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Historically, societies have always located near water, due partly to the fact that water enables more efficient travel compared to going over land. Waterways are critically important to the transportation of people and goods throughout the world. The complex network of connections between coastal ports, inland ports, rail, air, and truck routes forms a foundation of material economic wealth worldwide. For Europe, maritime transport has been a catalyst of economic development and prosperity throughout its history. Maritime transport enables trade and contacts between all the European nations. It ensures the security of supply of energy, food and commodities and provides the main vehicle for European imports and exports to the rest of the world. As an economic activity, modern sea transportation involves not only profitability, but imposes itself as an objective requirement in developing a human society based on geographical, economical and political data. Thus, it is considered that for any country`s economy, maritime transportation represents one of its most important linkages to the world economy. In order to support this idea, we can consider the fact that, when a shipping company is set up and organized, it immediately establishes a series of activities for cargo and passenger transportation, on world`s rivers, seas and oceans. Cargo and passenger transportation respond to the world economy`s needs, but the main purpose of establishing a shipping company is represented by the financial efficiency of the investment, meaning obtaining profit, in the short and also the long run. Shipping companies are considered important components of a state`s economy, due to the important role held in exporting and importing activities, for passenger and cargo movement. Most important role played for an economy is that they reduce the distance between producers and consumers, by realizing a series of connections between different national or international ports, or between the origin country of the ship-owner and other countries in the world.1 ³Shipping is one of the world`s most important industries and in studying maritime economics we are drawn into a discussion of the world economy as a whole. Seaborne trade is, in a sense, at the apex of world economic activity.´ 2
Alexa, C.: ÄTransporturi i expedi ii interna ionale´ , Editura ASE, Bucure ti, 2001, page 1; Stopford, M.: ÄMaritime Economics´, 3rd edition, Abingdon, Oxon, 2009, chapter 1, page 2, paragraph 3.
This paper, ³International Maritime Freight in Transportation´, aims to realize a clear and precise evaluation of how shipping companies perform their activity on the Romanian market, by highlighting their relationship with other businesses (through the charter contract) and also the price applied to these contracts, meaning the freight. For the case study I have chosen a private limited company, ³BALKAN SHIPPING AGENCY´ LTD, one of the most active shipping companies from our country. The paper has been structured as follows: The first chapter presents general and particular aspects of marine transportation, including characteristics, main advantages and disadvantage, but also its importance within the world economy, its impact over the environment, and the effects over the international trade activities. The second chapter presents the types of charter contracts, their defining features, the forms these contracts might take, the bill of lading, its uses and also a differentiation between the bill of lading, as a transportation document, and the charter contract. The third chapter is based on describing the international freight market, the ways of establishing freight, its formation and the factors that influence it. The fourth chapter is represented by the case study on BALKAN SHIPPING LTD, comprising descriptions of the parties involved, the transportation route, cargo description, freight calculation and documentation needed in order for the transportation activity to be realized. The paper ends with conclusions and recommendations on the Romanian market of maritime transportation services.
Chapter I General Aspects Regarding Maritime Transportation
1.1. The Objective and the Importance of Maritime Transportation Activity
Transport is the most important link in economic relations. It is involved in creating products and delivering them to consumers, provides the link between production and consumption, between different industries, between countries and regions. It affects the development of the economy as a consumer of metal, energy, timber, rubber and other products. More than 100 million people in a world work in the system of transport. Sea transport is mostly used for external transactions. Only in some countries such as USA, Russia, China, Canada, Turkey, France, maritime transport provides internal transportation. This mode of transport is considered to be the largest carrier of freight throughout recorded history (carries more than 80% foreign trade goods) and also the cheapest and the most convenient, especially when displacing large quantities of merchandise. Most of cargo of the maritime transport accounted for liquid cargo ± oil and petroleum products. Dry-cargo vessels have a smaller share. In their basic structure bulk is dominated, then, general and secondary mass. The main condition for safe operation of the world¶s mercantile fleet is its constant renewal, increase tonnage of vessels, increase engine power, increase speed, automation, and improved environmental performance. Densities of vessels aged over 10 years are more than 1 / 3 of the world fleet and the ones aged over 25 years represent only 1 / 20. In developing countries and countries in Eastern Europe there is a tendency to increase the share of older vessels, which increases the risk of shipping3. The structure of marine transport is dominated by specialized vessels ± tankers, bulk carriers, reefers, timbers. Tankers make up the greater part of half the world¶s fleet, which is associated with the development of world oil market. Most courts are designed according to the navigation (navigation mode) and under a certain type of cargo. Some ships are only for passengers, more ships are used to transport passengers and cargo (cargo), but the bulk of courts specialize in cargo transportation. There
ÄThe importance of maritime transport in the global economy´, April, 2nd, 2010, available at http://www.nissoana.com/ , last accessed 30/06/2010.
are four main types of marine vessels: 1) cargo ship (bulkers, liquid, combination) that perform certain booking or operate on regular routes, 2) cargo ship, 3) high-speed passenger liners, which have two or three classes for passengers, mail and luggage compartment, 4) a small number of comfortable high-speed vessels intended only for passengers and mail. Merchant service is a set of ships, which together with their personnel is engaged in commercial activities. Marine cargo ships have always been an important part of m erchant fleet and its main support in the financial sense. Thus, merchant ships may be divided into several categories, according to their purpose and/or size, just like the above mentioned marine vessels.
One of the most important characteristics of this means of transportation refers to the specific environmental conditions in which it develops its activity ± seas and oceans ± that require special safety measures. It is generally known that any maritime expedition is naturally exposed to sea risks, the easements and the dangers of the unfettered force of nature. This is the reason why, with the social-economic development of the countries, the organizational improvement of these activities was imposed, through more efficient safety measures of insuring the ships, the cargo, the passengers and the crew`s members, but also the establishment of a more adequate legal framework to allow a normal development of the marine sector. No other transportation means can assure the movement of billion tons of cargo across seas and oceans. Even if airlines succeeded to become leaders on the transoceanic passengers¶ displacement, there still cannot be predicted a substitute means for transporting cargos. With respect to the other means of transportation, ship transportation is characterized by high loading capacity, but even the most recently designed ships have a relatively slow speed, even though they travel at very long distances. Marine and river transportation realize connections between different ports 4 of the globe, in high efficiency conditions, the costs being lower compared with land transportation. It is moreover recommended when moving small value goods and shipping costs prevail over time needed for displacement.
- Allows the concentration in marine hubs. the advantage is highlighted especially on long distances ± transoceanic shipments. 1. vol. we can admit that the marine transportation. - In certain situations. helping the external debt reduction of the developing countries. without stopping between the loading and the destination ports. - Uses a developed range of ships. it can become a means of improving and offsetting the balance of payments of one country. which are dispersed. but especially tone per mile. of huge quantities of goods. including ice areas and without water passage. classical or specialized. it is then true that. which can be transported on the most diverse marine and oceanic routes. we can consider the following: - The most economically means. from various maritime routes.As advantages 5 of this means of transportation. 5 Beziris. improving the access over the less developed and developing countries. calculated even with respect to total costs incurred. 6 The land or district behind the borders of a coast or river. - Allows the receiving of different goods and quantities. even to displaced tone. A. with regard to all determinant factors of efficiency. is able to keep its advantages through an adequate organization in constructing national and international fleets and harbors. through: establishing prices and delivery quantities which correspond to both the interests of the producers and the importers. as an objective economic necessity. 7 . Bucuresti. All in all. on the entire area of the served hinterland6.: ÄTransportul Maritim ± Probleme Tehnice si de Exploatare´. - Allows the movement of cargo and passengers almost in any area of the globe. the shipping routes require much less arrangements for developing their activities. in comparison with land transportation. 1988. which allow transporting large quantities on long distances. Editura Tehnica. The area from which products are delivered to a port for shipping elsewhere is that port's hinterland. reaching commercial agreements for every single basic product (UNCTAD decisions). in the same international harbors. the largest international harbors. and in better safety conditions. with capacities from some tone deadweight to over 100 000 ± 300 000 tdw. - Even considering the long distances covered. according to their destination.
