Chapter 1

The business of shipping involves the physical movement of goods and passengers from ports of supply to ports of demand Marine transportation plays a major role in international commerce. It is estimated that U.S. waterborne freight accounts for more than 2.5 billion short tons of cargo moved annually Commodities essential to the manufacturing processes such as coal or iron ore are very heavy and dense and have low unit value. The markets demand for a product that drives its manufacture in turn creates a demand for the raw materials required to produce a product o The Supply Chain Raw Materials Storage Manufacturing Warehouse Market Five Modes of Transportation o Water carriers o Air carriers o Motor carriers o Rail carriers o Pipelines Other New Modes Electronic carriers Space carriers Operating Characteristics o Accessibility Ability of a mode to reach many different locations o Corridor length Refers to the maximum distance that a mode can travel efficiently and economically o Energy usage Energy used to transport goods o Package and shipment size The size of goods that can be shipped at one time o Reliability How often the carrier can get the shipment to its destination on time o Ride quality How smooth a ride the carrier provides (has big effect on packaging requirements) o Speed How quickly the product can be taken to and from its pick-up point to its final destination In 1795 approximately 92% of imports and 86% of exports were carried in U.S. flag vessels Cabotage: the transport of goods between two ports in the same country by a vessel registered in another country

The Merchant Marine Act of 1936 was passed in 1936 providing new federal subsidies aimed at modernizing the domestic merchant fleet. Subsidies: money that is paid, usually by a government, to keep the price of a product or service low or to help a business or organization to continue to function Just-in time logistics: cutting out the middleman. Goods do not go to the warehouse but go directly to market.

Chapter 2
A countries merchant fleet is vital to its economic and national defense interests Governments can do things private carriers cannot: o Create more extensive transportation services o Have many more resources with which to develop transportation networks When there is excess competition between carriers a government may intervene by imposing regulations to adjust rates and fares When transportation extends beyond a government the other government regulation goes into effect Layers of Regulation Environment o International/Global o National o Regional o Local (port-specific) The IMO is the global maritime regulatory body. o A self-governing agency of the UN o Established in 1948; headquartered in London IMO objectives: o Safety of shipping o Security of shipping o Prevention of marine pollution from ships o Currently consists of 170 member states (plus 3 other associate members) o International forum where member states can discuss and establish minimum standards to which all members must adhere The IMO has no enforcement authority o IMO has adopted 40+ conventions and protocols to include SOLAS [Safety of Life at Sea]- 1974 COLREGS [Convention on the International Regulations for Preventing Collisions at Sea]- 1972 STCW [Standards of Training, Certification, and Watchkeeping for Seafarers]1978/1995 MARPOL [Prevention of Pollution from Ships]- 1973/1978 OPPRC [Oil Pollution Preparedness, Response and Cooperation]- 1990 o The IMO allows port nations [through Port State Control (PSC)] to inspect any vessel entering their ports for compliance

International industry sponsored organizations are also concerned with the safe operation and management of ships and protecting the environment o International Ship Managers Association (ISMA) o International Organization for Standards (ISO) o Det Norske Veritas (DNV) o Global Maritime Distress and Safety System (GMDSS) Another layer of regulation is national: o To guarantee that a maritime capability is available when needed, many governments have enacted legislation to support their own maritime industries/interests Transportation regulations can be divided into 3 major categories: o Safety regulations o Economic regulations o Environmental regulations National Regulatory Involvement o Environment controls: Oil pollution Gas emissions Ballast water Vapor emissions Anti-Cabotage laws Exclusive Economic Zones (EEZ)- territorial waters off the coasts of several countries Direct subsidies: paid directly to the carriers and shipyards Indirect subsidies: provide government funding to an industry for projects such as building locks in rivers, dredging channels, maintain ATONs, or vessel traffic systems (VTS) Flag of Convenience: provide inexpensive documentation to register ships, freedom to employ crew members of any citizenship, less onerous vessel inspection, and significant tax advantages. US Regulatory Involvement o International agreements are codified into the U.S. Code of Federal Regulations (CFR) o Various government agencies are involved in different aspects of the U.S. Maritime Industry o Safety US Coast Guard (under DHS-Dept of Homeland Security) National Transportation Safety Board (NTSB)- all types of transportation conducted safely o Management American Bureau of Shipping (ABS) Established by Merchant Marine Act of 1920 Maritime Administration (MARAD) Under Department of Transportation (DoT) Established by Merchant Marine Act of 1936 o Economic Federal Maritime Commission (FMC) Established by the Merchant Marine Act of 1936

