Sea Transport - Notes

“Shipping, Freight Forwarding & Global Trade Operations”

TOPIC PAGE

1 Global Business Environment. 2 - 3

2 Various factors affecting international trade –

Tariff & Non Tariff Barriers

4

3 Regulatory Authorities & Government Policies

Role of Department Of Commerce & Finance Ministry

5-8

4 Letter of Credit & other payment terms 9-20

5 Bills of Lading, switch B/L, air & sea-waybill, master & house B/L 21-31

6 INCO TERMS – International Commercial Terms 32-36

7 Modes of Transport & Selection of Mode of Transport 37-39

8 Shipping and Sea Borne Trade, Liner and Tramp Shipping 40-43

9 Types of ships used in Tramp Trade 44

10 Evolution in shipping industry – Bulk, Break Bulk, Containerization

and Multimodal Operations

45-47

11 Feeders /Hub & Spoke Operations, 3rd Party Common Carrier 48-49

12 Types of containers & dimensions 50-53

13 Freight rates and basis of calculation, Freight Surcharges and Role

of FMC in the U.S. Trade

54-56

14 Sea freight Export & Import Documentation / Cargo Flow 57-60

15 Services offered by Shipping lines and various service providers in

Global Logistics.

Role of NVOCC

Role of Consolidators

61-64

16 Value Added Services. 65-66

17 Conference, Consortiums and Alliances, Mergers 67-69

18 Classification Societies 70

19 Dangerous Goods 71-73

20 P&I Club, T.T. Club General Average 74

21 About Ships, Harbour, Port and Docks 75-76

22 Container stuffing 77-82

23 Air cargo 83-87

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe

Contact : H/P 09823015374 email – [email protected] www.rsathe.com

2

Global Business Environment

Importance of International Business:

Importance of International Business in the National economy:

1. To meet imports of industrial or human needs

2. Raw material of critical nature

3. Oil imports to keep the country on the move

4. Debt Servicing: It is necessary to aim at sufficient export earnings to cover both

imports and debt servicing

5. Government is keen on reducing the adverse Balance of Payment position

6. Profitable use of natural resources

7. Increase in employment opportunities

8. Increase in the standard of living: i.e. by exporting the producer improves the

quality of the product by applying the latest technology and it is made available

in exporting country.

9. Peace: International collaboration & closer cultural relations help in political

peace between the countries. Countries have come closer on account of

international marketing. In modern world export marketing is an inevitable

part of business activity of a country.

Importance of International Business for individual firm:

1. Product in declining stage of Life Cycle in domestic market or when Product

becomes obsolete in domestic market it may be in demand in foreign market

or sold in foreign market.

2. High-tech oriented companies enter into less developed countries to skim the

market.

3. International Market is vast and internal market is limited hence export

volumes help manufacturers.

4. Building-up of image and reputation in International Market as an expansion

strategy.

5. Technical know-how for building the industrial base in the country.

6. Restrictions in domestic market force companies to view export as an

alternative.

7. To pay for import bill, Government pressurizes companies to export and earn

valuable foreign exchange. Many firms go for overseas market for availing of

incentives such as import facilities to modernize their plant.

8. Fulfill export obligation

9. To utilize installed capacity: If the installed capacity of the firm is much more

than the level of demand of the product in the domestic market, it can export

the surplus production.



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10. Insufficiency of domestic demand: If the domestic demand for the product is

not sufficient to consume the production, the firm can enter the foreign

market and utilize its unutilized capacity.

11. Reduce business risk- A diversified export business helps the exporting firm in

minimizing the risk of sharp fluctuations in the domestic business

12. Economies of scale: mass production helps manufacturer to keep the price low

in domestic and international markets.

13. With improved business and international business needs, the company spends

more money to research and developmental activity. This also helps in

improved standard of living.

The Scope of International Marketing:

1. Overseas manufacturing

2. Working with local partners

3. Brand names

4. Trademark

5. Patents

6. Processes

7. Negotiating and entering in licensing/ Franchising agreements, where by

foreign firms are permitted to use the exporting nation’s know-how

8. Physical Exports



4

Various factors affecting international trade

For developing or underdeveloped countries managing B.O.P. is a challenging task.

To protect the home trade & manage B.O.P. all countries in the world have

introduced barriers for the International Business.

1. Tariff Barrier: Import duty increases the landed price of goods. With the result

imported goods become expensive.

2. Non Tariff Barrier

• Government laws,

• Regulations,

• Policies,

• Conditions,

• Restrictions,

• Or specific requirements

Examples of Non Tariff Barriers

1. Quotas or quantitative restrictions or license.

2. GSP (Generalized System of Preferences)

3. Counter trade

4. Import levies on imported goods are often collected towards the usage of

ports and terminal facilities.

5. Import Pre-shipment Inspections

6. Consular Invoice or Legalization or Visa of Export Documents

7. Health, Safety and Technical Standards

8. Foreign Currency Deposit for imports.

9. Product Labeling in Foreign Language

10. Closed Market Distribution

11. Free and Preferential Tariff Treatments

12. MFN (Most Favored Nation)

13. Free Trade (FT)

14. British Preferential Tariff ( BPT)

15. A preferential duty on goods or services originating from some members of

the British Commonwealth.

16. Export quota is to protect the domestic supply of the goods, for example,

sugar, cement and lumber. Export quota may also be used to boost the

world prices.

17. Import license.



5

Regulatory Authorities & Government Policies Role of Department Of Commerce – Responsible for

1. International Trade and Commercial Policy including tariff and non-tariff

barriers.

2. International Agencies connected with Trade Policy e.g. United Nations

Conference on Trade and Development (UNCTAD), GATT / WTO

3. All matters relating to foreign trade.

4. Import and Export Trade Policy and Control.

5. Export products and industries and trade facilitation

All fiscal concessions and policy issues having financial implications are decided with

the concurrence of the Department of Economic Affairs (Ministry of Finance) or

failing such concurrence with the approval of the Cabinet.

Various organizations under Department of Commerce

1. Directorate General of Foreign Trade

2. Directorate General of Anti-Dumping and Allied Duties and related matters.

3. Directorate General of Commercial Intelligence and Statistics.

4. Export Inspection Council

5. Indian Institute of Foreign Trade

6. Indian Institute of Packaging

7. Federation of Indian Export Organizations

8. Indian Council of Arbitration

9. Indian Diamond Institute, Surat

10. National Centre for Trade Information

11. The State Trading Corporation of India Ltd.

12. Spices Trading Corporation of India Ltd.

13. Tea Trading Corporation of India Ltd.

14. MMTC Ltd.

15. Export Credit Guarantee Corporation of India Ltd. (ECGC)

16. India Trade Promotion Organization (ITPO)

17. Export Promotion Councils



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Export Promotion Council

The basic objective of export promotion councils is to promote and develop the

exports of the country. Each Council is responsible for the promotion of a particular

group of products, projects and services.

The major functions of the EPCs are:-

1. To provide commercially useful information and assistance to their members

in developing and increasing their exports;

2. To offer professional advice to their members in areas such as technology up

gradation, quality and design improvement, standards and specifications,

product development, innovation etc;

3. To organize visits of delegations of its members abroad to explore overseas

market opportunities;

4. To organize participation in trade fairs, exhibitions and buyer-seller meets in

India and abroad;

5. To promote interaction between the exporting community and the

Government both at the Central and State levels; and

6. To build a statistical base and provide data on the exports and imports of the

country, exports and imports of their members, as well as other relevant

international trade data.

The EPCs are Non-Profit, Autonomous and Professional Bodies. The EPCs regulate

their own affairs. EPC's are registered under the Companies Act or the Societies

Registration Act, as the case may be.

The Ministry of Commerce and Industry & concerned ministry (Ministry of Textiles

or Agriculture) of the Government of India, interact with the Managing Committee of

the Council concerned, twice a year, once for approving their annual plans and

budget and again for a mid-year appraisal and review of their performance.

In order to give a boost to exports, Government expects that the EPCs function as

professional bodies.



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Export Promotion Councils in India

1. Agriculture and Processed Food Products Export Development Authority

2. Apparel Export Promotion Council

3. Basic Chemicals, Pharmaceuticals And Cosmetics Export Promotion Council

4. Carpet Export Promotion Council

5. Cashew Export Promotion Council

6. Chemicals And Allied Products Export Promotion Council

7. Cotton Textile Export Promotion Council

8. Coffee Board

9. Coir Board

10. Electronic & Computer Software Export Promotion

11. Engineering Export Promotion Council

12. Export Promotion Council For Handicrafts

13. Gem And Jewellery Export Promotion Council

14. Handloom Export Promotion Council

15. Indian Silk Export Promotion Council

16. Jute Manufactures Development Council

17. Leather Exports Promotion Council

18. Marine Products Exports Development Authority (MPEDA)

19. Overseas Construction Council Of India

20. Plastics Export Promotion Council

21. Rubber Board

22. Shellac Export Promotion Council

23. Sports Goods Export Promotion Council

24. Spice Board

25. Synthetic & Rayon Textile Export Promotion Council

26. Tobacco Board

27. Wool & Woolens Export Promotion Council



8

Role of Finance Ministry

Department of Economic Affairs:

Reserve Bank of India

Department of Revenue:

Indirect Taxes - Customs & Central Excise

Direct Taxes – Income Tax

Reserve Bank of India

1. Exporter has to ensure that he receives money from buyers in 180 day. Failing

which shipper will face FEMA.

2. Importer has to obtain forex from RBI (through the banker)

3. Logistics companies collect freight in local currency. They have to approach RBI

for remittance of freight collected in India.

Banks are instructed through Reserve Bank of India to ensure

1. Documents are not accepted by the bankers from exporter in absence of GR

form or SDF. Money is not released to Exporters in absence of GRI/SDF.

2. L/C is not opened without import license.

Central Board of Excise and Customs – CBEC

Mission statement (Vide CBEC Web site)

1. Realizing the revenues in a fair, equitable and efficient manner

2. Administer the Government's economic, tariff and trade policies.

3. Facilitate trade and industry by streamlining and simplifying Customs and

Excise processes to help Indian business to enhance its competitiveness

4. Create a climate for voluntary compliance by providing guidance and building

mutual trust

5. Combat revenue evasion, commercial frauds in an effective manner

Customs

Customs is located at entry or exit point of the country. Job of customs is to ensure

that lawful import & export takes place. Hence Customs law is applicable to all

parties involved in value chain e.g.

1. Port authority

2. Forwarders

3. Shipping line & airline

4. Banks

Customs act applicable to Carrier, Port Authority, Forwarders

1. Cargo can’t be loaded on to the vessel / aircraft unless it is approved by

customs.

2. Cargo can’t be delivered to the importer unless it is custom cleared.

3. Carrier has to submit the manifest to customs for all

• Export cargo loaded on board the vessel / aircraft (EGM)

• Import cargo, which is to be discharged from ship (IGM)



9

Letter of credit and other payment terms Buyer’s Bank is known as “ISSUING BANK” and Seller’s bank is known as ADVISING

BANK” Seller is known as “BENEFICIARY”

When buyer is guaranteeing payment. He / she has a right to protect himself.

Buyer can insist on the following

L/C Validity (last date for shipment) Marks and numbers

Mention whether Part shipment allowed /not

allowed

Certificate of origin (issued by chamber of

commerce

Recommend type of packing Port of loading / Port of discharge

Insist on packing list to be submitted along with B/L Age of Vessel to be used for loading

Ship to be used with Lloyds 100 A 1 Shipment by regular liners/conference

Lash vessel Permitted / not permitted Transshipment allowed or not

Type of B/L to be used / Shipped on board B/L Insurance certificate

Pre shipment inspection quality & quantity Documents must be presented to bank within 15

days.

1. Seller asks buyer

for letter of credit (L/C)

4. Seller’s bank either

adds confirmation

(guarantees payment to

seller) or simply

advises seller that L/C

has been issued.

5. Seller makes

shipment, presents documents to its bank

in accordance with

L/C’s terms.

2. Buyer asks its bank to

issue L/C in accordance

with seller’s terms.

3. After approving

buyer’s credit line, buyer’s bank notifies

seller’s bank that it has

issued L/C

6. Seller’s bank

examines and

approves

documents, then sends

them to buyer’s bank

by air mail or courier

7. Buyer’s bank examines

and approves

documents. Once

approved, it debits

buyer’s account and

wires money to seller’s bank.

8. On receipt of funds,

seller’s bank credits

seller’s account (If a

confirmed L/C, seller’s

bank would have paid

seller after Step 6



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LETTER OF CREDIT - SAMPLE 1

XYZ BANK LTD

Shipment from: FOB KANDLA To: JEDDAH PORT

Partial shipment: ALLOWED Transshipment: NOT ALLOWED

Container shipment:

Special conditions: (Please also refer to general conditions, overleaf page 2)

1. Payment under reserve owing to discrepancies before our prior approval is

strictly forbidden.

2. Documents to be presented within 20 days from date of shipment but within

validity of the credit.

3. Documents negotiated under this L/C should be forwarded by DHL courier to our

Madina RC Branch 223, souq ghurab, Madina road, Jeddah Attn: L/C Dept, and

duplicates by registered air mail on P.O. Box 605, Jeddah 21421, Saudi Arabia.

Tel: 6655822/6673641.

4. Negotiation of documents restricted at your counter.

5. “Made in India” should be marked on each pieces. Certificate in this effect is

required.

6. Please advise this L/C to the beneficiary through “Bank of Indiana, overseas

branch, Shivajinagar, Pune-411005, India”. Telex: 0146-7223

GENERAL CONDITIONS (WHICH FORM AN INTEGRAL PART OF THIS L/C)

UNLESS OTHERWISE STIPULATED IN THE CREDIT:

1. All Documents should be manually signed.

2. Documents issued prior to the date of issuance of credit not acceptable.

3. Documents issued by EDI not acceptable.

4. Transport document issued by freight forwarder not acceptable.

5. Charter party / short form bill lading / not acceptable.

6. House airway bill not acceptable.

7. Cost additional to the freight as shown in Article 33 D not acceptable.

8. Transshipment Sub Article 23 D is not acceptable.

9. In case of air shipment, copy of Invoice & Cert. Origin should accompany the

goods. AWB to evidence the same.