3. adapted to technical standards at international level. 8 . The most important drawback is still represented by the fact that it`s speed is very slow compared to all the other means of transportation. but also the economical characteristics of this sector. with intense and variable international relations. For a better understanding of the economic and political factors that contributed to the development of the marine transportation activities is necessary to look at the double interaction between the development of the sector and the one of the world economy. Besides the political influence. One of the principal reasons of the industrial revolution was building a cheap and fast means of 7 Batranca. ÄTransportul Maritim ± Probleme Tehnice si de Exploatare´ (1988). the most noticeable being the closing of the Suez Channel in 1956 and 1967. 2004. is to weight its effects over the marine transportation market. Beiziris identified in his paper. As the sector faced deeper internationalization. The most important increases in freight prices were generated by political conflicts. 1. through the quality of the construction and the installation on board. A. Forming a qualified and specialized staff. Assuring the safety conditions before sea risks. Bucuresti.By considering the development of the marine transportation activities up to their complexity. corresponding to the high quality and value of the available means. G. The first reaction of a ship owner or a charterer after an important event (for example: a nuclear accident in Russia or an increase in oil price). the new industrialized countries together with OECD (The Organization for Economic Cooperation and Development) contributed to the maritime development. ÄConsideratii Privind Fundamentarea Deciziilor in Transportul Maritim´. The Development of Maritime Transportation The marine transportation activity is one of the most internationalized activities and for studying its advance is necessary to take into account the evolution of the world economy 7. neither the strategic influence of the marine transportation activity can be neglected. The advantages and disadvantages of this means of transportation indicate that their solution is close related to international economic and political factors. the following problems or disadvantages: The necessary investments needed for specialized modern ships construction. Editura AIT Laboratories.
and the extent to which this can be practiced depends crucially upon the size of the market. Protecting the ship owners and the producers of goods. Sea Transportation and the Economics The idea of shipping as the catalyst of economic development is not new8 .html. This progress. legal and economic framework. Avoiding accidents and the organization of the marine rescue and assistance. A business working in a country town without links to the outside world can never.transportation. Establishing. In the third chapter of ³The Wealth of nations´. for : Assuring safety conditions for human life and the ships over the sea. Preventing the environmental pollution and especially the one of the marine environment.4. achieve the high levels of efficiency because it`s very small market will limit the degree of specialization. available at http://www. based on international cooperation. every day distances seem to be shorter and shorter. he argued that the central economic force is a capitalist society in the division of labor. ÄShipping Industry´. equality in the obligations and the rights of the parties involved.economywatch. so it is upon the sea-coast. saw shipping as one of the stepping stones to economic growth. Adam Smith. fair. often regarded as the father of modern economics. This proved to be a profound insight. and along the 8 Economy Watch ± Economy. This is why. Adam Smith saw shipping as a source of cheap transport which can open up wider markets to specialization. published in 1977. lasting and operational. under the supervision of United Nation Organization. last accessed 26/06/2010. Economic development has gone hand in hand with sea trade for sound economic reasons. is due to the activities of the commercial marine transportation. Investment and Financial Reports. Unifying the marine transportation legislation and methodology. an adequate. The increased importance of the marine sector determined the development of a whole international cooperation. 1.com/world-industries/shipping-industry. a process which Adam Smith explains in the following way: ³As by means of water carriage a more extensive market is opened to every sort of industry than what land carriage alone can afford it. 9 . he argued. by offering transport for even the most everyday products at prices far below those that can be achieved by any other means. from a world built up from isolated communities to a global community. able to guarantee. for maritime trade.
Oxon. a lorry carrying a 40-foot container from Felixstowe to Edinburgh might be competing with a small container ship carrying 200 containers. but of the global economy in particular. an aspect of the business that hardly changes over centuries. Today. Or a truck holing 40 tons of oil along our congested highways competes with a coastal oil tanker carrying 4 000 tons of oil by sea. No wonder that the oceans are the highways of economic development. that industry of every kind naturally begins to subdivide and improve itself. For example. Moreover. therefore. it is natural that the first improvement of art and industry should be made where this convenience opens the whole world to a market for the produce of every sort of labor. 3rd edition. 2009 Martin Stopford. especially petroleum and natural gas. shipping makes possible the bulk movements of raw materials and primary commodities to sites of manufacturing. is also largely dependent on shipping.5. Abingdon. Sea Transportation and International Trade Sea transport or simply shipping is essential to the functioning not just of modern society generally. ÄMaritime Economics´. By exploiting economies of scale and integrated transport system. For international trade. chapter 1. the movement of forms of fuel and energy.´ 10 This is a labor productivity of 15 times. ÄMaritime Economics´.banks of navigable rivers. shipping continues to demonstrate Adam Smith`s insight. 3rd edition. Since such. the viability and efficiency of the world economy would be adversely 9 10 Adam Smith quoted in Martin Stopford. a broad wheeled wagon attended by two men and drawn by eight horses is about six weeks time carries and brings back between London and Edinburgh nearly 4 tons weight of goods. Ships now travel at speeds that trucks can hardy match on congested urban roads and at a fraction of the cost. and manufactured products to their markets. Abingdon. and it is frequently not until a long time after that those improvement extend themselves to the inland parts of the country «. 2009. frequently carries and brings back 200 ton weight of goods. as follows: ³ «.´9 Adam Smith painted a graphic picture of the economic benefits offered by sea transport in the eighteen century. In about the same time a ship navigated by six or eight men. therefore. paragraph 3 10 . Oxon. are the advantages of water carriage. page 3. Without effective and economical sea transport. 1. sea transport remains the most economical mode of transportation that moves all kinds of goods around the world. and sailing between the ports of London and Leith.
There are also clear benefits to exporters and importers when sea transportation costs less while facilitating µJust-In-Time¶ stock management. Presently. short-sea has become increasingly important because most trunk or deep-sea vessels do not call at small or ³off-line´ ports. 2009 Vol. growth in international trade continued. and with much less risk of damage to the goods.´12 Due to the financial crisis and economic downturn. the depth may be insufficient to accommodate large vessels. ³feeder operators´ provide separate short-sea shipping services that mediate between small ports and large vessels.affected. growth in the world economy and in global merchandise exports decelerated in 2009 and it is expected by analysts to decline in 2010. made the outlook for maritime trade uncertain. short-sea transport is an indispensable part of the growth in sea transportation. as compared to 4.August. To take an important example.´ Short-Sea Transport and Economic Development in Penang´. Downside risks. and even slower in 2009. economic growth has become closely related to developments and improvements in sea transportation. 2000 Business Intelligence Journal . ÄWithin the very broad area of sea transportation. traders can expect relatively safe.5 per cent in 2007. (MPhil) 11 . Since small ports greatly outnumber major ports in the world. 2 No. Chang Kah Loon. but at a slower rate of 3. The reduction in the global production and demand resulted in lower levels of trade and undermined growth in maritime commercial activities. As mentioned earlier. developments and advancements in sea transportation have had profound impacts upon international trade. easy and economical access to international markets through a combination of deep-sea and short-sea shipping that utilizes container transshipment opportunities. including the adverse feedback between the financial sector and the real economy. ³Sigmund Freud´. At such ports. after the economic downturn and sharp decline in world merchandise trade. 2. Indeed.11 In recent times.6 per cent in 2008. 11 12 Pamela Tirschwell. Instead. or the cargo amounts are too limited to justify the use of large vessels. Climate change and the need to adapt to the international regulatory regime for greenhouse gas emissions from international shipping are adding a further challenge to maritime transport sector. the conversion of merchandising from break-bulk shipping to containerization now permits goods dispatched from their point of origin to reach their intended destination more efficiently.
especially in developed regions.50 India 13.50 6.50 13.50 7.00 2.00 -1.00 8.50 10.50 7.50 13.Consistent with the past trend.00 7.50 North America 3.00 1.50 Switzerland 2. we realize that deceleration of maritime trade volume affected all shipping sectors.50 16.00 -6.50 World 5.00 Japan 2.00 2.50 3.50 3.00 5.50 South and Central America 8.50 19.50 -0.00 1.00 -3.htm.50 3.00 10.00 0.50 China 16. All in all.00 7.50 2.00 1. available at http://www.00 6.00 4.00 1.50 -2.00 -20.00 *Commonwealth of Independent States: a regional organization .50 2.50 7.50 Six East Asian Traders* 5.50 2.50 3.00 14.00 United States 3.50 1.00 8.00 9.00 0. followed by developed economies (33.50 2.50 6. after analyzing the decline in demand for consumption goods.50 5.00 4. Even though.50 0. 12 .00 11.00 0.50 0.50 5.50 17.50 Asia 8.00 Mexico 3. major loading areas were located in developing regions (60.50 8.50 5.00 2.00 3. *Malaysia. Taiwan.00 -4.50 4.9 per cent).50 -5.00 Norway 5. over the years developing economies have increased their share of imports.00 6.6 per cent) and countries with transition economies (5. These facts are shown in the graph bellow: Table 1. last accessed 30/06/2010.00 -2.50 3.00 Canada 3.50 4.00 Hong Kong. formed during the breakup of the Soviet Union. Source: WTO. Kinmen.50 5.00 1.00 4. and also parts and components used as inputs in globalized production process.00 4.00 11.00 16.´Growth in the volume of world merchandise trade by selected region and economy´(2000-2008). whose participating countries are former Soviet Republics.6 per cent).50 2.50 1.wto. Republic of Korea.00 20.00 6.00 8.00 14. China 3.50 European Union (27) 3.50 0.1.00 4.50 2.50 -1.00 -2.00 12.50 5.50 2.00 Europe 3.00 -11.50 5.50 Commonwealth of Independent States* 17. as well as the fall in industrial production in major economies and reduced energy demand.50 Australia 9. Matsu and Thailand.00 9.org/english/res_e/statis_e/its2008_e/its08_world_trade_dev_e.00 3. Penghu.00 20. World Merchandise Trade (2000-2008) Exports Imports Countries 200020002007 2008 2007 2008 2008 2008 5.00 1. including finished consumer goods.00 1.
