GENERAL STRUCTURE

OF SHIPPING

WORLD SEA-BORNE TRADE

It has been calculated that more than 90% of world trade, in
tonnage terms, goes by ship.
Despite the technical innovations that have transformed
transport in the last two centuries, ships remain the most
economical means of moving large quantities of goods from
one place to another.
They are cheaper to build and run than other forms of
transport, such as road and railways, and they can carry
huge amounts of cargo some modern oil tankers can carry
more than half a million tons of oil at a time.
In tonnage terms, most seaborne trade consists of goods
carried in bulk.

World Seaborne Trade Volume

Development 1996-2006 (in million tonnes) - Growth rate in 2006
Major trades

Total World Trade

2,900

+6%
Crude oil and oil products

7,000

+5%

The 4 main Dry Bulk Cargoes (Iron Ore, Coal, Grain, Bauxite/Alumina)
Other Cargoes
Total World Trade

2,400

+2%

6,000

1,900
+7%

5,000
1,400

4,000

900
1996

1997

1998

1999

2000

2001

2002

2003

Source: Indicators issued from various sources such as ISL Bremen for World fleet and trading figures
and Clarkson Research Studies for shipbuilding and scrapped vessels.

2004

2005

2006 (*)

estimates

(*)

INTERNATIONAL
SHIPPING
- CHARACTERISTICS
AND STRUCTURE

LINER AND TRAMP

OPERATIONS
FORMS OF
SHIPPINGS

LINER SHIPPING
Merchandise is carried by regular shipping lines.
Shipping services are provided regularly at
specified ports irrespective of quantity of cargo
available.
Ships usually carry general cargo ie. An
accumulation of small loads belonging to many
shippers.
Such services are useful for small exporters.
Such shipping lines are not committed to any
discipline in terms of service schedule and the
freight rates.

TRAMP SHIPPING
Ships used for transportation of homogeneous
cargo which is moved in bulk quantities eg.
Grain, coal, wheat etc.
Such ships work on inducement basis and ply
indiscriminately between the ports of the world
depending upon the laws of demand and supply
in the market which also determine the rates.
The shipping lines operating as tramps can
operate on any route for which the freight cargo
is available.

LINER FREIGHTING
The liner shipping companies provide commitment
of regular service on specified sea routes at
specified freight rates.
Costs fairly fixed in nature, low variable costs
Ships designed for a specific trade route
Price according to value of service to maximize
profitability
Charges based on a weight or measure (W/M)
basis
Different commodities would have different W/M
charges

CHARTERING

CHARTERING
Chartering is an activity within the shipping
industry.
Chartering in short refers to hiring of ships.Ships
can be hired on Time basis or Voyage basis

CHARTERING THE TRADITIONAL

METHOD

Trade enquiry
Shipping dept to give feedback on freight rates,
feasibility, etc
When trading deal is finalized, shipping dept
asked to charter ship.
Shipping dept controls voyage
At the end of the voyage laytime calculations
& voyage accounting

Chartering A Working Model

Pre-fixing

Fixture negotiations

Voyage management

Post-fixture

Pre-Fixing
Trade Enquiry
given to charterer

Charterer asked
to fix ship

Charterer checks
Ports condition,
Feasibility, tonnage
availability

Trader negotiates
Finalises deal

Feedback
to
trader

Fixture Negotiations
Charterer enters
market
Evaluates
available ships

Negotiates and
Finalises best
tonnage

Nominates vessel
to shipper/
Receiver
Gets approval

Commencment
of voyage

Voyage Management
Instructions of
master

Appointment of
agents, arranging
bunkers etc.
Regular
monitoring
of
voyage

Completion
of voyage

Control of
documentation

Post-Fixture
Charterer
prepares
laytime
calculations

Prepares final
voyage accounts

End of
process

Follow up
with
shipper/receiver

Prepares final
voyage accounts

TYPES OF CHARTERING
In some cases a charterer may own cargo and employs a
shipbroker to find a ship to deliver the cargo for a certain freight
rate. Freight rates may be on a per-ton basis over a certain route
(e.g. for iron ore between Brazil and China) or alternatively may
be expressed in terms of a total sum - normally in U.S. dollars per day for the agreed duration of the charter.
A charterer may also be a party without their own cargoes who
takes a vessel on charter for a specified period from the owner
and then trades the ship to carry cargoes at a profit to the hire
rate, or even makes a profit in a rising market by re-letting the
ship out to other charterers.