10. In case of container shipment:

• No. of package in each container should be declared on B/L.

• LCL not acceptable.

• Beneficiary must put a strong sticker / label inside the door of container

stating name of opener, address, Tel.No., Commodity Description and Mode of

Packing, and Packing List must evidence the same.

11. The Invoice must show the breakdown of the amount as follow:

• F.O.B. Value ---------------------



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• Freight --------------------- (In case CFR or CIF)

• Insurance Premium. -------------------

• Total (CIF / CFR)

12. B/L should indicate name, address and telephone number of the carrying

vessel’s agent at port of discharge.

B/L must certify that the carrying steamer is not over 15 years of age at the

time of loading otherwise the vessel must have a valid certificate for cargo gear

and tackle issued by one of the following societies approved by the

Government of Saudi Arabia. Copy of it must accompany the documents.

1) American Bureau of Shipping

2) Bureau Veritas

3) Det Norske Veritas

4) Germanischer Lloyds

5) Lloyds Register of shipping

6) Nippon Kaiji Kyokai

13. Negotiating bank telex (other than advising bank) should also confirm that all

charges of advising bank have been paid.

14. DOCUMENTS REQUIRED (In the box marked x ) WHICH MUST EVIDENCE THE

NUMBER OF THIS CREDIT.

1) Signed Commercial Invoice in --Triplicate Original and duplicate

certified by Chamber of Commerce and legalized by Saudi Arabian

Consulate.

2) Full set “clean shipped on board marine bills of lading” made out to

order of XYZ BANK LTD, marked freight prepaid / to be collected and

notify openers & showing the number of this credit.

3) Clean Airway bill showing XYZ BANK LTD as consignee, marked freight

prepaid/ to be collected and notify openers and showing the number

of this credit.

4) Detailed Packing List in DUPLICATE.

5) Weight Certificate in DUPLICATE

6) Certificate of INDIAN origin issued or attested by Chamber of

Commerce and legalized by Saudi Arabian consulate stating the name

and address of the manufacturer / producers, and that goods

exported are wholly of domestic origin, or, if otherwise the exporter

should issued a decoration in the form No.2 detailed overleaf, and

appended to the certificate or origin.

7) Negotiable insurance policy or certificate, for full invoice value plus

10% irrespective of percentage showing claims payable in K.S.A.R &

C.C. and T.P.N.D. risks, extended cover from warehouse to

warehouse. (Showing premium paid & number of this credit.)

Instituted cargo clauses (all risks) Land transit clauses.

8) A declaration issued by the insurance company in the form No.3

detailed overleaf.



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9) If Saudi Arabian consulate is not available at the port of loading or at

the beneficiaries domicile legalization (where application in this

credit) may be made by the chamber of commerce and / or industry

or the federation of industries at the domicile of the beneficiary and

authenticated by any Arab consulate.

Others :

We are informed by applicant that Insurance will be covered by them.

Please advise this credit to beneficiary -------all charges and commissions outside

KSA

REIMBURSEMENT INSTRUCTIONS : For reimbursement of drawings (s) under this

credit. At Maturity Date 90 DAYS FROM THE DATE OF RECEIVING DOCUMENTS

AT OUR COUNTER You are authorized to debit our account with you.

We will credit your account at any bank of your choice.

We will credit your account at our Head Office, Riyadh.

You may claim on our account directly from

Seven working days from the date of your tested telexes to us stating L/C number,

amount, value date, DHL / Courier AWB No. and date B/L date, vessel name,

shipping agent name at port of destination and that one set of original documents

have already been dispatched by courier, duplicate by a following registered

airmail and that all terms and conditions have been complied with.

EXCERSISE

1. PLEASE MAKE A LIST OF DOCUMENTS SHIPPER WILL HAVE TO SUBMIT TO

THE BANK AT THE TIME OF NEGOTIATIONS.

2. PREPARE B/L



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LETTER OF CREDIT – SAMPLE 2

FORM OF DOCUMENTARY CREDIT - IRREVOCABLE

DOCUMENTARY CREDIT

APPLICANT

ABC CO LTD, PUNE INDIA

BENEFICIARY : XYZ CO LTD

NEW YORK U.S.A.

• PARTIAL SHIPMENTS PROHIBITED

• TRANSSHIPMENT PROHIBITED

• DOCUMENTS REQUIRED

• FULL SET OF SIGNED CLEAN ON BOARD SHIPPING CO’S OCEAN B/L OF REGULAR

LINER VESSEL

• +2 NON NEGOTIABLE COPIES

• B/L MUST BE MARKED FREIGHT PAID,

• B/L MUST NOT BE DATED LATER THAN THE LAST DATE OF SHIPMENT MADE OUT

TO THE ORDER OF ISSUING BANK, AND CLAUSED NOTIFY.

• INSURANCE POLICIES/ CERTIFICATES IN DUPLICATE DATED NOT LATER THAN

THE B/L DATE. SIGNED BY INSURANCE CO, IN BLANK FOR FULL INVOICE VALUE

PLUS 10 PERCENT IN THE SAME CURRENCY COVERING MARINE RISKS, INSTITUTE

CARGO CLAUSES A, INSTITUTE WAR CLAUSES (CARGO) SRCC, TPND,

RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE, WAREHOUSE TO

WAREHOUSE UPTO IMPORTERS GODOWN AT PUNE, INDIA. CLAIMS PAYABLE AT

DESTINATION.

• SIGNED INVOICES IN QUADRUPLICATE CERTIFYING THAT THE GOODS SHIPPED

ARE AS PER Purchase Order NO. OF THE APPLICANT, STATING THAT ALL TERMS

AND CONDITIONS OF THIS L/C AND ABOVE P.O. ARE COMPLIED WITH BEARING

L/C NO AND DATE.

• PACKING LIST AND WEIGHT NOTE IN DUPLICATE.

• CERTIFICATE FROM LLOYDS/OR ITS EQUIVALENT AUTHORITY OR THE SHIPPING

CO OR ITS AUTHORISED AGENT TO EFFECT THAT-

• THE VESSEL IS REGISTERED WITH AN APPROVED CLASSIFICATION SOCIETY AS PER

THE INSTITUTE CLASSIFICATION CLAUSE AND

• CLASS MAINTAINED EQ TO LLOYD’s 100A1.

• THE VESSEL IS NOT MORE THAN 15 YEARS OLD.

• CERTIFICATE OF ORIGIN IN DUPLICATE ISSUED BY CHAMBER OF COMMERCE

STATING GOODS ARE OF …………………..ORIGIN AND INDICATING NAME OF

APPLICANT AS IMPORTERS.

• ADDITIONAL CONDITIONS

1. IMPORTERS CODE NO. TO APPEAR ON ALL COMMERCIAL INVOICES.

2. ONE FULL SET OF NON NEGOTIABLE DOCUMENTS TO BE AIRMAILED TO THE

IMPORTER WITHIN …….DAYS FROM DESPATCHES AND INVOICES TO CERITY

ACCORIDINGLY.

3. SHORT FORM AND THIRD PARTY B/L ARE NOT ACCEPTABLE



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4. B/L (OR OTHER TRANSPORT DOCUMENTS) SHOULD NOT BE DATED PRIOR TO

THE DATE OF THIS CREDIT.

5. BENEFICIARY TO ADVISE APPLICANT THE DETAILS OF SHIPMENT

SUCH AS

B/L NO AND DATE, VESSEL NAME, VALUE OF CONSIGNMENT, QUANTITY AND

DESCRIPTION OF GOODS BY CABLE/FAX/TELEX WITHIN 3 DAYS FROM THE

DATE OF SHIPMENT.COPY OF SUCH CABLE/ FAX/TELEX TO ACCOMPANY THE

DOCUMENTS.

• DISCREPANCY CHARGES OF USD 50.00 SHALL BE DEDUCTED FROM THE

PROCEEDS IF DOCUMENTS ARE PRESENTED WITH DISCREPANCY / IES.

• CHARGES OUTSIDE INDIA TO BENEFICIARY.

EXCERSISE

1. PLEASE MAKE A LIST OF DOCUMENTS SHIPPER WILL HAVE TO SUBMIT TO

THE BANK AT THE TIME OF NEGOTIATIONS.

2. PREPARE B/L



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TYPES OF LETTER OF CREDIT Irrevocable L.C

• It can neither be modified nor cancelled without the consent of beneficiary.

• It constitutes a firm commitment on the part of opening bank. Revocable L.C

• A Revocable L.C. could be revoked, cancelled, amended or modified by the opening Bank without notice to the beneficiary.

• A Revocable L.C. does not constitute a legally binding undertaking between the Bank or Banks concerned and the beneficiary.

All credits have to indicate clearly whether they are revocable or irrevocable in the absence of such indication all credits are deemed to be irrevocable. Transferable L.C. A credit can be transferable if the opening bank specifically assents & issues a transferable credit. Revolving Credit A revolving credit is a credit where the amount is renewed or reinstated from time to time without a specific amendment. Back to Back Credit A Back To Back credit is issued on the strength of a credit already received. Deferred payment Credit

• Are usually used in the Import/ Export of Capital Goods. • Payment is made in installments & each installment is covered by a

separate draft. Red clause credits It is a method of financing before shipment. It authorises the advising bank to make advances to the beneficiary before presentation of documents. Green Clause L/C Green Clause letter of credit is an extension of the Red Clause credits in that it envisages the grant of storage facilitates at the port of shipment over & above pre-shipment finance.



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CHECK LIST FOR SCRUTINY OF THE L/C • Date of Issue

• Date and place of Expiry

• Applicant Bank

• Applicant

• Beneficiary

• Currency

• Validity of L/C

• Quantity & Size of goods

• Value of the L/C

• Stipulation regarding part shipment or transshipment

• Partial shipment

• Any additional document

• Correct Name & Spellings of crucial wordings of Shipper as well as

buyer’s Name & Address

• Place of Taking in Charge/ Dispatch from…/Place of receipt

• Port of loading/ Airport of Departure

• Port of Discharge/ Airport of Destination

• Place of final Destination/ For transportation to…/ Place of delivery

• Specific route if any

• Any prohibition of a particular line of Shipping Companies ( Conference

vessel or Non- conference vessel)

• Shipping marks requirement

• Latest date of Shipment

• Shipment Period

• Description of goods and/or services

• Documents Required

• Additional Conditions

• Charges

• Period for Presentation

• Confirmation Instructions

• Instructions to the Paying/ Accepting/ Negotiating Bank

• Sender to Receiver Information



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ELEMENTS OF EXPORT/ IMPORT CONTRACT

• Product, Standards & Specification

• Quantity

• Inspection

• Total Value Of Contract

• Terms Of Delivery

• Taxes, Duties & Charges

• Period Of Delivery/ Shipment Etc.

• Pre-shipment-transshipment–part Shipment

• Packing, Labeling & Marking

• Terms Of Payment – Amount, Mode & Currency

• Discounts & Commissions

• Licenses & Permits

• Insurance

• Documentary Requirements

• Guarantee

• Force Majeure

• Remedies

• Arbitration



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DIFFERENT METHODS PAYMENT – RISK TABLE Term Of

Settlement When goods available to

buyer

When the seller gets Paid

Risk to seller Risk to Buyer

Advance Payment

Upon arrival at P.O.D.

Prior to shipment

None The risk to buyer is maximum as buyer has already paid some times before shipment.

Open Account On receipt of shipment and shipping documents.

As per mutual arrangement, but after receipt of goods

Risk to shipper is maximum as buyer to pay on receipt of goods.

Risk to buyer is the least or none

Bills for collection – on D/P terms

After payment of the bills .

Upon presentation of the draft and documents to the buyer.

Seller is exposed to risk if buyer refuses to collect documents from bank. Seller may have difficulty in finding alternate buyer.

Relies on seller to ship goods as per specifications. Cannot examine goods till payment made and delivery taken.

Bills for collection – on D/A terms

Upon acceptance of time draft / documents.

Upon maturity of time draft ( payment on agreed date)

Non- payment on due date. Control over goods already lost.

Payment to be made regardless of product quality, but buyer can examine goods and negotiate.

Bankers Acceptance(BA)

Upon acceptance of time draft and co-acceptance by his bank.

Upon maturity of time draft.

Control lost over shipment. However acceptance or co-acceptance by bank ensures payment on due date.

Irrespective of possible disputes over quality / quantity buyer or bank must pay.

Deferred Payment

Documents (goods) delivered on acceptance of time draft and/or co-acceptance by his bank.

Seller is paid on due date.

Payment on schedule date is assured only if banker’s co- acceptance or deferred payment guarantee(DPG) is available.

Irrespective of possible disputes over quality / quantity buyer must pay to bank.

Letter of Credit Only upon payment against LC and taking delivery of documents.

When shipment has been made and documents presented to the negotiating bank.

Documents must be approved by the issuing/ confirming bank

Buyer cannot examine goods till payment is made. Must rely on seller to ship the goods as per L/C.



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DOCUMENTS AGAINST PAYMENT

Documents Against Payment:

Instead of Promissory note buyer makes a payment to

bank and collects documents.



20

NOTES



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Bills of Lading

WHAT IS A BILL OF LADING?

1. A Bill of Lading is a Receipt for Goods issued by the carrier.

2. A Bill of Lading is an Evidence of the Contract of Carriage.

3. An Order Bill of Lading is a Transferable Document of Title to Goods.

UCP 500

INTERNATIONAL CHAMBER OF COMMERCE (ICC) has standardised customs and

practices when issuing and using DOCUMENTARY CREDITS.

