tmw basic-liner trade

TMW Basic Liner Trade

This document contains a text extract of the e-learning course “TMW Basic Liner Trade”. We recommend that you complete the e-learning course for enhanced learning, examples and illustrations. The course is available in Maersk Learning Centre at http://mlc.apmoller.net Copyright © 2005 A.P. Møller - Mærsk A/S, Centre Education. Internal document. Not for distribution outside the A.P. Moller - Maersk Group.

Liner Trade

WWW.SEALANDLOGISTIC.COM

http://mlc.apmoller.net/

http://www.sealandlogistic.com



Table of Contents Actors.....................................................................................4 Actors – Introduction.............................................................................................................4 Actors – Main Actors.............................................................................................................4 Actors – Other Actors ...........................................................................................................4

Liner Trade and Network ......................................................6 Liner Trade and Network – Introduction ...............................................................................6 Liner Trade and Network – Containerisation ........................................................................6 Liner Trade and Network – Liner Trade vs. Tramp Trade ....................................................7 Liner Trade and Network – Liner Network ............................................................................7 Liner Trade and Network – Hub ports...................................................................................8 Liner Trade and Network – Vessel Scheduling.....................................................................8 Liner Trade and Network – Competitors.............................................................................10

Cargo and Containers.........................................................11 Cargo and Containers – Introduction..................................................................................11 Cargo and Containers – Commodities................................................................................11 Cargo and Containers – Container Types ..........................................................................12 Cargo and Containers – Container Sizes ...........................................................................12 Cargo and Containers – TEU/FFE......................................................................................14 Cargo and Containers – Container Seal and Number ........................................................14 Cargo and Containers – Load types and locations.............................................................14 Cargo and Containers – Transport modes .........................................................................15 Cargo and Containers – Locations .....................................................................................16

Freight and Charges ...........................................................17 Freight and Charges – Introduction ....................................................................................17 Freight and Charges – Freight and Charges ......................................................................17 Freight and Charges – Payment.........................................................................................17 Freight and Charges – Tariff / Service Contract .................................................................18 Freight and Charges – Quotation .......................................................................................19 Freight and Charges – Conferences...................................................................................20

Version 1.1. March 2005 © A.P.Møller - Mærsk A/S, Centre Education Not for distribution outside the A.P. Moller - Maersk Group


Processes and Documents ................................................22 Processes and Documents – Introduction..........................................................................22 Processes and Documents – Sailing Schedule ..................................................................22 Processes and Documents – Origin Flow...........................................................................23 Processes and Documents – Origin Documents ................................................................23 Processes and Documents – Destination Flow ..................................................................25 Processes and Documents – Destination Documents........................................................26 Processes and Documents – Free Time ............................................................................27 Processes and Documents – Intermodal............................................................................28

Vessels and Planning .........................................................30 Vessels and Planning – Introduction ..................................................................................30 Vessels and Planning – Terminal Activities ........................................................................30 Vessels and Planning – Vessel Elements ..........................................................................31 Vessels and Planning – Stowage Co-ordination.................................................................33 Vessels and Planning – Vessel Size ..................................................................................33 Vessels and Planning – Vessel Deployment ......................................................................34 Vessels and Planning – Own/Charter Vessels ...................................................................35 Vessels and Planning – Strategic Co-operation .................................................................36

Organisation ........................................................................37 Organisation - Introduction .................................................................................................37 Organisation – Centre.........................................................................................................37 Organisation – Agents ........................................................................................................39

Issues and Challenges........................................................42 Issues and Challenges – Introduction ................................................................................42 Issues and Challenges – Trade Imbalance ........................................................................42 Issues and Challenges – Utilisation....................................................................................42 Issues and Challenges – Security ......................................................................................43 Issues and Challenges – Environment ...............................................................................45



Actors Actors – Introduction There are many parties involved in an international trade situation. This section takes you through some of the actors who are often involved in a shipping process. Actors – Main Actors Three important actors that you must know are the Shipper, the Consignee and the Carrier: • The Shipper is the party who delivers goods for shipment. The shipper may

also be known as the Exporter, Seller or Vendor. • The Consignee is the party who is entitled to receive the goods at destination.

The consignee may also be referred to as the Importer or Buyer. • The Carrier is the party who transports the goods from origin to destination. The

carrier is also known as the Shipping Line or Transport Provider. The shipper and consignee are the shipping line’s customers and often represent the seller and buyer of goods. However, note that in some cases, traders or buying agents are involved in the international trade transaction and if so, the actual seller or buyer of the goods may not be involved in the shipping process at all. In such case, it is the trader or buying agent who is the shipping line’s customer and will appear on the paperwork as shipper and consignee. Actors – Other Actors Other parties in the shipping process include: • Freight Forwarders – who are hired by some exporters and importers to assist

with shipping-related processes such as booking, documentation and cargo consolidation.

• Banks - facilitate payment for goods between exporter and importer, e.g.

through a payment mechanism known as Letter of Credit.



• Customs House Brokers (CHB) – are licensed to assist exporters and importers to clear goods through Customs.

• Terminal Operators - handle all activities in the port area on behalf of one or

more shipping lines, e.g. loading and discharging of containers. • Government Authorities - create, administrate and enforce compliance with

legislation related to international trade, e.g. trade and security matters.



Liner Trade and Network Liner Trade and Network – Introduction In this section, you will learn about concepts such as containerisation, liner trade, liner networks, hubports and vessel scheduling. There is also a short introduction to the largest global ocean carriers. Liner Trade and Network – Containerisation The first container shipment took place in 1956. Until then, general cargo was transported in cartons or on pallets which were loaded onboard the vessels one by one. This type of transport is referred to as “break-bulk” shipping and still exists today. The invention of the container has however had enormous impact on the shipping industry and international trade in general. Today, container shipping is the dominant way of transporting general cargo by sea. Break-bulk shipping “Break-bulk” cargo consists of loose, non-containerised cargo, e.g. in cartons or on pallets. It requires significant manual handling to load and discharge goods onto/from the vessel’s cargo holds but may be needed if cargo is not suitable for stuffing in a container, e.g. due to the cargo dimensions. The disadvantages of break-bulk shipping is that it is labor-intensive and goods are handled many times during loading/unloading, there is an increased risk of damage or loss due to handling and weather and an increased risk of theft and pilferage. Container shipping A container is a steel/aluminium box. Its great advantage in shipping is that after the merchant has stowed his goods in the container and the doors are closed, the container can be loaded onto vessels, freight trains, trucks and other means of transport without anybody touching the actual cargo. This is both cost-efficient and safe. The advantages of container shipping include that it is easy to transfer cargo between different transport modes (vessel, road, rail); risks of damage, loss and



pilferage are reduced; load/unload operations in port are efficient and therefore vessels spend shorter time in port (= less cost, faster transit). The disadvantage of container shipping for the carrier is that it requires capital investments in equipment and infrastructure (containers, cranes, etc.). Liner Trade and Network – Liner Trade vs. Tramp Trade A fundamental distinction in shipping is the difference between tramp trade and liner trade. Tramp vessels go wherever the cargo takes them while liner vessels operate on a fixed route with a fixed schedule. Maersk Sealand is a container shipping line, i.e. we operate container vessels on liner trade basis. Characteristics of tramp trade: Tramp trade is a transportation situation similar to when you take a taxi – the vessel goes where the customer wants to go. This also means that the carrier has to manage the uncertainty of route and schedules for future sailings. There are only a single or few commodities onboard and few shippers and consignees per sailing. Tramp trade is typically used for commodities such as oil, steel, grain etc. Characteristics of liner trade: Liner trade is similar to when you take the bus – vessels operate on a predetermined route. There are many different commodities onboard and many shippers and consignees per sailing. Liner trade offers customers regular space between two ports at fixed intervals and is the most common type of operation for container vessels Liner Trade and Network – Liner Network Shipping lines typically operate vessels in one or more trade lanes, providing ocean transport that follows the major cargo flows in international trade. In this way, shipping lines can serve exporters and importers with regular sailings between ports world wide. Major trade lanes in container shipping follow the North-South, East-West and intra-regional trade patterns of the world.