as shown by the chart bellow.europa. available at http://epp. Lithuania and Poland followed with considerable falls in their ports¶ cargo throughputs for the first three quarters of 2009. In addition.2 billion tones of freight are loaded and unloaded in EU ports every year . T E T i ` i i E i Perspecti e With the strategic importance of shipping to the EU economy . at least in Lithuania and Poland. it seems that the end of the year has borne witness to some kind of recovery.Total merchandise traded in EU major ports (2009) Source: European Commision.6. 1. Romanian was one of the countries that experiences one of the lowest volume of merchandise traded in its major ports.and the increase of the maritime traffic going through EU waters (every year 1 billion tones of oil are transiting through EU ports and EU waters). Eurostat.The year 2009 has been di i lt for the entire shi ing industry and the majority of the Balti ports saw their cargo volumes fall Finland and Germany recorded biggest losses. Statistic Database. Estonia was able to boost its already positive growth during the last quarters. Prelimi nary data suggests that Estonia was the only state in the Baltic Sea region to increase its cargo volumes in 2009.ec. ³Mariti transport of oods ± 3rd quart r 2009´. last accessed 28/06/2010. Chart 1. In 2009. but Sweden.eurostat.2. the EU is constantly developing and intensifying its maritime safety 13 ¡ £ ¢ £ ¡ . EU .PDF. However.eu/cache/ITY_OFFPUB/ S -QA-10-027/EN/ S -QA-10-027-EN.
in particular by increasing the pressure on owners of substandard ships.policy which the aim to eradicate substandard shipping essentially through a convergent application of internationally agreed rules. with the main objective to restore the competitiveness of the sector while benefiting only those operators who respect the safety standards. a 25 year-old single-hull oil tanker carrying the Maltese flag and chartered by Total-Fina. The ³Erika´ and the ³Prestige´ accidents encouraged the EU to drastically reform its existing regime and to adopt new rules and standards for prevention of accidents at sea.600 meters some 250 km off the Spanish coast.000 tons of oil. safety and security in European shipping´. The damage caused to the environment and the exceptionally high cost of the damage to fisheries and tourism make the Erika oil spill one of the major environmental disasters of recent years. hence the decision to ban single hull tankers in view of the risk of grounding. the 13th. ³Improving the competitiveness. under the polluter pays principle. the environment is hit hard when ships carrying dangerous cargo run into trouble. However. carrying some 77. after six agonizing days since Wednesday. measures were introduced in 2000 to improve port reception facilities for ship waste and cargo residues. north western corner of the Iberian Peninsula. Maritime Transport Policy. 13 European Commission. which gives them an incentive to deliver waste ashore rather than dispose of it illegally at sea. polluting almost 400 kilometers of French coastline. and by collecting a fee from all ships whether they use the facilities or not. the tanker "Prestige" broke in two. sunk to the depth of 3. the Erika. when the ship sent the SOS signal at a few miles off the Galician coast. The tanker. 13 Some of the greatest accidents with huge evidence over the environment are presented below: On 12 December 1999. The directive aims to reduce marine pollution by ensuring that all EU ports provide adequate waste reception facilities. To counter this practice. On the 19th of November 2002. in particular involving oil tankers. that does not prevent unscrupulous or negligent operators and crews from illegally discharging polluting substances into the sea. The EU considerably reinforced its legislative arsenal to combat flags of convenience and give Europe better protection against the risks of accidental oil spills. The third maritime safety package was born in November 2005. The European Commission is keen to improve the safety of vessels carrying potentially polluting cargo. As maritime oil disasters have proved. with a large quantity of oil still on board. broke into pieces some 40 nautical miles off the southern tip of Brittany. 2006 14 .
14 It was adopted on 11 March 2009 15 . With the Third Maritime Safety Package14. an important step has been achieved both on the improvement of the effectiveness of existing measures to prevent accidents and on the management of their consequences if the worse were to happen. with the adoption of the measures proposed in the third maritime safety package.More than three years later. the EU has completed this legislative arsenal covering all chain of responsibility of the maritime sector.
1998 The printed text contains a number of clauses with or without blank spaces. Also. either by their brokers. the name of the ship. the shipper is the person with whom or in favor of whom a transportation contract was signed. without having the status of contractual parties.g.C h a p t e r II Charter Contracts and the Bill of Lading 2. Sorescu M. containing the rights. It can have as many blots. on the ground of the agreed terms between the ship owner and the charterer. containing confidential terms which one doesn not wish to divulge to certain employees of one of the contracting parties. ships are taken on the basis of charter contracts negotiated by brokers. Generally. there is the beneficial owner. of the shipper and the consignee. printed on different forms (usually referred to as the printed text16 ).1. either on behalf of the charterer or the ship owner. A charter contract is defined by the following characteristics15: It is a document. the ongoing of the contract implies the participation. moreover by additional clauses. the shipper is 15 16 Caraiani G. Generally. 17 These clauses are frequently enclosed with the charter party. According to the Hamburg Rules.. even though Contractual relationships could be more complex. followed. the cargo to be loaded. 18 A person or a company which has a commercial control over a vessel`s operation without owning the ship. It is signed either by the charterer or the ship owner. The parties are generally referred to as the ship owner and the charterer. called: addendum or rider17 . 16 . It contains a suite of standard clauses. clauses which best highlight the parties` requests. which must be filled in by the contracting parties (e. on their behalf. When closing a charter contract with a charterer who is not the ship owner. Editura Lumina Lex. a consignee is the person who was delivered or who delivered the object of the transportation contract. it is used the ³dispondent owner´ 18 denomination. On the other side. corrections and additions in compliance to the parties` requests. obligations and the responsibilities of each of the parties involved (the charterer or the ship owner). Bucuresti. the freight). Main Characteristics and the Parties Involved in Shipping Contracts Generally. it is prepared by the charterer`s broker. Beside the ship owner and the charterer.: ÄTransporturi Maritime´. who is the registered owner of a vessel who can charter the vessel out to others.
this is why the new forms gave up the division system in two parts. the first one prevails because of the specific data filled in. The American practices from the 70`s established two distinctive parts for these standard forms: the first one contains numbered cassettes to be filled in and the second one. due to different legal problems generated by the diversity of legal systems. These new introduced clauses have priority in interpretation when their content is contrary to the one given by the standard clauses. Forms of the Contract Although the great majority of charter contracts are written. From the same reason. Over time. The advantage of the system was that the second part was to be filled in only if the parties wanted to modify the standard clauses. a series of standard clauses. in certain cases (a litigation for instance). because he will prove his quality through the bill of lading. Regarding the erased words. in case the standard contract is divided in two parts. Even so.2. The receiver is the person or the entitled company to receive the cargo. they are considered nonexistent. uncovered in the standard contract. and depending on the delivery terms and conditions. whose clauses are printed on s tandard forms. which give the parties involved the possibility of 17 . 2. Much more frequent are those cases when the parties have to negoti te in order to a reach an agreement regarding supplementary clauses for certain aspects. given by the general context of the contract. otherwise it would have been incorporated by reference. the newest standard contracts contain a series of clauses presented in more than one version.also the exporter of the cargo to be transported. Almost each of these standard forms are numbered in order to ease the amendment of the contract. In order to overcome these issues. This person can or cannot be nominated in the contract. if only the clauses contained by the contract would be meaningless without them. they are taken into consideration. there a only few cases when the parties totally agree the standard clauses. in order to avoid isolated meanings. In practice. this is not compulsory. and their existence helps to the correct the interpretation. These supplementary clauses are known under the denomination of ³rider´ or ³adendum´. it has been imposed a series of standard contracts. because the first is considered to better represent the interests of the parties. submitted to the ship master at the arrival. he can also be the charterer.
in exchange of a so called ³hire´ ± it is calculated according to the usage period. according to which the ship owner provides a discharged vessel to the charterer. 2. without the crew and the specific materials and also assumes the maintenance expenses. A charter contract is considered agreed if it is negotiated and agreed by different charterers` or ship owners associations. A charter contract is recommended when there is no charterers` association with whom a certain contract could be negotiated or when even if the contract has been negotiated with a charterers` association. Even if the recommended contract is desired to be used without modifications to the printed amendments. supply. The ³bareboat´ charterer disposes of the vessel.3. Standard clauses of this contract cannot be modified or erased. Charter by demise / Bareboat charter It is a rental contract. there is also used the term ³approved´. there is no possibility that all members of that association to use it. Types of Charter Contracts: A. All these standard contracts are the result of long negotiation between different groups of charterers and ship owners. port duties and cross channels fees. A charter contract is considered approved when it has been agreed.choosing the most suitable clauses for specific situations. with the purpose of avoiding the possible amendments. or they have been framed by organizations representing either charterer`s interests. without being adopted by a charterers` association. meaning all the financial expenses of the commercial and technical activities performed. adopted or recommended by different organizations of associations. Besides these three terms. It is adopted by a charterers` organization if it officially sustains a contract agreed under the above conditions or by another charterers` organization or association19. The most representative standard contracts are agreed. this is not compulsory. 18 . anchorage. for temporary usage. adopted or recommended. freight. The ship owner is obliged to assure for the charterer the disposal of the vessel in proper technical 19 It should be noted that a charter contract can also be adopted by a ship owners` association if it has been issued by another ship owners` association with the purpose of being used in a sector field. insurance. either the ones of the ship owners. without the previous agreement of the parties that agreed to them. current or accidental repairs.
