Table of Contents - SHIPPING DEPARTMENT

Customs Brokers Freight Forwarders or Consolidators Case Sample: Freight Consolidation (1) The Forwarding Practices of Exporters Importer's Specified Forwarder or Consolidator and Its Implication Case Sample: Freight Consolidation (2) Freight Containers Container Classifications Container Dimensions and Capacity Rating, Tare Mass and Payload of Containers The Marking and Identification of Containers Table and Diagram: Dimension of General Purpose Containers Containerized Shipments Container Size, Number and Load Options o Case Sample: Container Selection (1) Maximized Use of a Container Capacity o Case Sample: Container Selection (2) Palletized Cargo in Container Shipments o Table: Pallet Count FCL, LCL, CY, and CFS o Modes of CY and CFS Container Services Packing (Loading) and Emptying the Containers The Use of Loading Equipment Inspecting the Container Stowage of Container Efficient Packing of Containers--Corrugated Cartons, Wooden Cases/Boxes and Bales o Diagram: Package Orientation Efficient Packing of Containers--Palletized Cargoes (Cartons, Cases/Boxes, Bags, and Drums) and Wooden Crates o Diagram: Palletized Cargo o Case Sample: Shipping Pallets Pallet Stowing Patterns in a Container Pallet Yield in a Container o Table: Pallet Yield Stack Loading of Pallets Interlocking of Export Packs o Diagram: Interlocked Cargo Pallet Constructions and Designs RO/RO Vessels and LASH Conference Shipping Non-conference Shipping Charter Shipping Road Freight Rail Freight Air Freight Benefits of Air Freight Landbridges The Use of Landbridges as Alternative Routes to the Conventional Ocean Traffic

Diagram: Microbridge Freight or Tariff Rates Freight Rebates Conference Discounts and Contract Shippers Freight Adjustments Weight or Measure in the Freight Cost Calculation Case Sample: Weight or Measure Freight Payment--Freight Prepaid and Freight Collect Shipment Control Partial and Installment Shipments o Case Sample: Non-Partial Shipment Customs Closing Date Seaports of the World Booking of Shipping Space Transhipments Landlocked Countries and Transhipping Points Shipping Order (S/O) Export Shipping Instructions Sample Form: B/L Application-Instructions Dock Receipt Sample Form: Dock Receipt (Shipping Note) Customs Export Declaration Ocean (Marine) Bills of Lading Sample Document: Ocean Bill of Lading Shipper's Load and Count Clean versus Foul Bills of Lading Short Form versus Long Form Bills of Lading Received versus On Board Bills of Lading Straight versus Order Bills of Lading o Synopsis: The Title to the Goods in an Order Bill of Lading Other Ocean/Sea Transport Documents Stale Bill of Lading and the Guarantee for Delivery of Goods Air Waybills Sample Document: Air Waybill (Air Consignment Note) Master and House Air Waybills Clean versus Foul Air Waybills Road Waybills and Rail Waybills Post Receipts and Courier's Receipts Export-Import Cargo (Marine) Insurance Insurance Policy and Cover Note Insurance Policy versus Insurance Certificate Open Policy versus Specific Policy Advantages of an Open Policy Over a Specific Policy Principles of Cargo (Marine) Insurance Institute Clauses (of Cargo Insurance) Other Institute Clauses Standard Cargo Insurance--Three Basic Policies (in the Old Cargo Clauses) The New Institute Cargo Clauses Comparison of Institute Cargo Clauses (A), (B) and (C) Terminology in the Institute Cargo Clauses Endorsement of the Insurance Clauses Duration of Insurance Clauses

Insurance Premiums Amount of Insurance Coverage Contingency Insurance Insurance Claims Payments in the Particular Average Claims and the General Average Claims Insurance Application-Instructions Sample Form: Insurance Application-Instructions Export Credit Risk Insurance Calculate the length of time needed for a shipment between two dates using the Time-Lapse Calculator Calculate the distance between ports and/or cities using the Distance Calculator Check the due date or final date of a shipment using the Due Date Calculator Check the current time of each country using the Time Zone Converter (in Real Time) Online Shipping Schedules and Cargo Tracking

Customs Brokers

The customs broker---broker or customhouse broker or customs house broker---is an individual or company licensed to clear export and import goods through customs.

In general, the role of brokers is the same worldwide. Besides clearing of goods through customs, other export services a broker renders include booking of space for ocean, air and land freight, canvassing and providing the freight cost, and preparation of export documents and sending them to the bank for negotiation. In certain countries, it is a business practice that exporters prepare their own export documents. The broker also renders the forwarding services as a freight forwarder. Few large exporters have their own in- house licensed customs broker. The broker basically handles any export goods. At times, it is necessary to retain the service of a broker experienced in the exporter's line of product and the port of destination. It is important to select a reliable customs broker. The exporter normally has to sign an authorization paper allowing the broker to handle the customs declaration. In case the broker commits an error, the exporter is held liable. The brokerage fee varies from country to country. The broker may collect a basic service fee on top of other charges, such as documentation charges and port fees. In certain countries, the broker collects a uniform base fee, plus a small percentage of the value of shipment. In a country

where the brokerage fee is not regulated, it may vary considerably among brokers. The exporter must check with different brokers in order to get the best offer. It is important to request the broker to show the breakdown of charges on the billing. A good and honest broker can help new exporters with certain export routines and help them save money.

Freight Forwarders or Consolidators

The freight forwarder---forwarder---is an individual or firm who renders cargo delivery services. In domestic (local) freight forwarding, it is the delivery of goods usually from the exporter's premises to the local customs in exporting, and vice versa in importing. The customs broker also renders local freight forwarding for exporters and importers. International (foreign) freight forwarding is the delivery of goods from the exporter's premises (or from the port or point of origin) to the port or point of destination (or to the importer's premises). The freight consolidator---consolidator or groupage operator---is an individual or firm who accepts less than container load (LCL) shipments from individual shippers, and then combines them for delivery to the carrier in full container load (FCL) shipment. The services of a forwarder are usually available in a consolidator, and the forwarder often engages in the consolidation of cargo. Hence, the term forwarder is often used synonymously with the consolidator. The forwarder provides a wide range of services. Besides all of the export services available from a customs broker, the forwarder may also arrange for the insurance, export packing and trucking. The forwarder usually receives the forwarder's charges from the exporter. In addition, it may receive a commission from the carrier---freight company (ocean, air, truck and rail). In the ocean shipment, the forwarder may 'buy' the shipping space, in a special arrangement with the carrier, and 'resell' the space to individual shippers, instead of receiving a commission. In such an arrangement, the forwarder functions as an independent distribution or logistical company known as the NVOCC (nonvessel operating common carrier) or NVO (nonvessel owner or nonvessel owning carrier), or commonly referred to as the ocean freight

consolidator. The Case Sample: Freight Consolidation (1) below illustrates the function of a NVOCC or NVO.

Case Sample: Freight Consolidation (1)

XY Consolidator 'buys' 100 containers of 20' from RS Shipping on vessel S/S AMIGO, Voyage No. 8, the route is from Port A (of the exporting country) to Port B (of the importing country), at a discounted box rate of US$1,300/container. To explain the case, it is assumed that the freight is charged on measure basis only, instead of weight or measure, and assumed that the capacity of 20' container is 33 CBM (cubic meters). As such, XY Consolidator 'buys' a total fixed shipping space of 3,300 CBM at the ocean freight cost of US$39.394/CBM. If the shipper UVW Exports books 10 CBM of space for a product directly with RS Shipping, on the same vessel and voyage number, the LCL (less than container load) rate is US$55/CBM. If the shipper ABC Exports books a 20' container directly with RS Shipping, the FCL (full container load) flat rate is US$1,500/container, which is US$45.455/CBM. In case ABC Exports is able to load 28 CBM only due to the odd sized export packages, the freight cost is US$53.571/CBM. In general, the CBM cost of FCL is lower than the LCL. XY Consolidator, which does not operate or own any ships, offers (i.e., 'sells' the space they 'bought') UVW Exports and other LCL shippers to transport their goods at US$54/CBM, against the US$55/CBM from RS Shipping. XY Consolidator offers ABC Exports and other FCL shippers at US$1,450/container, against the US$1,500/container from RS Shipping. In practice, the consolidator 'selling' at the same rate as the shipping company is not uncommon. XY Consolidator groups all LCLs of individual shippers into FCLs, and then delivers all FCLs to RS Shipping in one lot, that is 100 containers of 20' or less, if the space is not fully 'sold'. In such a case, XY Consolidator operates as a NVOCC and issues a freight forwarder's bill of lading to each shipper, without receiving a commission from RS Shipping.

In a related case, the letter of credit from the importer may stipulate "transport documents issued by freight forwarder are not acceptable ", thus the bill of lading from a NVOCC is not acceptable.

The Forwarding Practices of Exporters

Exporters use the services of a forwarder primarily for convenience. New exporters can benefit from the services of a good and honest forwarder. In less developed countries, it is a business practice that the exporter utilizes own contacts or sources of export services like trucking and customs declaration, especially in ocean shipments, instead of relying on the forwarder, which is the practice in developed countries. Referring to Case Sample: Freight Consolidation (1), XY Consolidator may offer UVW Exports to transport their goods at US$70/CBM, including such charges as the inland freight (cartage) and handling, from UVW Exports' premises to Port B. If UVW Exports uses its own contacts in the forwarding instead of a consolidator, the freight rate of US$55/CBM from RS Shipping plus all other charges may amount to less than US$70/CBM. Exporters should always check the options.

Importer's Specified Forwarder or Consolidator and Its Implication

Some importers may specify the forwarder to use for their imports. The international freight forwarder either has own office or a handling agent abroad.

Case Sample: Freight Consolidation (2)

Further to Case Sample: Freight Consolidation (1), assuming that XY Consolidator has an office named XY Branch at the importing country of DEF Imports, and DEF Imports contracts XY Branch to handle a shipment from UVW Exports at the exporting country, the sales term is FOB Port A in the exporting country. The contract, in which UVW Exports is informed in advance by DEF Imports, calls for a delivery from Port A to DEF Imports' premises---meaning that DEF Imports has to pay XY Branch the agreed-upon CBM (cubic meter) cost to cover such charges as the ocean freight from Port A to Port B in the importing country, and the handling charge, documentation fee, and inland freight from Port B to DEF Imports' premises. XY Branch notifies XY Consolidator of the contract and requests it to coordinate with UVW Exports. As the trade term is FOB Port A, UVW Exports must arrange and pay for the cartage from its premises to Port A, plus the brokerage fee and other charges. Under this situation, XY Consolidator may offer to handle the trucking and customs declaration for UVW Exports. The exporter (the UVW Exports) must check the options before accepting the offer. Depending on the country, the cost can be lower, or higher, when the exporter uses its own contacts.

In another instance, the importer, especially the new customer, may not inform the exporter that a forwarder will be involved in the delivery. The exporter becomes aware of such involvement only after receiving the letter of credit, in which a forwarder is specified. Such incidence must be avoided as the cost of exporting can be affected, for example, the diversion of cargo to another location designated by the forwarder, which may cost more.

Freight Containers

The pattern of cargo reception and shipment has changed with the use of the freight container--container, box or LO/LO (lift on/lift off). The use of containers, which started more than 40 years ago, in intercontinental traffic is now available in most seaports worldwide. In the 1960's, many seaports either had inadequate container facility or none at all. Consequently, export shipments often relied on conventional (break-bulk) vessels. The cargoes were placed alongside a vessel for hoisting on board. The stevedores (longshoremen) were often employed to carry cargoes on and off the vessel. The loading and unloading of vessels consumed too much time, which caused dockside bottlenecks and delayed shipments. With the increased use of containers, the congestion was decentralized. The problem of congestion was transferred from the docks or piers to the container freight stations or terminals.

ISO Freight Containers The acronym ISO stands for the International Organization for Standardization, with headquarters in Geneva, Switzerland. The ISO freight container refers to a container complying with the ISO container standards in existence at the time of its manufacture.

Container Classifications

Containers are available in configurations to take almost every kind of cargo and mode of transportation (ocean, air, road, and rail).

Containers for Intercontinental Use In terms of the type of cargo for which the containers are mainly intended, they are classified as general cargo container and specific cargo container.

General Cargo Container

(1) General purpose (dry cargo) container

It is suitable for the widest varieties of cargo. It is fully enclosed and weatherproof, having rigid walls, roof and floor, with at least one of its walls, either end wall (end loading) or side wall (side loading), equipped with doors. Please see Dimension of General Purpose Containers for the related information.

Dry Cargo Container

(2) Specific purpose container It is used to facilitate the packing (loading) and emptying (unloading) of container other than by means of doors at one side of the container, and for other specific purposes like ventilation.

Closed ventilated container It is used for the carriage of cargo, such as hides, that cannot stand excessive moisture. It is similar to the dry cargo container with specially designed natural or mechanical (forced) ventilation. Open top container It is similar to the dry cargo container except that it has no rigid roof, but has a movable or removable cover (e.g. a cover made of canvas, plastic or reinforced plastic material) supported on movable or removable roof bows. The open top container is used for machinery, sheet glass, and other heavy, bulky or long objects. Platform (flat rack) It does not have a superstructure, that is, rigid side walls and load-carrying structures. The term load refers to static/dynamic form of load (not cargo load) or forces arising out of the lifting, handling, securement and transporting of container. It is equipped with top and bottom corner fittings. The corner fittings (see diagram in the Dimension of General Purpose Containers) provide means of supporting, stacking, handling and securing the container. The flat rack is used for

machinery, lumber, and other heavy or large objects.

Platform based containers open sided

Specific Cargo Container

(1) Thermal container (reefer) It has insulated walls, doors, roof, and floor, which limit the range of temperature loss or gain. It is used for perishable goods like meat, fruits and vegetables.

Insulated container It does not use any device for cooling and/or heating. Refrigerated container (with expendable refrigerant) It uses dry ice or liquefied gases. It does not require external power supply or fuel supply. Mechanically refrigerated container It uses a refrigerating appliance, that is, the mechanical compressor or absorption unit. Heated container It uses the heater, that is, a heat-producing appliance. Refrigerated and heated container It uses the refrigerating appliance (mechanical or expendable refrigerant) and heater.

(2) Tank container

It is used for the carriage of bulk gases and liquids like chemicals.

(3) Dry bulk container It is used for the carriage of dry solids in bulk without packaging, such as grains and dry chemicals. It consists of a cargo-carrying structure firmly secured within the intercontinental container framework.

(4) Named cargo types It consists of various types of containers, such as automobile (car) containers and livestock (cattle and poultry) containers.

Unit Load Device (ULD) The unit load device (ULD) is the air equivalent of the ISO container. Due to its unique shape resembling an igloo, the ULD is sometimes called the igloo (or iglu). The air mode containers mainly are of the IATA (International Air Transport Association) types. The popular sizes of ULD include the IATA Type:

IATA Type 8 5 3 lower deck container, lower deck container, main deck container, 60.4" x 61.5" x 64" 88" 88" x 125" x 64" x 125" x 86"

Several other types of ULD are also in use worldwide. Container Dimensions and Capacity

Containers intended for intercontinental use have external nominal dimensions of:

Length ----- 9.8125 feet (2.991m) as 10 feet; 19.875 feet (6.058m) as 20 feet; 29.9375 feet (9.125m) as 30 feet; and 40 feet (12.192m) Width ----- 8 feet (2.438m) Height ----- 8.5 feet (2.591m) and 9.5 feet (2.896m)

All above dimensions have permissible tolerances. The 20 feet (20') and 40 feet (40') containers are very popular in ocean freight. The 8.5 feet (8.5') high container---8 feet 6 inches (8' 6") high container---is often referred to as standard container. The demand for the high cube container---hicube---is increasing. The popular high cube container has a normal height of 9.5 feet (9.5' or 9' 6"). There are half height containers (4.25' or 4' 3" high) designed for heavy loads such as steel rods and ingots, which absorb the weight limit in half the normal space. The most widely used type of container is the general purpose (dry cargo) container (please see Container Classifications) having a nominal length and height of 20' x 8.5', 40' x 8.5', and 40' x 9.5'. Referring to the Dimension of General Purpose Containers below, the dimensions shown in the table are not fixed, that is, the external and internal dimensions may vary among containers of the same length and height. The container capacity is the total cube a container can accommodate. The term cube often refers to the cubic measurement of cargo. The capacity (i.e., the internal volume) is determined by multiplying the internal dimensions, that is, the product of internal length, width and height. The capacity may vary among containers of the same length and height.

Rating, Tare Mass and Payload of Containers

Rating Rating is the maximum gross mass (or weight), that is, the maximum permissible weight of a container plus its contents. The rating of a 20' dry cargo container is 24,000 kgs. (52,900 lbs.), and a 40', including the high cube container, is 30,480 kgs. (67,200 lbs.).

Tare Mass Tare Mass---tare weight or tare ---is the mass (or weight) of empty container, including all fittings and appliances used in a particular type of container in its normal operating condition. The tare mass of containers may vary due to the different construction techniques and materials used in the container. A 20' x 8.5' dry cargo container may weigh 1,800 kgs. to 2,400 kgs., a 40' x 8.5' may weigh 2,800 kgs. to 4,000 kgs, and a 40' x 9.5' may weigh 3,900 kgs. to 4,200 kgs. Some dry cargo containers may fall outside the indicated weight range. The reefer weighs more than a dry cargo container of the same size.

Payload Payload is the maximum permitted mass (or weight) of payload, including the dunnage and cargo securement arrangements that are not associated with the container in its normal operating condition. Therefore, Payload = Rating - Tare Mass. If the tare mass of a 20' dry cargo container is 2,400 kgs. and a 40' is 3,900 kgs., the payload of 20' is 21,600 kgs. (i.e., 24,000 kgs. minus 2,400 kgs.) and 40' is 26,580 kgs. (i.e., 30,480 kgs. minus 3,900 kgs.). However, the exporter may be prohibited to have that much payload in areas where there are legal limitations to the overall load of a vehicle. In exporting, it is common to encounter a payload of 17,500 kgs. or less in the 20' container, and 24,000 kgs. or less in the 40' container.

The Marking and Identification of Containers

The rating, tare mass and payload of a container is marked on its wall, usually on the end (rear) door in the case of an end- loading dry cargo container. Each container has an identification code or container number---a combination of the 4letter characters that identify the owner (the operator of container) and the 7- numeric characters that identify the container. The container number can be found on the outer and inner side walls. The container number is entered on the bill of lading to facilitate the identification and tracking of the container and the cargo.

Table and Diagram: Dimension of General Purpose Containers

Dimension of General Purpose Containers CONTAINER Nominal Dimension External 6.096 m 19' 4.25" Internal 5.899 m 40' External 12.192 m 39' 5.375" Internal 12.024 m 40' Hicube External 12.192 m 39' 5.375" Internal 12.024 m 2.353 m 2.692 m 76.172 cbm 66 cbm 2.438 m 2.896 m 2690 cft 2350 cft 7' 8.625" 8' 10" 2.353 m 8' 2.388 m 9' 6" 67.535 cbm 58 cbm 2.438 m 2.591 m 2385 cft 2050 cft 7' 8.625" 7' 10" 2.353 m 8' 2.388 m 8' 6" 33.131 cbm 28 cbm 2.438 m 2.591 m 1170 cft 1000 cft 7' 8.625" 7' 10" Length 20' Width 8' Height 8' 6" Capacity Cubic Feet Cubic Meter Recommended Load Volume Cubic Feet Cubic Meter

NOTE: Containers with the same external length may not have exactly the same internal length and width. The Recommended Load Volume (RLV) refers to the suggested maximum cube to use in calculating a full container load. The RLV can be about 10-15% less than the container capacity, depending on the export pack dimensions.

Rear view of 20' x 8.5' container

CAUTION: Miscalculated capacity may result in a large empty and unusable space or a

shortage in space. For example (see 20' x 8.5' container diagram on the left), the master cartons have a uniform height of 20 inches, and the length and width are greater than the height. If 1170 cubic feet is used to calculate a 20' full container load, most likely some cartons will not fit despite the empty space of about 170 cubic feet. You cannot stuff the remaining cartons into the remaining 14" high empty space.

Rating, Tare Mass and Payload of Containers

Rating Rating is the maximum gross mass (or weight), that is, the maximum permissible weight of a container plus its contents. The rating of a 20' dry cargo container is 24,000 kgs. (52,900 lbs.), and a 40', including the high cube container, is 30,480 kgs. (67,200 lbs.).