Within each trade, a carrier may operate a number of services or so-called “strings”, i.e. vessel routes between predetermined ports. For easy reference, each service/string is typically given a name or number. For example, Maersk Sealand’s AE1 and AE2 strings run between Asia and Europe. By connecting the strings/services in the different trade lanes and transshipping cargo at major hub ports, the carrier creates a network that offers customers transport to and from a high number of locations world wide. The main strings cover major ports and are served by large, so-called Mother vessels. Smaller container vessels suitable of calling smaller ports are deployed to carry containers to and from the large ports. They are called Feeder vessels because they “feed” cargo to the mother vessels. Liner Trade and Network – Hub ports Ports at which containers are transshipped from one vessel (one string) to another are referred to as Hub ports. Some hub ports have minimal hinterland of their own but just happen to be well-positioned geographically to support the liner network at a point where it is efficient to let vessel routes cross, e.g. Tanjung Pelepas in Malaysia or Balboa and Manzanillo in Panama. Other ports, e.g. Rotterdam in Europe, are not only important hubs but also act as gateways for export and import of cargo from/to many inland locations. Cabotage legislation In some countries, e.g. USA and Brazil, so-called cabotage laws prevent foreign vessels from carrying local cargo between two local ports. In the USA, due to cabotage legislation known as the Jones Act, global carriers are generally not able to tranship US-cargo from one vessel to another in a US port. This is why Maersk Sealand does not consider US ports “major hub ports”. Liner Trade and Network – Vessel Scheduling When deciding which ports to call and which routes to sail, the shipping line takes a number of elements into consideration. Customer requirements The basis for vessel scheduling is essentially the customers’ requirements. When deciding which ports to call, the shipping line must consider: • Trade patterns and demand: Where from/to is cargo moving? • Transit time: How many days are the customers expecting or willing to accept?

(limits how many ports can be included in the rotation)



• Customer demands: For example, is arrival on a certain day of the week required?

Profitability The shipping line also considers the profit potential in serving a particular route: • Is there enough cargo on a regular basis? • Is it a stable market? • How many other carriers are operating in the market? • How competitive is the market? Vessel availability If a route/trade is deemed attractive from a demand and profitability perspective, the next step is to consider vessel availability: • Which vessel type(s) would be suitable for this route/string? • Do we have vessels available? • Can we make vessels available? Port availability It is also necessary to decide which exact ports to call: • Which are the best located ports compared to the market? • Can the ports accommodate the vessels that we plan to deploy (size)? • What are the costs of calling a particular port? Scheduling When the strategic decisions regarding routes and ports have been made, it is time to plan the vessel schedules at a more detailed level, for example: • How long does it take to go from one port to another? • When can a berth be made available at the port? • Do we need to pass through any canals at a certain time? • Do we have to consider tide? • Is arrival on a certain week day required? (In some parts of the world,

businesses close on Sundays. In others, Friday is a day off). Strategic planning All in all, many elements are taken into consideration in the scheduling process and it is an important part of a shipping line’s strategic planning. Shipping lines will continuously monitor the market situation and make regular adjustments to their services and port rotations. Especially when new routes are opened or decisions are made to move vessels from one service to another, careful planning is required.



Liner Trade and Network – Competitors Maersk Sealand is one of the world’s largest liner shipping companies but operates in a competitive market with many players. A number of carriers compete with Maersk Sealand on a global scale, offering services to ports worldwide, while some smaller carriers compete with Maersk Sealand on a smaller scale by serving niche trades or regional markets. Especially if you are involved in sales, you must be familiar with the major players. In January 2005, the 20 largest global carriers were (in order of nominal fleet size (TEU) operated): 1. Maersk Sealand (incl. Safmarine) 2. Mediterranean Shipping Company (MSC) 3. Evergreen Marine Corp. 4. P&O Nedlloyd 5. CMA-CGM 6. APL 7. Hanjin Shipping (incl. Senator Lines) 8. Nippon Yusen Kaisha Line (NYK) 9. Cosco Container Lines 10. China Shipping Container Line (CSCL) 11. Orient Overseas Container Line (OOCL) 12. Kawasaki Kisen Kaisha Ltd (K-Line) 13. Zim Shipping 14. Mitsui O.S.K. (MOL) 15. Compañia Sudamericana de Vapores (CSAV) 16. CP Ships (incl. CanMar, Cast, ANZDL, Contship, Lykes Line, TMM Line, Italia

Line) 17. Hapag-Lloyd 18. Yang Ming 19. Hamburg Süd (incl. Hamburg Süd, Columbus Line, Alianca, Ellerman) 20. Hyundai Merchant Marime (HMM) (Source: Alphaliner, January 2005)



Cargo and Containers Cargo and Containers – Introduction Cargo and containers are fundamental elements of shipping. Additionally, this section will go through different load types. Cargo and Containers – Commodities Containerised shipping allows many different cargo types to be carried on the same vessel. In this way, Maersk Sealand and other shipping lines are able to accommodate transport needs of many different customers. Some commodities require special containers, handling or documentation and therefore customer must advise the commodity type. Generally, we refer to four cargo types: General, Hazardous, Out of Gauge and Reefer cargo. General cargo Normal merchandise and goods, often packed in boxes/cartons or bags, e.g. clothing, furniture, toys, components, plastic products and much more. This type of cargo includes both raw materials, components for manufacturing and finished goods. Hazardous cargo Goods of a dangerous nature, e.g. explosives, chemicals and firecrackers. The International Maritime Organisation (IMO) operates with 9 classes of dangerous goods. The class determines special handling, documentation and stowage requirements and level of precaution. Out of Gauge cargo (OOG) Odd-sized goods that do not fit into a standard container, e.g. windmills and large machinery. Reefer cargo Goods requiring a temperature- or humidity-controlled environment during transport are carried in special reefer containers, e.g. fresh fruit, fish and other perishable products. Leather products may also be carried in reefer containers (requires humidity control).



Cargo and Containers – Container Types Different types of cargo require different types of containers. Most cargo is carried in standard dry cargo containers, i.e. closed aluminum or steel boxes with doors at one end. But the cargo type or cargo dimensions may require that different equipment types are used. The shipping line that has special equipment available and is able to handle such shipments onboard its vessels has an advantage over others. Some of the main container types are: Dry freight / standard containers A dry freight container is a closed box with one set of doors, and is designed for general cargo. Maersk dry containers are made of aluminium or steel and are equipped with inside plywood lining. Reefer containers A reefer container is a container equipped with lining and machinery that can maintain and control temperature, humidity and ventilation during shipment. Flat rack containers A flat rack container is a unit which consists of a base frame and two end walls, or alternatively, four individual corner posts. Flat racks are ideal for transporting heavy machinery and pipes, since they can be loaded from the top or from the sides. The end walls/corner posts can be either fixed or collapsible. Maersk Sealand flat rack containers are available in 20’ and 40’ lengths. Open top containers An open top container of aluminium or steel allows cargo to be lowered into the container by means of a crane if the cargo is not suited for loading through the doors. Rather than having a permanent metal roof, the open top container is equipped with removable roof bows and a tarpaulin cover. Also the door header can be removed. Bullrings for securing are mounted on the floor. Open top containers are designed primarily for heavy loads requiring top loading, and of course for over height cargo. Cargo and Containers – Container Sizes Containers also exist in different sizes to accommodate different customer needs. Length and Height In international shipping, containers follow standard measurements which allows for efficient handling in terminals and onboard vessels.