from all points of view. 22 Represents a single payment for the total amount due. freight calculation depends on the quantity of goods transported. channel and ports fees are the responsibility of the charterer (as compared to voyage charter party. 23 1939 ± Uniform Time Charter . Charter party21 It contains the contractual terms specific to tramp transportation and appears under two forms: - Voyage Charter Party ± represents the rental of a vessel for a given number of voyages (this number is mentioned. - Time Charter Party ± defines the situations when the charterer rents the vessel for a predetermined period of time. where they could have been covered by the ship owner). the lower the premiums paid for insuring the vessel. This type of contract specifies the principal condition under which the transport is performed: - The quantity and the description of the goods dispatched. durable and functional. which confirms the engagement of the necessary transportation space and also the principal conditions for its performance. to testify his agreement. sealed. when the transportation document was no more than single paper. According to ³BALTIME´23. consequently. or it represents a total sum according to the vessel`s capacity (lump sum)22. known in the Middle Age. it appears as a letter from the ship owner`s broker to the charterer. cut in two pieces. this document has to be sustained by the bill of lading. as apposed to a series of periodic payments. One or more copies of this letter have to be signed by the charterer. the ship master 20 By issuing this certificate. each of them containg the integral text of the document and both the charterer and the ship owner being given one half. Booking Note Is represents the booking of the necessary transportation space. The better the technical condition of the vessel. It is also the most suitable for linear transportation. The loading and unloading port. in view of dispatching a predetermined quantity of goods. According to this contract. 19 . fin order to perform the voyag e.condition and also to present the registration documents. In this case. the lower the risks assumed by the insurance companies. The name and address of the sender. fuel. Loading. the certificate of origin and the class certificate20. Afterwards. the loading and unloading operations can represent the responsibility of both the charterer and the ship owner. the clearing company grants to the charterers and to the insurance companies that the vessel is solid. the higher the interest of the charterers. together with the duration of the contract). C. B. Also referred to as ³berth note´. 21 The denomination comes from Äcarta-partita´. unloading expenses.
Freight conditions. its calculation. Main Clauses of Charter Party Contract Generally. 2. and it may incorporate the full terms of the contract between the consignor and the carrier by reference (i.4. Loading/unloading norms. A bill of lading can be used as a traded object.e. 2. or a chartering contract. and also the necessary period until reaching the destination port. Bareboat or charter by demise It refers to ship leasing arrangement in which the use of the entire vessel and all associated expenses pass on from the ship owner to the lessee (charterer). Data referring to the commencement period of the voyage. the lay days. The term derives from the verb "to lade" which means to load a cargo onto a ship or other form of transportation. In this type of contract. costs bearing for each of the parties involved.1. the charter party contracts comprise the following main clauses: - The vessel`s denomination. the loading port and the destination one. its main characteristics and the useful capacity. the short form simply refers to the main contract as an existing 20 . - The notification manner regarding the vessel`s arrival at the loading port. Cargo description. The intermediary ports. The standard short form bill of lading is evidence of the contract of carriage of goods and it serves a number of purposes: - It is evidence that a valid contract of carriage.3. the currency. the full commercial responsibility fall on the charterer and the freight is a function of the time the vessel is at the charterer`s disposal. If the lessee also has the right to appoint own master and the crew. exists. the lay day calculation. the date when the vessel is supposed to arrive at the loading port. The freight. it is called a bareboat charter. D.is obliged to follow the charterer`s orders regarding the vessel`s operation. the last day admitted for loading. The Bill of Lading A bill of lading (sometimes referred to as a BOL or B/L) is a document signed by a carrier (a transporter of goods) or the carrier's representative and issued to a consignor (the shipper of goods) that evidences the receipt of goods for shipment to a specified designation and person.
it can be endorsed by A Ltd. irrespectively of who the actual holder of the B/L.This bill states that the goods are consigned to a specified person and it is not negotiable free from existing equities. being freely transferable but not a negotiable instrument in the legal sense.) issued by the carrier sets out all the terms of the contract of carriage. however it binds the carrier to its terms. Bearer bill of lading . Although. or to order or assigns". This matches everyday experience in that the contract a person might make with a commercial carrier like FedEx for mostly airway parcels. and. So. like a cheque or other negotiable instrument. Order bill of lading . may be at a specific moment. whereas the long form of a bill of lading (connaissement integral. it may be endorsed affecting ownership of the goods actually being carried.g. Main Types of Bill of Lading Through bill of lading .e. i f the endorser would fail to disclose the charge. A bearer bill can be negotiated by physical delivery. It is also known as a non-negotiable bill of lading. for example. - It is also a document of transfer. but from the banker's point of view this type of bill of lading is not safe. the endorsee is bound by the lien. or the right to take delivery can be transferred by physical delivery of the bill accompanied by adequate evidence of a company's intention to transfer. 21 . Such bill may be created explicitly or it is an order bill that fails to nominate the consignee whether in its original form or through an endorsement in blank. i. the endorsee will have the right to claim damages for failing to transfer an unencumbered title. fr. 2. - It is a receipt signed by the carrier confirming whether goods matching the contract description have been received in good condition (a bill will be described as clean if the goods have been received on board in apparent good condition and stowed ready for transport). it states that delivery is to be made to the further order of the consignee using words such as "delivery to A Ltd. Consequently. is separate from any contract for the sale of the goods to be carried. e. if the carrier or another holds a lien over the goods as security for unpaid debts. any endorsee acquires no better rights than those held by the endorser.This bill states that delivery shall be made to whosoever holds the bill. it governs all the legal aspects of physical carriage. and owner of the goods.5.This bill uses express words to make the bill negotiable.document.
g. A straight bill of lading by land or sea. whether negotiable or not. and does no more than identify that a particular individual has a right to possession at the time when delivery is to be made. under the terms of the Uniform Commercial Code. the consignor can sue to recover his or her loss. when we hand over the bill of lading we surrender title to the goods and our power of sale over the goods.e. i. 2. It is customary in transactions where the shipper and consignee is the same person in law making the rigid production of documents unnecessary.Surrender bill of lading . the right to sue may not be clear in contract. This direct liability is called Surrender Bill of Lading (SBL). the doctrine of privity of contract states that a third party has no right to enforce the agreement. because this is one of a series of loads being delivered to the same consignee).e. i. Problems arise when goods are found to have been lost or damaged in transit. bills of lading are "documents of title". whether this is a problem to the consignee depends on who owns the goods and who holds the risks associated with the carriage. If the consignor has reserved title until payment is made. Hence. A sea waybill is a non-negotiable receipt issued by the carrier.6. Delivery is made to the consignee who identifies himself. But if ownership and/or the risk of loss have transferred to the consignee. This will be answered by examining the terms of all the relevant contracts. they can be endorsed and so transfer the right to take delivery to the last endorsee. However. a number of international Conventions and domestic laws specifically address when a consignee has the 22 .Under a term import documentary credit the bank releases the documents on receipt from the negotiating bank but the importer does not pay the bank until the maturity of the draft under the relative credit. a bill of lading is not a document of title. although there could be remedies in tort/delict (the issue of risk will have been most carefully considered to decide who should insure the goods during transit). Because the consignee is not a party to the contract of carriage. This differs from an Äorder´ or Äbearer´ bill of lading which is possessory title documents and negotiable. Nevertheless. They do no more than require delivery of the goods to the named consignee and (subject to the shipper's ability to redirect the goods) to no other. It is most common in the container trade either where the cargo is likely to arrive before the formal documents or where the shipper does not insist on separate bills for every item of cargo carried (e. or delivery is delayed or refused. or sea waybills are not documents that can convey title to the goods they represent. Issues of the Bill of Lading and its Enforcement In most national and international systems.
