1.
Transportation

2.
Introduction
Transport and distribution have an important role in international trade. It is necessary for companies to
choose the right method of transport to ensure their packages to be efficient and cost-effective. There are
various factors that will influence company’s decision on which type of transport to use. These factors can
be about business’ requirements, destination country, and the type of goods.
Road, sea, rail and air are four ways of import and export. As a first step the company has to
consider all part of their project:
• Firstly, it is important what has to be distributed including size, weight and which type of
goods. For example, for the transportation of foods or fruits, speed is important and it’s
important to choose the shortest and quickest way
• Sending cost is another element very important
• Destination countries’ law, value of goods, risk of transport are other elements to be
considered and depend on company, country of destination and customers’ requirements
So who wants to deal with international transportation has to balance quality, cost, time and
conditions.
Source: Secondary Sources on Google

3.
Air Transport – An Overview
• In the international movement of goods, the role of Air Transport is well-organised. Amongst the
different modes of transport viz., sea, rail and road.
The air transport has the advantage of
(i) taking least time for carriage
(ii) handling high valued or perishable goods
The disadvantages are
(i) comparatively high transportation cost
(ii) unsuitability for transportation of bulk commodities
• Air transportation for business was first developed for mail service. The industry then evolved into
passenger service with air cargo as only a sideline. Unlike ocean shipping, there is considerable mixing
between passenger transport and cargo transport
• Air cargo industry vs. air logistics industry
 Air cargo only refers to the air portion of the journey
 Air logistics manages the door to door delivery
Source: Secondary Sources on Google

4.
Air Transport – An Overview
• Reasons for the Growth in Air Cargo:
 Deregulation and liberalization of the air cargo industry
 Global interdependence helped by world trade agreements
 International production and sales of goods and services
 New inventory management concepts such as Just In Time and Zero stocks
 The vast development of high value and limited time consumable commodities
• Air Transport Characteristics
 Quicker and smoother than land or sea travel
 Less transport-related stresses
 Less packaging is needed (save expense)
 Less insurance expense
Source: Secondary Sources on Google

5.
Air Cargo Operations
• The air cargo industry incorporates an industrial supply chain, which includes airlines, customs, ground
services, air cargo forwarders, brokers, domestic transportation, air cargo terminals, distribution centers
and integrated international express services. Of these, air cargo terminals are critical in the air cargo
supply chain. A typical air cargo terminal has three main users – airlines, air cargo terminal operators
and forwarders/cargo-agents who are the principal contributors to the revenue of air cargo terminals
• A freight forwarder is described as "a shipper or freight forwarder is a natural or legal person who
provides services in the international carriage of goods. He is an intermediary between the exporter or
importer and the transport companies". Logistics operator owns a large part of the transport process,
unlike the freight forwarder
• The demand for air freight is limited by cost, typically priced higher then that of other transport
mediums. These values differ from country to country, season to season and from product to product
and for different volumes also
Source: Secondary Sources on Google

6.
Air Cargo Operations
• International air cargo business is concerned with the transportation of goods by air on International
flights both for import of cargo into and export of cargo out of India. Domestic air cargo business is
concerned with carrying goods by air through the domestic flights operating within the country. Within
that, cargo that is transported by passenger flights through the belly space of aircraft is one and by
dedicated freighter aircraft is another variant.
• At another level, Express Delivery Services have emerged as a key product in recent times as compared
to the conventional General air Cargo services. Express delivery services when rendered through the
Scheduled passenger Flights, are known as Air Express operators. Express airlines, both domestic and
foreign, operate dedicated freighters* and have their own unique requirements based on customer
demand, the growth in volumes handled etc.
• Air cargo industry has three primary types of carriers; combination carriers (passenger airlines that use
a portion of their “belly-hold” capacity to carry cargo and may also operate separate air cargo fleets),
conventional all-cargo carriers operating both scheduled and charter services, and integrated (express)
carriers (FedEX, UPS) operating their own fleet of aircraft and delivery vehicles providing overnight,
door-to-door service
*A Freighter is a Cargo Aircraft (also known as freight aircraft, airlifter or cargo jet). It is a fixed-wing
aircraft that is designed or converted for the carriage of cargo rather than passengers. Such aircraft
usually do not incorporate passenger amenities and generally feature one or more large doors for
loading cargo.
Source: Secondary Sources on Google

