1. Tramp & Liner Trade Chartering & Brokering Freight Rates
The Shipping Business
Tramp & Liner Trade
Chartering & Brokering
Freight Rates

2. Tramp Shipping
-- shipping service where carriers contract to haul cargo in shipload lots between ports designated by charterer.
Tramp ships provide convenient, timely & economic transportation for many goods needed in a complex industrial society.
In established trades (i.e., grain from US, Canada, Argentina & Australia to N. Europe, Med, Africa, Japan & S. Asia
On new routes to alleviate temporary critical shortages

3. Tramp Shipping
Moves 4.5 billion tons of basic agricultural, forestry, mining products & manufactured raw materials (steel, cement, etc) world-wide
Depends on a global network of brokers, agents & representatives to market services, and procure & contract cargoes
Post WWII:
Surplus Liberties & Victories dominated the general service (bulk & break-bulk) fleets
70’s-80’s: larger “SD-14’s” (UK) & “Fortune Class (Japan) predominate

4. Tramp Shipping
Smaller general purpose Tramps face fierce competition from:
Larger bulkers: 30-50,000 DWT “Handi-Max” & very large ( ,000 DWT) special purpose, ore carriers
Container ships
Tankers outfitted for grain transport (pneumatic “vacuators” for quick unloading)
STILL (1996): 50% of all dry-bulk ships & 20% of all dry-bulk cargo carried by 10-30,000 DWT vessels to service:
Cargoes that cannot be placed in containers
Transportation of small (10-15,000 T) lots
Shallow depth ports and/or
Ports with low to moderate facilities requiring self-unloading vessels

5. Liner Shipping
-- shipping service that operates on an established route and has published sailing dates and published tariffs
Private carriers transport only the goods of a single shipper (more typical of tramp trade)
Common Carriers transport for any and all goods offered between the specified ports it serves (typical of Liner Service)
[Basically, a vessel carrying the property of 2 more shippers is a common carrier]

6. Liner Shipping
Conference: An association of common carriers operating on the same ocean route and using a common tariff
Closed Conference: limits membership to the specific number of carriers that will be sufficient to to provide transportation for the proffered cargo
Open Conference: admits membership to any common carrier prepared to serve the trade routed covered by the conference
[There are about 300 Conferences world-wide, most unite 10 or less Liner Companies, a few as many as 50]

7. Liner Shipping Examples of Conferences:
United States Atlantic and Gulf Ports/Eastern Mediterranean and North African Freight Conference
TRADE: From U.S. Atlantic, Gulf and Great Lakes ports, and inland and coastal points and ports in Greece, Egypt, Turkey, Algeria, Cyprus, Lebanon, Malta, Morocco, Syria, Tunisia and Yugoslavia
MEMBERS: Farrell Lines, New York, NY; Lykes Bros. Steamship Co., Tampa, FL; Waterman Steamship Corp., New York, NY
Israel Trade Conference
TRADE: Between U.S. Atlantic, Gulf, Great Lakes, Pacific (including Alaska and Hawaii) to and from Israel.
MEMBERS: Zim Israeli Navigation Co. Ltd., Haifa, Israel; Farrell Lines, New York, NY; Lykes Bros. Steamship Co., Tampa, FL

8. Liner Shipping
Liner companies may have a variety of structures, but all encompass the following functions:

9. Liner Shipping Traffic Department Chartering Department
Inbound Freight Division
Delivery Orders
Inland Routing
Customs Brokers
Warehousing
Tracing and Claims
General Freight Agent
Sales Staff
Outbound Freight Division
Booking Clerk
Manifesting Section
Chartering Department
Charters ships in & out of fleet

10. Liner Shipping Vessel Operations Department Marine Superintendent
Port Captains
Supervision of Deck Personnel
Deck maintenance – Inspections & dry-docking
Seaworthiness, Safety & Voyage Instructions
Superintendent Engineer
Port Engineers
Supervision of Engine Personnel
Machinery maintenance – Inspections & dry-docking
Commissary Superintendent
Supervision of Steward Personnel
Ship’s Stores Acquisition
Terminal Manager
Facilities (equipment & stevedoring)
Administrative (receiving & delivery, security)

11. Ship’s Compliment Deck Dept. Engine Dept Steward’s Dept.
Modern Tanker (Compliment of 14-20)
Licensed:
Captain
Chief Mate
2nd Mate
3rd Mate
Chief Engineer
1st Engineer
2nd Engineer
3rd Engineer
Unlicensed:
AB’s (2-3)
DEMac’s (2-3)
Steward/Cook
Messman/BR (1-2)
Passenger Ship (Compliment of ; QM2 ~ 1250)
Staff Captain
Chief Mate (1-2)
2nd Mate (2-3)
3rd Mate (3-6)
Staff Chief
1st Engineer (1-2)
2nd Engineer (2-3)
3rd Engineer (3-12)
Chief Steward
Galley Staff
Dinning Staff
Housekeeping Staff
Chief Purser
Cruise Staff
AB’s (6-12)
OS’s & Deck Maint Staff
DEMac’s (6-12)
Engr Maint Staff

12. Vessel Management Companies
Companies offering full management services or a combination of specialized expertise including:
Crewing
Regulatory Compliance
Condition Surveys
Purchasing
Chartering
Brokering and Insurance
Shipyard Selection
Terminal Requirements
Feasibility Studies
Vessel Selection
Vessel Activation
Route Proposals
Weather Information
Local Regulations
Hotel Operations
Layers of corporate structure proliferate
Vessels individual corporations with single owner, & multiple operators
Single operator of ships with different owners
Owner/operators wholly owned subsidiaries of conglomerates

13. Chartering CHARTER-The hiring of a vessel for either:
a specified period of time or
a specific voyage or set of voyages.
A chartered vessel is technically a private carrier which predominates in tramp trade, but liner companies often charter vessels or lease vessels to charter depending on cargo demand
CHARTERER-The entity hiring the vessel from the shipowner.
CHARTER-PARTY-The contract between the owner and the charterer, stipulating in detail each party’s responsibilities in the transaction.
Charta Partita is Latin for a “letter divided.”