It is customary for parties to the bill to agree both which country's courts shall have the jurisdiction to hear any case in a forum selection clause. the bill of lading is more important than the charter party because the negotiable bill of lading gives the right to receive the goods.right to sue. overseas or airborne shipping. and the municipal system of law to be applied in that case choice of law clause. The fact that there is a bill of lading creates the presumption that 23 . For that. The legal solution most often adopted is to apply the principle of subrogation. the laws of whatever other countries are involved in the transaction covered by a particular bill may also be applicable including the Hague Rules. This enables most of the more obvious cases of injustice to be avoided. The bill of lading does not replace the contract of affreightment but it is the presupposition of it. to give the consignee the same rights of action held by the consignor. consequently. In the liner shipping one will generally not find a charter party but only a bill of lading that. The law selected is termed the proper law in private international law and it gives a form of extraterritorial effect to an otherwise sovereign law (e. etc. in theory at least. be a charter party and a bill of lading.e.g. Since bills of lading are most frequently used in trans border. In tramp shipping. where only full cargos are transported. Bill of Lading Versus Charter Contracts As a document. the charter-party does not represent the goods. i. another document is necessary that serves as proof of the actual loading of the goods and consequently that can be considered as the implementing evidence of the contract of affreightment. In fact the charter party is only a contract of affreightment that only represents the hire of tonnage space. there will generally be a charter party and a bill of lading. the Hague-Visby Rules and the Hamburg Rules at international level for shipping. This other document is now exactly the bill of lading and for each transport of goods there should.7. a Chinese consignor contracts with a Greek carrier for delivery to a consignee based in New York: they agree that any dispute will be referred to the courts in New York (since that is the most convenient place ² the forum convenience) but that the New York courts will apply Greek law as the lex causae to determine the extent of the carrier's liability. The Warsaw Convention for the Unification of Certain Rules for International Carriage by Air 1929 and The Montreal Convention for the Unification of Certain Rules for International Carriage by Air 1999 for air waybills.) 2.
: ³Le contrat d'affrètement maritime´. In that case the terms of the bill of lading will prevail on those of the charter party. The bill of lading can be issued in two different manners: 1. 2. 24 . the bill of lading is also the proof that the goods were loaded on board the ship. which means that those terms will in fact have to be applied. Anvers. page 93. orally or in writing (e. Without a preceding contract of affreightment. or the charterer is also the shipper. "The terms of the contract may also be gathered from the charter. that the contract is signed before it is carried out.e. 2008. In that case. This way of concluding happens in the liner shipping tacitly. regarding the relation charter party/bill of lading. if the bill of lading is not negotiable then the bill of lading is only a receipt. in which case the bill of lading as between charterer and ship owner is usually merely a receipt"25. provided that they are not in contradiction with the terms of the Hague-Visby Rules 24. a) If the bill of lading bears the words "Freight and all other conditions and exceptions as per Charter" the terms of the contract of affreightment are incorporated in the bill of lading. There is only a presumption of a contract of affreightment and the provisions which govern the bill of lading.previously a contract of affreightment was already concluded. 24 25 Wildiers. P. the bill of lading is the confirmation and the written proof of the contract of affreightment. Scruton on ÄCharterparties and Bills of lading´. where there is one provided that its terms either wholly or in parts are expressly incorporated in the bill of lading. If the bill of lading is negotiable then the Hague-Visby Rules which are of public order apply. Editions Lloyd Anversois. via the press) and that the freight forwarder binds himself to ship goods with that named ship. An important difference between the charter party and the bill of lading lies in the fact that the charter party is a gestation agreement i.g. apply. b) The bill of lading does not refer to the charter-party. 1969. For the implementation of a charter party that was signed by the parties concerned. whereas the bill of lading is an actual agreement because the contract is only signed after the goods have been really loaded on board. when the ship owner announces the sailing and the destination of the ship.
fresh water. 26 Deadwight Tonnage: is a measure of how much wight a ship is carrying or can safely carry. but on the market of certain groups of merchandise and vessels. General Aspects Regarding Maritime Freight Freight is the reward payable to the carrier for the carriage and arrival of goods in a mercantile or recognized condition. agreements between states. Total costs generated by the vessel also include the fees paid by the ship owner . 27 Deadweight Cargo Capacity: it gives the wught of the cargo that the vessel can carry and it depends on water temperature and the water (whether it is salt. regarding its volume and its transportation capacity. provisions. for loading and unloading the cargo. but on other factors. ready to be delivered to the merchant. Expenses related to vessels are divided in more categories: a) Expenses corresponding to purchasing and maintaining the vessel. DWCC 27 . either displacing or not. fuel. the ship owner has to cover his expenses and also gain a certain profit. insurance premiums. c) Expenses indirectly related to operating the vessel and uncontrolled by the ship owner. the amount of fuel consumption at different speeds. channel administrations. maximum speed. There are more than one freight markets. port administrations. ballast water. like: norms specific to the state where the vessel is registered. but also on the supply and demand at the acquisition moment. loading capacity.C H A P T E R III FREIGHT IN INTERNATIONAL SEA TRANPORTATION 3. thus demand and supply not only interact on the general transportation market. These are reflected in everyday operation costs. TRB. respectively the consumption of fuel per day. passengers and crew. fuel acquisition price. the number of crew members and their wages. fuel supply. brackish). agreements between different transportation operators. from the collected freight. which do not depend on the way the vessel is organized and operated. TRN.1. These costs are strictly dependent on the value of raw materials and labor consumed for building the vessel. it is very useful to know the construction characteristics: DWT 26 . b) Expenses related to the direct operation of the vessel. 25 . For an efficient use of the vessel. As in any other activity. It is the sum of the weights of cargo.
by the competition of substitutes or alternatives for the particular commodity carried. and have equal bargaining power. The demand for sea transportation is affected both by direct competition between carriers and. but the factors affecting both supply and demand are probably more complicated than in the case of most other industries and services. takers or ore carriers. rates made in this way represent the most efficient methods of pricing. From the economist`s point of view. and where demand is fairly elastic. Under these circumstances. like all pricing. therefore. and the contract is drawn up as an agreement known as a charter party. on some routes there is also competition from air transport for high value to low weight ratio consignments. The charter rates are quoted on a competitive basis in various exchanges throughout the world. Where both groups are numerous. Under these conditions. prices are fixed by the ³haggling of the market´ and are known as contract prices. The contract may be for a single voyage at so much per tone of the commodity carried. the charterers instructing the ship to proceed to a certain range of ports and determining the port of discharge while the ship is es route. affected by the elasticity of demand for these commodities. depending upon demand and supply conditions. because it is a derived demand. The price eventually fixed depends largely on the relationship between buyers and sellers. In the case of very long-term charters. It is quite usual for cargoes of these commodities to be loaded and actually marketed during transit.2. the ship owner is subject to competition from carriers on the same route. On any particular route. The market for tramp charters operates under such conditions. and their movement is irregular. As in all forms of transport. the rate structure for tramp is a very simple product and emerges from competitive interplay of supply and demand. and it is. for where price is determined under conditions of perfect competition. usually so much per tone of the ship`s deadweight carrying capacity. For example. the rate of hire is fixed to give the owner a reasonable return on his investment. the demand for shipping is derived from the demand for the commodities carried.3. and in the coasting trade there is also competition from inland transport. conditions of relatively perfect competition prevail. Cost Elements in Sea Transportation The pricing of cargo ships` services. production is encouraged to follow 26 . is dependent on the forces of supply and demand. Foodstuff and raw materials in particular are traded in a highly competitive world market. and also from carriers operating from alternative supply areas. or it may be for a period at a stipulated rate of hire.
so he seeks the lowest possible transport charge. The duration of the charter: generally. In weak market conditions their relative efficiency ensures a small profit while others just break even. as it arises when the freight rate is related to a floating currency. containership. as the freight percentage of the total value may have a direct bearing on the salability of the commodity. In these conditions. he will be forced to pay more but there is a limiting factor in the price of the commodity at the point of sale to the rate which the ship owner may receive. the ship owner and the charterer are free to conclude a charter party of any terms. the less it is influenced by the market situation relative to the availability for ships and the demand for them. Because of currency depreciation. and price itself does not deviate to any great extent from the average total cost. The daily cost to be borne by the charterer. Currency surcharge is another factor to be considered. 2. He has thus a prime interest in the availability of tramp shipping space at any particular time by reason of the fact that freight and chartering rates will reflect variations in the economic forces of supply and demand. General market conditions: this is a major factor and generally an abundance of available ships for charter tends to depress the rate particularly for voyage and shortterm charters.consumers` wishes. the longer the charter. 4. oil tanker). In a market situation where there are plenty of vessels the shipper will be able to charter at a rate which will be only marginally above the operating costs of the vessel. The terms of the charter: as mentioned before. carrier. 8. 5. 7. Where the market is 27 . In this way the consumer is satisfied and production capacity most usefully employed. In the opposite situation. The factors influencing the formulation of a fixture rate are detailed bellow: 1. The tramp shipper markets goods of relatively low value. 3. The types of traffic to be conveyed. Ship specification which would also embrace the type of vessel (bulk. The identity of cost to be borne by the charterer and ship owner must be clearly established. a currency surcharge is imposed in order to minimize losses that the ship owner or the charterer could incur in such situations. the premium returns are earned by the operators of the most efficient ships. 6. Responsibility for the survey costs of the vessel must be clearly defined as to whether they are for the charterer`s or ship owner`s account.
