Chapter 5 Cargo Transport

1. Chapter 5 Cargo Transport • Modes of Transportation • Shipment Clause in International Contracts • Transport Documents

2. Modes of Transportation • There are several ways to carry the goods to their destination, including ocean transportation, road transportation, air transportation and international multi-modal transport and so on. When more than one mode is available, careful considerations should be made to decide the right method of transportation. You will have to consider the time needed for the transport, the quantity of the goods, the safety of the goods, the availability of the transport vehicles, freight, etc.

3. Ocean Transportation Marine transportation can fall into two groups: • Liners 班轮运输 • Charters (Tramps)租船运输

4. Liners • Liners operate on a scheduled service between a group of ports. Liners sail on scheduled dates and times irrespective of whether they are full or not. Shipment made on liners is relatively small but frequent. • Liner transport is characterized by a fixed sailing schedule, fixed calling ports, a fixed navigation route and relatively fixed freight rates.(四固定) • The respective liabilities of the consignors and the carriers are listed in the bills of lading issued by the liner companies. Liner companies publish their sailing schedules in newspapers or distribute them among the consignors.

5. Freight of Liners • Liner companies charge consignors according to their liner’s freight tariff like W, M, W/M, A.V., W/M or A.V., unit/head… • Freight of liners is inclusive of the loading and unloading charges. • The freight of liners comprises two parts: basic charges; the surcharges and additionals . • Great attention should be paid to the additional charges, which are many in variety. For example, Heavy Lift Additional(超重附加费), Lengthy Cargo Additional(超长附加费), Transshipment Surcharge(转船附加费). Port Surcharge(港口附加费).

6. The Calculation of Basic Charges Several ways are used in calculating the basic charges: • By weight ton, shortened as W/T. A weight ton can be a metric ton or a long ton, as is decided by the liner companies. Cargoes that are charged by W/T are marked “W” in the liner’s freight tariff. • By measurement ton, shortened as M/T. A measurement ton is either one cubic meter or 40 cubic feet. Cargoes that are charged by M/T are marked “M” in the liner’s freight tariff. Note: W/T and M/T are together called freight ton (F/T). Generally, the former is applied to the goods with more gravity while the latter with less gravity.

7. The Calculation of Basic Charges • By either W/T or M/T, whichever the higher. Goods that are charged in this way are marked W/M in the liner’s freight tariff. • By a certain percentage of FOB price of the goods. Goods that are charged in this way are marked “A.V” or “Ad Val” in the liner’s freight tariff, for goods of high value. • By either W/M or A. V.. The goods are charged by either the measurement ton or the weight ton or the value of goods, whichever the highest. While if the freight of a kind of goods is to be charged by M/W plus A. V., then the freight will be charged by either the measurement ton or the weight ton, whichever the higher, plus a certain percentage by A.V. • By the number of the goods, Unit/Head. The goods like cattle, trucks are charged in this way. • By Open Rate, discussed by the consignor and the carrier for the goods like grain, mineral ore, coal, etc

8. The Calculation of the Freight of Liners Included in the liner’s freight tariff are the grading of the goods, the basic freight rates of different graded cargoes, the basic freight rates of refrigerated cargoes and domesticated animals, additional charge rates, etc. Two charts are needed: Classification of Commodities(等级运价表) and Scale of Class Rate(费率表). To get the freight of your cargoes , you need to: • 1) know the grade of the goods (by looking up for your goods in the freight tariff which lists various goods in alphabetical order) and by which method it is to be charged (by M/T or W/T or A. V. or others); • 2)with the information hereupon achieved, get the basic freight rates of the goods.

9. The Calculation of the Freight of Liners • 3) get additional charges of the route and the ports that will be called upon, which is given in percentage of the basic freight rates; • 4)get the total unit freight by adding the additional charges to the basic freight charges; • 5) get the total freight by multiplying the total unit freight by the total units of the goods.

