International Maritime Freight Transportation

Ê

Historically, societies have always located near water, due partly to the fact that water
enables more efficient travel compared to going over land. Waterways are critically important
to the transportation of people and goods throughout the world. The complex network of
connections between coastal ports, inland ports, rail, air, and truck routes forms a foundation
of material economic wealth worldwide.
For Europe, maritime transport has been a catalyst of economic development and
prosperity throughout its history. Maritime transport enables trade and contacts between all
the European nations. It ensures the security of supply of energy, food and commodities and
provides the main vehicle for European imports and exports to the rest of the world.
As an economic activity, modern sea transportation involves not only profitability, but
imposes itself as an objective requirement in developing a human society based on
geographical, economical and political data. Thus, it is considered that for any country`s
economy, maritime transportation represents one of its most important linkages to the world
economy. In order to support this idea, we can consider the fact that, when a shipping
company is set up and organized, it immediately establishes a series of activities for cargo and
passenger transportation, on world`s rivers, seas and oceans. Cargo and passenger
transportation respond to the world economy`s needs, but the main purpose of establishing a
shipping company is represented by the financial efficiency of the investment, meaning
obtaining profit, in the short and also the long run.
Shipping companies are considered important components of a state`s economy, due
to the important role held in exporting and importing activities, for passenger and cargo
movement. Most important role played for an economy is that they reduce the distance
between producers and consumers, by realizing a series of connections between different
national or international ports, or between the origin country of the ship-owner and other
countries in the world.1
³Shipping is one of the world`s most important industries and in studying maritime
economics we are drawn into a discussion of the world economy as a whole. Seaborne trade
is, in a sense, at the apex of world economic activity.´ 2
1
Alexa, C.: Ä©
´ , Editura ASE, Bucureşti, 2001, page 1;
2
Stopford, M.: Ä ´, 3rd edition, Abingdon, Oxon, 2009, chapter 1, page 2, paragraph 3.
c
This paper, ³Ê

´, aims to realize a
clear and precise evaluation of how shipping companies perform their activity on the
Romanian market, by highlighting their relationship with other businesses (through the
charter contract) and also the price applied to these contracts, meaning the freight.
For the case study I have chosen a private limited company, ³BALKAN SHIPPING
AGENCY´ LTD, one of the most active shipping companies from our country.
The paper has been structured as follows:
The first chapter presents general and particular aspects of marine transportation,
including characteristics, main advantages and disadvantage, but also its importance within
the world economy, its impact over the environment, and the effects over the international
trade activities.
The second chapter presents the types of charter contracts, their defining features, the
forms these contracts might take, the bill of lading, its uses and also a differentiation between
the bill of lading, as a transportation document, and the charter contract.
The third chapter is based on describing the international freight market, the ways of
establishing freight, its formation and the factors that influence it.
The fourth chapter is represented by the case study on BALKAN SHIPPING LTD,
comprising descriptions of the parties involved, the transportation route, cargo description,
freight calculation and documentation needed in order for the transportation activity to be
realized.
The paper ends with conclusions and recommendations on the Romanian market of
maritime transportation services.

-
¦
Ê

Ê

Transport is the most important link in economic relations. It is involved in creating
products and delivering them to consumers, provides the link between production and
consumption, between different industries, between countries and regions. It affects the
development of the economy as a consumer of metal, energy, timber, rubber and other
products. More than 100 million people in a world work in the system of transport.
Sea transport is mostly used for external transactions. Only in some countries such as
USA, Russia, China, Canada, Turkey, France, maritime transport provides internal
transportation. This mode of transport is considered to be the largest carrier of freight
throughout recorded history (carries more than 80% foreign trade goods) and also the
cheapest and the most convenient, especially when displacing large quantities of merchandise.
Most of cargo of the maritime transport accounted for liquid cargo ± oil and petroleum
products. Dry-cargo vessels have a smaller share. In their basic structure bulk is dominated,
then, general and secondary mass.
The main condition for safe operation of the world¶s mercantile fleet is its constant
renewal, increase tonnage of vessels, increase engine power, increase speed, automation, and
improved environmental performance. Densities of vessels aged over 10 years are more than
1 / 3 of the world fleet and the ones aged over 25 years represent only 1 / 20. In developing
countries and countries in Eastern Europe there is a tendency to increase the share of older
vessels, which increases the risk of shipping3.
The structure of marine transport is dominated by specialized vessels ± tankers, bulk
carriers, reefers, timbers. Tankers make up the greater part of half the world¶s fleet, which is
associated with the development of world oil market.
Most courts are designed according to the navigation (navigation mode) and under a
certain type of cargo. Some ships are only for passengers, more ships are used to transport
passengers and cargo (cargo), but the bulk of courts specialize in cargo transportation. There
3
Ä© ´, April, 2nd, 2010, available at
http://www.nissoana.com/ , last accessed 30/06/2010.
*
are four main types of marine vessels: 1) cargo ship (bulkers, liquid, combination) that
perform certain booking or operate on regular routes, 2) cargo ship, 3) high-speed passenger
liners, which have two or three classes for passengers, mail and luggage compartment, 4) a
small number of comfortable high-speed vessels intended only for passengers and mail.
Merchant service is a set of ships, which together with their personnel is engaged in
commercial activities. Marine cargo ships have always been an important part of merchant
fleet and its main support in the financial sense. Thus, merchant ships may be divided into
several categories, according to their purpose and/or size, just like the above mentioned
marine vessels.

!