ICC Publication No. 50O, is applicable to all Documentary Credits

If a Letter of Credit calls for or permits any of the following transport documents

covering a shipment; banks will, unless otherwise stipulated in the Letter of credit,

accept following document issued by carrier:

1. Marine/Ocean Bill of Lading

2. Non Negotiable Sea Waybill

3. Charter Party Bill of Lading

4. Multimodal Transport Document

5. Air Transport Document (AWB)

6. Road – Lorry or Truck Receipt

7. Rail Receipt

8. Inland Waterway B/L

9. Courier and Post Receipts

10. Freight Forwarders B/L or FCR

TRANSSHIPMENT

For the purpose of Article 23, transshipment means unloading and reloading of cargo

from one vessel to another vessel during the course of ocean carriage from the port

of loading to the port of discharge.

Article 23 D of UCP 500 reads as follows:

Unless transshipment is prohibited by the terms of the Letter of Credit, banks will

accept a bill of lading, which indicates that the goods will be transshipped, provided

that the entire ocean carriage is covered by one and the same bill of lading.

Even if the Credit prohibits transshipment, banks will accept a bill of lading which:

Indicates that the transshipment will take place as long as the relevant cargo is

shipped in Container(s), Trailer(s) and/or "LASH" barge(s) as evidenced by the bill of

lading, provided that the entire ocean carriage is covered by one and the same bill of

lading.

UCP 500 is replaced by UCP 600 in July 2007:



22

Clean Transport Documents.

A clean transport document is one which bears no clause or notation which

expressly declares a defective condition of the goods and/or the packaging.

Shipped On Board

Loading on board or shipment on a named vessel may be indicated by pre printed

wording on the bill of lading that the goods have been loaded on board a named

vessel or shipped on a named vessel, in which case the date of issuance of the bill of

lading will be deemed to be the date of loading on board and the date of shipment.

On board notation: In all other cases loading on board a named vessel must be

evidenced by a notation on the bill of lading, which gives the date on which the

goods have been loaded on board, in which case the date of the board notation will

be deemed to be the date of shipment.

If the bill of lading contains the indication "intended vessel", or similar qualification

in relation to the vessel, loading on board a named vessel must be evidenced by an

on board notation on the bill of lading which, in addition to the date on which the

goods have been loaded on board, also includes the name of the vessel on which the

goods have been loaded, even if they have been loaded on the vessel named as the

"intended vessel".

Received for shipment B/L When cargo is received at carrier’s CFS or CY carrier can

issue Combined Transport Document stating place of receipt CFS / CY. This is known

as received for shipment B/L. If letter of credit requires “SHIPPED ON BOARD” B/L

exporter will not be in a position to negotiate this B/L.

Received for Shipment B/L

It is not a type of B/L, in reality it is MTD issued by the carrier on receipt of goods

for multimodal transport..

While issuing Received for Shipment B/L carrier must ensure that name of CFS is

typed as place of receipt. E.g. Place of Receipt CFS (Name of CFS) Port of Loading

(Name of Port)

FREIGHT

Freight shall be deemed fully earned on receipt of the Goods by the Carrier and shall

be paid and non-returnable in any event.

Freight prepaid - B/L with this clause does not mean freight is received subject to

realization of cheque.

If freight cheque is returned unpaid, carrier can’t exercise LIEN over cargo. Hence

never issue FREIGHT PREPAID B/L to unknown customer against cheque.

LIEN

can be exercised by the carrier if consignee refuses to pay the freight

The Carrier shall have a lien on the Goods and any documents relating thereto for all

sums payable to the Carrier under this contract………………



23

Important B/L clause

Should we allow following clauses in the Bill of Lading?

1. NEW CASES

2. NEWBAGS

3. BRAND NEW GUNNY BAGS

4. USE NO HOOKS

5. HANDLE WITH CARE

6. CLEAN ON BOARD

7. ACTUALLY ON BOARD

8. CONFIRMED ON BOARD

9. SHIPPER LOAD STOWE AND COUNT

10. SAID TO CONTAIN

11. GLASS WITH CARE

12. STRONG CASES

13. STRONG CARTONS

14. NO HAY OR STRAW USED

15. PACKED IN SEAWORTHY BALES

16. AVOID CONTAMINATION

17. NO SOLID WOOD PACKING

MATERIAL USED.

18. STOWED AWAY FROM BOILERS AND

ENGINES

19. KEPT COLD AND DRY

20. STOWED BELOW WATERLINE

21. STOWED AND SHIPPED UNDERDECK

22. NOT TO BE STOWED IN HOLD

WITH….

23. KEEP AWAY FROM FREEZING

24. AVOID DAMPNESS

25. STORE IN A COOL AND DRY PLACE

26. FOR DIRECT DELIVERY ONLY

27. INSURANCE COVERED BY SELLER

28. TRANSHIPMENT PROHIBITED

29. TRANSHIPMENT NOT ALLOWED

30. PARTIAL SHIPMENT PROHIBITED

31. PARTIAL SHIPMENT NOT ALLOWED

32. STRONG SEAWORTHY PACKING

33. DO NOT STACK UPSIDE DOWN



24

BILL OF LADING

SHIPPER / EXPORTER

YZ COMPANY

CONSIGNEE

(NON NEGOTIABLE UNLESS CONSIGNED “TO ORDER”)

Or

(NEGOTIABLE ONLY IF CONSIGNED “TO ORDER”,

“TO ORDER OF” A NAMED PERSON OR “TO ORDER OF BEARER”)

TO ORDER OF

STATE BANK OF INDIA

NOTIFY PARTY

(It is agreed that no responsibility shall be attached to the carrier or it’s agent for

failure to notify)

Name of company typed in this column is the company which has placed an order

however cargo must not be delivered to this party unless consignee in consignee

column has endorsed the B/L in favour of notify party.

‘TO ORDER”( No name written after “TO ORDER” means “TO

ORDER OF SHIPPER” : At the time of shipment, shipper prefers

not to write name of the buyer. At a later stage when money is

received by the shipper or shipper’s bank, B/L is endorsed in

favour of Buyer.

Means only SBI can endorse the

B/L in favour of ultimate buyer

i.e. Notify Party

If “TO ORDER” word is not

printed, this B/L will be “Non

Negotiable” hence name of the

company written here is entitled

to receive cargo without

surrender of “Original B/L’



25

Switch B/L

Many carriers do not permit issuance of switch B/L. Hence one needs to check with

principles prior to issuing such B/L.

Traders often purchase goods from one country and sell the same goods to buyer in

another country (without physically importing goods in trader’s country) for such

transaction B/L is switched. Such trading activity is known as “Merchanting of

Goods”

RBI approves such trading transactions vide the rules under “Merchanting trade”.

Such transactions are permitted only if Indian trader is earning more foreign

exchange than what he is spending on purchase of goods.

Procedure

To be allowed to switch Bill, Customer should present all the original Bs/L issued by

agent in the POL to the agent in the third port. In the case Customer fails to present

a series of Bs/L due to the delay in the POL, customer can demand to issue the

Switch B/L in exchange for the guarantee of the bank.

SHIPPER

AAA EXPORTS INDIA

BUYER

FU FU INC MALAYASIA

BBB INC.

HONGKONG

SWITCH B/L

L/C FOR $ 1,00,000

L/C FOR $ 1,25,000/-

1st set of B/L issued at load port

2nd set of B/L issued at Hong Kong



26

Air - Waybill AWB is non negotiable transport document. Since air cargo reaches faster than

documents through the bank, airlines have introduced AWB.

Sea - Waybill Sea Waybill is non-negotiable transport document. Since containerized cargo

reaches faster than documents through the bank, shipping lines have introduced Sea

Waybill.



27

Consolidation & Groupage The advent of containerization has made the consolidation or groupage of small

consignments into full container loads a necessity. This activity is carried out in two

different manners.

1. Consolidator

2. Groupage operator

Non Vessel Operating Common Carrier (NVOCC):

NVOCC is an individual or firm who accepts LCL shipments from various shippers,

and then combines them for delivery to the carrier as FCL shipment. NVOCC earns

money out of the difference between LCL freight earned and FCL freight paid to

shipping Line. In the ocean shipment, the NVO buys the shipping space, in a special

arrangement with the carrier, and 'resell' the space to individual forwarders or

shippers. In such an arrangement, the NVO acts as a carrier retailing another carrier’s

space.

CONTAINER

NVOCC

SHIPPER - 15 CBM = $300






FCL27 CBM = $1560

PAY SHIPPING

LINE$1200

PROFIT$360



28

NVOCC DOCUMENTATION

Containers are either owned or leased by the NVO. Liability of NVOCC is that of

principal and / or carrier and is subject to the terms & conditions that apply to the

Bill of Lading issued by them.

MASTER B/L

HOUSE B/L



29

Consolidator: Often buyer negotiates FCL rates with carrier and appoints Consolidator to

consolidate various LCL consignments. Consolidator on behalf of buyer accepts LCL

shipments from individual shippers, and then combines them for delivery to the

carrier as FCL shipment. The buyer for services rendered pays consolidator.

DOCUMENTATION

CONTAINER

CONSOLIDATION







ON CIF PURCHASE FREIGHT ON LCL WOULD

HAVE BEEN27 CBM = $1560

PAY SHIPPING

LINEFCL RATE OF $1200

SAVE$360

ON FREIGHT

SAVE$420

ON FREIGHT

SAVE ON CUSTOM CLEARENCE

SAVE ON LCL TRANSPORT



30

Master B/L and House B/L

Origin of these terms is air cargo industry. FIATA approved forwarders consolidate

the consignments of several independent shippers that are destined to the same

airport. Forwarders issue their own House AWB (HAWB) to their customers.

Forwarders book / load such consolidated cargo with airline, air line issue one

Master AWB (MAWB) for consolidated cargo.

With emergence of NVOCC, Logistics companies and International Freight

forwarders, terms such as Master B/L and House B/L were introduced in sea freight

industry.

NVOCC, Logistics companies and International Freight forwarders issue House B/L to

shippers. Shipper negotiates this B/L through banks. However UCP doesn’t recognize

HBL but they recognize Marine/Ocean Bill of Lading, Non Negotiable Sea Waybill,

Multimodal Transport Document and Freight Forwarders B/L or FCR. Though we use

terms like House B/L we don’t print B/L form with heading “House B/L”

Master B/L issued by shipping line works as service B/L because NVOCC, Forwarders

don’t negotiate this B/L through banks.

SEA WAYBILL issued by shipping line to NVOCC is

known as Master Bills of Lading.

OCEAN B/L issued by NVOCC to Shipper is known as

House B/L.

In above situation House B/L is Negotiated through

Bank and Sea Waybill is not Negotiated through Bank.



31

NOTES



32

INCO TERMS International Commercial Terms

This study material is for information and education only and should not be taken as legal advise.

It is viewpoint on the official Incoterms 2010 and what may be contained therein.

You should consult the official publication of ICC.

Incoterms are a set of uniform rules codifying the interpretation of trade terms

defining the rights and obligations of both buyer and seller in an international

transaction. INCOTERMS are drafted by the International Chamber of Commerce

(ICC).

Incoterm 2010 is adopted in major trading countries. Eleven Incoterms enables the

businessperson to select the most suitable term for his or her needs.

INCOTERMS are designed to arrange for the transfer of risk from seller to buyer at an

convenient place.

INCOTERMS define obligations of buyer & seller such as

1. Transportation from factory to place of delivery.

2. Insurance from factory to place of delivery.

3. Export licence& other export authorization (if required).

4. Security clearance: ACD / ENS payable to carrier at origin. There is no

mention of these expenses in Incoterms 2010 however these charges are

payable to carrier at origin.

5. Security clearance: Importer Security Filing at destination.

6. Information required for insurance e.g. carrier details, vessel age &

registration certificate payable to carrier.

7. Loading of cargo on trailer or rail wagon at seller's premises.

8. Discharge of cargo from seller's means of transport at place of delivery.

9. Loading of goods on means of transport (main carriage) e.g. THC /CFS

charges.

10. Pre-shipment checking i.e. quality, weighing, measuring, counting.

11. Documents: e.g. Certificate of origin, GSP certificate of origin, packing list,

Legalization of documents etc. required by buyer for import clearance.

12. Pre-shipment inspection as per buyer's requirement (as per contract)

13. Pre-shipment inspection (mandatory at country of origin).

14. Pre-shipment inspection (mandatory as law of importing country).

15. Export licence (if required), customs clearance (Export) and export duty if

any.

16. Miscellaneous cost e.g. Octroi, local taxes, "gate in fees" etc at origin.

17. Transport document fee (B/L, MTD, AWB fee) payable to carrier for obtaining

transport document.

18. Import licence, customs clearance (Import) and import duty if any.

19. Miscellaneous cost e.g. Octroi, local taxes, "gate out fees" etc at destination.

20. CFS charges if any at final destination.

21. Destination THC or charges at airport LCL THC.

22. "Delivery order" charges payable to shipping line/carrier to take physical

delivery of cargo.



33

23. Transportation from place mentioned as final destination on "Transport

Document" to buyer’s warehouse.

24. Contract of carriage for main carriage.

25. Contract of insurance for main carriage.

In order to ensure proper selection of Incoterms buyers and sellers are expected to

look beyond INCOTERMS 2010 publication i.e.

• What type of transport document (B/L, MTD, AWB ) will be ideal for the

transaction.

• What type of logistics service provider one must use.

• Which will be the “named place” for each of the INCOTEMS.

• How and when the payment and banking transaction will take place.

• Buyer and seller must have good knowledge of import/export procedures

and operations.

Above issues are not discussed in official publication however in this study material

few examples are given for the benefit of seminar participants.

In addition to INCOTERMS International Business House must have broad

understanding of:

• The contract of carriage.

• The insurance contract

• The contract of finance (ICC booklet no.600 on UCPDC)

• The export sales contract involving Incoterms 2010.

At the time and place where risk is transferred from seller to buyer, money is

payable by buyer to seller. Most of the time banks are involved in financial

transactions and various documents are required for negotiations. These specific

issues are not discussed in Incoterms official publication.

Most of the examples (e.g.)

Given in this study material are not published in official publication of Incoterms.

Following terms are repeatedly used in these study notes.

Place of Delivery = Place where risk of loss of cargo or damage to cargo passes from

seller to buyer.