10. The Calculation of the Freight of Liners Total Freight =Total Quantity× Basic Rate×(1+Surcharge/Additinals Rate) 商品运费总额 =[基本运费×(1+∑附加费率)+∑附加费额] ×总运费吨

11. Charters Unlike the liners, a tramp does not sail on a fixed route or a fixed schedule, but goes all over the world in search of cargoes, primarily bulk shipment, like coal, grain, timber, steel, ores, fertilizers, etc., which are carried in complete ship loads. Tramp vessels are engaged under chartering on a time or voyage basis, and sometimes are chartered to supplement existing liner services to meet peak cargo shipment demands. Chartering might be Voyage Charter/ Trip Charter,Time Charter or Bareboat Charter.

12. Charters

13. Types of Charter vessels Voyage charter is for the carriage of goods from one specified port to another. It might be for one single or consecutive single voyages or for one return or consecutive return voyages. Time charter, as the name signifies, is on the time basis. The chartering might be a year or many years, during which the business of the boat is under the management of the charterer (船方）. Bareboat charter, the hire of the vessel itself. The charterer has to pay an agreed sum of freight to the ship-owner for deploying the ship for an agreed definite period of time.

14. Charters Issues to make sure:(P121-122/中文P54) • Differences between voyage charter and time charter; • Charter Party 租船合同; • Division of loading and unloading cost. 船方管装管卸(Gross Terms) 船方管装不管卸(Free Out) 船方管卸不管装(Free in) 船方不管装不管卸(Free In and Out)

15. Railway Transportation • Railway transport of China now comprises three parts: domestic railway transport, railway transport to Hong Kong and Macao, and international combined railway transport. The consignor needs to get the cargo receipt to settle payment at the bank.

16. Railway Transportation

17. Air Transportation Advantages: Air transport offers quick transit of the goods with low risk of damage and pilferage, and thus with very competitive insurance rates. It can also save packing cost and reduce amount of capital tied up in transit. It is the best choice for the carriage of the goods with high value and limited dimensions. Disadvantages: But it has limited capacity of overall dimensions together with weight restrictions and vulnerability to bad weather.

18. Types of Air Transportation • Scheduled Airlines 班机 • Chartered Carriers 包机 • Consolidated Consignment 集中托运 • Air Express 航空急件

19. Calculation of Air Transportation • W/M is adopted, whichever the higher. • 1 unit of weight=1KG(以千克为单位) 1 unit of measurement weight =6000 cubic centimeters 每6000立方厘米(或365立方英寸)折算为 1千克,不足1千克的尾数四舍五入。

20. Parcel Post Transport • This method is very simple and convenient. This is only used for the delivery of very small quantity of goods. The delivery is done when a receipt of the goods is obtained. • The limitation of dimension: not longer than 1 meter and heavier than 20 kg.

21. Container Transportation Containers are of different sizes, but now the universally-used containers in international trade are 8ft x 8ft x 20ft and 8ft x 8ft x 40ft, with the former being taken as the standard container unit, called TEU (Twenty-foot Equivalent Unit)标准箱. It has a weight of 18 metric tons and a capacity of 31-35 cubic meters.

22. Container Transportation • There are many kinds of containers, e.g. dry cargo containers, bulk containers, hanging garment containers, half high containers, open top containers, livestock containers, etc. There are full container loads(FCL) and less than container loads (LCL). FCL is directly sent to the container yard (CY)(集装箱堆场）. The vanning of LCL is done either by the consignor or the carrier at the production site or the warehouse, then it is sent to the container freight station (CFS)（集装箱货运站） for consolidation by the carrier. Containerized transport often operates on the basis of “CY to CY(场到场)” or “Door to Door(门到门)”. • Container charges are of various kinds. There are additional container charges, by which the total freight is got by adding some additional rate to the basic rate. There are container freight rates by which a container load is charged at a given freight rate.