One of the most important characteristics of this means of transportation refers to the
specific environmental conditions in which it develops its activity ± seas and oceans ± that
require special safety measures. It is generally known that any maritime expedition is
naturally exposed to sea risks, the easements and the dangers of the unfettered force of nature.
This is the reason why, with the social-economic development of the countries, the
organizational improvement of these activities was imposed, through more efficient safety
measures of insuring the ships, the cargo, the passengers and the crew`s members, but also the
establishment of a more adequate legal framework to allow a normal development of the
marine sector.
No other transportation means can assure the movement of billion tons of cargo across
seas and oceans. Even if airlines succeeded to become leaders on the transoceanic passengers¶
displacement, there still cannot be predicted a substitute means for transporting cargos. With
respect to the other means of transportation, ship transportation is characterized by high
loading capacity, but even the most recently designed ships have a relatively slow speed, even
though they travel at very long distances. Marine and river transportation realize connections
between different 4 of the globe, in high efficiency conditions, the costs being lower
compared with land transportation. It is moreover recommended when moving small value
goods and shipping costs prevail over time needed for displacement.
-
Harbors (en)
â
As

5 of this means of transportation, we can consider the following:
- The most economically means, calculated even with respect to total costs incurred,
even to displaced tone, but especially tone per mile; it is then true that, the advantage
is highlighted especially on long distances ± transoceanic shipments;
- Uses a developed range of ships, classical or specialized, with capacities from some
tone deadweight to over 100 000 ± 300 000 tdw, which allow transporting large
quantities on long distances, without stopping between the loading and the destination
ports;
- Allows the movement of cargo and passengers almost in any area of the globe,
including ice areas and without water passage, and in better safety conditions;
- Even considering the long distances covered, the shipping routes require much less
arrangements for developing their activities, in comparison with land transportation;
- Allows the concentration in marine hubs, the largest international harbors, of huge
quantities of goods, which can be transported on the most diverse marine and oceanic
routes;
- Allows the receiving of different goods and quantities, in the same international
harbors, from various maritime routes, which are dispersed, according to their
destination, on the entire area of the served 6;
- In certain situations, it can become a means of improving and offsetting the balance of
payments of one country, helping the external debt reduction of the developing
countries, through: establishing prices and delivery quantities which correspond to
both the interests of the producers and the importers, improving the access over the
less developed and developing countries, reaching commercial agreements for every
single basic product (UNCTAD decisions).
All in all, we can admit that the marine transportation, as an objective economic
necessity, is able to keep its advantages through an adequate organization in constructing
national and international fleets and harbors, with regard to all determinant factors of
efficiency.
5
Beziris, A.: Ä© © ´, vol. 1, Editura Tehnica, Bucuresti,
1988;
6
The land or district behind the borders of a coast or river. The area from which products are delivered to a port
for shipping elsewhere is that port's hinterland.
ù
By considering the development of the marine transportation activities up to their
complexity, A. Beiziris identified in his paper, Ä© ©
´ (1988), the following

:
- The necessary investments needed for specialized modern ships construction, adapted
to technical standards at international level;
- Assuring the safety conditions before sea risks, through the quality of the construction
and the installation on board;
- Forming a qualified and specialized staff, corresponding to the high quality and value
of the available means, but also the economical characteristics of this sector, with
intense and variable international relations;
- The most important drawback is still represented by the fact that it`s speed is very
slow compared to all the other means of transportation.
The advantages and disadvantages of this means of transportation indicate that their
solution is close related to international economic and political factors.
" #

The marine transportation activity is one of the most internationalized activities and
for studying its advance is necessary to take into account the evolution of the world
economy 7.
The first reaction of a ship owner or a charterer after an important event (for example:
a nuclear accident in Russia or an increase in oil price), is to weight its effects over the marine
transportation market. The most important increases in freight prices were generated by
political conflicts, the most noticeable being the closing of the Suez Channel in 1956 and
1967. Besides the political influence, neither the strategic influence of the marine
transportation activity can be neglected. As the sector faced deeper internationalization, the
new industrialized countries together with OECD (The Organization for Economic
Cooperation and Development) contributed to the maritime development.
For a better understanding of the economic and political factors that contributed to
the development of the marine transportation activities is necessary to look at the double
interaction between the development of the sector and the one of the world economy. One of
the principal reasons of the industrial revolution was building a cheap and fast means of
7
Batranca, G. Ä¦ © ´, Editura AIT
Laboratories, Bucuresti, 2004;
o
transportation. This is why, every day distances seem to be shorter and shorter. This progress,
from a world built up from isolated communities to a global community, is due to the
activities of the commercial marine transportation.
The increased importance of the marine sector determined the development of a
whole international cooperation, under the supervision of X , for :
- Assuring safety conditions for human life and the ships over the sea;
- Avoiding accidents and the organization of the marine rescue and assistance;
- Preventing the environmental pollution and especially the one of the marine
environment;
- Unifying the marine transportation legislation and methodology;
- Protecting the ship owners and the producers of goods;
- Establishing, for maritime trade, an adequate, fair, lasting and operational, legal and
economic framework, able to guarantee, based on international cooperation, equality
in the obligations and the rights of the parties involved.
$ %

&

The idea of shipping as the catalyst of economic development is not new8 . Adam
Smith, often regarded as the father of modern economics, saw shipping as one of the stepping
stones to economic growth. In the third chapter of ³The Wealth of nations´, published in
1977, he argued that the central economic force is a capitalist society in the division of labor,
and the extent to which this can be practiced depends crucially upon the size of the market. A
business working in a country town without links to the outside world can never, he argued,
achieve the high levels of efficiency because it`s very small market will limit the degree of
specialization.
Adam Smith saw shipping as a source of cheap transport which can open up wider
markets to specialization, by offering transport for even the most everyday products at prices
far below those that can be achieved by any other means. This proved to be a profound
insight. Economic development has gone hand in hand with sea trade for sound economic
reasons, a process which Adam Smith explains in the following way:
³As by means of water carriage a more extensive market is opened to every sort of
industry than what land carriage alone can afford it, so it is upon the sea-coast, and along the
8
Economy Watch ± Economy, Investment and Financial Reports, Ä½ ! ´, available at
http://www.economywatch.com/world-industries/shipping-industry.html, last accessed 26/06/2010;

banks of navigable rivers, that industry of every kind naturally begins to subdivide and
improve itself, and it is frequently not until a long time after that those improvement extend
themselves to the inland parts of the country «.´9
Adam Smith painted a graphic picture of the economic benefits offered by sea
transport in the eighteen century, as follows:
³ «. a broad wheeled wagon attended by two men and drawn by eight horses is about
six weeks time carries and brings back between London and Edinburgh nearly 4 tons weight
of goods. In about the same time a ship navigated by six or eight men, and sailing between the
ports of London and Leith, frequently carries and brings back 200 ton weight of goods. Since
such, therefore, are the advantages of water carriage, it is natural that the first improvement of
art and industry should be made where this convenience opens the whole world to a market
for the produce of every sort of labor.´ 10
This is a labor productivity of 15 times. By exploiting economies of scale and
integrated transport system, shipping continues to demonstrate Adam Smith`s insight. Today,
a lorry carrying a 40-foot container from Felixstowe to Edinburgh might be competing with a
small container ship carrying 200 containers. Or a truck holing 40 tons of oil along our
congested highways competes with a coastal oil tanker carrying 4 000 tons of oil by sea. Ships
now travel at speeds that trucks can hardy match on congested urban roads and at a fraction of
the cost. No wonder that the oceans are the highways of economic development, an aspect of
the business that hardly changes over centuries.
' %

