Terms of shipment

Terms of shipment

Definition of shipment

Shipment- goods shipped together as part of the same lot; the act of carrying cargo.

A good transport system is needed if goods are to be traded efficiently. A consignor can choose to send his consignment (the goods) to the consignee by water, by road, rail or pipe-lines; and air.

When choosing the most suitable form of transport, the consignor has to consider:

• what kind of goods are to be sent - perishable goods have to be transported more quickly than non-perishable goods, for example;
• the place of destination - not all destinations can be reached by all forms of transport;
• the cost of each form of transport, how fast it is and how safe;

Cargo can be divided into three categories, such as

• general cargo - goods sent packed in boxes, cases, chests and other containers.
• bulk cargo - large quantities of items, such as sandy grain and coal, when sent unpacked.
• bulky cargo – large quantities of items, such as cars, which have to be sent unpacked.

There are several types of sea- and ocean-going ships which carry cargoes:Liners follow fixed way and keep to a schedule. Tramps take any cargo they can get and sail to any port required. They do not follow a schedule of any fixed way. Coasters travel from one port to another along the coast of a country. They are not used for international shipping.

Advantages and disadvantages of different forms of transporting cargoes

Sea and railway modes to transport cargoes account for the largest flow of traffic.

When choosing the most suitable form of transport, the consignor and consignee have to consider all advantages and disadvantages of it. As far as sea transportation is concerned, the carrier is the shipping company.

+ It is the cheapest form of transport over longer distances, unlimited distances can be covered and large quantities can be transported.

- the slowest means of transport; it may be subject to delays and weather conditions,  limited network of inland waterways, according to the Incoterm the exporter or the importer have to pay a high insurance costs.

If goods are transported by train, the carrier is the railway company.

+The price of railway transport depends on how fast the goods are to travel: the slow goods train is cheaper than the passenger train, and the express train is the fastest and most expensive of all, all types of cargo can be transported by rail, any distance can be covered; large quantities can be carried.

- there is a relatively high risk of theft.

Goods which need careful handling, such as fruit, are often sent by road, as they only need to be loaded and unloaded once. Normally, they are sent as general cargo.

+ very fast over short distances, most destinations can be reached. It is relatively secure, Door-to-door transportation minimizes the need for handling, trader can cooperate with other sellers.

- only small quantities can be transported and there is a relatively high risk of accidents and delays because of traffic jams. This means of delivery is expensive and time-consuming over longer distances, intercontinental transportation is virtually impossible.

Air transport is chosen when the goods are valuable or urgently needed. The carrier is the airline.

+ fast and secure, which means that insurance costs are low, there is no limitation as to distance.

- expensive, subject to delays, dependable on weather conditions and virtually not practical for short distances.

World shipping problems and risks

All the parties involved in sea transportation have some difficulties while shipping goods. There are two kinds of problems for traders: 1)increasing costs and 2)inefficient services. Increasing freights lead to increasing prices which decrease sales.

The second problem is caused by liner companies. 1- Traders have to pay demurrage for delaying and their customers may get tired of waiting and buy goods elsewhere.

2- poor facilities at ports.

3-Fast modernization often solves problems of rich countries. However, it sometimes makes more problems for poor countries. Containerization means unemployment for thousands of stevedores.

4-A monopoly is when one company or a group of companies, working together, controls the market. This means that the sellers can raise or lower prices ,customers have no choice when they want to buy something.

Conferences

Special attention is to be paid to conferences. Cargo liner companies run regular services on fixed routes all over the world. They are called conferences because they hold meetings to agree to routes, timetables and freight rates. They need to do this to make sure too many ships do not arrive and leave a port at the same time.

Freight market and types of vessels

The freight market is not a uniform market. The most important freight markets are the dry cargo market, the tanker market, the reefer market, and the passenger market.

Dry cargo Market It is the most diversified market, and may be divided into the following markets: bulk and tweendecker, container, ro/ro, liner, feeder and special.

a) The Bulk and Tweendecker Market

Within the bulk sector can be transported bulk cargoes like coal, grain, scrap, steel, cement, wood chips and cars.

Tweendecker Market means the shipment of all kinds of bagged commodities, e.g. rice, sugar, cement.

b) The Container Market - The market for container ships is limited. They are used in traffic between highly industrialised areas with a developed inland transportation system in both the exporting and the importing areas. This traffic requires large investments in specially equipped vessels, port installations and terminal equipment.

c) The Ro/Ro Market - the го/ro ships (Roll on/ Roll off). can carry all types of commodities  placed on wheeled platforms which may be handled by the use of fork-lift trucks.

d) The Liner Market - Liner traffic is a firmly controlled activity where remuneration is fixed.

e) The Feeder Market - There are shipping companies carrying on independent trading with vessels of smaller sizes.

f) Special Markets: 1)heavy-lift carriers;2)barges and pontoons used for the transport of heavy material;3)barge carriers.

Tanker Market One characteristic of the tanker market is small number of big charterers. The tankers - and especially those carrying crude. The largest tankers usually called VLCC (Very Large Crude Carriers) and ULCC (Ultra Large Crude Carriers) about 200,000 and 350,000 tons.

Reefer Market – developed for perishable goods.

Passenger Market – transportation of people.

The procedure of chartering a vessel

     Chartered vessels do not follow fixed routes but go wherever they are needed. A company wanting to charter a ship will apply to one of the world markets for shipping such as the Baltic Exchange in London. In the Baltic a broker who acts as the charterer's agent works for the company looking for a ship. His job is to find the right kind of ship at the lowest price possible.

