scmt340 final exam

difference between value of service and cost of service

value of service: the value of the product drives the cost of the moving container
cost of service

what are the two types of ocean cargo?

liner service
charter/tramp service

liner service

service provided by a ship that operates on a regular schedule traveling from a group of ports to another (ex. transit operation, busses on campus); mostly involves containers; completes the route over and over knowing exactly how long it will take other characteristics:

• regular schedules

• regular routes

• many different cargo types

• many different shippers

• service oriented

• value of service pricing

• oligopolistic in nature

• "common" carrier

what are some issues with liner shipping?

rate instability and competition; large blocks of capacity can enter/exit the market; endemic over capacity; low variable costs; destructive competition

what did liner shipping look like before the shipping act of 1916?

had closed conferences
loyalty contracts
fighting ships (undercutting of prices)

charter/tramp service

service provided by a ship that doesn't operate on a regular schedule and is available to be chartered for any voyage from any port to any port (ex. renting a car); you could charter for a period of time or for a voyage; also can be with or without staff included other characteristics;

• no regular schedules

• no regular routes

• mostly shiploads of a single commodity

• used usually for single shipper

• cost oriented/competitive

• "contract" carrier

voyage charter

ship owners leases the vessel for the transport of the charterer's goods on a single voyage from one port to another, at an agreed rate/vessel DWT per month (renting a cab)

ship owner basic obligations for a voyage charter

• furnish master and crew

• assume all port charges in connection with the crew

• remain responsible for the operation/safety of the vessel

• direct movement of the vessel for loading, transporting, discharging the cargo

• pay for cost of fuel/water

• pay all port charges associated with the vessel

• deliver the cargo to the side of the vessel at the agreed time

negotiable obligations:

• pay for all cargo handling expenses

• share cargo costs

key clauses of voyage charter

• loading/discharging ports (safe port, safe berth, always afloat)

• cargo description and quantity

• freight: reward payable to carrier -- per unit shipped, lump sum

• loading & discharging cost allocation -- gross terms, FIO and free stowed/trimmed

time charter

ship owner leases the vessel to the charterer for a stipulated period of time at an agreed rate per vessel DWT per month (renting a limo...could be with or without crew)

ship owner obligations for time charter

• furnish master and crew

• assume all port charges in connection with crew

• remain responsible for operation/safety of vessel

charterer obligations for time charter

• direct movement of vessel for loading/transporting/discharging the cargo

• pay for cost of fuel, water

• pay for all cargo handling expenses

• pay for all port charges associated with vessel

what is a bareboat/demise charter?

a special type of time charter where they transfer everything to charterer other than title of the vessel; no crew, fuel, stores; charterer has entire burden; usually used by those who already have shipping operations but need a vessel

what are some cargo types in charter/tramp service shipping?

dry & wet-bulk cargo
break-bulk
neo-bulk

dry & wet-bulk cargo

depending on type of item shipping

neo-bulk

not really thought of in bulk container (cars, lumber, chemicals, fertilizers)

conference system

used as a background for industry self regulation; the economics of an oligopoly (cartel) forces for cooperation, and independent action; keeps the shippers and carriers tied to the cartel

what is one way of skirting the Jones act and why?

Jones act requires that any transport US --> US must be carrying the American flag; many people would stop at a foreign port in between in order to carry another flag on board which was much cheaper

what is some shipper service criteria?

• make service more reliable

• provide door to door service reliability

• provider shorter transit times

• provide real time information on shipment location

what did the shipping act of 1984 accomplish?

practices addressed earlier were no longer allowed; but did fix rates and rationalize service, publish intermodal rates, enter into service contracts, and vary rates with volume over time

lay days

used to account for time involved in loading/unloading/discharging cargo; an incentive not to delay loading/discharge beyond a reasonable time; important to know: port conditions, holidays, work habits, type of cargo you're carrying

demurrage

penalty assessed by a ship owner against a charterer for failure to meet lay time specified

dispatch

bonus paid by ship owner to charterer for loading/discharging the vessel within a shorter period than specified

who all is involved in the charter market?

• ship and cargo brokers

• baltic exchange

• spot charters

what are some types of ship measurements?

space: net registered tons, grain cubic, bale cubic, TEU's, FEU's
weight: deadweight tons (DWT)

what are some types of cargo measurements?

