the agreed time,
the carrier is not liable for delay in delivery.
3.The amount of liability was increased by 25% more than the liability
defined under the Huge-Visby rules.
4.The Hamburg rules are applicable to all contracts of carriage by se, except
charter party contracts.
5.The Hamburg rules cover shipment of live animals and deck cargo, which
Hague and Hague-Visby rules did not cover.
6. The Hamburg rules applied to both imports and exports to and from a
signatory nation, where as the Hague and Hague-Visby rules apply only to
exports.
As can be seen the above convection addressed to the various provisions
under carriage by se, rail and road. However the United Nations
Convention for the international combined transport of goods also called
TCM convention for the first time tried to make a framework of rules for
inter modal transport. This conventions was adopted by the UN conference
on 24 the may 1980. Some of the significant changes brought about by
this convention are as follows :
1. It introduced single contract between the shipper and the carrier
irrespective of any number of modes of such transport.
2. It introduced Multimodal Transport Document also called MTD as a
replacement to the bill of lading.
3. It made MTD as the document of title.
4. It simplified custom regulation to facilitate cross border trade.
Concept of Unitisation
One of the main concerns of a manufacturer is damage of goods
during loading and unloading and times consumed in these
activities. They constantly look for avenues to reduce these
concerns. One of the methods of doing so is that of combining
packages into a unit. This lends itself to mechanical handling and
reduces the number of handlings which the package would have.
Literally speaking, in unitization the products and grouped together
in cartons, bags and barrels for handling efficiency. But specifically,
the containers used to group individual products are called master
cartons. When these master cartons are grouped together it is called
unitization. For examples, Pears comes in a box. This is called the
individual package. But it is delivered to the dealer in a combined
package of 100 or more soaps . This is called master carton. These
master cartons are then grouped together in a box, by some rope etc.
to form one unit for shipment purposes. This is called unitization.
Container Terminal
A container terminal is a facility where cargo containers are
transshipped between different transport vehicles, for onward
transportation. The transshipment may be between container
ships and land vehicles, for example trains or trucks in which
case the terminal is described as a maritime container terminal.
Alternatively the transshipment may be between land vehicles,
typically between train and truck, in which case the terminal is
described as an inland container terminal.
Maritime container terminals tend to be part of a larger port, and
the biggest maritime container terminals can be found situated
around major harbours. Inland container terminals tend to be
located in or near major cities, with good rail connections to
maritime container terminals.
AGENCIES RELATED TO
SHIPPING INDUSTRY
The entire logistic chain functions smoothly if there is a good co-ordination
between various agencies. The exporter and the importer could be far away
from each other on different continents. They conduct their business through
various intermediaries. These include clearing and forwarding agents,
logistics companies, road transporters; warehousing corporations, shipping
lines, port authorities etc. In addition to these, various government agencies
such as Customs & Central Excise department, Sales Tax department,
Municipal Corporations etc. are also involved. The passage of cargo becomes
smooth if there is a clear understanding and a good co-ordination between
all these agencies. The exporter wants to despatch the cargo and obtain the
shipping documents and entrust the cargo to the agencies who can ensure
the smooth passage of cargo. Importer on the other hand is concerned with
safe arrival of the cargo ordered by him.
To facilitate the smooth and trouble free passage of cargo from the point of
manufacture to the destination, following agencies help the shippers-
C & F agent works closely with the shipper right from the offer stage. He
provides freight rates to various destinations and also informs the
shippers about the most economical modes of transportation. He also
advises the most cost effective routing advice for the destination.
2.
Once the order is received by the shipper, C & F agent makes the ship
booking keeping in mind the last date of shipment on the letter of credit.
3.
As the despatch dead line approaches C & F Agent estimates the transit
time between the factory and the port of shipment as mentioned in the
L / C. He advises the despatch date from the factory to the shipper so
that the cargo reaches the port right in time. If the cargo reaches too
early, it attracts demurrage charges. On the other hand, if the cargo
reaches late, it may miss the ship, thereby causing the delay. Such
delays are inconvenient and expensive to both the importer as well as
exporter.
4.
Once the goods are despatched from the factory, the C & F Agent
intimates the shipping line regarding the expected arrival schedule of
goods at the port, along with the mode of inland transportation. He also
completes the octroi formalities (wherever necessary) so that the export
goods are not subjected to octroi duty.
4.
C & F Agent then applies for and secures port permit so that the goods
can enter the port premises. At the same time, the export declaration
showing the names of shipper & consignee, value of the goods and
commodity classification number etc. are prepared.
5.
After this, the C & F Agent prepares bill of lading in compliance with the
terms and conditions of the sale / letter of credit.
6.
After this, the bill of lading is submitted to the shipping company and the
cargo is loaded on board the vessel. The shipping companys
representative examines the cargo for its condition & signs the bill of
lading accordingly. In case of C & F and CIF contracts the ocean freight is
also paid at this stage and the Freight Prepaid seal is obtained on the
bill of lading.
7.
C & F Agent then collects all the documents such as bill of lading,
customs certified invoice, consular invoice, certificate of origin etc. from
the respective authorities and sends them to the shipper for further
negotiations of documents as per L/C conditions.
The above activities ensure that the shipper can effect his shipment in time
and in the most efficient manner thanks to the various services and advice
provided by his C & F Agents. C & F Agent plays a vital role in fulfilling the
various delivery commitments made by the shipper to the importer abroad,
there by ensuring repeat orders and growth in business for the shipper.
B.FREIGHT FORWARDERS
For international cargo movement the exporter needs an expert
with
knowledge of various formalities and contacts with various agencies such as
shipping lines, port authorities, customs, warehouses etc. Freight forwarder
possesses such contacts and knowledge for the benefit of the shipper.
Normally, freight forwarder prepares the shipping documents on behalf of the
shipper. With the advent of containerisation and the new developments in the
shipping industry, many freight forwarders now offer extended services as
transport operations for inland transportation as well as multi modal inland
and ocean bound transportation. These freight forwarders are called as nonvessel operation common carries (NVOCCs) and are authorised to issue
transport documents. Freight forwarders perform the following functions :-
Advice the shippers on the best and the most economical model/s of
Transportation.
Facilities
Providers have entered into specialized operational research
models to quantify the impact on the cost for different patterns for
the distribution chain for any combination of multimodel
movement under given cost parameters.
Cost Control
Controlling costs is distinct from reducing costs. A companys
primary concern is to control costs and then think of reduction.
While individually, these kaizen or cost-control measures may
not transform into tangible results but collectively, all the
companies stand to gain in the long run.
Working Models
First and the most widely used model in India even today is of
internal purchase, sales and dispatch departments that handle all
the commercial and sourcing functions for the company.
Packing list This contains all the information in the invoice (except
value), plus the number of boxes, their gross weight and net weight,
shipping mark, if the cargo is containerized, then the container number is
mentioned. This list facilitates the customs examination.
document of title of goods but it only acts as receipt of goods for dispatch.
It mentions names of the airports of dispatch and destination, names and
addresses of consignor and consignee, name of air carrier, freight amount,
date and number of the flight etc.
Airway bill is a contract between the shipper or his agent, and the
airline or its agent. It contains instructions for the airline handling
staff. It also acts as a custom declaration form and in case insurance
amount is included on the Airway bill, it serves as certificate of
insurance. Since the freight charges are also mentioned, it acts as
freight bill also.
Shipping bill This is a customs document and not to be confused with
airway bill. It is classified in terms of drawback goods, dutiable goods and
duty-free goods.