PARTY AGREEMENT
Depending on the type of ship and the type of
charter, normally a standard contract form called
a charter agreement is used to record the exact
rate, duration and terms agreed between the
shipowner and the charterer.

DEVELOPMENT IN
SEA
TRANSPORTATION

UNITIZATION
The art of packaging cargo into unit loads.
A unit is a certain quantity or volume chosen as a
standard. Several units can be combined to one larger unit
(e.g. pallet) or divided into smaller sub-units (e.g.
consumer packages).
A unit load combines packages or items into a single
"unit" of a few thousand kilograms that can be moved
easily with simple equipment. A unit load packs tightly
into warehouse racks, containers, trucks, and railcars, yet
can be easily broken apart at a distribution point, usually
a distribution center, wholesaler, retail store, etc.

CONTAINERISATION- MEANING

A method of distribution of goods using containers.

The use of containers has facilitated as well as
revolutionized the carriage of goods.
The containers are carried by train or road to the sea ports
where they are loaded on the ships for onward
transportation to their destination.

CONTAINERISATION- PROCEDURE
The exporters do not need to carry the cargo to the
seaports and can directly approach the container freight
station or the inland container depot to book the cargo
there for transportation to the destination.
The custom clearance of cargo is provided at the inland
container depots, and in the process, the exporters are
able to save a lot of time.
The packing of cargo in a container is either done at the
depot or in the factory of exporter.

TYPES OF CONTAINERS

General purpose containers

Refrigerated containers
Fruit containers
Bulk containers
Ventilated containers
Open top containers
Open sided containers
Hanger containers
Bin containers

Stuffing of cargo in the container

Different types of packages should be packed separately.
Container should be lined with paper or foil in case of
specially sensitive goods.
Packing in the boxes should be carefully checked.
Exporter should not pack together:
Wet goods with dry goods
Goods with sharp edges or corners with goods in soft packaging
Dusty goods with dust sensitive goods
Placing heavy packets on light packets
Odour emitting goods with odour sensitive goods

Precautions for Packing the Containers

The container should be thoroughly checked to ensure
that:
There are no holes or cracks in walls or roofs.
The doors can be easily operated.
Locking doors and handles function properly.
There are no labels pasted of the previous cargo.
Container is water proof.
Container is absolutely dry from inside.
Container is clean and free of dust.
Container is odourless.

Advantages of using Containers

Risk of damage is reduced substantially.

Delivery of goods is done in a good condition.
Packing costs are reduced substantially.
No mishandling of cargo.

INTER AND MULTI-MODAL

TRANSPORT

INTER-MODAL TRANSPORT
Intermodal freight transport involves the transportation
of freight in a container or vehicle, using multiple modes
of transportation (rail, ship, and truck), without any
handling of the freight itself when changing modes.
Mostly associated with piggyback or container
shipments.

BENEFITS OF INTER-MODAL
TRANSPORT
Allow freight to be transported faster.
Reduced cost
Combines advantages (and disadvantages) of each mode
used
Reduces risk of theft and loss
Shortens customer order cycle time
Promotes seamless product movement
Eliminates unnecessary handling

MULTI-MODAL TRANSPORT
Multimodal Transport is commonly known as referring to
a transport operation that is carried out using different
modes of transport and organised by a single operator.
Multimodal Transport is also a legal concept strictly
defined in the United Nations Convention on the
International Transport of Goods and other international
instruments, where the specified liability regime of the
operator differs from those applicable in modal
operations.

Benefits of Multi-Modal Transport

Multimodal Transport is generally considered as the most
efficient way of handling an international door to door transport
operation.
Multimodal Transport allows to combine in one voyage the
specific advantages of each mode, such as the flexibility of road
haulage, the larger capacity of railways and the lower costs of
water transport in the best possible fashion.
Multimodal Transport also offers the shipper the possibility to
rely on a single counterpart, the multimodal transport operator
(MTO) who is the architect of the entire journey and only
responsible party from pickup to delivery, rather than having to
deal with each and every modal specialist of the transport chain.