14. Chartering There are three basic types of Charter Parties
Voyage Charter
Contract of carriage in which the charterer pays for the use of a ship’s cargo capacity for one, or sometimes more than one, voyage.
the ship owner pays all the operating costs of the ship (including bunkers, canal and port charges, pilotage, towage and ship’s agency) …
while payment for cargo handling charges are subject of agreement between the parties.
Time Charter
The hire of a ship for a specified period of time.
The owner provides the ship with crew, stores and provisions, ready in all aspects to load cargo and proceed on a voyage.
The charterer pays for bunkering and all voyage related expenses including canal tolls and port charges.

15. Chartering Voyage Charter Time Charter Bare-Boat Charter
There are three basic types of Charter Parties
Voyage Charter
Time Charter
Bare-Boat Charter
The leasing of an empty ship for a specified period of time for a specific fee in this arrangement,
the ship owner virtually relinquishes all rights and responsibilities in respect of the vessel and the charterer becomes the de facto owner for this period.
The charterer is generally responsible for all operating expenses including crewing and insurance.
Also called a Demise Charter

16. Chartering VOYAGE TIME DEMISE Responsibility Basis of charter hire
Cargo Tonnage
Ship Capacity
Duration of Charter Party
Specif. voyage(s)
Period of time
Geographic Limits
Port to port
By area
Maintenance of Seaworthiness
owner
charterer
Possession, command, operation & navigation (demise)
Employer of crew
Master under direction of
Fuel costs, Port & Harbor fees
Hull & Machinery Insurance
negotiable
Protection & Indemnity (P&I)
Payment to shipowner
End of voyage
Monthly
Legal term for compensation
Freight
Hire

17. Weight & Measure There is tonnage and there is tonnage
Deadweight Tonnage (DWT) – The displacement of a fully loaded vessel in Long Tons (2240 lbs) or Metric Tons (1000 Kg) including structure, fuel, water, stores, cargo, passengers & crew.
Light Weight Tonnage – Displacement of “empty” vessel (no fuel, stores, cargo, etc.)
Deadweight Items – The difference between DWT and LWT including Cargo Deadweight
Gross Tons – The entire interior volume of the vessel (including deck houses and excluding certain spaces exempted by statute) in 100’s of cu. ft. (1 g.t. = 100 cu.ft.)
Net Tons – Volume remaining after “non-earning” spaces have been deducted from the Gross Tonnage.

18. Weight & Measure There is tonnage and there is tonnage
Gross & Net Tonnage – are legal terms used to determine port & canal transit fees and classify the “size” of vessels for certain legal activities and regulations. They are intended to be a measure of the “earning capacity” of the vessel.
As an analogy consider “Gross Income” which the IRS defines as the total of what you make but exempting certain items (.e.g, contributions to an IRA) and “Taxable (Net) Income” which is Gross Income minus deductions (either standard or itemized).
Calculation of Gross and Net Tonnage can be as complicated as a 1040 Tax Form and there are “loopholes” for getting certain spaces exempted or deducted that actually may be used to carry cargo.
Originally the “tun” was a cask for carrying 250 gal. of wine. It weighed 2240 lbs and occupied 57 cu. ft. of space.

19. Freight Rates …
… the prices charged for the services of ocean carriers. Determined by ship operators to reflect:
The cost of providing the carriage including
Vessel operation
Cargo handling, port fees & tariffs
Exchange rates among international currencies
The value of this service to the shipper
The ability of the merchandise to support the expense of being shipped
Economic conditions in general
… subservient to
The Law of “Supply & Demand” including
Competition among carriers on the same route
Competition among ports

20. Freight Rates …
Charge carriage by weight ($/100 lbs) or volume ($/cu.ft.)?
It depends …
If 1 LT (2240 lbs) of cargo occupies less than 40 cu.ft., charge by weight. (deadweight cargo)
If 1 LT (2240 lbs) of cargo occupies more than 40 cu.ft., charge by volume. (cubic cargo)
The weight (in LT) of 40 cu.ft. is the stowage factor
Carriers charge “by weight or measure” whichever generates the most revenue
But what about the type of cargo? (nails vs. oranges vs. computer parts?)

21. Freight Rates …
Class Rates – assigned to groups of unrelated cargos that are found to require approximately the same revenue for their transport
Class D (dangerous cargo) is the highest rate followed by Class 1 through 8, with Class 8 the cheapest
There are deadweight cargo and cubic cargo rates in each class
Fuel surcharge computed to reflect fuel price fluctuations without redefining class rate scales
Commodity Rates – negotiated compromise falling between class rates
Applicable to specifically described cargoes (e.g., Paper: wrapping, not corrugated, other than cellulose film)
Commodity rates take precedent when both class & commodity rates are offered

22. Freight Rates …
Through Rates – are charged for shipments originating with one ocean carrier but transferred to connecting carriers at intermediate ports
Usually the originating carrier issues the Bill of Lading, collects all charges, and divides the revenue with the other carrier(s) as per the through rate agreement
Sometimes the Through Rate is lower than the combination of rates of each of the participating carriers
Similar to a flight from Chicago to NY via Atlanta being cheaper than the sum of the legs or, possibly, a direct flight.
However, sometimes through rates are the sum of the connecting carriers’ charges plus a transfer fee.