23. CY & CFS

24. International Multi-modal Transport International Multi-modal Transport or International Combined Transport or International Inter-modal Transportinvolves at least two modes of transport such as land/sea, land/air, land/sea/air, or sea/air transports. Features: • One multi-modal transportation operator (多式联运经营人) takes the responsibilities • One carriage contract • One freight rate

25. Shipment Clause • Time of shipment (or Time of Delivery ) • Place or Port of Loading and Place or Port of Destination • Partial Shipment and Transshipment • Shipping advice • Demurrage and Dispatch Money • Lay Time

26. Several Ways Used to State the Time of Shipment in the Contract • 1. A definite time is given for shipment. e.g. Shipment during January Shipment at or before the end of June Shipment on or before July 15 Shipment is to be made in three equal monthly lots during January, February, and March. • 2. When the payment is made by L/C, the time of shipment is usually made in connection with the time of receipt of L/C. e.g. Shipment is to be made within 30 days after receipt of L/C. • 3. Recent shipment. When the shipment can be made soon after the conclusion of the contract, the parties can adopt such terms as immediate shipment, prompt shipment, or shipment as soon as possible, etc. (Be cautious)

27. Considerations To stipulate the time of delivery when the parties are concluding a contract, both parties have to think of many links and elements for the implementation of the sales contract. For the seller, he should think if he can get the contracted goods ready and implement the required formalities in the required time; for the buyer, he should think how long it will take him to get the import license, import finance, and how long it will take him to get ready to receive the goods. So the parties need to negotiate to find a time that is acceptable to both parties. Once the time is agreed upon, the parties are obliged to fulfill their obligations before the agreed time expired, or they might face claims. In deciding the time of shipment, considerations must be given to the following: • 1.The supply of the goods. Sufficient time should be given to the production of the goods.

28. 2.Transportation. Considerations should be given to the vessel, the voyage, and the conditions of the port. If the vessel is always available and the port is on operation all the time, the shipment can be sooner; otherwise a longer period of time should be allowed for the shipment. • 3.The market conditions of the goods. Some goods are seasonal, so they require sooner shipment so as to meet the seasonal market demand. Sometimes when the marine transport is not soon enough, air transport can be used. • 4. The conditions of the goods. Some goods are likely to mould and get damp, such as cigarette leaves, and they should not be shipped in rainy seasons; some goods should not be carried in summer when it is hot, like grease, etc. Also, in the provision of the time of shipment, considerations should be given to processing, packing, inspection and other elements.

29. Ways to State the Port of Shipment and the Place of Departure • Generally only one port of shipment or one place of departure is stated in the contract. But sometimes the goods are not in one place, and several ports or places are allowed. This is especially the case when the goods are to be assembled with components from various places. e.g. Shipment is to be made at a German port, an Italian port and a Japanese port. Note: Under FOB, an indefinite port (e.g. a Chinese port) of shipment is not allowed because the buyer will be at a loss as to where he should send his ship.

30. Ways to State the Port or Place of Destination • 1.Generally speaking, only one port or place of destination is given in the contract. But when the buyer cannot decide where to receive his goods, more than one port or place of destination can be stated in the contract, and the buyer should make his final decision as to where he will receive the goods some days before the shipment is made. e.g. CIF London/Liverpool/Manchester • 2. Optional ports: Sometimes when the contract is concluded the buyer has not found his buyers, so perhaps he does not know where to receive the goods even after the shipment is made. Under such circumstances, the parties can state optional ports in their contracts. e.g. CIF London/Hamburg/Rotterdam optional

31. Ways to State the Port or Place of Destination • Notes: The optional ports should be on the same route and should not be more than three. The buyer should inform the ship of his final decision 48 hours before the ship has reached the first optional port. Otherwise the shipper has the right to unload the goods at any of the optional ports. Also additional charges because of the use of optional ports should be charged to the buyer’s account. e.g.CIFLondon, optional Hamburg/Rotterdam.Optional surcharges are for the Buyers’ account.

32. Additional Points about the Port of Destination • 1. When a trade ban has been adopted by the UN or our government against a country, we cannot accept a port of the sanctioned nation as the port of destination. • 2. When the port of destination does not have a direct route connecting the seller and the buyer, or when the boats going there are few, transshipment should be allowed. • 3. The port of destination should be suitable for the boat to anchor and deliver its goods. • 4. Generally, inland cities are not allowed to be the place of destination unless the multi-modal transport carrier can effect the inland transport. • 5. Some different ports have the same name, like Victoria, which is the name of 12 ports (in Hong Kong, Guinea, Canada, Cameroon, etc.). Under such cases, it is advisable to state clearly in the contract the country in which the port of destination lies.

