Sea Transport - Notes

“Shipping, Freight Forwarding & Global Trade Operations” TOPIC

PAGE 2-3

1

Global Business Environment.

2

Various factors affecting international trade – Tariff & Non Tariff Barriers

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

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

19

Dangerous Goods

20

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

21

About Ships, Harbour, Port and Docks

75-76

22

Container stuffing

77-82

23

Air cargo

83-87

4

44

70 71-73 74

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. Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

3 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. 2. 3. 4. 5. 6. 7. 8.

Overseas manufacturing Working with local partners Brand names Trademark Patents Processes Negotiating and entering in licensing/ Franchising agreements, where by foreign firms are permitted to use the exporting nation’s know-how Physical Exports

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

17.

Quotas or quantitative restrictions or license. GSP (Generalized System of Preferences) Counter trade Import levies on imported goods are often collected towards the usage of ports and terminal facilities. Import Pre-shipment Inspections Consular Invoice or Legalization or Visa of Export Documents Health, Safety and Technical Standards Foreign Currency Deposit for imports. Product Labeling in Foreign Language Closed Market Distribution Free and Preferential Tariff Treatments MFN (Most Favored Nation) Free Trade (FT) British Preferential Tariff ( BPT) A preferential duty on goods or services originating from some members of the British Commonwealth. 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. Import license.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

6

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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

7

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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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. 2. 3. 4. 5.

Realizing the revenues in a fair, equitable and efficient manner Administer the Government's economic, tariff and trade policies. Facilitate trade and industry by streamlining and simplifying Customs and Excise processes to help Indian business to enhance its competitiveness Create a climate for voluntary compliance by providing guidance and building mutual trust 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)

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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”

1. Seller asks buyer for letter of credit (L/C)

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

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.

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

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) Mention whether Part shipment allowed /not allowed Recommend type of packing Insist on packing list to be submitted along with B/L Ship to be used with Lloyds 100 A 1 Lash vessel Permitted / not permitted Type of B/L to be used / Shipped on board B/L Pre shipment inspection quality & quantity

Marks and numbers Certificate of origin (issued by chamber of commerce Port of loading / Port of discharge Age of Vessel to be used for loading Shipment by regular liners/conference Transshipment allowed or not Insurance certificate Documents must be presented to bank within 15 days.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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LETTER OF CREDIT - SAMPLE 1 XYZ BANK LTD

Shipment from: FOB KANDLA Partial shipment: ALLOWED Container shipment:

To: JEDDAH PORT Transshipment: NOT ALLOWED

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. 2. 3. 4. 5. 6. 7. 8. 9.

All Documents should be manually signed. Documents issued prior to the date of issuance of credit not acceptable. Documents issued by EDI not acceptable. Transport document issued by freight forwarder not acceptable. Charter party / short form bill lading / not acceptable. House airway bill not acceptable. Cost additional to the freight as shown in Article 33 D not acceptable. Transshipment Sub Article 23 D is not acceptable. 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 --------------------Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

11 • 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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

12 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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

13

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 THATTHE 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 Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

15

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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

16 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 Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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DIFFERENT METHODS PAYMENT – RISK TABLE Term Of Settlement Advance Payment

When goods available to buyer Upon arrival at P.O.D.

When the seller gets Paid

Risk to seller

Prior to shipment

None

On receipt of shipment and shipping documents. After payment of the bills .

As per mutual arrangement, but after receipt of goods Upon presentation of the draft and documents to the buyer.

Bills for collection – on D/A terms

Upon acceptance of time draft / documents.

Upon maturity of time draft ( payment on agreed date)

Risk to shipper is maximum as buyer to pay on receipt of goods. Seller is exposed to risk if buyer refuses to collect documents from bank. Seller may have difficulty in finding alternate buyer. Non- payment on due date. Control over goods already lost.

Bankers Acceptance(BA)

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

Upon maturity of time draft.

Deferred Payment

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

Seller is paid on due date.

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.

Open Account

Bills for collection – on D/P terms

Control lost over shipment. However acceptance or co-acceptance by bank ensures payment on due date. Payment on schedule date is assured only if banker’s coacceptance or deferred payment guarantee(DPG) is available. Documents must be approved by the issuing/ confirming bank

Risk to Buyer

The risk to buyer is maximum as buyer has already paid some times before shipment. Risk to buyer is the least or none Relies on seller to ship goods as per specifications. Cannot examine goods till payment made and delivery taken. Payment to be made regardless of product quality, but buyer can examine goods and negotiate. Irrespective of possible disputes over quality / quantity buyer or bank must pay.

