Unit – Liner Trade

04/01/2020
 Objectives
-Origin of Containerisation
-Milestones in Containerisation
-Standard ISO Container Dimension
-Growth of Container Ship Sizes
-Liner & Logistics Services
-Liner Agents
-NVOCCs
-CHAs & Freight Forwarders & Brokers
-Alliances, Consortia & Conferences
-The Changing Scenario
-Industry Statistics
-What can be done as indicated by analysts
 Origin of Containerisation for Sea
Transport
• 1955, Malcom P. McLean, a trucking entrepreneur from North Carolina, USA, bought
a steamship company with the idea of transporting entire truck trailers with their
cargo still inside. 
• Container vessels eliminate the individual hatches, holds and dividers of the
traditional general cargo vessels. The hull of a typical container ship is a huge
warehouse divided into cells by vertical guide rails. These cells are designed to hold
cargo in pre-packed units – containers. Shipping containers are usually made of
steel, but other materials like aluminium, fiberglass or plywood are also used. They
are designed to be entirely transferred to and from smaller coastal carriers, trains,
trucks and/or semi-trailers (and so are carried by different modes of transport during
one voyage, thus giving the name intermodal transport) There are several types of
containers and they are categorized according to their size and functions.
• Today, about 90% of non-bulk cargo worldwide is transported by container, and
modern container ships can carry up to 16,020 twenty-foot equivalent units (TEU)
(CMA CGM Marco Polo). As a class, container ships now rival crude oil
tankers and bulk carriers as the largest commercial vessels on the ocean
 Milestones in Container Trade
• On the 26th of April 1956 Ideal X left New Jersey, heading for Houston.
• On successful completion of the voyage of Ideal X McLean ordered the first ever ship specifically designed
to carry containers: Gateway City.
• Gateway City’s first voyage was in October 1957, and went from New Jersey to Miami.
• McLean was using 33 foot containers for the above movements.
•  In April 1966,  Sea-Land’s Fairland sailed from the US to the Netherlands with a whopping 236 containers
on-board.
 January 1968: ISO 338 defined the terminology, dimensions and ratings.
• 1968 container ships had the capacity to carry around 1,000 TEUs- this was exceptionally large at the time.
• July 1968: ISO 790 defined how containers should be identified.
• In 1969, 25 ships were built and the size of the largest ships increased to approaching 2,000 TEU. In 1972,
the first container ships with a capacity of more than 3,000 TEU were completed by the Howaldtwerke
Shipyard in Germany.
• October 1970: ISO 1897 defined the recognised sizes of the containers.
• As a result of these standards we now have the 20 foot and 40 foot shipping 
• In early 1970’s many union workers went on strike, disrupting the shipping industry and shipping
container’s rapid expansion.
 Standard Container Dimensions
• Internal and External Dimensions of ISO Containers
• 20 GP
• 40 GP
Eqpt Type L B in H in L in B in H in
in feet feet mtr Mtr mtr
feet
20 20’
8’0″ 8’6″ 6.06 2.44 2.59
( external)
40 40′ 8’0″ 8’6″ 12.19 2.44 2.59
20
19’3″ 7’7″ 7’9″ 5.87 2.33 2.35
(internal )
40 39’4″ 7’7″ 7’9″ 12.00 2.33 2.35
 Liner Services
• What is Liner Shipping ?

• Liner shipping is the service of transporting goods by means of high-capacity,

ocean-going ships that transit regular routes on fixed schedules. There are
approximately 400 liner services in operation today, most providing weekly
departures from all the ports that each service calls. Liner vessels, primarily in
the form of containerships and roll-on/roll-off ships, carry about 60 percent of
the goods by value moved internationally by sea each year.
• Liner services provide both precision and reliability to the shippers and
consignees alike, the near-certainty that their goods can depart and will arrive
on time. Liner services today tend to be predominantly containerised trades,
the goods being shipped down the logistic “chain” stretching from the premises
of the producer to those of the ultimate receiver. Speed and certainty have
saved huge sums of money as large stocks of goods are no longer required,
with delivery guaranteed “just in time”.
Liner Service Types
 Liner agency

