Formalities of Shipping

As with many specific areas of industry sea-freight has developed a whole plethora of terms and abbreviations over a period of time that spans centuries. Few common are discussed along with formalities involved in shipping

Common Shipping Terms

Full container load (FCL) – As the term implies, this refers to a load that will fill a given container.
Less than container load (LCL) – Once again, as the term implies, this is a shipment that will not fill a container and therefore will require to be consolidated with other LCLs in order to economically fill a shipping container.
Hook to hook – This term is used by many shipping lines when quoting prices for break-bulk sea freight. It means that the shipping line’s price includes loading the goods on to the vessel and unloading the goods at the destination port. It also includes the cost of transporting the goods between the origin and destination ports. It is important to note that this price does not typically include insurance nor does it include the stevedoring cost at both ports to attach or detach the cargo from the ship’s lifting gear. In addition it does not include other port handling costs.
Full liner terms – This means the same as hook to hook.
Liner in – The shipping line is responsible for the cost of loading the cargo on board the vessel.
Liner out – The shipping line is responsible for the cost of unloading the cargo at the destination port.
Free in and/or Free out – In effect this is the opposite of hook to hook. Many purchasers of sea-freight who are new to the industry make the mistake of interpreting ‘free’ as meaning free to them. Whenever the term ‘free’ is used in this context it means free to the shipping line. Therefore the party purchasing the sea-freight will be responsible for the cost of loading and unloading the goods on and off the ship.
Break bulk cargo – This is a general term for non-containerized loose freight. Out-of-gauge cargo and heavy-weight items that are unsuitable for containerization fall into this category. Bulk cargoes such as crude oil, loose grain or bulk powders, and iron ore would not be classified as break bulk.
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.
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 (see below) provided by the consignor.
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. 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.
Lost slots – A slot is a term used to describe the space taken up by an ISO shipping container on a cellular container vessel. 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’.
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.

Booking of Shipping Space

Shipping space with a carrier can be booked by an exporter directly with the carrier or carrier’s agent or through a customs broker or a forwarder. Generally the exporter selects a carrier and shipping schedule and let the customs broker or forwarder book the space.

The process of booking shipping space can be summarized as under.

Choosing the Carrier: If the importer does not specify a carrier, the exporter has the freedom to choose a shipping company which offers a competitive rate and can meet the latest date for shipment. Certain importing countries may prohibit the use of flag vessels of a hostile country and any vessels that would make a stopover in a hostile country en route to their country may be prohibited by some importing countries.
Worldwide Seaports: The name of the port should be verified. Some port names may be spelled differently,
Checking the Ocean Shipping Schedules: The notifications on ocean shipping schedules (both outbound and inbound) are usually published in major newspapers. If the same is not available, the exporter may contact the carrier, customs broker or forwarder. Sometimes shipping schedules the information on shipping schedules may be also separately published by private publishers.
Carrier – Voyage/Flight No: The phrase “carrier – voyage no.” refers to the name of the carrier and its voyage number. The name of a carrier is usually preceded by letters S/S, SS, S.S., M/V, MV or M.V. The S/S, SS or S.S. stands for steamship, while M/V, MV or M.V. for merchant vessel. The term steamship is still widely used despite the fact that modern ships are not propelled by steam.
ETD (ETS) and ETA: When booking shipping space, the exporter should know the ETD (ETS) and ETA of the shipment. The term ETD is the estimated or expected time of departure from the port or point of origin; it applies to all modes of transportation.

The term ETS is the estimated or expected time of sailing from the port of origin. The term ETA is the estimated or expected time of arrival at the port or point of destination; it applies to all modes of transportation.

Stopover En Route to Destination: When booking a shipping space, it is important to verify whether the vessel will stopover in other port(s) to unload and load other cargoes en route to the destination. The ports of stopover has general history of congestion, the overall voyage time may extend beyond the expected time.
Verbal Booking of Space and Dead Freight: In many countries, verbal booking of shipping space is accepted, with the exception of dangerous goods. If the space booked is not utilized, the carrier may levy a charge known as dead freight. To avoid paying the dead freight charge if the space is not likely to be used, the exporter must inform the customs broker or forwarder in advance, so that other shippers may use the space.
Dangerous Goods: In case of shipment of dangerous goods, a written application for shipping space is required. When goods arrive at the designated customs delivery location, the goods along with the shipping order and Dangerous Goods Note are submitted to the ship’s master for approval before customs clearance and loading.

Conference and Non-Conference Shipping

Conference shipping

The shipping conferences are formal groups where different shipping companies come together. The primary objective of shipping conferences is to fix freight rates (or passenger fares in the case of passenger shipping conferences). Generally freight rates are set by the type of commodity; with the highest value commodities are charged higher rates than lower value commodities.