Ê

Sea transport or simply shipping is essential to the functioning not just of modern
society generally, but of the global economy in particular. For international trade, sea
transport remains the most economical mode of transportation that moves all kinds of goods
around the world. For example, shipping makes possible the bulk movements of raw materials
and primary commodities to sites of manufacturing, and manufactured products to their
markets. Moreover, the movement of forms of fuel and energy, especially petroleum and
natural gas, is also largely dependent on shipping. Without effective and economical sea
transport, therefore, the viability and efficiency of the world economy would be adversely
9
Adam Smith quoted in Martin Stopford, Ä ´, 3rd edition, Abingdon, Oxon, 2009
10
Martin Stopford, Ä ´, 3rd edition, Abingdon, Oxon, 2009, chapter 1, page 3, paragraph 3
ë
affected. Indeed, economic growth has become closely related to developments and
improvements in sea transportation.11
In recent times, developments and advancements in sea transportation have had
profound impacts upon international trade. To take an important example, the conversion of
merchandising from break-bulk shipping to containerization now permits goods dispatched
from their point of origin to reach their intended destination more efficiently, and with much
less risk of damage to the goods. There are also clear benefits to exporters and importers when
sea transportation costs less while facilitating µJust-In-Time¶ stock management. Presently,
traders can expect relatively safe, easy and economical access to international markets
through a combination of deep-sea and short-sea shipping that utilizes container
transshipment opportunities.
ÄWithin the very broad area of sea transportation, short-sea has become increasingly
important because most trunk or deep-sea vessels do not call at small or ³off-line´ ports. At
such ports, the depth may be insufficient to accommodate large vessels, or the cargo amounts
are too limited to justify the use of large vessels. Instead, ³feeder operators´ provide separate
short-sea shipping services that mediate between small ports and large vessels. Since small
ports greatly outnumber major ports in the world, short-sea transport is an indispensable part
of the growth in sea transportation.´12
Due to the financial crisis and economic downturn, growth in the world economy and
in global merchandise exports decelerated in 2009 and it is expected by analysts to decline in
2010. The reduction in the global production and demand resulted in lower levels of trade and
undermined growth in maritime commercial activities. Downside risks, including the adverse
feedback between the financial sector and the real economy, made the outlook for maritime
trade uncertain. Climate change and the need to adapt to the international regulatory regime
for greenhouse gas emissions from international shipping are adding a further challenge to
maritime transport sector.
As mentioned earlier, after the economic downturn and sharp decline in world
merchandise trade, growth in international trade continued, but at a slower rate of 3.6 per cent
in 2008, as compared to 4.5 per cent in 2007, and even slower in 2009.
11
Pamela Tirschwell, ³½ ", 2000
12
Business Intelligence Journal - August, 2009 Vol. 2 No. 2,´ ½ #½ ©
´, Chang Kah Loon, (MPhil)
ëë
Consistent with the past trend, major loading areas were located in developing regions
(60.6 per cent), followed by developed economies (33.6 per cent) and countries with
transition economies (5.9 per cent). These facts are shown in the graph bellow:
Table 1.1. World Merchandise Trade (2000-2008)

&( Ê
)))* ¦ )))*
))+ )), ))+ ))+ )), ))+
5,00 6,00 1,50 World 5,00 6,00 1,50
2,50 5,00 1,50 North America 3,00 2,00 -2,50
0,00 2,00 -6,00 Canada 3,50 5,00 0,50
2,00 1,50 -5,00 Mexico 3,00 4,00 0,50
3,50 6,50 6,00 United States 3,00 1,00 -3,50
5,50 3,50 0,50 South and Central America 8,50 17,50 13,50
3,50 4,00 0,00 Europe 3,00 4,00 -1,50
3,50 3,50 -0,50 European Union (27) 3,00 3,50 -1,50
1,00 1,50 0,00 Norway 5,00 9,50 2,00
3,50 7,00 1,50 Switzerland 2,00 5,00 2,50
7,50 7,50 2,50 Commonwealth of Independent States* 17,00 20,00 16,50
10,00 11,50 5,50 Asia 8,00 8,00 4,50
2,50 2,50 5,50 Australia 9,00 11,00 10,00
20,50 19,50 8,50 China 16,00 14,00 4,00
-4,00 -20,00 -11,00 Hong Kong, China 3,00 7,00 -2,00
12,50 13,00 7,50 India 13,50 16,00 14,00
6,00 9,50 2,00 Japan 2,50 1,50 -2,00
8,00 8,50 4,50 Six East Asian Traders* 5,50 5,00 4,00
*Commonwealth of Independent States: a regional organization , whose participating countries are former Soviet Republics, formed during
the breakup of the Soviet Union;
*Malaysia, Republic of Korea, Taiwan, Penghu, Kinmen, Matsu and Thailand.
Source: WTO,´å $ $ ´(2000-2008),