Transport Document =

• Bill of Lading (B/L),

• Multimodal Transport Document ( MTD) or Combined Transport Document

(CTD),

• Railway Receipt (R/R),

• Truck or Lorry receipt (L/R),

• Air Waybill ( AWB),

• Forwarder’s Cargo Receipt (FCR)

• Sea Waybill (SWB) etc.

Main Carriage = Transportation covered under "transport document"



34

INCOTERMS 2010 - TRANSFER OF RISK FROM SELLER TO BUYER Following seven Incoterms are ideal for containerized cargo or rail, road and air

shipments

EXW Seller must deliver goods by placing them at seller's factory or seller's warehouse.

FCA Situation 1: when goods are loaded by seller at seller's premises (factory or warehouse)

Situation 2: when goods are placed at CFS, CY, ICD, air cargo terminal, rail/road cargo

terminal of carrier nominated by buyer. Carrier nominated by buyer must discharge goods

from arriving means of transport.

CPT When goods are delivered to carrier at CFS, ICD, air cargo terminal, rail/ road terminal. (even

though carriage is paid by seller till destination, risk is transferred from seller to buyer at

country of origin)

CIP When goods are delivered to carrier at CFS,ICD, air cargo terminal, rail/ road terminal. (even

though carriage is paid by seller till destination, risk is transferred from seller to buyer at

country of origin)

DAT When seller (carrier nominated by seller) discharge goods from arrival means of transport at

the named terminal at destination. Terminal includes any place such as open storage area,

berth (quay), warehouse, container yard, CFS or rail/road/air cargo terminal.

DAP When goods are placed at the named destination (buyer's warehouse or buyer's factory) on

arrival means of transport. Discharge of goods to be arranged by buyer.

(Import duty is not paid by seller)

DDP When goods are placed at the named destination (buyer's warehouse or buyer's factory) on

arrival means of transport. Discharge of goods to be arranged by buyer.

(Import duty is paid by seller)

Following four Incoterms are ideal for bulk & break bulk cargo shipment by

sea or inland waterways. FAS When goods are placed alongside ship.

Shipper needs to produce port / terminal operator's receipt as proof of delivery.

FOB When goods are loaded on board the vessel.

CFR When goods are loaded on board the vessel (even though carriage is paid by seller till

destination, risk is transferred from seller to buyer when goods are loaded )

CIF When goods are loaded on board the vessel (even though carriage is paid by seller till

destination, risk is transferred from seller to buyer when goods are loaded)

CPT, CIP, CFR, CIF

Freight is paid by seller up to destination however risk is transferred

from seller to buyer when goods are delivered to carrier at country of

origin.



35

Incoterms 2010 – Summary of Contract of Carriage and Insurance

Term Freight Transport

document Insurance

EXW Buyer to pay freight right from seller's factory or warehouse

(Buyer to arrange loading) MTD,FCR,

L/R, RR Buyer

FCA Situation 1

Buyer to pay freight right from seller's factory or

warehouse.(Seller to arrange loading)

MTD,FCR,

L/R, RR Buyer

Situation 2

Buyer to pay freight from CFS, ICD, rail/road/air cargo

terminal at country of origin.

MTD,FCR,

L/R, RR,

AWB

Buyer

CPT Seller to pay freight

from CFS, ICD, rail/road/air cargo terminal at country of

origin to CFS, ICD, rail/road/air cargo terminal at destination.

MTD,FCR,

L/R, RR,

AWB

Buyer

CIP Seller to pay freight

from CFS, ICD, rail/road/air cargo terminal at country of

origin to CFS, ICD, rail/road/air cargo terminal at destination.

MTD,FCR,

L/R, RR,

AWB

Seller

DAT Seller to pay freight up to terminal at destination. Terminal

includes any place such as open storage area, berth (quay),

warehouse, container yard, CFS or rail/road/air cargo

terminal.

MTD,FCR,

L/R, RR,

AWB, B/L

Seller

DAP Seller to pay freight up to buyer's warehouse or factory or

any other place. (Import duty is not paid by seller) MTD,FCR,

L/R, RR Seller

DDP Seller to pay freight up to buyer's warehouse or factory or

any other place. (Import duty is paid by seller) MTD,FCR,

L/R, RR Seller

FAS Ocean freight paid by buyer. (Proof of delivery is dock

receipt) This Incoterm can be used only when port to port

transport is involved.

Ocean B/L Buyer

FOB Ocean freight paid by buyer.

This Incoterm can be used only when port to port transport

is involved.

Ocean B/L Buyer

CFR Ocean freight paid by seller.


is involved.

Ocean B/L Buyer

CIF Ocean freight paid by seller.


is involved.

Ocean B/L Seller

Recommended usage of Incoterms 2010 by modes of transport as

follows:

1. EXW, FCA, CPT, CIP, DAT, DAP, DDP: Rail, Road, Air as a single mode of transport

or Rail, Road, Air and Water as multimodal transport (combined transport).

2. FAS, FOB, CFR, CIF: inland waterways or sea transport only. (Port to Port)

3. FCA, CPT, CIP and DAT: can be used for air port to air port service.



36

NOTES



37

Modes of Transport & Selection of Mode of Transport

Air

Water:

A. Ocean transport or deep-sea transport,

B. Coastal transport

C. Inland waterway i.e. rivers and canals, lakes.

Land:

A. Rail,

B. Truck or trailers and other means.

Pipelines:

Transport liquids and gases, especially petroleum and natural gas.

Advantages of Road Transport

1. Door-to-Door service

2. Flexibility

3. Frequency

4. Routing options

5. Superior service

6. Greater reach

7. Transportation of over dimension cargo overweight cargo is possible

Advantages of Rail Transport

1. Low cost of transportation in case of long hauls and low value/ high volume

(tonnage) is transported. Rail transport is more efficient and economical in

case of traffic, which can be carried in full trainloads. Products like cement,

fertilizers, salt, coal, manganese ore, iron ore, food grains and other products

generally move in large quantities. Because parcel size is big such

commodities move by rail.

2. Railways are more energy efficient: Using the same quantity of fuel oil

railways can carry more than six times the traffic that could be carried by

road.

3. Less prone to accidents and mishaps as compared to road transport.



38

Advantages of Air Transport

1. Schedules & frequencies: Majority of air cargo is shipped on scheduled

passenger flights as a result of which shippers enjoy good frequency. In

addition to passenger flights; on busy cargo route airlines operate freighters.

2. Transit time - best in industry: When fastest deliveries are required, one has

to think of air transport, which is the most expensive mode of transport.

3. Inventory cost control: For shipment of very high value cargo like diamonds,

gems and jewellery air transport is preferred to keep the inventory cost low.

Water Transport

1. Rivers: like Mississippi in the US and Hoogly in India. Rotterdam's hinterland

is well connected by waterways. A modern fleet of thousands of barges

transport cargo deep into Europe.

2. Canals: The Kiel-Canal in Germany is the world's busiest artificial waterway -

more than 38.000 vessels (ships) transited in 2001.It is the safest, shortest

and the most convenient shipping route between the North Sea and the

Baltic Sea. St. Lawrence sea way is another busy waterway.

3. Lakes: Today, the United States and Canada maintain the largest bilateral

trade relationship in the world.

4. Coastal: transportation along the seacoast of a country. In other words, it's

domestic sea transport. Many nations have cabotage act which protects the

domestic sea / water and air transport from foreign competition.

5. International deep sea: Commonly used where large expanses of water

separate countries.

Advantages of Water Transport

1. Lowest cost of transportation:

2. Water is cheapest mode of transport because ships do not require any fuel to

float.

3. In view of buoyancy of water, there is no limitation on size of vessel.

4. Cost of fuel, machinery and manning (crew) does not grow proportionately.

5. Therefore, by building bigger ships, per unit or per ton cost of transportation

comes down drastically.

6. Since ships can cut through water easily, fuel consumed is very low. Fuel used

by ships is not as expensive as fuel used in airplanes.

7. Because of the low price, sea freight would represent too small a percentage

of the product cost. With the result, the exporter can compete in

international markets.



39

Advantages of Modern Water Transport

Ability to offer door-to-door service by using containers: Modern container liner

companies or international forwarders offer door-to-door service, which reduces the

transportation cost and damage in transit.

Schedules and frequencies: Modern container liner companies offer regular and

reliable service to the smallest exporters. Many leading exporters use regular liner

ships as floating/moving warehouse and apply modern business practices such as JIT

to keep cost of inventory as low as possible.

Transportation of over dimension cargo overweight cargo is possible: Water carrier

can transport cargo that is in excess dimensions and is overweight. Air carrier can't

handle a package exceeding the dimensions of aircraft or dimensions of Door

Opening.

Flexibility:

Various sizes of ships: Majority of transport vehicles such as trailers, trucks, rail

wagons and aircrafts are available in particular models / sizes. Where as ships are

made to order and ship owner deploys ships to meet the trade requirements.

Shipper can find ships as per required size.

UNCTAD TRADE STATISTICS

1. World sea borne trade (goods loaded) in the year 2002 reached to 5.88

billion tons.

2. In the year 2002 world merchant fleet was 844.2 million DWT.

3. The fleet of oil tankers & dry bulk carriers’ together makeup 71.6% of the

total world fleet.

4. Average age of world fleet at the end of 2003 was 12.6 years.

5. Average age of general cargo vessels was 17 years

6. Average age of container fleet was 9.1 years

7. Developing countries’ share of world fleet was 20.3%

8. In the year 2000 World container traffic reached to 236.7 million TEU.



40

Shipping And Sea Borne Trade Introduction:

The ocean transport industry serves five distinct markets, namely

• Dry bulk trades,

• The oil and refined products trades

• The gas and chemical trades,

• The general cargo trades which is containerized., and

• The reefer (i.e., refrigerated cargo) trades.

The industry provides a wide range of shipping services, which may be broadly split

into two main categories:



41

Liner shipping: Ideal for those who have small volumes or high value products, which do not justify

chartering of ships. If high value cargo is shipped on chartered vessels in large

quantity the cost of inventory goes up drastically. Liner ships offer regular reliable

shipping service to the trade with fixed schedule.

Liner ships

• Ply on a regular scheduled services between groups of ports.

• Offer cargo space irrespective of volume, to all shippers who require them.

• Sail on scheduled dates, irrespective of whether they are full or not.

• Carry general cargo and unitized cargo in containers

Liner shipping is the common arrangement for general cargo and containers,

whereas all other trades are usually accommodated through tramp shipping.

However, this divide is not strict, as liner operators may charter tramp ships to

complement their fleets in times of peak demand, and tramp operators may

occasionally engage in regular liner services for limited periods. Container ships are

used for liner service.

Liner operations

Since liner vessel calls at various ports to load / discharge container, vessel must be

loaded in such a manner that at each port container can be discharged or loaded

without rework. At the same time stability of ship must be maintained.

Closing Date / cutoff date: Last date on which export goods / containers can be

accepted for a nominated sailing. Many ports in the world are very strict on closing

or cut off date because it helps them to load vessel efficiently and avoid delays.

Stowage plan : Stow = To place, arrange or store away especially in a neat compact

way. The cargo was stowed in the ship’s hold

Stowage = The act, manner, or process of stowing. Stowage planning of container

vessels is also known as Bay Plan. Ship planners in office prepare stowage plan with

the help of bookings and containers physically received in terminal as on cutoff date.

This stowage plan is communicated to stevedores to ensure that ship is loaded as

per the plan. Bay plan shows the locations of all the containers on the vessel.



42

Liner shipping is a highly capital-intensive segment of the industry.

In the Year 2003 ,daily operating cost of a typical container vessel of 4,000 to 5,000

TEU, was in excess of $40,000 for including capital, administrative and operating

costs. Cost of new container ship was an average of $80 million each. Ocean

terminals cost anywhere between $100 – 300 m

For any shipping line to serve customers and stay in business a minimum of five ships

are needed for a service string, such as between the Pacific Northwest and Asia.

Apart from investment in ships, shipping lines either own or use expensive

infrastructure on land such as

Port Terminal

All export containers are transported to port terminal prior to arrival of vessel. On

berthing of vessel containers from terminal are transported to ship side and are

loaded on board the vessel. All containers discharged from vessel are stacked in the

import terminal. Storage of containers at port terminals helps in faster turnaround

time.

Container Yard (CY)

Is used for collection, distribution and storage full and empty containers.

Full Container Load (FCL)

A parcel of goods, which is big enough to utilize all the space in a container. Such

parcel is often packed or stuffed by shipper at factory. Some times shipper delivers

FCL cargo to shipping line at CFS for stuffing.

Less than Container Load (LCL)

If exporter has small parcel to fill a container i.e. less than a container load, he books

cargo with carrier as LCL. Such carrier who is accepting LCL bookings from various

exporters stuffs all LCL, compatible goods in one container for the same destination.

Container Freight Station (CFS)

Export CFS:

Is very large warehouse complex used for receiving export LCL cargo. At CFS

exporters can arrange customs examination of cargo and handover goods to

shipping line for stuffing.

Import CFS:

With regards to imports, shipping line de-stuff LCL containers and store cargo in CFS.

Importer at his convenience arranges custom clearance, pays import duty and takes

delivery of cargo from import CFS.

Inland container Depot

Also known as Dry Ports, C/Bs (in UK), Depots (in Australia) and Rail Head or IPI (in

USA). Shipping lines and rail companies promoted Inland Container Depots at

landlocked industrial towns. This facilitates usage of low cost rail transport to and

from port to ICD. Exporters and Importers can arrange custom clearance at ICD.



43

Tramp shipping: Chartering of ships is ideal for those having large cargo volumes, which are to be

shipped on one vessel. Crude oil, fertilizers, food grains, minerals, chemicals etc

moves by chartered vessels. These commodities are low in value and move in large

quantities. Ships serving this trade will be of size anywhere between 5000 m.tons to

500,000 m.tons. Ships are chartered under different terms and conditions, including

single voyage or consecutive voyage charters, time charter, trip charter, or bareboat

charter. The charter rates depend upon elements of cost on account of ship-owner

and charterer. Such cost elements are depicted in the table below.