Tare Mass Tare Mass---tare weight or tare ---is the mass (or weight) of empty container, including all fittings and appliances used in a particular type of container in its normal operating condition. The tare mass of containers may vary due to the different construction techniques and materials used in the container. A 20' x 8.5' dry cargo container may weigh 1,800 kgs. to 2,400 kgs., a 40' x 8.5' may weigh 2,800 kgs. to 4,000 kgs, and a 40' x 9.5' may weigh 3,900 kgs. to 4,200 kgs. Some dry cargo containers may fall outside the indicated weight range. The reefer weighs more than a dry cargo container of the same size.

Payload

Payload is the maximum permitted mass (or weight) of payload, including the dunnage and cargo securement arrangements that are not associated with the container in its normal operating condition. Therefore, Payload = Rating - Tare Mass. If the tare mass of a 20' dry cargo container is 2,400 kgs. and a 40' is 3,900 kgs., the payload of 20' is 21,600 kgs. (i.e., 24,000 kgs. minus 2,400 kgs.) and 40' is 26,580 kgs. (i.e., 30,480 kgs. minus 3,900 kgs.). However, the exporter may be prohibited to have that much payload in areas where there are legal limitations to the overall load of a vehicle. In exporting, it is common to encounter a payload of 17,500 kgs. or less in the 20' container, and 24,000 kgs. or less in the 40' container.

The Marking and Identification of Containers

The rating, tare mass and payload of a container is marked on its wall, usually on the end (rear) door in the case of an end- loading dry cargo container. Each container has an identification code or container number---a combination of the 4letter characters that identify the owner (the operator of container) and the 7- numeric characters that identify the container. The container number can be found on the outer and inner side walls. The container number is entered on the bill of lading to facilitate the identification and tracking of the container and the cargo.

Table and Diagram: Dimension of General Purpose Containers

Dimension of General Purpose Containe rs CONTAINER Nominal Dimension External 6.096 m 19' 4.25" Internal 5.899 m 40' External 12.192 m 39' 5.375" Internal 12.024 m 40' Hicube External 12.192 m 39' 5.375" Internal 12.024 m 2.353 m 2.692 m 76.172 cbm 66 cbm 2.438 m 2.896 m 2690 cft 2350 cft 7' 8.625" 8' 10" 2.353 m 8' 2.388 m 9' 6" 67.535 cbm 58 cbm 2.438 m 2.591 m 2385 cft 2050 cft 7' 8.625" 7' 10" 2.353 m 8' 2.388 m 8' 6" 33.131 cbm 28 cbm 2.438 m 2.591 m 1170 cft 1000 cft 7' 8.625" 7' 10" Length 20' Width 8' Height 8' 6" Capacity Cubic Feet Cubic Meter Recommended Load Volume Cubic Feet Cubic Meter

NOTE: Containers with the same external length may not have exactly the same internal length and width. The Recommended Load Volume (RLV) refers to the suggested maximum cube to use in calculating a full container load. The RLV can be about 10-15% less than the container capacity, depending on the export

pack dimensions.

Rear view of 20' x 8.5' container

CAUTION: Miscalculated capacity may result in a large empty and unusable space or a shortage in space. For example (see 20' x 8.5' container diagram on the left), the master cartons have a uniform height of 20 inches, and the length and width are greater than the height. If 1170 cubic feet is used to calculate a 20' full container load, most likely some cartons will not fit despite the empty space of about 170 cubic feet. You cannot stuff the remaining cartons into the remaining 14" high empty space.

Containerized Shipments

The use of containers in export shipments makes the transport and handling easier and faster. The crane and gantry are commonly used in handling containers. The forklift is also used at the docks and container terminals to move the 20' and shorter dry cargo containers, which are equipped with forklift pockets---fork pockets or tine pockets. The ports worldwide handle over 100 million TEUs annually. The unit TEU (twenty-foot equivalent unit) is used to express the relative number of containers based on the equivalent length of a 20' container. For example, 100 containers of 20' is 100 TEUs, while 100 containers of 40' is 200 TEUs. The container ships used in the international traffic are designed with the cells (compartments with cell guides) resembling a honeycomb wherein the containers are placed, thus named cellular container ships . The ships are bigger and faster nowadays, especially those used in the deep-sea voyage (long haul). Those rated below 20 knots are common in the short-sea voyage (short haul). The knot is

a unit of ship's speed, being one nautical mile per hour. One nautical mile is 1.852 kilometers. A ship that steams at 20 knots is moving at a speed of about 37 kilometers per hour. Some cellular container ships in the 20 to 23 knot range can accommodate 2,000 to 3,000 TEUs. Some rated 24 knots have a carrying capacity of 4,000 to 4,900 TEUs and load of 56,000 to 75,000 metric tons. The length of the vessel can be about 900' (275 meters) and the beam---the widest part of a ship---can be about 125' (38 meters). The size of vessel is huge compare to a standard football field having a goal line of 300' (91.44 meters) and an end line of 160' (48.77 meters).

Convenience of Containers in Multimodal Transport and Transhipment Containers are designed to facilitate the carriage of goods without intermediate reloading. They are fitted with devices permitting their ready handling, particularly in the multimodal transport and transhipment (the word "transhipment" is also written with two letter 's' as "transshipment"). The prefix 'multi-' means at least two or many. The term mode refers to the way or means. Multimodal transport means at least two different modes of transportation. In export shipping, it refers to delivery using a combination of usually ocean and land (rail or road) carriers, and using only one shipping document known as through bill of lading or combined transport bill of lading, issued usually by the ocean shipping company or its agent.

Theft, Pilferage, Damage, and Insurance The cargo security of container shipments against theft, pilferage and damage is improved, especially in the CY/CY container service. Hence, the cargo insurance in a container shipment generally is lower than in a break-bulk shipment. The metal seal that is provided by the carrier and used in securing the container doors is tamperproof, but it is easily removed. In some countries, the importer's customs broker may use padlocks to secure the doors of container for their client once the FCL (full container load) shipment reached the destination port.

Importer's Specified Container Shipping Company

Importers may specify in the purchase order and/or the letter of credit (L/C) the container shipping company or the vessel to use for their shipment. Big importers, such as chain stores, and large shippers may have a contract with the shipping company to deliver an annual minimum TEU (twenty- foot equivalent unit) at preferred or discounted freight rates.

Container Size, Number and Load Options

The cargo weight and cube influence the size and number of containers needed for an order. The term cube refers to the cubic measurement of cargo. From the analysis in the Case Sample: Container Selection (1) below, it is obvious that not all 1,500 cartons (2,250 cu. ft. or 63.713 CBM) will fit into two 20' containers or one 40' standard container. A solution is to request the importer to adjust the order to 1,365 cartons (2,047.5 cu. ft or 57.979 CBM) to make one 40' FCL (full container load), in case the high cube container (the hicube ) is not available. The alternate solution is to use a 40' hicube. However,

not all shipping companies and sea routes have the hicube, there are legal limitations to the overall height of a vehicle in certain areas (e.g, tunnel and underpass) and countries, and the FCL (full container load) freight rate of hicube is higher than the standard container.

Some of the shipping companies having high cube containers include:

APL (U.S.A.) Evergreen (Taiwan) Hanjin (South Korea) Hapag-Lloyd (Germany) "K" Line (Japan) Maersk (Denmark) NYK (Japan) OOCL (Hong Kong-Taiwan) Sea-Land (U.S.A.)

Case Sample: Container Selection (1)

An importer orders 1,500 cartons of product DX. The gross weight of each carton is 10.5 kilograms and its length-width-height is 1.5' x 1' x 1' (1.5 cu. ft. or 0.04248 CBM). The nature of product DX demands the stowage of cartons in upright position. The cargo gross weight of 15,750 kilograms suits a 20' or a 40' container. The total cube is 2,250 cu. ft. (63.713 CBM). The capacity of a 20' container is about 1,170 cu. ft. (33.131 CBM) and a 40' is about 2,385 cu. ft. (67.535 CBM). It seems that all 1,500 cartons will fit into two 20' containers or one 40' standard container, but the figure is misleading. It is important to consider the excess, but unusable, space generated from the stowage of odd sized cartons. Analysis on some possible methods of stowing product DX and the total number of cartons that will fit into a container, based on the internal dimension of the general purpose container and the Diagram: Package Orientation, is as follows:

Method of Stowing (A) (B) (C) Stowing the front (length) of all cartons parallel to the side (length/deep) of container. Stowing the front (length) of all cartons parallel to the end (width/wide) of container. Crosswise stowing---alternate each row in the wide (shown below) using the methods (A) and (B), that is, a row of CA alternate with a row of CB presented below.

Container 20' x 8.5' Standard Container deep wide high Total:

Method (A) 12 rows 7 rows 7 layers 588 cartons

Method (B) 19 rows 5 rows 7 layers 665 cartons

Cube:

882 cu. ft.

997.5 cu. ft.

Container 20' x 8.5' Standard Container deep wide high Total: Cube:

CA 12 rows 3 rows 7 layers 252 cartons

CB 19 rows 3 rows 7 layers 399 cartons

Method (C) (C) = CA + CB

651 cartons 976.5 cu. ft.

Container 40' x 8.5' Standard Container deep wide high

Method (A) 26 rows 7 rows 7 layers

Method (B) 39 rows 5 rows 7 layers 1,365 cartons 2,047.5 cu. ft.

Total: 1,274 cartons Cube: 1,911 cu. ft.

Container 40' x 8.5' Standard Container deep wide high Total:

CA 26 rows 3 rows 7 layers 546 cartons

CB 39 rows 3 rows 7 layers 819 cartons

Method (C) (C) = CA + CB

1,365 cartons

Cube:

2,047.5 cu. ft.

Container 40' x 9.5' deep

Method (A) 26 rows 7 rows 8 layers

Method (B) 39 rows 5 rows 8 layers 1,560 cartons 2,340 cu. ft.

High Cube wide Container high

Total: 1,456 cartons Cube: 2,184 cu. ft.

Container 40' x 9.5' deep

CA 26 rows 3 rows 8 layers 624 cartons

CB 39 rows 3 rows 8 layers 936 cartons

Method (C) (C) = CA + CB

High Cube wide Container high Total: Cube:

1,560 cartons 2,340 cu. ft.

Maximized Use of a Container Capacity

The essence in maximizing the use of a container capacity is to stuff the most cubes (i.e., largest cubic measurement) into a container that would give the lowest freight cost. If the capacity of a container is 1,170 cu. ft., it does not mean that the exporter must (or can) fully stuff it up to 1,170 cu. ft.. This can seldom be done due to the restrictions imposed by the kind of cargo and the type and size of the export pack. The freight cost per cubic unit generally is lower when more cubes are stuffed into a container. However, when the total cube is too close to the container capacity, unloading and

reloading of container may happen. The cost of extra time and labor spent on unloading and reloading usually is much more than the unit cost of freight saved for stuffing in more cubes. It would be fortunate if there is no cargo overflow---a situation where some export packs cannot fit into the container because the remaining space does not accommodate the size of the packs. The recommended load volume provides a guide in calculating a full container load (FCL), which helps in avoiding cargo overflow.

Case Sample: Container Selection (2)

In cases where the importer uses his/her own consolidator in handling the delivery in an FOB sales term, the exporter may not worry about maximizing the use of a container capacity. For example, assuming that in the Case Sample: Container Selection (1) the importer orders 665 cartons of product DX at FOB price and will let his/her own consolidator, which is located in the importer's country and has an office in the exporter's country, handle the forwarding. The consolidator, knowing that the cargo is product DX but not knowing the total weight and cube of the proposed consignment, may quote the importer as follows:

Quotation - Ocean Freight FROM TO WEIGHT MEASURE COMMODITY : : : : : FOB Port of Origin Importer's Warehouse Per 1000 Kgs Per Cubic Meter Product DX

FREIGHT RATES : 20' Std. Container CY/CY LCL Minimum US$2,145 US$65 W/M US$125

The Std. Container refers to the 8.5' high standard container. The CY/CY is explained in Modes of CY and CFS Container Services The LCL is explained in FCL versus LCL The W/M is explained in Weight or Measure The Minimum is the minimum billing or minimum charge in the freight service. The above quote includes the ocean freight and the inland freight and handling charge in the importing country. The brokerage fee and customs duty in the importing country are on the importer's account. The cube of 665 cartons is 997.5 cu. ft. (i.e., 665 cartons x 1.5 cu. ft.) or 28.25 CBM. The total freight in the LCL (less container load) is US$1,836.25 (i.e., 28.25 CBM x US$65; please see the explanations in the Case Sample: Weight or Measure), while in a 20' container is US$2,145. In such a case, the exporter does not have to worry about maximizing the use of a container capacity.

Palletized Cargo in Container Shipments

The Table: Pallet Count below gives an idea of the number of pallets a standard dry cargo container can accommodate, assuming that each pallet is stacked with cargo to 4.5' high and each pallet itself is about 5.5" high (or the total height of each loaded pallet is about 5 feet). To show the gross weight (Gr. Wt.) of each pallet, it is assumed that the acceptable maximum payload to consignees in a 20' container is 17,500 kgs. and in a 40' is 24,000 kgs..

Table: Pallet Count

20' Container
(for example with 17,500 kgs. payload) Pallet Nominal Size Total Gr. Wt. Total No. of Pallet No. of Each Pallet Cu. Ft. Pallet (kgs.) Deep Wide 45" x 53" 45" x 45" 44" x 52" 44" x 44" 41" x 49" 40" x 48" 40" x 40" 36" x 45" 36" x 36" 35" x 44" 34" x 45" 33" x 44" 4 5 4 5 5 5 5 6 6 6 6 7 2 2 2 2 2 2 2 2 2 2 2 2 8 10 8 10 10 10 10 12 12 12 12 14 663 703 636 672 698 667 556 675 540 660 638 706 2,188 1,750 2,188 1,750 1,750 1,750 1,750 1,458 1,458 1,458 1,458 1,250

40' Container
(for example with 24,000 kgs. payload) Pallet Nominal Size Total Gr. Wt. Total No. of Pallet No. of Each Pallet Cu. Ft. Pallet (kgs.)

Deep Wide 45" x 53" 45" x 45" 44" x 52" 44" x 44" 41" x 49" 40" x 48" 40" x 40" 36" x 45" 36" x 36" 35" x 44" 34" x 45" 33" x 44" 8 10 9 10 10 10 11 13 13 13 13 14 2 2 2 2 2 2 2 2 2 2 2 2 16 20 18 20 20 20 22 26 26 26 26 28 1.325 1,406 1,430 1,344 1,396 1,334 1,222 1,463 1,170 1,430 1,381 1,412 1,500 1,200 1,333 1,200 1,200 1,200 1,091 923 923 923 923 857

The

indicates the more frequently used pallet size in the export shipments.

It is apparent from the Table: Pallet Count that the palletized cargo leaves a lot of excess space, considering that the capacity of standard container in a 20' is about 1,170 cu. ft. (33.131 CBM) and in a 40' is about 2,385 cu. ft. (67.535 CBM). Therefore, if the palletized cargo is light, the freight cost per cubic unit in a container is high. The moving and static load capacity of a pallet may vary considerably. For safety reasons, limit the weight of the palletized load to 1,000 kgs. (2,204.6 lbs.). The packing (loading) of a container generally is faster when the cargo is palletized. However, the loading of palletized cargo can be time consuming if the loading equipment, such as forklift and pallet truck, cannot enter the container (please see Packing (Loading) and Emptying the Containers for related information).

Packing (Loading) and Emptying the Containers

The hand packing and emptying of containers is still common in many countries. The time required in packing or emptying a container depends on the kind, size and weight of the cargo, the means (manual or mechanical), and the number of persons doing the packing or emptying. Packing generally takes more time than emptying.

Unitized Load Unitizing or unitization is the assembly and packing of a number of cargo, either the same or different items, into a standardized or compact unit for ease of handling by the mechanical equipment. The palletized cargo, container load and carload are examples of a unitized load. The unitized load facilitates the loading, unloading and inventory of shipment, and improves the cargo security against theft, pilferage and damage.

Turn-Over Rate of Containers In the CY/CY, CY/CFS and CFS/CY container services, the carrier allows the shipper or the consignee, as the case may be, to retain (hold) the container at their premises normally for 24-48 hours only, in order to maximize the turn-over rate of the container. An overtime use charge, known as demurrage, is collected on overstayed containers. In special cases, such as when the shipper or the consignee is doing a substantial amount of business with the carrier, some carriers may allow a longer time without charging demurrage.

The Use of Loading Equipment

Not all shippers have a container loading dock or raised bank with suitable dock plate at their premises, where the forklift and pallet truck can enter the container. The cargo is often manually or mechanically lifted from the ground onto the container that sits on the chassis (the bogie) or flatbed truck (the open truck). The inclining belt conveyor sometimes is used to move the cargo from the ground up to the container doors, and the roller conveyor is used to convey the cargo from the container doors to the inner section, particularly when packing a 40' container, which is deep.

In case the shipper's premises have a raised bank and the forklift is used, the forklift must have a lift mast that is non-rising and less than 7' 6" (i.e., less than 90 inches), in order to allow cargo to be forked into a standard dry cargo container.

Inspecting the Container

In the case of a CY/CY or CY/CFS container service, the shipper has to arrange for the drayage of the empty container from the carrier's container terminal to the shipper's premises. The shipper must inspect the container to ensure it will adequately protect the cargo. In a dry cargo container, the doors, walls and ceiling demand the utmost attention. The doors must be in good working condition and the door locking bars should secure and lock properly. The load may push against the container doors during a rough sea voyage. Even though the rating of a 20' container is 24,000 kgs., the doors cannot withstand that much pressure of solid load pushed against them during conveyance. The walls and ceiling must be free from cracks or damage to prevent water and moisture from entering. There is a chance that a dry cargo container will be carried on deck since the cellular container ship carries about one-third of the containers on deck. The possible ingress of the sea water, rain and salt- laden moisture through a damaged container may ruin the cargo. Always inspect the container before using it. If a container was contaminated (e.g. chemical spill) in prior use, then using the same container can be hazardous. Extra caution must be taken when packing food products in a dry cargo container. Some food products may absorb odor and moisture.

Stowage of Container

Never allow anyone to smoke inside a container. A carelessly discarded cigarette can cause a serious fire that may destroy the cargo and the ship, and may cause the loss of life.

In tropical areas, the air inside a dry cargo container is hot, humid and suffocating, especially inside a 40' container. To relieve discomfort when packing a container, it is necessary to use forced ventilation with an electric blower or fan. The air humidity is high, especially during the wet or rainy season. Forced ventilation can minimize humid air from being trapped inside a container, as the air may condense into liquid and damage the cargo when the container enters a subzero temperature area. The weight of cargo must be distributed evenly within the container. As a rule of thumb, the center of gravity should not be above half the height of the container, and it should be within two feet from the center of container in the front-rear direction and within one foot in the sidewise (transverse) direction. Cargoes like video monitors and glasswares have a stacking limit or the maximum stack. Otherwise, the compression from excess weight of overlaying packages may damage the goods underneath. For this reason, heavier packages should never be stowed above lighter packages. Liquids should never be stowed above non- liquids. Keep soft packages away from other packages or objects with protrusions or sharp corners, to preve nt damage cause by movement at sea and on land (rail and truck). A ship at sea may move in different directions simultaneously. Always apply dunnage (i.e., material used to separate and protect the cargo from damage during conveyance, for example, foam, mat and fiberboard) and/or cargo securements when necessary to prevent the cargo from crashing and cascading inside the container. Cascaded cargo may lie against the container doors, posing danger to any person who opens the doors.