7.
Air Cargo Operations
• Air Cargo Containers:
 Very different from that used for other modes of transport
 Intermodal* container is tough, designed for bad weather and rough handling
 Air cargo containers, need to be lighter
 Intermodal-size containers for air cargo are only used on freighters
• Security is a major concern:
 Luggage can be associated with a specific passenger, cargo flies without anybody
 Concept of “Known Shipper” i.e. a person that can be held responsible for their shipment
 Hazardous Cargo: highly restricted if it moves by air; rules concerning the transport of hazardous
goods are developed by the ICAO (International Civil Aviation Organization), but need to be controlled
and enforced by national law
*An intermodal container, often called a shipping container, is a large standardized shipping container,
designed and built for intermodal freight transport, meaning these containers can be used across
different modes of transport. Intermodal freight transport involves the transportation of freight in an
intermodal container or vehicle, using multiple modes of transportation (e.g., rail, ship, and truck),
without any handling of the freight itself when changing modes.
Source: Secondary Sources on Google

8.
Aviation Regulation
• Bilateral
 Every scheduled flight (passenger and cargo) that moves between two countries needs to be agreed
upon in advance in a treaty between the two countries
 A treaty between two countries, not between any airlines
 A bilateral is a very long and detailed agreement on what rights each country gives each other in
regards to airline service
• Freedoms of the Air
Freedoms of the air or traffic rights are aviation agreements between two countries which grant a
country’s airline(s) approval to enter and land in another country’s airspace. These were formulated in
1944, after World War II when 54 nations came together, in Chicago to discuss civil aviation, and agreed
on a series of rules in the Convention on International Civil Aviation (commonly known as the Chicago
convention). There are generally 9 freedoms of the air that define the framework under which air
services operate across the globe.
Let’s have a look at each!!
Source: Secondary Sources on Google

9.
Aviation Regulation
• First Freedom
the right granted by one State to another
State or States to fly across its territory
without landing. Also known as
overflight rights.
• Second Freedom
the right granted by one State to another
State or States to land in its territory for
non-traffic purposes. Also known as a
technical/ refuelling stop.
• Third Freedom
the right granted by one State to another
State to fly in traffic (revenue
passengers) coming from the home State
of the carrier.
Source: Secondary Sources on Google

10.
Aviation Regulation
• Fourth Freedom
the right granted by one State to
another State to take on, in the
territory of the first State, traffic
(revenue passengers) destined for the
home State of the carrier
• Fifth Freedom
the freedom to carry traffic between
two foreign countries on a flight that
either originated in or is destined for
the carrier’s home country. It enables
airlines to carry passengers from a
home country to another
intermediate country and then fly on
to third-country with the right to pick
passengers in the intermediate
country
Source: Secondary Sources on Google

11.
Aviation Regulation
• Sixth Freedom
the freedom to carry traffic
between two foreign countries via
the carrier’s home country
• Seventh Freedom
the right granted by one State to
another State, of transporting
traffic between two foreign
states any with no requirement to
necessarily operate to any point in
the territory of the recipient State,
i.e the service need not connect to
or be an extension of any service
to/from the home State of the
carrier.
ICAO characterizes all “freedoms” beyond the Fifth as “so-called” because only the first five “freedoms”
have been officially recognized as such by international treaty. These are also controversial rights especially
as some of them involve the ability for a foreign carrier to fly domestic routes — termed as “cabotage.”
Source: Secondary Sources on Google