Benefits of Multi-Modal Transport

The burden of documentation and other formalities
connected with segmented transport is reduced.
Loss of time and risk of loss, pilferage and damage to the
conventional segmented transport are eliminated.
The through rates offered by MTO make it easier for the
exporter to negotiate sales contracts with foreign buyers
on the basis of delivered prices.
The resultant cost savings tend to reduce the through
freight rates and the cost of cargo insurance.

Multi-Modal Transport Document

Mentions the place of acceptance and place of delivery.
May be issued by an operator who does not necessarily
owns the ships used to carry out any sea transport
involved.
Confirms that the goods have been taken in charge.
Involves transshipment.
MTD constitutes the title to the goods and is transferable
by endorsement.

Multi-Modal Transport- The Challenge

Multimodal Transport requires a thorough control over all
the steps involved in international transport, including
multiple storage and handling stages.
This means extensive use of information technologies and
carriers networks and regulatory frameworks that can
provide freedom to plan and operate to carriers and
reliable liablity regimes to customers.
Multimodal transport needs to be competitive in markets
where unimodal operations not only have been there for a
long time but also are simpler to handle and, most of
time, more cost effective.

CFS- Container Freight Stations

CFS is a place where containers are stuffed, de-stuffed and
aggregation/ segregation of export/import cargo takes place.
With the growing volume of international trade, the need for
expeditious clearance of goods at the port within the minimum
possible time has been gaining importance. This is more so
when the ports are facing congestion at their premises.
Further, for optimal utilization of existing infrastructure, space,
equipment, goods that are landed at ports need to be evacuated
straightaway without any loss of time.
Accordingly the concept of Container Freight Stations(CFS)
has grown in importance along with the development and
growth of ports.

CFS
A CFS is an extended arm of Port/ ICD/Air cargo Complex,
where import/ export goods are kept till completion of their
examination and clearance.
The imported goods can be immediately shifted from the port
to CFS which also helps in the reduction of port congestion.
All the activities related to clearance of goods for home
consumption, warehousing, temporary admissions, re-export,
temporary storage for onward transit and outright export and
transshipments take place from such stations.
Therefore, clearance of goods from CFS is an important
point of consideration for trade in respect of export/ import
Cargo as it is the final Customs contact point.

Main function of CFS

Receipt,dispatch and clearance of Containerized
Cargo, up-to-date inventory control and tracking
system to locate containers/cargo.

CFS in case of imports

In respect of import consignment, the Steamer
Agents/liners/Importers desiring to take the consignment
to CFS, file Import General Manifests in the port.After
obtaining the permission,the Container moves to CFS
under Customs escort or under bond and bank guarantee.
The CFS allow de-stuffing of the goods. The importer
files the Bill of Entry at Customs House and then
Customs formalities of assessment, examination and
payment of duty are completed. Thereafter, Customs
givesOut of Charge and the Custodian releases the
goods from CFS by issuing a Gate-Pass.

CFS in case of exports

In respect of exports, the goods are brought directly to
CFS under a Shipping Bill. The export cargo in Less than
Container Load(LCL)/ Full container Load (FCL) is
received by the Custodian of CFS for safe custody.After
stuffing of the goods, Container/ Customs Bonded Truck
(CBT) is sealed by the Custom Officer and the same is
removed from CFS for export through the desired Port.

ICD
The Inland Container Depot (ICD) is a common user
facility with Public Authority status.
It is equipped with fixed installations and offering
services for handling and temporary storage of
import/export laden and empty containers carried under
Customs control and with Customs and other agencies
competent to clear goods for home use, warehousing,
temporary admissions, re-export, temporary storage for
onward transit and outright export.
It has all the loading and non- loading equipments needed
to handle container cargo.

Objectives of ICD
Bring shipping services to the doorstep of shippers across the
nation.
Assist in decongesting the seaports and make them more userfriendly.
Help revive and modernize the railway as a primary mode for
the long distance haulage of cargo.
Assist in the reduction of overall cost of cargo.
Transit cargo to Landlocked neighbouring countries
Integration of surface transportation of containers;
Cargo consolation point and custom clearance establishment
close to areas of production and consumption;
A comprehensive cargo sorting centre and a temporary cargo
facility.

