Page 205 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes Bhopal Local bus owners association where the local bus owners are the members of the
association. They enjoy unity and work with strict discipline for their common good.
3. Particular Trade or Geographical Area: The conference practice is followed by the shipping
lines engaged in a particular trade or operating in a specified geographical area. The
competition from other shipping lines is encountered by entering into agreements with
other conferences operating on alternative routes in such a way that each conference
works in one route

9.7 Ocean Freight Rate Structure

The ocean transport industry provides a wide range of shipping services, which may be broadly
split into two main categories: liner shipping and tramp shipping. The determination of the
freight rates are different for unlike forms of shipping.

9.7.1 Liner Shipping

Liner shipping takes place in an environment which is totally different from tramp shipping. In
that liner services are provided on the basis of fixed schedules and itineraries. Until recently, the
liner-shipping sector was largely oligopolistic in that these services were controlled by cartels,
called shipping conferences. A conference exists for each major trade route, and it is the conferences
that draw up tariffs, scheduling freight rates at which goods will be transported. However, since
the mid-1970s many independent carriers have entered the liner-shipping sector, and they fix their
rates on the basis of ‘what the traffic will bear,’ essentially applying market-pricing techniques.
Two basic factors affect rate fixing in liner shipping-port and distance related factors and cargo
related factors. For general cargo, liner tariff rates are assessed on cargo weight, measurement
or value. Goods measuring less than 40 cu.ft. per 1,000 kg are charged on a cargo weight basis
and above that measure by the measurement tariff scale. If goods are of very high value, they are
charged irrespective of weight and measurement on an ad valorem basis. Under liner freight
tariffs, carrier assumes responsibility for loading and discharging expenses, as well as the carriage
of the goods by sea.
In container shipping, different charges are applied to ‘Less-than-Container-Loads’ (LCL) and
‘Full-Container-Loads’ (FCL). In the former case, the rates are usually the same as those charged
for conventional shipments. For FCL containers, there exists the principle of Commodity Box
Rates (CBR). CBR is a lump sum payable for the carriage of a container stuffed with a particular
commodity. The rate is based on the average utilisation of the box, e.g. 13 tons in a twenty-foot
container. As a more recent development, container carriers have introduced the ‘freight-all-
kinds’ (FAK) principle. FAK rates are non-discriminatory by treating all commodities the same
way. They are basically average cost rates; the ship owner distributes his projected total costs
over the anticipated number of containers to be moved.

!
Caution In combined transport arrangements by one carrier under a through document,
an intermodal freight rate is charged. This rate is the sum of charges in the port of loading,
ocean freight rate, charges in the port of discharge, and the road or rail haulage to the final
destination.
9.7.2 Conference Shipping

There are three types of conference rates, including commodity rates, class rates, and commodity-
class rates. Under the first category, rates are quoted individually for several hundred

200 LOVELY PROFESSIONAL UNIVERSITY