Standard lengths are 20 and 40 foot. Additionally, 45 foot containers may be available. Standard height is 8 feet and 6 inches. Additional height is added to some 40’ and 45’ containers which are then referred to as High Cube containers. Payload and Capacity There is a limit to how much a container can carry in terms of weight and volume. It is primarily the volume of cargo to be shipped (cubic metre / square feet volume) and the cargo dimensions that determine which container size is used but weight must also be considered. Heavy containers may require special handling during terminal operations, container stacking and transport by road. “Payload” is the maximum cargo weight the container is built to carry (depends on the size of the container and which type of materials it is built of, e.g. aluminium or steel). “Capacity” is the absolute maximum cubic capacity of the container (CBM or Sq. Feet) but note that if cargo is e.g. palletised or packed in boxes, the loading capacity is often less. For example, the maximum capacity of a 20’ container is approx. 33 CBM (if you filled it with water) but the “true cargo maximum” is probably closer to 28 CBM. Standard container sizes and payload/capacity 20 foot container (20’) • Length: 20’ • Height: 8’6” • Payload: up to 28.3 tons • Capacity: Max. 33 CBM 40 foot container (40’) • Length: 40’ • Height: 8’6” • Payload: up to 30.4 tons • Capacity: Max. 67 CBM 40 foot high-cube container (40HC) • Length: 40’ • Height: 9’6” • Payload: up to 30.4 tons • Capacity: Max. 76 CBM



45 foot high-cube container (45HC) • Length: 45’ • Height: 9’6” • Payload: up to 30.4 tons • Capacity: Max. 86 CBM Cargo and Containers – TEU/FFE Within container shipping, the number of containers that a carrier owns or operates, the number of containers that a vessel can carry, or the number of containers that a customer ships per year is expressed in so-called TEU or FFE. TEU means Twenty-foot Equivalent Unit (one 20’ container). FFE means Forty-Foot Equivalent unit (one 40’ container). 40HC and 45HC containers are also referred to as FFE. Cargo and Containers – Container Seal and Number All containers have their own unique identification number which consists of 4 letters and 6-7 numbers (e.g. MAEU8564592). The container number enables carriers to keep track of their containers at all times and customers to follow their shipments, e.g. via the carriers’ internet tracking systems. Container Seal To make sure that nobody interferes with the cargo during transit, a seal must be affixed to the container doors at the time the cargo is stuffed into the container and must not be broken until the container reaches its final destination. A seal is a numbered locking device. The seal number is recorded in the carrier’s IT systems and on relevant shipping documents. Seals minimize the risk of unauthorised access to the container contents and therefore reduce the risk of theft, pilferage as well as other interference such as placement of contraband (illegal or non-declared goods). Seals are in the interest of all parties in the shipping process. Cargo and Containers – Load types and locations Within shipping it is common to refer to FCL and LCL shipments, and CY and CFS locations. Full Container Load (FCL)



A container which is loaded by the shipper is referred to as a Full Container Load (FCL). In this type of scenario, the shipper loads the container and delivers it as a single unit to the transport provider. The transport provider does not physically handle the cartons, pallets or other packages – only the container. Less than Container Load (LCL) Shippers who do not have enough cargo to fill a container on their own will deliver their goods in cartons, pallets or other packaging to the transport provider or a freight forwarder. The transport provider or freight forwarder will consolidate the goods into a container together with other shippers’ cargoes going to the same destination. This is called a Less-than-Container Load (LCL) shipment. Container Freight Station (CFS) A container freight station (CFS) is a facility / warehouse at which a freight forwarder or transport provider receives small cargo lots from shippers for loading into containers, or where the freight forwarder / transport provider unloads cargo from containers and delivers to consignees. You may also hear the word “CFS” used to represent cargo that is delivered loose (LCL) to the transport provider. Container Yard (CY) A container yard (CY) is a facility at which the carrier receives/delivers full and empty containers from/to shippers and consignees. Cargo and Containers – Transport modes You may hear shipments referred to as CY/CY, CFS/CY or CFS/CFS. The terms illustrate the handling and interaction with the customer at origin and destination. CY/CY The transport provider receives a full container from the shipper and delivers the full container at destination. Also called FCL. In this scenario, the transport provider never physically sees the cargo that the shipper has stuffed into the container. He only handles the container. CFS/CY The transport provider receives loose cargo from the shipper at origin. The transport provider arranges to consolidate it into a container for shipment together with other cargo for the same consignee. At destination, the transport provider delivers the full load container to the consignee at destination.



CFS/CFS The transport provider receives loose cargo (not containerised) from the shipper at origin and delivers the cargo loose to the consignee at destination. Also called LCL. The transport provider consolidates LCL cargo from multiple shippers into a container for shipment. At destination, the transport provider de-consolidates the container and delivers the different LCL cargoes to the various consignees. Cargo and Containers – Locations Carriers such as Maersk Sealand arrange shipments from port to port but may also offer the customer to arrange the collection and delivery of the container from/to inland points. The place of receipt and delivery can therefore be either the port or an inland point. In order to plan the shipment and quote the right price for it, the carrier must know where from and where to the customer wants to ship his cargo. We refer to four main locations: Place of Receipt, Port of Loading, Port of Discharge and Place of Delivery. Place of Receipt is the port or inland location where the carrier receives the container from the shipper and the Carrier’s responsibility for the shipment starts. Place of Delivery is the port or inland location where the carrier’s responsibility for the shipment ends and the consignee takes delivery of the container. The specific combination of a container’s place of receipt and place of delivery (point A to Point B) is referred to as a Corridor. A customer may move cargo in one or more corridors.



Freight and Charges Freight and Charges – Introduction This section covers matters relating to freight and charges. Freight and Charges – Freight and Charges The total price of a container shipment consists of different charges. Some are quoted in USD and some are quoted in local currency. The price paid by the customer to the carrier for the transport of a container between two ports is referred to as the Freight Rate. It is typically quoted in USD. On top of the freight rate, a carrier may be entitled in some trades to add so-called BAF and/or CAF because it is customary within shipping that the customer carries part of the burden of fluctuating oil prices (bunker prices) and fluctuating currency exchange rates. BAF means Bunker Adjustment Factor. CAF means Currency Adjustment Factor. Additionally, the carrier will charge the customer fees that are specific to the local services provided at origin and destination, e.g. documentation, haulage (trucking) and terminal handling charges. The additional charges are usually quoted in local currency and depend on local costs and market practices. Other surcharges are also used, for example: Toll and canal fees, equipment cleaning charges, security fees, and many more depending on the particular shipment. Freight and Charges – Payment It can be either the shipper or the consignee who pays all the applicable charges for a shipment, or they agree how to split the charges between them. Therefore, carriers may issue invoices and collect payments both at origin and destination.