The shipowners who want to charter their ships also apply to brokers in the Baltic. The broker's job is to charter vessels out for their owners at the highest price possible.

The  brokers negotiate the price and the terms of the charter. The final price and terms depend on the market. If there are a lot of ships and few charterers the price will be low. If there is a big demand for ships and not marry ships available, the price will be higher. The contract is called a charter party.

Types of charter parties: We can distinguish charter agreements according to different factors. One of the factors is the use of the ship. If the charterer has control over the whole vessel, this may be called chartering in full. If the owner cannot find a charterer for the whole vessel, he may divide the space between several charterers, which is known as a space charter. From a functional point of view, an important distinction is made between voyage charter, time charter and bareboat charter.

Voyage The voyage charter may cover a single voyage or several consecutive voyages. A voyage charter means chartering a vessel for the certain amount of voyages. (The owner has the operational control of the vessel)

Time and Bareboat The time charter under which the owner puts the vessel at the disposal of the charterer for a certain period of time.

The bareboat charter (demise charter) means that the vessel is put at the disposal of the charterer for a certain period of time, but here the charterer takes all responsibility for the operation of the vessel.

Contract of Affreightment Contracts of affreightment generally cover a longer period of time than voyage charter-parties. Under a contract of affreightment, the owner promises to carry for the charterer during a specified period of time  a large quantity of goods between certain ports.

Management agreement The management agreement is a know-how and service agreement, where the manager is responsible for the duty of operating and finding employment for the vessel as if he were the owner and for the account of the actual owner. 
 
 

Five group of export documents Export documents are numerous because there are so many organizations involved in export transactions. Export documents fall under five main categories.

1. Dispatch Documents of dispatch are numerous and they are used within the seller’s country to carry the goods to the port of shipment.

2.Shipping documents - concern the movement of goods from one country to another;

3.Invoices - a document issued by a seller to a buyer listing the goods and stating the sum of money due.

4.Customs forms - connected with clearing goods for customs like customs entry, certificate of quality, certificate of origin or customs invoice, and have to be prepared by the exporter.

5.Bank documents - concerned with payment.

A letter of credit is a promise made by the buyers’ bank (the opening or issuing bank) to send a certain sum of money to the sellers’ bank (the advising bank).

bills of exchange(B/E), the exporters credit the importers, which is advantageous to the importers.

Main shipping documents

- Standard shipping note - a document used in shipping goods by sea. (SSN) is used by the receiving authorities of ports to control and organize cargo arriving from exporters. The form gives full details of the consignment.

- Shipping instructions form (SIF) is provided by shipping agents for exporters to give all the details of the consignments they send. the main function - telling the agents how to ship the goods.(value of the goods, freight and charges, etc. It should be remembered that this form contains LCL (Less than Container Load) or FCL (Full Container Load) boxes. If an LCL is to be packed, then the shipping company can caary the consignment with the goods of another exporter. An FCL would normally be packed by the exporters and unpacked by the consignees. 

- Application for special stowage order Some goods can't be stowed like ordinary cargo because they may be dangerous, or they may be extremely valuable, or they may be live animals. Some foods and chemicals have to be refrigerated. So for special stowage the exporter must complete an Application for Special Stowage Order Form. This form gives full details of goods and is sent to the shipping company.

• Waybill - a document attached to goods in transit specifying their nature, point of origin, and destination as well as the route to be taken and the rate to be charged

2.Bill of Lading:

Among numerous shipping documents such as a waybill, certificate of inspection, export licence and others, the Bill of Lading (B/L) is the central document of sea export transaction. it is approval that the shipping line has received the goods. In addition, the owner of this document is theowner of the goods. For the last reason the B/L can be used to transfer the goods from one owner to another. When the exporters complete it, they can write the buyers’ name in the space “consignee”.

However, there are also various types of B/L.

• Clean/dirty Bill of Lading can be clean (when the goods appear to be good order when loaded onto the ship) or dirty (when some of the goods are damaged or missing).  Furthermore, if the B/L is an essential part of the terms of payment, e.g. by the Letter of Credit, the bank may refuse it.
• Received is issued when the goods have been inspected but haven’t yet been loaded onto the ship.
• On-board is issued for goods which have already been loaded onto a ship.
• Straight can't be negotiated. Only the consignee stated on the B/L can take delivery of the goods.
• Order can be negotiated by endorsement.
• Through is used when the goods are to be transported by more than one carrier.
• Container is used for the transportation of containerized goods.
• Groupage is used for grouped consignments.

3.Invoices:

Commercial Invoice

This document contains complete details of the order on the B/L. But it also shows the terms of shipment and payment, the value of the order and details of insurance.

This type of invoice is the sellers’ formal request for payment. Along with the transport documents, it is probably the most important paper needed in an export transaction, as it is also an essential component of certain terms of payment.

Pro-forma It is not a request for payment. It is a ‘sample’ invoice, which may be issued when the buyer has requested a quotation; when the seller sends the buyer goods on approval;.

Customs It is a special invoice for the customs authorities of the importing country. This invoice is very similar to the commercial invoice, but requires additional information such as the domestic value and export price of the goods.

Consular Certain countries may insist on a consular invoice as proof that the goods being imported are not over-priced.

4. Certificate of Origin is issued by the Chamber of Commerce as proof of where the goods were produced.

• Certificate of Quality
• Packing List - packing register which lists the goods to be transported and their consignee; 
• Insurance Policy