space: cubic feet, cubic meters, measurement tons
weight: long tons, short tons, metric tons

deadweight tonnage (DWT)

total weight carrying capacity of a ship measured in long tons or metric tonnes; determined as the difference in water displacement when the ship is empty and fully loaded

cargo deadweight tonnage

obtained by subtracting the weight of the bunker, crew-related items, and stores for a voyage; actual cargo capacity of a ship; it is the measure of greatest interest to shippers...theoretical carrying capacity of a ship

gross tonnage

total VOLUME of a ship's carrying capacity, measured as the space available below deck and expressed in tons (hundreds of cubic feet)

gross registered tonnage (GRT)

gross tonnage calculated in a specific way, generally for purpose of determining the fee a ship will pay to use a canal (Panama GRT or Suez GRT)

plimsoll mark & load lines

shows to what depth you can load the vessel safely; shows the classification society of the ship
load lines: indicate how heavily a ship can be loaded; in winter water is more dense so you can load less
from top to bottom
TF: tropical fresh water
F: fresh water
T: tropical
S: summer
W: winter
WNA: winter North Atlantic line

panamax

ship of maximum size that can enter the panama canal (locks are 110 feet wide, 1000 feet long)

post-panamax

ship that is too large to enter locks of panama canal

handy size

ship in the 10,000-50,000 DWT

neo-panamax

can get in the new panama canal

suez-max

roughly 150,000 DWT; maximum to fit through Suez canal

cape-size

large dry-bulk carrier of a capacity greater than 80,000 DWT (relates to ships that were originally too large to fit through Suez canal and had to go around cape of good hope)

aframax

large oil carrier with capacity between 80 to 120,000 DWT; standard size

very large crude carrier (VLCC)

oil tanker up to 300,000 DWT

ultra-large crude carrier (ULCC)

oil tanker more than 300,000 DWT

very large ore carrier (VLOC)

ore carrier more than 200,000 DWT

ultra large ore carrier (ULOC)

ore carrier more than 300,000 DWT

wet bulk

liquid cargo that's loaded into hold of ship

dry bulk

dry bulk loaded directly into hold of ship even though dry takes shape of hold (grain)

break-bulk

cargo that is packaged but not containerized; (bales, boxes, drums, crates, pallets also vehicles)

containers

cargo that is placed in containers before loaded either 8.5 X 8 X 20 ft or 8.5 X 8 X 40 ft

what is TEU

twenty foot equivalent unit

what is FEU

forty foot equivalent unit

Evergiven

golden-class container ship, one of the largest container ships in the world; owned by Shoei Kisen Kaisha (Japanese); time chartered; registered in Panama

what are some types of ships?

container ships
roll on/roll off ships
break-bulk ships
combination ships
crude carriers
product and chemical carriers
dry bulk carriers
liquefied natural gas carriers

what is the rule about the country a ship is registered in?

according to the international convention, every ship must be registered in a specific country and fly that country's flag; the country in which a ship is registered determines:

• laws applicable onboard

• taxes the ship will pay

• regulations that are followed onboard in most instances, ship owners have the ability to choose the flag their ship will fly

what are flags of convenience?

flags that have lost costs and few regulations; Panama, Liberia, other small countries

hague rules

1924 convention limits carriers' liability to $500 per package

hague-visby rules

A 1968 liability convention that limits carriers' liability to SDR 667 per package or SDR 2 per kilogram, whichever is higher. This is the convention followed by most countries.

hamburg rules

A 1978 convention that limits carriers' liability to SDR 835 per package or SDR 2.50 per kilogram, whichever is higher. It also eliminates most of the "defenses" a carrier could use to discharge itself of liability. This convention has been ratified by few countries, none of which are large trading countries.

rotterdam rules

A new liability convention (2009) that limits carriers' liability to SDR 875 per package or SDR 4 per kilogram, eliminates most of the "defenses," and that is likely to become the most commonly adopted convention by 2020.

special drawing rights (SDR)

supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund.

non-vessel operating common carriers (NVOCC)

shipping companies that don't own or operate their own ships; operate by purchasing space on a ship and then selling the space to companies; sometimes NVOCC has only one container onboard and consolidates multiple shippers' cargo in one container

security

two types of requirements:
pre-shipment notifications; in US called Importer Security Filing (10+2 rule)....all cargo manifests must be sent to Customs border protection at least 24hrs before arriving in US
pre-shipment inspections: Container security initiative (CSI)...customs and border protection inspectors located in foreign ports inspect the cargo before its loaded on ship bound for US

examples of some freight charges

ARB: arbitrary charge (cleaning fee)
BAF/FAF: bunker adjustment factor/fuel adjustment factor (surcharge)
CAF: currency adjustment factor
CY/CY: container yard to container yard
CFS/CY: container freight stations to container yard movement of cargo
Chassis charge: charge for a truck chassis in port of departure/destination
THC: terminal handling charge, container yard charge

where is the Suez canal?

Egypt connects Mediterranean Sea to red sea

where is the Panama canal?

The Panama Canal connects Pacific and the Atlantic Ocean through the Panama isthmus.

what is the history of railroads?

• invention of the steam engine

• 1830s the first railroads in the Northeast

• railroad expansion, opening more in the west

• 1869-transcontinental railroad

• land grants: UP & CP were granted 400 foot right of ways, plus 10 sq mi for every mile of track

• later enlarged to 20 sq mi

• total of 130,000,000 sq mi given away

• emergence of Robber Barons

granger laws

A set of laws designed to address railroad discrimination against small farmers, covering issues like freight rates and railroad rebates.