The economical influence: the demand for transportation services is derived from the level of economic activity. In case freight is determined according to the cargo`s weight. some directly and others as a result of changes in transport costs and rates and in the services offered.4. or to give to the charterer the use of the whole or part of the cargo-carrying space of the ship for the carriage of his goods on a specified voyage or voyages or for a specified time. it is very important to specify whether it is expressed in metric ton. Among those factors that directly influence freight transportation are the following: 1. Generally. 3.3. 3. long ton or short ton. it is used when the charterer is allowed to load maximum capacity or in case of oversized cargoes. Means of Establishing Freight Freight can be established by various means. This means easily allows freight comparisons and also an efficient calculation of voyages. as there are significant differences between them. independent on the quantity of goods loaded. At this point. d) Deadweight unit: it is mainly used in afreightment contracts 28 . The ship owner is able to hold the rate at a fair level to show a profit margin. but he must be careful not to hold his rates so high that they price the goods out of the market. Trends and changes in the national or regional economy affect manufacturing and distribution processes. when the vessel`s capacity to be used is unknown. this means is no longer used. As a derived demand. but generally the most frequent are the following: a) According to the weight and volume of the cargo. e) As a percent of the cargoes value: in practice. c) World Scale reference: specific to oil tankers. 28 . Factors Influencing Freight A variety of factors influence freight transportation demand. the charter pays a certain amount of money. the most basic 28 The expression usually employed to describe the contract between a ship-owner and another person called the charterer. by which the ship-owner agrees to carry goods of the charterer in his ship. In the liner trades the freight costs are more stable and controlled. b) Lamp sum freight: according to this means of establishing freight. joint cooperation between shipper and carrier and other parties is needed.strong the proven reliability shown before will ensure that the services of such vessels will be sought out before other opportunities are taken up.
2. As production facilities are shifted to locations around the globe where goods can be produced more economically. Packaging materials. rates tend to be higher. Expansion in a national or regional economy results in increases in overall freight demand. For example. 7. 3. Industrial localization patterns: are critical in determining transport demand as measured in ton-miles or other units that reflect length of haul. International transportation agreements: they often involve complex negotiations as the nations involved seek to protect their interests and to create opportunities for trade and economic growth. many companies manage worldwide production and distribution system. Globalization of business: today. with many commodities likely to be shipped by one mode when distances are short and by another when distances are longer. Other direct factors: 5. and national economies are increasingly being integrated into a global economy. 8. Economic regulation and deregulation: deregulation in transportation industry was driven by the desire to encourage greater price and service competition and to increase opportunities to develop multimodal and intermodal relations among and within various modes. Among the factors that have an indirect impact on freight demand. the demand for world trade will continue to increase. by influencing costs and services are the following: 1. where carrier entry or participation is restricted in a particular market. The spatial distribution of economic activity also influences mode choice. International trade agreements: global production and distribution are also affected by international trade agreements. 2. Intermodal operating agreements. 9. 29 . 4. Other indirect factors: 3. Recycling. Just in time inventory practices. 6. Centralized warehousing. quotas and tariff restrictions. while contractions in the economy result in reductions in freight demand.influence on total freight demand is the volume of goods produced and consumed. Carrier-shipper alliances.
ÄMaritim Economics´. Fuel prices. Publicly provided infrastructure. 6. Environmental policies and restrictions. The concept was developed during the Second World War when the British Government introduced a schedule of official freight rates as a basis for paying the owners of requisitioned tankers. In contrast. Ship owners. 9. This system was adopted by the tanker industry and has been progressively revised over the years. through reports drawn by specialized institutions belonging to this field. which is why this indicator is permanently analyzed. The third and the most complex measure of freight rates is Worldscale. This kind of data is periodically published: monthly. The schedule showed the cost of transporting a cargo of oil on each of the main routes using a standard 12. 2003. 2nd edition. Safety policies and regulations. Government subsidization of carriers. Effects in changes of truck size and weight limits. Three different unit of measurement are commonly used29 : voyage rate statistics.000 dwt tanker. Taylor and Francis e-Library. weekly or even daily. Worldscale is available on a subscription basis and the annual fee entitles the subscriber not only to the Schedule itself but also to notices of all amendments and the right to request rates for any voyage not shown in the Schedule. time charter rates are generally measured in $000 per day and they are commonly reported for trips (round voyages). 10. 5. Single-source delivery of international LTL shipments. the cost of transporting a metric ton of cargo using a vessel on a round voyage. which are generally reported in $ per ton for a standard voyage. The book shows. chapter 3. 29 Martin Stopford. page 93 30 . User charges and other taxes. mainly on demand and supply. in order to obtain possible market forecasts. 11. 8. for each tanker route.5. Owners were paid the rate shown in the schedule or some fraction of it. for dry cargo commodities. The Worldscale index is published in a book which is used as the basis for calculating tanker spot rates. shippers and charterers take great interest in statistics showing trends in freight rates and charter rates. 7.4. International Freight Market: Organization and Functioning The fixed freight level for different categories of vessel and cargoes depends on market conditions. 3.
This year. This way of establishing freight level is much more obvious d uring economic growth periods. like winter harshness (which determined an increase in coal demand) or pirate attacks (which brought a negative influence on transport routes including the Suez Channel).com.com/futures/bdi_baltic_dry_index. freight level will increase. while transportation demand still maintains its level. last year was represented by a positive and unexpected evolution of the BDI. 31 . the costs related to the amount of fuel consumed and those related to the vessel s crew. Figure 3. By September 2009. This aspect is described by the BDI ± the Baltic Exchange Dry Index . to 663 points registered in December 2008). The supply will increase. it exceeded 1. 20 -30% more vessels will be launched to water.Maritime transportation services are bought and sold on the international freight market.316 points. when freight is several times more than in the recession periods.793 points re ached in May 2008. which is the major index on the Baltic International Future Freight Exchange from London. available at http://investmenttools.htm. As we can see from the graph. ht Freight evolution is subject to the free interaction between supply and demand: for example. as compared to 2007. Even if by February 2009. The relation between tonnage demand and supply on the international freight market is determined in establishing the freig level. They consider that the upward evolution was supported by circumstantial evidence. because.1.The Evolution of Baltic Exchange dry Index (2007 -2009) Source: InvestmentTools.000 points.evolution. soon after the 2008 crush (more exactly from 11. freight ware barely able to cover the operating costs of the vessels. freight level is expected to decrease. if tonnage demand increases more than the supply of tonnage. compounded of all national freight markets. the index started to maintain a stable level of 3. last accessed 06/07/2010. but still analysts are not very optimistic.
liquid fertilizers.2. nitric acid). Romania. ISO 14001 and Responsible Care certifications. Turnu Magurele.urea. in order to highlight their importance for the Romanian transportation and economic market.1. It is the specialist for film resins. The company`s headquarter can be found at the following address: 1. 32 . Portului Street. e-mail address: office@donauchem. 4. a middleman (BOGFIL COM LTD) and the most important. the relationship between parties involved and their influence on the Romanian transportation market. The company is represented by highly qualified team works on innovative solutions for clients with the aid of state-of-the-art laboratories. having the contact data: Phone: +40 247 416438. Teleorman County. Bellow. 4. The exporter (the producer company) ± DONA CHEM LTD: the company`s object of activity is represented by the production and distribution of mineral fertilizers (simple . a shipping company (BALKAN SHIPPING AGENCY LTD) and a custom operator (EUROEST OPERATIONS). the company is able to supply the entire range of chemical fertilizers requested by the agricultural activities.1. we need a producer company (DONAU CHEM LTD). glues for the chipboard and plywood industries as well as for glues and hardeners for the furniture industry and load bearing wooden structures. phenol and urea. At this moment.ro .1. ammonium nitrate. In order to realize this transportation activity. being the first manufacturer of synthetic resins from melamine. I will try to describe each of them. 145200.C H A P T E R IV CASE ST DY ± PERFORMING AN INTERNATIONAL SEA TRANSPORT 4. global know-how and future oriented technologies and the high quality of products and services are attested by ISO 9001. but also the production of spare parts and technological tools. I should mention the fact that the technologies functioning within DONAU CHEM reach the standards of European factories. insulation resins. The importer (the consignee) ± AIGO LTD : AIGO is a global leader in providing high performance adhesion and surfacing solutions. Parties Involved This paper`s aim is to realize an accurate analysis of the way a maritime transport is performed. a consignee (AIGO LTD).1. complex and liquid forms) and intermediaries (ammonia.