Efficient Packing of Containers --Corrugated Cartons, Wooden Cases/Boxes, and Bales

The basic information on how to efficiently pack (load) the containers is being discussed here. There are several container- loading software in the market in which the exporters and shippers may use to generate the efficient way of packing (loading) the containers. The cube relation, that is, the dimension of export pack in relation to the internal dimension of container, is used to efficiently pack (load) a container. Referring to the Diagram: Package Orientation below, a regular-shaped export pack (e.g. carton) has six different possible orientations as follows:

Export Pack Orientation

(1) (2) (3) (4) (5) (6)
LEGEND:

A || D A || D A || H A || W A || H A || W

B || W B || H B || W B || D B || D B || H

C || H C || W C || D C || H C || W C || D

"||" means parallel to "A" represents the external length of carton "B" represents the external width of carton "C" represents the external height of carton "D" represents the internal length (deep) of container "W" represents the internal width (wide) of container "H" represents the internal height of container

The orientation or a combination of orientations that allows the greatest number of packs or the highest multiple of packs is the most efficient method of packing. Referring to the Case Sample: Container Selection (1), the method (A) of stowing the container is the export pack orientation (1) shown above, the method (B) is the orientation (4), and the method (C) is the combination of orientations (1) and (4). The product DX demands the stowage of cartons in an upright position. Other orientations cannot be used as the product could be damaged. Further to the above case sample, assume that the product DX can be stowed in any orientation. The different multiples of carton (of the product DX) that can be packed into a 40' x 8.5' standard dry cargo container, based on the external dimension of carton A = 18" B = 12" C = 12" and the internal dimension of 40' container D = 473" W = 92"

H = 94" are as follows:

Export Pack Orientation (1)

Multiple of Carton Total No. of Cartons

D W H D H W H W D

A = 26 B = 7 C = 7 A = 26 B = 7 C = 7 A = 5 B = 7 C = 39 A = 5 B = 39 C = 7 A = 5 B = 39 C = 7 A = 5 B = 7 C = 39

26 x 07 x 07 = 1,274

(2)

26 x 07 x 07 = 1,274

(3)

05 x 07 x 39 = 1,365

(4)

W D H H D W W H D

05 x 39 x 07 = 1,365

(5)

05 x 39 x 07 = 1,365

(6)

05 x 07 x 39 = 1,365

Export pack orientations (3) to (6) have the highest number of cartons, thus are the most efficient way of packing. In practice, the orientations (1), (4), and a combination of (1) and (4) are often used.

Diagram: Package Orientation

EXPORT PACK

CONTAINER

Pallet Stowing Patterns in a Container

The pallet stowing patterns [L], [M] and [N] presented below as viewed from the top of the container:

Pattern [L]

Pattern [M]

Pattern [N]

Pallet Yield in a Container

Referring to the Diagram: Palletized Cargo and Diagram: Container, and the pallet orientations [1] and [2] below,

Pallet Orientation
[1] [2]

Y || D Y || W

Z || W Z || D

LEGEND:

"||" means parallel to "Y" represents the side of pallet "Z" represents the side of pallet "D" represents the internal length (deep) of container "W" represents the internal width (wide) of container

a comparison of the pallet yield in the 20' and 40' dry cargo containers, based on the total height of each loaded pallet of about 60" and the internal dimension of 20' container D = 232" W = 92" and the internal dimension of 40' container D = 473" W = 92" is presented in the Table: Pallet Yield below:

Table: Pallet Yield

20' Container Pallet Stowing Pattern >>

Pallet Orientation >>

[L] [1]

[L] [2]

[M]

[N]

[1] + [2] [1] + [2]

Total Total Pallets Pallets

Total Pallets

Total Pallets

% Floor Utilized

Pallet Size Y Side 45" 45" 44" 44" 41" 40" 40" 36" 36" 35" 34" 33" Z Side 53" 45" 52" 44" 49" 48" 40" 45" 36" 44" 45" 44" 5 10 5 10 5 5 10 12 12 12 12 14 8 10 8 10 8 8 10 10 12 10 10 10 11 11 12 10 10 12 11 10 9 9 10 10 89.39% 94.87% 85.76% 90.70% 94.12% 89.96% 74.96% 91.08% 72.86% 86.58% 86.02% 95.24%

40' Container Pallet Stowing Pattern >>

Pallet Orientation >>

[L] [1]

[L] [2]

[M]

[N]

[1] + [2] [1] + [2]

Total Total Pallets Pallets Pallet Size Y Side 45" 45" 44" 44" 41" 40" Z Side 53" 45" 52" 44" 49" 48" 10 20 10 20 11 11 16 20 18 20 18 18

Total Pallets

Total Pallets

% Floor Utilized

87.69% 93.07% 94.64% 88.98% 20 20 20 20 92.33% 88.24%

40" 36" 36v 35" 34" 33"

40" 45" 36" 44" 45" 44"

22 26 26 26 26 28

22 20 26 20 20 20 23 23 24 22 22 24 23 22

80.89% 96.79% 77.43% 92.01% 91.41% 93.43%

The above indicates the stowing pattern is inapplicable or unnecessary due to the largesized pallet or pallet with equal sides. The % Floor Utilized is based on the highest Total Pallets (i.e., the highest total number of pallets in a container for the given pallet size, stowing pattern and pallet orientation).

Stack Loading of Pallets

Referring to the Table: Pallet Yield above, the number of pallets in a container can be doubled by double stacking of pallets, but at the expense of the total height and the gross weight of each loaded pallet. Stack loading is possible only if the cargo underneath can stand up to the compression from the overlaying pallet, and the center of gravity does not exceed half the height of the container. To prevent the cargo beneath the stack from being torn and damaged, use dunnage like plywood, compressed particle board, fiberboard, and matting, to separate the lower and upper pallets. L-shaped wood or steel corner supports can be used to give added strength to the packages. To prevent the pallets from shifting and crushing inside the container, block and brace the pallets at the voids with lumber and plywood, or secure them with chains, ropes and straps to the bull rings at the upper and lower corners of the side walls of the container.

Interlocking of Export Packs

Interlock the export packs (e.g. cartons or bags) on a pallet and inside a container wherever possible. Please see the Diagram: Interlocked Cargo below. The interlocked cargo provides load stability, giving a compact stow that reduces the potential of collapse with movement on land, air and at sea.

Diagram: Interlocked Cargo

------------------------Cargo can be stretch wrapped with plastic film to protect against dirt, theft or loss, and to stand up to rough handling in transit. -------------------------

Pallet Constructions and Designs

Pallets are built with varied construction techniques. The materials commonly used in the construction of pallets are wood (softwood and hardwood) and plastic (high density polyethylene). Metals (steel and aluminum) are also used but less frequently. The low cost softwood pallet---made of softwoods like pine and spruce---is used for light cargo and it is expendable. The hardwood pallet---made of hardwoods like ash and maple--costs more but has greater strength than the softwood pallet, and is good for repeated use. The wooden pallet is often customized to suit the type, size and weight of the exporter's cargo and to meet handling and loading requirements. The plastic pallet generally costs more than a wooden pallet of the same size, but it is chemical and moisture resistant, cleans easily, is lighter, and will not splinter. Hence, the plastic pallet is more durable than the wooden pallet. Nevertheless, the wooden pallet is used most often in export shipments.

Basic Pallet Designs Two -Way or Four-Way Pallets A two -way pallet allows forking at the two opposite sides of the pallet, while a four-way pallet allows forking at all four sides. The four-way pallet is good for both pallet orientations [1] and [2].

Two-Way Pallet

Two-Way Pallet

Four-Way Pallet

Four-Way Pallet

Single-Faced or Double-Faced Pallets A single-faced pallet has one full deck (i.e., non-reversible deck), which is often called a skid, while a double-faced pallet has two full decks (i.e., reversible decks). The doublefaced pallet is ideal for stack loading, racking of palletized cargo, and conveyor use.

Single-Faced Pallet Skid

Double-Faced Pallet

With Forklift Pockets or With Forklift or Pallet Truck Ent ries Pallets with the forklift pockets allow forking with a forklift, while pallets with the forklift or pallet truck entries allow forking with either a forklift or a pallet truck. Some pallets are designed with forklift pockets that also permit forking with a pallet truck, in which the rollers beneath the forks of the pallet truck can come in firm contact with the floor of warehouse and container.

With Forklift Pockets

With Forklift or Pallet Truck Entries

Variations of Basic Pallet Designs

Two -Way Single-Faced Pallet It is usually made of wood, with forklift or pallet truck entries.

Two-Way Single-Faced Pallet

Two -Way Double-Faced Pallet It is usually made of wood, with forklift pockets.

Two-Way Double-Faced Pallet

Four-Way Single-Faced Pallet It is usually made of wood or plastic. The four-way single- faced pallet made of wood may have a 'half-deck' at the bottom. The four-way single- faced pallet made of plastic usually does not have a bottom deck.

Four-Way Single-Faced Pallet ('Half-deck' bottom)

Four-Way Double-Faced Pallet It is usually made of plastic or wood, with forklift pockets at all four sides

Four-Way Double-Faced Pallet

RO/RO Vessels and LASH

Besides the full container ship, the RO/RO (roll on/roll off) vessel and the LASH are other systems of water transport used in international trade.

RO/RO (Role On/Role Off ) Vessels The RO/RO vessel (RO/RO or RORO) derived from the traditional car ferry, where motor vehicles are driven on and off by their drivers. RO/RO is popular within the European trade routes. It is also used in other trade routes like the U.S.A.-Central America route and Europe-West Africa route. The RO/RO is equipped with ramp(s) that makes loading and unloading from the side and/or bow (front of vessel) and/or stern (rear of vessel) possible. Some modern RO/ROs are designed as a trailer/break-bulk/container carrier suitable for the deep-sea voyage (long haul), making loading and unloading of containers from the top, like a full container ship, possible using the crane. The type of cargo that can be carried on a RO/RO is flexible, including large objects. The full RO/RO has low stowage factors, as a result of wasted space around the underside of the trailers and other motor vehicles. Therefore, the full RO/RO is not ideal for deep-sea trade. The low stowage factors, however, are compensated for by the quickness of the "turn around' time in ports in the short-sea voyage (short haul). In general, the capital cost for a full RO/RO is lower than the full container ship or the LASH. When the cargo availability is insufficient in a port in the short-sea trade, investment in sophisticated container hand ling installations can be uneconomical. Therefore, the full RO/RO offers a solution to short-sea transport needs. A large area of land for parking trailers and other motor vehicles is necessary while they await loading.

LASH (Lighter Aboard Ship) The lighter aboard ship or LASH---barge-carrier or barge-carrying vessel---is designed to carry lighters (barges), where they are lifted by crane over the stern (rear) of the vessel. The LASH and barge come in different configurations. Some LASHes can accommodate over 24 barges. Each barge may carry 600 to 1,000 metric tons of cargo, which is much bigger than the ocean freight container, and can float and be towed up and down a river or canal, thus the barge is often referred to as the floating container. The LASH is useful in moving a relatively large volume of cargo in the short-sea trade and to and from sites on rivers and canals, such as Rhine Canal in Europe, that cannot be used by the larger ocean- going vessels. The LASH keeps the load in the same vessel for the entire trip, thus reduces cargo handling, transport costs and time. The LASH is popular in Europe, taking advantage of the extensive inland waterway systems which are the cheapest means of inland transport. The export goods from landlocked European countries like Switzerland may move by LASH or other inland

waterway transports to the port of Rotterdam (Netherlands) or Antwerp (Belgium), and transfer to the ocean going vessel for the deep-sea voyage.

Conference Shipping

Conference shipping is provided by the conference carrier or member of a freight conference. The freight conference---conference or steamship conference or liner conference---is a group of operators of vessel who operate on the same routes and cooperate on shipping schedules at the standardized freight rates between ports. Conference shipping has regular sailing schedules, thus is called the liner service. Most ocean freight is carried by conferences. Conference carriers or their agents issue an ocean bill of lading.

Non-conference Shipping

Non-conference shipping is provided by the independent carrier or operator of vessel who is not a member of a freight conference, sometimes called outside shipping. Independent carriers, which carry about 25% of the ocean freight, operate on selected trade routes in competition with conference carriers. Non-conference shipping often does not ha ve regular sailing schedules and freight rates between ports. Consequently, it is perceived as less dependable than conference shipping. Independent carriers or their agents issue an ocean bill of lading.

Charter Shipping

Charter shipping is a tramp service. The term tramp, as used in the ocean shipping, refers to a cargo ship not operating on regular routes and schedules, and picking up cargo only when it is chartered (hired) from the ship operator. While conference and non-conference shipping are for general cargoes, charter shipping usually is for bulk cargoes like oil, coal, ore, and grain. Charter shipping has the lowest freight rate per unit of weight or measure. A charter party is required in charter shipping. A charter party---charter party contract--is a written contract between the ship operator and the charterer (shipper). The contract normally includes the ports, freight rate and time involved in the voyage(s). The ship operator issues a charter party bill of lading. Unless a letter of credit (L/C) permits or calls for a charter party bill of lading, the bank will reject such transport document in the L/C negotiation. Some trade terms used specifically in charter shipping are as follows:

FI Free In The word "free" as used in the charter shipping term means not including. FI is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the cost of loading goods onto the vessel.

FO Free Out FO is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the cost of unloading goods from the vessel.

FIO Free In and Out

FIO is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the costs of loading goods onto the vessel and unloading goods from the vessel.

Please see International Commercial Terms for the different trade terms used in exportingimporting.

Voyage charter The ship is chartered for a single journey and it may involve more than one port of call. The ship operator crews and operates the ship and it is the operator's own ship's master in control of the ship. This type of charter shipping is analogous to the limousine service where the driver, who is in control of the car in a journey, is provided by the car operator.

Time charter The ship is chartered for a period of time. This type of charter shipping is similar to a voyage charter in the crewing and operating of the ship. The contract may call for a specific or unlimited number of voyages within the agreed time.

Bareboat charter The term bareboat means a ship without a crew and ship's master. The charterer (shipper) is in charge of crewing and operating the ship within a period of time, usually a number of years. This type of charter shipping is analogous to a car leasing where the lessor (the car operator) provides the car only and the lessee provides his/her own driver.

Road Freight

The road freight and rail freight are commonly used in the cross-border deliveries, for example, the delivery of export goods between mainland European countries and between North American countries. About 50% to 80% of cross-border deliveries are completed using road freight. Generally, a transit distance within 1,000 kilometers using road freight is competitive compared to rail and air freight. In road freight, like in a RO/RO (roll on/roll off) service, the cargo on a trailer may be accompanied by a driver who completes the journey to the final destination, or another driver continues the journey with the same trailer at certain juncture to the final destination, or a subsequent carrier collects the cargo and trailer or the cargo only and continues the transit to the final destination, such as in the case of a transhipment. The trailers may come in lengths of 45', 48' and 53'. Road freight is widely used in the inland delivery of goods to the port of export. The delivery charge is called the cartage or trucking fee. The hauling charge for transporting the ocean freight container on land, normally not including the loading and unloading of cargo, is called the drayage. In practice, the term "cartage" is used synonymously with "drayage" in certain countries. The cartage, drayage and other inland transport charges (e.g. waterway freight and rail freight) are known as inland freight. Trucking company issues a road waybill, also known as a road consignment note. In some countries, there are legal limitations to the overall height (e.g. 13' 6") and load (gross weight) of a vehicle on freeways and major roads. The transportation of bulk cargo may not be suitable in road freight.

TL versus LTL TL (truckload) or FTL (full truckload) means a full trailer or truck, while LTL (less than truckload; loose truckload) means not a full trailer or truck. The TL resembles the FCL (full container load), while the LTL resembles the LCL (less than container load).

Rail Freight

Rail freight is popular in multimodal transport and transhipment. It is widely used in landbridges. Rail cars--- rail wagons---are available in configurations to accommodate many kinds of cargo. Flat cars---flatbed rail cars---can be 40' to 89' long and can run at 120 kms. per hour. Some rail cars are specially designed to carry road trailers in a road-rail service or TOFC (trailer on flat car) service, which is often referred to as the piggyback. In a COFC (container on flat car) service, for example using 50 flat cars each with a 60-ton capacity, the combined flat cars may carry loads weighing up to 3,000 metric tons, which is far more than a truck or an airplane can carry. Hence, rail freight is very popular in the movement of ocean freight containers and in the transport of bulk cargo in long distance land travel, such as land travel between the East and West Coast ports in U.S.A. and/or Canada. The U.S.A., Canada and other countries have a double-stack train system that moves more freight. The 80' and longer container flat cars may carry 8 TEUs (twenty- foot equivalent units) when the ocean containers are double stacked. Large shippers, who have rail sidings at their facility, may arrange directly with the rail carrier to have the rail cars moved to their facility for loading. The rail carrier will pick up the rail cars at a specified time and move them to the port of export for loading on the vessel. There is also an overtime use charge, as in the use of ocean freight containers, also known as demurrage, that is collected on overstayed rail cars. Rail carriers issue a rail waybill, also known as a rail consignment note.

CL versus LCL The word carload relates to the rail car. CL (carload) or FCL (full carload) means a full rail car, while LCL (less than carload; loose carload) means not a full rail car.

Air Freight

Most air cargoes are carried on passenger airliner. About 80% to 90% of air cargoes are transported by IATA (International Air Transport Association) members. IATA standardizes the rules and regulations for air carriers throughout the world. Air freighters like the Boeing 747-400F can carry loads weighing up to 110.67 metric tons. It can carry 30 IATA Type 2H pallets or containers (10'-high main deck pallet or container, dimension is 96" x 125" x 118") and 32 IATA Type 8 containers (lower deck container, dimension is 60.4" x 61.5" x 64"). The air container permits cargo transport linking air, land and ocean freight without intermediate reloading, using a multimodal transport document. Air freight is often used for high value but low volume cargo. It is generally perceived as expensive. The higher transport charges of air freight, compared to the charges of land and ocean freight, are compensated for by various benefits (of air freight). Airlines or air cargo companies or their agents issue an air waybill (AWB), which is often a straight waybill, that is, the buyer is named the consignee on the waybill and he/she can claim the consignment from the carrier by simply showing proof of identity. Unless the goods are consigned to a third party like a bank, or a cash payment has been received, or the buyer's integrity is unquestionable, it is risky to use a straight waybill in export shipments even if the means of payment is by a letter of credit (L/C) or a cheque (check).

Benefits of Air Freight

Faster delivery The ports world wide can be reached in 1 or 2 days or in a few hours by air freight, thus reducing the risks of theft, pilferage and damage to the goods. Delivery to certain areas may take several weeks to arrive by ocean and land freight. Time sensitive or perishable goods, such as fresh seafood and flowers, often rely on the air freight.

Better security Air freight has a tighter control over its cargo, thus it has better security that reduces the cargo exposure to theft, pilferage and damage.

Less packaging Air freight requires less packaging because of faster delivery and better security. Less

packaging may mean saving freight, packaging and labor costs.

Lower insurance Air freight is faster and has better security than the land and ocean freight, thus the insurance premium rate generally is lower.

Shorter collection time in an open account trade arrangement The time to collect payment in an open account trade arrangement most often runs from the time the customer receives the goods and not from the time the goods are dispatched. Air delivery is fast, thus the collection time is shorter.

The Use of Landbridges as Alternative Routes to the Conventional Ocean Traffic Comparison of Institute Cargo Clauses (A), (B) and (C)

Landbridges

The "landbridge " is a generic term meaning use the land freight as a means of transport connection. The landbridge is a way of transporting cargo from a port or an inland point of origin in the shipper's country to an inland point or a port of final destination in the consignee's country using a combination of usually sea and land, or air and land, or air, land and sea transports, instead of relying fully on journey by water or air, using a multimodal transport document known as through bill of lading or combined transport bill of lading.

The three processes of landbridge are as follows:

Microbridge (Micro -landbridge) Shipment from a country's port to another country's inland destination and vice versa. For example, shipment from Asian port to U.S. Midwest destination, cargo unloads at U.S. West Coast port and connects via rail to the final destination under one bill of lading, instead of eastbound route via Panama Canal or westbound route via Suez Canal to the U.S. East Coast port and then to final Midwest destination. Please see Diagram: Microbridge below.

Minibridge (Mini-landbridge) Shipment from a country's port to another country's port with overland journey in the first country. For example, shipment from Port of Seattle (Washington, U.S.A.) to the Port of Rotterdam (Netherlands), cargo delivers via rail to New York (New York, U.S.A.), and then to Rotterdam.

Landbridge Shipment from a country to another country, and passes overland in a third country. For example, shipment from Kobe (Japan) to Hamburg (Germany), cargo unloads at Los Angeles (California, U.S.A.) and connects via rail to New York (New York, U.S.A.), and then to Hamburg.

