Logistics

Sea Cargo

From ancient time, mankind has relied on transporting goods using the riverways and seaways. The sea has connected the world closer by allowing rapid and efficient transport of goods in a sustainable and cost effective manner. Earlier on we had sail boats, which were then modernized to modern day Barges, and mega carriers!

Here is a video demonstrating the different kind of container ships available:

Whilst cargo movement by land will be dependent on the rules and regulation of the country and its treaty and pact with the neighboring countries incase of international transit. However the governing rules for Sea Freight is universal, with customs rule and documentation varying from country to country.

Types of Containers

We would like to briefly touch upon the kind of containers available: 

  1. Dry Storage Containers: These are the most used container, enclosed on three sides having a single door. They are available in various sizes standardized by ISO. They are used for the shipping of dry materials and come in sizes of 10, 20 and 40 feet. The dimensions of the containers are below: 

Type

Length (ft. inches)

Width (ft. Inches)

Height (ft inches)

Door Opening (ft inches)

Cubic Capacity (cu ft)

20 Foot

19’3”

7’8”

7’9 7/8”

Height: 7’5”
Width: 7’8”

1165

40 Foot

39’5”

7’8”

7’9 7/8”

Height: 7’5”
Width: 7’8”

2350

40 Foot HC

39’5”

7’8”

8’9 15/16”

Height: 8’5 1/2”
Width: 7’8”

2694

Type

Length (cm)

Width (cm)

Height (cm)

Door opening (cm)

Cubic Capacity (m3)

20 Foot

589.74

234.8

238.44

Hight: 234
Width: 233.68

33

40 Foot

1219.2

234.8

238.44

Height: 234
Width: 233.68

67

40 Foot HC

1219.2

234.8

269.24

Height: 259 Width: 233.68

76

  1. Apart from the above we have open top containers, where the loading of the containers happens from the top. The container is later sealed using a tarpaulin material. Flat Rack containers are suitable where the loading needs to take place from the top or the sides. Apart from this there also refrigerated and garment hanger containers also for carrying specialized and perishable cargo. 

At HyPa, we aren’t touching on Air Cargo, as Tissue and Packaging goods are seldom transported by air. Sea is the main choice of transport used. It is important to understand the width and height and cubic volume of a container to maximize the loading and increase the efficiency in logistical movement. The more you can load in a container and optimize the space, you save on local clearing charges, reduced carbon foot-print, reduced ocean freights. 

Instruments

A key part of the supply chain is the documentation. Since the cargo changes hand frequently and the liability constantly shifts from the mill to the customers place, the documentation of the goods needs to perfect! Again, we aren’t doing land transport as the documentation varies from country to country. We will be going over Sea Cargo. We will be touching base on the following documents commonly used. Bill of Lading (BL), Certificate of origin (COO), Invoice and Packing List. These are generally the documents required across the globe. Some country’s have special requirement in documentation to either protect the consumer or the environment.

Let us go through the documentation process as the documents are released:

Invoice and Packing List:

When the shipper loads the container either at the mill or at the port, they generate an invoice and packing list. The invoice mentions the value of the cargo loaded whilst the packing list mentions the cargo in the container. Sometimes there is also a detailed packing list, mentioning the itemized weight (net and gross)  of every reel/bundle/pallet in the container. The same is essential as the consignee can verify the material they have received. 

Insurance:

A marine insurance is issued by the shipper or the consignee based on the inco term used. The marine insurance covers the damage of the goods caused due to the following: 

  1. Natural Disasters 
  2. Man – made disasters 
  3. Collision, overturning or derailment of the land conveyance 
  4. Sinking or Stranding of Ships 
  5. Discharge of cargo at point of distress or damage caused by jettison 

The insurance covers the transits through a combination of any of the following: 

  1. Water 
  2. Air 
  3. Road or Rail 

However, the exact cover would depend on the policy taken by the insurer. Marine insurance does not cover: 

  1. Loss or damage due to willful act of negligence and misconduct 
  2. Loss or damage due to delay 
  3. Loss or damage due to improper packaging 
  4. Financial default of the operator of the vessels 
  5. Loss or damage due to strike, riot and civil commotion 
  6. War Risk 

Again, these are common exclusions, whilst it would vary from the policy had. Broadly the policy covers the goods from transit damages from the factory to the consignee’s place of unloading. 

Certificate of Origin: 

The Certificate of Origin (COO) is a critical document as it mentions the country of origin of the goods. The document is critical, as governments, use the same to analyze the trade between their partner countries. Some countries have agreements amongst them promoting trade, whilst some are restricting the import from certain countries, to maintain an equilibrium in trade. For example:

If the goods are produced in China, and are consigned to the USA, and the goods fall in the taxable or dutiable list, the goods would attract the appropriate duty. Even if the shipper imports the goods, in a tertiary country such as Vietnam, but does not add sizable value on the cargo, the goods still carry the COO of Chinese origin. The reason the United States had imposed a duty on Chinese goods, was to maintain a trade balance. Since the US had a sizeable import with export limited to certain automobiles and agriculture products there was a trade deficit that they wanted to balance. 