computer systems and dockworkers' union contracts. DANAU CHEM LTD. The port operator ± E ROEST OPERATIONS: it cooperates with the port authority to move cargo through a port at a contracted minimum level of productivity. the delivery conditions fall under FOB Incoterms 2000. ship broking. 900132.3.4. which offers complete service on custom requirements: cargo declaration for export. the producer company presented by this study case. 200040. No. The port operator also manages paperwork.1. primary custom declarations. 33 . hires a middleman because. or email@example.com. Calafat. Dolj County. EUROEST disposes of all necessary equipment in order needed in loading and unloading activities and it is contracted by the producer company for loading the cargo exported to China. even if this is not a necessary condition. Nowadays the company developed overseas and created both branch offices and subsidiaries in Germany.1088.ro. custom clearance and warehouse. The middleman can also arrange for the carriers of the cargo (as in the transport presented by this case study). The company can be contacted at: 22.Wuding Rd. safety and port security. Shanghai. Constanta. It also fills EUR certificates. 205200.). The company has 40 years of service to the shipping community worldwide. communication equipment. trucks and freight trains and optimizing the flow of goods through customs to minimize the amount of time a ship spends in port. Mircea cel Batran Street. and bunkering and freight forwarding.The company can be contacted at: 18F. ships agency.1. bills of lading and pays custom duties at the clients` order. sale and purchase. They may be state-owned (particularly for port authorities) or privately run (like the one used in this case).397. 4. which specifies that the exporter is in charged with export custom clearance. or firstname.lastname@example.org. The middleman ± BOGFIL COM LTD: it is a custom agent. 4. under the negotiated terms. Maintaining efficiency involves managing and upgrading waterways. The shipper BALKAN SHIPPING AGENCY LTD: since 1997. BALKAN SHIPPING is a member of Ship Agents and Brokers Association of Romania. storage facilities. Jiaozhou Rd. Cobuz Street. The work involves managing the movement of cargo containers between cargo ships. Constanta County. because the exporter is entitled of choosing his own transportation company. leases. 4. Greece. The company`s headquarter is located at: 132.com. Belgium and Singapore. we have extensive experience in all aspects of liner agency.(No.
2. and relatively non-toxic. It is a raw material for the manufacture of many important chemical compounds. The molecule has two amine (-NH2) residues joined by a carbonyl (-CO-) functional group. Regarding the external transport. ³Xin Shan Tou´ is the name of the ship. The moment the ship arrives to Constanta port. thus ready for departure. 900636. The synthesis of this organic compound by Friedrich Wöhler in 1828 from an inorganic precursor was an important milestone in the development of chemistry. including water vapor in the air. in Constanta port.Shanghai (China). especially the urea-formaldehyde resins. colorless. I want to clarify that the internal transport (from Turnu Magurele to Constanta) is made by rail. Nicolae Grigorescu Street. As attested by the Statement of facts ± time sheet ( see annex 1). 4. Being solid. Considering the fact that the producer company is located in Turnu Magurele and the loading is made in Constanta. 34 . Cargo description Carbamide (urea) or is an organic compound with the chemical formula (NH2 )2CO. After that. odorless (although the ammonia which it gives off in the presence of water. Constanta. The port operator is responsible for loading the cargo and makes sure everything is settled until the departure moment. Constanta County. It serves an important role in the metabolism of nitrogen-containing compounds by animals and is the main nitrogen-containing substance in the urine of mammals. it is berthed and loaded. which will be transporting the cargo from Romania to China. such as: 1.ro. neither acidic nor alkaline. Route description This study will be based on analyzing the transport of chemical fertilizers (specifically Carbamide) directly from Romania to China. highly soluble in water. or email@example.com. cargo was ready to be loaded at the 1st of July 2010. 4. has a strong odor). following the route: Constanta (Romania) ± Istanbul (Turkey) ± Port Kelang (Malaysia) ± Nansha (China) ± Shekou (China) ± Ningbo (China) .The company can be contacted at: 16. Various plastics. the estimated duration period until destination is considered to be 21 ± 25 days. Urea is also an important raw material for the chemical industry. urea is widely used in fertilizers as a convenient source of nitrogen.
having the custom code 31021010) will be transported in bulk. Urea nitrate. and maximum 10 % less than 1 mm and more than 4 mm granulometry (it is used in the qualitative and quantitative evaluation of the free-floating). As with most solid fertilizers. well-ventilated area is recommended. Therefore.7%).40 % moisture. which calculates the exact quantity of cargo at discharge (see annex 5). As the cargo transported by our company is bulk loaded. without humidity. we observe that minimum 90 % of the urea transported has a 1 ± 4 mm granulometry.519 MT.2. More than 90% of world production of urea is destined for use as a nitrogen-release fertilizer. product treated against caking. another industrial feedstock. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in common use (46. 4.2 % Nitrogen. 17 Euro. 0. The Certificate of Quality also mentions the validity period of four months from delivery date. it has the lowest transportation costs per unit of nitrogen nutrient. meaning that it is transported unpacked and in large quantities. meaning that the total value of transported cargo is 259071. cargo (chemical fertilizer. Potassium cyanate. free flowing. if stored in bulk. Thus. Concerning the quantity of urea transported. see annex 2). The substance contains: 46. Freight calculation Sea freight calculations can be divided into two main components: break-bulk and containerized. white colour. 3. dry.93 % Biuret and the rest of 0. Regarding the Romania ± China transport. cargo is described as: prilled. We can see from the commercial invoice that the unit price for urea is 208. under cover with a tarpaulin. such as urea-formaldehyde or the urea-melamine-formaldehyde used in marine plywood (the case of our importer company ± AIGO LTD) . urea. storage in a cool. or. free from harmful substance. I will apply the first 35 . The total quantity of cargo loaded is also attested by the Draft Survey Report. Because it absorbs moisture from the atmosphere is has to be stored either in closed/sealed bags on pallets.4. 52 Euro. the Certificate of Quantity (see annex 3) attests a net weight of 1244. only in case of adequate storage conditions: closed spaces. Various adhesives.519 MT (according to Cargo Manifest document. This unit price is one of the determinants of the custom duties the exporter is obliged to pay. Cargo transported also has a box to be filled in the Commercial Invoice (see annex 4). an explosive. According to the Certificate of Quality (see annex 3). More specific the quantity of urea which will be transported is 1244. 4.
freight costs will be computed according to the delivered weight. a very important determinant of freight level is the amount of fuel consumed. whichever yields the greatest revenue. expenses related to the chosen route (35 % for crossing the Bosphorus Strait) and insurance.176. In this case. the number of K`s can be computed by the following relation: K= (E+Q)*Km*Cs/1000. transportation cost has been agreed to 12 $ per metric ton loaded. hazard risks are also to be considered. where L= unit length (barge length) B= unit width (barge width) T0= weight in accordance with the draft Km= route kilometers Cs (sector coefficient)= represents the degree of difficulty of the route. As an additional clause negotiated between parties. referred to as K. represented by 1. freight level will be established according to the capacity or weight of the transported cargo. Considering the price per metric ton of cargo transported (208. charter commissions. As mentioned earlier. For determining fuel consumption. 519 MT of chemical fertilizers. cargo is measured along the greatest length. In order to determine freight level.244.40 kilograms of fuel per K (the vessel`s activity measurement). The vessel`s activity is measured in a special unit measurement. together with the season when the transport is performed. where Q= the quantity of loaded cargo E= unit equivalent (barge) E= L*(B+2*To)*1.30 ± 2. the number of K`s is multiplied with a specific amount of fuel. charter commissions. Thus. freight level is determined by: running expenses (operating expenses related to the vessel). the ship owner considers all factors which determine the transportation cost and also the assumed profitability. Shipping lines quote bulk cargo per ³freight ton´. port taxes. fuel costs (calculated bellow). fuel costs. crew member`s wages. which is 1 metric ton or 1 cubic meter. costs depending on the chosen route. the coefficient is settled at 2. including wages. established by each of the companies. 36 . width and weight of the entire shipment. This cost includes: expenses related to vessel`s operation. For this practical situation. 17 euro).calculation method: in this case.
jettisoning (throwing overboard of property to save other property). the ship sinking. cargo. The FOB term requires the 37 . considering the fact that no transport is performed nowadays without concluding an insurance contract: in our case. and any transport or cargo by which property is transferred. decay. or held between the points of origin (Constanta) and final destination (Shanghai).28+ 1244. the importer will be responsible for insuring the vessel and also the cargo transported. and various other liability exposures. under the FOB delivery. and war. concluded an agreement with BALKAN SHIPPING AGENCY (internal and international forwarding agency). we have: E= 67.4(10. To be covered. 4.92 kilograms Past experience related to hazard risks influenced the international transportation and insurance market.00)= 67. mold.4*7. is part of the custom value.4 +2*2.35= 13373.5.35/1000= 5691. which at its turn. as the result of the occurrence of an insured peril (risk).2= 485. capsizing. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point.28 K= (485.03 It means that. Perils insured against include collision of the ship with another ship or object. Excluded are wear and tear. or being stranded. Marine loss is damage or destruction of a ship's hull and the ship's cargo. The cost of the insurance will also be included in the transportation cost (freight). in order to transport chemical fertilizers from Romania to China. fire. terminals. an act cannot involve prior knowledge by the owner of the ship or its cargo. Documentation This study case assumes that the producer company ± DONAU CHEM LTD. barratry (fraud or other illegal act by a ship's master or crew. dampness.In this case. Free On Board clause assumes that the seller delivers when the goods pass the ship's rail at the named port of shipment ± Constanta port. piracy. in accordance to the conditions imposed by Incoterms 2000. The port operator took care of receiving and loading the cargo. the total fuel consumption needed for performing this transportation is: K*Cs= 5691. This contract offers coverage in the event of a marine loss.03*2.519)*1400*2. needed to be paid by the importer. Marine Insurance covers the loss or damage of ships. acquired. resulting in damage or destruction of the ship and/or cargo).