available at http://www.wto.org/english/res_e/statis_e/its2008_e/its08_world_trade_dev_e.htm, last accessed
30/06/2010.
Even though, over the years developing economies have increased their share of
imports, including finished consumer goods, and also parts and components used as inputs in
globalized production process.
All in all, after analyzing the decline in demand for consumption goods, as well as the
fall in industrial production in major economies and reduced energy demand, especially in
developed regions, we realize that deceleration of maritime trade volume affected all shipping
sectors.
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policy which the aim to eradicate substandard shipping essentially through a convergent
application of internationally agreed rules.
As maritime oil disasters have proved, the environment is hit hard when ships carrying
dangerous cargo run into trouble. The European Commission is keen to improve the safety of
vessels carrying potentially polluting cargo, hence the decision to ban single hull tankers in
view of the risk of grounding. However, that does not prevent unscrupulous or negligent
operators and crews from illegally discharging polluting substances into the sea. To counter
this practice, measures were introduced in 2000 to improve port reception facilities for ship
waste and cargo residues. The directive aims to reduce marine pollution by ensuring that all
EU ports provide adequate waste reception facilities, and by collecting a fee from all ships
whether they use the facilities or not, under the polluter pays principle, which gives them an
incentive to deliver waste ashore rather than dispose of it illegally at sea. 13 Some of the
greatest accidents with huge evidence over the environment are presented below:
On 12 December 1999, the Erika, a 25 year-old single-hull oil tanker carrying the
Maltese flag and chartered by Total-Fina, broke into pieces some 40 nautical miles off the
southern tip of Brittany, polluting almost 400 kilometers of French coastline. The damage
caused to the environment and the exceptionally high cost of the damage to fisheries and
tourism make the Erika oil spill one of the major environmental disasters of recent years.
On the 19th of November 2002, the tanker "Prestige" broke in two, after six agonizing
days since Wednesday, the 13th, when the ship sent the SOS signal at a few miles off the
Galician coast, north western corner of the Iberian Peninsula. The tanker, carrying some
77,000 tons of oil, sunk to the depth of 3,600 meters some 250 km off the Spanish coast, with
a large quantity of oil still on board.
The ³Erika´ and the ³Prestige´ accidents encouraged the EU to drastically reform its
existing regime and to adopt new rules and standards for prevention of accidents at sea, in
particular involving oil tankers. The EU considerably reinforced its legislative arsenal to
combat flags of convenience and give Europe better protection against the risks of accidental
oil spills. The third maritime safety package was born in November 2005, with the main
objective to restore the competitiveness of the sector while benefiting only those operators
who respect the safety standards, in particular by increasing the pressure on owners of sub-
standard ships.
13
European Commission, ³! % ´, Maritime
Transport Policy, 2006
ë-
More than three years later, with the adoption of the measures proposed in the third
maritime safety package, an important step has been achieved both on the improvement of the
effectiveness of existing measures to prevent accidents and on the management of their
consequences if the worse were to happen. With the Third Maritime Safety Package14, the EU
has completed this legislative arsenal covering all chain of responsibility of the maritime
sector.

14
It was adopted on 11 March 2009
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Ê % ¦

Generally, ships are taken on the basis of charter contracts negotiated by brokers,
either on behalf of the charterer or the ship owner.
A charter contract is defined by the following

':
- It is a document, containing the rights, obligations and the responsibilities of each of
the parties involved (the charterer or the ship owner);
- Generally, it is prepared by the charterer`s broker, on the ground of the agreed terms
between the ship owner and the charterer;
- It is signed either by the charterer or the ship owner, either by their brokers, on their
behalf;
- It contains a suite of standard clauses, printed on different forms (usually referred to as
the 16 ), followed, moreover by additional clauses, called: or
17
, clauses which best highlight the parties` requests;
- It can have as many blots, corrections and additions in compliance to the parties`
requests;
The parties are generally referred to as the ship owner and the charterer, even though
Contractual relationships could be more complex. When closing a charter contract with a
18
charterer who is not the ship owner, it is used the ³dispondent owner´ denomination. On the
other side, there is the beneficial owner, who is the registered owner of a vessel who can
charter the vessel out to others.
Beside the ship owner and the charterer, the ongoing of the contract implies the
participation, without having the status of contractual parties, of the shipper and the
consignee. According to the Hamburg Rules, the shipper is the person with whom or in favor
of whom a transportation contract was signed. Also, a consignee is the person who was
delivered or who delivered the object of the transportation contract. Generally, the shipper is
15
Caraiani G., Sorescu M.: Ä© ´, Editura Lumina Lex, Bucuresti, 1998
16
The printed text contains a number of clauses with or without blank spaces, which must be filled in by the
contracting parties (e.g. the name of the ship, the cargo to be loaded, the freight);
17
These clauses are frequently enclosed with the charter party, containing confidential terms which one doesn
not wish to divulge to certain employees of one of the contracting parties;
18
A person or a company which has a commercial control over a vessel`s operation without owning the ship.
ëâ
also the exporter of the cargo to be transported, and depending on the delivery terms and
conditions, he can also be the charterer.
The receiver is the person or the entitled company to receive the cargo. This person
can or cannot be nominated in the contract, because he will prove his quality through the bill
of lading, submitted to the ship master at the arrival.
¦

Although the great majority of charter contracts are written, this is not compulsory.
Over time, due to different legal problems generated by the diversity of legal systems, it has
been imposed a series of standard contracts, whose clauses are printed on standard forms.
Almost each of these standard forms are numbered in order to ease the amendment of the
contract.
The American practices from the 70`s established two distinctive parts for these
standard forms: the first one contains numbered cassettes to be filled in and the second one, a
series of standard clauses. The advantage of the system was that the second part was to be
filled in only if the parties wanted to modify the standard clauses, otherwise it would have
been incorporated by reference. In practice, there a only few cases when the parties totally
agree the standard clauses, this is why the new forms gave up the division system in two parts.
Much more frequent are those cases when the parties have to negotiate in order to
reach an agreement regarding supplementary clauses for certain aspects, uncovered in the
standard contract. These supplementary clauses are known under the denomination of ³rider´
or ³adendum´, and their existence helps to the correct the interpretation, given by the general
context of the contract, in order to avoid isolated meanings. These new introduced clauses
have priority in interpretation when their content is contrary to the one given by the standard
clauses, because the first is considered to better represent the interests of the parties. From the
same reason, in case the standard contract is divided in two parts, the first one prevails
because of the specific data filled in.
Regarding the erased words, they are considered nonexistent. Even so, in certain cases
(a litigation for instance), they are taken into consideration, if only the clauses contained by
the contract would be meaningless without them.
In order to overcome these issues, the newest standard contracts contain a series of clauses
presented in more than one version, which give the parties involved the possibility of
ëù
choosing the most suitable clauses for specific situations, with the purpose of avoiding the
possible amendments.
All these standard contracts are the result of long negotiation between different groups
of charterers and ship owners, or they have been framed by organizations representing either
charterer`s interests, either the ones of the ship owners. The most representative standard
contracts are agreed, adopted or recommended by different organizations of associations.
A charter contract is considered agreed if it is negotiated and agreed by different
charterers` or ship owners associations. Standard clauses of this contract cannot be modified
or erased, without the previous agreement of the parties that agreed to them.
It is adopted by a charterers` organization if it officially sustains a contract agreed
under the above conditions or by another charterers` organization or association19.
A charter contract is recommended when there is no charterers` association with
whom a certain contract could be negotiated or when even if the contract has been negotiated
with a charterers` association, there is no possibility that all members of that association to
use it. Even if the recommended contract is desired to be used without modifications to the
printed amendments, this is not compulsory.
Besides these three terms, there is also used the term ³approved´. A charter contract is
considered approved when it has been agreed, adopted or recommended.
" ¦