• Liner trades cover more than overseeing the activity on the quayside; there is a
link to be maintained between the manufacturers of goods to be shipped and the
shipping lines that will carry the goods.
• Market - A liner agent will “Market” the transport offered by the shipping line,
while balancing the satisfaction of the shipper.
• Paperwork - Every shipment on the liner service must have the correct, which in
the case of a large containership could be in the hundreds of thousands. A liner
agent will complete all that paperwork, or these days, complex electronic
procedures, identifying the ownership of the goods, recording their precise
description and weight, making an accurate detail of their destination, and
ensuring that all legal obligations are met. All of this information needs to be
received by the discharge port well before the goods reach the ship.
• Payment Collection of payment for carriage of goods will also be organised by the
liner agent. Liner agents can be employed by the shipping line itself, but there are
many independent outsourced companies offering liner agency.
• In contrast with port agents, liner agents are not normally based in ports, as a port
is only one channel of many for the liner trades. With an integrated network, from
manufacturer by road or rail to ship, to end user, liner agents can easily be based
away from ports.
 Duties of a Liner Agent

• As dispatcher
• Arrange for a suitable berth.
• Contact the stevedores Assist the master and his crew.
• To arrange for the pilot and/or tugs.
• Arrange for the clearing of the ship and the goods and to fulfil the other custom
and administrative formalities.
• Deposit the note of protest.
• Arrange for loading, discharging, provisioning and bunkering of the ship.
• The signing on and signing off of crew members.
• To mediate in case of general average.
 By outward cargo

• Mail the sailing lists; visit exhibitions or fairs; announcement in specialized papers.
• Contact shippers by telephone, in writing, by fax or e-mail.
• Visit customers, inland as well as abroad.
• Quote freight charges to the clientele.
• Enter cargo on booking lists.
• Forward details of booked cargo to the owners.
• Hand over the shipping permits and bills of lading from shippers; to initial shipping permit; to check bills of lading.
• Calculate the freight in accordance with the measurement slips.
• Hand over a copy of the booking lists to the stevedore.
• Arrange the formalities in connection with dangerous goods.
• Request a berth from the harbour master.
• Draw up the manifests per destination harbour.
• Arrange for clearance of the ship on arrival by the water clerk
• Signing and dating of bills of lading.
• Collect freights if payable before departure and before delivery of the bills of lading.
• Clearing of the ship at departure.
• Inform the next port of call and the owners of the ship's departure.
• Prepare the settlement of account.
• Prepare the special documents required in the different ports of discharge.
• Draw up  "manifest correctors" in case of wrong freight calculations.
• Deal with claims.
• By inward cargo
• Reception of cargo plan and manifests per harbour and cargo.
• Check the freight calculations.
• Send loading plan to stevedores; drawing up of discharging plan.
• Mail the notices of arrival to receivers.
• Contact receivers/forwarders to agree on means of reception of
the goods.
• Draw up freight lists for customs.
• Prepare the delivery orders, freight and/or reception invoices
• Deliver goods on the exchange for the delivery order.
• Appointment of a surveyor in case of damage to the goods.
• Prepare a report to the owners in connection with damages.
• Draw up settlement of accounts.
• Appointment of experts in case of dispute regarding damages to
the cargo.
 Logistic Services
 What is Logistics ?
 Logistics is the “process of planning, implementing, and controlling the efficient,
effective flow and storage of goods, services, and related information from point of
origin to point of consumption for the purpose of conforming to customer
requirements.“
 Origin of Logistics:
 The concept of “Logistics” started many years before Christ and was used by Greek
generals (Alexander the Great) in order to describe all the procedures for the army’s
procurement on food, clothing, ammunition, etc
 Earlier logistics were always an issue in war affairs. Kingdoms and generals with
strategic planning on logistics were those who won the war. World War II was the
major motivation of logistics to increase recognition and emphasis, following the clear
importance of their contribution toward the Allied victory.
 Starting from the early ‘60s, many factors, such as deregulation, competitive
pressures, information technology, globalization, profit leverage, etc., contributed to
the increase of logistics science in the form we know it today.
 Freight Forwarder

 What is Freight Forwarding ?

 Freight forwarding - is the coordination and shipment of goods from one place

to another via a single or multiple carriers via air, marine, rail or road.