Types of Charter

Elements of cost on account of ship owner Voyage

Charter

Time

Charter

Bareboat

Charter

Capital investment (ship) Owner Owner Owner

Operating Cost Owner Owner Charterer

Voyage Cost Owner Owner Charterer

Cargo Handling cost Owner Charterer Charterer

Voyage Charter Time Charter 1-5 years Bareboat Charter

Ideal for one time or

short term

requirement.

Expenses such as crew

salary, cargo loading &

unloading, fuel, port

expenses are on

account of ship owner.

Ideal for the exporters who have

regular cargo movement e.g. Steel

Mills importing ore, Oil Companies

regularly importing crude.

Charterer takes the ship on

charter for a fix time frame.

Charterer looks after cargo

booking. All cargo related

expenses are on account of

charterer.

All costs such as fuel, crew salary,

etc is on account of ship owner.

Advantage: Charterer can avoid

repeated chartering. Charterer

will have long term rate

commitment.

Ideal for ship owners who have

expertise to operate ships.

Usually large size shipping line or

exporter/importer who ship large

size consignments very regularly

takes ships on bare boat charter

from another ship owner.

Charterer just takes the bare ship

on charter. Charterer looks after

manning, deployment, all costs

such as bunkers, crew salary, port

charges, booking commissions etc.

Advantage: In absence of required

funds to acquire the ship,

charterer (shipping company or

big time exporter like oil

company) prefers bareboat

charter.

Note: Information in the above table is an attempt to develop basic understanding. In

reality one needs to study the charter party very carefully.

The charter rates are quoted on a competitive basis through brokers in various

Exchanges throughout the world. One of such exchange is Baltic Exchange.



44

Types of ships used in Tramp Trade

1.Car Carriers

2.Roll on Roll off ships

3.Passenger/Cruise liners

4.Refrigerator [Reefer Ships]

5.Break Bulk Cargo Ships

9.Timber or lumber carriers

10.Bulk-carriers [Bulkers]

11.Heavy lift cargo ships

12.Cattle Carrier

13.LPG carriers [Liquid petroleum Gas carriers]

14.Chemical Tankers:

15.Product Tankers

16.Edible Oil Tankers

17.Tankers

18.Coal carrier

19.Cement carrier

20.Supply boat

21.Oil Bulk Ore Carrier (OBO)

Tankers

Types of Tankers Deadweight tonnage

Product carrier [for petroleum products] 10,000-60,000 t

CC [Crude Carrier] Upto 80,000 t

LCC [Large Crude Carrier] 80,000 t – 120,000 t

VLCC [Very Large Crude Carrier] 120,000 t – 250,000 t

ULCC [Ultra Large Crude Carrier ] Over 250,000 t

Handy size: About 25-35,000mt.

Handymax : Larger form of handy size, about 45,000mt

Panamax : The biggest type of ship able to transit Panama, which has a 32.23m

beam restriction as the main restriction. This means ships of around 70-80,000mt

DWT

Capesize: Ship bigger than a Panamax, i.e. from about 80,000-200,000 tons

deadweight. Too big to transit Panama canal, has to go via Cape Horn, hence 'Cape'

sized vessel.

Post Panamax: The type of container ship unable to transit Panama, which has a

32.23m beam restriction as the main restriction. This means ships of more than 70-

80,000mt DWT can’t pass through Panama Canal.



45

Evolution in shipping industry Bulk Cargo:

Cargo loaded in to the ship without any packing or without containerization. Approx.

70% of world trade in terms of tonnage, moves as Bulk Cargo.

Break Bulk Cargo:

Cargo packed and loaded in to ship (without containerization).

Major problem in Break Bulk shipments is multiple handling of cargo which results in

1. Damage to cargo

2. Loss of time

3. Increased handling cost

4. Pilferage in transit warehouses

To avoid above mentioned problems trade thought of unitization by using Pallets or

Jumbo Bags. This is known as UNITIZATION. During 1970 / 80 CONTAINERS were

introduced by shipping lines, which is the most popular method of UNITIZATION.

Containerization:

With the introduction of containers the entire transport industry underwent drastic

change.

1. Design of ships changed. Ship owners acquired Gearless Cellular Ships.

2. Size of ships increased dramatically. With lower operating cost, shipping lines

could compete with other carriers.

3. Turn around time of ships improved.

4. Ports underwent major change by building deep-water berths and container

terminals.

5. Traditional cargo handling equipments in the port were replaced with most

modern Rail Mounted Quay Cranes, Rubber Mounted Gantry Cranes, Reach

Stackers and Large Size Fork lifts.

6. Road transport vehicles were split in to two parts i.e. Tractor or Prime Mover

or Horse and trailer.

7. Rail companies also took advantage of containerization by introducing

services like Trailer on Flat Car (TOFC) and Container on Flat Car (COFC). This

change assisted Rail Companies to regain their business from road

transporters.

8. Shipping lines and rail companies promoted Inland Container Depots or

Container Bases or Dry Ports at landlocked industrial towns. This resulted in

Multi Modal Operations and Door-to-Door service.



46

MULTI-MODAL TRANSPORT

What is multi modal transport?

Inter-modal or multi-modal transport became integral part of shipping industry and

undoubtedly goes hand in hand with containerization.

As per U. S. Department of Transportation, "Intermodal used to denote movements

by cargo containers interchangeably between transport modes, i.e. motor, water

and air carriers, and where the equipment is compatible within the multiple system".

Business Environment

In competitive Business environment, liner-shipping companies are striving to

achieve a competitive edge over- their rivals in the markets.

Liner companies are becoming more and more marketing / customer oriented. The

multi-modal transport operator issues one Bills of Lading covering entire journey and

shoulders the responsibility for the whole transport operation in all its stages. Future

of shipping companies depends to a great extent, on their ability to fulfill the

customers' needs.

International Multi-modal transport system

The International multi-modal transport system, one company offers combined, or

multi-modal transport services.

• The transport operation utilizes at least two modes of transport.

• The transport operation is from the exporter's stores to the consumer's

stores.

Due to the pressing necessity to provide an International system for multi-modal

transport, UN UNCTAD submitted a proposal for- the International Multi-modal

Transport Convention, which was adopted during its session, held in Geneva in 1980.

This convention stipulates that a contract should be concluded between the shipper

and the multi-modal transport operator, by which the latter undertakes to carry out

an International transport operation, whether he himself carries out the operation,

or whether- it is carried out through other parties.

The companies, which function as multi-modal transport operator, are:

Liner shipping lines, especially those operating container ships. In order to serve the

customers better in addition to maritime transport services, the shipping lines are

offering value added services such as air and land transport services or sea and road

/ rail transport. In other words these companies function as multi-modal transport

Operators. Land or air transport operations are effected through sub-contracts or

own assets.

Freight Forwarders: They depend on the services and assets of other companies.



47

Why multimodal transport has been successful in USA?

• Large distance between the West Coast and the East Coast.

• Rail service is very reliable.

• The possibility to serve all inland points in the USA via the West Coast without

crossing the Panama Canal (which is both expensive and time consuming).

• Buying power of people situated in cities and towns located in interior parts of

USA is good with the result movement of merchandise to inland areas is

substantial.

Multimodal Service in U.S.A.

The Americans define intermodal move as a haul of sea container along a distance

that is longer than 500 miles usually by rail. Less than 500 miles is by road.

1. Land bridge service – Far East to Europe cargo via USA.

2. Mini Land bridge service – Port to Port rail transport.

3. Interior Point Intermodal – Port to interior point rail transport.

In Europe the situation is totally different.

1. Smaller distances between ports and inland destinations

2. Fragmented population within many different nations

3. The slow pace of investments in the transport infrastructure

4. The lanes are crossing tunnels, eliminated the possibility to build an

intermodal transport system similar- to the American one.

Due to smaller distances between ports and inland destinations containers in

Europe travel short distances:

1. Average 75 km by truck,

2. Average 200 km by rail

3. Average 140 km by inland waterway

The most popular means of inland transport is the road followed by rail (15 %) and

by inland waterways barges (10 %)

In Europe, intermodal transport is usually named "Combined Transport".



48

Feeders /Hub & Spoke Operations

Break-bulk Liners

Exporters and importers always prefer to use shipping line that offers faster transit,

better frequency and carry cargo safely.

Prior to containerization, liner companies used break bulk ships. Transshipment of

break bulk cargo was not acceptable to the trade because of risk of damage. In view

of this limitation Break Bulk Liner shipping companies offered direct services with

smaller ships.

Container Liners

With introduction of containers, ship owners acquired big ships to cut down

operating costs. Improved turnaround time of container ships also supported

acquisition of large size container vessels. However their success was dependant on

near full-load without lowering freight rates. To secure full loads shipping lines have

to call at more ports, additional port of call results in increased Transit time.

Increased transit time weakens competitiveness. Hence to maintain transit time of

important markets and to gain more business, carriers operate feeder service from

smaller markets to nearest hub port.

Is it transshipment for Bankers?

UCP 500 Article 23 D

Even if the credit prohibits transshipment, banks will accept a bill of lading which

indicates that transshipment will take place as long as the relevant cargo is shipped

in Containers, Trailer or LASH barge as evidenced by the bill of lading, provided that

the entire ocean carriage is covered by one & the same bill of lading.



49

Feeder vessel

A vessel normally used for Carriage of export containers from ports to hub port. At

hub port main line vessel loads these containers and transport to final destination.

At hub port feeder vessel also loads import containers discharged by main line vessel

and transport to final destination.

3rd

Party Common Carrier - Feeder Vessel

3RD PARTY CCMainline Vessel to

Hamburg

3RD PARTY CC

AAA LINE’S CUSTOMERPAYS FREIGHT TO UPTO MALMO

“AAA LINE” ISSUE ONE B / L UPTO MALMO MALMO (Sweden)CALCUTTA

HAMBURGCALCUTTA COLOMBO

“AAA LINE” PAYS SLOT HIRE $200 TO

3RD PARTY CCCCU TO CMB

CONTAINER RIDES ON

“AAA LINE’S” OWN VESSEL

MALMO(Sweden)

“AAA LINE” PAYS SLOT HIRE $250 TO

3RD PARTY CCHamburg To Malmo

CALCUTTA TO MALMO FREIGHT OF $1300 IS COLLECTED BY “AAA LINE”

REVENUE TO “AAA LINE” $850



50

Types of containers & dimensions

1. General Purpose (GP) or Dry (D) container – 20’

2. General Purpose (GP) or Dry (D) container – 20’ High Cube ( 9' 6" height)

3. General Purpose (GP) or Dry (D) container – 40’

4. General Purpose (GP) or Dry (D) container – 45 ( 9' 6" height)

5. General Purpose (GP) or Dry (D) container – 40’ High Cube ( 9' 6" height)

6. Flat Rack (F / R) or Flat Bed or Flat

7. Bulk Head Container

8. Tank Container (Tanktainers)

9. Flexitank

10. Open top container

11. Half Height Container

12. Open Side Container

13. Pallet Wide Container

14. Reefer Container

15. Garments on Hanger Container

THOUGH ALL CONTAINERS ARE OF ISO STANDARDS INTERNAL DIMENSIONS MIGHT

VARY, HENCE CUSTOMER SERVICE REPRESENTATIVE MUST ADVISE INTERNAL

DIMENSIONS TO AN EXPORTER AT THE TIME OF BOOKING.



51

20' Standard - Volume 33.200 cubic meters 11,170 cubic feet

Payload (Weight) 21,850 kg to 28,160 kg 48,171 lb - 62,082 lb

Tare Weight 2,150 kg to 2,220 kg 4,740 lb - 4,894 lb

Max Gross Weight 24,000 kg to 30,480 kg 52,911 lb - 67,197 lb

Internal Length 5.898 m 19'4"

Internal Width 2.352 m 7'9"

Internal Height 2.392 m 7'10"

External Length 6.058 m 19'10 1/2"

External Width 2.438 m 8'0"

External Height 2.591 m 8'6"

Door Opening Width 2.340 m 7'8"

Door Opening Height 2.280 m 7'6"

40' Standard - volume 67.700 cubic meters 2,391 cubic feet

Payload (Weight) 26,760 kg - 28,760 kg 58,996 lb - 63,405 lb

Tare Weight 3,720 kg - 3,740 kg 8,201 lb - 8,245 lb

Max Gross Weight 30,480 kg - 32,500 kg 67,197 lb - 71,650 lb




External Length 12.192 m 40'0"





40' High cube - volume 76.400 cubic meters 2,700 cubic feet

Payload (Weight) 26,750 kg - 28,550 kg 58,974 lb - 62,942 lb

Tare Weight 3,730 kg - 3,950 kg 8,223 lb - 8,708 lb

Max Gross Weight 30,480 kg - 32,500 kg 67,197 lb - 71,650 lb











52

45' High Cube

Cubic Capacity 86.500 cubic meters 3,055 cubic feet

Payload (Weight) 28,280 kg 62,350 lb

Tare Weight 4,740 kg 10,450 lb

Max Gross Weight 33,020 kg 72,800 lb









20' Open Top










Roof Opening Length 5.500 m 18'1"

Roof Opening Width 2.220 m 7'3"

40' Open Top










Roof Opening Length 11.600 m 38'1"

Roof Opening Width 2.140 m 7'0"



53

20' Reefer

Cubic Capacity 28.300 cubic meters 999 cubic feet












40' Reefer








External Length 12,192 m 40'0"





40' Reefer Hi Cube















54

Freight rates and basis of calculation

Factors affecting freight rates

• The weight & measurement ratio of the commodity being shipped

• The value of the commodity

• The distance

• Efficiency of the port of origin as well as the port of destination

• Waiting time at each port

• Maintenance of the containers

• Port charges including tug hire, berth hire, pilotage etc.

• Cargo handling expenses including labor costs and crane charges

• Taxes

• Commissions for cargo booking

• The commodity's susceptibility to damage or extra care required in terms of

handling and stowage

• The value of commodity

• Fluctuation in Fuel costs

• Currency exchange rates fluctuations

• Canal dues

• Insurance costs

• Depreciation of the ship and equipment onboard

• Salary paid to the crew members

• Maintenance of the ship

• Cargo availability at the port of call

• Demand & supply of ships / cargo.

