Shipping Risks - Making the Right Choice

8/2/2019 Shipping Risks - Making the Right Choice

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INCREASING OPPORTUNITIESIN INTERNATIONAL TRADE

- ARE YOU RISK COVERED ??

Anoma Ranasinghe

General Manager Documentation

Mitsui OSK Lines Lanka (Pvt.) Ltd.

Shipping Risks Making theRight Choice

SELECT THE BEST METHOD OF

TRANSPORT APPLICABLE FORYOUR TRADE..

All transportation methods haveadvantages & disadvantages

Main transportation methods are :

Maritime transportation

Air transportation

Road transportation

Rail transportation

Maritime Transportation

- Slow. Cheap.Not the best method whentransporting perishable goods of a highvalue or if it s an ur ent deliver .

Air Transportation

Secure and very fast method. Usuallyneeds little packaging, has low cost of

,most expensive method..

Road Transportation

- Normally faster & safe. Allows direct

transportation from the suppliers to theuyer s ware ouse. ssures grea esdegree of flexibility.


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Rail Transportation

Slow & flexible. Requires certainnumber of containers before shipping.

,large quantities of cargo at relativelyinexpensive rates.

International Shipping

The most demanded transportationindustry is: international shipping

which is responsible for the carriage of90% world trade and is the life blood of

e g o a economy.

Half the world would starve and theother half would freeze !!!!!!

International Shipping

Ships are technically sophisticatedhigh value assets (larger hi-tech vesselscan cost over USD 150 million to build),

and the operation of merchant shipsgenerates an estimated annual incomeof over USD 380 billion in freight rates,

representing about 5% of the total globaleconomy .

Different Shipping Markets

Liner

Involves regularservices, provided by

shipping cos., between

Tramps

Call at any port ,to pickup whatever the cargoes;

sc e u e , a vert seports of loading &discharging & freightrates based on co.tariffs.

manufactured or partlymanufactured goods

Bulk Dry Bulk liquid

R/M &semi R/M crude oil

Freight rates arenegotiated

TRANSPORT PROVIDER - SHOULDIT BE A FREIGHT FORWARDER OR


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WHO IS A FREIGHT FORWARDER ?

Agents who arrange land, sea and airtransportation of goods.

They complete all procedural anddocumentation formalities involved in

ustom an ort c earance on e a othe shipper, and

arrange for warehousing of cargobefore shipment of export cargo.

Any danger in hiring a Freight

Forwarder who is not an owner or anagent of the carrier to transport your

goo s o ore gn uyers.

Advantages of aFreight Forwarder

Acts on behalf of exporters in arrangingtransportation Services.

Facilitates the international movement of,

administrative and physical services to theexporter.

Specialists in multi-modal transportation;therefore well placed to select the method

of transportation best suited for the type ofproduct and at the lowest cost.

Selecting a Freight Forwarder :- Not too difficult

Is the Freight Forwarder a member of the

Forwarders Association ?

Obtain recommendations from otherexporting firms & trade associations.

Speak with several Forwarders beforedeciding which one to use.

Consider companys references.

Check on the credit rating.

NVOC OPERATOR

NVOC operations are a particularfeature of containerized transport.

Freight Forwarders and others contractto carry even though owning no ships

or an means of carria e. The NVOCOperator will issue his own bill of

lading in which he features ascontracting carrier.

What is the advantage inselecting a regular liner for

transport of goods ???

Regular liners are ordinarily referredto as Main Lines . Liner shipping consists

companies or ship operators wherebycargo carrying ships are operated

between scheduled advertised ports ofloading and discharging on a regular

basis. The freight rates which are chargedare based on the tariffs. Companies

offering such services are known as linercompanies.


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Advantages in loading with amain line

Space is protected.

Special rates could be negotiated.

Financial stabilit .

Early settlement of cargo claims.

Ability to track cargo until delivered.

In depth market knowledge.

Could obtain better cut offs.

Sale & Carriage Relationship

SELLER CONTRACT OF SALE BUYER

( Also call ed Shipper or ( May also be named

Consignee may employ consignee indor seeForwarding Agent or of the Bill of LadingFreight forwarder to and / or receiver ofMake contract wit h the cargo ).Carrier ).

Makes a cont ract No expressof carriage contract.

Carriercontract s wit h the Shipperand issues Bill of Lading.

Functions of a bill of lading Receipt for goods Functions of a bill of lading

Evidence of a contract of carriage

regarded as the best evidence of a

contract of carriage

Functions of a bill of lading

Document of title

* it enables the holder of the bill of

the port of discharge.

* It permits the holder of the bill oflading to transfer the title of the goodsduring transit by endorsement.

* It can be used as security forpayment.

Transport Documents

Marine/Ocean Bill of Lading

Non- Negotiable Sea Waybill

Charter Party Bill of Lading

Air Transport Document - Air Waybill

Road, Rail or Inland Waterway TransportDocument

Courier & Post Receipts

House Bill of Lading issued by FreightForwarders


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Shipping risks - Maritime frauds

Shipping business, depends on high

degree of trust. Taking this advantage ;it isthe perfect vehicle for a number of

.

Shipping risks - Maritime frauds

Documentary frauds

a) Bills of Lading :pre dating or post dating

/submission of forged bills of lading.

b) False Certificates

c) Back Letters/indemnities

Maritime frauds

Insurance frauds

a) exaggerate damage for cargo

b) scuttling - deliberately sinking aship by allowing water to flow in to the hull

celebrity case salem

Maritime frauds

Cargo frauds

a) under declare the measurement

b) shipping of cargo which does not complywith the re uirement . .

i.e steel rusty/drums secondhand/dented or leaking

c ) not declaring dangerous & hazardous

d) claiming from ship owners or insurerswhen cargo is not actually damaged.