Unless the customer has signed a credit agreement with the carrier, payment must take place before the shipping documents or cargo are released by the carrier to the shipper/consignee. Prepaid / Collect charges Prepaid Charges are the charges that are paid by the shipper at origin, usually before the goods are shipped or before the carrier releases the shipping documents to the shipper. Collect Charges are charges that are paid by the consignee at destination, usually before the goods are released by the carrier to the consignee. It is quite common that the shipper pays the local origin charges and the consignee pays the local destination charges (but it is not a definite rule). So, the local origin charges are often invoiced on pre-paid basis to the shipper and local destination charges are often invoiced on collect basis to the consignee. Whether the ocean freight is prepaid or collect depends on the agreement between the shipper and the consignee. They must advise the carrier of the agreed terms at time of booking. Freight and Charges – Tariff / Service Contract Maersk Sealand maintains tariffs (lists) of standard rates and charges that apply to all shipments in a particular corridor. The tariffs are used when new and existing customers request price quotes for future shipments and are updated regularly in accordance with market developments. In some cases, Maersk Sealand negotiates special rates with strategically important clients. If so, these rates are documented in so-called Service Contracts. Tariffs The tariff is a carrier’s list of standard rates and charges to be applied for shipments in a specific corridor. The tariff is adjusted frequently in accordance with the changes in the container market. The tariffs form basis for all rate quotations. Even if Maersk Sealand decides to negotiate special rates with some customers, the tariff will be the guideline / starting point. Service Contracts If a carrier agrees special rates and charges with a customer, they are documented in a Service Contract. Service Contracts are primarily negotiated with large, strategically important customers, usually on an annual basis. The carrier and the customer commit to using the agreed rates and charges for a period of time regardless of how the container market develops. In other words, the



rates are “locked” which provides cost reliability for the customer and income reliability for the carrier. Signing a service contract is an advantage for the carrier if the general market rates decrease but an advantage for the customer if the general market rates increase. Freight and Charges – Quotation The basic starting point for a rate quotation is the standard tariff which is based on the general market rate levels and the carrier’s pricing strategy. A number of elements influence the rate levels that the carrier offers or is willing to negotiate with the customer. Sometimes the rate offered deviates from the standard tariff. A number of elements influence the quotation process: Corridor A very basic factor that influences the freight rate and charges is the corridor. The carrier’s operating expenses, and therefore also the rates and charges that the customer must pay for the carriage, depend on where from and where to the customer wants to ship his cargo. Furthermore, competition, market practice and the supply/demand situation within the corridor and trade lane influence the rates and charges. Volume (TEU/FFE) Large customers who ship many containers (TEU/FFE) per year will typically expect the carrier to be willing to negotiate better rates than those that are quoted by the carrier to small customers. And as in any other business, carriers may be willing to negotiate “volume discounts” with large, regular and strategically important customers. Service Requirements Different customers also have different requirements and expectations when it comes to what they want to receive from the carrier in exchange for their payment. So pricing sometimes needs to be adjusted according to the customer’s service requirements. Service requirements vary from customer to customer. Some customers want top service, vessel space guarantees, quality containers and fast transit times – and are willing to pay for it. Others just want the lowest rates possible and are willing to accept lower service levels.



Commodity Typically, shippers of high-value commodities such as reefer cargo are generally willing to pay higher rates than shippers of low-value cargoes (such as metal scrap or waste paper). So the commodity type may also influence the rate quotation. Freight and Charges – Conferences In connection with rates and charges, you should be familiar with the concept of Conferences and Discussion Agreements. Definition A “Conference” is an arrangement between a group of shipping lines to serve a particular trade. Members meet to discuss changing market conditions and take appropriate actions regarding tariffs and policies in order to secure a stable market. In some trades, the carriers even publish and follow a common tariff with uniform freight rates and surcharges for a specified range of loading and unloading ports. In addition to the tariff rates, the individual carriers offer shippers independently negotiated service contracts. In US trades, “Discussion agreements” have taken over. Rate making is voluntary and each member publishes its own tariff. Conferences and Agreements The first conference, the Bombay Steam Traffic Conference, was formed in 1875 in the tea trade from India to the UK. Today, there are about 150 conferences in the world covering virtually every trade, for example:

o Trans Atlantic Conference Agreement, TACA o Far Eastern Freight Conference, FEFC o US Australasia Discussion Agreement, USADA o Europe Middle East Rate Agreement, EMERA o West Coast South American Discussion Agreement, WCSADA

Not every liner operator in a certain trade is a member of a conference or agreement. Some carriers decide not to be part of conferences and some conferences are closed and require an invitation to join from the existing members. Maersk Sealand participates in conferences/agreements in some trades while in others, we have decided not to. Competition / Anti Trust Laws



Both the US and EU competition laws (antitrust laws) do not allow two or more competing companies to meet and fix prices. However, unique to the industry, conferences and discussion agreements between shipping lines have so far been exempted from the antitrust laws under certain conditions. The practice is regularly discussed and disputed by various parties such as shippers, legislators and competing shipping lines. Purpose A reason why conferences and discussion agreements are allowed to exist in some form is a desire to create confidence that transport will always be available at relatively stable prices and terms to both “easy” and “difficult”, small and large ports, within a larger geographical scope than could be provided by individual lines.



Processes and Documents Processes and Documents – Introduction This section introduces the key processes and documents used in the shipping process, at origin (at time of export) and at destination (at time of import). Processes and Documents – Sailing Schedule One of the first parts of the shipping process is for the customer – or the carrier on his behalf - to identify when goods must be shipped from origin for them to arrive at destination at the desired time. Carriers publish their vessel sailing schedules on the internet, making it easy for customers to access the information. Sailing schedules show ETD (Estimated Time of Departure) and ETA (Estimated Time of Arrival). Given the nature of shipping, exact departure and arrival times are not guaranteed but punctuality is a key service element for shipping lines. Voyage A liner vessel will sail according to a fixed schedule in a rotation between a number of fixed ports. Each round trip is called a “voyage” and is given a “voyage number” to avoid any confusion regarding which exact vessel sailing the carrier, customers and other parties in the shipping process are referring to, e.g. during the booking process. Cut-off To make sure that vessels depart on time, carriers will stipulate a so-called “Cut-off time” to the customers. The Cut-off or Closing time is the deadline before which a shipper must deliver his cargo to the carrier’s terminal or depot prior to departure. In some cases, a shipper may contact the carrier to ask if he can deliver the container after the cut-off time due to a delay at the factory or on the way to the terminal. If the carrier agrees to accept the container after the official cut-off time, it



is referred to as a “Late gate”. “Late gates” are only agreed to in some cases as they may cause inefficient operations and delays. Processes and Documents – Origin Flow A booking is the first step in the shipping process. Carriers will take bookings from customers in various ways, e.g. via email, telephone, fax or internet. In Maersk, we encourage the use of our on-line booking option on the internet which saves time and reduces the risk of communication and data quality errors. After the booking, a number of other activities follow at origin until the container is finally shipped. Here’s a walkthrough of the main activities: 1. Booking: Customer needs transport and contacts MSL, advising details of the

shipment to be moved. 2. Booking Confirmation: MSL checks equipment and vessel space availability and

advises if MSL accepts the shipment. 3. Empty Dispatch: MSL allocates an empty container. Shipper loads the

container and it is taken to the port or carrier yard. 4. Receipt: MSL confirms that the container has been received at the port terminal

or container yard. 5. Shipping Instructions: Shipper advises details to MSL of cargo loaded in the

container and confirms shipping information. 6. Invoice preparation: MSL prepares documentation for the shipper and advises

prepaid charges. 7. Vessel Manifest: MSL prepares documentation and submits details to Customs

about the containers planned for loading. 8. Vessel Departure: Container is loaded and the vessel departs. The shipper

pays prepaid charges to MSL and the B/L is released. Processes and Documents – Origin Documents Documents and other messages that transfer information between the carrier, the customer and other parties play important roles in the shipping process and you are likely to hear them referred to by colleagues and customers often, if not daily. Here’s a walkthrough of some of the major documents/messages in the process:



Booking A booking is a request/message from the customer to the carrier via internet, email, fax or telephone that he would like to ship a container at a specified time. The booking lists origin, destination, equipment requirements, cargo type, shipper name, consignee name (receiver of cargo), etc. Booking Confirmation The booking confirmation is a message sent by email or fax by the carrier to the customer, advising that his booking has been accepted. The booking confirmation re-states the booking details such as ETD, vessel sailing, origin, destination, equipment size, etc. Dock Receipt A Dock Receipt is a document, stamp or message issued by the carrier or terminal operator to confirm that the container has arrived at the terminal or container yard (“the dock”). The dock receipt states the time of arrival to the terminal and confirms that the container was received in good order and condition (if not, carrier must make sure to make notation on the receipt). Shipping Instructions Shipping Instructions (S/I) is information provided by the customer to the carrier about the shipment, in particular a description of the goods (type, volume, etc.) and a confirmation of the container and seal number as well as the final sender/receiver name and address. The information is included in official shipping documents. Vessel Manifest The Vessel Manifest is an official document submitted by the carrier to Customs authorities before vessel departure, advising what will be or has been loaded onboard the vessel. The manifest provides details of e.g. cargo types and shipper/consignee details and is prepared by the agent in the port of loading. Invoice – Prepaid Charges At origin, the carrier will prepare an invoice to the shipper covering the relevant prepaid charges. An invoice is a formal demand for payment and includes payment terms, description of cargo and breakdown of charges. Bill of Lading (B/L) The Bill of Lading (B/L) is a very central document in the shipping process. It is a cargo receipt issued by the carrier to the shipper when the container has been received or shipped and confirms the date of receipt/shipment and the quantity and condition of the container at the time when the carrier took custody of it.



The B/L also evidences a contract of carriage between the shipper and the carrier and acts as the “key to the cargo” – at destination the carrier will release the container to the party who submits an original B/L document. The Bill of Lading is a central document exactly for that reason: because it serves as the “key to the cargo”. A person who presents an original B/L document at destination obtains release of the goods from the carrier. The B/L is a so-called Document of Title which means that goods can be sold during transit and as long as the new owner obtains an endorsed original B/L document, he can receive the goods from the carrier at destination. Sea Waybill (SWB) If the shipper requests it, the carrier may issue a so-called Sea Waybill (SWB) instead of a Bill of Lading. The Sea Waybill works much the same way as the B/L but it is not a document of title. In practical terms this means that goods shipped on a Sea Waybill can only be released to the consignee that is listed on the document. In other words: as long as a person can present proper identification that he/she represents the consignee named in the Sea Waybill, the goods will be released to that person at destination (whereas on a B/L, goods are released to the person who presents an endorsed original B/L document to the carrier at destination). Sea Waybills are often used where no sale of goods is expected during transit and where the shipper and consignee trust that payment can take place and legal ownership for the goods can change without the use of an original B/L document. A Sea Waybill is only issued in “copies”, not originals, and sometimes it is not printed as a physical document at all. Advantages of Sea Waybills are less administration and fast/simplified release at destination because exchange of original documents is not required. Processes and Documents – Destination Flow When the container is about to arrive at destination and after it has arrived, important processes take place to make sure that the container is delivered to the correct receiver. When goods have been shipped on a Bill of Lading, the consignee must submit an original B/L document to the carrier before the cargo can be released. The carrier also wants to make sure that all outstanding charges are paid (unless credit has been agreed).



Additionally, the carrier may be obliged to ensure that the customer is authorised by Customs to move the goods into the country. Here’s a walkthrough of the main activities at destination: 1. Arrival Notice: 3-7 days before vessel arrival, Maersk Sealand advises its

customers that their containers are about to arrive. 2. Manifest preparation: MSL declares cargo and vessel details to Customs. 3. Invoice preparation: MSL advises the consignee of collect charges. 4. B/L and Payment: Consignee submits an original B/L and pays outstanding

charges to MSL. 5. Customs Release: MSL receives notification from Customs or proof from

Consignee that goods are customs cleared. 6. Cargo Release: MSL releases the cargo to Consignee when all paperwork is in

order and collect charges have been paid. 7. Delivery: Container is taken to the consignee’s premises. 8. Empty Return: Consignee unloads cargo and the empty container returns to the

terminal. Note that if the container was shipped on a Sea Waybill instead of a Bill of Lading, the consignee does not have to submit a document to MSL (but will of course still have to pay the outstanding charges). If the consignee has a credit agreement with MSL, payment may take place after container release / delivery. Processes and Documents – Destination Documents Here’s a walkthrough of some of the major documents/messages used during the destination process: Arrival Notice The Arrival Notice is an email or fax notification to consignee containing arrival information such as: Vessel name and voyage, Bill of Lading number and details, ETA, Container number, Seal number and Charges due. Vessel Manifest



The Vessel Manifest is an official document submitted by the carrier to Customs authorities prior to vessel arrival, advising details of cargo onboard and containers to be discharged. The manifest provides details of e.g. cargo types and shipper/consignee details and is prepared by the agent in the port of discharge. Invoice – collect charges At destination, the carrier prepares an invoice to the consignee covering the charges for the shipment that must be paid to the carrier at destination before the cargo is released (unless credit has been agreed). Bill of Lading (B/L) The cargo receipt that was issued to the shipper at time of shipment is the “key to the cargo” and an original B/L must be submitted to the carrier as proof that the person who collects the cargo represents the correct consignee. Cargo Release Cargo release is a term used to describe the confirmation by the carrier that the container can be released to the consignee. The cargo release is issued when outstanding charges have been paid and the consignee has submitted a duly endorsed original B/L to the carrier at destination. In some parts of the world, a physical document is issued (sometimes called a Delivery Order). In other parts of the world, it is not a document as such but could be a message via email or fax to the terminal operator, a check mark in an IT system that confirms release, or a pin number given to the consignee that allows him/her to collect the container at the terminal. Processes and Documents – Free Time After arrival at the port of discharge, the customer must collect his container from the terminal within an agreed number of days, referred to as “Free time”. Typical free time is 2-5 days but carriers may agree with some customers to extend this period. Demurrage If the container is still at the terminal after expiry of the free time, the customer will be liable to pay so-called “Demurrage” charges to compensate the carrier for the cost of storing the container at the terminal. Detention / Per Diem When the customer takes delivery of the container at destination, he must unload the container so it can be returned to the carrier and used for a new shipment.



If the container is not returned with the agreed free time, the customer may be required to pay so-called “Detention” or “Per Diem” charges for each day the container is in his custody. (Per Diem is the term commonly used in the USA while Detention is the term commonly used in many other places). Detention/Per Diem is an “equipment rental charge” which compensates the carrier for not being able to generate income by using the container for a new shipment right away. Remember It is important to remember that the container cannot leave the carrier’s terminal or container yard at destination for delivery to the consignee until the consignee has submitted an original Bill of Lading and paid freight and charges to the carrier. Customs may also need to release the goods before the container will be allowed to exit the terminal. It is the customer’s responsibility to arrange for customs clearance, payment and B/L submission within the free time or he will be liable to pay demurrage. Processes and Documents – Intermodal Shipping lines not only transport containers between sea ports but also offer their customers to transport the container to/from inland locations in connection with the ocean carriage. This is commonly referred to as intermodal transportation and takes place using rail, barge or road transport. Common concepts related to intermodal include: Pre-carriage The carriage of containers by any transport mode from place of receipt to the port of loading. On-carriage The carriage of containers by any transport mode from port of discharge to final place of delivery. Mini-landbridge A movement of cargo from one sea port to another over land, using road or rail transport. Haulage A term commonly used to describe trucking but may in some cases also cover other intermodal modes. Chassis



A wheeled unit, which can be detached from the truck head, on which a container is placed for transport by road. Tri-axle chassis A chassis with an extra set of wheels to support additional weight when carrying heavy containers by road. Genset A generator that provides power for reefer containers during terminal storage and vessel transit.