Benefits of ICD
1.
2.
3.
4.
5.
6.

Establishment of customs clearance facility close to

production and consumption centers,
Improved container usage and reduction in the movement of
empty containers;
Improved turn around time of ships thereby reducing
demurrage and avoiding pilferage;
Issuance of Through Bill of Lading by Shipping lines and
thereby assuming liability from dispatch to destination ports;
Lower freight to increase trade flows;
Optimal use of surface transport and the decongestion of the
sea ports;

Benefits of ICD
7.
8.

Reduction in marine pollution activities around the seaport.

Easy and safe access to international shipping facilities in
the hinterland giving a boost to inland trading;
9. Revitalization of export agriculture leading to multiproduct economy and the avoidance of employment
opportunities stemming urban-rural drift and increase in
revenue to the government
10. Rehabilitation of the surface transport system and enhanced
usage of containers.
11. Reducing the pressure on the roads and avoiding the
carriage on the road.

INDIAN SHIPPING
GROWTH, POLICY
AND PROBLEMS

eEnterprises
Lab

Overview of the Indian container

shipping industry
India is a peninsular country and there are
dozens of large and several smaller ports
along its coastline.
Chennai (Madras), Vizag, Tuticorin, Cochin, Kolkatta
(Calcutta), on the east coast
Goa, Mangalore, Mumbai (Bombay) on the west coast

The typical volume of containers handled by

a medium sized port is in the range of
250,000 300,000.
Most of the business transactions among
partners, are currently being done manually.

Types of companies

eEnterprises
Lab

Local, small and

medium sized
companies

Lower volumes
Very minimal information
systems capabilities

Domestic Large

Elaborate infrastructure for

operation
Reasonably good enterprise
information systems but almost
non-existent business integration

(e.g., Container Corporation

of India,
St. Johns Freight systems)

Multinational
companies
(examples:
OCS-NYK line, etc)

Access to larger clientele

because of their international
presence
Sophisticated systems at their
foreign operations, but not yet
deployed in India

eEnterprises
Lab

Challenges
Infrastructure
Power, computing
facilities and
connectivity

Systems/software
costs
Varies widely and
is significant

Processes
By and large well
documented

Remarks:
The underlying
infrastructure has
become affordable
for most companies
The move from
manual processes is
not only a
technological one,
but cultural as well.

PORTS
AND
PORT TRUST

Port
A port is a facility for receiving ships and transferring
cargo.
They are usually situated at the edge of an ocean, sea,
river, or lake. Ports often have cargo-handling equipment
such as cranes and forklifts for use in loading/unloading
of ships, which may be provided by private interests or
public bodies.
Harbour pilots , barges and tugboats are often used to
safely maneuver large ships in tight quarters as they
approach and leave the docks.
Ports which handle international traffic will have customs
facilities.

Types of Ports
Some ports on a lake, river, or canal have access to a sea
or ocean; they are sometimes called "inland ports".
A "fishing port" is a type of port or harbor facility
particularly suitable for landing and distributing fish.
A "dry port" is a term sometimes used to describe a yard
used to place containers or conventional bulk cargo,
usually connected to a seaport by rail or road.
A "port of call" is an intermediate stop, where a ship
picks up supplies, fuel, etc.

Port trust
An association or body consisting of chairman
and other trustees for governing and regulating
the operations of the port.

PORTS SECTOR GLOBAL OVERVIEW

There are more than 2,000 ports around the world, from
single berth locations handling a few hundreds tons a
year to multipurpose facilities handling up to 300 million
tons a year

More than 80 percent of trade with origins or

destinations in developing countries, in tonnage, is
waterborne

World port traffic is made for 45% of liquid bulks (mainly

oil, petroleum products, and chemicals), for 23% of dry
bulks (coal, iron ore, grain, and phosphate), and for
32% of general cargo.

Containerization of general cargo traffic has

progressed steadily over the last 20 years
Source : World Bank / UNCTAD

PORTS SECTOR GLOBAL OVERVIEW

Transport usually accounts for a quarter of total logistics costs in OECD

countries, storage for a fifth, and inventories for a sixth.

