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Maritime Transport
Common shipping terms
Weight or Measure (W/M)
This is a common method used by shipping lines to price sea-freight for
break bulk shipments.

It is important to understand that this method considers that one metric

tonne is equal to one cubic meter and that the price quoted applies to the
higher of the two numbers.

Rather confusingly this system can also be referred to as Freight Tonnes or

Revenue Tonnes.

For example: The cargo to be transported by the carrier weighs 1,500

metric tonnes and has a volume of 7,500 cubic meters. The price quoted is
US$75 per weight or measure. Therefore the price will be calculated by
taking the higher number of the weight or measure and multiplying it by
US$75:

7,500 × US$75 = US$562,500

Maritime Transport
Common shipping terms
Stackable cargo
Another very important note to remember is that not all cargo is stackable. In
other words it does not lend itself to having cargo loaded on top of it.

Therefore if we continue with the example above and consider how much
ship’s volume capacity is required to carry 7,500 cubic meters we can
reasonably assume that we will require a ship with a volumetric capacity
somewhat in excess of 7,500 cubic meters.

If a cargo is non-stackable it will mean by definition that any space above it

will be lost as loading capacity.

In addition to this problem the shape of the cargo or the contours of the ship
may also result in lost loading capacity. These issues will be dealt with by the
shipping company who will prepare a stowage plan. Some cargo may be
suitable for securing on deck exposed to the weather and seawater.

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Maritime Transport
Common shipping terms
Lost slots

Maritime Transport
Common shipping terms
Lost slots
A slot is a term used to describe the space taken up by an ISO shipping
container on a cellular container vessel. If certain types of specialist container
are used to transport the goods such as flat-racks or open-top containers
then there is the possibility that the cargo will protrude outside the normal
cubic dimensions of a standard shipping container.

For example a piece of machinery may fit inside the confines of an open-top
container but protrude through the top of the container. In this case the
carrier will be forced to either load the container on the top of the stack or
lose the potential for loading on top of this particular container.

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Maritime Transport
Common shipping terms
Lost slots

Maritime Transport
Common shipping terms
Lost slots
A slot is a term used to describe the space taken up by an ISO shipping
container on a cellular container vessel. If certain types of specialist container
are used to transport the goods such as flat-racks or open-top containers
then there is the possibility that the cargo will protrude outside the normal
cubic dimensions of a standard shipping container.

For example a piece of machinery may fit inside the confines of an open-top
container but protrude through the top of the container. In this case the
carrier will be forced to either load the container on the top of the stack or
lose the potential for loading on top of this particular container.

This will lead to a request from the shipping line for the consignor to pay for
the ‘lost slots’. In other words pay for the slots that cannot be used by the
shipping line because the cargo is protruding into another slot’s space. In
some cases where flat-racks are used the number of lost slots could be quite
high if the cargo protrudes in several directions.

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Maritime Transport
Common shipping terms
Stowage plan
This is a plan prepared by a representative of the shipping line which will
clearly show where each item to be loaded will be placed in the ship’s holds
or on the open deck.
The plan will be based on a detailed packing list provided by the consignor.

Maritime Transport
Common shipping terms
Stowage plan
This is a plan prepared by a representative of the shipping line which will
clearly show where each item to be loaded will be placed in the ship’s holds
or on the open deck.
The plan will be based on a detailed packing list provided by the consignor.

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Maritime Transport
Common shipping terms
Stowage plan
This is a plan prepared by a representative of the shipping line which will
clearly show where each item to be loaded will be placed in the ship’s holds
or on the open deck.
The plan will be based on a detailed packing list provided by the consignor.

Port rotation
This refers to the order and names of the ports at which the ship is planning
to call.

Maritime Transport
Common shipping terms
Stowage plan
This is a plan prepared by a representative of the shipping line which will
clearly show where each item to be loaded will be placed in the ship’s holds
or on the open deck.
The plan will be based on a detailed packing list provided by the consignor.