¦
1

3 ¦ & '
It is a rental contract, according to which the ship owner provides a discharged vessel
to the charterer, for temporary usage, in exchange of a so called ³hire´ ± it is calculated
according to the usage period. The ³bareboat´ charterer disposes of the vessel, without the
crew and the specific materials and also assumes the maintenance expenses, current or
accidental repairs, supply, freight, anchorage, insurance, port duties and cross channels fees,
meaning all the financial expenses of the commercial and technical activities performed. The
ship owner is obliged to assure for the charterer the disposal of the vessel in proper technical
19
It should be noted that a charter contract can also be adopted by a ship owners` association if it has been issued
by another ship owners` association with the purpose of being used in a sector field, without being adopted by a
charterers` association.
ëo
condition and also to present the registration documents, the certificate of origin and the class
certificate20.
' '(
Is represents the booking of the necessary transportation space, in view of dispatching
a predetermined quantity of goods. It is also the most suitable for linear transportation.
This type of contract specifies the principal condition under which the transport is
performed:
Ô The quantity and the description of the goods dispatched;
Ô The loading and unloading port;
Ô The name and address of the sender.
Also referred to as ³berth note´, it appears as a letter from the ship owner`s broker to
the charterer, which confirms the engagement of the necessary transportation space and also
the principal conditions for its performance. One or more copies of this letter have to be
signed by the charterer, to testify his agreement. Afterwards, this document has to be
sustained by the bill of lading.
¦ ¦ )*
It contains the contractual terms specific to tramp transportation and appears under
two forms:
Ô Voyage Charter Party ± represents the rental of a vessel for a given number of voyages
(this number is mentioned, together with the duration of the contract). According to this
contract, the loading and unloading operations can represent the responsibility of both the
charterer and the ship owner. In this case, freight calculation depends on the quantity of
goods transported, or it represents a total sum according to the vessel`s capacity (lump
sum)22.
Ô Time Charter Party ± defines the situations when the charterer rents the vessel for a
predetermined period of time. Loading, unloading expenses, fuel, channel and ports fees
are the responsibility of the charterer (as compared to , where they
could have been covered by the ship owner). According to ³BALTIME´23, the ship master
20
By issuing this certificate, the clearing company grants to the charterers and to the insurance companies that the
vessel is solid, sealed, durable and functional, from all points of view, fin order to perform the voyag e. The
better the technical condition of the vessel, the higher the interest of the charterers, the lower the risks assumed
by the insurance companies, consequently, the lower the premiums paid for insuring the vessel.
21
The denomination comes from Äcarta-partita´, known in the Middle Age, when the transportation document
was no more than single paper, cut in two pieces, each of them containg the integral text of the document and
both the charterer and the ship owner being given one half;
22
Represents a single payment for the total amount due, as apposed to a series of periodic payments;
23
1939 ± Uniform Time Charter .
ë
is obliged to follow the charterer`s orders regarding the vessel`s operation. In this type of
contract, the full commercial responsibility fall on the charterer and the freight is a
function of the time the vessel is at the charterer`s disposal.
'
It refers to ship leasing arrangement in which the use of the entire vessel and all
associated expenses pass on from the ship owner to the lessee (charterer). If the lessee also
has the right to appoint own master and the crew, it is called a bareboat charter.
"
¦
¦

¦

Generally, the charter party contracts comprise the following main clauses:
Ô The vessel`s denomination, its main characteristics and the useful capacity;
Ô Data referring to the commencement period of the voyage, the date when the vessel is
supposed to arrive at the loading port, the lay days, the last day admitted for loading,
and also the necessary period until reaching the destination port;
Ô The notification manner regarding the vessel`s arrival at the loading port;
Ô Cargo description;
Ô The intermediary ports, the loading port and the destination one;
Ô The freight, its calculation, the currency;
Ô Freight conditions, costs bearing for each of the parties involved;
Ô Loading/unloading norms, the lay day calculation.
$ /0

A bill of lading (sometimes referred to as a BOL or B/L) is a document signed by a
carrier (a transporter of goods) or the carrier's representative and issued to a consignor (the
shipper of goods) that evidences the receipt of goods for shipment to a specified designation
and person. The term derives from the verb "to lade" which means to load a cargo onto a ship
or other form of transportation.
A bill of lading can be used as a traded object. The standard short form bill of lading is
evidence of the contract of carriage of goods and it serves a number of 1
Ô It is evidence that a valid contract of carriage, or a chartering contract, exists, and it
may incorporate the full terms of the between the consignor and the carrier by
reference (i.e. the short form simply refers to the main contract as an existing

document, whereas the long form of a bill of lading (connaissement integral, fr.)
issued by the carrier sets out all the terms of the contract of carriage;
Ô It is a receipt signed by the carrier confirming whether goods matching the contract
description have been received in good condition (a bill will be described as clean if
the goods have been received on board in apparent good condition and stowed ready
for transport);
Ô It is also a document of transfer, being
, it governs all the legal aspects of physical carriage, and,
like a cheque or other negotiable instrument, it may be endorsed affecting ownership
of the goods actually being carried. This matches everyday experience in that the
contract a person might make with a commercial carrier like FedEx for mostly airway
parcels, is separate from any contract for the sale of the goods to be carried, however it
binds the carrier to its terms, irrespectively of who the actual holder of the B/L, and
owner of the goods, may be at a specific moment.
'
/0