As a consequence of both liberalization of maritime transport and

corporate restructure in the shipping industry, international freight rates
have significantly decreased in real terms over the last 10 years, often
by more than 40%

Maritime freight costs, as a percentage of import values, have

decreased from 6.64% on average for the whole world in 1980 to 5.24%
in 1997. For the developing world, the corresponding figures were
10.4% in 1980, 8.60% in 1990 and 8.04% in 1997, and still 11.53%
for Africa.

Total logistics costs (packaging, storage, transport, inventories,

administration and management) are estimated to reach up to 20% of
total production costs in OECD countries, while freight costs alone
(transport and insurance) can make up to 40% of values of exports for
several African landlocked countries.
Source : World Bank / UNCTAD

EMERGING ROLE OF PORTS IN WORLD TRADE

The role of ports have changed from patronizer to

facilitator and service provider

From a mere landing station for ships to load and unload

cargo, seaports have emerged as a critical part of the
Global value Chain

The past decade has witnessed relocation of industrial

manufacturing resulting in shifts in global trade flow

Falling barriers to international trade have allowed

businesses to locate different parts of their production
processes across the globe

This is done to take advantage of the fine differences in

cost, resources, logistics and markets, in their search for
competitive advantage

EMERGING ROLE OF PORTS IN WORLD TRADE

The trends in global shipping has tended to increasingly

favour deployment of large sized vessels (ULCCs,VLCCs,
Cape size, Super cape size, 6000, 10,000 TEUs)
requiring deeper draught ports

Efficient modes of cargo discharge are required to minimize

detention time and thus costs

Deep draught berths and efficient modern container

handling equipment have become essential to attract
mainline vessels

INDIAN PORTS SECTOR

The 6000 Km coastline of India is dotted with 12 major

ports and around 180 minor and intermediate ports

History of organized major ports in India dates back to

the 19th Century, with the commissioning of the Kolkota
port in the year 1870 followed by Mumbai Port in 1875
and Chennai Port in 1881

Ennore Port is the youngest and the first corporate port,

commissioned in June 2001

Over 95% of the overseas cargo volumes are routed

through these ports

PORTS AND THE COMPETITIVE EDGE

The rise of competition, the globalization of exchanges and the

resulting international restructuring have forced businesses,
now subject to growing competitive pressures, to seek greater
competitiveness and differentiation

Subsequently logistics has become an important strategic

procedure in the improvement of competitiveness

A structured and powerful logistic service represents a

guarantee of efficiency and reliability, the supplier having to
deliver the right product, in the right quantity at the right time

Logistics interfaces between producers and distributors, has

become critical in establishing competitiveness of products

PORTS AND THE COMPETITIVE EDGE

The concentration of the production units

and their relocation far from their
destination market implies an increasing
recourse to logistic services, which
becomes the essential link in this
competitiveness approach

WHAT AILS THE INDIAN PORT SECTOR

Evolved as state monopolies, the Indian ports

may not exactly be ready to meet the
challenges of free trade and economic
globalization
In fact Indian ports remain a bottleneck in
the supply distribution chain

WHAT AILS THE INDIAN PORT SECTOR

Monopoly and inadequate investments in technology have

resulted in inefficient operations and high cost of services

Bottlenecks in the form of poor Road and rail Connectivity to

hinterland have substantially impeded the growth of ports

Labor unions impeded and obstructed the reduction of the

labor force and up gradation of skills which is possible
only through modernization of port-handling equipment.

Centralized government control slowed down the pace of

planning,and the command structures, limited
responsiveness to market demand.

Public investment in port infrastructure was insufficient or

inadequate, because it relied heavily on state budget.

THE ROAD TO REFORM

Globally, Privatization of port facilities has proved to

improve efficiency of port operations as well as bring
about cost efficiency

Private sector has also proved its ability to bear the

financial burden of port expansion and modernization

Private sector is better at planning, financial management

and risk management

They are subject to less political interference

OBJECTIVE FOR INDIAN PORTS OF THE FUTURE

Thus Ports of the future need to achieve a

high degree of operational efficiency and
Cost Efficiency to be able to provide the
much needed competitive edge to Indian
Exports