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

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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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DOCUMENTS AGAINST PAYMENT

Documents Against Payment: Instead of Promissory note buyer makes a payment to bank and collects documents.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

20

NOTES

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

21

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. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Marine/Ocean Bill of Lading Non Negotiable Sea Waybill Charter Party Bill of Lading Multimodal Transport Document Air Transport Document (AWB) Road – Lorry or Truck Receipt Rail Receipt Inland Waterway B/L Courier and Post Receipts 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:

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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………………

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Important B/L clause

Should we allow following clauses in the Bill of Lading? 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

NEW CASES NEWBAGS BRAND NEW GUNNY BAGS USE NO HOOKS HANDLE WITH CARE CLEAN ON BOARD ACTUALLY ON BOARD CONFIRMED ON BOARD SHIPPER LOAD STOWE AND COUNT SAID TO CONTAIN GLASS WITH CARE STRONG CASES STRONG CARTONS NO HAY OR STRAW USED PACKED IN SEAWORTHY BALES AVOID CONTAMINATION 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

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BILL OF LADING SHIPPER / EXPORTER YZ COMPANY

CONSIGNEE (NON NEGOTIABLE UNLESS CONSIGNED “TO ORDER”) Or

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’

(NEGOTIABLE ONLY IF CONSIGNED “TO ORDER”, “TO ORDER OF” A NAMED PERSON OR “TO ORDER OF BEARER”)

TO ORDER OF STATE BANK OF INDIA

Means only SBI can endorse the B/L in favour of ultimate buyer i.e. Notify Party

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.

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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

SWITCH B/L

1st set of B/L issued at load port

L/C FOR $ 1,00,000

2nd set of B/L issued at Hong Kong L/C FOR $ 1,25,000/BBB INC. HONGKONG

BUYER FU FU INC MALAYASIA

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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.

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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.

NVOCC

PROFIT $360

SHIPPER - 1 5 CBM = $300 SHIPPER - 2 3 CBM = $180 SHIPPER - 3 7 CBM = $420 SHIPPER - 4 4 CBM = $240

FCL CONTAINER 27 CBM = $1560

PAY SHIPPING LINE $1200

SHIPPER - 5 6 CBM = $360 SHIPPER - 6 1 CBM = $60

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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.

HOUSE B/L

MASTER B/L

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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 CONSOLIDATION

SHIPPER - 1 5 CBM = $300 SHIPPER - 2 3 CBM = $180 SHIPPER - 3 7 CBM = $420 SHIPPER - 4 4 CBM = $240

SAVE ON CUSTOM CLEARENCE SAVE ON LCL TRANSPORT

ON CIF PURCHASE CONTAINER FREIGHT ON LCL WOULD HAVE BEEN 27 CBM = $1560

SAVE $360 ON FREIGHT

PAY SHIPPING LINE FCL RATE OF $1200

SHIPPER - 5 6 CBM = $360 SHIPPER - 6 1 CBM = $60

SAVE $420 ON FREIGHT

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

DOCUMENTATION

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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.

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NOTES

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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. Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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"

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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)

CPT

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. 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 FOB CFR CIF

When goods are placed alongside ship. Shipper needs to produce port / terminal operator's receipt as proof of delivery. When goods are loaded on board the vessel. 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 ) 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.

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Incoterms 2010 – Summary of Contract of Carriage and Insurance Term

Freight

EXW

Buyer to pay freight right from seller's factory or warehouse (Buyer to arrange loading) Situation 1 Buyer to pay freight right from seller's factory or warehouse.(Seller to arrange loading) Situation 2 Buyer to pay freight from CFS, ICD, rail/road/air cargo terminal at country of origin. 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.

FCA

CPT

CIP

DAT

DAP DDP FAS

FOB

CFR

CIF

Transport Insurance document MTD,FCR, Buyer L/R, RR MTD,FCR, Buyer L/R, RR MTD,FCR, L/R, RR, AWB MTD,FCR, L/R, RR, AWB

Buyer

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. 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. 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, AWB MTD,FCR, L/R, RR, AWB, B/L

Seller

MTD,FCR, L/R, RR

Seller

Seller to pay freight up to buyer's warehouse or factory or any other place. (Import duty is paid by seller) 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 freight paid by buyer. This Incoterm can be used only when port to port transport is involved. Ocean freight paid by seller. This Incoterm can be used only when port to port transport is involved. Ocean freight paid by seller. This Incoterm can be used only when port to port transport is involved.

MTD,FCR, L/R, RR Ocean B/L

Seller

Ocean B/L

Buyer

Ocean B/L

Buyer

Ocean B/L

Seller

Buyer

Seller

Buyer

Recommended usage of Incoterms 2010 by modes of transport as follows: 1. 2. 3.