• Equipment repositioning cost

• Faster transit

• Value added services

• Influence of similar products and ports located in one region.

Freight

Consideration paid by the exporter or importer to the carrier for transportation

of goods. Freight also refers to the “cargo” carried.

Two most important parameters of any Cargo.

1. Weight

2. Volume

In other words the economies of the transport industry indicate that costs of

service are related to the volume and weight of the consignment.

W / M = Weight or measurement whichever is greater.

W = Weight – 1 Metric Ton of 1000 Kgs.

M = Measurement – 1 Cubic metre.

Break-bulk cargo rates & LCL rates are quoted W / M.

FCL rates are based on size and type of container.



55

Freight ad-valorem

Value of consignment mentioned in a Bill of Lading, amends carrier’s limitation of

liability to the stated value. Because of increased liability, carrier recovers freight

on Ad Valorem basis. e.g. 4% of declared value. High value cargo is charged rate

on value basis. e.g. Gold, Silver etc.

Ad Valorem rate works out to be expensive hence many exporters don’t indicate

value of cargo on the B/L. Shipping line also doesn't welcome declaration of

value because they have no means of checking value of cargo

Freight rates are primarily dependent on the following costs.

1. Fuel costs

2. Currency exchange rates

3. Canal dues

4. Insurance

5. Port charges & efficiency of port.

Freight surcharges:

Any fluctuation in above costs must be recovered from shipper or consignees.

Since such fluctuations are temporary shipping lines prefer to introduce freight

surcharges rather than tariff amendment. These surcharges are either increased

or decreased or abolished from time to time.

1. FAF or BAF = Fuel Adjustment Factor or Bunker Adjustment Factor

2. CAF = Currency Adjustment Factor

3. Canal surcharge

4. War risk surcharge or Insurance surcharge.

5. Congestion Surcharge

6. Peak season surcharge

7. Winter Surcharge

Terminal handling charges (THC)

Fees collected in addition to ocean freight by shipping lines from shippers at load

port & consignees at discharge port. Fees cover the cost of paying the terminals

operators for the

1. Storage of cargo at CFS

2. Stuffing / de-stuffing of cargo at CFS

3. Transporting containers to or from CY/CFS to Port terminal.

4. Storage of containers at terminal,

5. Moving containers to or from terminal / vessel.

6. Loading and unloading of containers and other costs related to cargo

handling.

THC is also known as Container / Port Service Charge.



56

Federal Maritime Commission

(FMC)

The Federal Maritime Commission established in 1961 as an independent agency

of U.S. Government.

FMC - Functions

1. FMC is responsible for the regulation of shipping in the foreign trade of

the United States.

2. To protect American shippers / consignees, carriers and others engaged

in the foreign commerce of the U.S. against restrictive rules and

regulations of foreign governments and practices of foreign-flag carriers

that have an adverse effect on shipping in U.S. trades

3. To investigate, upon its own motion or upon filing of a complaint,

discriminatory, unfair, or unreasonable rates, charges, classifications, and

practices of ocean common carriers, terminal operators, and freight

forwarders serving in the foreign commerce of the U.S.

4. FMC receives agreements among ocean common carriers or marine

terminal operators and monitors them to assure that they are not

substantially anticompetitive or otherwise violation of the Shipping Act of

1984

5. To review tariff publications under the access and accuracy standards of

the Shipping Act of 1984

6. To regulate rates, charges, classifications, rules, and regulations

contained in tariffs of carriers controlled by foreign governments and

operating in U.S. trades to ensure that such matters are just and

reasonable;

7. To conduct investigations. Investigations are conducted into alleged

violations of the full range of statutes and regulations administered by

the Commission, including:

8. Legal rebating

9. Mis-descriptions or mis-declarations of cargo

10. Illegal or unfiled agreements

11. Untariffed cargo carriage

12. Protect American business from various types of consumer abuses, such

as failure of carriers or intermediaries to carry out transportation

obligations, resulting in cargo delays and financial losses for shippers.

* Source – FMC website



57

Export & Import Documentation / Cargo Flow

Exports: Exporter to prepare documents for export clearance. Exporter must despatch

following documents to CHA before despatch of goods.

• Shipping instructions.

• Declaration form for export of goods (with / without claim of drawback or other

schemes).

• Form SDF or GRI (exchange control copy)

• Pro-forma / Commercial Invoice

• Packing list

• AR4 form (in case of excisable goods)

• Letter of credit

• Advance import licence

• Generalised Scheme Preference form or quota (if required)

• Certification on nature of goods (i.e. dangerous goods, perishables, etc)

Timely despatch of documents enable CHA to process the shipping bill and avoid

the delays in unloading trucks.

Procedure

1. CHA on receipt of above documents types the shipping bill and submits to

customs.

2. Customs allocate the serial number of shipping bill.

3. Custom appraiser at customhouse will scrutinize invoice and shipping bill and

pass the shipping bill.

In case of EDI all data as per declaration form is fed into electronic data information

systems by customs data entry staff. In case of EDI, after data entry is made, CHA

verifies checklist generated (printed) by customs.

4. CHA takes carting order from shipping line / airline and along with relevant

export documents; LCL consignments are taken into CFS or export section of the

air cargo complex. Factory stuffed FCL containers are taken to the Port terminal

or CY

5. CFS manager or CY manager or Air India accepts cargo on behalf of shipping line /

airline on the basis of shipping bill and the gate pass

6. Cargo is carted by the agent into the CFS or air cargo examination hall ( cargo

from truck is discharged in the warehouse and cargo is stacked as per warehouse

manager’s instructions)

7. CHA approaches the customs appraiser and examiner (customs officials) located

in this warehouse and requests them for cargo examination.



58

8. Few packages required by customs for physical examination will be moved from

stack to customs desk. These boxes will be opened for inspection of cargo and

repacked after examination.

9. After examination, CHA obtains the let ship order from custom officials.

10. After detailed entry into register, warehouse operator hands over documents to

relevant shipping line / airline staff or representative.

11. Shipping line staff (or their contractors) stuff LCL cargo in container. For airfreight

cooling period is applicable.

12. Shipping line staff gives mates receipt or it’s equivalent to CFS manager.

13. LCL containers are sealed by customs and are moved to stack yard within CFS

14. 48 hours prior to arrival of vessel, containers are moved to pre-stack area in the

port. The shipping line arranges this movement.

15. On arrival of the vessel, containers are moved by trailers to ship side and are

loaded on to the ship.

16. CHA pays CFS manager the wharfage or warehousing charges and obtains Mates

Receipt.

17. Later on, CHA submits this mates receipt and obtains the B/L.

Export Documents

Documents prepared by or obtained by exporter and sent to buyer.

• Invoice

• Packing List

• Insurance Certificate if insurance paid by seller.

• Certificate of Origin Certificate

• Bill of Lading or A.W.B

• Other Documents

Documents retained in India

• Shipping Bill

• Export Declaration Form

• GR Form – S.D.F. Form

• ARE-1 Form

• “H” Form (May Change based on VAT)

• “N” Form

• Export Authorisation

• Quota Certificate in quota is involved.

• Other Documents

For export clearance Shipper has to file and process Shipping Bill (a document)

required for customs clearance. Upon shipment shipper collects original bills of

lading from shipping line and surrenders the B/L to his bank.



59

For import clearance Consignee collects original documents from his bank.

Consignee hands over Original B/L to carrier and obtains Delivery Order. Without

Delivery Order consignee can’t arrange custom clearance. Consignee has to file and

process Bill of Entry (a document) required for customs clearance.



60

Import Documentation / Cargo Flow

Prior to arrival of the vessel, carrier files Import General Manifest (IGM) with the

customs. Filing of IGM is a must. Without an IGM Importer cannot file a Bill of Entry.

On receipt of Arrival Notice from carrier, importer approaches the bank and on

payment obtains the original B/L.

Importer hands over the original B/L, Invoice, Packing list, Import declaration form

and import license copy to the CHA / Custom Broker.

CHA surrenders the OBL and obtains Examination order or Delivery order from

carrier. CHA prepares Bill of Entry, which is a customs document and gets the goods

examined.

After customs examination CHA pays import duty to the customs banker and moves

the goods to consignee’s warehouse.

Though procedure mentioned above looks very simple the entire process is very

difficult because of the stringent norms of Import Policy.

LCL containers are de-stuffed and cargo is stored at CFS.

FCL containers in India are de-stuffed for customs examination. In developed nations

importer pays import duty prior to arrival of ship so that import containers can move

directly. Customs do not insist on physical examination of cargo. However customs

randomly select containers prior to arrival of vessel, these containers are detained in

port for physical examination of cargo.

IMPORT DOCUMENTS

Received from supplier

• Invoice

• Packing List

• Insurance Certificate if insurance paid by seller

• Certificate of Origin

• B.L. or A.W.B

• Other Documents

Prepared or obtained by Importer

• Purchase Order/ O.A /L.C

• D.F. – Under Valuation Rules, 2007

• I.E.C. No.

• Industrial Approval

• Insurance Certificate if insurance paid by buyer

• Import License

• Other Documents



61

Services offered by Shipping lines and various service

providers in Global Logistics.

Prior to containerization shipping business was primarily restricted to port to port

shipments. Exporter was responsible for all pre shipment activities and importer was

responsible for all activities at destination.

Custom broker or Custom House Agent (CHA).

For pre and post shipment activities

At origin, shipper uses CHA to custom clear cargo

At destination consignee uses custom broker or CHA to custom clear cargo & pay

duty on behalf of importer.

Clearing & Forwarding Agent

Services offered by CHA in addition to customs clearance is known as freight

forwarding service. Such services are:

• Octroi formalities

• Selection of shipping line or airline

• Booking of space with carrier.

• Release of B/L or AWB

• Warehousing of import cargo

• Forwarding import cargo to importer’s warehouse.

Such service provider is known as Clearing & Forwarding Agent or C&F Agent.

Forwarders, international freight forwarders and ……….

With containerization and modern management concepts the world trade has

undergone a change. Importers and exporters have changed their buying pattern.

Instead of buying on Port-to-Port basis the trade has shifted to ware house to ware

house-buying. This has resulted in to Door-to-Door services.

This is how Multi Modal Transport came in to existence.

To survive competition Customs Brokers / CHA and shipping lines had to offer value

added services.

Few CHA, by offering value added services became freight forwarders. Shipping lines

became Multi Modal Transport operators.

When buyer wants to buy Ex. Works, buyer has to rely upon the forwarder who will

organize all the formalities at origin and at destination. What buyer gets is all

services under one roof.

When exporter sells on DDP or DDU basis, seller has to rely upon the forwarder who

will organize all the formalities at origin and at destination.



62

As intermodal transportation becomes more complex, the job of a freight

forwarder becomes more essential and difficult.

He needs to coordinate the complexity in finances, transport and other service

activities. For example, he will:

Importers and Exporters expect following services from the freight forwarder:

1. Freight forwarders are familiar with the import laws of foreign countries. Often

exporters expect guidance from forwarders. Forwarders are expected to

comply with those foreign laws and ensure that all paperwork meets law of the

country.

2. Freight forwarders are expected to locate the most suitable shipping line or

airline to transport the export shipment of goods and to make certain that

these goods reach destination in most efficient and economical manner.

3. Forwarders are expected to keep a watch on the constantly changing

regulations, which affect cargo movements; such as foreign documentation

requirements, hazardous materials rules, government regulations, special

packaging or handling restrictions, and any applicable licensing provisions.

4. Help buyer / seller select terms of sale

5. Make routing recommendations for air cargo.

6. Prepare commercial invoices

7. Export packing

8. Obtain port warehouse space

9. Obtain export licenses

10. Issue export declarations

11. Obtain certificates of origin

12. Obtain and prepare consular invoices

13. Compile air way bills and B/L.

14. Obtain cargo insurance

15. Pay all charges to port authority (port dues/wharfage).

16. Consolidation on behalf of buyer.

17. Pay freight charges

18. Trace and expedite shipments…………………………………

Many exporters and importers consider Freight forwarder, more than a partner- in

the international business.

There are two types of freight forwarders:

1. Ocean freight forwarders

2. International air cargo agents, which are accredited by the international Air

Transportation Association (IATA).



63

Consolidation & Groupage The advent of containerization has made the consolidation or groupage of small

consignments into full container loads a necessity. This activity is carried out in two

different manners.

3. Consolidator

4. Groupage operator

Non Vessel Operating Common Carrier (NVOCC):

NVOCC is an individual or firm who accepts LCL shipments from various shippers,

and then combines them for delivery to the carrier as FCL shipment. NVOCC earns

money out of the difference between LCL freight earned and FCL freight paid to

shipping Line. In the ocean shipment, the NVO buys the shipping space, in a special

arrangement with the carrier, and 'resell' the space to individual forwarders or

shippers. In such an arrangement, the NVO acts as a carrier retailing another carrier’s

space.

CONTAINER

NVOCC







FCL27 CBM = $1560

PAY SHIPPING

LINE$1200

PROFIT$360



64

Consolidator: Often buyer negotiates FCL rates with carrier and appoints Consolidator to

consolidate various LCL consignments. Consolidator on behalf of buyer accepts LCL

shipments from individual shippers, and then combines them for delivery to the

carrier as FCL shipment. The buyer for services rendered pays consolidator.

CONTAINER

CONSOLIDATION







ON CIF PURCHASE FREIGHT ON LCL WOULD

HAVE BEEN27 CBM = $1560

PAY SHIPPING

LINEFCL RATE OF $1200

SAVE$360

ON FREIGHT

SAVE$420

ON FREIGHT

SAVE ON CUSTOM CLEARENCE

SAVE ON LCL TRANSPORT



65

Value Added Services. Customers needs of the day

Today's shippers and importers demand a very high standard of service.