The major advantage of landbridge is the speed of shipment, based on the fact that the traffic by land or air is generally faster than by sea, and that the nearest distance between the two points is a straight line. The landbridge is useful for cargo semi-sensitive to time and cost. During winter some ports in the northern hemisphere may be closed due to heavy snow and frozen seaway. Nevertheless, the landbridge keeps the export and import cargo moving. The volume of ocean freight flowing between the East and the West increased considerably in the past decades, especially between the Far East and North America. The growth in cargo traffic is expected to continue. The conventional Eastbound ocean traffic from Asia to the East Coast areas in North America flows via the Pacific Ocean---the Trans -Pacific Route. The route crosses the Panama Canal (in central Panama) into the Caribbean Sea, and then into the Atlantic Ocean. It may take 7-8 hours for ships to negotiate the 82-km. Panama Canal through six pairs of locks. The conventional Westbound ocean traffic from Asia to the Western Europe or the East Coast areas in North America flows via the Mediterranean Sea---the Trans -Mediterranean

Route. The route crosses the Indian Ocean, Red Sea (between Africa and Middle East), Suez Canal (in eastern Egypt, a 161-km. canal linking several lakes and without any locks), and then into the Mediterranean Sea, serving the Mediterranean countries and their neighboring landlocked countries. The voyage continues from the Mediterranean Sea through the Strait of Gibraltar (between Spain in Europe and Morocco in Africa) into the Atlantic Ocean, serving the East Coast areas in North America, and from the Atlantic Ocean northbound to the North Sea and Baltic Sea, serving the North Sea and Baltic countries and their neighboring landlocked countries. An alternate ocean route to the Trans-Mediterranean Route is through the Cape of Good Hope at South Africa, that is, going around the southern tip of the African Continent, but the transit time is much longer.

Panama Canal and Dry Canal in Relation to the Landbridge Services The panamax is the draft limits of the Panama Canal, which imposed a ship's carrying capacity limit to around 3,500 TEUs (twenty-foot equivalent units). Modern container ships exceed the panamax, that is, cannot transit the canal. The future container ships in the deep-sea voyage are expected to be much bigger than those currently in service. The landbridge service that utilizes the West Coast ports in North America becomes more important in the Trans-Pacific Route. There were plans to build a dry canal---rail line for container traffic---linking the Pacific Ocean and the Caribbean Sea in Central American country (e.g. Nicaragua) using the landbridge service, in order to meet the increasing flow of cargo between the East Asia and the North and Latin America.

Feeder Vessels and Transhipments in Relation to the Landbridge Services As export and import traffic increases worldwide, large container ships having a load capacity of 80,000 metric tons or more are expected to service the Trans-Pacific Route and other sea routes, calling at a limited number of deep-sea ports at each end of the voyage. Consequently, the network of feeder services serve by the smaller container ship, called the feeder vessel, serving the large deep-sea ports is expected to expand. In the process, a wider application of the landbridge is indispensable, particularly in North America, and the transhipment of export goods will become more frequent in certain trade routes. The ports of Hong Kong (China) and Singapore in Asia and the port of Rotterdam (Netherlands) in Europe, for example, are popular ports of transhipment in the deep-sea voyage.

Diagram: Microbridge

Double-Stack Train System

MICROBRIDGE

The Use of Landbridges as Alternate Routes to the Conventional Ocean Traffic

Shipment to the European Ports from the West Coast Ports in North America Use the minibridge (mini- landbridge) or the land-sea carriage, that is, freight container from the West Coast port send via rail to the East Coast port, and then by ship to Europe.

Shipment to the European Ports or Areas from the Far East and Australia and Vice Versa Use the landbridge in North America or the sea-land-sea carriage or air-land-sea carriage, that is, ocean vessel or airplane reaches the West Coast port or area in North America and the freight container (or the air cargo transfers to ocean container) connects by rail to the East Coast port or area in North America, and then by ship to Europe. Alternately, use the Trans -Siberian landbridge in the Russian Federation or the sealand carriage or air-land carriage, that is, ocean vessel or airplane reaches the East Coast port (e.g. Port of Nachodka situated in Asia) or area in the Russian Federation and the freight container (or the air cargo transfers to container) connects via Trans-Siberian Railway to the border station in Europe, and then by rail and/or truck to the European countries. Some exporters from Japan, Hong Kong (China) and Australia use the TransSiberian landbridge. Exporters also use the ocean-air service (non- landbridge service) through the Russian Federation, that is, cargo reaches the Russian East Coast port (e.g. Port of Vladivostok situated in Asia) and connect by air to Europe.

Shipment to the East Coast and Midwest Areas in North America from the Far East Ports Use the microbridge (micro- landbridge) or the sea-land carriage, that is, ocean vessel leaves the Far East port and reaches the West Coast port in North America, such as Vancouver (in British Columbia, Canada), Los Angeles (in California, U.S.A.), or Seattle (in Washington, U.S.A.), and the freight container delivers via rail and/or truck from West Coast port to the Midwest and East Coast areas.

Shipment to the West Coast and Midwest Areas in North America from the European Ports

Use the microbridge (micro- landbridge) or the sea-land carriage, that is, ocean vessel leaves the European port and reaches the East Coast port in North America, such as Halifax (in Nova Scotia, Canada), Saint John (in New Brunswick, Canada), or New York (in New York, U.S.A.), and the freight container delivers via rail and/or truck from East Coast port to the Midwest and West Coast areas.

Shipment to the Far East Ports from the East Coast and Midwest Areas in North America Use the microbridge (micro- landbridge) or the land-sea carriage, that is, freight container from the East Coast and Midwest Areas send via rail to the West Coast port, and then by ship to the Far East.

Freight or Tariff Rates

The freight rates for export shipments can be obtained by contacting the carrier directly or the carrier's agent or the freight forwarder or consolidator. The Tariff Ocean and air carriers have freight rates published in a rate book called the tariff, which gives the rates for different kinds of cargo between specific ports worldwide. The freight conference publishes its ocean cargo rates, while IATA (International Air Transport Association) publishes the air cargo rates. There is no price competition among members within the conferences and the IATA. Land (road and rail) carriers also have their tariffs, but the cargo rates are often published independently. Hence, a wider range of rates are often applied among the competing carriers, especially in the highly competitive road transports.

Applicable Tariff Rates The freight rate is often influenced by the volume of traffic on a given route. When an exporter contacts the carrier or carrier's agent for the freight rate, the information normally required of an exporter is the kind of cargo and its intended destination. Information such as the gross weight and total cube of the consignment, the expected date of shipment, and whether the freight will be prepaid or collect may also be required. Then, the carrier or carrier's agent refers to the tariff for the applicable freight rate.

Different Freight Rates and Terminology Used in International Shipments

General Cargo Rates The general cargo rate applies to a shipment of mixed products.

Specific Commodity Rates The specific commodity rate applies to the shipment of a specific product between specified ports. It is lower than the general cargo rate. In practice, most export goods are transported under the specific commodity rate.

NES Rates The NES rate (not elsewhere specified rate) or the NOS rate (not otherwise specified rate), sometimes referred to incorrectly as the FAK rate (freight all kinds rate), applies to a product that is not specifically listed in the tariff for a given route, that is, a product not found under the specific commodity or the general cargo classifications. The NES rate is higher than the specific commodity and the general cargo rates. In case an exporter has a special product that is not listed in the tariff, he/she may apply with the carrier or the freight conference for a specific commodity rate for the product for the specified route. Once the product is listed in the tariff, the exporter can save considerable freight costs in future shipments of such product in the specified route. Box Rates Most ocean freight in modern shipping is containerized. Hence, there is a trend towards the flat rate per container for FCL (full container load) shipments, known as box rate, at times also referred to as FAK rate (freight all kinds rate), instead of the weight or measure that is commonly applied in the LCL (less than container load) shipments. The box rate is convenient in simplifying the freight cost calculation in consignments consisting of a wide range of products. The box rate is commonly used between the ocean carrier and the NVOCC (nonvessel operating common carrier), large shipper (e.g. the giant trading company), or large importer (e.g. the chain store). Through Freight Rates The through freight rate is used in multimodal transport and transhipment. It covers the specified route and mode(s) of transportation to the final destination.

Conference and Non-Conference Rates The term conference rate refers to the rate of the conference carrier. The term nonconference rate refers to the rate of the independent or non-conference carrier. The freight rate from members of a conference is uniform, but it may differ between the

conferences. The non-conference rate varies among the independent carriers. The nonconference rate is lower than the conference rate.

Charter Rates The charter rate used in the charter industry varies greatly among the charter operators. It is the lowest rate per weight or measure. The operator may offer a very low rate on a return trip in order to secure the cargo, for example, in the return trip from a voyage charter.

Freight Rate Breaks Air carriers and some road carriers use a sliding scale of rates or a discount schedule in charging freight. The sliding scale of rates in the air freight may break at 100, 200, 300, 500, and 1000 kilograms (kgs.). As such, an air consignment of 200 kgs. to 299 kgs. has a lower rate than the 100 kgs. to 199 kgs.. The freight rate breaks in road transport may vary greatly among carriers.

Freight Rebates

The granting of a freight rebate to the shipper is not uncommon in the highly competitive transport industry. The grant can be legal or illegal. The commission of the freight forwarder is about 2% to 5% in ocean freight and about 10% in air freight. It is legal for the forwarder in air freight to pay back the shipper portion of the commission it earns from the carrier, but such a payback may be deemed illegal in ocean freight. For example, if an airline quotes a freight rate of US$1,000 for a consignment and the commission of a forwarder is 10% (or US$100), the forwarder may quote the shipper US$950, the US$50 (or 5% of US$1,000) difference represents the payback by such forwarder. In countries where exporters customarily deal directly with the shipping line in ocean freight instead of dealing with the forwarder, it is not surprising that most exporters prefer to deal with the forwarder in air freight instead of dealing directly with the airline, in order to take advantage of the payback.

Conference Discounts and Contract Shippers

The freight conference offers discounts or rebates to the 'loyal' shipper, known as contract shipper, who gives its entire support to members of the conference. When a general cargo contract is signed between shipper and conference, the contract shipper is prohibited from participating directly or indirectly in any arrangements relating to the carriage of cargo by any vessel not operated by one of the conference carriers. The contract shipper usually enjoys a 9.5% immediate discount on the amount of freight ruling at the time of shipment. Some contracts may grant a 10% rebate, instead of an immediate discount on each shipment, after a required period (six months or more usually) of 'loyalty' to the conference.

Weight or Measure in the Freight Cost Calculation

The freight rate on export goods is often based on W/M (weight or measure ), that is, based on the weight or the volume of cargo (the cube or measurement of cargo). The rate uses the comparative relation between weight and volume of cargo. A cargo that is large in relation to its weight is charged according to its total cube, while a cargo that is heavy in relation to its size is charged according to its gross weight. In general, light cargo is charged based on measure, while heavy cargo based on weight. Most sea consignments are charged based on measure, while most air consignments are charged based on weight. The freight cost by weight or measure that will give the carrier the higher revenue is the rate that applies. The unit of ton being used in the freight cost calculation may differ among carriers. It can be a metric ton (2204.6 lbs. or 1000 kgs.), a short ton (2000 lbs. or 907 kgs.), or a long ton (2240 lbs. or 1016 kgs.). The exporter must verify with the carrier which unit is being used. In practice, the most frequently used is the metric ton.

Units of Weight or Measure Commonly Used in the Freight Cost Calculation

LEGEND: MT kg. = metric ton = kilogram

lb. CBM cu. cms. cu. ft. cu. ins.

= pound = cubic meter = cubic centimeters = cubic feet = cubic inches

Weight Mode of Transportation Ocean Freight 1 MT (1000 kgs.)

or

Measure

or

1 CBM (35.3 cu. ft.)

Air Freight

1 MT (1000 kgs.) 1 kg. 1 lb.

or or or

6 CBM (211.8 cu. ft.) 6000 cu. cms. (366 cu. ins.) 166 cu. ins.

Road and Rail Freight

1 MT (1000 kgs.) 1 kg. 1 lb.

or or or

3.3 CBM (116.5 cu. ft.) 3300 cu. cms. (201.3 cu. ins.) 91.3 cu. ins.

Some freight carriers may use the (long ton) 2240 lbs. (as weight) or 40 cu. ft. (as measure ) in the freight cost calculation.

In ocean freight, some freight carriers may use the terms U.S. shipping ton and British shipping ton. One (1) U.S. shipping ton is equivalent to 40 cubic feet, and one (1) British shipping ton is equivalent to 42 cubic feet. Other units may be used in the inland freight cost calculation. For example, the inland freight could be charged on a per package basis, but within a maximum allowable weight and/or cube per package. Some carriers may rate a product on a weight basis only. In the case of irregular shaped cargo, the weight or measure applies, where the measure is determined by taking the three widest dimensions that describe the smallest cubic space enclosing the cargo.

Minimum Bill of Lading A minimum bill of lading---minimum billing or minimum charge---is often required in a freight service. In ocean freight, a minimum of usually 2 or 3 CBM (cubic meters) is required. The freight consolidator may specify the minimum requirement in a dollar amount, instead in CBM. In air freight, a minimum of usually 1 kilogram is required. If a consignment is light and small, it is more economical to ship by air rather than by sea considering the benefits of air freight. In road and rail freight, the minimum requirements vary widely among carriers.

Case Sample: Weight or Measure

Assuming that an ocean carrier or a freight consolidator offers an exporter US$65 W/M for the shipment of 665 cartons of product DX.

The gross weight of each carton is 10.5 kgs. and its length-width-height is 1.5' x 1' x 1', which is 1.5 cu. ft. or 0.04248 CBM per carton. The specified weight is per 1,000 kgs. and measure is per cubic meter. The consignment has a weight of 6,982.5 kgs. (i.e., 10.5 kgs. x 665) and a measure of 997.5 cu. ft. (i.e., 1.5 cu. ft. x 665) or 28.25 CBM (i.e., 0.04248 CBM x 665).

Freight Cost Calculation

The freight cost by weight is: US$65 x (6,982.5 1,000) = US$ 453.86

The freight cost by measure is: US$65 x 28.25 = US$ 1,836.25

The measure of product DX is large in relation to its weight, that is, the freight cost by measure gives the carrier or the consolidator a higher revenue, thus the exporter pays US$1,836.25.

Freight Adjustments

Currency Adjustment Factor (CAF) In times of unstable currency, the freight rate is often quoted with a currency adjustment factor (CAF) to cover an additional charge for currency appreciation. The CAF, if any, is indicated on the bill of lading. The tariff of most international carriers uses the U.S. dollar as the basis of the freight cost calculation. The CAF allows for fluctuations in the value of the dollar against the currency in which the carrier earns its revenues.

Bunker Adjustment Factor (BAF) The term bunker refers to oil. It may also refer to a compartment on a ship for storing fuel, that is, oil in modern ships and coal in old-time steamships. In times of unstable oil prices, the freight is often quoted with a bunker adjustment factor (BAF) to cover an oil price hike. The BAF, if any, is indicated on the bill of lading. The BAF allows for fluctuations in the cost of oil.

Freight Payment --Freight Prepaid and Freight Collect

The term freight used here refers to transportation charges. The INCOTERMS (International Commercial Terms) determine whether the shipper or the consignee is responsible for paying the freight.

Freight Prepaid Freight prepaid means the freight has been paid or prepaid by the shipper. The trade terms CFR (C&F), CIF, DAF, CPT, CIP, DDU, DDP, DES, and DEQ require a prepayment of the cost of main carriage.

In a prepaid delivery, the letter of credit (L/C) normally requires that the words "Freight Prepaid" be marked on the bill of lading (B/L), clearly indicating payment or prepayment of freight at port (or point) of origin. The mark may appear by stamp or be indicated by other means. The words "freight to be prepaid" or "freight prepayable " or similar wording that may appear on the B/L do not prove that the freight has been paid. In a prepaid delivery by a courier, the transport document (i.e., the courier's receipt) issued by a courier or expedited delivery service must show that the courier charges have been paid or prepaid by the shipper.

Freight Collect Freight collect means that the freight still has to be paid by the consignee. The trade terms FOB, FAS, EXW, and FCA require a collection of the cost of the main carriage. In a collect delivery, the letter of credit (L/C) normally requires that the words "Freight Collect" be marked on the bill of lading, clearly indicating freight payable at destination. The mark may appear by stamp or be indicated by other means. A collection charge usually is included in the freight rate or is collected separately. Hence, the freight charged on a collect basis is normally higher than on a prepaid basis.

Shipment Control

Proper control of the date of shipment is very important in the exporting. A delayed shipment may mean losing the order and the customer's trust. In the sample letter of credit (L/C) the latest shipment is March 19, 2001. The latest negotiation is 15 days after the date of shipment which would be April 3, 2001, but the L/C expires on March 26, 2001. Hence, the latest negotiation date would be March 26, 2001 if the

shipment is on March 19, 2001, which means that the UVW Exports must present the documents to The Moon Bank within 7 days after the date of shipment.

The Earliest Date of Shipment Importers may stipulate in the letter of credit (L/C) an earliest date of shipment to prevent the exporter from shipping the goods too early, thus avoiding the high inventory, warehouse congestion and financial strain.

The Latest Date of Shipment The latest date of shipment or the last date for shipment stipulated in the letter of credit (L/C) prevents the exporter from shipping the goods too late, thus avoiding an inventory shortage. This stipulation is important especially for seasonal goods or during a currency devaluation in the importing country, in which a late shipment may render the goods unsaleable or cost more to the importer.

Disregarded Expressions as to the Date for Shipment Expressions such as "immediately", "promptly", "as soon as possible " and the like should not be used for shipments. If they are stated in the letter of credit (L/C), the bank will disregard them.

Partial and Installment Shipments

Partial Shipment The partial shipment---part shipment---is allowed, unless otherwise stipulated in the L/C.

When shipments are made on different dates and/or different ports or points of origin, but the transport documents indicate the same destination and bear the same means of conveyance for the same journey, they are not regarded as covering partial shipments. Please see Case Sample: Non-Partial Shipment below. When shipments are made by post or by courier, if the post receipts or the courier's receipts bear the same date and place of dispatch and have been authenticated by any stamp, signature, mark, or label, they are not regarded as partial shipment.

Installment Shipment Installment shipment means shipping an order in different batches and on different periods stipulated in the letter of credit (L/C). In case of shipments by installment within given periods are stipulated in the L/C, failure to ship any installment within the period allowed will render the L/C unavailable or inoperative for that installment and any subsequent installments, unless the L/C stipulates otherwise.

Case Sample: Non-Partial Shipment

The route of vessel S/S HERMANA voyage No. 8 is from Port A to Port B (both in the seller's country) and then to Port C (in the buyer's country). The transit time between Port A and Port B is 2 days. If the seller makes two separate shipments, one from Port A and the other from Port B, two days apart under one letter of credit (L/C) to the same buyer at Port C via the same vessel S/S HERMANA voyage No. 8, such case is not a partial shipment. However, the L/C in such shipments must indicate (if for example that the Port A and Port B are in the U.S.A.) "shipment from any U.S. ports to Port C", and neither "shipment from Port A to Port C" nor "shipment from Port B to Port C", otherwise a discrepancy will occur.

Customs Closing Date

The customs closing date is the last date that the carrier accepts the cargo for shipment in a specified voyage at designated delivery location or closing location---the container terminal or dock. The exporter must arrange for cargo arrival at the carrier's designated closing location before the cut-off date and time, otherwise he/she may lose the order. The delivery date and location and the customs closing date for the goods are specified in the shipping order (S/O). The authorized delivery date can be 2 days, including the day before the closing date. In case the cargo arrives at the container terminal or dock earlier than the date specified by the carrier, the vessel may not arrive yet and the carrier may not accept the cargo. The cargo may incur warehousing charges if it is not returned to the shipper.

Seaports of the World

Go to continent or region: Africa | America (North) | America (Central) | America (South) | Asia | Middle East | Europe (Western) | Europe (Eastern) | Oceania/Australasia

Certain countries are landlocked and so are inaccessible by deep-sea ocean vessels. Import and export goods must be transhipped in other country(ies) by means of truck and/or rail and/or inland waterway (river, canal or lake) transports. Please see Landlocked Countries and Transhipping Points. Some port names may be spelled differently, for example, Arkhangelsk in the Russian Federation may appear as Archangels. Certain seaport and country names may contain foreign (non-English) characters. Please use Internet Explorer browser to display the foreign characters properly.

For the abbreviation of Canadian provinces and territories and the USA states and territories, please refer to the Gene ral References---Abbreviations - Provinces, States and Territories.