12.
Aviation Regulation
• Eighth Freedom
the right of transporting cabotage
traffic between two points in the
territory of the granting State on a
service which originates or terminates
in the home country of the foreign
carrier. That is a foreign airline flies
from its home country (Country A) to
Country B and then operates domestic
services in Country B.
Ninth Freedom
the right of transporting cabotage
traffic of the granting State on a
service performed entirely within the
territory of the granting State. That is
a foreign carrier operates domestic
services.
Source: Secondary Sources on Google

13.
Indian Air Cargo Industry
Air cargo handled at Indian airports grew by more than 20 times from 0.08 MMT (million metric tonne) in
1972-73 to 2.5 MMT in 2014-15. During the period 2013-14 to 2017-18 it accelerated sharply and grew
with a CAGR of 10.0%.
Source: Secondary Sources on Google

14.
Indian Air Cargo Industry – Growth Prospects
The Indian air cargo industry is poised for significant growth on the back of both the strength of India's
economic growth and many other drivers of growth in India's commerce, trade, investment and
consumption, which include significant demand from small and medium B2B segments.
As per the Boeing 20-Year Forecast, while global air cargo would reach 509 billion Revenue Tonne
Kilometers (RTKs) by 2035 i.e. twice that seen in 2015, at an annual average rate of 4.2%, Asia will lead
the growth, with domestic China, intra-Asia, and Indian market expanding at the highest rates of 6.2%,
5.5% and 6.7% p.a. respectively, as shown in the graph below.
Source: Secondary Sources on Google

15.
Cost Structure
• The principal components of the cost for air cargo transport are: the aircraft’s capital and
direct operating costs, the airport and navigation fees, the ground handling charges and the
cost for airline administration
• The capital costs include depreciation and amortization for purchased aircraft and rentals for
leased aircraft. The direct operating costs are primarily for fuel, maintenance, crew and
insurance. The crew and insurance costs are fixed. The maintenance costs, which include
routine maintenance as well as major overhauls for the airframe and engines, are variable
• The airport fees are primarily landing and parking fees. The ground handling costs include
handling charges for the aircraft and cargo
• These costs can be divided between exogenous costs, over which the carriers have little or no
influence, for example fuel prices and airport charges, and endogenous costs, which the carrier
can control through its procurement and operating procedures, for example capital, labour,
and maintenance
Source: Secondary Sources on Google

16.
Load Factor’s Impact on Cost
• Load factor* is important in determining average unit cost not only because there is a
significant portion of fixed costs but more importantly because fuel consumption varies with
the total weight of the aircraft
• Since charter flights have higher load factors than scheduled air cargo services, they tend to
have lower average unit costs for a similar number of operating hours.
• * Load factor is the portion (percentage) of the cargo carrier capacity that is actually utilized
Source: Secondary Sources on Google

17.
IATA vs ICAO
• The International Civil Aviation Organization (ICAO) is a United Nations Specialized Agency
based in Montreal that is tasked with governing the standards of international air navigation,
transport, and planning. It is the sole international organization with legal authority to
implement — and revise — standards on infrastructure, navigation technology, flight
inspections, and cross-border procedures for international flights
• Also based in Montreal, the International Air Transport Association (IATA) is a non-
governmental entity and trade association that is primarily concerned with the enforcement of
private sector standards — with an emphasis on commercial airlines, travel agencies, and
consumers. Its purpose is to ensure safety and efficiency for travellers
• Although the ICAO and IATA often cooperate to streamline international air traffic, their
designation is markedly different and they serve different purposes — the former is concerned
with regulating international travel at a state-level, whereas the latter is focused on the
private sector
Source: Secondary Sources on Google

18.
Sea Transport – An Overview
• Among different modes of transport, namely, road, rail,
air, and water used for physical movement of goods
traffic in international trade, ocean or sea transport
plays a proverbially most important role
• You know that road and rail transport, though very
important as a link transport, are more suited for short
distances and used in cases where either the exporting
and importing countries are having geographical
proximities or where use of sea transport is not
possible
• Similarly, use of air transport, though it has made rapid
strides in recent years, suffers space limitations and
higher freight costs in case of most commodities
• As against ,these, the ocean transport has the
capability of carrying a large array of items in the
same ship at comparatively cheaper freight rates,
particularly over longer distances
Source: Secondary Sources on Google