Maritime frauds

Other criminal activities

a) smuggling

b) Illegal immigrantsc) piracy

Detecting /avoid fraud

Criminals will take protection indifferent jurisdiction where freedomof information is restricted. .

a Education & trainin are owerfulweapons.

b) IMB/BIMCO/Insurance cos./Banks

c) customs/police /revenue authorities

d) anti piracy centre in Kuala Lumpur.


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RELEASE OF CARGOES AGAINSTORIGINAL BILL OF LADING

most important functions performed by a shipagent..

The following checklists are designed :-* Is it consigned to the order of the shipper or

* Is it a sea waybill ?* Is it a straight/non negotiable bill of lading ?* Did it arrive care of the master in the shipsbag ?

* Is it an NVOC/house bill of lading ?

Cargo release without taking an originalbill of lading.

There will be situations where the agent is instructed

to deliver cargo without taking the original bill oflading.

* Great care is needed. .* breach of the bill of lading contract .* the legal holder of the bill of lading can sue the

ship owner, the carrier or the party who haswrongfully delivered the cargo.

(The legal holder of the bill oflading could be the shipper, the receiver, a bank or

another party to whom the bill of lading has beennegotiated.)

Cargo release..

CAN THE SHIPPING LINES DELIVER GOODS

WITHOUT THE ORIGINAL BILL OF LADINGDESPITE HAVING STIPULATED IN IT

RELEASE IS POSSIBLE?

couple of shipping lines have changed thewordings on the face of their Bills of Lading,which deals with delivery of cargo

Cargo release..

Traditional wordings are on the followinglines:

In witness whereof the number of

tenor and date ,have been signed ,oneof which being accomplished ,theothers to stand void.

MAERSK SEALAND B/L

Where the bill of lading is non-negotiable theCarrier may give delivery of the Goods to thenamed consignee upon reasonable proof ofidentity and without requiring of an original bill oflading.

Where the bill of ladin is ne otiable theCarrier will be entitled to give delivery of theGoods against what he reasonably believes tobe a genuine original bill of lading. Delivery asaforesaid is authorized and shall constitute duedelivery hereunder and the Merchant shall haveno claim for loss or non-delivery.

Bill of lading clause

clause includes wordings:

1) concerning the release of goods withoutnecessarily requiring surrender of an original

.

2) Where the b/l is non negotiable,whereby the carrier may deliver goods to the

named consignee upon reasonable proof ofidentity without surrender of an original b/l.

3) Delivery of goods against a b/l thecarrier reasonably believes to be genuine.


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Bill of lading clauses . These clauses have created confusion in

the banks and as a result some banks

have refused to accept this type of Bills ofLading while others continue accepting

.

International Chamber of Commerce hasalso objected to this type of clauses

appearing on the face of the b/l as theyfeel it dilutes the InternationalNegotiability of the B/l.

Comment NO PARTY IS ABLE TO COMMENT ON THE

RIGHTS OR WRONGS OF CARRIERSCHANGING THEIR B/L WORDING TO

FACILITATE THE RELEASE OF CARGO.SHIPPING LINES ARE OBVIOUSLYENTITLED TO CHANGE THE WORDINGS OFTHEIR BILLS OF LADING , AND BANKSHAVE A RIGHT TO ACCEPT OR REJECTTHOSE BILL OF LADING.WHETHER OR NOTTHE CHANGED WORDINGS WILL HAVE THEDESIRED EFFECT AND PROTECT THESHIPPING LINES FROM CLAIMS IS AQUESTION FOR COURTS OF LAW TODECIDE

Arrangements in the case ofaccident with B/L.

If the full set of original bills of Ladingis lost/misplaced or delivery inexchange of L/G is requested..

a Identification of ri htful art ..

* person requesting re-issue needs to beidentified as the rightful claimant.

* for identification - demand fordocumentary evidence.

i.e. sales contract, invoice, referring tothe L/C issuing bank.


b) i. Re-issue of Bills of Lading

* in case; loss of some of the originals; re-issueshould not be done until remaining originals arerecovered.

* .of lading with a supplementary symbol.

* following clause to indicated on the face

this bill of lading is issued in exchange for aLetter of Guarantee as the original one has beenallegedly lost by the shipper

* office at the place of discharge or delivery to benotified of the re-issue.

Arrangements in the case of

accident with B/L.b) ii cargo delivery in exchange of Letter of

Guarantee

Shipping Agents are required to release shipmentsonly against the presentation of fully endorsed original

bill of ladin . Even where three or more originals have been

issued; submission of one original deemed sufficientto justify delivery of cargo.

In case of delay in arrival of the original bill of lading orloss of a bill of lading, cargo may be released againstthe submission of a letter of guarantee; guaranteedby a creditable bank for at least 300 % of the CIFvalue of the shipment. (shipping guarantee)

Arrangements in the case ofAccident with B/L.

c) Banks letter of joint guarantee, andrequirements thereon.


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Signatory authorized representative of the

merchants organization.

Joint & several guarantee - by a creditable bank,

.

Duration of guarantee indefinite .

Limit of guarantee - no limit. Exceptional case300% of the CIF value will be accepted as a limit.

Security in lieu of joint guarantee depositing of

cash or establishment of the right of pledge on abank deposit is acceptable.


d) Urging of bill of lading presentation. non production of the bill of ladingwithin one month of the submission of

e) Safekeeping of letter of guarantee - asper the legal requirement

Conclusion.

Shipping is a capital intensive industry.

The shipping markets are becomingincreasingly risky as fluctuations in freightrates and ship prices have increased

substantially. Every organization faces risk; and must balance

its attitude towards risk & reward.

Therefore it is very prudent for merchants ininternational trade to identify risks that theywould face in their day to day operations whenselecting a mode of transport for the movementof goods..