Chapter II conceptual framework shipping Industry 1 Environment

2.1.4. Shipping Operation
2.1.4.1. Chartering
A shipping liner could either own or charter the vessels in running the business. There are some options of the contract available for shipping liners when they chartered the vessels:

• Bareboat / Demise Charter: The charterer hires a ship for a period of time during which the ship owner provides only the ship and the charterer provides the crew, all stores and bunker and pays all operating costs. Owner lets an unmanned ship for a long period at a rate that covers any depreciation and nominal return.

• Time Charter (T/C): A form of charter party wherein owner lets or leases his vessel and crew to the charterer for a stipulated period of time. The ship owner still manages the vessel and the charterer pays for the bunker and port charges in addition to the charter hire. The charter rate (hire) is quoted in terms of a cost per month per Deadweight Tons.

• Voyage Charter: A contract whereby the ship owner places the vessel at the disposal of the charterer for one or more voyages, the ship owner being

responsible for the operation of the vessel. A charter for a particular vessel to move a single cargo between specified loading port(s) and discharge port(s) in the immediate future. Contract rate (spot rate) covers total operating expenses, i.e., bunkers, port charges, canal tolls, crew's wages and food, insurance and repairs. Cargo owner absorbs, in addition, any expenses specifically levied against the cargo.

• Consecutive Voyage Charter / Contract of affreightment (COA): A service contract under which a ship owner agrees to transport a specified quantity of oil products or specialty products, at a specified rate per ton, between designated loading and discharge ports. This type contract differs from a spot or consecutive voyage charter in that no particular vessel is specified.

2.1.4.2. Costs
A shipping liner charges a freight as a compensation expense of cargo transportation service. The freight is collected on commodity based, which could be one of following options:

• Revenue based: The freight is calculated based on percentage of the goods price (ad valorem). This option is chose when expensive goods are carried.

• Cost based: The freight is calculated based on the expense e.g. operational cost, insurance cost.

Operational cost of a shipping liner consists of:
• Fixed cost: crew salary, insurance, maintenance, stores and tools, administration cost, interest and depreciation.

• Variable cost: expense of bunker, oil and water, stevedoring

2.1.4.3. Tariff System
There are some tariff systems in the container shipment industry:
• Break Bulk rate: published rate applied to Less than Container (LCL). It could also be classified as commodity rate (based on the type commodity goods) or class rate (based on the class of the goods).

• Commodity Box Rate (CBR): published rate applied to Full Container Load

(FCL) that is calculated based on commodity / class rate per box.
• Mix Commodity Box Rate: Published rate applied to FCL that contains much kind of goods.
2.1.4.4. Shipping terms and Payment
There are some terms and payment responsibility options of loading and unloading:

• Liner Term: cost of loading and unloading a vessel is borne by the shipping liner. The shipping liner will also be responsible for the cargo security from one port to another (from tackle to tackle).

• FIOS (Free In Out Ship) term: cost of loading and unloading a vessel is borne by the shipper. The shipping liner will only be responsible for the security of the cargo on the vessels.
2.1.4.5. Cargo Delivery
Following are some types of cargo delivery:

• Door to Door (House to House): Through transportation of a container and its contents from consignor to consignee. The shipping liner will be responsible for security of the cargo since it was in the place of receipt until it reached the place of delivery (warehouse of the consignee).

• Full Container Load (FCL) / Full Container Load (FCL): This type of delivery require shipping liner be responsible for security of the cargo since it was in the container yard (CY) of loading terminal until it reached the CY of unloading terminal.

• Less than Container Load (LCL) /Less than Container Load (LCL) (pier to pier): The shipping liner is responsible of security of the cargo since it was received at the container freight stations (CFS) in the loading terminal until it was hand over to the consignee at the CFS in the unloading terminal.

• Mix of FCL and LCL.