19.
Sea Transport – An Overview
• The adoption of modern technology by shipping has set up a world wide trading network
which has made it possible for the different regions of the world to specialise in exports. For
example, production of coffee in Brazil or oil in Saudi Arabia is dependent on cheap and
efficient system of sea transportation
• Shipping technology of today is such that it provides us with large sea carrier with
sophisticated means of propulsion* and handling. Voyages have thus become safer and quicker
and this makes role of shipping very crucial in promotion of exports and imports
(*Marine propulsion is the mechanism or system used to generate thrust to move a ship or
boat across water)
Advantages:
 Cheap Freight: In comparison to rail, road, and air, ocean freight rates are more affordable
and especially more economically viable for bulkier cargo
 Less Maintenance Cost: Maintenance cost of water transport is quite cheaper in
comparison to maintenance cost involved in air and rail transport. This is also one of the
main reason because of which ocean freight rates are not high.
Source: Secondary Sources on Google

20.
Sea Transport – An Overview
Advantages:
 Best for Bulky Goods: Heavy and bulky items of shipment can be transported with ease
through ocean freight without incurring enormous costs in transportation, as ocean freight
rates are cheap. Airplanes cannot transport bulky items such as automobile parts,
machinery, industrial parts etc. and ships can carry all kinds of heavy objects
 Important for Foreign Trade: While airlines are increasingly used today for international
shipping, oceans have been for long connecting the global trade markets. Even till today,
foreign trade is highly dependent upon ocean shipping
 Eco-friendly: Ships have a minimal carbon footprint as they consume lesser fuel in
comparison to aeroplanes. As they are Eco-friendly, large organizations prefer them over
other means of transport
 Safety: Ships are designed to carry dangerous materials and critical cargo safely. The
industry is well-versed in the handling of such goods. Cargo loss by incidents during
transportation is falling as maritime security increases and has dropped significantly in the
past decade. Containers are constructed to be sealed and locked during transportation for
extra security
Source: Secondary Sources on Google

21.
Sea Transport – An Overview
Advantages:
 Efficiency: No matter the size of your shipments, sea freight companies can usually cater
to your needs. Tinier shipments can be arranged in a group together with other cargo to
fill a container, agreed for cost-sharing for the transportation services. Big cargos can be fill
in one or more containers, providing shippers incomparable bulk options
Disadvantages:
 Slow Speed: Ocean transportation is a more time-consuming mode and is ideal for those
items which have a long lead time. Other transportation options like air freight can deliver
items in maximum 2-3 days while ocean freight might even take a month
 Risky: Since there is a high amount of time involvement from shipping to delivery, the risks
associated with ocean shipping are higher. There might be delays or weather obstructions
which can cause loss or damage of shipment
 Lack of Infrastructure: Certain parts of the world might not have the facilities of ports and
terminals and can therefore not receive large ships carrying containers. Usually, a
significant amount of capital expenditure is essential to handle container based networks
Source: Secondary Sources on Google

22.
Major Shipping Routes for Global Trade
Ocean shipping services transport more than 80 percent of all globally traded products. In fact,
maritime trade is a huge part of what makes the world go round. The clothes you wear, the
vehicle you drive (and the fuel), the TV you watch, and the cellphone in your hand likely came
from countries like China, Japan, Germany and the United Kingdom.
But, have you ever thought about the shipping routes ocean vessels take to ensure a quick and
safe delivery? Let’s look into the maritime lanes which are the most popular:
• The English Channel: Known as the busiest shipping lane in the world, the English Channel
separates England from France, and connects the North Sea and the Atlantic Ocean. The
channel is 350 miles long, 20-150 miles wide, and 150-400 feet deep. Approximately 500 ships
travel the channel daily, making it a critical route in the European shipping network. Products
carries include grain, minerals, steel and oil
• Strait of Malacca: The Malacca Strait is a narrow 550 miles and is the shortest route between
the Pacific and Indian oceans. It links major Asian economies such as India, Indonesia,
Malaysia, Singapore, China, Japan, Taiwan and South Korea. The Strait of Malacca is the world’s
second-busiest waterway, with more than 83,000 vessels traveling this route each year. In
2016, 16 million barrels of oil flowed through the strait daily, also making it a major oil
chokepoint. Other goods transported through this strait include coal, palm oil, Indonesian
coffee and liquefied natural gas Source: Secondary Sources on Google