 Freight Forwarder - a party engaged in all modes of the domestic or

international transportation process by the means of arranging shipping,
preparing documentation, customs clearance, warehousing and delivery.

 What do Freight Forwarders in India do ???

Difference between a NVOCC and Freight Forwarder

The NVOCC acts as the carrier while the FF does not.

• The NVOCC issues a bill of lading while the FF does not
• The NVOCC is responsible for loss or damage while the FF isn’t
• The NVOCC can own and operate their own or leased containers
• The NVOCC acts as a virtual carrier and accepts all liabilities of a carrier legally, in
certain areas of operation
• The NVOCC need not be an agent or partner of the FF, whereas an FF can act as a
partner or agent for an NVOCC. 
• The NVOCC is a cargo consolidator who does not own any vessel, but acts as a
carrier legally by accepting the required responsibilities of a carrier who issues their
own bill of lading (or airway bill), which is called House bill of lading under sea
shipment and House airway bill under air shipment.
• The NVOCC books large quantities of space with shipping lines and sells the space
to shippers in smaller amounts. 
• The NVOCC consolidate small shipments of LCL (less container load) and
issues HBL (House Bill of Lading) 
• The NVOCC can also undertake the services provided by an FF
 Custom House Agent

• A Customs House Agent (CHA) is licensed to act as an agent for transaction of any business relating to the entry or departure of conveyances or the import or export of goods
.
at a customs station

• The purpose of a custom house agent is to tackle the problem that management of many businesses
simply do not have the resources to personally deal with import and export issues. This is a particular
concern given that India is traditionally a trading nation
• The laws governing these agents specifically state that any action they take is treated legally as if it was
made by the company itself. In legal terms, the agent is treated as if they were the legal owner of the
goods they deal with. One exception to this is that a custom house agent cannot normally be held
personally responsible for any duty that is not paid by the company.
• A custom house agent must be licensed by the local Commissioner of Customs. 
• A Custom House Agent has to be not only well informed of the Customs laws and procedures and
documentation, but has to be alert all the time, closely following the instructions or change in the public
notices, issued from time to time. His is a very peculiar position in that, though he is employed by the
Importers/Exporters, he is licensed by the department and hence he can satisfy them only to the extent
the law permits and within the procedures laid down by the Customs House. He has, accordingly, to
function under two masters, the tax payer and tax collector, both simultaneously satisfactorily.
• In most countries they are called customs brokers.
 Freight Broker

• A freight broker is an individual or company that serves as a liaison

between another individual or company that needs shipping services and
an authorized motor carrier. Though a freight broker plays an important
role in the movement of cargo, the broker doesn't function as a shipper or
a carrier. Instead, a freight broker works to determine the needs of a
shipper and connects that shipper with a carrier willing to transport the
items at an acceptable price.
•  A freight broker is an intermediary between a shipper who has goods to
transport and a carrier who has capacity to move that freight.
• The broker doesn't function as a shipper or a carrier. Instead, a freight
broker works to determine the needs of a shipper and connects that
shipper with a carrier willing to transport the items at an acceptable price.
Various Arrangements in Shipping Industry by

Owners

Conferences

Consotrium

Alliances
 Shipping Conference
• Agreement between two or more shipping companies to provide scheduled cargo and/or passenger
service on a particular trade route under uniform rates and common terms. Also called shipping
conference.
• Prevalent in the period 1875 -1998 – Some of the known Conferences which were applicable to India
are IPBCC – India Pakistan Bangladesh Ceylon Conference. ANAERA -Asia North America Eastbound
Rate Agreement. FEFC – Far East Freight Conference.
• The First Conference operated in the Britain –Calcutta Trade in 1875
• There are different shipping conferences for different regions of the world. Shipping conferences, aside
from setting rates, adopt a wide number of policies such as allocation of customers, loyalty contracts,
open pricing contracts, etc.
•  Shipment by conference lines is sometimes referred to as liner shipping and the freight rates are
referred to as liner terms. Shipping lines which are not members of a conference for a particular route
are known as outsiders, independent lines, or non-conference lines.
• The relevance of Conferences commenced declining from the 1970s. In 2002 Conference carriers
accounted for 60% of the teu capacity in Major trade lanes, by the end of 1990 they started losing
significance and the alliances and Consortia became the name of the game. ( Source UNCTAD ).
• Conferences were banned by the EU in 2008 – price fixing, anti trust law, monopolistic pricing.
 Shipping Consortium
• Consortium definition - Shipping Dictionary
• Short-term arrangement in which several firms (from the same or different industry sectors or
countries) pool their financial and human resources to undertake a large project that benefits all
members of the group. A consortium lasts for a period that is usually shorter than that for a
syndicate.

