1. GBTT 252 Fall 2011 05 December 2011 Final Review 2011 quote: “It will take one or two years before the market gets balanced again...of course what kind of industry emerges at that point is much less certain…..” Michael Bodouroglou Paragon Shipping - CEO NYSE: PRGN

2. Final Review Chapter 14 – Terminal Operations Chapter 15 – Stevedoring Chapter 16 – Containerization Chapter 17 – Intermodal Transportation Chapter 18 – Freight Rates Chapter 19 – Ocean Bill of Lading

3. Final Review CHAPTER 14 Under the Shipping Act of 1984, the FMC regulates certain practices of the entities that operate marine terminals. These entities, designated ""marine terminal operators,"" are defined as parties in the that offer terminal services - that is, parties engaged in ""the business of furnishing wharfage, dock, warehouse or other terminal facilities,"" to ocean common carriers in foreign commerce. In practice, that definition covers two sorts of MTOs: Public port authorities – These qualify as MTOs because they own and maintain the docks and other facilities that ocean common carriers use, and because they sometimes directly operate the terminals as well. Private terminal operators – These are companies that, typically, lease terminals from a public port authority (which acts as landlord) and operate those terminals as a private business that serves ocean common carriers calling at the port.

4. Final Review CHAPTER 15 STEVEDORE – The name associated with a person who is physically responsible for handling cargo from/to a ship when it is alongside a terminal. Another name for this person is a longshoreman, long gone are the days of the quintessential longshoreman epitomized in the film “On the Waterfront” The Stevedore contract is NOT a collective bargaining agreement with a labor union. A shipper will enter into a contract with a Stevedoring company who in turn is contracted with a union as applicable. (In the US, where applicable, it will be a local of the ILA – International Longshoreman Association) The stevedore, or the act of stevedoring, is based on labor. The labor involved in loading or unloading a vessel takes form in many duties. - Line Handling- Crane Operating - Cargo Stowing- Cargo Handling (Lightering/Loading) - Cleaning Holds- Load/Lay Dunnage - Rigging

5. Final Review CHAPTER 15 Once requirements and terms have been established, stevedore company bids service proposal to the company. The cost analysis of the stevedoring company will include its contractual obligations to the longshoremen’s local in the port. Wages and working condition requirements will greatly impact rates for cargo handled. Like Charter Parties, the stevedoring contract contains implied warranties that are owed to the shipper. Examples of implied warranties due are: -Adequate/Safe mooring facilities- All necessary labor required -Appropriate yard/facility storage for cargo -Open berth for all contracted companies vessels

6. Final Review CHAPTER 16 Review of important concepts from the development of containerization: -Breakbulk cargo handling- Shipping methods pre-intermodalism -Intermodalism- Transformation of global supply chains -ISO – (Standardization)- Cost Benefits to standardizing shipping -Container types/sizes- Collateral loss from containerization -“Empties” Concept- Weak links in long global supply chains -Worldwide Capacity challenges- Social effects of break bulk ports decline -Rail/Truck response- Upland distribution meeting scale of transport

7. Final Review CHAPTER 17 Intermodal Transportation can be defined as follows – “….A systems approach transportation in which goods are moved in a continuous through movement between origin and destination using two or more modes of transportation in the most efficient manner…..” INTER – Modal also describes the use of these modes to make transportation of cargo more efficient to the shipper, and profitable to the carrier. The modes utilized in transportation are - Air Carriers - Motor Carriers - Rail Carriers - Pipelines

8. Final Review CHAPTER 17 Requirements of the intermodal system to be effective – -The Single Bill of Lading - The intermodal contract by concept and practice -Individual modes of transportation to recognize benefits of collaboration (Ex - Liner conferences) -Container Logistics – Specifically economy of density, “empty boxes” -Land Bridge concept and the marketing of shipping services as a single point provider – (Ex – FEDEX) -Distribution networks ; “Hub and Spoke” and “Short Sea” - Private/Public partnership for infrastructure investment – (Ex –ISTEA) - What kind of freight infrastructure project will yield benefits and yet cannot attract sufficient private-sector support? (Ex -Container on Barge successes and failures)