23.
Major Shipping Routes for Global Trade
• Panama Canal: The Panama Canal is an artificial passageway designed to reduce transit times
between the Pacific and Atlantic oceans. It’s approximately 50 miles long, 10 miles wide and
takes roughly 10 hours to travel (tolls are required). More than 14,000 ships navigate the
Panama Canal each year, carrying vegetable oil and fats, canned and refrigerated foods,
chemicals and petroleum chemicals, lumber, machinery parts and grains
• Suez Canal: On November 17, 1869, the 120-mile manually constructed Suez Canal opened,
creating the shortest maritime route between the Atlantic and Indian oceans. Without this
route, vessels would have to travel around Africa’s Cape of Good Hope (transit times typically
lasting 24 days compared to the canal’s 16 hours). Today, it’s considered one of the world’s
most heavily used shipping lanes, with more than 100 vessels traversing it daily. Top
commodities transported are petroleum, coal, metals, wood, oilseeds, cement and fertilizers
• Bosphorus Strait: The Turkish Strait of Bosphorus links the Black Sea to the Marmara Sea,
ultimately connecting to the Atlantic Ocean. It forms a boundary between Europe and Asia and
is internationally significant for oil, commercial and military trade. The strait is 19 miles long,
120-408 feet deep, and has a maximum width of 2.3 miles. More than 48,000 vessels navigate
the Bosphorus each year, about 132 per day. Common vessels passing through include general
cargo ships, bulk carriers, chemical tankers, containerships, livestock carriers, and liquid
petroleum gas carriers.
Source: Secondary Sources on Google

24.
Major Shipping Routes for Global Trade
• Strait of Hormuz: The Strait of Hormuz connects the Gulf of Oman with the Persian Gulf. It
consists of two lanes that accommodate inbound and outbound traffic, and a two-mile buffer
zone separates them. Hormuz is also a critical lane for oil transportation. In 2016, total oil flow
increased to a record high of 18.5 million barrels per day — or, about 30 percent of the world’s
total oil consumption. It’s delivered primarily to Asian markets such as China, Japan, India,
South Korea and Singapore
• The Danish Straits: The Danish Straits are a system of three channels — the Oresund, the
Great Belt and the Little Belt — that interlink the North Sea and Baltic Sea. The Great Belt is
the widest channel and is the primary passage for large vessels. The Danish Straits are crucial
for transporting oil between Russia and Europe. In fact, an estimated 3.2 million barrels per
day of crude oil and petroleum products flowed through the Danish Straits in 2016
• Saint Lawrence Seaway: Considered the most important shipping lane in North America, the
St. Lawrence Seaway connects the Atlantic Ocean with the Great Lakes. Together, the Great
Lakes and St. Lawrence River form the longest deep-draft navigation system in the world. It
extends 2,300 miles into North America & directly serves Ontario, Quebec, Illinois, Michigan,
Ohio, Indiana, Wisconsin, New York and Pennsylvania. Every year, more than 350,000 pounds
of raw materials, agricultural commodities and manufactured products travel this route. The
amount of products flowing through make it a crucial network for commerce between the U.S.,
Canada & more than 59 overseas markets. Source: Secondary Sources on Google