Country (Area)

Seaport
Algiers Annaba Oran Skikda Lobito Luanda Soyo Cotonou landlocked landlocked landlocked Douala Praia landlocked landlocked Pointe Noire Abidjan Djibouti Alexandria Damietta Port Said

Algeria

Angola

Benin Botswana Burkina Faso (Upper Volta) Burundi Cameroon Cape Verde Islands Central African Rep. Chad Congo Cte d'Ivoire (Ivory Coast) Djibouti Egypt

Equatorial Guinea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Libya Madagascar Malawi Mali Mauritania Mauritius Morocco

Bata Malabo Assab Massawa Libreville (Owendo) Port Gentil Banjul Tema Conakry Bissau Mombasa landlocked Buchanan Monrovia Benghazi Tripoli Majunga Tamatave landlocked landlocked Nouakchott Port Louis Agadir Casablanca Ceuta Beira Maputo Nacala Luderitz landlocked Calabar Lagos-Apapa Port Harcourt Warri Pointe des Galets

Mozambique

Namibia Niger Nigeria

Runion

Rwanda St. Helena - Ascension - Tristan da Cunha Sao Tom and Princip Senegal Seychelles Sierra Leone Somalia South Africa

landlocked Jamestown

Sao Tom Dakar Victoria Freetown Berbera Mogadishu Cape Town Durban East London Port Elizabeth Saldanha Bay Port Sudan landlocked Dar es Salaam Mtwara Tanga Zanzibar Lome Sfax Sousse Tunis- La Goulette landlocked Boma Matadi landlocked landlocked

Sudan Swaziland Tanzania

Togo Tunisia

Uganda Zaire Zambia Zimbabwe

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Country (Area)

Seaport
Halifax, NS Montreal, PQ Quebec, PQ Saint John, NB Toronto, ON Vancouver, BC Coatzacoalcos Guaymas Lzaro Crdenas Manzanillo Salina Cruz Tampico Tuxpan Veracruz Anchorage, AK Baltimore, MD Baton Rouge, LA Beaumont, TX Boston, MA Brownsville, TX Buffalo, NY Canaveral, FL Charleston, SC Chicago, IL Cleveland, OH Corpus Christi, TX Detroit, MI Duluth-Superior, MN

Canada

Mexico

U.S.A.

Erie, PA Freeport, TX Galveston, TX Gulfport, MS Hampton Roads, VA Honolulu, HI Houston, TX Jacksonville, FL Lake Charles, LA Long Beach, CA Los Angeles, CA Milwaukee, WI Mobile, AL New Orleans, LA New York, NY Oakland, CA Orange, TX Palm Beach, FL Panama City, FL Pascagoula, MS Pensacola, FL Philadelphia, PA Port Arthur, TX Port Everglades, FL Portland, ME Portland, OR Sacramento, CA San Diego, CA San Francisco, CA Savannah, GA Seattle, WA Stockton, CA Tacoma, WA Tampa, FL Toledo, OH

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Country (Area)

Seaport
Sandy Ground St. John's Oranjestad Freeport Nassau Bridgetown Belize City Hamilton George Town Puerto Caldera Puerto Limon Puntarenas Havana Roseau Rio Haina Santo Domingo Acajutla St. George's Pointe Pitre Santo Tomas de Castilla Cap Haitien Port au Prince Puerto Corts Kingston Fort de France

Anguilla Antigua and Barbuda Aruba Bahamas Barbados Belize Bermuda Cayman Islands Costa Rica

Cuba Dominica Dominican Republic El Salvador Grenada Guadeloupe Guatemala Haiti Honduras Jamaica Martinique

Montserrat Netherlands Antilles Nicaragua Panama

Plymouth Willemstad Curacao Corinto Balboa Colon Cristobal Ponce San Juan Basseterre Castries Kingstown Port of Spain Grand Turk St. Croix

Puerto Rico St. Kitts and Nevis St. Lucia St. Vincent and Grenadines Trinidad and Tobago Turks and Caicos Islands Virgin Islands (U.S.)

Seaports in America (South), Asia and Middle East > Seaports in Europe and Oceania > Landlocked Countries and Transhipping Points >

Languages of the World Capitals of the World

Booking of Shipping Space

The exporter can book shipping space with a carrier or carrier's agent directly or through a customs broker or forwarder. In practice, it is not uncommon for the exporter to select a carrier and shipping schedule and let the customs broker or forwarder book the space.

Choosing the Carrier Unless the importer specifies a carrier, the exporter is free to choose a shipping company or airline 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 territory.

Worldwide Seaports Please see Seaports of the World. Some port names may be spelled differently, for example, Arkhangelsk in the Russian Federation may appear as Archangels. The letters after the port names in Australia, Canada and the U.S.A. represent the state or province where the port is located (please see General References--Abbreviations - Provinces, States and Territories).

Checking the Ocean Shipping Schedules In many countries, the ocean shipping schedules (both outbound and inbound) are published in a major newspaper. In countries where newspapers do not carry shipping schedules, the exporter may contact the carrier, customs broker or forwarder for shipping information. The information is also available from private publishers of shipping schedules.

Carrier - Voyage/Flight No. The phrase "carrier - voyage/flight no." refers to the name of the carrier and its voyage number (in the case of ocean and land freight) or flight number (in the case of air freight). In ocean freight, the name of a carrier usually is 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. ETD is shipment on or about. The term ETS is the estimated or expected time of sailing from the port of origin; it applies to ocean freight. ETS is sailing on or about. 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 stopover in certain ports, particularly congested ones, may extend far beyond the expected time.

Verbal Booking of Space and Dead Freight In many countries, verbal booking of shipping space is accepted, except for dangerous goods. Sometimes, the space booked is no t used and the carrier may levy a charge known as dead freight. The exporter must inform the customs broker or forwarder who booked the space on his/her behalf in advance if the space will not be used, so that other shippers may use the space and to avoid paying the dead freight charge.

Dangerous Goods When shipping dangerous goods, a written application for shipping space is required. If a shipping order is issued for dangerous goods, it does not mean that the goods will be

accepted for loading on board the vessel. When they arrive at the designated customs delivery (closing) location, the goods, shipping order and Dangerous Goods Note are submitted to the ship's master for approval before customs clearance and loading.

Transhipments

The prefix "trans -" means over or to the other side of. Transhipment or transshipment (written with two letter 's')---transit shipment---means a shipment destined to a port or an interior point (location or depot) is best reached by connecting shipment(s) from other port(s) and/or point(s). It is the unloading and reloading of cargo from one means of conveyance to another, in the same or different modes of transportation, during the course of carriage from the place of shipment to the place of destination stipulated in the letter of credit (L/C). Unless otherwise stipulated in the L/C, transhipment is allowed provided that the entire carriage is covered by one and the same transport document. Some exporters refuse to accept transhipment because of a belief that it costs more and is slower than a direct shipment. Some importers have the same belief. Contrary to this belief, by using transhipment the cost to certain destinations can be lower and it can be faster than a direct shipment. For instance, the frequency of sailing to a certain destination in a direct shipment is once every two weeks, but by transhipment to the same destination the frequency of sailing can be once or twice weekly. The point in such an instance is that the greater the supply the lower the cost and the earlier the shipment the earlier the importer may receive the goods. In other words, transhipment may save cost and time. Most ocean freight are containerized in modern shipping. Hence, intermediate reloading of cargo is eliminated in the transhipment, which reduces the cost and time. The transhipment charge usually is included in the through freight rates, but the shipper must verify with the carrier to ensure that no additional transhipment charge will be collected from the consignee. Multilateral agreements make the transhipment possible. With worldwide trades and new trading partners on the rise, new routes for transhipment will emerge. For example, trades between Far East and CIS (Commonwealth of Independent States of former Eastern Bloc), the shipment traditionally passes through the Black Sea, but the transit time is shorter by transhipment via the Middle East country (e.g. Iran). Shipments from Asia and Europe to Central and South America, and vice versa, often require transhipment at ports in North America.

Feeder Vessel and Master Ship In booking the ocean shipping space with a transhipment, the shipping company provides the names and voyage numbers of the feeder vessel and master ship. The master ship sometimes is referred to as the mother ship. The names and voyage numbers of the feeder vessel and master ship are entered in the ocean bill of lading.

Transhipment in Landlocked Countries Certain countries are landlocked and so are inaccessible by deep-sea ocean vessels. Import and export goods must be transhipped in other country(ies) by means of truck and/or rail and/or inland waterway (river, canal or lake) transports. Please see some of the landlocked countries in the Landlocked Countries and Transhipping Points.

Shipping Order (S/O)

The shipping order---shipping permit---is issued by the shipping company to a shipper with a confirmed space booking, authorizing the receiving clerk (cargo checker) at the container terminal or dock to receive a specified amount of goods from the named shipper. A shipping order (S/O) typically contains the space booking number, names and addresses of the shipper and customs broker or forwarder, vessel and voyage number, sailing time, delivery date and location, customs closing date, and number and type of packages. The customs broker or forwarder usually requires the packing list of a consignment in order to book the shipping space and to obtain the S/O and/or to prepare the dock receipt (shipping note). In some cases, the presentation of the packing list and a valid export permit is required to obtain the S/O. The S/O accompanies the dock receipt and the deliverer of the goods presents these two and other documents that may be required in the delivery to the receiving clerk (cargo checker) at the closing location. In certain countries, only the space booking number is needed instead of a formal S/O, since the information in an S/O is found in the dock receipt.

Freight Payment---Freight Prepaid and Freight Collect Principles of Cargo (Marine) Insurance

Export Shipping Instructions

When an exporter engages a custom broker or forwarder to handle the customs declaration, he/she must give instructions on what to do with the shipment in the shipping instructions. The format of the shipping instructions varies, but all the forms essentially contain the same information. One form is often used in different modes of transportation.

B/L Application-Instructions (Bill of Lading Application-Instructions)

Please see the sample B/L Application-Instructions (BLAI) below that is used in ocean shipment. The letter of credit (L/C) is a confidential document. Many exporters prefer not to let the customs broker or forwarder see the L/C, and instead provide a BLAI detailing the requirements and instructions of an ocean shipment. Please refer to the Ocean (Marine) Bills of Lading for the explanations on some of the fields in the sample B/L Application-Instructions (BLAI).

The exporter may provide the BLAI to the customs broker after he/she has obtained a shipping order (S/O) or a space booking number from the carrier. The BLAI usually is provided to the customs broker before obtaining the S/O in cases where the packing list and valid export permit are required to obtain the S/O. The BLAI normally is accompanied by a copy of the commercial invoice and packing list, and the Insurance Application-Instructions if the customs broker is to arrange for insurance. Some exporters supply the original L/C or its photocopy without supplying the BLAI, and let the forwarder manage the rest of the export routines with payment of fees and charges, which may include preparing of export documents and sending them to the bank.

Shipper's Letter of Instructions

The Shipper's Letter of Instructions (SLI) are shipping instructions that are used in air shipment, and at times in ocean shipment. The SLI contains basically the same information as in a B/L Application-Instructions, and it may contain the words "The exporter authorizes the forwarder named above to act as forwarding agent for export control and customs purposes" or the like. The SLI form is available from the carrier or the forwarder.

Sample Form: B/L Application-Instructions --- Export Shipping Instructions

UVW EXPORTS
B/L Application-Instructions Sales Confirmation No. Shipper's Reference Commercial Invoice No. Export/Manufacturer's License No. Name Custom Broker or Forwarder Tel. No. Contact Person Shipping Company or Agent Shipping Order or Booking No. Delivery or Closing Location Dock & Pier No. Container Terminal Fax. No. Ref. No. Tel. No. 88 Prosperity Street East, Suite 707 Export-City and Postal Code, Export-Country Tel: (07) 1234-5678 Fax: (07) 1234-8888 E- mail: shipping@uvwexports.com.jp

Customs Closing Date

A. B.

The CLEAN "ON BOARD" bill of lading is required. The short form (blank back) bill of lading is: Not Acceptable Acceptable

C.

The transport documents issued by the freight forwarder are: Not Acceptable Acceptable

D.

The charter party bill of lading is: Not Acceptable Acceptable

1.

SHIPPER/CONSIGNOR

2.

CONSIGNEE

3.

NOTIFY PARTY

4.

ALSO NOTIFY

5. 6. 7. 8. 9. 10. 11. 12.

CARRIER - VOYAGE/FLIGHT NO. LOADING ON BOARD DATE DISPATCH/TAKING IN CHARGE DATE FROM (Port of Loading) FROM (Place of Dispatch/Taking In Charge) TO (Port of Discharge) VIA (Tranship At) THENCE TO (For Transhipment To)

13.

DESCRIPTION OF PACKAGES & GOODS:

14.

MARKS & NUMBERS:

15.

BILL OF LADING MARKED:

Freight Prepaid

Freight Collect

Other Instructions

ETA At ETA On Issued by:

No. of copy of the Bill of Lading required

Original Copy Date:

Dock Receipt

The dock receipt---shipping note---when signed by the receiving clerk (cargo checker) at the container terminal or dock is a proof of the delivery of goods. Please see the sample Dock Receipt below. The format of the dock receipt varies, but the contents are basically the same. Some dock receipts may include the Commodity Code (of goods) field. In practice, the commodity code of goods may be entered in the "Description of Packages and Goods" field in the dock receipt. The dock receipt is made out by the customs broker following the instructions and information contained in the shipping order (S/O),B/L application-instructions (BLAI or the export shipping instructions) and packing list. The number of copies of the dock receipt required depends on the circumstances. Certain countries require a fixed number, where at least one signed copy is returned to the forwarding agent or the shipper as proof of delivery. The bill of lading (B/L) is issued in due course in exchange for the dock receipt.

The bill of lading (B/L) is made out word for word according to the dock receipt. Therefore, it is very important that the shipper provides the correct information in the B/L application-instructions and packing list, and that the customs broker or forwarder does not make any errors and omissions in the dock receipt, otherwise a discrepancy may occur in the B/L and the bank will reject the documents. The phrase "only clean dock receipt accepted" in the dock receipt is to ensure that the receiving clerk (cargo checker) at the container terminal or dock puts a 'clean' or similar notation on the conditions of goods received. The dock receipt can be clean or foul (unclean, dirty or claused). If a dock receipt is clean, the bill of lading (B/L) issued in due course will be clean, otherwise the B/L will be foul (please refer to the Clean versus Foul Bills of Lading for more information).

Mate's Receipt

The counterpart of the dock receipt that is used in the chartering trades is known as mate's receipt. The mate's receipt is signed by the mate (the deck officer) of the vessel.

Sample Form: Dock Receipt

(Shipping Note)

DOCK RECEIPT

Customs Export Declaration

In many countries, export shipments valued below a minimum requirement may not require a formal customs declaration. The purposes of customs export declaration are to verify and regulate outgoing cargo (including re-export goods) and to collect the statistical data (of the product, quantity, value, and destination) for export references. The format of customs export declaration forms varies from country to country. The form typically contains the information found in the commercial invoice and the bill of lading or waybill. In addition, the form may include:

the business license number and/or tax account number and/or export permit (license) number of the exporter the business license number of the manufacturer from whom the export-trader buys the export goods the commodity code or category of goods

the country of destination and its country code (a numeric country code may be assigned to each importing country by the customs of exporting country for compiling statistics) the name, address and code (or license) number of the customs broker or forwarder the customs charges

The exporter normally must sign an authorization paper (the power of attorney) allowing the customs broker or the forwarder to handle the customs declaration. In certain countries, exporters may prepare the customs declaration forms by themselves and let the customs broker handle the rest of the customs formalities.

Ocean (Marine) Bills of Lading Booking of Shipping Space

Ocean (Marine) Bills of Lading

The bill of lading (in ocean transport), waybill or consignment note (in air, road, rail or sea transport), and receipt (in postal or courier delivery) are collectively known as the transport documents. Please see the sample Ocean Bill of Lading below. The bill of lading (B/L) serves as a receipt for goods, an evidence of the contract of carriage, and a document of title to the goods. The carrier issues the B/L according to the information in a dock receipt,

or in some cases according to a completed working copy of the B/L supplied by the customs broker. The B/L must indicate that the goods have been loaded on board or shipped on a named vessel, and it must be signed or authenticated by the carrier or the master, or the agent on behalf of the carrier or the master. The signature or authentication must be identified as carrier or master, and in the case of agent signing or authenticating, the name and capacity of the carrier or the master on whose behalf such agent signs or authenticates must be indicated. Unless otherwise stipulated in the letter of credit (L/C), a bill of lading containing an indication that it is subject to a charter party and/or that the vessel is propelled by sail only is not acceptable.

The Date of Shipment in Ocean Freight

In cases where the bill of lading (B/L) has pre-printed wording indicating that the goods have been loaded on board or shipped on a named vessel, the issuance date of such B/L is considered to be the date of loading on board or the date of shipment. In cases where the B/L does not have pre-printed wording indicating that the goods have been loaded on board or shipped on a named vessel, the loading on board a named vessel is evidenced by the on board notation (e.g. "on board", "laden on board" or "shipped on board") on the B/L, which must be initialled and dated by the carrier or its agent. The date of the on board notation is considered to be the date of shipment.

Transhipment Clauses in Ocean Bills of Lading

If the bill of lading incorporates clauses stating that the carrier reserves the right to tranship, then the transhipment is allowed even if the letter of credit (L/C) prohibits transhipment.

Loading On Deck

Unless otherwise stipulated in the letter of credit (L/C), the bill of lading (B/L) must not indicate that the goods are or will be loaded on deck. Modern cellular container ships carry about one-third of the containers on deck. Consequently, the B/L may contain a provision that the goods may be carried on deck. If such provision is contained on the B/L, then the loading on deck is acceptable even if the L/C stipulates otherwise, provided that the B/L does not specifically state that the goods are or will be loaded on deck.

" Full Set ... " (as stipulated in the sample Letter of Credit) and " Number of Original B(s)/L "

Full set means all the originals as so issued by the carrier or its agent. A set contains at least two originals. In practice, a set of three originals is the most common.

The number of original bills of lading (Bs/L) may be expressed as 3/3 (read as 'three of three') or 2/2 (read as 'two of two'). In the sample Letter of Credit the L/C stipulates "Full set 3/3 ...", which means that DEF Imports requires a full set B/L containing three originals. If the L/C did not contain the expression "Full set 3/3", then the number of original bills of lading required would depend on the number as so issued by the carrier. It can be a sole original B/L, that is, one original only. The originals are marked as "original" on their face and all have equal value, that is, all have the same validity. The purpose of issuing more than one original is to ensure that the port of destination will receive the original when dispatched separately. The original Bs/L are proof of ownership of goods, one of which must be surrendered to the carrier at destination, duly endorsed by the title holder in the goods in exchange for the goods or the delivery order. When one of the originals is being surrendered to the carrier, the others become invalid.

" ... two (2) non-negotiable copies " (as stipulated in the sample Letter of Credit)

The non-negotiable copy of bill of lading (B/L) should not be confused with the non-negotiable bill of lading or straight bill of lading. The non-negotiable copy of B/L simply means the unsigned copy of the B/L, which is for information purposes. The copies are marked as "non-negotiable". The copies of the B/L can be of any number. The number depends on the requirements of the importer, importing country, shipper, carrier, Chamber of Commerce (if the L/C calls for certification of the B/L), and Consulate (if the L/C calls for consular legalization of the B/L). In the sample Letter of Credit DEF Imports requires two copies of the non-negotiable copy of bill of lading.

" Place of Receipt "

If the place of receipt (or taking in charge) is different from the port of loading, as in the case of multimodal transport, the on board notation or the preprinted wording must include the letter of credit (L/C) stipulated port of loading and the name of vessel on which the goods have been loaded.

" Container No(s). " and " Seal No(s). "

Please refer to The Marking and Identification of Containers. The container number is entered on the dock receipt and the bill of lading (B/L). Under the shipper's load and count arrangement, the shipper or its agent must seal the container before transferring it to the carrier. The container that originates from a bonded factory outside the EPZ (export processing zone) or from a factory inside the EPZ is sealed before leaving the bonded factory or the EPZ. The metal seal for the container is provided by the carrier. The seal number is entered on the dock receipt and the B/L. If a seal is broken for customs purposes, a customs inspector must supervise the breaking of the seal and the resealing of the container. The new seal number replaces the previous number that was entered on the dock receipt.

" Shipper "

Unless otherwise stipulated in the letter of credit (L/C), the bill of lading may indicate as the shipper (the consignor) of the goods a party other than the beneficiary of the L/C.

" Notify Party " and " Also Notify " or " Additional Notify Party "

The notify party is the party that the carrier must notify when the goods arrive at the port of destination. The carrier issues an Arrival Notice informing the notify party about the cargo discharge point, number of packages and other information. The letter of credit (L/C) may require that the carrier notifies a party in addition to the notify party, usually using the words "also notify". The notify party depends on the L/C requirement, it can be the importer, freight forwarder or bank. In the sample Letter of Credit the L/C stipulated "notify the above accountee", in other words the notify party is DEF Imports, 7 Sunshine Street, Sunlight City, Import-Country. If the notify party and the consignee are the same party, then enter the word "SAME" or "CONSIGNEE" in the 'Notify Party' field in the bill of lading (B/L).

Sample Document: Ocean Bill of Lading

Remarks: Fields or items in blue color contain links to the explanation.