The US government used different methods of direct subsidies to maintain a strong domestic merchant fleet o Mail contracts (about 1920) o Ship construction/ operation subsidies (1936) o Operating subsidies (1996) Maritime Security Act (MSA) approved the Maritime Security Program (MSP) Voluntary Intermodal Sealift Agreement (VISA): a sealift mobilization program that ensures the availability of US flag vessels to the DOD (Dept. of Defense) in the event of a war or other major contingency. Movements toward economic deregulations have occurred which have given companies much more flexibility: o Shipping Act of 1984 o Ocean Shipping Reform Act (OSRA)-1998 Other government agencies: o Surface Transportation Board (STD) (under DoT) Responsible for economic regulation of the US domestic fleet o Federal Communication Commission (FCC) Regulates interstate and foreign communication by radio or satellite o National Cargo Bureau (NCB) Dedicated to the safe cargo handling of domestic and foreign ships Jones Act: to reaffirm the nations cabotage laws the Jones act was passed. The Jones act is still in effect.

Chapter 3
Security has an ever increasing and important role in our nations marine transportation system o More than 95% of US international cargo is carried by ship IMO amended the SOLAS with the: o International Ship and Port Facility Security (ISPS) Code: to increase ship and port security o The US implemented the ISPS code through the passage of the Marine Transportation Security Act of 2002 (MTSA) o The TSA developed the Transportation Worker Identification Credential (TWIC): for identifying individual workers o The Automatic Identification System (AIS): for instant vessel tracking and monitoring o The Sea Marshall (aka Boarding Officer) program: places armed security personnel on key vessels as they transit ports o The U.S. Coast Guard Maritime Safety and Security Teams (MSST): provide rapid response anti-terrorism force protection for strategic ports/shipping areas There are 13 MSSTs located across the U.S. o The Coast Guard and Maritime Transportation Act of 2004 (CGMTA): augmented the MTSA by closing some gaps in the security measures o Container Security Initiative (CSI): increase security for container cargo shipped to the U.S. through inspections at the foreign loading port

Customs-Trade Partnership Against Terrorism (C-TPAT): through information sharing and cooperation, businesses help the U.S. government prevent terrorism while ensuring a safe and expedited supply chain o Security and Accountability for Every Port Act (SAFE): Established a timeline for TWIC program Designates USCG Captain of the Port Controlling access to the terminals and vessels has been improved through the use of technology: o Biometric IDs o Closed circuit security cameras o Security fences o Floating intrusion barriers o Large container x-ray machines and sensors

Chapter 4
Charter (Tramp) Service o Ships are hired for a specific voyage or period of time o Have no fixed schedule Liner Service o Have published/regular schedules Private Service o Owned or leased on a long term basis by the same company that owns the goods being shipped o Flexible (supply and demand) o Responsive History o Began in 1850 shipping coal o 1919-1939: size of ship grew to 10k DWT o Oil fuel replaced coal Tramp Shipping o Different types of charter services: Voyage charter Time charter Bareboat charter o A ships flag of registry affects its rates Management of Tramp Ships o Owners rely on ship brokers to find cargoes for them to carry o Shipbroker: specialist intermediary who negotiates/obtains a cargo movement contract (charter party) between a ship owner and charterer The physical headquarters for ship brokerage: Baltic Exchange in London o The largest ship owners group is the Baltic and International Maritime Council (BIMCO) headquartered in Copenhagen

Main Objective: facilitate commercial operations of its membership by means of developing standard contracts and clauses, and providing quality information, advise and education Its membership controls around 65% of the worlds tonnage Accredited as a Non-Governmental Organization (NGO) Ship owners, brokers, and charterers need to be as informed as possible Type of Costs o Fixed Crew Wages and Substances Vessel Maintenance and Repair Insurance, amortization, interest, overhead o Variable Fuel Port fees Pilotage, towage, dockage/shortage Cargo handling