Port rotation
This refers to the order and names of the ports at which the ship is planning
to call.

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Maritime Transport
Common shipping terms
Stowage plan
This is a plan prepared by a representative of the shipping line which will
clearly show where each item to be loaded will be placed in the ship’s holds
or on the open deck.
The plan will be based on a detailed packing list provided by the consignor.

Port rotation
This refers to the order and names of the ports at which the ship is planning
to call.

TEU
This stands for 20 foot equivalent unit and is equal to one 20 foot ISO
shipping container. Cellular container ships are usually described by the
amount of TEUs they can carry.

FEU
This stands for a 40 foot equivalent unit and is equal to one forty foot ISO
shipping container.

Maritime Transport
Surcharges
When international sea-freight prices are being quoted anywhere in the
world as a matter of custom and practice, as well as convenience, all prices
are generally quoted in US$ or Euros. In addition to the basic cost of sea-
freight there are a number of other surcharges that may be applied:

Bunker adjustment factor (BAF)

BAF is a common surcharge applied to sea-freight rates by shipping lines. It
is designed to take account of the variations in the price of marine fuel in
different parts of the world. The BAF being charged on certain trade routes
by the shipping lines working this route is determined by the liner
conference whose members work on this route. The BAF is changed from
time to time

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Maritime Transport
Surcharges
Currency adjustment factor (CAF)
CAF is another common surcharge that is applied to take account of any
differences in cost incurred by the shipping line due to currency exchange
fluctuations for services bought by them in foreign currencies in the
execution of their services on the customer’s behalf.

All sea freight rates are generally priced in US$ or Euros but local services
purchased by the shipping company will be in the local currency of the
country in which the goods or services are bought.

The surcharge is designed to compensate the shipping line for this and is
usually charged as a percentage of the basic freight charge.

Maritime Transport
Surcharges
Peak season surcharge (PSS)
PSS is a surcharge that is applied to both airfreight and sea-freight
originating in the Far East. Due to the rapid growth in exports from countries
such as China, and the lag in the provision of commensurate infrastructure
to handle this unprecedented growth, backlogs occur at certain times of the
year.
A shortage of transport carrier capacity and an imbalance in trade flows
means that carriers can apply this surcharge which customers are forced to
pay. The surcharge may be a considerable uplift on the normal freight rates.

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Maritime Transport
Surcharges
Repositioning charge
This is a surcharge that is sometimes applied by the shipping line to cover the
cost of returning an empty container to a location where it may be loaded with
revenue-earning cargo.
The cost of handling, shipping and trucking the empty container is a loss to the
shipping line. In addition, because an empty container is repositioned by being
transported on one of its ships, there is the lost opportunity cost associated
with utilizing this space.
This type of charge is most likely to be applied where there is an imbalance in
trade volumes on a given route.
For example between the USA and China there is an imbalance. In other words
more cargo is shipped in full containers from China to the USA than the other
way round. Therefore of all the containers that leave China fully loaded a
significant number will be returned to China empty.

Maritime Transport
Surcharges
War risk surcharge
This surcharge may be applied to any mode of transport in a war zone as
well as an area around the actual war zone. It is applied to take account of
the increased possibility of incidents that could result in the partial or total
loss of the company’s assets.

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Maritime Transport
Documentation
One very important aspect of moving goods internationally by sea is the
associated documents required by various government agencies, financial
institutions and trading partners at both origin and destination. Some of the
major documents used:

Bills of lading (B/L)

A bill of lading is issued by the shipping line as a receipt for the cargo being
transported on its ship.
It is also a contract of carriage to deliver the cargo to a named destination. In
addition it lays out what has been loaded and in what condition.

A bill of lading is a negotiable document unless it states otherwise.

This means that the goods may be bought and sold during the sea voyage
using the bill of lading as title to the goods. Therefore the legal bearer of the
bill of lading is the owner. There are several different types of bills of lading to
suit differing circumstances.