A RELIABLE SHIPPING LINE

( NON-NEGOTIABLE UNLESS CONSIGNED TO ORDER )

( SEE REVERSE FOR TERMS AND CONDITIONS )

Shipper's Load and Count Stale Bill of Lading and the Guarantee for Delivery of Goods

Shipper's Load and Count

The phrase "shipper's Load and count" means cargo moving under a bill of lading (B/L) where the carrier acts as a transport contractor without responsibility for loading or unloading. The carrier marks this phrase on the B/L if it does not supervise the loading or unloading of the cargo, which is the typical case in a full container load shipment. Hence, the carrier will not be held accountable for the number of units reported on the B/L. The carrier often adds the words "said to contain" or "said by shipper to contain" before the number of units of a commodity, for example, "3 40FT. CONTAINERS SAID TO CONTAIN 4,095 CARTONS RUBBER SHOES".

Clean versus Foul Bills of Lading

The bill of lading (B/L) is made out according to the information contained in the dock receipt, or in some cases according to the completed working copy of the B/L supplied by the customs broker. If a dock receipt is clean, the B/L will be clean, otherwise the B/L will be foul. The bank will reject a foul bill of lading, unless stipulated otherwise in the letter of credit (L/C).

Clean Bill of Lading

The clean bill of lading bears an indication that the goods were received without damages, irregularities or short shipment, usually the words

"apparent good order and condition", "clean on board" or the like are indicated on the B/L.

Foul Bill of Lading

The foul bill of lading---unclean bill of lading, dirty bill of lading or claused bill of lading---is the opposite of the clean bill of lading. It bears an indication that the goods were received with damages, irregularities or short shipment, usually the words "unclean on board" or the like are indicated on the B/L, for example, "insufficient packing", "missing safety seal" and "one carton short".

Short Form versus Long Form Bills of Lading

Short Form Bill of Lading

In a short form bill of lading---blank back bill of lading---the terms and conditions of carriage on the reverse (back) of the bill of lading (B/L) are omitted, instead they are listed on a document other than the B/L. Unless

otherwise stipulated in the letter of credit (L/C), a short form bill of lading is acceptable. The short form B/L saves the cost of printing (i.e., no printing on the back of the B/L) and if the terms and conditions of carriage change, there is no need to reprint the B/L form.

Long Form Bill of Lading

In a long form bill of lading the terms and conditions of carriage are printed on the reverse (back) of the bill of lading. The long form bill of lading is commonly used in international shipping.

Received versus On Board Bills of Lading

Received Bill of Lading

The received bill of lading does not prove that the goods have been shipped. It only acknowledges that the goods have been received by the carrier for shipment. Therefore, the goods could be in the dock or warehouse.

On Board Bill of Lading

The on board bill of lading---shipped bill of lading---proves that the goods have been shipped, as evidenced by the pre-printed wording or the on board notation (e.g. "on board", "laden on board" or "shipped on board") on the bill of lading.

Straight versus Order Bills of Lading

Straight Bill of Lading

In a straight bill of lading---non-negotiable bill of lading---the title to the goods is conferred directly to a party named in the letter of credit (the importer usually), as such the title to the goods is not transferable to another party by endorsement. In other words, the bill of lading is not negotiable. The letter of credit calls for a straight bill of lading usually by using such words as "consigned to [the named party]" or "issued in the name of [the named party]". The named party can obtain the goods directly from the carrier at destination. Therefore, unless the cash payment has been received by the

exporter or the buyer's integrity is unquestionable, the use of a straight bill of lading is risky (please see Fly-By-Night Importers for related information).

Order Bill of Lading

In an order bill of lading---negotiable bill of lading---the title to the goods is conferred to the order of shipper or to the order of a named party in the letter of credit (the issuing bank usually). The purpose of an order bill of lading is to protect the interest of the shipper or the named party to the title to the goods. The title to the goods is transferable to another party by endorsement, usually on the reverse (back) of the bill of lading (B/L) by the title holder of the B/L. If the endorsement of B/L is required in the letter of credit (L/C), all the originals must be endorsed. The letter of credit may calls for an order bill of lading that is: (1) To order blank endorsed or To order of shipper and blank endorsed, (2) To order of shipper and endorsed to order of [the named party], or (3) To order of [the named party (other than the shipper)].

To order blank endorsed or To order of shipper and blank endorsed Unless provided otherwise, a consignment that is "to order" means to order of shipper. The "blank endorsed" means without specifying to whom the bill of lading (B/L) is transferred. In such instance, whoever bears the B/L after endorsement holds the title to the goods.

If the sample letter of credit requires a B/L that is "to order blank endorsed", as such enter the words "To Order" in the Consignee field in the bill of lading and other documents/forms. In a "to order blank endorsed" bill of lading (B/L), technically speaking whoever bears the B/L after its issuance holds the title to the goods. If the sample letter of credit requires a B/L that is "to order of shipper and blank endorsed", as such enter the words "To Order of UVW Exports" in the Consignee field, since the shipper in such L/C is UVW Exports. In both the above sample cases, the B/L must bear blank endorsement of the shipper as follows:

UVW Exports
(plus the authorized signature)

And, entering the words "To Order" or "To Order of UVW Exports" in either of the above cases is correct, but to avoid rejection of documents, always follow the wordings stipulated in the letter of credit as a precaution.

To order of shipper and endorsed to order of [the named party] This letter of credit (L/C) requirement resembles the "to order of shipper and blank endorsed", except that the words "To Order of [the named party]" must be indicated over the shipper's endorsement. If the sample letter of credit requires a bill of lading that is "to order of shipper and endorsed to order of The Moon Bank", as such enter the words "To Order of UVW Exports" in the Consignee field in the bill of lading and the endorsement as follows:

To Order of The Moon Bank UVW Exports

(plus the authorized signature)

To order of [the named party (other than the shipper)] The named party under this letter of credit (L/C) requirement most often is the issuing bank. The L/C does not call for an endorsement, thus the exporter does not have to endorse the bill of lading. The sample letter of credit requires a bill of lading "to order of The Sun Bank, Sunlight City, Import Country", as such enter the words "To Order of The Sun Bank, Sunlight City, Import Country" in the Consignee field in the bill of lading and other documents/forms.

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Synopsis: The Title to the Goods in an Order Bill of Lading

To order blank endorsed or To order of shipper and blank endorsed

The title to the goods is conferred to the shipper, who retains the ownership in the consignment.

The shipper presents the blank endorsed bill of lading (B/L) and other required

export documents to the bank, the bank negotiates the letter of credit (L/C) and the bank becomes the title holder in the goods. In such a case the B/L is negotiable, that is, the rights of holder can be transferred to another party.

To order of shipper and endorsed to order of [the named party]

The title to the goods is conferred to the shipper, who retains the ownership in the consignment.

If the named party is the negotiating bank, the shipper's endorsement of the bill of lading (B/L) transfers the title to the goods to the negotiating bank, and the bank can transfer the title to the goods to another party by endorsement. The shipper presents the endorsed B/L and other required export documents to the negotiating bank. If the named party is other than the negotiating bank, then the negotiating bank merely holds the B/L, not its title, on behalf of the named party.

To order of [the named party (other than the shipper)]

The title to the goods is conferred to the named party, who retains the ownership in the consignment. The shipper merely holds the bill of lading (B/L) on behalf of the named party.

The shipper presents the B/L and other required export documents to the negotiating bank, the bank holds the B/L on behalf of the named party and negotiates the letter of credit (L/C). The named party can transfer the title to the goods to another party by endorsement. In practice, the named party in the "to order of [the named party]" usually is the issuing bank. Therefore, unless the importer pays the issuing bank and the issuing bank endorses the B/L to order of the importer, the importer cannot obtain the goods from the carrier. Clearly, the interests of the issuing bank and the exporter (the shipper) are protected if the B/L is "to order of [the named issuing bank]".

Seaports of the World Air Waybills

Air Waybills

Please see the sample Air Waybill (AWB) below. The air waybill---air consignment note or airway bill of lading---serves as a receipt for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. Hence, the AWB is non-negotiable. The goods in the air consignment are consigned directly to the party (the consignee) named in the letter of credit (L/C). Unless the goods are consigned to a third party like the issuing bank, the importer can obtain the goods from the carrier at destination without paying the issuing bank or the consignor. Therefore, unless a cash payment has been received by the exporter or the buyer's integrity is unquestionable, consigning goods directly to the importer is risky. For air consignment to certain destinations, it is possible to arrange payment on a COD (cash on delivery) basis and consign the goods directly to the importer. The goods are released to the importer only after the importer makes the payment and complies with the instructions in the AWB. In air freight, the exporter (the consignor) often engages a freight forwarder or consolidator to handle the forwarding of goods. The consignor provides a Shipper's

Letter of Instructions which authorizes the forwarding agent to sign certain documents (e.g. the AWB) on behalf of the consignor. The AWB must indicate that the goods have been accepted for carriage, and it must be signed or authenticated by the carrier or the named agent for or on behalf of the carrier. The signature or authentication of the carrier must be identified as carrier, and in the case of agent signing or authenticating, the name and the capacity of the carrier on whose behalf the agent signs or authenticates must be indicated. The AWB is issued usually in set of twelve copies. Copies 1, 2 and 3 of AWB are originals and have the same validity. The originalsare usually marked as:

Copy 1 - Original for Carrier Copy 2 - Original for Consignee Copy 3 - Original for Shipper

or

Original 1 - (For Carrier) Original 2 - (For Consignee) Original 3 - (For Shipper)

or similar expressions at the bottom of the AWB.

Copy 1 or Original 1 is to be signed by the consignor or its agent. Copy 2 or Original 2, which is to accompany the goods through to the airport of destination, is signed by the carrier and by the consignor or its agent. Copy 3 or Original 3 is signed by the carrier, and is handed to the consignor or its agent after the goods have been accepted for carriage. If the letter of credit (L/C)

stipulates a full set of originals, the presentation of Copy 3 or Original 3 to the bank will satisfy the requirement. The AWB also operates like a through bill of lading. It can be used in transhipment, that is, unloading and reloading from one aircraft to another aircraft during the course of carriage from the airport of departure to the airport of destination stipulated in the L/C. A set of AWB's issued by the first carrier usually includes a For Second Carrier copy and a For Third Carrier copy, which are used if required in transhipment. The first three digits in the sample Air Waybill represented, for example, by digits '000', identifies the carrier, and constitute part of the air waybill (AWB) number (e.g. 000-12345678). The carrier's agents, such as the freight forwarder, may issue their own house air waybill (HAWB), the format of which may differ from the sample air waybill.

The Date of Shipment in Air Freight

The issuance date of the air waybill (AWB) is considered to be the date of shipment. If the letter of credit (L/C) calls for an actual date of dispatch, the AWB must indicate a specific notation of the date of dispatch, and the date indicated is considered to be the date of shipment. The expression "Flight/Date [For Carrier Use Only] Flight/Date" on the sample Air Waybill, for example, is not considered as a specific notation of the date of dispatch.

Transhipment Indicated in Air Waybills

If the air waybill indicates that transhipment will or may take place, then the transhipment is allowed even if the letter of credit (L/C) prohibits transhipment, provided that the entire carriage is covered by one and the same air waybill.

Split Shipment

The split shipment means that portions of a shipment covered by one air waybill enter the country at different times.

Sample Document: Air Waybill (Air Consignment Note)

Master and House Air Waybills

The freight forwarder may consolidate the consignments of several independent shippers that are intended for the same airport of destination and dispatch them together under one air waybill (AWB) issued by the carrier, known as master air waybill (MAWB), with a cargo manifest detailing such consignments attached to the MAWB. The freight forwarder in turn issues to each shipper its own AWB, known as ahouse air waybill (HAWB) or freight forwarder's waybill. In the case of air freight using a house air waybill (HAWB), just like in ocean freight using a house bill of lading (the freight forwarder's bill of lading), it is the freight forwarder's handling agent at destination, not the carrier, who notifies the consignee of the cargo arrival at destination.

Clean versus Foul Air Waybills

Clean Air Waybill

The clean air waybill may bear an indication that the goods were received without damages, irregularities or short shipment, the words "apparent good order and condition", "clean on board" or the like may be indicated on the air waybill (AWB).

Foul Air Waybill

The foul air waybill---unclean air waybill, dirty air waybill or claused air waybill---is the opposite of the clean air waybill. It bears an indication that the goods were received with damages, irregularities or short shipment, usually the words "unclean on board" or the like are indicated on the air waybill (AWB), for example, "insufficient packing", "missing safety seal" and "one carton short".

Road Waybills and Rail Waybills

The road waybill (road consignment note) or rail waybill (rail consignment note)serves as a receipt for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. The consignee can obtain the goods from the carrier at the destination point without presentation of the road waybill or the rail waybill, as the case may be.

The road waybill or rail waybill must be signed or authenticated and/or bear a reception stamp or other indication of receipt by the carrier or the named agent for or on behalf of the carrier. The signature, authentication, reception stamp, or other indication of receipt by the carrier must be identified on the face of waybill as that of the carrier, and in the case of agent signing or authenticating, the name and capacity of the carrier on whose behalf such agent signs or authenticates must be indicated. The original road waybill or rail waybill may or may not be marked as "original", as such the waybill(s) presented to the bank are accepted as the original. If the road waybill or rail waybill does not indicate on its face the number issued or unless otherwise stipulated in the letter of credit (L/C), the number of waybills required for presentation to the negotiating bank would depend on the number issued by the carrier as forming a full set. Unlike in an ocean (marine) bill of lading or air waybill, a road waybill or rail waybill usually is not distinguished as either clean or foul, because the road carrier or the rail carrier normally will not accept cargo that is damaged, shows signs of irregularities, or is short shipped.

The Date of Shipment in Land (Road and Rail) Freight

If the road waybill or rail waybill contains a reception stamp, the date of the reception stamp is considered to be the date of shipment. Otherwise, the date of issuance of the waybill is considered to be the date of shipment.

Transhipment Indicated in Road or Rail Waybills

If the road waybill or rail waybill indicates that transhipment will or may take place, then the transhipment is allowed even if the letter of credit (L/C) prohibits transhipment, provided the entire carriage is covered by one and the same waybill and within the same mode of transportation.

Post Receipts and Courier's Receipts

Post Receipt

The post receipt---postal receipt, parcel post receipt, or certificate of posting--is issued by the Post Office for goods sent by parcel post. The date stamped on the face of a post receipt is deemed to be the date of shipment or dispatch. It must be dated in the place from which the letter of credit (L/C) stipulates the goods are to be shipped or dispatched.

Parcel Post Shipments In practice, most export shipments by parcel post belong to air parcel and do not have a letter of credit (L/C). The payment is often by cheque. The importer may use parcel post to avoid expenses in opening an L/C and in processing of

goods on arrival. The consignment most often is a small order and the goods are consigned directly to the importer. Hence, unless the cheque is cashed or the integrity of the importer is unquestionable, the exporter must not dispatch the goods. Please refer to the Fly-By-Night Importersfor related information. The importer may request to dispatch the goods on different dates. For example if the order is 10 cartons, the importer may request to dispatch 2 cartons every 2 days. The maximum weight and measurement requirements of a parcel may vary from country to country. Generally, the weight limit is 10-20 kilograms.

Courier's Receipt

The courier's receipt is issued by a courier (or expedited delivery service). The courier's receipt must indicate the name of the courier (or expedited delivery service) and be stamped, signed or otherwise authenticated on its face and indicate a date of pick-up or of receipt or wording to this effect, the date is deemed to be the date of shipment or dispatch. Unless the letter of credit (L/C) specifically calls for a document issued by a named courier (or expedited delivery service), a document issued by any courier (or expedited delivery service) is acceptable.

Courier Shipments The delivery charge by courier is higher than by parcel post. However, the courier shipment is faster and generally offers better security against theft and pilferage. The nature of a courier shipment is similar to a parcel post shipment. Since the goods are consigned directly to the importer, the exporter must not dispatch the goods unless the cheque is cashed or the integrity of the importer is unquestionable.

Road Waybills and Rail Waybills

The road waybill (road consignment note) or rail waybill (rail consignment note)serves as a receipt for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. The consignee can obtain the goods from the carrier at the destination point without presentation of the road waybill or the rail waybill, as the case may be. The road waybill or rail waybill must be signed or authenticated and/or bear a reception stamp or other indication of receipt by the carrier or the named agent for or on behalf of the carrier. The signature, authentication, reception stamp, or other indication of receipt by the carrier must be identified on the face of waybill as that of the carrier, and in the case of agent signing or authenticating, the name and capacity of the carrier on whose behalf such agent signs or authenticates must be indicated. The original road waybill or rail waybill may or may not be marked as "original", as such the waybill(s) presented to the bank are accepted as the original. If the road waybill or rail waybill does not indicate on its face the number issued or unless otherwise stipulated in the letter of credit (L/C), the number of waybills required for presentation to the negotiating bank would depend on the number issued by the carrier as forming a full set. Unlike in an ocean (marine) bill of lading or air waybill, a road waybill or rail waybill usually is not distinguished as either clean or foul, because the road carrier or the rail carrier normally will not accept cargo that is damaged, shows signs of irregularities, or is short shipped.

The Date of Shipment in Land (Road and Rail) Freight

If the road waybill or rail waybill contains a reception stamp, the date of the reception stamp is considered to be the date of shipment. Otherwise, the date of issuance of the waybill is considered to be the date of shipment.

Transhipment Indicated in Road or Rail Waybills

If the road waybill or rail waybill indicates that transhipment will or may take place, then the transhipment is allowed even if the letter of credit (L/C) prohibits transhipment, provided the entire carriage is covered by one and the same waybill and within the same mode of transportation.

Post Receipts and Courier's Receipts

Post Receipt

The post receipt---postal receipt, parcel post receipt, or certificate of posting--is issued by the Post Office for goods sent by parcel post. The date stamped on the face of a post receipt is deemed to be the date of shipment or dispatch. It must be dated in the place from which the letter of credit (L/C) stipulates the goods are to be shipped or dispatched.

Parcel Post Shipments In practice, most export shipments by parcel post belong to air parcel and do not have a letter of credit (L/C). The payment is often by cheque. The importer may use parcel post to avoid expenses in opening an L/C and in processing of goods on arrival. The consignment most often is a small order and the goods are consigned directly to the importer. Hence, unless the cheque is cashed or the integrity of the importer is unquestionable, the exporter must not dispatch the goods. Please refer to the Fly-By-Night Importersfor related information. The importer may request to dispatch the goods on different dates. For example if the order is 10 cartons, the importer may request to dispatch 2 cartons every 2 days. The maximum weight and measurement requirements of a parcel may vary from country to country. Generally, the weight limit is 10-20 kilograms.

Courier's Receipt

The courier's receipt is issued by a courier (or expedited delivery service). The courier's receipt must indicate the name of the courier (or expedited delivery service) and be stamped, signed or otherwise authenticated on its face and indicate a date of pick-up or of receipt or wording to this effect, the date is deemed to be the date of shipment or dispatch.

Unless the letter of credit (L/C) specifically calls for a document issued by a named courier (or expedited delivery service), a document issued by any courier (or expedited delivery service) is acceptable.

Courier Shipments The delivery charge by courier is higher than by parcel post. However, the courier shipment is faster and generally offers better security against theft and pilferage. The nature of a courier shipment is similar to a parcel post shipment. Since the goods are consigned directly to the importer, the exporter must not dispatch the goods unless the cheque is cashed or the integrity of the importer is unquestionable.

Export-Import Cargo (Marine) Insurance

The term cargo insurance, popularly known as marine insurance, applies to all modes of transportation. The need for export (or import) cargo insurance often differs from exporter to exporter (or importer to importer) and from consignment to consignment. Unless the insurance is mandatory in a trade term, the exporter or the importer may opt not to insure the goods at his/her own risks. Depending on the international commercial terms, either the seller (the exporter) or the buyer (the importer) is responsible for insuring the cargo. The seller is obligated to insure the cargo in the CIF and CIP terms. The seller may opt not to insure the cargo at his/her own risks in the DDU and DDP terms. The trade terms DDU and DDP are often used in the turnkey projects where the amount at stake is large. In practice, the seller usually insures the cargo in the DDU and DDP terms.