25.
Structure of Shipping Services
Shipping services are organised according to the nature and trading requirements of goods traffic
in international trade. The goods traffic can be divided into two broad categories, namely, bulk
cargo and break-bulk or general cargo.
Bulk cargo, whether dry or liquid, belongs to the category of primary commodities such as ores,
fertilizers, food grains, crude oils, petroleum, edible oils, etc., and move as ship loads.
The break-bulk or general cargo on the other hand, refers to the manufactured or semi-
manufactured, processed or semi processed goods that move invariably in different types of
packing, like cases, bags etc.
The shipping services catering to the requirement of bulk cargo movement in world trade is
known as “tramp shipping” or “chartering”
The shipping services required for the movement of break-bulk or general cargo is known as “liner
shipping”
Source: Secondary Sources on Google

26.
Structure of Shipping Services
Liner Shipping:
• A ship engaged in liner trade is a unit in a fleet of vessels regularly engaged in a particular trade
• The owners are usually a limited company and, in many cases, are members of the liner
conference or the other. The ship-owner's remuneration mainly consists of the freight earnings
which is dependent on the kind and quantity of cargo carried
• All running expenses are paid by ship-owner who appoints the master (captain of the ship) and
supply the crew
• Information of the intended sailings is circulated among shippers by means of sailing schedules
and by means of advertisement through news papers
• Such information would generally include the following details:
 Name of the Ship
 Port, Dock/Berth where the ship will load
 The date when she will be ready to receive cargo
 Last date of the receipt of cargo
 Expected date of sailing & the port or series of ports to which the vessel will proceed
Source: Secondary Sources on Google

27.
Structure of Shipping Services
Liner Shipping:
• The owner of the ship is also the carrier but his functions will be restricted to those of the
common carrier only. Ships which have fixed sailing schedules with fixed ports of call are
known as liner ships. The segment of the trade which is generally moved through liner ships
consists of semi-processed or finished items in small and measured quantity such as leather,
tea, ready made garments, machinery, electronic goods, etc
• The fixed sailing schedule is the requirement of a regular liner shipping service with adequate
frequency and port coverage. The fixed frequencies, announced by the ship owner will in
advance, help the supplier/buyer to plan their trading. This particular phenomenon is in direct
contrast with the movement of bulk commodities which is generally on tramp basis
Source: Secondary Sources on Google

28.
Structure of Shipping Services
Tramp Shipping:
• Movements of bulk commodities such as iron-ore, fertilizers, food grains, coal, crude oil,
petroleum, LPG, chemicals, etc., are usually offered by shippers in ship loads. Hence they
would like to hire or charter a part of the vessel or the full vessel to meet their exclusive
requirements. To suit the shipper's requirement, a ship owner usually offers specialised
carriers for transportation of various commodities
• These ships operate on the principle of tramping and move from one place to another as per
requirements of the trade. Their freight rates are freely negotiated between the
shipper/charterer and the ship owner and are solely guided by forces of demand and supply
for such ships. Historically, this has been found to be the best method of keeping down the
transport cost of low value bulk commodity and this has served as an impetus to the boost of
trade in bulk commodities
• Tramp vessels have no fixed routes or schedule of arrival or departure. The routes and the
schedule of tramp ships is regulated through the requirement of the shipper/charterer
Source: Secondary Sources on Google

29.
Structure of Shipping Services
Tramp Shipping:
• In terms of characteristics we can include the following points:
 Sufficiently low value so that the cheapness of transport out ways the value of speed and
regularity of delivery
 Relatively great bulk of weight
 Requires no exceptional facilities of the carriage for handling
Source: Secondary Sources on Google

30.
Liner Freight Rate Overview
• Irrespective of the type of shipment whether it is a break bulk or in containers, the rates
charged have to reflect the law of supply and demand. The major factor in shipping industry
today is the competition. Shipping conferences were introduced to stabilize freight rates, and
to reduce the possibility of under-cutting of rates by an over supply of operators.
• A conference is an association of two or more liner shipping companies operating in a well
defined trade, plying a fixed route or routes within certain geographical limits, who agree to
abide by its regulations to their mutual benefit and quote the same rates of freight and other
agreed conditions.
• A Tariff in the liner world is a published list of charges applicable to the types of cargo normally
carried on the trade concerned. The charges are based either on the weight carried, for heavy
(dense) cargo, or on the volume taken up, for light cargo.
• In reality, whereas all conferences were able to set their own rates, they were all constrained
by the rates being set by non-conference operators.
Source: Secondary Sources on Google