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). FAS, FOB, CFR, CIF: inland waterways or sea transport only. (Port to Port) FCA, CPT, CIP and DAT: can be used for air port to air port service. Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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NOTES

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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.

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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.

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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.

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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:

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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.

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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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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 Capital investment (ship) Operating Cost Voyage Cost Cargo Handling cost

Voyage Charter Owner Owner Owner Owner

Voyage Charter Ideal for one time or short term requirement.

Time Charter Owner Owner Owner Charterer

Bareboat Charter Owner Charterer Charterer Charterer

Time Charter 1-5 years Ideal for the exporters who have regular cargo movement e.g. Steel Mills importing ore, Oil Companies Expenses such as crew regularly importing crude. salary, cargo loading & Charterer takes the ship on unloading, fuel, port charter for a fix time frame. expenses are on Charterer looks after cargo account of ship owner. booking. All cargo related expenses are on account of charterer. All costs such as fuel, crew salary, etc is on account of ship owner.

Bareboat Charter Ideal for ship owners who have expertise to operate ships.

Advantage: Charterer can avoid repeated chartering. Charterer will have long term rate commitment.

Advantage: In absence of required funds to acquire the ship, charterer (shipping company or big time exporter like oil company) prefers bareboat charter.

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.

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.

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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 Product carrier [for petroleum products] CC [Crude Carrier] LCC [Large Crude Carrier] VLCC [Very Large Crude Carrier] ULCC [Ultra Large Crude Carrier ]

Deadweight tonnage 10,000-60,000 t Upto 80,000 t 80,000 t – 120,000 t 120,000 t – 250,000 t 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 7080,000mt DWT can’t pass through Panama Canal.

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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.

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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.

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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".

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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.

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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

AAA LINE’S CUSTOMER PAYS FREIGHT TO UPTO MALMO “AAA LINE” ISSUE ONE B / L UPTO MALMO

CALCUTTA

MALMO (Sweden)

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

COLOMBO

3RD PARTY CC

“AAA LINE” PAYS SLOT HIRE $200 TO 3RD PARTY CC CCU TO CMB

HAMBURG

MALMO(Sweden)

3RD PARTY CC Mainline Vessel to Hamburg

CONTAINER RIDES ON “AAA LINE’S” OWN VESSEL

“AAA LINE” PAYS SLOT HIRE $250 TO 3RD PARTY CC Hamburg To Malmo

REVENUE TO “AAA LINE” $850

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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.

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51

33.200 cubic meters

11,170 cubic feet

Payload (Weight)

20' Standard - Volume

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 Payload (Weight)

67.700 cubic meters 26,760 kg - 28,760 kg

2,391 cubic feet 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

Internal Length

12.032 m

39'6"

Internal Width

2.352 m

7'9"

Internal Height

2.392 m

7'10"

External Length

12.192 m

40'0"

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' High cube - volume Payload (Weight)

76.400 cubic meters 26,750 kg - 28,550 kg

2,700 cubic feet 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

Internal Length

12.033 m

39'6"

Internal Width

2.352 m

7'9"

Internal Height

2.698 m

8'10"

External Length

12.192 m

40'0"

External Width

2.438 m

8'0"

External Height

2.896 m

9'6"

Door Opening Width

2.340 m

7'8"

Door Opening Height

2.585 m

8'6"

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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

Internal Length

13.556 m

44'6"

Internal Width

2.352 m

7'9"

Internal Height

2.701 m

8'10"

External Length

13.716 m

45'0"

External Width

2.438 m

8'0"

External Height

2.896 m

9'6"

Door Opening Width

2.340 m

7'8"

Door Opening Height

2.588 m

8'6"

20' Open Top Cubic Capacity

32.200 cubic meters

1,130 cubic feet

Payload (Weight)

28,230 kg

62,240 lb

Tare Weight

2,250 kg

4,960 lb

Max Gross Weight

30,480 kg

67,200 lb

Internal Length

5.900 m

19'4"

Internal Width

2.350 m

7'8"

Internal Height

2.310 m

7'7"

Door Opening Width

2.340 m

7'8"

Door Opening Height

2.260 m

7'5"

Roof Opening Length

5.500 m

18'1"

Roof Opening Width

2.220 m

7'3"

40' Open Top Cubic Capacity

65.5 cubic meters

2,306 cubic feet

Payload (Weight)

26,580 kg

58,602 lb

Tare Weight

3,900 kg

8,598 lb

Max Gross Weight

30,480 kg

67,200 lb

Internal Length

12.040 m

39'6"

Internal Width

2.350 m

7'8"