The bank to which the payment will be made 10. phone number. the external invoice shows the fact that the merchandise has been sold. 7. 8. the quantity of the delivered goods. its identification data (legal form. but also the manufacturing place. registration number from the Trade Register Office). object of activity. the shipper is requested to present the following documents: 1. This document has the following functions: 38 . The Certificate of Origin Represent a very important document in international transactions. Transportation cost (freight). The External Commercial Invoice In order to transfer the property right from the seller to the buyer. for preparing the custom documents. 9. 4. Commercial denomination of the cargo transported. It also includes a declaration asserting the origin country of the goods. Loading expenses also fall on the exporter`s responsibility. 5. the exporter will have to pay a pre established price. Name and address of the seller. Premium and insurance type Besides the property right transfer from the seller to the buyer. negotiated with the middleman. Packaging description. Issuance date and number of the invoice. In the same time. For import cargo clearance. Name and address of the buyer.seller to clear the goods for export and makes the buyer responsible for all the costs incurred after the cargo has been loaded on board. will be responsible with concluding the charter contract (see Annex 10) with the shipping agency. an external invoice has to be issued. This document is prepared by the exporter and it synthesizes all the relevant clauses of the contract (see annex 4). which is. 2. This type of primary contract includes the following elements: 1. Transaction value. 2. the importer. thus it serves at obtaining the counter value of the merchandise. because it verifies the nature. 6. AIGO LTD. In our case. by being part of the compulsory documents requested by the bank for proceeding the import payment. 3. by specifying the unit price and the total value. in our case BALKAN SHIPPING AGENCY. Means and conditions of payment.
Name of the exporter. the invoice number. in order to charge the counter value of export. Assures the compliance with the measures of commercial policies from the importing country. or a chartering contract. Name and address of the consignee. within international trade activities. as for example the origin denomination. 3. exists. the quantity transported. Allows the importer to obtain some custom formalities. Name of the vessel.1. and also his signature. 5. the importer will first have to demonstrate through the certificate of origin its right to a lower custom duty or even an exemption. whenever partner countries share agreements that provide preferential tariffs. 3. 5. Custom Declaration It represents the act whereby a person indicates the wish to place goods under a given customs procedure as provided for by the Community Customs Code (CCC) (Articles 4 (17) and 59 to 78 CC). 3. and it may incorporate the full terms of the contract between the consignor and the carrier by reference to the existing contract. It represents the evidence that a valid contract of carriage. Packaging type . This type of document has to comprise the following mentions: 1. Date and place the bill of lading has been issued. Cargo denomination and its weight. Assures the protection of certain intellectual property rights. together with other documents. 2. in this way. 2. In order to collect the payment from the importer`s bank. this task is performed by the owner of the goods or a person 39 . a certificate of quality is requested. importer`s and exporter`s name. The Transportation Document In our case. by the exporter`s bank. 4. but it can also be attested by any institution specialized in quality control. the transportation document takes the form of a bill of lading (see annex 6). The Certificate of Quality Regarding the quality compliance. The Certificate of Origin contains the weight and the type of the cargo. Generally. on the quality of goods 4. due to the fact that the cargo is transported by water. 6. the certificate`s content has to correspond exactly with the provisions stipulated by the contract. 7. Name and complete address of the exporter. This document is issued by the producer company.
The custom value at export is the calculation basis of the custom rights the Chinese company will have to pay when transportation reaches its destination. transportation costs ± freight. customs. the seller has to present the bank with the necessary shipping documents confirming the shipment of goods within a given time frame. custom value also includes other taxes provided by the national legislation of the importing country (China). is the payment condition. the declaration is to be presented to the official customs office. According to Article 201 CCIP. It is the same for Mate s Receipt. authorized with supervising the place where the exporter is established and the cargo is packed and loaded for the export transport. Master s Receipt It represents the proof that all transportation documents have been delivered to the master (commander) of the vessel (see annex 8). The attached commercial invoice in this transportation simulation mentions as payment method the letter of credit. 7. These persons may be individuals or companies. The Letter of Credit Right next to the condition of delivery from the commercial invoice. I have added bellow the so called letter of credit life cycle. According to the delivery condition.acting on his behalf (a representative). other costs will be added: insurance. a letter of credit gives the seller reassurance that he will receive the payment for the goods. In order for the payment to occur. It may also be performed by the person having control over the goods. One of the most important elements mentioned in the custom declaration is the custom value of transported cargo (see annex 7). expenses related to cargo handling. 40 . For a better interpretation of the process. Besides the custom rights. 6. only that the person who receives the documents is the vessel`s mate (deputy commander) (see annex 9). from the importer. the name and the address of the bank which will be collecting the counter value of the cargo transported. Basically. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country. It is a binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be transferred to the seller. as well as in certain cases associations of persons. or political instability.
The idea in an international trade transaction is to shift the risk from the actual buyer to a bank. which is the buyer (the buyer is the applicant and the seller is the beneficiary). The specified bank makes the payment upon the successful presentation of the required documents by the seller within the specified time fram Note that the bank e.It is very important to mention that letters of credit deal in documents. Thus a LC (as it is commonly referred to) is a payment undertaking given by a ban to the k seller and is issued on behalf of the applicant. not goods. Thus the process works both in favor of both the buyer and the seller. scrutinizes the documents and not the goods for making payment. The bank that advises the LC to the Seller is called the advising bank which is generally in the country of the Seller. The seller gets assured that if documents are presented on time and in the way that they have been requested on the LC the payment will be made and buyer on the other hand is assured that the bank will thoroughly examine these presented documents and ensure that they meet the terms and conditions stipulated in the LC. The Bank that issues the LC is referred to as the issuing bank which is generally in the country of the Buyer. 41 .
by using bank loans. Entering the Romanian market of maritime transport services is rather difficult. extractive industry.Conclusions and Recommendations Last year. but also freight level and tariff policies adopted at global level. in February 2009. a very important role will be played by ship brokers and shipping companies. because they best meet the requests of demand and supply. This is due to the lack of a national merchant fleet and consequently a domestic freight market. Due to the low volume of transported cargo. to which one should also add the lack of concrete support from the local authorities. due to the large number of shippers as compared with the reduced volume of cargo available for transport. Domestic demand for maritime transportation is represented by the economic agents belonging to energy sector. shipping supply at the Romanian ports level is represented by foreign ship owners and foreign maritime companies. the lack of stable ship owners. The investigation was mainly based on analyzing the functioning mechanisms of the transportation market and identifying certain dysfunctional elements related to its non competitive character. as for example the services market that deals with loading and unloading activities. Unfortunately. In the same time. agriculture and forestry. Thus. 42 . As a result. Another specific aspect of the Romanian maritime market is represented by freight dependence and practiced tariffs at the level of national maritime ports. navigation market or navigation market. processing industries. there were also identified some issues related to this connected markets. It is the same situation for the vessels registered under the national flag. but also to the construction and trade sectors. the Romanian Competition Council launched a very useful investigation for better understanding the Romanian maritime market. on stimulating ship construction. a series of other connected markets are regarded. that it could not be taken into account. promoting the national flag and bringing to line the national legislation to the one of the Community. following this analysis. This market is considered to be a competitive one. By analyzing the market of maritime services. the maritime transportation market is characterized by opacity and misleading information. because of the large investment needed for building or acquiring a ship. In over to overcome this issue. This strategy should be based on supporting Romanian ship owners. it was considered that a national strategy should be prepared and applied to the maritime sector. the number of national ship owners is so reduced.
As observed in Chapter 1.5% of the total merchandise handled in the European Union`s major port has been loaded or unloaded in the Romanian ports. page 13. on the services market related to cargo loading and unloading in the Romanian ports. which indicate dominant or even monopolistic positions on this market.In this situation. we deal with a very small number of port operators specialized in handling certain categories of merchandise. Unfortunately. Only 1. Chart 1. in order to erase this problems generated by different legal regimes applied to the same service. there is no sufficient evidence to support the practice of an anti competitive practice. 43 . it is best recommended the adoption of specific measures by the Romanian Minister of Transport.2. at this moment.Total merchandise traded in EU major ports (2009).
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