1. On -Time delivery

2. Overall responsibility

3. Price

4. On-Time pick-up

5. Transit time

6. Service territory

7. Billing accuracy

8. Correct equipment

9. Degree of control

10. Claims processing

11. Container Tracking or Tracing capability

These may be grouped into three main factors:

1. Quality

2. Price and

3. Delivery time.

Just in Time

To minimize cost of inventory many companies adopt s "Just In Time" logistics

concept. Shippers give more importance to accurate information. They want to know

what is happening to all their shipments in terms of location. They want it

electronically as well as verbally, and they want it to be available at any given time.



66

Logistics service providers offer following value added

services.

1. 3rd party and 4th party logistics service provider (3PL and 4PL)

2. Air Freight - Direct & Consolidation Services.

3. Air Freight Services: Air Port to Air Port, Door to Door.

4. Automated documentation

5. Bonded storage service

6. Break-bulk services

7. Buying Assistance: similar to buying house or buying agent.

8. Cargo Management

9. Cargo tracking system

10. Communication facilities

11. Consolidation - Full-container-load (FCL).

12. Consolidation - Less-than-container-load (LCL)

13. Container services

14. Container stuffing at Factory - useful for EXW.

15. Custom Clearance & Forwarding.

16. Customs Brokerage

17. Export packaging

18. Fumigation

19. International sales assistance similar to indenting agent.

20. Insurance

21. Kitting

22. Multi-Modal Transport Operations (Sea, Air, Rail & Road)

23. Nomination freight - Consignee and Consignor nominated cargo

24. Non-Vessel Operating Common Carrier (NVOCC)

25. Ocean freight services

26. Packing & Removing

27. Pre shipment survey.

28. Project cargo - out of gauge, project shipping

29. Purchase order processing

30. Shipment follow-up with shippers.

31. Quality inspection.

32. Refrigerated Services

33. Sea Cargo: Port-to-Port, Door-to-Door.

34. Shipment reporting

35. Supplier follow-up

36. Warehousing - Bonded facilities

37. Warehousing & Distribution.



67

Conference, Consortiums and Alliances

Liner Conferences

Is an organization of a group of shipping lines. Conference agreements are made

between two or more ocean carriers operating on the same route. There are more

than300 liner conferences in the world whose membership is ranging from 2 to 40

member lines. Conference member lines agree to operate a common freight tariff.

In mid 18th century, excess tonnage caused cutthroat competition in shipping

industry. Companies operating / competing on specific routes organized into cartels.

Trans-Atlantic shipping conference was the first organized cartel formed in

1868,between shipping companies serving North America and Europe trade.

In 1875 Calcutta Conference was formed, with the formal price & space selling

mechanism. Calcutta conference member lines offered services between North

Europe and India.

Objectives of conferences

1. Improve Market share of member lines.

2. Improve revenue by implementing administrative pricing policy.

3. Blocking non-cartel lines from the route

Administration of Conferences is in hands of “Conference Secretariat”. Conference

Secretariat is responsible for

1. Fixing of freight tariff rates.

2. Appointment of auditors to ensure that all member lines adhere to uniform

tariff rates.

3. Conditions of value added services offered by member lines.

4. Space rationing or Revenue distribution amongst the member lines.

5. Curtail inter-liner competition by fixed allocation or rationalization of space.

6. Provide satisfactory services to the shippers.

7. Protect shipping lines from outside competition. By signing rate contracts /

loyalty contracts / deferred rebate contracts with shippers.

Similar to shipping industry all airlines in the world are members of

FIATA & IATA.



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Consortia or Alliance

Consortia is a group of Shipping lines or CTO's who agree to rationalize sailings in a

particular trade route and carry each others' containers.

In 1992, liner shipping was in troubled water. That time many leading carriers

wanted to offer a global service network to their customers. However, investment

would have been huge. At this time, like-minded carriers came up with the idea of

forming a strategic alliance with other international carriers to establish a global

service network. The world’s first global alliance came in to existence in 1994.

Supply and demand of cargo & space also plays a role in long-term investment

decisions. Carriers must order new ships for 15 to 20-year cycles, weighing long-term

demand forecasting against price trends in the global vessel construction market.

Trans-Pacific trade saw solid, double-digit cargo growth in the Asia trades in 1991-

92-93. Major Trans-Pacific carriers looked at this growth as great future at the same

time they were being offered highly concessionary terms from shipyards looking to

fill their order books. Many Trans-Pacific shipping lines decided to acquire new

vessels.

1996-97 saw a dramatic increase in new container capacity in the Pacific, just when

cargo demand was beginning to level off. The pressure to fill ships in both directions

and hold onto market share caused rates to fall by $600 to $1,200 per 40-foot

container — a 30 to 50 percent drop over eighteen months.

Looking at the benefits of consortium and drop in cargo volumes, majority of carriers

followed the suit, forming similar alliances. Major advantage of consortium is that

carrier continues to deal with their loyal customers and maintain corporate identity.

Consortia addresses the rationalization of

1. Freight rates amongst Consortia members,

2. Container shipping services & operations by sharing all resources.

Improved quality of service

1. Sailing frequency

2. Ports of call and

3. Transit time

Other Benefits:

1. Make the most appropriate joint use of their fleets.

2. Reduce their operating costs such as feeder costs and ports / terminals.

3. Maintain their own corporate identity.

4. Maintain fair competitive conditions among its member.

5. Greater sales coverage.

6. Through the sharing of vessel space, terminals and equipment. participating

shipping companies can achieve cost reduction derived from economies of

scale.



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Mergers and acquisitions

Another major trend has been corporate enlargement through mergers and

acquisitions

1. Maersk / Sealand / CMB / P&O / Nedlloyd

2. APL / NOL

3. Hanjin / DSR / Senator

4. CMA / CGM

5. CP Ships/ Hapag Lloyds



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Classification Societies: In the second half of the 18th century, marine insurers, based at Lloyd's coffee house

in London, developed a system for the independent inspection of the hull and

equipment of ships presented to them for insurance cover. This was an attempt to

'classify' the condition of each ship on an annual basis.

The condition of the hull is classified 'A1', meaning 'first or highest class'.

Today many classification societies exist in the world.

1. American Bureau of Shipping (ABS)

2. Bureau Veritas (BV)

3. China Classification Society (CCS)

4. Croatian Register of Shipping (CRS)

5. Det Norske Veritas (DNV)

6. Germanischer Lloyd (GL)

7. Indian Register of Shipping (IRS)

8. Korean Register of Shipping (KR))

9. Lloyd's Register of Shipping (LRS)

10. Nippon Kaiji Kyokai (ClassNK)

11. Registro Italiano Navale (RINA)

12. The Russian Maritime Register of Shipping (RS)



71

Dangerous Goods

Goods are to be considered dangerous if the transport of such goods might cause

harm, risk, peril, or other evil to people, environment, equipment or any property

whatsoever.

International Maritime Organization (IMO)

IMO was established in London, in 1958, as a specialist agency of UN. One of the

most important tasks allocated to IMO when it met for the first time was to develop

international standards, which would replace the multiplicity of national legislation

that then existed. IMO regulates the transport of dangerous cargo by formulating

rules and regulations. The vast majority of maritime countries have ratified the most

important conventions, as the table below shows.

1. Load Lines

2. SOLAS :Safety of life at sea

3. STCW : Standards of Training, Certification, and Watch keeping

4. Collision Regulations

5. International Convention on Tonnage Measurement of Ships.

6. MARPOL: The International Convention for the Prevention of Pollution from

Ships

Carriage of hazardous commodities is restricted and controlled by IMDG Code.

IMDG introduces the basic principles such as

1. Classification

2. Marking,

3. Identification and consignment procedures

4. Labeling documentation

5. Packing of dangerous goods shipments.

6. Stowage

7. Container traffic and stowage

8. Segregation of incompatible substances

IMDG General Classification

Class 1 - Explosives

Class 2 - Gases:

Class 3 - Flammable liquids.

Class 4 - Flammable solids or substances

Class 5 - Oxidizing substances:

Class 6 - Toxic and infectious substances

Class 7 - Radio active materials

Class 8 - Corrosives

Class 9 - Miscellaneous materials



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Hazard –

Condition that increases the probability or severity of a loss.

Dangerous Goods –

Goods which are hazardous to human or marine environment.

Flash Point

The minimum temperature at which a liquid gives off enough vapors to form an

ignitable mixture with the air near the surface of the liquid. Materials with flash

point <61oC are considered to be dangerous goods.

Flammable

Capable of being easily ignited and / or burning with extreme rapidity, and has a

flashpoint under 100 degrees F

Corrosive

A Corrosive material is one, which causes damage to skin, eyes or other parts on the

body on contact. The technical definition is - "destruction, or irreversible damage to

living tissue at the site of contact".

Toxic

Any substance, which is harmful to human health, when exposed beyond certain

permissible limits.

Throughout the voyage dangerous cargo requires careful

1. Packaging

2. Planning

3. Stowage and

4. Monitoring

Why we give importance to Dangerous Goods Declaration?

1. To ensure that accidents do not happen

2. If accidents do occur, to ensure the amount of damage is minimized

3. “Risk Management & Damage Control”

Dangerous Goods Declaration

Document issued by a shipper in accordance with applicable conventions or

regulations, describing hazardous goods or materials for transport purposes, and

stating that the latter have been packed and labeled in accordance with the

provisions of the relevant conventions or regulations.

Dangerous Goods Packing Certificate

A document as part of the dangerous goods declaration in which the responsible

party (shipper or forwarder or NVOCC or carrier) declares that the cargo has been

stowed / packed in container in accordance with and in compliance with the IMDG

regulations.

• Source – IMO website



73

RULES FOR TRANSPORT OF DANGEROUS GOODS

AIR SHIP ROAD RAILInternational

Civil Aviation

Organisation

International

Maritime

Organisation

United Nations

Economic

Commission

for Europe

Office of

International

Rail Transport

(ICAO) based

in Montreal

(IMO) based in

London

(ECE) based in

Geneva

(OCTI) based

in Berne

Technical

Instructions

for the Safe

Transport of

Dangerous

Goods by Air

(T1)

International

Maritime

Goods Code

(IMDG)

European

Agreement

concerning the

International

Carriage of

Dangerous

Good By

Road

(ADR)

Regulations

concening the

International

Carriage of

Dangerous

Goods by

Rail

(RID)



74

P&I Club, T.T. Club General Average

P&I Club

Protection and Indemnity club is insurance in respect of third party liabilities and

expenses arising from owning ships or operating ships as principals. It is not hull

insurance, war risk insurance, loss of profit / freight insurance, detention insurance,

strike insurance or uninsured legal expenses (Defence) cover.

T T Club

Works on similar lines of P&I Club. It offers cover to MTO and ship agents.

GENERAL AVERAGE

When a marine casualty arises steps may need to be taken to protect or save the

ship and cargo from serious damage or total loss. The steps taken may result in

expenditure being incurred and/or deliberate loss or damage to some of the

property at risk, but result in the saving of other property.

Example 1: A ship has suffered a fire in the cargo hold. Water is poured into the hold

to extinguish the fire and prevent it spreading through the ship and cargo. Other

cargo that was in the hold but not on fire is damaged by the water used to extinguish

the fire. Who pays?

Example 2: If cargo vessel will encounter a potentially serious accident on the sea,

such as a fire or encountering severe heavy weather, which may result in the ship

having to incur additional costs to save the entire journey (such as towing costs,

emergency repairs costs). Because the vessel has had to pay these costs in order to

save the cargo and the journey, both the ship and all cargo owners share in the

payment of these costs.

General Average is designed to provide an equitable distribution of these losses or

sacrifices between the Parties that have benefited.

In such cases all the property that has been saved at the completion of the voyage

contributes to the financial compensation for the water damage suffered.

The amount of the claim is usually calculated by Average Adjusters, appointed by

Ship owners. The contribution of each Party is calculated pro rata to the value of

their property at the end of the voyage.

If importers (usually beneficiary of insurance policy) are advised that a General

Average has been declared, it will be necessary to either have a General Average

Guarantee signed by importer underwriters or pay a cash deposit, to ensure the

release of the cargo.



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Various parts of ship



76

Harbour and port

Harbour



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Container Stuffing

Stuffing Plan

Freight is usually paid on per container basis. That means more you stuff in a

container less is per unit cost of transportation. Hence to avoid overflow of cargo or

wastage of space, it is essential for shippers to have a stuffing plan before cargo is

loaded into the container.

Measurement

Volume capacity of a 20' container is 33 CBM and 40’ container capacity is 67 CBM

however the actual loading capacity of a container depends on the internal

dimensions of a container, door dimension of a container, dimensions of the carton

boxes and many other factors such as the packaging material and the competence

and experience of the stuffing personnel.

Weight

Weight carrying capacity of containers differs. In many countries the permissible

weight limits for road and rail transportation are lower than the maximum payload

of a container. Therefore the stuffing plan should also take the weight into

consideration.

Use of Pallets

Palletisation is widely applied in some countries to increase cargo handling

efficiency. When pallets are used, it is important to observe the following:

1. Wooden pallets must be strong enough to allow storage of three tiers when

loaded. Pallets must be fumigated as per the regulations of importing country

2. Carton boxes must not overhang the edges of the pallets.

3. Boxes which utilise less than 90% of the pallet surface and do not align with

the pallet edge can shift in transit.

4. Slipsheets can be used for easy loading and discharge and save wastage of

space.



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Hints and Tips..

As per UK P&I club’s research one in six container journeys result in damage to cargo

.Yet over half of these could be easily avoided!

Damage is often the result of bad packaging, choosing inadequate containers, poor

labeling and insufficient security and safety measures.

The following is the advice from Thomas Millar P&I Ltd (TT Club), the world's largest

marine mutual insurer, aims to increase awareness, identifying some of the most

frequent causes of cargo claims and suggesting ways in which you can avoid them.

A minimal amount of time could save you a lot of expense in the long run.