Internal Height

2.310 m

7'7"

Door Opening Width

2.340 m

7'8"

Door Opening Height

2.260 m

7'5"

Roof Opening Length

11.600 m

38'1"

Roof Opening Width

2.140 m

7'0"

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

53

20' Reefer Cubic Capacity

28.300 cubic meters

999 cubic feet

Payload (Weight)

27,450 kg

60,517 lb

Tare Weight

3,030 kg

6,680 lb

Max Gross Weight

30,480 kg

67,197 lb

Internal Length

5.446 m

17'10"

Internal Width

2.294 m

7'6"

Internal Height

2.263 m

7'5"

External Length

6.058 m

19'11"

External Width

2.438 m

8'0"

External Height

2.591 m

8'6"

Door Opening Width

2.290 m

7'6"

Door Opening Height

2.260 m

7'5"

40' Reefer Cubic Capacity

67.700 cubic meters

2,391 cubic feet

Payload (Weight)

29,190 kg

64,353 lb

Tare Weight

4,810 kg

10,604 lb

Max Gross Weight

34,000 kg

74,957 lb

Internal Length

11.583 m

38'0"

Internal Width

2.294 m

7'6"

Internal Height

2.548 m

8'4"

External Length

12,192 m

40'0"

External Width

2.438 m

8'0"

External Height

2.896 m

9'6"

Door Opening Width

2.290 m

7'6"

Door Opening Height

2.572 m

8'5"

Cubic Capacity

67.500 cubic meters

2,384 cubic feet

Payload (Weight)

28,760 kg

63,405 lb

Tare Weight

4,260 kg

9,392 lb

Max Gross Weight

33,020 kg

72,797 lb

Internal Length

11.583 m

38'0"

40' Reefer Hi Cube

Internal Width

2.294 m

7'6"

Internal Height

2.548 m

8'4"

External Length

12.192 m

40'0"

External Width

2.438 m

8'0"

External Height

2.896 m

9'6"

Door Opening Width

2.290 m

7'6"

Door Opening Height

2.500 m

8'3"

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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.

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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.

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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

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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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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).

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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.

NVOCC

PROFIT $360

SHIPPER - 1 5 CBM = $300 SHIPPER - 2 3 CBM = $180 SHIPPER - 3 7 CBM = $420 SHIPPER - 4 4 CBM = $240

FCL CONTAINER 27 CBM = $1560

PAY SHIPPING LINE $1200

SHIPPER - 5 6 CBM = $360 SHIPPER - 6 1 CBM = $60

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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 CONSOLIDATION

SHIPPER - 1 5 CBM = $300 SHIPPER - 2 3 CBM = $180 SHIPPER - 3 7 CBM = $420 SHIPPER - 4 4 CBM = $240

SAVE ON CUSTOM CLEARENCE SAVE ON LCL TRANSPORT

ON CIF PURCHASE CONTAINER FREIGHT ON LCL WOULD HAVE BEEN 27 CBM = $1560

SAVE $360 ON FREIGHT

PAY SHIPPING LINE FCL RATE OF $1200

SHIPPER - 5 6 CBM = $360 SHIPPER - 6 1 CBM = $60

SAVE $420 ON FREIGHT

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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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.

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Logistics service providers offer following value added services. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

3rd party and 4th party logistics service provider (3PL and 4PL) Air Freight - Direct & Consolidation Services. Air Freight Services: Air Port to Air Port, Door to Door. Automated documentation Bonded storage service Break-bulk services Buying Assistance: similar to buying house or buying agent. Cargo Management Cargo tracking system Communication facilities Consolidation - Full-container-load (FCL). Consolidation - Less-than-container-load (LCL) Container services Container stuffing at Factory - useful for EXW. Custom Clearance & Forwarding. Customs Brokerage Export packaging Fumigation International sales assistance similar to indenting agent. Insurance Kitting Multi-Modal Transport Operations (Sea, Air, Rail & Road) Nomination freight - Consignee and Consignor nominated cargo Non-Vessel Operating Common Carrier (NVOCC) Ocean freight services Packing & Removing Pre shipment survey. Project cargo - out of gauge, project shipping Purchase order processing Shipment follow-up with shippers. Quality inspection. Refrigerated Services Sea Cargo: Port-to-Port, Door-to-Door. Shipment reporting Supplier follow-up Warehousing - Bonded facilities Warehousing & Distribution.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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 199192-93. 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.

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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

Workshop on “Shipping, Freight Forwarding & Global Trade Operations” Facilitator: Rajiv Sathe Contact : H/P 09823015374 email – [email protected] www.rsathe.com

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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)

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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