Insurance Policy and Cover Note

Proof of insurance coverage is contained in a document known as policy or insurance policy. The format of insurance policy forms varies from insurer to insurer, but all essentially have the Institute Clauses and the same information as contained in the Insurance Application-Instructions (IAI). The policy must be issued and signed by an insurance company or its agent. If more than one original is issued and is so indicated in the policy, all the originals must be presented to the bank, unless otherwise authorized in the letter of credit (L/C). The sample letter of credit requires "insurance policy in duplicate ...", as such the presentation of one original and one copy (both signed) will satisfy the requirement. Unless authorized in the letter of credit (L/C), the cover note issued by broker, which is a temporary insurance coverage pending the later issuance of an insurance policy, is not acceptable.

Insurance Policy versus Insurance Certificate

The insurance policy, either a specific policy or an open policy, is issued once by the insurer. In the case of the exporter holding an open policy, he/she cannot send that sole policy to all the buyers and for all the shipments made over a period of time. Therefore, in lieu thereof aninsurance certificate---certificate of insurance---is issued by the exporter to each shipment. The blank insurance certificates are supplied by the insurer pre-signed and bearing the open policy number of the exporter. Unless otherwise stipulated in the letter of credit (L/C), the insurance certificate issued under the open policy is acceptable. If the L/C specifically calls for an

insurance certificate, the insurance policy is accepted in lieu thereof. In practice, the insurance policy is often used. In the sample letter of credit the insurance policy is required, hence the bank will not accept the insurance certificate.

Open Policy versus Specific Policy

Open Policy

The open policy---blanket policy or floating policy---is issued once by the insurer under contract to cover all shipments made by the exporter over a period of time (one year usually) subject to renewal, rather than to one shipment only. It is more often used by the large exporter. In an open policy the exporter is required to periodically (monthly usually) declare every shipment made to any location, covering any type of goods, and using any means of conveyance, including multimodal transport and transhipment, in order that the insurer may calculate the insurance premiums and invoice them accordingly. The exporter completes the insurance declaration form supplied by the insurer and/or supplies the copy of the insurance certificates (see Insurance Policy versus Insurance Certificate above) to the insurer. An insurance declaration form typically contains the information in an Insurance Application-Instructions (IAI).

Specific Policy

The specific policy---voyage policy---is issued by the insurer to cover a particular shipment or one shipment only. The specific policy is often used in many countries. The exporter may use the Insurance ApplicationInstructions (IAI) or similar form to apply for a specific policy.

Advantages of an Open Policy Over a Specific Policy

Time Saving and Convenience

In certain countries the insurance agent (broker) may hand-deliver the insurance policy to the exporter within 4-5 hours after the receipt of the Insurance Application-Instructions (IAI) or similar form. However, in some countries it is not uncommon that the policy is mailed to the exporter 2-3 days after the receipt of the Insurance Application-Instructions (IAI) or similar form. Considering that the national mail in some countries may take four (4) or more days to reach the addressee, the deadline to meet the L/C latest negotiation date may not be met. In an open policy the exporter may have the documentary proof of insurance coverage in a matter of minutes by simply completing and signing the blank insurance certificates supplied by the insurer.

Shipments Insured Automatically

Under the open policy the insurer most often does not know the shipments made by the exporter before the receipt of the insurance declaration form and/or copy of the insurance certificates, but such shipments are insured (please refer to the Utmost Good Faith for related information).

Principles of Cargo (Marine) Insurance

The cargo (marine) insurance works on the principles of insurable interest, utmost good faith, and indemnity.

Insurable Interest

When the goods are lost or damaged and the owner of the goods (i.e., the title holder in the goods) suffers a loss, fails to realize an expected profit, or incurs liability from the loss or damage, the owner (the title holder) is deemed to have an insurable interest in the goods. When the exporter delivers the goods, the insurable interest in such goods transfers at the point and time where the risk shifts from the exporter to the importer, as determined by the international commercial terms used. For example, the point and time where the risk shifts in:

CIF (Cost, Insurance and Freight to the named port of destination) --the point the risk shifts is on board the ship at the named port of loading, as such the insurable interest transfers from the exporter to the importer at the time the goods pass over the ship's rail. CIP (Carriage and Insurance Paid To the named place of destination) --the point the risk shifts is at the depot in the country of shipment, as such the insurable interest transfers from the exporter to the importer at the time the goods are loaded on truck or container, rail car, or airplane (or goods placed in the custody of an air carrier) at the named point of departure.

The time the insurable interest transfers from the exporter to the importer is, technically, the time the exporter endorses the specific policy or the insurance certificate to the importer, as the case may be. The insurance certificate bears the open policy number of the exporter and, like in a specific policy, the claim agent at port of destination and that claim payable at destination are also indicated. The importer relies on the specif ic policy or the insurance certificate and the supporting claims documents as proof that the goods have been insured and that he/she has the insurable interest in the goods when filing for insurance claims against loss or damage. In the trade terms DDU and DDP, the exporter is responsible for the risks up to the delivery of goods to the final point at destination (the project site or importer's premises usually), as such the insurable interest in the goods does not transfer from the exporter to the importer in the shipment. Some countries may require that the import and/or export shipments be insured with their national insurance companies.

Utmost Good Faith

The principle of utmost good faith is indispensable in any insurance contract. Under the open policy the insurer usually knows only of the shipments made by the exporter after the receipt of the insurance declaration form and/or the copy of the insurance certificates. Under such circumstances, a consignment may have reached the importer in:

good condition, that is, without sustaining any loss or damage, before the insurer knows of such consignment. If the exporter knows that the consignment has safely reached the importer and deliberately does not declare such consignment in the insurance declaration form in order to avoid paying the insurance premium, such action is a breach of good faith. Consequently, the insurer may cancel the insurance policy issued to the exporter when the exporter's bad faith is known. bad condition, that is, sustaining loss or damage, before the insurer knows of such consignment. Whether or not the exporter knows that the consignment has not safely reached the importer and fails to declare such consignment in the insurance declaration form, the insurer is liable to pay for the loss or damage out of good faith.

Indemnity

Cargo insurance is a contract of indemnity, that is, to compensate for the loss or damage in terms of the value of the insured goods. The amount insured as agreed between the insurer and the assured forms the basis of indemnity.

Institute Clauses

The Institute Clauses of the Institute of London Underwriters, often referred to as the London Clauses or English Clauses, form the basis of the cargo insurance contract in many countries. In U.S.A. and some other areas, the Institute Clauses of the American Institute of Marine Underwriters, often referred to as theAmerican Institute Clauses or American Clauses, are used. The American Clauses and the London Clauses can be different from one another. The most common Institute Clauses include the Institute Cargo Clauses, Institute War Clauses, Institute Strike Clauses, and Institute Air Cargo Clauses.

Institute Cargo Clauses

The Institute Cargo Clauses specifically excludes the risks of war (in the F.C.&S. Clause---Free of Capture and Seizure Clause) and the risks of

strikes, riots and civil commotions (in the F.S.R.&C.C. Clause---Free of Strikes, Riots and Civil Commotions Clause). The risks of delay in delivery and inherent vice are not included in the Clauses.

Institute War Clauses (Cargo)

The Institute War Clauses (Cargo) specifically exclude the loss, damage or expense arising from any hostile use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter. The Clauses cover:

the risks excluded in the Institute Cargo Clauses by the F.C.&S. Clause; the loss of or damage to the interest insured caused by: hostilities, warlike operations, civil war, revolution, rebellion, insurrection or civil strife arising therefrom; mines, torpedoes, bombs or other engines of war; the general average and salvage charges incurred for the purpose of avoiding, or in connection with the avoidance of, loss by a peril insured against by these clauses.

Under the War Clauses, the insurance takes effect only as the interest insured are loaded on an overseas vessel and terminates either as the interest are discharged from the overseas vessel at final port or place of discharge, or on expiry of 15 days counting from midnight of the day of arrival of the vessel at

the final port or place of discharge, whichever shall first occur. In other words the goods are covered only while they are on a vessel. In the case of transhipment, the overseas vessel arrives at an intermediate port or place to discharge the interest for on-carriage by another overseas vessel, the insurance terminates on expiry of 15 days counting from midnight of the day of arrival of the vessel at the intermediate port or place, but reattaches as the interest are loaded on the on-carrying overseas vessel. During the period of 15 days such insurance remains in force after discharge at such intermediate port or place of discharge.

Institute Strike Clauses (Cargo)

The Institute Strikes, Riots and Civil Commotions Clauses is commonly referred to as the Institute Strike Clauses. The insurance covers the loss of or damage to the property insured caused by strikers, locked-out workmen, or persons taking part in labor disturbances, riots or civil commotions, and persons acting maliciously. However, it does not cover the loss or damage proximately caused by delay, inherent vice or nature of the property insured and the loss or damage caused by hostilities, warlike operations, civil war, revolution, rebel-lion, insurrection or civil strife arising therefrom.

Institute Air Cargo Clauses (All Risks)

The Institute Air Cargo Clauses (All Risks) are used specifically in air freight. The terms and conditions of cover closely follow the Institute Cargo Clauses

(All Risks) revised to suit air shipments. The Clauses exclude sendings by Post (i.e., postal shipments not covered).

Other Institute Clauses

Transit Clause

It names the points of voyage (i.e., the commencement of the transit, continues during the ordinary course of transit and terminates on delivery) between which the insurance is in effect. It may incorporate the Warehouse to Warehouse Clause (see Duration of Insurance Coverage).

Termination of Adventure Clause

It provides for the insurance to remain in effect in the event that the contract of affreightment or the adventure is terminated at a port or place other than the named destination (i.e., before the named destination is reached), subject to prompt notice being given to insurer and to payment of an additional premium, if required.

Craft Clause

It provides for coverage including transit by craft, raft or lighter to or from the vessel.

Change of Voyage Clause

It provides for continuous coverage in case of change of voyage or of any omission or error in the description of the interest vessel or voyage, subject to payment of an additional premium.

Constructive Total Loss Clause

It gives the insurer the right to pay the assured for the total loss when the goods are so damaged that the cost of recovering and reconditioning would exceed their original value.

G.A. Clause (General Average Clause)

It gives the rules to be followed to settle the general average claims and the salvage charges.

Seaworthiness Admitted Clause

It provides that in the event of loss the assured's right to recovery shall not be prejudiced by the fact that the loss may have been attributable to the wrongful act or misconduct of the shipowners or their crews, committed without the privity of the assured.

Bailee Clause

It requires the assured and their agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimizing a loss and to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised---it obligates the assured to file a claim against third parties who may be liable for the loss or damage.

Not to Inure Clause

It prohibits the assured from assigning any right of recovery in the policy to the carrier or other bailee (warehouse owner, truck owner, etc.). Therefore, it prevents the carrier or other bailee from becoming the assured from such assignment of the right of recovery, otherwise the insurer could not bring action against them in case of loss or damage.

Both to Blame Collision Clause

It protects the assured against any claim that he/she may have as a result of collision.

F.C.&S. Clause (Free of Capture and Seizure Clause)

It excludes coverage of risks against

the capture, seizure, arrest, restraint or detainment, and the consequences thereof or of any attempt thereat; the consequences of hostilities or warlike operations, whether there be a declaration of war or not; the collision or contact with a mine or torpedo; and the consequences of civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or piracy.

F.S.R.&C.C. Clause (Free of Strikes, Riots and Civil Commotions Clause)

It excludes the loss or damage

caused by strikers, locked-out workmen, or persons taking part in labor disturbances, riots or civil commotions; resulting from strikes, lock-outs, disturbances, riots or civil commotions.

Reasonable Despatch Clause

It requires the assured to act with 'reasonable despatch'---how the owner would act in case the goods are not insured---in all circumstances within his/her control.

Sue and Labour Clause

It provides for reimbursing the assured for the expenses to protect the interest insured from further loss or damage.

T.P.&N.D. Clause (Theft, Pilferage and Non-Delivery Clause)

It covers theft, pilferage and non-delivery of goods, includes theft and pilferage by the crew.

Institute Malicious Damage Clause

It covers deliberate damage to or deliberate destruction of the property insured or any part thereof by the wrongful act of any person(s).

Institute Dangerous Drugs Clause

It provides that no claim will be paid in respect of drugs to which the various International Conventions relating to opium and other dangerous drugs apply unless: the drugs are expressly declared as much in the policy, the exporting and importing countries are specifically stated, the route by which the drugs were conveyed was usual and customary, and the proof of loss is accompanied by a license, certificate or authorization issued by the government of the exporting or the importing country, as the case may be.

Standard Cargo Insurance --Three Basic Policies (in the Old Cargo Clauses)

Institute Cargo Clauses (All Risks)

The term All Risks is misleading as not all the risks are covered. The All Risks (A.R.) is the broadest form of coverage commonly encountered in exporting. It covers all risks of physical loss or damage from any external causes irrespective of percentage. If the assured wishes to be covered against the risks of war, strikes, riots, and civil commotions, the insurer deletes the exclusions in the Institute Cargo Clauses and endorses the special clauses, that is, the Institute War Clauses and Institute Strike Clauses, on the insurance policy and the assured pays an additional premium.

Institute Cargo Clauses (With Average)

The With Average (W.A.) is sometimes called the With Particular Average. In insurance parlance, the word "particular" means partial, and the word "average" means loss. As such, the words "with average" and "with particular average" mean including partial loss. The With Average (W.A.) is a less inclusive form of coverage than the All Risks. It covers against total loss and partial loss caused by the perils of the sea (i.e., the vessel has been stranded, sunk, burnt or been in a collision with

other vessels or external substances other than water, such as ice), jettison of cargo, barratry (i.e., negligence, fraud or wrongful acts of the ship's master and/or crew resulting in injury or loss to the ship's owner), and other like perils. The partial loss, however, is subject to a franchise being written into the policy. The percentage of franchise can be 3% (or other percentage as specified) of the value of the shipment as agreed between the insurer and the assured. If the loss is less than the indicated franchise of 3% (or other percentage as specified) the assured cannot claim the loss. However, if the loss is equal to or more than the indicated franchise, the assured can claim the loss in full amount without any deduction from the insurer. Instead of a franchise the insurer and the assured may agree on an excess (deductible). The percentage of excess can be 3-10%. If the loss is equal to or less than the indicated excess, the assured bears the loss, that is, cannot claim the loss. However, if the loss is more than the indicated excess, the assured can claim the loss minus the deduction of the percentage of excess specified. In other words, the assured will always shoulder a percentage of the loss regardless of the amount of the loss.

Institute Cargo Clauses (Free of Particular Average)

In insurance parlance, the words "free of" mean the insurer (the insurance company) is not liable for whatever follows the words "free of". The words "particular average" mean partial loss. As such, the words "free of particular average" mean excluding partial loss. The Free of Particular Average (F.P.A.) is the narrowest form of coverage. It covers against total loss. When partial loss is specifically covered in the policy, it is recoverable from the insurer only if the loss is the result of the carrying vessel being stranded, sunk or burnt, on fire, or in collision.

The New Institute Cargo Clauses

The new clauses are not exact replacements of the old clauses. Some companies may still use the old clauses. The counterparts of the new cargo clauses are as follows:

New Cargo Clauses

Old Cargo Clauses

Institute Cargo Clauses (A) Institute Cargo Clauses (B) Institute Cargo Clauses (C)

Institute Cargo Clauses (All Risks) Institute Cargo Clauses (With Average)

(A.R.) (W.A.)

Institute Cargo Clauses (Free of Particular Average) (F.P.A.)

Comparison of Institute Cargo Clauses (A), (B) and (C)

LEGEND: Risks covered Risks not covered (or Exclusions)

Risks Covered and the Exclusions

Institute Cargo Clauses (A) (B) (C)

Loss or damage to the subject matter insured proximately caused by [in Clauses (A)] and reasonably attributable to [in Clauses (B) and (C)]:

Fire or explosion Vessel or craft stranded, sunk, burnt or capsized Land conveyance overturned or derailed Collision or contact of vessel, craft or conveyance with any external object except water Discharge of cargo at port of distress (A) Earthquake, lightning or volcanic eruption Malicious damage Theft Delay Inherent vice or nature of the subject matter insured Willful mi sconduct of the assured (B) (C)

(A)
Loss or damage to the subject matter insured caused by:

(B)

(C)

General average sacrifice

Jettison Washing overboard Entry of sea, river or lake water into vessel, craft, conveyance, container or place of storage Total loss of any package lost overboard or dropped whilst loading on to, or unloading from, vessel or craft Piracy (A) War Strikes, riots and civil commotions, includes terrorists or any persons acting from a political motive Use of any atomic or nuclear weapon Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear Insufficiency or unsuitability of packing The assured privy to the unseaworthiness of vessel or craft and/or unfitness of vessel, craft, conveyance or container at the time of loading Insolvency or financial default of the owners or operators of the vessel (B) (C)

Endorsement of the Insurance Clauses

The term endorsement used in the endorsement of insurance clauses refers to the modifying of insurance to include risks not covered in the basic policies by adding suitable clauses and paying additional premium. For example, in the Institute Cargo Clauses none of the three basic policies covers the risks of war, strikes, riots, and civil commotions. In order to cover against such risks, the F.C.&S. Clause (Free of Capture and Seizure Clause) and the F.S.R.&C.C. Clause (Free of Strikes, Riots and Civil Commotions Clause) are deleted from the policy (by stamping the word "DELETED" over such clauses usually) and the Institute War Clauses and the Institute Strike Clausesare endorsed. The endorsement usually is in the form of pre-printed clauses attached (i.e., stapled, gummed or taped) to the policy. Some policy forms may be provided with an endorsement space wherein the clauses are typed and/or attached. There are clauses which are approved by certain associations (e.g. bank, trade, etc.) to suit the particular market needs. For example, the Bank Clause:

"It is warranted and agreed to by the Assured and the Company that in the event of loss or damage becoming recoverable under this Policy, the Company will not be liable for more than its share of the loss or damage at the rate of exchange mentioned in this Policy." (The word "Company" above refers to the insurance company.)

The exporter may consult the insurance company or its agents for any specific endorsements that may be required in a particular market and trade.

Terminology in the Institute Cargo Clauses

Proximately caused by

In many circumstances, it is the chain of causes that lead to the loss or damage to the subject matter insured. The loss or damage can be due to the actual or effective cause known as proximate cause.

Case Sample: Delayed Delivery and Insurance

A consignment of commemorative items to celebrate the 50th anniversary of the company was insured against Institute Cargo Clauses (A) and arrived after the anniversary date in good condition. The goods were in a vessel that collided with ice and took refuge in an intermediate port for repair. Due to the unavailability of a vessel for the on-carriage of goods and poor weather, the goods remained in the intermediate port for some time. The goods finally arrived at the company with no physical loss or damage, but the company suffered loss proximately (i.e., actually or effectively) caused by the delay in delivery

Reasonably attributable to

Most of the risks under the Clause (B) and Clause (C) have been changed from the "proximately caused by" to "reasonably attributable to".

Malicious damage

The exclusion in the deliberate damage to or deliberate destruction of the property insured or any part thereof by the wrongful act of any person(s).

Delay

Although the delay was caused by a risk insured against (except expenses payable under general average), the assured cannot claim the loss or damage due to the delay. In the above Case Sample: Delayed Delivery and Insurance the company cannot take action against the insurer, but it may take action against the carrier for the delay in delivery.

Willful misconduct of the assured

If the loss or damage is the result of negligence or actions taken by the assured, he/she cannot claim such loss or damage.

General average sacrifice

The word "average" means loss. The general average sacrifice is an intentional sacrifice or expenditure reasonably incurred for the purpose of preserving the imperiled property involved in the common maritime adventure. In other words, sacrifice in the cargo for the benefit of saving the rest and the vessel. The jettison and the cargo damaged by water used to extinguish a fire aboard the vessel are examples of the general average sacrifice. If the action taken is successful, each party to the adventure---all cargo owners and the vessel owner---bear the loss and expenses incurred based on the

value of each shipment in proportion to the total value of cargo and vessel. The cargo owners whose goods are safe and sound or uninsured in the marine perils must also contribute to pay for the loss and expenses.

Jettison

It means the cargo is thrown overboard to lighten the vessel during a storm or when a vessel grounds and can be floated at high tide with lesser load.

Piracy

The piracy is excepted in the War Exclusion in the Clause (A) only. To cover against piracy in the Clause (B) and Clause (C), theInstitute War Clauses must be endorsed. The F.C.&S. Clause (Free of Capture and Seizure Clause) in the old Institute Cargo Clauses excludes the piracy.

Inherent vice or nature of the subject matter insured

The word "vice" means fault. The inherent vice means the nature or characteristic of a product which could result in damage to the product despite all care and caution by the carrier. For example, cut flowers may wilt and die, milk may turn sour, and cement may set.

