1. Global Transportation
Chapter 8
Global Transportation

2. THE BALANCING ACT: SECURITY VERSUS GLOBAL COMMERCE
Prior to 9/11, shipments could clear U.S. ports and airports in hours.
Today there is more security, inspections, paperwork that takes much longer.
Balance between security and global commerce.
Tightened security measures are here to stay and global shippers are adjusting their shipping processes and inventories to allow for the added transit times.

3. EXTENT AND MAGNITUDE OF TRADE
Overview of the North American Free Trade Agreement (NAFTA)
NAFTA establishes free trade between Canada, America and Mexico.
The Treaty states the objectives of the three Countries is based on the principles of an unimpeded flow of goods, most-favoured- nation (MFN) status, and a commitment to enhance the cross-border movement of goods and services.

4. South Africa is part of the SADC (Southern African Development Community) and the African Free Trade Zone which is similar to NAFTA.

6. GLOBAL TRANSPORTATION PROVIDERS
Ocean Transportation
Types of carriers: liners, tramps, and private vessels
LINERS
Liners are ships that ply fixed routes on published schedules.
Liner services are either container or break- bulk types.

7. Liners cont’
Freight must be moved to the liner company’s terminal at the port after the shipper has arranged freight booking or reservation
Freight is loaded by machine if bulk, or crane if containerized.

8. Liners cont’
Container movement is gaining over the traditional break-bulk (general cargo) method of ocean carriage.
When goods have to be heavily crated and packaged for break-bulk movement, a container often provides much of that needed protection

9. Liners cont’
Break-bulk ship might require many days to unload and load its cargo by small crane and manpower
An entire container ship can enter, unload, load, and clear a port in less than 12 hours
Such speed has brought about labour savings to both the shipper and the liner company, as well as increased ship (and capital) utilization.
Because a ship is only earning revenue at sea, it is easy to see why containers have become a dominant form of packaged-goods shipping.

11. Liners cont’
Container service, although saving port and ship time, has brought about different operating and management concerns for the ship company
This service requires a large investment in containers – at sea, delivered inland, loaded
Although a ship might carry 1,000 containers, an investment of 1,500 to 2,500 containers is necessary to support that ship

12. Liners cont’
With inland movement of containers, control over this land movement becomes a necessity.
The container itself is a large investment and is attractive to thieves in areas of warehouse or housing shortages.

14. Liners cont’ roll-on/roll-off ship, referred to as a RORO ship.
These ships carry trucks, trailers, and construction equipment much like a multilevel ferryboat.
Especially effective when ports don’t have cranes (container with wheels don’t a crane)

16. TRAMPS The tramp ship is one that is hired like a taxi or leased auto.
That is, it is a bulk or tank ship that is hired on a voyage or time basis.
Time charters are usually longer-term charters in which the shipper will make or arrange for more than a one-way move.
Such charters are made with or without crews being provided by the shipowner.

17. PRIVATE VESSELS
Private ships are owned or leased on a long-term basis by the firm moving the goods.
Many oil ships fit this category, as do automotive and lumber vessels.

18. SHIP REGISTRY
Although a ship might be U.S.-owned and ply a route between the United States and the Persian Gulf, it might be registered in and fly the flag of Liberia or Panama. These nations represent what are called flags of convenience.
That is, the owners derive certain benefits of taxes, manning, and some relaxed safety requirements by being registered in those countries, rather than in the United States, Canada, or wherever.
The top flags of convenience nations include Panama, Liberia, the Bahamas, Greece, and Malta.

19. Air Carriers
Air transportation offers the global transportation user speed
Four types of air carriers are available for international shippers: air parcel post, express or expedited service, passenger, and cargo.

20. AIR PARCEL POST
Air parcel post service is provided by the postal service of a country and is designed to handle small packages.
The postal service contracts with an air carrier to pick up and deliver the item from one country to another

21. EXPRESS OR EXPEDITED SERVICE
Express or courier service is provided by air carriers and is generally restricted to small shipments weighing less than 32 kg.
Speed is the essential characteristic of this service, with next-day or second-day delivery a standard service level.
Examples of major carriers providing this service include Federal Express, United Parcel Service (UPS), and DHL.

22. PASSENGER CARRIERS
Regularly scheduled international passenger flights haul freight in the “belly” of the plane.
These carriers focus on the movement of passengers, but the excess capacity in the nonpassenger compartment permits the transporting of cargo along with passengers.

23. ALLCARGO CARRIERS
All-cargo carriers specialize in the movement of freight, not passengers.
The air planes are outfitted with larger hatch openings, cargo compartments, and floor- bearing ratings.
Many air cargo planes have mechanized materials-handling devices on board to permit the movement of heavier cargo inside the plane.

24. ALLCARGO CARRIERS cont’
Some of the larger planes are capable of transporting a 40-foot container (FEU), trucks, and other motor vehicles.
Generally, these carriers haul heavier shipments weighing more than 32 kg. BAX Global, Federal Express, and UPS Air are examples of U.S. all- cargo carriers.