The process of fixing rates is usually complicated, because lower cost carriers will prefer that the cartel fix lower rates than higher cost carriers will prefer. Again there is no control over non-price competition. Carriers may wish to schedule vessels in a similar way resulting in lower utilization for all. Finally, the rates fixed by the conference must be enforceable. The conference should be able to detect and deter member firms from secretly cutting rates and thereby attracting larger volumes.

Non-conference shipping

These are shipping lines which operate on routes served by a liner conference but which are not members of that conference. Non-Conference Lines operate independently on its own tariff, terms and conditions. They are also called “independents” in the shipping industry.

There are also instances where some independent lines team up to form consortiums to increase their participation in trade routes, increase their sailing frequency and geographical coverage to meet the demands of the shipping industry

Charter shipping and Charter party

A charter party is an agreement between two parties regarding lease of a cargo or a vessel. One party offers to lease its vessel or cargo to another party at stipulated rate or under decided conditions. It is a legal contract, made under the laws governing the shipping world between a cargo vessel owner and a charterer. Clauses for a different charter parties vary. It is these clauses that make different types of charter parties

Depending on these clauses, the charter parties are,

Bareboat charter party: This is a typical agreement where there is no maintenance liability or any kind of claim on the vessel by the owner for the period of lease of the vessel. The owner agrees to lease the vessel without any administration, financial or technical responsibility for it. The charterer acts as the sole owner of the ship and is responsible for all the maintenance and functioning costs of the vessel including fuel, crew maintenance, repair, custom duties, port expenses etc for that time. It is the most suitable for tankers and bulk carriers.
Voyage charter party: This is the most commonly used Charter Party. Under this particular agreement, the owner of the ship agrees to lease the cargo to the charterer for a particular voyage. The cost paid for such a lease includes costs like fuel, loading and unloading of the cargo etc. The vessel owner supplies the charterer with the vessel and sometimes the crew for a voyage to a designated port. However, there is a specific time limit under this kind of contract.
The time mentioned in the lease contract includes the time needed for loading and unloading of the cargo, exceeding which may need the charterer to remunerate the owner in terms of compensation charges. Also, the charterer remains responsible for any incidental charges. Being a voyage bound trip with availability of crew, voyage charter party becomes one of the most famous charter parties.
Time charter party: Often confused with the previous charter party, this charter party refers to lease of a vessel by the owner to a charterer for a specified period of time. The owner only offers his vessel at a predetermined rate. The charterer agrees to bear all the expenses incurred on running of the vessel in return of availability of vessel for that time.
Lump sum charter party: In this particular type of charter party, the owner agrees to lease his vessel to the charterer for a specified cargo to be shipped to a specified port.
Contract of Affreightment: This type of charter party particularly suits to bulk cargos that often need more than one voyage for complete shipment. Under this contract, the owner offers to carry the mentioned cargo at a price decided at rate of per tonnage or per voyage. This type of contract is especially found in industrial cargos like that of coal, stones, building material, metallurgical materials etc.
Dock charter party: This type of contract is made on the basis of the port or dock where the vessel is received by the charterer upon leasing or the owner while returning. The exchange happens in areas which are essentially suited to the size of vessel and are called commercial area of the port.

Shipping Stowage

Stowage refers to the area on a ship available for storage and also the process of arranging goods in a stowage area methodically in a practical and functional manner. The stowage area is primarily below decks and includes the cavernous holds to cup-boards in the state rooms. The crew of a ship is trained in placing items in storage, and before taking on a load of supplies, they will plan the best way to store it on board so that they can quickly stow and organize any goods.

Stowage can vary in nature depending on the type of goods it is supposed to hold. A hold is generally designed to hold goods in a variety of configurations unless it is a specially designed ship like an oil tanker or a reefer. Climate control may be available to protect cargo which can otherwise decompose or sensitive to weather. Ships can have cameras to monitor the cargo during transit, and also personnel who periodically inspect the hold for signs of damage or tampering.

Individual storage compartments are available for things like sailing supplies such as charts, ropes, tools, safety equipments as well as personal possessions. The space may have compartments and shelves to organize the contents, making it easy to store them efficiently and take out when needs.

When placing materials in stowage, planning has to be made to arrange the materials in a manner which balance the weight and ensure optimum performance of the ship. It must have a logical distribution to reduce the risk of damage and injuries. The access needs of the cargo also warrants consideration. For example a perishable cargo should go in last so it will come out first. For a ship making multiple stops, sailors need to store cargo in order of delivery for ease of unloading at each port.