War

The exclusions of war, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power (for the purpose of this clause 'power' includes any authority maintaining naval, military or air forces in association with a power); capture, arrest, restraint, detainment (piracy excepted), and the consequences thereof or any attempt thereat; derelict mines, torpedoes, bombs, or other derelict weapons of war. This clause basically replaces the old F.C.&S. Clause (Free of Capture and Seizure Clause).

Strikes, riots and civil commotions, includes terrorists or any persons acting from a political motive

The insurance does not cover loss, damage or expense caused by or resulting from: strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions; strikes, lock-outs, labour disturbances,

riots or civil commotions; terrorists or any persons acting from a political motive. This clause is similar to the old F.S.R.&C.C. Clause (Free of Strikes, Riots and Civil Commotions Clause) except the new clauses include an additional exclusion of terrorists or any persons acting from a political motive.

Use of any atomic or nuclear weapon

The exclusion in the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter. This exclusion also appeared in the Institute War Clauses.

Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject matter

The ordinary leakage or ordinary loss in weight or volume is a form of inherent vice. The natural processes of evaporation (liquid turns to gas) and sublimation (solid turns to gas) may be involved. For example, alcohol evaporates and the mothball (naphthalene ball) sublimates, as a result alcohol and mothballs may lose weight or volume. The ordinary wear and tear of the subject matter is often linked to the insufficiency or unsuitability of packing where the cargo may move and 'rub' against each other or against the container during the sea voyage because

of high wind and waves. Friction (from 'rubbing') may result in wear and tear to the cargo.

Insufficiency or unsuitability of packing of the subject matter insured

The packing used here includes stowage in a container but only when such stowage is completed by the assured or his/her agent before the insurance coverage takes effect. This clause reminds the shipper to be careful in the preparation of export packs and the loading or stuffing of the container.

The assured privy to the unseaworthiness of vessel or craft and/or unfitness of vessel, craft, conveyance, or container at the time of loading

The word "privy" means having knowledge of. If the shipper knows that the vessel, craft, conveyance, or container is unseaworthy or unfit but still uses it, then any loss, damage or expense arising from such use is excluded, that is, the insurer is not liable to pay for the loss, damage or expense. This clause encourages the shipper to be careful in his/her selection of the vessel, craft and conveyance, and emphasizes the importance of inspecting the container, particularly when the shipper will be loading the container himself/herself.

Insolvency or financial default of the owners or operators of the vessel

This clause encourages the shipper to be cautious in his/her use of the carrier.

Export Credit Risk Insurance

Exports not only face the risks of physical loss or damage, they may also face the risks of non-payment due to buyer's insolvency or default, government blockage of currency transfer, and other risks, known as credit risks. There are specialized organizations, often government owned, which insure credit risks. Credit risk insurance usually is applied in overseas projects and the coverage may run for a number of years. In some countries, credit risk insurance may cover open account sales, but is subject to credit terms such as the destination country, the terms of sales, and the amount involved. Some insurers may require that the products for export have a minimum percentage of domestic content (51% or more usually) to qualify for coverage.

Duration of Insurance Clauses

In the Warehouse to Warehouse Clause, the insurance coverage commences from the time the goods leave the warehouse or place of storage at the place named in the policy, continues during the ordinary course of transit and terminates either on delivery

to the consignee's or other final warehouse or place of storage at the destination named in the policy, to any other warehouse or place of storage, whether prior to or at the destination named in the policy, which the assured elect to use either for storage other than in the ordinary course of transit or for allocation or distribution, on the expiry of 60 days after completion of discharge overside from the overseas vessel at the final port of discharge (or the 30 days limit applies in the case of air freight),

whichever shall first occur. In certain countries, the insurance company may have the marine extension clauses to override the main clauses, for example theFifteen (15) Days Clause, in which the insurance coverage terminates on the expiry of 15 days after completion of discharge overside from the overseas vessel at the final port of discharge. Under the American Institute Clauses, the number of days of the expiry of insurance coverage after completion of discharge overside from the overseas vessel at the final port of discharge is 15 days (or 30 days if the destination to which the goods are insured is outside the limits of the port)

Insurance Premiums

The general guiding rate of the insurance premium is 1% of the amount insured. The premium rates may vary, for example, from 0.5% to 2.5% or more depending on factors such as:

Type of goods --The goods that are more susceptible to damage demand a higher premium. For example, glassware has a higher premium rate than the hammer. The country and distance of destination --Countries with a history of higher risks of loss or damage or at a war zone require a higher premium. The longer the distance of voyage, the greater is the risks of loss or damage, thus a higher premium rate. Value of the goods --The higher the value of the goods, the higher the amount the insurer will compensate in the event of loss or damage, thus a higher premium rate. For example, the precious jewellery has a higher premium rate than costume jewellery. Mode of transportation --Generally, ocean freight has a higher premium than land freight, and land freight has a higher premium than air freight. Air freight, in general, has better cargo security than ocean and land freight and it is faster to reach the destination by air, thus there is less exposure to the risks of loss or damage.

The type of risks covered --The more risks are covered, the higher the premium. In the Institute Cargo Clauses (A), (B) and (C), the Clauses (A) have the greatest extent of cover, followed by the Clauses (B), and then the Clauses (C). Any endorsement of the insurance clauses requires payment of an additional premium. Container or break-bulk shipment --Containers provide better protection for the cargo. Therefore, container shipments have a lower premium than break-bulk shipments. Type of packing --The better the goods are protected, the lower the premium. The risks of insufficient and unsuitable packing have been excluded in the new Institute Cargo Clauses.

Contingency Insurance

In the trade contract terms FOB and CFR, the insurable interest transfers from the exporter to the importer at the time the goods pass over the ship's rail. It is very important that the exporter provides the details of the shipment to the importer promptly, so that the insurance can be arranged on time. In practice, it is not uncommon that the importer arranges for insurance after the vessel has left the port of origin in the FOB and CFRterms. While it is the responsibility of the importer to arrange the insurance, the exporter may suffer loss if the goods are damaged before the insurable interest is transferred. As such, the exporter may insure the goods from the warehouse to the loading on board the vessel to overcome the contingency, without letting the importer know.

If the goods are exported on the open account basis where no letter of credit (L/C) is involved, there is a risk that the importer may reject the shipment if the goods are damaged on arrival. Contingency insurance may minimize the exporter's loss in such a circumstance. It is possible for the exporter to insure the goods from warehouse to warehouse. However, if the importer insures the goods too and claims the damage, the exporter cannot file for claims as he/she no longer has the insurable interest, and the exporter may not be able to provide the supporting insurance claim documents used by the importer to substantiate losses.

Insurance Claims

In the trade contract terms CIF and CIP, arrangement is usually made for any claims to be paid at destination to the consignee or issuing bank. However, should a loss occur prior to the passing of title to the goods to the consignee, such loss is payable at origin to the shipper or financing agent. The assured is obligated in the policy to do everything to minimize the loss or damage, to file claims against the carrier or any other party who could be responsible for the loss or damage, and to notify the insurer or claim agent immediately of the loss or damage. The insurer or claim agent then appoints a marine surveyor (the adjuster) to inspect the subject matter insured and report on the cause of the loss or damage, the value of the cargo, and the extent of damage. In some cases, the surveyor is named in the policy and the policy may require that request for survey to the surveyor or that claims against the carrier or any other party be made within a specified period of time after discharge of the goods from the vessel.

The surveyor issues a Certificate of Loss (Certificate of Survey), accompanied usually by the report of findings, to the consignee. The consignee may be required to pay a surveyor's fee, which may be refunded by the insurer or claim agent if the loss is recoverable under the policy. When making an insurance claim, the claimant (the assured) usually is required to submit the following documents:

Original insurance policy or insurance certificate --It proves that the claimant has the insurable interest. It helps the insurer or claim agent to establish that the cargo in question is the subject matter insured and to check the amount and risks covered. Original bill of lading or other transport document --It evidences the contract of carriage where the insurer or claim agent may take action against after paying the claimant. It helps the insurer or claim agent to determine that the claim is not the cause of a foul bill of lading, for example, a bill of lading with the "insufficient packing" notation where such risk is excluded in the coverage. Commercial invoice --It helps the insurer or claim agent to determine the percentage of loss in a partial loss. It may prove that the cargo in question is the subject matter insured. Packing list --It determines where in the consignment the loss or damage occurred. It may point to the cause of damage that might be excluded in the coverage, for example unsuitable packing. Certificate of Loss (Certificate of Survey) --It shows the cause, value and extent of the loss or damage. It is issued by the marine surveyor appointed by the insurer or claim agent.

The landing account or weight notes (notes on weight) at destination --It helps the insurer or claim agent to identify where the loss or damage may have actually occurred. The records from the carrier or stevedoring contractor at destination may pinpoint that the loss or damage has happened on the vessel, in the container, during unloading, or while in the dock warehouse. Any correspondence with the carrier or any other party who could be responsible for the loss or damage --It helps the insurer or claim agent to verify that the Not to Inure Clause is not violated. Master's protest --A written declaration by the ship's master giving details of disaster, accident or injury at sea. This document is particularly important when a general average claim is involved.

Subrogation

When the assured is fully paid in an insurance claim, he/she normally signs a subrogation form giving the insurer the rights to the lost or damaged cargo. It is only then the insurer may take actions against the carrier or any other party who could be responsible for the loss or damage.

Payments in the Particular Average Claims and the General Average Claims

While the payment in a particular average claim (either partial or total loss) usually is prompt, in a general average claim it may take many months. Referring to the general average sacrifice, the appointed marine surveyor (the adjuster) carefully calculates the value of eachshipment---the wholesale price of each type of goods less the applicable customs duties, taxes and other charges---in proportion to the total value of the shipments and vessel. Cargo owners whose goods are fully insured---the amount insured equals or exceeds the value of the goods---the insurers may put up immediately a general average guarantee to cover the contribution in the general average sacrifice, so that the cargo owners may obtain the goods from the carrier instead of waiting for many months for the settlement date. In some cases, the assured is required to post a general average bond in addition to the insurer's guarantee. The insurers are liable for the cost of the claim in a general average claim as provided in all three basic types of policies in the old and the new Institute Cargo Clauses. In the case of uninsured goods, the cargo owners must wait until the settlement date to obtain the goods from the carrier, unless the cash is put up to cover their shares of the contribution. Still, it may be weeks before the amount of the individual contribution is available.

Insurance Application-Instructions

Please see the sample Insurance Application-Instructions (IAI) below. The exporter may use the IAI to apply for a specific policy. Some exporters supply the original letter of credit (L/C) or its photocopy without supplying the IAI, and let the forwarder handle the insurance application.

(1) " NAME OF THE ASSURED (Beneficiary - Payable to the order of) "

Unless otherwise stipulated in the letter of credit (L/C), the exporter's complete name and address is entered in the field (NAME OF THE ASSURED). The exporter endorses the insurance document in blank---without specifying to whom the document isendorsed---before presenting it to the bank.

(2) " AMOUNT INSURED "

Amount of Insurance Coverage

Unless otherwise stipulated in the letter of credit (L/C), the minimum amount of insurance coverage the insurance document must indicate should be the CIF or the CIP value of the goods, as the case may be, plus 10%. If the CIF or the CIP value cannot be determined, the minimum amount of insurance coverage would be 110% of the amount requested under the L/C for payment, acceptance or negotiation, or 110% of the total amount of the invoice, whichever is the greater. The insurance coverage of 10% more than the CIF or the CIP value is intended as insurance against the loss of expected profit. The L/C may call for an amount of insurance coverage over 110% as settled between the exporter and importer, for example, 120% CIF value or 130% CIP value. In the case of trade terms DDU and DDP, the insurable interest in the goods is not transferred to the importer and the amount of insurance coverage depends on the exporter's requirement.

In the case of a transferable letter of credit transferred to the second beneficiary, the percentage of insurance coverage may be increased to provide the amount of cover stipulated in the original L/C. In the sample letter of credit the amount of insurance coverage required is 110% CIF value, as such enter "USS$27,500.00" in the field (AMOUNT INSURED).

(3) " TERMS OF INSURANCE COVERAGE (Clauses) "

If the trade terms call for insurance, the letter of credit (L/C) normally will stipulate the type of insurance required and the additional risks which are to be covered, if any. The terms "usual risks", "customary risks" or similar imprecise terms should not be used in the L/C. In the sample letter of credit the DEF Imports requires insurance covering Institute Cargo Clauses (A), plus the additional risksInstitute War Clauses and Institute Strikes Clauses. Unless otherwise stipulated in the L/C, the insurance document which indicates that the cover is subject to a franchise or an excess is acceptable.

(4) " LATEST ISSUING DATE OF INSURANCE POLICY "

The insurance policy or insurance certificate, as the case may be, must bear a date of issuance not later than the date of loading on board or dispatch or taking in charge as indicated in the transport document, unless otherwise stipulated in the L/C.

(5) CLAIM AGENT: " Indicate complete name and address of claim agent at port of destination " " Indicate claims payable in ________ (city, c ountry) in ________ currency "

The sample letter of credit specifically requires "insurance policy ... evidencing that claims are payable in Import-Country", as such enter "Sunlight City, Import-Country" or "Import-Country" in the space (blank) provided. The exporter must check the insurance policy upon receipt to ensure that the claims and the claim agent at destination are properly indicated. Unless otherwise stipulated in the letter of credit (L/C), the insurance document must be expressed in the same currency as the L/C. Further to the sample letter of credit, enter "U.S. Dollar" in the space (blank) provided.

Sample Form: Insurance Application-Instructions

UVW EXPORTS
Insurance Application-Instructions Sales Confirmation No. Commercial Invoice No. Name Insurance Company Tel. No. Contact Person Fax. No. Ref. No. 88 Prosperity Street East, Suite 707 Export-City and Postal Code, Export-Country Tel: (07) 1234-5678 Fax: (07) 1234-8888 E- mail: shipping@uvwexports.com.jp

Shipper's Reference

1.

NAME OF THE ASSURED (Beneficiary - Payable to the order of):

2.

AMOUNT INSURED:

3.

TERMS OF INSURANCE COVERAGE (Clauses):

4.

LATEST ISSUING DATE OF INSURANCE POLICY: Loading On Board date: Dispatch/Taking In Charge date:

5.

CLAIM AGENT: Indicate complete name and address of claim agent at port of destination. Indicate claims payable in __________________________ (city, country) in ____________________ currency.

6.

DESCRIPTION OF PACKAGES & GOODS:

7.

MARKS & NUMBERS:

8.

CONTAINER NUMBER:

9. 10. 11. 12. 13. 14. 15.

CARRIER - VOYAGE/FLIGHT NO. SHIPMENT ON OR ABOUT FROM (Port of Loading) FROM (Place of Dispatch/Taking In Charge) TO (Port of Discharge) VIA (Tranship At) THENCE TO (For Transhipment To)

Other Instructions

Insurance Rate Premium Issued by:

No. of copy of the Insurance Policy required

Original Copy (Duplicate)

Date:

Terminology in the Institute Cargo Clauses

Proximately caused by

In many circumstances, it is the chain of causes that lead to the loss or damage to the subject matter insured. The loss or damage can be due to the actual or effective cause known as proximate cause.

Case Sample: Delayed Delivery and Insurance

A consignment of commemorative items to celebrate the 50th anniversary of the company was insured against Institute Cargo Clauses (A) and arrived after the anniversary date in good condition. The goods were in a vessel that collided with ice and took refuge in an intermediate port for repair. Due to the unavailability of a vessel for the on-carriage of goods and poor weather, the goods remained in the intermediate port for some time. The goods finally arrived at the company with no physical loss or damage, but the company suffered loss proximately (i.e., actually or effectively) caused by the delay in delivery

Reasonably attributable to

Most of the risks under the Clause (B) and Clause (C) have been changed from the "proximately caused by" to "reasonably attributable to".

Malicious damage

The exclusion in the deliberate damage to or deliberate destruction of the property insured or any part thereof by the wrongful act of any person(s).

Delay

Although the delay was caused by a risk insured against (except expenses payable under general average), the assured cannot claim the loss or damage due to the delay. In the above Case Sample: Delayed Delivery and Insurance the company cannot take action against the insurer, but it may take action against the carrier for the delay in delivery.

Willful misconduct of the assured

If the loss or damage is the result of negligence or actions taken by the assured, he/she cannot claim such loss or damage.

General average sacrifice

The word "average" means loss. The general average sacrifice is an intentional sacrifice or expenditure reasonably incurred for the purpose of preserving the imperiled property involved in the common maritime adventure. In other words, sacrifice in the cargo for the benefit of saving the rest and the vessel. The jettison and the cargo damaged by water used to extinguish a fire aboard the vessel are examples of the general average sacrifice. If the action taken is successful, each party to the adventure---all cargo owners and the vessel owner---bear the loss and expenses incurred based on the

value of each shipment in proportion to the total value of cargo and vessel. The cargo owners whose goods are safe and sound or uninsured in the marine perils must also contribute to pay for the loss and expenses.

Jettison

It means the cargo is thrown overboard to lighten the vessel during a storm or when a vessel grounds and can be floated at high tide with lesser load.

Piracy

The piracy is excepted in the War Exclusion in the Clause (A) only. To cover against piracy in the Clause (B) and Clause (C), theInstitute War Clauses must be endorsed. The F.C.&S. Clause (Free of Capture and Seizure Clause) in the old Institute Cargo Clauses excludes the piracy.

Inherent vice or nature of the subject matter insured

The word "vice" means fault. The inherent vice means the nature or characteristic of a product which could result in damage to the product despite all care and caution by the carrier. For example, cut flowers may wilt and die, milk may turn sour, and cement may set.

War

The exclusions of war, civil war, revolution, rebellion, insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power (for the purpose of this clause 'power' includes any authority maintaining naval, military or air forces in association with a power); capture, arrest, restraint, detainment (piracy excepted), and the consequences thereof or any attempt thereat; derelict mines, torpedoes, bombs, or other derelict weapons of war. This clause basically replaces the old F.C.&S. Clause (Free of Capture and Seizure Clause).

Strikes, riots and civil commotions, includes terrorists or any persons acting from a political motive

The insurance does not cover loss, damage or expense caused by or resulting from: strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions; strikes, lock-outs, labour disturbances,

riots or civil commotions; terrorists or any persons acting from a political motive. This clause is similar to the old F.S.R.&C.C. Clause (Free of Strikes, Riots and Civil Commotions Clause) except the new clauses include an additional exclusion of terrorists or any persons acting from a political motive.

Use of any atomic or nuclear weapon

The exclusion in the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter. This exclusion also appeared in the Institute War Clauses.

Ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject matter

The ordinary leakage or ordinary loss in weight or volume is a form of inherent vice. The natural processes of evaporation (liquid turns to gas) and sublimation (solid turns to gas) may be involved. For example, alcohol evaporates and the mothball (naphthalene ball) sublimates, as a result alcohol and mothballs may lose weight or volume. The ordinary wear and tear of the subject matter is often linked to the insufficiency or unsuitability of packing where the cargo may move and 'rub' against each other or against the container during the sea voyage because

of high wind and waves. Friction (from 'rubbing') may result in wear and tear to the cargo.

Insufficiency or unsuitability of packing of the subject matter insured

The packing used here includes stowage in a container but only when such stowage is completed by the assured or his/her agent before the insurance coverage takes effect. This clause reminds the shipper to be careful in the preparation of export packs and the loading or stuffing of the container.

The assured privy to the unseaworthiness of vessel or craft and/or unfitness of vessel, craft, conveyance, or container at the time of loading

The word "privy" means having knowledge of. If the shipper knows that the vessel, craft, conveyance, or container is unseaworthy or unfit but still uses it, then any loss, damage or expense arising from such use is excluded, that is, the insurer is not liable to pay for the loss, damage or expense. This clause encourages the shipper to be careful in his/her selection of the vessel, craft and conveyance, and emphasizes the importance of inspecting the container, particularly when the shipper will be loading the container himself/herself.

Insolvency or financial default of the owners or operators of the vessel

This clause encourages the shipper to be cautious in his/her use of the carrier.

Export Credit Risk Insurance

Exports not only face the risks of physical loss or damage, they may also face the risks of non-payment due to buyer's insolvency or default, government blockage of currency transfer, and other risks, known as credit risks. There are specialized organizations, often government owned, which insure credit risks. Credit risk insurance usually is applied in overseas projects and the coverage may run for a number of years. In some countries, credit risk insurance may cover open account sales, but is subject to credit terms such as the destination country, the terms of sales, and the amount involved. Some insurers may require that the products for export have a minimum percentage of domestic content (51% or more usually) to qualify for coverage.