26. Ancillary Services companies provide a variety of functions that offer the user lower costs, improved service, and/or technical expertise and include: air freight forwarders, international freight forwarders, nonvessel operating common carriers, ship brokers, and ship agents

27. AIR FREIGHT FORWARDERS
The air freight forwarder books space on an air carrier’s plane and solicits freight from numerous shippers to fill the booked space.
The air freight forwarder offers the shipper of small shipments a rate savings resulting from the advanced purchase of space

28. INTERNATIONAL FREIGHT FORWARDERS
These firms arrange movement for the shipper. They do not necessarily act as consolidators or earn their revenues in the manner like domestic forwarders.
International freight forwarders act as agents for shippers by applying familiarity and expertise with ocean shipping to facilitate through movement.

29. INTERNATIONAL FREIGHT FORWARDERS cont’
They represent the shipper in arranging such activities as inland transportation, packaging, documentation, booking, and legal fees
They play an invaluable role for shippers who are not familiar with the intricacies of shipping or those who do not have the scale or volume to warrant having in-house expertise in this area.

30. NONVESSEL OPERATING COMMON CARRIERS (NVOCC)
Nonvessel operating carriers assemble and disperse less-than-container shipments and move them as full-container shipments.
They serve much the same role as the domestic freight forwarders.
A shipper moving a small item would otherwise have to move it via break-bulk ocean carrier or air freight.

31. NONVESSEL OPERATING COMMON CARRIERS (NVOCC) con’t
The NVOCC consolidates this shipment with many others and gains the economies of container movement.
Some NVOCCs operate from inland cities, where they unload inbound containers and distribute the goods to consignees.
They in turn solicit outbound freight, consolidate shipments into the containers, and move them back to a seaport for outbound movement.

32. NONVESSEL OPERATING COMMON CARRIERS (NVOCC) cont’
The steamship line gains opportunities from broadened territorial traffic, and it gains services and control over containers from the NVOCC solicitations.
Shippers and receivers gain from the shipping expertise and processes of the NVOCC, as well as from expanded and simplified import and export opportunities.

33. SHIP BROKERS
These firms act as middlemen between the tramp shipowner and a chartering shipper or receiver.
The brokers’ extensive exposure, contacts, and knowledge of the overall ship market make them valuable parties in these arrangements.
They are compensated on the basis of a percentage of the chartering fees.

34. SHIP AGENTS
Ship agents act on behalf of a liner company or tramp ship operator (either owner or charter company) to represent their interests in facilitating ship arrival, clearance, loading, unloading, and fee payment while at a specific port.
Liner firms will use agents when the frequency of sailings are so sparse that it is not economical for them to invest in their own terminals or to have management personnel on site.

35. LAND BRIDGES
The "landbridge" is a generic term meaning use the land freight as a means of transport connection.
The landbridge is a way of transporting cargo from a port or an inland point of origin in the shipper's country to an inland point or a port of final destination in the consignee's country using a combination of usually sea and land, or air and land, or air, land and sea transports

37. RATE MAKING IN GLOBAL TRANSPORTATION
Rate making is presented from the standpoint of three major transportation supply sources available to shippers: air, liners, and chartered tramp ships.

38. Shipping Conferences
A steamship conference is a voluntary organization of vessel-operating carriers whose main function is to set acceptable rates for steamships and shippers.
The goal of the conference is to maintain a stable market and fair competition among carriers.
Another important element of the steamship conference is to administer operating rules that guarantee the shipper a consistent level of service from participating lines.

39. Global Air AIR CARGO RATE
Air cargo rates are based on the value of service or the cost of service
The less sensitive cargo is to rates, the higher the rate will be.
On traffic lanes where demand is strong and plane capacity is limited, the air rates will be high, and vice versa for traffic lanes where supply exceeds demand.

40. AIR CARGO RATE
Products with high prices or emergency conditions surrounding the move will be charged high rates because the freight rate is a small portion (less than 1 percent) of the landed selling price.
Cost factors enter into air carrier pricing of cargo.

41. AIR CARGO RATE
Given the limited cargo- carrying capacity of a plane, space is a premium.
The utilization of this space is related to the density of the cargo, with low-density cargo requiring more space per weight unit than high-density cargo.
Rates are based on a product density

42. AIR CARGO RATE cont’
Container rates are also available for cargo shipped in a container.
The rate is cost based, rather than value of service or commodity based.
The rate applies to a minimum weight in the container

43. LINER RATE MAKING
Approximately 80 to 90 percent of total cost is fixed and 10 to 20 percent is variable.
Liner companies tend to have large overhead costs in the form of managements that are necessary for solicitation purposes.

44. LINER RATE MAKING cont’
A majority of the total costs of operating a ship are fixed.
Because cargo loading, unloading, and fuel are the only primary variable costs, the ship’s operation cost is roughly the same regardless of the commodity hauled.

45. LINER RATE MAKING cont’
Ship operators will often determine unit costs in terms of cost per cubic metre of ship space so as to better evaluate and price for the range of commodities handled.
There is a tendency to price according to the principles of value of service.
That is, a floor of variable costs must be covered as a minimum; then the blend of high- and low-value-per-kilogram commodities, as well as the host of traffic elasticities, leads to pricing according to what the traffic will bear to maximize revenue.