31.
Liner Freight Rate Overview
• Freight charge is the consideration paid by the shippers or consignees to carrier for moving
their cargo (transportation from one location to an other location) for using vessel space of
liners. The allocation of space to accommodate the cargo and to transport it from the port of
loading till the discharge port has got different type of expenses to the liner and the income
out of such transporting should be more than the cost of such movement.
• Two most important parameters of cargo are weight and measurement. Break bulk or LCL*
cargo freight rates are quoted in revenue ton basis i.e. weight ton or measurement ton
whichever is higher. FCL* rates are quoted based on the size and type of the container.
(*Ocean freight shipping presents a reliable means of large-volume transportation, with
options designed to accommodate varying cargo sizes. Two of these include Full Container
Load (FCL) and Less Than Container Load (LCL) shipping. FCL refers to shipments for which all
goods in a container are owned by one party, while LCL involves multiple shippers’ goods
packed together.)
Source: Secondary Sources on Google

32.
Liner Freight Rate Overview
• An ad valorem freight rate is one where the freight is based on the value of the goods. An ad
valorem bill of lading is one where the value of the goods is shown on the face of the
document, which value then becomes the carrier’s limit of liability, in return for this increased
liability the carrier will charge an addition to the sea freight
• In the case of ad-valorem B/L the value of the cargo will be mentioned in the B/L. In such case
the carrier Limitations of liability will be the stated value. Because of increased liability the
carrier recovers higher freight (advalorem basis eg 5% of the declared value on high value
cargo such as gold and silver)
• Many shippers do not mention value of the cargo in the B/L to avoid higher freight. Even
carriers do not prefer such declaration, as they have no means of checking. Not only the
question of checking the value of the cargo, but also the risk of their liability in case of loss /
damage to the cargo.
Source: Secondary Sources on Google

33.
Cost Structure of Liner Services
The costs can be divided into following three categories:
• Organisational Overhead Costs like depreciation on ships, interest charges on borrowed capital
and administrative expenses for maintaining and running of offices and agencies
• Voyage or Operational Costs such as fuel consumption, crew cost, insurance charges and other
dues, and port charges, canal and other dues
• Voyage Variable Costs for storage and handling of cargo
Source: Secondary Sources on Google

34.
Surcharges
• Over and above the basic freight rates, the operator of the liner ship or the conference would
levy a few surcharges on a flat basis. These are usually in the form of a percentage on tariff
rates of individual commodities, and are of the following types:
 Currency Adjustment Factor - This is charged as a percentage of the tariff rate and is referred
as CAF. This is charged to safeguard the likely loss due to Currency fluctuations
 Bunker Surcharges - Bunker Adjustment Factor or Fuel Adjustment Factor (FAF) is an
additional surcharge levied on the ship operators to compensate for the fluctuations in the
fuel prices
 Port Congestion Surcharge: : This surcharge is levied when the liner carriers suffer abnormal
delays at certain ports for loading and unloading operations. Usually only those commodities
which have to be discharged at these ports would be subjected to such a surcharge. The time
lost by the carrier at a port on account of congestion would be totally unproductive and it has
to bear certain fixed items of cost, known as standing charges. The concerned shippers,
therefore, have to compensate the carrier at least for the standing charges incurred during
the period of detention
 Heavy lifts & long lengths surcharge : Some articles are heavy as well as lengthy which cannot
be handled by the gear of the ship. They require the help of floating derricks for which extra
charges are made. Similarly, charges for extra lengths are added to the freight rateSource: Secondary Sources on Google