Maritime Transport
Documentation
Bills of lading (B/L)

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Maritime Transport
Documentation
Letters of credit (L/C)
Although these documents are not necessarily required to facilitate the actual
international transport of goods by sea or to fulfil the customs authorities’
requirements they are nevertheless crucial to facilitating the exchange of
goods for money across international borders.
They act as a protection for both the buyer and seller.
A letter of credit (LC) issued by a bank in one country (the issuing bank) on
behalf of a buyer names the seller as beneficiary to the funds outlined in the
LC provided certain terms are clearly met by the seller.
The LC is then sent to the seller’s bank in a different country, which is known
as the advising bank. This method is used to guarantee that the seller gets his
payment in time and in full, and the buyer does not release funds until the
goods are received in full and in good condition.
This is an extremely complicated financial area and the above description is
intended as a general guide only.

3 contracts
Commercial
Exporter Importer
contract
LC transaction
Buyer and seller must not
refers to this
contract. interfere in Bank’s decision
on whether documents
LC comply with LC application
contract contract
Once opened, LC is
independent of other
Bank’s standard for contracts, i.e.
examining documents commercial contract
is LC, not other Issuing and application
contracts. bank though LC is opened
on them.

Importer fills in application in strict accordance with commercial contract

Issuing bank opens LC in strict accordance with application.

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Maritime Transport
Documentation
Letters of credit (L/C)

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Maritime Transport
Documentation
Certificate of origin
This is a document issued by a certifying body that establishes the origin of
the goods being transported. This is often required by Customs authorities at
the final destination due to trade tariffs, international trade treaties or
embargoes on trade with certain countries.

Maritime Transport
Documentation
Certificate of origin

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Maritime Transport
Documentation
Commercial invoices
The commercial invoice produced by the seller establishes among other
things the weight of the goods, the number of items, a description of the
goods, and the price of the goods being sold.

Where LCs are also being used there should not be any discrepancy between
the details contained in the two documents.

The cost of the goods being imported assists the customs authorities to arrive
at a customs duty tariff .

However, it should be noted that they are under no obligation to accept the
value on a commercial invoice if they disagree with the value stated.

Maritime Transport
Documentation
Commercial invoices

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Maritime Transport
Documentation
Packing lists
A packing list is a detailed list of all the items to be transported.

A packing list typically contains as a minimum a brief description of the items;

their weight, the length, width, height of each item, and how many items are
contained in each package.

This allows a cubic capacity to be calculated for each item. In addition the
shipping line will ask the consignor to identify which items on the packing list
may be stackable and which items could be loaded on deck exposed to the
elements.

It is very important to understand that items loaded on the open deck will be
exposed to extremes of temperature, salt and water from sea spray or rain,
and the possibility of being lost overboard in the sea. Packing lists are
required for customs formalities as well.

Packing Note: Ind/ PL:Cons

Maritime Transport
Documentation
Packing lists

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Maritime Transport
Documentation
Other documents
Depending on the nature of the goods, the originating country and the final
country of delivery, various documents may also be required. These may
include documents such as:

 insurance certificates;
 certificates stating that the goods meet a certain safety or engineering
standard;
 data sheets relating to the management of certain hazardous
chemicals;
 certificates verifying that pallets or packing materials have been
fumigated to avoid the importation of biological pests.

This list is by no means exhaustive and requirements often change very

quickly and with little warning.

Maritime Transport
Documentation
Other documents

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Maritime Transport
Ports and cargo handling
Terminal handling
Whenever cargo is sent to a port due consideration needs to be given to
the nature of terminal handling facilities available.

Not all ports are capable of handling all types of cargo and some ports are
solely established to handle one type of cargo only, for example crude oil
terminals.

Others may have separate facilities for handling different types of cargo,
for example ISO containers and break-bulk cargo.

Charges for terminal handling will vary from port to port and by the type
of cargo handled.

Maritime Transport
Ports and cargo handling
Terminal handling
Many ports will offer free periods of storage prior to loading of the ship or
after unloading of the vessel.