Basic Principles

1. Choosing the right container

2. Checking your container

3. Produce a packing plan

4. Packaging Goods

5. Security Safety and

6. Unpacking

1. Choose the right container

Containers come in several types, lengths, widths and heights. Different shipping

lines have different types of containers with different inner dimensions. Match this

to your requirements.

Do not overlook climatic changes along the route that could affect your cargo.

Choose a container type that is appropriate. It is often false economy to avoid the

additional cost of a container with a fan, temperature control or ventilation.

Temperatures can increase inside a container e.g. a tropical climate can produce

temperatures of 50 degrees plus which in turn causes condensation and roasting.

Ensure the container has enough lashing points of the strength you require.

Confirm your requirements in writing to the freight forwarder and shipping line.

Seek guidance of the experienced freight forwarder or a shipping line.

Remember the responsibility of choosing equipment is of exporter and or importer

and not of the freight forwarder. The onus is on you!



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2. Checking your container

Prior to stuffing do a light test, which can reveal small holes in the container. Holes

could let in moisture.

Leftovers from previous consignments may contaminate your consignment.

Residues of previous cargo could be hazardous. If in any doubt return the container

for cleaning.

Watch out for structural damage such as damage to post rails or corner castings. This

can cause damage to cargo. If in doubt reject the container.

Before stuffing check that you can securely lock the doors. If not reject the

container.

Always check that the container is dry.

Ensure that the door gaskets aren't hard or damaged. If gaskets are damaged

rainwater might seep in.

Check for rust as rust is porous, rainwater might seep in.

Watch out for taped up vents to avoid condensation.

Remove old labels as these can be misleading and lead to delays

Just a few minutes of your time prior to stuffing can reduce the chance of your cargo

being damaged. If you overlook defects a court might decide negligence on your part

and you may find your insurance claim is drastically reduced or even rejected.

3. Prepare a container packing plan

Most shipping lines charge by the container load. The more goods you fit into the

container lower will be per unit cost to ship your goods. It is wise to draw up a

packing plan to maximize the fill factor.

Remember less free space in the container mean less risk of cargo shifting.

Weight must be evenly spread; side to side, end to end.

Always keep the centre of gravity as low as possible. Place large heavy items on the

bottom of the container and lighter ones on the top

Never exceed the containers maximum pay load. Pay load capacity is mentioned on

the door of a container.

Never exceed over the road restrictions on route.



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If cargo doesn't fill the container (under utilized box), start by covering the floor

space at an even height.

If you have to leave gaps try and leave them in the centre so that the cargo can be

secured by wedging them to the sidewalls.

If the upper tier doesn't run the full length of the container a vertical separator can

be used to restrain it.

Use an interlocking stow whenever possible.

Unitized cargo (pallets) is often more stable and quicker to pack.

Make a point of strongly shoring and blocking the face of the stow as this prevents

the cargo from falling out when the doors are open.

Place the heaviest items in the centre of the container.

Always place liquids underneath dry goods.

Ensure drums and barrels are stowed buns up and if possible separated as vibration

can wear away the seams and allow the contents to escape. It is best to use a double

layer of dunnage to limit damage.

Ensure you are aware of the safe loading limits of the lashing points.

Do not pack cargoes that are incompatible together e.g. cargoes that are prone to

sweating packed with moisture sensitive cargo.

Some destination countries require a packing list fixed to the inside of the container

door. Some destination countries require wood treatment certificates attached here

too. Follow the rules.

Declare the cargo weight accurately.

4. Packaging Goods

The forces exerted on a containers contents in transit by road, rail, ship or gantry

crane are considerable. If the contents are not properly secure, no matter how

heavy, damage will occur.

Most shippers tend to undercut costs by not packaging their goods properly which

often leads to crushed, unsalable goods. Appropriate packaging should be used to

protect your investment.



81

Remember free space in a container increases the risk of cargo shifting. Packaging

that fits in exactly (i.e. cardboard boxes) will reduce dead space and reduce the cost

of dunnage. All loose items must be chocked / lashed.

Stretch or shrink wrap is great for protection against wet damage. It's not cheap but

could save you money in the long run.

Use dunnage to protect non unitized cargoes from damage.

Dunnage: Materials of various types, often timber or matting, placed among the

cargo for separation, and hence protection from damage, for ventilation and, in the

case of certain cargoes, to provide a space in which the tynes of a forklift truck may

be inserted.

Ensure that dunnage is not wet or made from unseasoned wood as this may cause

condensation and damage. Be careful to check the quarantine regulations in the port

of destination as they may require the dunnage to be treated or fumigated.

5. Security

No seal can stop a theft. It's main function is to signal where and when a container

has been broken into.

Bolt seals are the best. Always check the seal and ensure it is the right type.

Always record the date and the seal number and keep these records safe.

Seal container yourself. Never leave the sealing of a container to a third party. Who

knows how honest they are?

Enter the seal number on all shipping documentation.

Arrange a convenient time for your cargo to be delivered as this reduces the time

the container is exposed to the elements and the risk of theft.

6. Safety and unpacking

Do not overlook what type of equipment the consignee has for unloading the

container

Always look at all external notices/labels before you open the container

If the contents is hazardous and appears to be leaking you should evacuate the area

immediately

If gas is present let it dissipate before entering the container



82

Always document the external appearance of the container. Are there any dents,

holes, rust. Keep camera handy to take photographs.

Inspect the internal contents of the container for damage and document any found.

Keep camera handy to take photographs.

It is always best to take photographs where possible as this could assist any claims.

Before opening import container always check the seal is the right type and that the

serial number agrees with the documentation. Has the seal been tampered with?

Always keep both parts of the seal until you have checked that all the cargo is

present and correct.

A useful idea is to use a strap tied round the door stanchions. This will prevent the

doors from swinging open and goods falling on you. Once you know you are safe you

can remove the strap and open the container fully.

Doors can easily cause damage if the wind slams them - secure them open.

It is the consignee’s responsibility to clean the container to a level that you would

wish to receive it.



83

AIR CARGO Air cargo industry compared to other transport industry is new. Major competitor of

air cargo is road & rail transport in domestic trade and sea transport in case of

international business.

ADVANTAGES OF AIR TRANSPORT

1. Schedules & frequencies : Majority of air cargo is shipped on scheduled

passenger flights with the result shippers enjoy good frequency. In addition to

passenger flights on busy cargo route airlines, operate freighters.

2. Transit time – best in industry: When fastest deliveries are required, one has to

think of air transport which is the most expensive mode of transport.

3. Inventory cost control: For shipment of very high value cargo like diamonds,

gems and jewellery air transport is preferred to keep the inventory cost low.

Limitations of air transport

Service limitations: Air cargo can’t offer door to door service. Terminal to terminal

transportation is one of the limitations of air cargo industry. Air transport provides

frequent and reliable service and faster transit time, but terminal and delivery delays

and congestion often reduce some of this advantage. Virtually every air shipment

begins and ends as a truck movement.

As mentioned above Terminal-to-terminal service involves additional cargo handling.

Multiple handling increases total cost of transportation and risk of loss / damage.

Limited reach: Airlines can serve the customers only where airports are located,

this, in some instances, can be a location quite far from the main business centers of

the city.

Transportation of over dimension cargo overweight cargo is not possible.

Prone to pilferage: due to terminal handling at origin & destination. This problem

primarily exists in underdeveloped countries.

Air is very expensive mode of transport.

Unit load device (ULD)

This results in to higher operations cost and risk of loss or damage to cargo. Early

years the airplane or aircraft used to suffer delays due to time spent in loading

individual packages (break bulk cargo), stacking the packages inside the airplane and

securing the packages. Solutions to similar problems in rail, road and sea transport

were found. The solution to the problem is unitization – making one unit out of

various packages for example: master cartons, pallet, jumbo bag, containers etc. The

air cargo industry introduced similar idea. Introduction of the Unit Load Device (ULD)

revolutionized the air cargo industry.

Benefits of ULD:

1. After security and customs clearance cargo is stuffed / secured in the ULD.

Such ULD’s are kept ready for loading. On arrival of airplane, these ULD’s are

quickly loaded aboard the airplane. This saves loading and unloading time.

2. Reduces chances of damages in transit and wrong delivery.



84

3. Improves space utilization of airplane. In other words, ULD assists airline to

improve revenues.

Ideally, shipper must load cargo in ULD at their warehouse but aviation safety will be

at a great risk and because of that, airline stuff all ULDs at air cargo terminals.

The IATA has developed the technical specifications for the ULDs. IATA studied the

development and set the rules for airworthiness certification of ULDs. In the current

competitive environment, each airline wants a tight control over other airlines' ULDs

in its system. IATA operates a ULD control system to facilitate quick return of ULDs to

the rightful owners.

International air transport is very well organized sector. In order to offer safe,

reliable, secure and economical air services to the customer’s airlines around the

world have come together and have formed IATA, the International Air Transport

Association. There are approximately 81,000 IATA agents worldwide.

To improve standards in shipment documentation, IATA Cargo works with

• Airline Members

• Customs administrators

• Shippers / shippers associations

• Freight forwarders

• Government authorities

• International Chamber of Commerce

IATA cargo has also worked on computerized cargo / document tracking. IATA also

helps to develop streamlined procedures, support cargo agent activities and fine-

tune regulations pertaining to the transportation.

IATA has provided vital input to the development of Conditions of Carriage, the

contract between the customer and the transporting airline.

Member airlines work on issues such as:

• Pricing issues

• Division of revenues gained from interlining

• Settlement of airline accounts.

• Issues of safety and passenger and cargo care and

• Rules and regulations related to air transportation.

Apart from avoiding competition idea behind common freight/fare tariff was to

avoid inconsistencies between tariffs affecting neighboring countries – and thereby

avoiding traffic diversion.

IATA is also instrumental in setting rules for the following :

• Multi-sector trips, revenue allocation – i.e., pro-rating – rules,

• Baggage allowances,

• Ticket and air waybill design



85

• Passenger and cargo agency appointment requirements, procedures and

agreements

• Designing a variety of standard formats and technical specifications for

tickets and air way bills.

Export & Import Documentation / Cargo Flow

Exports: Exporter to prepare documents for export clearance. Exporter must despatch

following documents to CHA before despatch of goods.

• Shipping instructions.

• Declaration form for export of goods (with / without claim of drawback or other

schemes).

• Form SDF or GRI (exchange control copy)

• Pro-forma / Commercial Invoice

• Packing list

• AR4 form (in case of excisable goods)

• Letter of credit

• Advance import licence

• Generalised Scheme Preference form or quota (if required)

• Certification on nature of goods (i.e. dangerous goods, perishables, etc)

Timely despatch of documents enable CHA to process the shipping bill and avoid

the delays in unloading trucks.

Procedure

1. CHA on receipt of above documents types the shipping bill and submits to

customs.

2. Customs allocate the serial number of shipping bill.

3. Custom appraiser at customhouse will scrutinize invoice and shipping bill and

pass the shipping bill.

In case of EDI all data as per declaration form is fed into electronic data information

systems by customs data entry staff. In case of EDI, after data entry is made, CHA

verifies checklist generated (printed) by customs.

4. CHA takes carting order from airline and along with relevant export documents;

consignments are taken into export section of the air cargo complex.

5. Air India accepts cargo on behalf of airline on the basis of shipping bill and the

gate pass

6. Cargo is carted by the agent into the air cargo examination hall ( cargo from truck

is discharged in the warehouse and cargo is stacked as per warehouse manager’s

instructions)

7. CHA approaches the customs appraiser and examiner (customs officials) located

in this warehouse and requests them for cargo examination.

8. Few packages required by customs for physical examination will be moved from

stack to customs desk. These boxes will be opened for inspection of cargo and

repacked after examination.



86

9. After examination, CHA obtains the let ship order from custom officials.

10. After detailed entry into register, warehouse operator hands over documents to

relevant airline staff or representative.

11. Airline contractor makes ULD. For airfreight cooling period is applicable.

12. On arrival of the aircraft, ULDs are moved to aircraft and are loaded.

13. CHA pays the wharfage or warehousing charges.

For export clearance Shipper has to file and process Shipping Bill (a document)

required for customs clearance. Upon shipment shipper collects original bills of

lading from shipping line and surrenders the B/L to his bank.

For import clearance Consignee collects original documents from his bank.

Consignee hands over Original B/L to carrier and obtains Delivery Order. Without

Delivery Order consignee can’t arrange custom clearance. Consignee has to file and

process Bill of Entry (a document) required for customs clearance.

AIRCARGO TERMINAL

AIRCARGO TERMINAL

AIRLINE



87

Import Documentation / Cargo Flow

Prior to arrival of the vessel, carrier files Import General Manifest (IGM) with the

customs. Filing of IGM is a must. Without an IGM Importer cannot file a Bill of Entry.

On receipt of Arrival Notice from carrier, importer approaches the bank and on

payment obtains the BRO.

Importer hands over the BRO, Invoice, Packing list, Import declaration form and

import license copy to the CHA / Custom Broker.

CHA surrenders the BRO and obtains Examination order or Delivery order from

carrier. CHA prepares Bill of Entry, which is a customs document and gets the goods

examined.

After customs examination CHA pays import duty to the customs banker and moves

the goods to consignee’s warehouse.

Though procedure mentioned above looks very simple the entire process is very

difficult because of the stringent norms of Import Policy.

Cargo from ULDs is removed and is stored at Cargo Terminal. At cargo terminal

customs carryout cargo examination.



88

FEEDBACK FORM Training held on _____________________

Name : ______________________________Designation: ________

Company_____________________________Mobile:____________

Email address: _______________________________

Parameter Excellent Very Good Good Satisfactory Poor

Content: How would you rate the overall

contents of the course

Customization: How would you rate the relevance of

the course as applicable to your job

Methodology: How would you rate the

methodology of the course

Faculty rating – knowledge: How would you rate the knowledge

of the faculty on the subject matter

Faculty rating – Presentation

style: How would you rate the

presentation style of the faculty(did

it make learning easier)

1..Would you recommend this program to others? YES / NO 2..What is the single most important aspect about the course that you liked ?

3.. Which topic in your opinion should be added?

4.. Which topic in your opinion can be eliminated?