Vessels and Planning Vessels and Planning – Introduction This section introduces a few “technical” aspects of shipping related to terminals, vessels and planning. Vessels and Planning – Terminal Activities The terminal is an area for loading and unloading of containers to and from vessels as well as storage of containers in transit. Reliable and efficient container handling operations is an important part of the shipping process. Efficient terminal operations keeps costs down, reduces the time spent by vessels in port and ensures that containers are shipped and delivered according to plan. Many activities related to the load/unload operations take place at the terminal. Here are a few of the main ones: Gate-in Gate-in is a term used to describe when a container enters the terminal. The shipper must have made a booking with the carrier before the container is allowed to enter the area. At time of gate-in, the terminal operator or carrier will check the external condition of the container and make sure that the container is properly sealed. If not in order, the container may be rejected or a notation will be made on the dock receipt. Container Yard An area is set aside for storage of full export containers waiting to be shipped and for storage of full import containers waiting to be collected. There is also an area where empty containers are kept. Depending on the type of operation, containers may be placed on the ground, placed on chassis (wheeled units) or stacked on top of each other.



Container Freight Station In some terminals, you also find a Container Freight Station (CFS) where carriers or freight forwarders load or unload cargo into/from containers on behalf of shippers and consignees. Equipment To stack containers and to move them around the terminal area (for example, to move containers to the quay for loading), some terminals use a so-called Straddle Carrier which is a wheeled vehicle designed to lift and carry containers within its own framework. In other terminals, tractor-trailers are used to move containers around and equipment is available to lift them on/off. Quay-side crane Only few container vessels are equipped with cranes nowadays so at the quay, cranes must be available to lift containers on and off the vessels. Some terminals use so-called Gantry cranes which travel on rails alongside the vessel and each have a car that is movable horizontally in a direction transverse to the rails – in this way able to reach across the wide container vessels. Maintenance & Repair Containers need regular maintenance and repair. Such work is carried out in dedicated work shops or areas where spare parts are also kept. Customs Authorities Customs are also present in the terminal area and must authorise release of the goods before a container is allowed to leave the terminal. Customs check documents and may carry out a physical examination of the container. Gate-out Gate-out is the term used to describe when a container leaves the terminal after the container has been released by the carrier and by Customs. At the gate, personnel will check that the truck driver is properly authorised to collect the container and will record that the container has left. Vessels and Planning – Vessel Elements Container vessels are constructed to carry unitised cargo in the form of standardised containers.



A typical container vessel is fitted with large hatches that lead to large box-shaped holds. In the holds (below deck), containers are stowed in vertical cells on top of each other, typically 6 to 9 containers high. On deck, on top of the hatches, containers are stacked up to 6 high and secured with “twist locks” and lashing equipment. Some vessel elements are described below. Engine room The part of the vessel, mainly below deck, where the motors, engines and propulsion machinery are located. Bridge The navigation and command post of the ship equipped with various navigation equipment such as radars, GPS satellite navigators, echo sounder, nautical charts, compasses and logs. Cargo holds The space and compartments below deck for stowage of cargo. Container vessels are additionally equipped with cell guides (steel bars and rails to steer containers during loading and unloading into the cargo holds). Hatch (Hatchway) An opening in the deck of a vessel through which cargo is loaded or unloaded from the holds below deck. Hatch cover Watertight means of closing the hatchway of a vessel – a “lid” which may be lifted off the vessel and placed on the quay during load/unload operations. Flag An indication of the country in which a vessel is registered which influences the requirements that the ship owner must meet/follow in connection with certification, crewing, tax, safety, etc. Twist lock A mechanical locking device placed in each corner of a container, used to secure two containers stacked on top of each other. Lashing equipment Wires, ropes, chains, rods or straps used to hold and secure cargo in position on deck. Draft (draught)



The depth of the vessel, i.e. the vertical distance between the waterline and the bottom of the keel of the vessel. Beam The width of the vessel. Length The length of the vessel, measured from the front stem to the aft stern. Vessels and Planning – Stowage Co-ordination Stowage of containers onboard the vessel must be carefully planned in order to ensure the safety of vessel and cargo, improve vessel utilisation, keep operational costs down and ensure fast and efficient loading and unloading operation in port. Many elements must be considered and stowage co-ordination is therefore handled by centralised functions where specialists are employed. Some elements that must be considered include: Weight distribution of the vessel – because it influences vessel stability, stress, torsion, trim and draft and therefore the safety of the vessel. Container weight – because it influences which and how many containers can be stacked on top of each other. Cargo destination – because it determines when a container needs to be taken off the vessel at which time it should be easily accessible. Container sizes – because containers must be stowed in suitable slots that fit the length and height of the box. Special cargo types – because Reefer, Dangerous and Out-of-Gauge cargo have special stowage requirements. Engine room – because heat is a problem for a few cargo types, e.g. cocoa butter, which therefore cannot be stowed close by (relevant for few cargo types only). Vessels and Planning – Vessel Size Vessel size is expressed in terms of how much the vessel can carry, referred to as capacity or tonnage, or its ability to pass canals and waterways which can be restricted by the vessel’s draft and width. Berthing in ports can also be restricted by the vessel’s draft (water depth), length (turning/navigation) and width (cranes must be able to reach across).



Each carrier typically operates a fleet of different sized vessels to be able to sail the most suitable routes and call the ports needed. Terminology related to vessel size/capacity includes: TEU capacity The number of containers that the vessel is able to carry onboard, expressed in units equivalent of a 20’ container. FFE capacity The number of containers that the vessel is able to carry onboard, expressed in units equivalent of a 40’ container. Tonnage The cubic capacity (volume) of a vessel. Deadweight (DWT) The variable weights (cargo, bunkers, equipment, provisions, water, stores and spare parts) that a vessel is designed to carry, expressed in tons. Light Weight The weight of the ship including hull, machinery, outfit, equipment and lubrication oil in machinery. Displacement The total weight of the ship, equal to the water displaced. The sum of Deadweight and Light Weight.

Panamax The maximum dimensions of a vessel capable of passing through the Panama Canal.

Post-Panamax A term used to describe vessels that are too large to pass the Panama Canal.

Malacca-max The maximum dimensions of a vessel capable of passing the Malacca Straits. Vessels and Planning – Vessel Deployment Operating a liner network requires many vessels. For example, if a round trip between the ports in one service takes 6 weeks for a vessel to complete and the carrier wants to offer his customers weekly port calls, the carrier will need to deploy 6 vessels to run the service.