Munn vs. Illinois (1877)

supreme court ruled that it was legal for states to regulate rates of businesses that "affect the public interest"

Wabash (1886)

supreme court ruled that states could not regulate the intrastate portion of an interstate shipment

1887 act to regulate commerce

Regulated railroads, established ICC

1903: elkins act

Prohibited rebates and created filed rate doctrine

1906 hepburn act

Regulated pipelines

1912 panama canal act

Prohibited railroads from owning water carriers

1920 transportation act

Established "Rule of Ratemaking", "Recapture Clause," Pooling and joint terminal usage

1935 Motor Carrier Act

federal regulation of trucking similar to railroads

1938 Civil Aeronautics Act

established the Civil Aeronautics board (CAB)

1940 Transportation Act

Regulated domestic waterways; National Transportation Policy

1942 Freight Forwarder Act

Federal regulation of surface freight forwarders

1958 transportation act

Provided financial assistance to the railroads

1966 department of transportation act

Established the DOT and Put the FAA under it

1970 rail passenger service act

established Amtrak which tracks are run by the federal government

1973 regional rail reorganization act

established conrail

1977 air-cargo deregulation act

prohibits from regulating price of cargo

1978 airline deregulation act

prohibits from regulating airlines

1980 motor carrier act

removed federal entry controls in interstate trucking and made it easier for carriers to reduce rates.

1993 negotiated rates act

Amends Federal transportation law to authorize persons against whom a claim is made by a motor carrier of property (other than a household goods carrier)

1995 ICC termination act

Abolished ICC and eliminated most truck economic regulation

what to know about motor carriers

• is a widely used mode of transportation in domestic supply chain

• economic structure of motor carrier industry contributes to the vast number of carriers in the industry

• comprise of for-hire and private fleet operations:

• truckload

• less than truckload (LTL)

• small package carriers

• low fixed cost, high variable

what is trucking almost always?

in some areas of the world trucking represents about 100% of the international traffic, however not matter what it almost always is the "first mile" and the "last mile"

what are some things that the rules/regulations of trucking influence

• weight that can be placed in a truck (80,000 lbs)

• hours that the truck can operate

• size of equipment that can be used

• number of hours a driver may work

• training the driver must have

what to know about railroads?

• capable of carrying a wide variety of products, much than other modes

• rail is a long haul, large volume system

• high fixed costs and comparatively low variable costs

• very small number of carriers (natural monopolies)

• trend is to merge smaller companies into larger ones with ultimate goal of have two transcontinental rail carriers

what are the 3 issues rail transportation is dominated by?

• ownership: of the railroad, which can be private or public

• infrastructure: such as issues of gauge, electrification, curves, maintenance which dictates the type of goods shipped and speed delivered

• relationship: between passenger traffic and merchandise traffic and which has priority

what is intermodal transportation?

a shipment that takes more than one mean of transportation from its departure to its point of destination, with only one bill of lading
- also called co-modality

what are 2 transportation models that have been created as a result of containerization in intermodal transport?

land bridge
intermodal terminal/dry port

what is a land bridge?

typically for goods that are shipped from Asia to Europe it's more economical to ship by ocean to the West Coast unload, transport by rail to the East Coast and then ship by ocean to Europe; this is cheaper as compared to going through the panama canal

what is an intermodal terminal/dry port?

a location where containerized goods change means of transportation

if rail is more expensive than ocean why would a company choose a land bridge rather than doing all ocean?

it would have lower inventory costs so even if the rail is more expensive, you still save costs

what are freight forwarders?

arrange all aspects of transportation and paperwork for a shipper, from following the exporting country's requirements to clearing customs in the importing country; aka serve as travel agents

what is project cargo?

a type of cargo that requires more advance planning because of its size, weight or volume; require special permits too

what are pipelines?

can be used for transport of liquid cargo (petroleum, oil, refined oil products, water) and gasses (natural gas) as well as coal, in the form of slurry (a mix of powdered coal and water); have low accessibility, have high fixed and low variable costs-own their right of way; and very slow (3-5 mph); sometimes used as storage

what are barges?

flat-bottomed boats that are designed to carry cargo on rivers/canals; some are self-propelled and others are designed to be pushed/pulled

what are the types of pipelines?

gathering lines: transport gasses/liquids
trunk lines: has a larger diameter
refined product pipelines: never transport crude/dirty oil through this

domestic water carriers

• are available along the Atlantic, Gulf and Pacific coasts along the Mississippi, Missouri, Tennessee and Ohio rivers and Great lakes

• relatively low cost; don't own right of way; easy entry and exit

• typically a long distance of low value, bulk-type material, agricultural, and forest products

• low rates but long transit time

• low accessibility but high capability