46. THE CONFERENCE OF RATE MAKING
Liner firms have long banded together into collective rate-making bodies called steamship conferences.
Conferences comprise member liner firms only.
The organization is international in scope because liner firms of many nations will belong to one.
They are also territorial in scope.

47. THE CONFERENCE OF RATE MAKING cont’
Because ship operators experience a relatively fixed cost per day, and weight is not necessarily a variable cost expense, rates are constructed to also accommodate the density of freight
Many rates are assessed on a weight basis.
Products that might occupy more of a proportionate share of space relative to their weight are often charged on a “weight or measure” (W/M) basis

48. THE CONFERENCE OF RATE MAKING cont’
Time/volume rates are a rate feature new to ocean shipping.
The service contract provides for a guaranteed amount of tonnage or containers over a certain time period.
The carrier or conference receives the benefit of a larger or guaranteed amount of tonnage.

49. Tramp Ship Cost Rate Factors
COSTS
Tramp ships are generally not controlled by a specific route with a single commodity.
Large oil tankers that are built for time charters for specific origin-destination markets are the exception.
The basic tramp vessel might haul coal, grain, fertilizers, and lumber in the same year

50. Tramp Ship Cost cont’
Adaptability is necessary to minimize lost revenue possibilities that will arise.
These vessels might not always be of low-cost, optimal design for any of the movements, but that is a basic trade-off to being flexible.

51. Tramp Ship Cost cont’
A major consideration of tramp owners is the nation in which the ship is registered.
The nation of registry requires the shipowner to comply with specific manning, safety, and tax provisions.

52. TRAMP SHIP RATE MAKING
A tramp shipowner experiences costs, like those of the liner, that are largely fixed in nature.
Ownership costs present themselves in depreciation and interest costs.
Fuel is not as greatly variable with the commodity weight load, as is ship speed or at-sea versus port time.
The key is that the shipowner minimizes empty nonrevenue miles and days.

53. TRAMP SHIP RATE MAKING cont’
Three primary forms of ship rental or chartering systems are in use. These are the voyage, time, and bareboat or demise charter

54. TRAMP SHIP RATE MAKING cont’
The voyage charter is one in which the shipowner mans, operates, and charters the vessel, similar to a taxicab for a specific voyage.
Shippers seek voyage charters for primarily one-way and sometimes two-way trips.
The owner is constantly seeking charters subsequent to present charters to minimize empty moves to the next charter.

55. TRAMP SHIP RATE MAKING cont’
The time charter is one in which the shipowner rents the vessel and crew to a shipper for use over a period of time that often includes use for several shipments.
The owner has his or her ship productively tied up for a longer period of time than in the voyage charter, and the shipper might judiciously arrange the moves, making the time charter more economical than several voyage charters.

56. TRAMP SHIP RATE MAKING cont’
The bareboat or demise charter is one in which the owner usually rents the vessel for a long period of time while the chartering party supplies the crew and performs the physical operation of the vessel.
In this setting, the owner is seeking to recoup capital and interest costs and to be assured that the ship will be safely operated.

57. ROLE OF PORT AUTHORITIES IN GLOBAL TRANSPORTATION
The term port authority applies to a state or local government that owns, operates, or otherwise provides wharf, dock, and other terminal investments at ports.
The primary reasons for the existence of these organizations are to allow for comprehensive planning, to provide the large physical investment base, and to provide for certain political needs within the area.

58. Port authorities roles includes:
Ownership of all waterfront rights and renting of waterside access rights to shipping companies and terminal firms.
Developing waterways and pier terminal facilities and renting them to users [short- and long-term bases) who do not have the scale of operations to support or perhaps do not wish to actually own such assets.

59. Port authorities roles includes: cont’
This capital financing role is perhaps the major benefit provided by these port authorities.
Port authorities also promote overall trade through their port areas:
This includes industrial development efforts, the offering of favorable financing, representation before regulatory bodies, and the encouragement of adequate transportation facilities on land.

60. Transnet National Ports Authority
The national ports authority is responsible for the safe, effective and efficient economic functioning of the national port system, which it manages in a landlord capacity.
The national ports authority provides port infrastructure and marine services at the eight commercial seaports in South Africa.

61. Transnet National Ports Authority
The core functions of the national ports authority are as follows:
To plan, provide, maintain and improve port infrastructure;
to provide or arrange marine-related services;
to ensure the provision of port services, including the management of port activities and the port regulatory function at all south African ports; and
to provide aids to navigation and assistance to the maneuvering of vessels within port limits and along  the coast.

62. FUTURE OF GLOBAL TRANSPORTATION
Global transportation will grow in importance as more manufacturing and merchandising firms become involved in overseas sourcing and marketing.
The cloud on the global trade horizon is nationalism. This ranges from tariff protection to political constraints and home flag carrier protection. ????

63. FUTURE OF GLOBAL TRANSPORTATION cont’
Such nationalism tends to appear whenever a home industry is threatened by foreign competition or forces.
The Jones Act in the United States, which requires domestic movements only by U.S. flag ships and domestic airlines, is one such example, though not a significant one on the world scene
END