To call the port twice a week, 12 vessels would be needed. To provide a fortnightly service (port call every two weeks), 3 vessels would be needed. Vessels and Planning – Own/Charter Vessels The more services a carrier operates, the more vessels are needed. This involves major investments. Shipping lines such as Maersk Sealand invest in their own vessels but they typically also charter (“lease”) vessels from other ship owners for shorter or longer periods of time. There are advantages and disadvantages to both owning and chartering vessels. Own vessels By owning vessels, a shipping line has full control and can manage their vessels as they feel best. This provides flexibility when planning vessel schedules. For example, the coordination of dry-docking (repairs), crew change, etc. can be tailored to fit into the deployment of the vessel. Buying (or building new) ships is expensive and requires good financing capability but provides the carrier with the possibility of tailoring the vessel exactly to the requirements of the service(s) in which they need to be deployed, e.g. in terms of speed, draft or reefer plugs. At the same time, it involves significant financial risks. Container ships are built to last many years (15-25 years) and orders for newbuildings must be placed several years in advance. It can be difficult to predict demand so far into the future. Charter vessels By chartering vessels, carriers are able to change their fleet composition relatively easy to meet the changing market conditions. Vessels are chartered for shorter or longer periods of time. Less than one year is generally considered short-term. The ship owner finances the purchase of the vessel and is generally responsible for costs of crew, technical management, dry-docking, etc. The price of charter tonnage (often a fixed rate, e.g. per day) fluctuates with the demand for the specific vessel type/size. When charter rates are low, shipping lines tend to try to secure vessels for longer periods of time, while they will tend to go for short charter periods when the charter rates are high.



Maersk Sealand aims towards having a balanced mix of short- and long-term charters to safeguard against market fluctuations while retaining some flexibility, should demand or market conditions change. Vessels and Planning – Strategic Co-operation Sometimes carriers form strategic partnerships and co-operate with each other with the purpose of reducing costs, improving efficiency and offering a wider range of services to their customers. There are several kinds of strategic co-operation between shipping lines, including Slot Charters, Vessel Sharing Agreements and Alliances: Slot charter A slot charter is when a carrier buys space (container slots) onboard another carrier’s vessels, either on a particular voyage or vessel string. Advantages to the shipping line that purchases slots are that it enables connection to ports otherwise not served and the arrangement can help alleviate space problems on own vessels on the given route. Advantage to the operating carrier is that the arrangement can help optimise vessel utilisation and thereby reduce the average cost per container moved. Vessel Sharing Agreement (VSA) VSA is an agreement whereby two or more carriers join forces and pool their vessels in different trades. It typically includes slot exchanges, sharing of terminals and sometimes interchange of container equipment. VSAs are often centered on singles services or trade lanes and the parties involved retain their own identity, marketing and pricing. Advantages to the participants are that each carrier can offer a regular service to its customers but need fewer vessels (= less investment) and that it helps optimise vessel utilisation (= reduce average cost per container moved). Alliances An alliance is similar to a VSA arrangement but often cover the entire geographical scope of the involved parties. Members of alliances retain their own brand, marketing and pricing but typically share or jointly operate vessels, terminals and equipment. Some alliances even include joint inland arrangements and asset investments.



Organisation Organisation - Introduction A global shipping line delivers its services to customers as a combined effort between a corporate organisation and a number of local agencies. Maersk Sealand’s corporate headquarters is also referred to as the Centre and sets the overall strategy for the business. The customers are served through a network of Agents who take on a number of operational tasks based on an Agency Agreement with Maersk Sealand. This section will go through some of the main activities of the Centre and the Agents respectively. Organisation – Centre Maersk Sealand’s corporate organisation is often referred to as Centre and represents the owners and top management of Maersk Sealand. Maersk Sealand is the trading name for the liner trade activities of the shareholding company A.P. Møller - Mærsk A/S. A.P. Møller - Mærsk A/S is the legal entity that is considered the so-called “principal carrier”, i.e. the entity who is ultimately responsible for the cargo carried under a Maersk Sealand B/L. The activities and responsibilities of the Centre organisation include: Strategy Centre sets overall strategy for Maersk Sealand. Policies and procedures Centre develops policies and procedures to be followed by agents, e.g. cargo acceptance policies, reporting and accounting procedures, HR policies, security procedures, etc. Investments



Centre manages the significant investments in vessels and containers made by A.P. Moller - Maersk. Fleet Management (Vessel Operations) Centre is responsible for the daily deployment of Maersk Sealand’s fleet of vessels and daily operational matters related hereto. This includes allocation of vessels and capacity to individual strings/services, scheduling, chartering vessels to Maersk Sealand’s network, including extra-loaders and vessels for positioning of empty equipment. It also involves coordination of procedures for handling of dangerous cargo and co-ordination with cargo coordinators/terminals concerning cargo stowage planning. Equipment Management Centre is responsible for the management of Maersk Sealand’s fleet of containers, totalling in excess of 1.5 million TEU, gensets, chassis and power packs. This includes purchase of new equipment, leasing and redelivery to ensure that the stock is in line with requirements, (fleet management), inter-regional positioning of the container equipment fleet to ensure optimal use of equipment employed (flow management), co-ordination of sale of containers and procedures for same, as well as Maintenance & Repair (compliance, cost control, advice, etc.) IT & Systems Maersk Sealand is interested in having an effective and efficient network of agencies and therefore invests significantly in the development of IT systems and e-commerce initiatives to support the business. At Centre, the Global Information Systems department manages this part of the business. Sales & Marketing Centre is responsible for overall sales and marketing strategy, guidelines and procedures. The corporate Sales & Marketing department determines the overall guidelines for PR, branding and external communication to ensure global consistency, conducts strategic analysis of market trends, competitors, etc. (market intelligence), analyses and decides on target market and customer segments, prepares global sales strategy and is involved in sales management for global key accounts. Finance & Risk Management



Centre Finance & Accounting is responsible for consolidation of accounts, management reporting, investment analysis, hedging, business audits (to make sure procedures are followed), etc. Claims Management Centre Claims sets procedures and provides legal advice for matters relating to claims and the Maersk Sealand B/L. Organisation – Agents Agents are individual companies appointed by Maersk Sealand to perform services according to an Agency Agreement and Agent’s Manual. Agents can be fully independent companies but are most often “own agents”, i.e. either fully owned by Maersk Sealand or operated in partnerships or joint ventures. Some key tasks of the Agencies are: Sales/Marketing All agents must perform energetic and systematic sales and marketing work, exchange information and sales leads about customers and cargo movements, follow the trade and market situation in their area closely and make regular follow-up to control that actual performance is matching the projections made in respect of total trade and market share budgeted for Maersk Sealand. Agents report findings about competition and keep abreast of development in other markets and trades than those Maersk Sealand currently serves, and make timely suggestions to Centre in respect of any new business opportunities. Service Delivery Activities related to customer service and operations on behalf of Maersk Sealand and in accordance with the Agent’s manual, including bookings, documentation, and operational coordination: Booking Agents take bookings on behalf of Maersk Sealand and by doing that, make a commitment to customers that their cargo will be carried by Maersk Sealand. Agents must endeavour to book the most profitable cargo but must also pay due respect to important shippers and consignees as well as adhere to the mutually agreed marketing plans. Agents must follow the acceptance policies and space allocation principles of Maersk Sealand, assist in controlling the flow of containers and special equipment and report weekly bookings to Maersk Sealand.