33. Partial Shipments • Partial shipments:In case of export covering a large amount of goods, it is necessary to make shipment in several lots by several carriers sailing on different dates. Reasons for partial shipments: • the limitation of shipping space available; • poor unloading facilities at the port of destination; • dull market season; • possible delay in the process of manufacturing the goods. • Partial shipments are allowed only when the clause “Partial shipments are allowed” is agreed upon in the sales contract. If partial shipments are not allowed, the clause “No partial shipments” or “Partial shipments not allowed” and the like should be given in the contract.

34. Transshipment Transshipment:Transshipment in marine transport is the movement of the goods in transit from one carrier to another at the ports of transshipment before the goods reach the port of destination. Transshipment is necessary when: • - ships going directly to the port of destination are not available, • - or the port of destination does not lie along the sailing route of the liner, • - or the amount of cargoes for a certain port of destination is so small that no ships would like to call at that port. • Transshipment is allowed when the sales contract has a clause like “Transshipment to be allowed”.

35. Other shipment clauses • Lay time • Demurrage • Dispatch

36. Transport Documents • Transport documents are the documents issued by the carrier testifying that the goods have been shipped for the transport and delivery. • Different modes of transport have different transport documents. In railway transport we have cargo receipt; in air transport we use air waybill and in post parcel receipt. Here we will focus on the marine transport bill of lading and the multi-modal transport documents.

37. Marine Transport Bill of Lading (B/L) • The Nature of B/L • Chief Contents of B/L • The Varieties of B/L

38. The Nature of B/L B/L is issued by the captain or the shipping companies to testify that the goods have been received or shipped on board for delivery to a certain place of destination. It has three significations. • First, it is a receipt of the goods testifying that the goods have been received by the carrier from the consignor. • Second, it is a document of title to the goods. With the B/L, the seller can come to the bank for negotiation, and its holder can take delivery of the goods at the port of destination from the carrier. • Third, it is the evidence of the contract of carriage between the consignor and the carrier. Listed on the B/L are the rights and liabilities of the carrier and the consignor, though under a charter party, the rights and liabilities are to be decided by the charter party. The bill of lading is an important shipping document that, together with the insurance policy and commercial invoices, constitutes the chief shipping documents indispensable to foreign trade.

39. Chief Contents of B/L • Different shipping companies have different forms of B/L, but any B/L contains the following information: • 1.Carrier. Not only the captain of the ship should be presented, but also the shipping companies should be given. • 2. Shipper, or consignor (generally the exporter). • 3. Consignee. This column should be filled in with great care and in accordance with the instructions of L/C. • 4. Notified party (generally the consignee). This is the party to be notified by the ship upon the arrival at the port of destination. If so required by the L/C, the complete address of the consignee should be filled here; if not required, the full address of the consignee should be given here in the duplicates. If “only” is required by the L/C following the name of consignee, there should be “only” there. If two or more than two names and addresses are required here by L/C, there should not be only one here. • 5. B/L NO.

40. 6. The name and voyage number of the carrying vessel. • 7. The date when the goods were received for shipment and / or loaded on the vessel, or sailing date. • 8.Port of discharge. If the B/L has another column “final destination” or “port of delivery” as in a combined transport bill of lading, the port of discharge should be the transshipment port. If not, this is the port of destination. • 9. Port of delivery. This is the port of final destination. If there is transshipment, there should be a remark here “with transshipment at…” • 10. Shipping marks. • 11. Description of the goods. • 12. Gross weight. • 13.Measurement.

41. 14. Number and kind of packages. • 15. Freight, whether it is prepaid as under CIF & CFR or to collect as under FOB. “freight prepaid”/ “freight to collect” • 16. Number of Original B/L signed on behalf of the Master or his agent. Generally there should be two or three originals with many non-negotiable B/Ls. One of the non-negotiable B/Ls will be retained by the carrier and the originals are kept by the shipper after they are duly signed by the Master or his agent for negotiation. With one of the originals used for taking delivery of the goods at the port or place of destination, the other originals will stand void. • 17. The signature of the Master or his agent and the date.