© # This bill states that the goods are consigned to a specified
person and it is not negotiable free from existing equities, i.e. any endorsee acquires no better
rights than those held by the endorser. So, for example, if the carrier or another holds a lien
over the goods as security for unpaid debts, the endorsee is bound by the lien. Although, i f the
endorser would fail to disclose the charge, the endorsee will have the right to claim damages
for failing to transfer an unencumbered title. It is also known as a non-negotiable bill of
lading, but from the banker's point of view this type of bill of lading is not safe.
- This bill uses express words to make the bill negotiable, e.g. it
states that delivery is to be made to the further order of the consignee using words such as
"delivery to A Ltd. or to order or assigns". Consequently, it can be endorsed by A Ltd. or the
right to take delivery can be transferred by physical delivery of the bill accompanied by
adequate evidence of a company's intention to transfer.
' - This bill states that delivery shall be made to whosoever holds
the bill. Such bill may be created explicitly or it is an order bill that fails to nominate the
consignee whether in its original form or through an endorsement in blank. A bearer bill can
be negotiated by physical delivery.
ë
½ - Under a term import documentary credit the bank releases
the documents on receipt from the negotiating bank but the importer does not pay the bank
until the maturity of the draft under the relative credit. This direct liability is called Surrender
Bill of Lading (SBL), i.e. when we hand over the bill of lading we surrender title to the goods
and our power of sale over the goods.
A $ is a non-negotiable receipt issued by the carrier. It is most common in
the container trade either where the cargo is likely to arrive before the formal documents or
where the shipper does not insist on separate bills for every item of cargo carried (e.g. because
this is one of a series of loads being delivered to the same consignee). Delivery is made to the
consignee who identifies himself. It is customary in transactions where the shipper and
consignee is the same person in law making the rigid production of documents unnecessary.
A straight bill of lading by land or sea, or sea waybills are not documents that can
convey title to the goods they represent. They do no more than require delivery of the goods
to the named consignee and (subject to the shipper's ability to redirect the goods) to no other.
This differs from an Äorder´ or Äbearer´ bill of lading which is possessory title documents and
negotiable, i.e. they can be endorsed and so transfer the right to take delivery to the last
endorsee. Nevertheless, bills of lading are "documents of title", whether negotiable or not,
under the terms of the Uniform Commercial Code.
2 Ê /0

&
In most national and international systems, a bill of lading is not a document of title,
and does no more than identify that a particular individual has a right to possession at the time
when delivery is to be made. Problems arise when goods are found to have been lost or
damaged in transit, or delivery is delayed or refused. Because the consignee is not a party to
the contract of carriage, the doctrine of privity of contract states that a third party has no right
to enforce the agreement. However, whether this is a problem to the consignee depends on
who owns the goods and who holds the risks associated with the carriage. This will be
answered by examining the terms of all the relevant contracts. If the consignor has reserved
title until payment is made, the consignor can sue to recover his or her loss. But if ownership
and/or the risk of loss have transferred to the consignee, the right to sue may not be clear in
contract, although there could be remedies in tort/delict (the issue of risk will have been most
carefully considered to decide who should insure the goods during transit). Hence, a number
of international Conventions and domestic laws specifically address when a consignee has the

right to sue. The legal solution most often adopted is to apply the principle of subrogation, i.e.
to give the consignee the same rights of action held by the consignor. This enables most of the
more obvious cases of injustice to be avoided.
Since bills of lading are most frequently used in trans border, overseas or airborne
shipping, the laws of whatever other countries are involved in the transaction covered by a
particular bill may also be applicable including the Hague Rules, the Hague-Visby Rules and
the Hamburg Rules at international level for shipping, The Warsaw Convention for the
Unification of Certain Rules for International Carriage by Air 1929 and The Montreal
Convention for the Unification of Certain Rules for International Carriage by Air 1999 for air
waybills, etc. It is customary for parties to the bill to agree both which country's courts shall
have the jurisdiction to hear any case in a forum selection clause, and the municipal system of
law to be applied in that case choice of law clause. The law selected is termed the proper law
in private international law and it gives a form of extraterritorial effect to an otherwise
sovereign law (e.g. a Chinese consignor contracts with a Greek carrier for delivery to a
consignee based in New York: they agree that any dispute will be referred to the courts in
New York (since that is the most convenient place ² the forum convenience) but that the
New York courts will apply Greek law as the lex causae to determine the extent of the
carrier's liability.)
, /0
3 ¦
¦

As a document, the bill of lading is more important than the charter party because the
negotiable bill of lading gives the right to receive the goods.
In fact the charter party is only a contract of affreightment that only represents the hire
of tonnage space; consequently, the charter-party does not represent the goods. For that,
another document is necessary that serves as proof of the actual loading of the goods and
consequently that can be considered as the implementing evidence of the contract of
affreightment. This other document is now exactly the bill of lading and for each transport of
goods there should, in theory at least, be a charter party and a bill of lading.
In tramp shipping, where only full cargos are transported, there will generally be a
charter party and a bill of lading. In the liner shipping one will generally not find a charter
party but only a bill of lading that.
The bill of lading does not replace the contract of affreightment but it is the
presupposition of it. The fact that there is a bill of lading creates the presumption that
c
previously a contract of affreightment was already concluded. This way of concluding
happens in the liner shipping tacitly, when the ship owner announces the sailing and the
destination of the ship, orally or in writing (e.g. via the press) and that the freight forwarder
binds himself to ship goods with that named ship.
In that case, the bill of lading is the confirmation and the written proof of the contract
of affreightment; the bill of lading is also the proof that the goods were loaded on board the
ship.
The bill of lading can be issued in two different manners:
4

.
There is only a presumption of a contract of affreightment and the provisions which
govern the bill of lading, apply. If the bill of lading is negotiable then the Hague-Visby Rules
which are of public order apply; if the bill of lading is not negotiable then the bill of lading is
only a receipt.