35.
Container Freight Station (CFS)
A Container Freight Station (CFS) is a warehouse station responsible for the consolidation or
deconsolidation of cargo before the products/goods are imported or exported. The station is
involved in an export-import transaction, both at the point of origin as well as the destination. In
simpler terms, it is a space where goods are stored before loading and after unloading the cargo.
For LCL (Less Than Container Load), wherein the shipments belong to several customers, the cargo
is loaded in one container and is brought to a CFS to be consolidated before the goods are sent to
their final destination.
The CFS is operated by a shipping line or a terminal and its warehouse is located close to the port
or shipping terminal. These stations are also responsible for customs clearance procedures and
documentation for its shipments. It is a customs notified area where all dealings are processed
through customs authentications. A Customs House Agent (CHA) serves as the main link between
container freight stations and the parties involved in the transaction.
An ICD or an Inland Container Depot is also a transit facility like CFS. However, ICDs are mostly
located in the interior part of the country while a CFS is a customs space situated close to
sea/ocean ports. An ICD can operate as an individual entity while the CFS is a part of the customs
house jurisdiction.
Source: Secondary Sources on Google

36.
Indian Shipping Industry
• India has 12 major and 200 notified minor and intermediate ports. The Indian ports and
shipping industry plays a vital role in sustaining growth in the country's trade and commerce.
India is the sixteenth largest maritime country in the world, with a coastline of about 7,517 km.
• As regards India, the ports and shipping industry plays a major role in sustaining growth in the
country's trade and commerce. As per the Ministry of Shipping, around 95% of India’s trading
by volume and 70% by value is moved through maritime transport.
• In FY20, major ports in India handled 704.82 million tonnes (MT) of cargo traffic, implying a
CAGR of 2.74% during FY16–FY20. Cargo traffic at non-major ports reached 447.21 MT in FY20
(till December 2019).
• The industry is regulated by the rules and regulations of International Maritime Organization
(IMO), classification society, and the requirements of the flag state. Apart from these, there are
also the rules and regulations of various countries where the vessel operates.
Source: Secondary Sources on Google

37.
Indian Shipping Industry Prospects
• Increasing investment and cargo traffic point towards a healthy outlook for the Indian ports
sector. Providers of services such as operation and maintenance (O&M), pilotage and
harbouring and marine assets such as barges and dredgers are benefiting from these
investments.
• The capacity addition at ports is expected to grow at a CAGR of 5–6% till 2022, thereby adding
275–325 MT of capacity.
• Under the Sagarmala Programme, Government has envisioned a total of 189 projects for
modernisation of ports involving an investment of Rs 1.42 trillion (US$ 22 billion) by the year
2035.
• Ministry of Shipping has set a target capacity of over 3,130 MMT by 2020, which would be
driven by participation from the private sector. Non-major ports are expected to generate over
50% of this capacity.
• India’s cargo traffic handled by ports is expected to reach 1,695 million metric tonnes by 2021–
22 according to a report by the National Transport Development Policy Committee.
• Within the ports sector, projects worth investment of US$ 10 billion have been identified and
will be awarded in the coming five years
Source: Secondary Sources on Google

38.
Major Ports in India
Below is the list of some of the largest container and cargo shipping ports in India:
• Kandla Port: Located 90 kilometers from the Gulf of Kutch, the Kandla Port was built in the
1950s in the Kandla Creek area as the first export processing port in India. It is the biggest
container port in India when it comes to the value and amount of cargo that travels through it
each year
• Mumbai Port is India’s largest port by size and shipping traffic. Located in west Mumbai on the
western coast of India, the Mumbai Port is situated in a natural harbor. The water reaches
depths of 10-12 meters, allowing easy docking and passage for large cargo ships.
• Chennai Port: As the second biggest port in India, Chennai Port (also known as the Madras
port) handles over 100 million metric tons of cargo per year. It began operations in 1881 as the
third established port in India. Chennai Port is located on the Coromandel Coast in the Bay of
Bengal.
• Port Blair Port: One of the youngest major ports in India, Port Blair was declared an official
shipping and cargo port by the Indian government due to its significant contributions to the
economy. It sits inside a natural harbor with a depth of twelve to thirteen meters. It can
accommodate cargo ships up to 500 feet in length.
Source: Secondary Sources on Google