Similarly, if the goods are of Indonesian origin, and are shipped to India, most goods fall under the ASEAN treaty, where there is no duty on the import. To ascertain the same, the goods need to have an Indonesian Certificate of Origin. If a shipper in Indonesia, loads Chinese origin goods, without adding value in a container and exports it to India, the consignee in India would be assessed a duty as the goods are of Chinese origin and not Indonesian origin! 

The Certificate of Origin, is usually issued by the Chamber of Commerce or the Department of Economy, and other similar trade regulating bodies that are members of the International Chamber of Commerce World Chambers Federation (IOC). 

Bill of Lading: 

A Bill of Lading (BL) is a document issued by the carrier to the shipper that details the type, quantity, origin and destination of the goods being carried. A BL also serves as the shipment receipt of the goods being carried. There are two types of BLs, such as Master BL (issued by the carrier themselves) and House BL (Issued by the freight forwarder). There are also two points when the BL is issued, Shipped on Board BL (when the container is loaded on the ship) and Received for Shipment BL (When the container is handed over to the shipping line for shipment). Whenever a BL is issued, it implies that the containers have been handed to the carrier for shipment by the shipper and the liability of the container movement shifts to the carrier. 

The BL is a legally binding document between the carrier and the shipper. It provides the carrier all the necessary information to invoice the charges correctly. A BL comprises of the following parties: 

  1. Shipper: The party shipping the good from the Port of Loading 
  2. Consignee: The party receiving the goods 
  3. Notify Party: The party being notified by the carrier that the goods have arrived the port of destination

The BL also mentions the following: 

  1. POL: Port of Loading: The port where the container was initially handed over to/loaded on the master vessel. The POL is where the carrier liability begins. 
  2. POD: Port of Destination: The final port the goods are destined to (Can be an inland port or a Sea Port). The POD is were the carriers liability seizes. 

The BL mentions the description of the goods, the weight and volume, HS Code (Harmonized System Codes, identifying the type of goods, using a 4+4 digit code such as Toilet Tissue Rolls: 4818.1090) and the Freight Pre-Paid or not. 

As mentioned, the BL can be issued by the Freight Forwarder (House BL) or by the Carrier (Master BL): 

  1. Master BL: A Master Bill of Lading is issued by the carrier carrying the goods shipped. The Master BL (MBL), can be issued to the freight forwarder/ NVOCC (Non – Vessel operating Common Carriers) or to the shipper. A MBL is the most reliable shipping document because it is signed by the carrier themselves, and is handed over to the person who made the booking. 
  2. House BL (HBL): A House Bill of Lading is issued by a freight forwarder or a NVOCC. Usually the freight forwarder or a NVOCC, books significant space on a ship to get the best rates. They then club various bookings of their customers in a single MBL and issue a HBL individually to all their customers. Both the HBL and the MBL contain the same accurate and detailed information about the shipment. The differences between the two documents are detailed below:

Master Bill of Lading

House Bill of Lading

MBL is issued to the shipper or a freight forwarder or NVOCC by the carrier themselves

HBL is issued to the actual shipper by a Freight Forwarder or NVOCC 

The Delivery Order (DO) is issued by the master carrier or their respective agents 

The Delivery order is usually issued by the Freight Forwarder or NVOCC or their partner agent 

Changes and amendments are expensive, as tariffs for any service is in accordance with published rates. 

Depending on the company you work with the same can be negotiated. 

Destination charges are usually more expensive than a Freight Forwarder of NVOCC 

Destination charges can be negotiated with the forwarder of NVOCC

Issuance of a new MBL is lengthy and expensive, as the said document is sacrosanct for the shipping line to determine the owner of the goods

Issuance of a HBL is generally easier than a MBL and again is dependent on the company you work with. 

Generally the document preferred by banks and other financial institutions financing the transactions  

The extent of security of the document is determined by the size of the forwarder/ NVOCC. Generally not accepted by the banks under LC or other negotiated terms .

There are also other types of Bills of Lading, which is more to do with the time of issuance or the process of release: 