If these periods of free time are exceeded for any reason then charges
known as demurrage or detention will usually be charged in addition.

If goods are unloaded from a ship directly on to a truck, and vice versa,
then this is usually referred to as direct delivery and ports will offer a
reduced charge for allowing this activity to take place.

This can speed up vessel turn-around times in the port but needs careful
planning to ensure sufficient trucks are continuously available to maintain
the direct delivery process until the ship is fully discharged or loaded.

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For a common person, the words Demurrage and Detention charges are kind of similar, but in the shipping industry,
logistics and supply chain one cannot use them interchangeably. They are widely different from each other. Freight
forwarders know these terms by-heart as it comes to them with experience.

Demurrage charges: Relates to cargo while it is still in the container

Detention charges: Relates to equipment while the container is empty either before packing or after unpacking

The best way to find the difference between the two is to put in the context of import and export:

Import
Demurrage: Demurrage charges are levied when the containers are stocked and under the control of the shipping line
and have not been picked up by the consignee yet from the terminal even though the free period is over. (free period
commences when the container is unloaded from the vessel and set on the terminal). The demurrage period starts when
the containers are still lying on the terminal after the free period until they are picked up and out gated from the terminal.

Detention: This detention charge is just the opposite of demurrage. Demurrage is when the container is full and on the
terminal after the free period is over while Detention charge is levied when the consignee retains the carrier’s container
outside the port, terminal, or depot beyond the allotted free time. Detention fee is charged when the container is still in the
possession of the consignee (whether it’s full or empty) and has not been returned.

For a common person, the words Demurrage and Detention charges are kind of similar, but in the shipping industry,
logistics and supply chain one cannot use them interchangeably. They are widely different from each other. Freight
forwarders know these terms by-heart as it comes to them with experience.

Demurrage charges: Relates to cargo while it is still in the container

Detention charges: Relates to equipment while the container is empty either before packing or after unpacking

The best way to find the difference between the two is to put in the context of import and export:

Import
Demurrage: Demurrage charges are levied when the containers are stocked and under the control of the shipping line
and have not been picked up by the consignee yet from the terminal even though the free period is over. (free period
commences when the container is unloaded from the vessel and set on the terminal). The demurrage period starts when
the containers are still lying on the terminal after the free period until they are picked up and out gated from the terminal.

Detention: This detention charge is just the opposite of demurrage. Demurrage is when the container is full and on the
terminal after the free period is over while Detention charge is levied when the consignee retains the carrier’s container
outside the port, terminal, or depot beyond the allotted free time. Detention fee is charged when the container is still in the
possession of the consignee (whether it’s full or empty) and has not been returned.
Let’s understand this using an example: A container is discharged from the ship on 10th October and is under the control
of the shipping line. The consignee picks up the delivery of the cargo by 20th October. The shipping line allows 7 free
days from the day of discharge. Based on it, the shipping line will charge the consignee demurrage for 4 days (from 17th
to 20th) at the rate fixed by the shipping line. Now the consignee de-stuffs the container taking around 7 days to do it and
then returns it to the shipping line which is beyond the specified timeline, then it is known as Detention, charged by the
shipping line.
The no of days a fully loaded container stays on the terminal after the free days, till the consignee picks it is charged with
demurrage and after the pick-up of the container, the consignee retains it beyond the free date, the detention is charged.

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Export
Demurrage: It is levied when the loaded export container has been returned to the shipping line,
however, it cannot be moved out due to unforeseen circumstances, even though the free time
allotted has expired. In such circumstances, demurrage will be included for the upkeep of container
till it’s boarded on to the next vessel.

Detention: This charge is levied on export containers. Generally, shipping lines give the consigner
5 days to pick-up the empty container, load it and return it back to the port. In case, it gets delayed,
the shipping line charges Detention for the extras days the container was kept with the consigner
beyond the said timeline.

Maritime Transport
Relationship between Port Charges and the
Location Where the Charge is incurred

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