5

a) If the bill of lading bears the words "Freight and all other conditions and exceptions
as per Charter" the terms of the contract of affreightment are incorporated in the bill of
lading, which means that those terms will in fact have to be applied, provided that they
are not in contradiction with the terms of the Hague-Visby Rules 24.
b) The bill of lading does not refer to the charter-party. In that case the terms of the bill
of lading will prevail on those of the charter party.
]© % $
$
% % $ $
$ ]25
An important difference between the charter party and the bill of lading lies in the fact
that the charter party is a gestation agreement i.e. that the contract is signed before it is carried
out; whereas the bill of lading is an actual agreement because the contract is only signed after
the goods have been really loaded on board.

24
Wildiers, P.: ³ + , "% Anvers, Editions Lloyd Anversois, 1969, page 93.
25
Scruton on Ä¦ ' ´, 2008, regarding the relation charter party/bill of lading.
-
¦6 &ÊÊÊ
&Ê6Ê7Ê7&7Ê70%&7 Ê7
"

Freight is the reward payable to the carrier for the carriage and arrival of goods in a
mercantile or recognized condition, ready to be delivered to the merchant.
There are more than one freight markets, thus demand and supply not only interact on
the general transportation market, but on the market of certain groups of merchandise and
vessels.
As in any other activity, from the collected freight, the ship owner has to cover his
expenses and also gain a certain profit.
Expenses related to vessels are divided in more categories:
a) Expenses corresponding to purchasing and maintaining the vessel. These costs are
strictly dependent on the value of raw materials and labor consumed for building the
vessel, but also on the supply and demand at the acquisition moment. For an efficient
use of the vessel, regarding its volume and its transportation capacity, it is very useful
to know the construction characteristics: DWT 26 , DWCC 27 , TRB, TRN, loading
capacity, maximum speed, the amount of fuel consumption at different speeds;
b) Expenses related to the direct operation of the vessel. These are reflected in everyday
operation costs, either displacing or not, for loading and unloading the cargo, fuel
supply, respectively the consumption of fuel per day, fuel acquisition price, the
number of crew members and their wages, insurance premiums;
c) Expenses indirectly related to operating the vessel and uncontrolled by the ship owner.
Total costs generated by the vessel also include the fees paid by the ship owner ,
which do not depend on the way the vessel is organized and operated, but on other
factors, like: norms specific to the state where the vessel is registered, agreements
between states, port administrations, channel administrations, agreements between
different transportation operators.
26
Deadwight Tonnage: is a measure of how much wight a ship is carrying or can safely carry. It is the sum of the
weights of cargo, fuel, fresh water, ballast water, provisions, passengers and crew;
27
Deadweight Cargo Capacity: it gives the wught of the cargo that the vessel can carry and it depends on water
temperature and the water (whether it is salt, brackish);
*
"¦& %

The pricing of cargo ships` services, like all pricing, is dependent on the forces of
supply and demand, but the factors affecting both supply and demand are probably more
complicated than in the case of most other industries and services. As in all forms of
transport, the demand for shipping is derived from the demand for the commodities carried,
and it is, therefore, affected by the elasticity of demand for these commodities.
The demand for sea transportation is affected both by direct competition between
carriers and, because it is a derived demand, by the competition of substitutes or alternatives
for the particular commodity carried. On any particular route, the ship owner is subject to
competition from carriers on the same route, and also from carriers operating from alternative
supply areas. For example, on some routes there is also competition from air transport for
high value to low weight ratio consignments, and in the coasting trade there is also
competition from inland transport.
The price eventually fixed depends largely on the relationship between buyers and
sellers. Where both groups are numerous, and have equal bargaining power, and where
demand is fairly elastic, conditions of relatively perfect competition prevail. Under these
circumstances, prices are fixed by the ³haggling of the market´ and are known as contract
prices. The market for tramp charters operates under such conditions, and the contract is
drawn up as an agreement known as a charter party.
The contract may be for a single voyage at so much per tone of the commodity carried,
or it may be for a period at a stipulated rate of hire, usually so much per tone of the ship`s
deadweight carrying capacity. The charter rates are quoted on a competitive basis in various
exchanges throughout the world. Foodstuff and raw materials in particular are traded in a
highly competitive world market, and their movement is irregular, depending upon demand
and supply conditions. It is quite usual for cargoes of these commodities to be loaded and
actually marketed during transit, the charterers instructing the ship to proceed to a certain
range of ports and determining the port of discharge while the ship is es route. In the case of
very long-term charters, takers or ore carriers, the rate of hire is fixed to give the owner a
reasonable return on his investment.
Under these conditions, the rate structure for tramp is a very simple product and
emerges from competitive interplay of supply and demand. From the economist`s point of
view, rates made in this way represent the most efficient methods of pricing, for where price
is determined under conditions of perfect competition, production is encouraged to follow
â
consumers` wishes, and price itself does not deviate to any great extent from the average total
cost. In this way the consumer is satisfied and production capacity most usefully employed.
The factors influencing the formulation of a fixture rate are detailed bellow:
1. Ship specification which would also embrace the type of vessel (bulk, carrier,
containership, oil tanker);
2. The types of traffic to be conveyed;
3. General market conditions: this is a major factor and generally an abundance of
available ships for charter tends to depress the rate particularly for voyage and short-
term charters;
4. The daily cost to be borne by the charterer;
5. The duration of the charter: generally, the longer the charter, the less it is influenced
by the market situation relative to the availability for ships and the demand for them;
6. The terms of the charter: as mentioned before, the ship owner and the charterer are
free to conclude a charter party of any terms;
7. The identity of cost to be borne by the charterer and ship owner must be clearly
established;
8. Responsibility for the survey costs of the vessel must be clearly defined as to whether
they are for the charterer`s or ship owner`s account.
Currency surcharge is another factor to be considered, as it arises when the freight rate
is related to a floating currency. Because of currency depreciation, a currency surcharge is
imposed in order to minimize losses that the ship owner or the charterer could incur in such
situations.
The tramp shipper markets goods of relatively low value, so he seeks the lowest
possible transport charge, as the freight percentage of the total value may have a direct
bearing on the salability of the commodity. He has thus a prime interest in the availability of
tramp shipping space at any particular time by reason of the fact that freight and chartering
rates will reflect variations in the economic forces of supply and demand. In a market
situation where there are plenty of vessels the shipper will be able to charter at a rate which
will be only marginally above the operating costs of the vessel. In the opposite situation, he
will be forced to pay more but there is a limiting factor in the price of the commodity at the
point of sale to the rate which the ship owner may receive. In these conditions, the premium
returns are earned by the operators of the most efficient ships. In weak market conditions their
relative efficiency ensures a small profit while others just break even. Where the market is
ù
strong the proven reliability shown before will ensure that the services of such vessels will be
sought out before other opportunities are taken up.
In the liner trades the freight costs are more stable and controlled. The ship owner is able
to hold the rate at a fair level to show a profit margin, but he must be careful not to hold his
rates so high that they price the goods out of the market. At this point, joint cooperation
between shipper and carrier and other parties is needed.
""
&