  1. Received for Shipment Bill of Lading/ RFS BL: A RFS BL, is issued by the Carrier or the NVOCC, upon taking possession of the cargo. The same is generally done when the export customs clearance is done at a Inland Container Depots. Whilst issuing a RFS BL, the line or forwarder or NVOCC is stating that the said container is in their possession and will be shipped in accordance. 
  2. Shipped on Board BL: A Shipped-on Board BL, is issued by the Carrier or forwarder/ NVOCC, when the containers have been loaded on the vessel, and the Port of Loading Manifest has been filed by the carrier at the time of sailing. This is the most secure type of BL, ensuring that the goods are on the vessel and enroute to the final destination or POD. A Shipped on Board BL is usually mandatory for any LC Shipment
  3. Telex Release BL/ Surrendered BL: A Telex BL, is where the shipper has submitted all three copies of the original BL, either to the freight forwarder or the carrier and have asked them to release the cargo to the consignee. The said process is the fastest method to release a shipment. Usually the surrendering of the originals take place at the POL, whilst some carrier offer to accept the same through their network branches. Whilst doing a Telex Release, a BL is still generated, and a paper trail is generated showing the handing over and handing back of the documents. Usually after issuing a telex release, the shipper loses ownership of the cargo, and the ownership is now in the hands of the consignee or endorsed party. 
  4. An “order” bill of lading: This is a negotiable form which is addressed “to order” or “to order of [a party]” instead of being consigned to the buyer. The carrier will hand over the shipment to whoever presents this bill of lading, as long as it is endorsed on the back. The holder of the order bill of lading is assumed to be the owner of the goods being shipped. The order bill of lading is commonly used when the purchase of goods is covered by a letter of credit or if the goods are expected to be traded on a mercantile exchange while the shipment is still in transit.

We hope the above gave you context of the various documents used in the supply chain. Again there are various other documents which are country specific or based on the region council requirements (example GCC, etc.). The above information is an overview on the need and functioning of the document. The legal implications and extents of the documents again vary from country to country. 

INCO Terms

The last bit of our Logistics Section is about the INCO Terms. The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They are widely used in international commercial transactions or procurement processes and their use is encouraged by trade councils, courts and international lawyers. A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the global or international transportation and delivery of goods. Incoterms inform sales contracts defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer, but they do not themselves conclude a contract, determine the price payable, currency or credit terms, govern contract law or define where title to goods transfers.

The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from the differing interpretations of the rules in different countries. As such they are regularly incorporated into sales contracts or invoices worldwide.

The first work published by the ICC on international trade terms was issued in 1923, with the first edition known as Incoterms published in 1936. The Incoterms rules were amended in 1953, 1967, 1976, 1980, 1990, 2000, and 2010, with the ninth version — Incoterms 2020 — having been published on September 10, 2019.

A nice video on the same:

The 7 Inco terms for any mode of transport are:

  1. EXW: Ex Works (Insert place of Delivery)    
  2. FCA  - Free Carrier (Insert named place of delivery) 
  3. CPT  - Carriage Paid to (insert place of destination) 
  4. CIP -  Carriage and Insurance Paid To (insert place of destination)  
  5. DAP - Delivered at Place (insert named place of destination)  
  6. DPU - Delivered at Place Unloaded (insert of place of destination)  
  7. DDP - Delivered Duty Paid (Insert place of destination

The 4 Inco Terms when the transport is made using sea and inland waterways are:

  1. FAS - Free Alongside Ship (insert name of port of loading) 
  2. FOB - Free on Board (insert named port of loading) 
  3. CFR - Cost and Freight (insert named port of destination) 
  4. CIF -  Cost Insurance and Freight (insert named port of destination)

The below is a Table understanding the basic liability for each term:

 

Freight Collect

Freight Prepaid

Groups

Any Mode of Transport 

Sea and inland Waterways

Any mode or Modes of Transport

Incoterms

EXW

FCA

FAS

FOB

CFR

CIF

CPT

CIP

DAP

DPU

DDP

Ex-Works (Place)

Free Carrier (Place)

Free Alongside Ship (Port)

Free on Board (Port)

Cost and Freight (Port)

Cost Insurance and Freight (Port)

Carriage paid to (Place)

Carriage and Insurance paid to (Place)

Delivered at Place (Place)

Delivered at Place Unloaded (Place)

Delivered Duty Paid (Place)

Transfer of Risk

At Buyers disposal 

On Buyers Transport

Alongside Ship

On Board Vessel

On Board Vessel 

On Board vessel

At Carrier

At Carrier 

At Named Place

At Named Place Unloaded

At Named Place

Obligation and Charges 

Export Packaging

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Loading Charges

Buyer

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Delivery to Port or Place

Buyer

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Export duty, taxes and custom clearance 

Buyer

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Origin Terminal Charges

Buyer

Buyer

Seller 

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Loading on Carriage

Buyer

Buyer

Buyer

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Carriage Charges

Buyer

Buyer

Buyer

Buyer

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Insurance

Negotiable

Seller 

Negotiable 

Seller

Negotiable

Destination Terminal Charges

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Seller

Seller

Seller

Seller

Seller

Delivery to Destination

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Seller

Seller

Seller

Unloading at Destination

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Seller

Buyer

Import Duty, Taxes and Customs Clearance 

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Seller

Logistics Summary

We hope we have given you a wholistic view of the logistics involved in the Hygiene and Packaging industry and the downstream value chain. We have given you the information based on the research conducted through multiple channels, and the authenticity and legalities of the same would be best judged by you and your team. We have tried to educate and explain the reason behind using the documents as well as the various Incoterm, so that the next time we are using the same, we know why. We welcome your feedback and you can always contact us at: contact@theconiferous.com