Documentation Agents issue Bills of Lading (transport documents) on behalf of Maersk Sealand and register cargo / shipment / invoicing details in applicable systems in a timely and accurate manner. Agents prepare and release the cargo manifest for each vessel arrival/departure and coordinate as required with local authorities as well as the agents in the next port of call. A proper recording system of containers received and delivered must also be maintained. Equipment co-ordination Agents must ensure that container equipment is always in a safe and cargo worthy condition. Agents are responsible for the fastest possible turnaround of containers which involves that Agents are responsible for equipment control (physical control/inspection of containers, chassis, gensets and other equipment located within any agent's area of responsibility) and must arrange maintenance/ repair as required in order to minimise the time the container is out of service due to damage. To control cost the agent must ensure that the most efficient and economical repair shop is used. Vessel co-ordination Agents coordinate with port authorities, terminal operations, pilots, bunker suppliers and other service providers on behalf of Maersk Sealand to ensure a smooth, timely and efficient unloading/loading operation. Agents must co-ordinate loading of vessel in accordance with stowage instructions received from Maersk Sealand’s cargo co-ordinators and must assist the Master and crew of the vessel as required. Terminal co-ordination Agents are responsible for negotiating and maintaining contracts and agreements for terminal, stevedoring and CFS operations in accordance with instructions from Maersk Sealand and monitor/report expenses related hereto. Where possible, the agent should work together with the contractor to make the operation more efficient at all times. Agents should also be alert to new developments, including changes in port policies, which might be of interest/importance to Maersk Sealand for strategic and overall long-term planning purposes. Intermodal co-ordination Agents are responsible for providing arrangements for inland transportation to and from all inland points served by Maersk Sealand in a timely and cost-efficient manner. Agents negotiate contracts on behalf of Maersk Sealand according to standards and procedures provided.



Finance Agents must follow procedures and requirements as laid out in the Agent’s manual concerning revenue and cost control, accounting and financial reporting related to the activities/services performed on behalf of Maersk Sealand. Finance-related activities include freight collection, cost control, accounting and reporting: Freight Collection Agents must ensure that all Maersk Sealand's freight revenue - payable within the Agent’s area - is promptly and fully collected from the customers. Cost Control It is the overall responsibility of the agent that expenses charged and paid on behalf of Maersk Sealand are strictly in accordance with valid tariffs and contracts, as approved by Centre, and that the services invoiced and paid for exactly tally the services rendered by the suppliers in question. Agents must ensure proper control of expenses to minimise costs and maximise efficiency. Costs paid by the Agents on behalf of Maersk Sealand are reimbursed through the so-called Current Account. Accounting Agents are required to follow good accounting practice and adhere to Maersk Sealand’s procedures. Local accounting legislation applies for agency-related revenue and costs. Accounting for Maersk Sealand revenue and costs have to be recorded according to the Danish Bookkeeping Act (as A.P. Møller - Mærsk A/S is a Danish company). Reporting Agents must prepare and submit to Maersk Sealand financial data/reports for inclusion in budgets, monthly reports, the Annual Report, etc.



Issues and Challenges Issues and Challenges – Introduction To be in business, a global carrier must be able to handle a number of strategic and operational issues. In this section, we will introduce a few of them briefly: Trade imbalance, Utilisation, Security and Environment. Issues and Challenges – Trade Imbalance A challenge that all carriers spend time dealing with is the effect of the imbalance of global trade patterns. Some areas of the world export more than they import, others import more than they export. Due to this imbalance, empty containers must be moved from import areas back to the export areas where cargo is waiting to be shipped. This is referred to as empty container positioning and is a significant cost to the carrier. Container Surplus/Deficit areas A net exporting area (export > import) becomes a Container Deficit area. For example, Asia is generally considered a container deficit area because the region exports more than it imports. A net importing area (export < import) becomes a Container Surplus area. For example, North America is generally considered a container surplus area because the region imports more than it exports. Head-haul / Back-haul trades The predominant direction in a trade is referred to as the Head-haul trade. Back-haul is the opposite term. To avoid or reduce the costs of positioning empty containers from container surplus areas back to container deficit areas, carriers actively seek customers that have cargo loads moving in the back-haul trade and may offer lower rates here than in the head-haul direction. Issues and Challenges – Utilisation Utilisation is a keyword in shipping.



A carrier’s ability to increase vessel and container utilisation is a key parameter in his ability to reduce costs, improve profitability and be competitive in the market. Vessel utilisation The costs of running a container vessel are high and many are fixed, i.e. many costs must be paid regardless of how many containers are onboard the vessel. The more containers a carrier is able to load onboard a vessel, the lower is the average cost per container. Carriers therefore follow vessel utilisation closely. Vessel utilisation is a measurement of the number of containers carried in percentage of total vessel capacity. Container utilisation Similarly, carriers will follow the utilisation of containers closely by monitoring how many cargo loads each container carries per year (on average). In other words, how many times a year is each container shipped with a cargo loaded inside for which a customer pays freight to the carrier. The more cargo loads each container carries per year, the less containers a carrier must invest in to run his operation and meet customer demand (= less costs). Issues and Challenges – Security A matter which has attracted increasing attention in recent years is security. As a transport and logistics provider, Maersk plays an important role in the security and safety of international trade. Security is protection against illegal acts caused by other people, consciously or unconsciously. The importance of security We need to focus on security in order to safeguard our employees, customers and suppliers – as well as secure the transportation infrastructure against misuse. Carriers and other transport and logistics providers can be misused for carriage of goods (or people) intended for illegal purposes across borders. Also, a “hurt or broken” transportation infrastructure can have far-reaching consequences, preventing international trade and thereby hurting economical developments associated herewith. Maersk is committed to show constant care to prevent breaches of security associated with operations and we rank security considerations equally with commercial and operational factors in managing our business and operations. We



cooperate closely with authorities and take all measures necessary to maintain the highest security standards in the organisation, the shore facilities as well as onboard our vessels, thereby providing the highest levels of security for our customers and employees. Security initiatives A number of security-related programmes and initiatives in recent years with direct impact on the shipping industry include e.g.: • US/Canada Customs’ 24-hour Advanced Manifest Rule • C-TPAT (Customs-Trade Partnership against Terrorism) • ISPS (International Ship and Port facility Security code) 24-hour Advanced Manifest Rule The 24-hour Advanced Manifest Rule is a rulemaking by US Customs, published in 2002. Canada has implemented the same rule and over time, other countries may follow. The US rulemaking requires carriers to file complete vessel manifests for all cargo onboard vessels that will call a US port. The manifest must be filed latest 24 hours before the cargo is loaded at the foreign load port. Based on timely and correct manifests, the carrier will receive permission to discharge cargo in the USA. Failure to provide timely and correct manifests will result in fines and/or the carrier will not be allowed to discharge the cargo for which the information is filed late or inaccurately. In Maersk, we therefore operate with strict procedures and deadlines for input and release of documentation and shipment details. C-TPAT (Customs-Trade Partnership against Terrorism) C-TPAT is a joint initiative between US Customs, carriers, logistics providers, terminal operators, customs brokers, importers and other supply chain parties. C-TPAT partners make self-assessment of their security, adjust security standards where necessary, communicate these and share best practices. Maersk Sealand as well as other Maersk entities such as Maersk Logistics, APM Terminals, Safmarine and Bridge Terminal Transport are C-TPAT partners. ISPS (International Ship and Port facility Security Code)



ISPS is an international convention that requires governments, shipping companies and port facilities to carry out risk assessments and reduce security vulnerabilities in ports and on ships. Issues and Challenges – Environment Maersk Sealand is also committed to the protection and conservation of the environment and places high priority on environmental considerations in managing our business. New steps and initiatives are continuously taken in this respect, for example by designing and operating vessels and containers in an environmentally friendly manner. Examples of what Maersk Sealand has done include: Fuel/oil consumption Improved fuel efficiency through innovative design of vessels and engine systems as well as efficient stowage of cargo and focus on ballast water, trim of vessel, etc. Vessel design and materials Use of environmentally friendly paint and coating as well as materials that can be recycled at the time the vessel needs to be scrapped. Vessel operations Save storage of sewage and garbage in tanks and secure controlled discharge, as well as control ballast water to minimise transfer of micro-organisms. Container design and materials Use of CFC-free cooling systems in all new reefer containers.


WWW.SEALANDLOGISTIC.COM