9. Final Review CHAPTER 18 The following factors are paramount in determining freight rates after breakeven has been established. 1.The rate should SEEM reasonable to both shipper and carrier. If the cost of transportation is not aligned with a perceived value, then competition from goods sourced closer will make the transportation cost seem like a barrier to the trade. 2.Competition – essential to providing a balance of rates that is market driven, yet sustainable. “Charge what the Market will Bear” 3. The amount of capacity to transport cargo – A vessels “Deadweight” (DWT) - Stowage Factor Rule of 40 – A commodity with a stowage factor less than 40 requires less than 40 cubic feet to stow a long ton of cargo. This measurement is referred to as the “deadweight” cargo. Freight rates are levied by weight. Stowage factor greater than 40 called “cubic” cargo and rates levied by volume

10. Final Review CHAPTER 18 4. Handling/Stowing characteristics – Cargos that are fragile, perishable, hazardous, dangerous, difficult to stow all require special attention (ie – surcharges) when assigning rates. 5. Availability of return cargo – The issue of “empty” cargo holds especially noted in today’s Trans-Pacific container trade affect the assignment of freight rates. An ocean carrier faced with empty holds/containers must assign a rate to cover expenses on the non-revenue producing leg of the voyage. 6. Although covered under the indirect/fixed costs section of the P/L, any special insurance premiums particular to a cargo must be factored. 7. Fuel Surcharges are often added in lieu of a built in fuel oil compensation to help ensure fluctuating bunker prices are covered

11. Final Review CHAPTER 18 Types of Ocean Freight Rates – Class Rates - rates that are assigned to large number of unrelated commodities that have been studied individually and found to require the same revenue for their transportation For example – Class D = Dangerous Cargo (explosives/corrosives) Commodity Rates – Rates charged for specific commodoties For example – Baltic Spot Rates Crude/Clean - Worldscale Container Rates – Conference agreements for dimensional cargo For example – Uniform rate without aforementioned exceptions, per TEU/FEU.

12. Final Review CHAPTER 19 The “Bill of Lading” or B/L – is a standard contract setting terms and conditions under which cargo is accepted for transportation. The B/L is used as a contract for a specific type of ocean cargo transport. The need for an individual contract exists for COMMON carriers. Typically when cargos are less than a full shipload, or stowed separately is when the transporter is classed as a common carrier. The most common example of common carriers in the ocean freight business is the container liner service. When the entire ship is filled with a cargo from one shipper typically a different type of contract applies. It specifically applies to the cargo at hand, for a specific voyage, or time frame. This carrier is known as a PRIVATE carrier and the contract is called……..? The CHARTER PARTY!

13. Final Review CHAPTER 19 Negotiable (Order) Bill of Lading This type of B/L allows for the transfer of ownership of goods. The legal ownership can be transferred from the consignee named in the bill to any other person and by them to still other persons without any of them seeing or having possession of the said goods. The B/L then becomes a negotiable instrument for the seller to move ownership, and thus payment for goods while in transit. Non Negotiable (Straight) Bill of Lading This type B/L does not allow transfer of title for possession of goods. Upon arrival, the goods can only be accepted by the named consignee. Due to the restrictions to trade of the straight B/L, this type is typically used by intra company material shipments, or for goods that are transported pre-paid.

14. Final Review CHAPTER 19 The Bill of Lading is a contract of carriage. Terms of agreement between carrier and shipper become effective when signed by Master and accepted by the shipper. There are a few essential elements that will be debated or litigated depending on the nature of damage. The B/L must be accurate specifically with the loading tally, the statement of condition, and the date of loading. If there are errors in these areas it becomes very difficult to resolve any issues. The COGSA rules apply “hook to hook” and typically are for foreign trade. However, coastwise trade operators may stipulate COGSA protection into their bills of lading as well. Both Harter Act, and COGSA hold the carrier responsible for loss or damage resulting from negligence in proper loading, stowing, custody, care, and delivery of goods. Neither ship nor carrier are liable for loss or damage from the causes defined in COGSA

15. Final Review THANK YOU ALL AND BE CAREFUL OUT THERE!