Shipping Consortium –( late 1960s to 1990s)- Aimed primarily at sharing fixed costs on a maritime
route through various technical, operational or commercial arrangements such as joint use of
vessels, port installations, marketing organisations. They do not contain price-fixing provisions and
generally involve lower market shares than conferences. Members of a consortium may be
independent lines or they may be members of the same conference.

 Group of carriers pooling resources in a trade lane to maximize their resources efficiently by
 the joint operation of maritime transport services;
 temporary capacity adjustments
 the joint operation or use of port terminals
 participation in one or more of the following pools: cargo, revenue or net revenue;
 a joint marketing structure and/or the issue of a joint bill of lading.
 Shipping Alliances
• Alliances – (mid 1990 to date) Formed amongst two or more leading container carriers, who
attempt to enhance their competitive advantages collectively vis-à-vis competitors on a global
marketplace. Members are not involved in price setting but in the rationalisation of their services
in a global basis and optimisation of each carrier’s assets through schemes such as sharing of
vessels, ports, charters, terminals, joint scheduling and, where permitted, coordination of inland
services. They do not include joint management and marketing functions or revenue pools

Difference between Alliance and

Consortium 

Consortium – on Certain trade routes. Alliance - Global

Shipping Alliances History
Shipping Alliances
History
a better learning experience
Comparing trade growth and capacity growth
son graph comparing Container shipping/World Container Exports & Container Fleet G
History of Container operators &
Changing Scenario
• Moodys Observation

• June 2016 - Moody’s downgraded its outlook on rated shipping companies, saying in a
report released Thursday that combined earnings would likely decline this year by 7% to
10%. Moody’s, which shifted its outlook on the sector from stable to negative

• Capacity is already high, and we expect supply growth will continue to outpace demand
growth by more than 2% in 2016, supporting the negative outlook on the segment,” the
report read. “The existing supply-demand imbalance will persist over the coming 12 to
18 months.”

• Alix Partners –
• The global fleet is forecast to continue growing 4.6% in 2016, and another 4.7% in
2017as larger vessels continue to come online. Meanwhile, many demand forecasts are
half that figure or less—generally, 1 to 3% globally.9
• The global fleet is forecast to continue growing 4.6% in 2016, and another 4.7% in
2017 as larger vessels continue to come online. Meanwhile, many demand forecasts are
half that figure or less—generally, 1 to 3% globally.
• An asset-intensive industry struggles with persistent financial losses caused by rampant
overcapacity and poor customer pricing discipline, resulting in financial distress and,
ultimately, large-scale consolidation. Sound familiar? It should.
• Container carriers’ top management should see parallels in the events that played out in
the consolidation of the US domestic passenger airline business during the past 20 years.
After years of massive losses, the network airlines finally succumbed many filed for
bankruptcy protection, reorganized, and consolidated. In 2008, Delta Air Lines bought
Northwest Airlines, turning Delta into a major national player with prized international
routes to growing Asian markets. United Airlines and Continental Airlines merged in
2010, followed by US Airways’ unexpected merger with American Airlines in 2013. Many
of those deals involved carriers with different fleets, network hubs, alliances, labor
agreements, and IT systems, and so required lengthy post merger integration initiatives
and activities to avoid disastrous results.
• In many ways, the recovery playbook for the container carrier industry has already been
written by the airlines, and the benefits are clear. Tight control over capacity, combined
with disciplined—and sophisticated— commercial management, has turned industry
profitability around. But the potential pitfalls, too, are painfully clear, as the largest
network airlines battle lingering challenges such as IT glitches and labor sentiment.