42. The Varieties of B/L • 1. On Board B/L “已装船提单”means that the goods have been shipped on board while Received for Shipment B/L“备运提单” means that the goods have been received for shipment. The latter is generally not favored by the buyer, and usually the L/C will require the seller to present On Board B/L for negotiation at the bank. • 2. Clean B/L“清洁提单carries no unfavorable remarks by the carrier while Unclean B/L(Foul B/L) “不清洁提单” carries such unfavorable remarks as “… packages in damaged condition”, “iron strap loose or missing”, etc. Generally the L/C will often require the seller to present clean B/L for negotiation, and unclean B/L may cause the seller great trouble.

43. 3. Straight B/L “记名提单”has a specified name in the column of consignee of the B/L This means that the goods can only be received by the person specified and the B/L is not to be transferred to any third person.Therefore, straight B/L is not negotiable and thus it is only used in international trade on special occasions. • Open B/L(or Bearer B/L)“不记名提单”has no specified names in the column of consignee of the B/L. This means that any holder of the B/L is entitled to take delivery of the goods and the B/L can be transferred to any third person.

44. Order B/L “指示提单”usually has “To order” or “To the order of…” rather than a specified name in the column of consignee of the B/L. This kind of B/L can be transferred to others by endorsement. • For endorsement, there are blank endorsement and special endorsement. Blank endorsement has only the name and signature of the endorser on the back of the B/L while special endorsement has the names of both the endorser and the endorsed. The B/L used in business practice is usually Order B/L with blank endorsement. This is not decided at the will of the seller but decided by the relevant instructions of the L/C.

45. 4. Under Direct B/L “直达提单”, the consignment will be carried direct to the port of destination without transshipment, while under Transshipment B/L “转船提单”, the consignment will be carried at least by two boats before it arrives at the port of destination. • Through B/L “联运提单”is used in the combined transport of marine and some other modes of transport. That means the consignment will be carried by at least two different modes of transport, one of which must be marine transport, before it arrives at the port of destination. • Through B/L is issued by the first carrier who is responsible for the safety of the goods when they are on his boat though he is obliged to deliver the goods to the second carrier.

46. 5.Combined Transport (container) B/L多式联运提单serves as a multi-modal transport document (MTD)多式联运单据. Combined transport, or multi-modal transport, involves at least two modes of transport in the carriage of a consignment. It is more and more used in accordance with the development of containerized transport. Such transport is generally operated by a multi-modal transport operator (MTO) who is responsible for the safe carriage of the goods throughout the transit. This is different from Through B/L, which is only used in the combined transport of marine and some other modes of transport. • MTO does not necessarily have a ship. He is usually a NVOCC (Non Vessel Operating Common Carrier). He offers package service to the consignor and other services like consolidating, storing, customs clearance,etc. He tries to acquire lower freight rates for the consignor and he is responsible for the safe carriage of the goods throughout the voyage.

47. Sea Waybill • Sea waybill is issued by the carrier or the agent evidencing that the goods have been received and that the goods are to be delivered to the designated consignee at the port of destination. • Features: 1. It is a receipt for the goods as well as the evidence of contract of carriage, but not a document of title to goods 2. It is a non-negotiable sea waybill.

48. Air Waybill • Compared with the bill of lading, air waybill“航空运单”is simple and not diversified in its type. It is a receipt from the airline acknowledging the receipt of the consignment from the shipper and a contract of carriage between the airline and the shipper. • An air waybill is equivalent to an ocean B/L, but it is not a document of title or negotiable instrument, as the buyer does not have to pay to get the air waybill to take delivery of the goods from the carrier. Hence collection cannot be used for the payment of the goods to be transported by air. • Each air waybill has 3 originals and at least 6 copies. The first original is kept by the airline for filing and accounting purposes. The second original is to be carried with the consignment and delivered to the consignee at the destination. The third is for the shipper, who may present it to the bank for settlement of the payment. The copies are distributed to the second or third carrier, or if required, to the airport of departure and airport of destination.