Freight can be established by various means, but generally the most frequent are the
following:
a) According to the weight and volume of the cargo. In case freight is determined
according to the cargo`s weight, it is very important to specify whether it is expressed
in metric ton, long ton or short ton, as there are significant differences between them.
b) Lamp sum freight: according to this means of establishing freight, the charter pays a
certain amount of money, independent on the quantity of goods loaded. Generally, it is
used when the charterer is allowed to load maximum capacity or in case of oversized
cargoes.
c) World Scale reference: specific to oil tankers. This means easily allows freight
comparisons and also an efficient calculation of voyages.
d) Deadweight unit: it is mainly used in afreightment contracts 28 , when the vessel`s
capacity to be used is unknown.
e) As a percent of the cargoes value: in practice, this means is no longer used.

"$
Ê
A variety of factors influence freight transportation demand, some directly and others
as a result of changes in transport costs and rates and in the services offered.
Among those factors that freight transportation are the following:
1. © : the demand for transportation services is derived from the
level of economic activity. Trends and changes in the national or regional economy
affect manufacturing and distribution processes. As a derived demand, the most basic
28
The expression usually employed to describe the contract between a #$ and another person called the
, by which the ship-owner agrees to carry goods of the charterer in his ship, to give to the charterer
the use of the whole or part of the cargo-carrying space of the ship for the carriage of his goods on a specified
voyage or voyages or for a specified time.
o
influence on total freight demand is the volume of goods produced and consumed.
Expansion in a national or regional economy results in increases in overall freight
demand, while contractions in the economy result in reductions in freight demand.
2. ! : are critical in determining transport demand as
measured in ton-miles or other units that reflect length of haul. The spatial distribution
of economic activity also influences mode choice, with many commodities likely to be
shipped by one mode when distances are short and by another when distances are
longer.
3. å : today, many companies manage worldwide production and
distribution system, and national economies are increasingly being integrated into a
global economy. As production facilities are shifted to locations around the globe
where goods can be produced more economically, the demand for world trade will
continue to increase.
4. ! : global production and distribution are also affected by
international trade agreements, quotas and tariff restrictions.
Other direct factors:
5. l ;
6. ¦ # ;
7. ¦ $ ;
8. ( ;
9. D.
Among the factors that have an

on freight demand, by influencing
costs and services are the following:
1. : deregulation in transportation industry was
driven by the desire to encourage greater price and service competition and to
increase opportunities to develop multimodal and intermodal relations among and
within various modes.
2. ! : they often involve complex negotiations as
the nations involved seek to protect their interests and to create opportunities for trade
and economic growth. For example, where carrier entry or participation is restricted
in a particular market, rates tend to be higher.
Other indirect factors:
3. ! ;

4. ½# © ;
5. ;
6. ;
7. X ;
8. å ;
9. ;
10.½ ;
11. ( $ .
"'Ê

8 1
9

The fixed freight level for different categories of vessel and cargoes depends on
market conditions, mainly on demand and supply, which is why this indicator is permanently
analyzed, in order to obtain possible market forecasts. This kind of data is periodically
published: monthly, weekly or even daily, through reports drawn by specialized institutions
belonging to this field.
Ship owners, shippers and charterers take great interest in statistics showing trends in
freight rates and charter rates. Three different unit of measurement are commonly used)- :
voyage rate statistics, for dry cargo commodities, which are generally reported in $ per ton for
a standard voyage. In contrast, time charter rates are generally measured in $000 per day and
they are commonly reported for trips (round voyages).
The third and the most complex measure of freight rates is Worldscale. The concept
was developed during the Second World War when the British Government introduced a
schedule of official freight rates as a basis for paying the owners of requisitioned tankers. The
schedule showed the cost of transporting a cargo of oil on each of the main routes using a
standard 12.000 dwt tanker. Owners were paid the rate shown in the schedule or some fraction
of it. This system was adopted by the tanker industry and has been progressively revised over
the years.
The Worldscale index is published in a book which is used as the basis for calculating
tanker spot rates. The book shows, for each tanker route, the cost of transporting a metric ton
of cargo using a vessel on a round voyage. Worldscale is available on a subscription basis and
the annual fee entitles the subscriber not only to the Schedule itself but also to notices of all
amendments and the right to request rates for any voyage not shown in the Schedule.
29
Martin Stopford, Ä ´, 2nd edition, Taylor and Francis e-Library, 2003, chapter 3, page 93
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Ê
This paper`s aim is to realize an accurate analysis of the way a maritime transport is
performed, the relationship between parties involved and their influence on the Romanian
transportation market.
In order to realize this transportation activity, we need a producer company (DONAU
CHEM LTD), a consignee (AIGO LTD), a middleman (BOGFIL COM LTD) and the most
important, a shipping company (BALKAN SHIPPING AGENCY LTD) and a custom
operator (EUROEST OPERATIONS). Bellow, I will try to describe each of them, in order to
highlight their importance for the Romanian transportation and economic market.
$ ( <

= ; #7 ¦6& 0#: the company`s
object of activity is represented by the production and distribution of mineral fertilizers
(simple - urea, liquid fertilizers, ammonium nitrate, complex and liquid forms) and
intermediaries (ammonia, nitric acid), but also the production of spare parts and technological
tools. At this moment, the company is able to supply the entire range of chemical fertilizers
requested by the agricultural activities. I should mention the fact that the technologies
functioning within DONAU CHEM reach the standards of European factories.
The company`s headquarter can be found at the following address: 1, Portului Street,
145200, Turnu Magurele, Teleorman County, Romania, having the contact data: Phone: +40
247 416438, e-mail address: office@donauchem.ro .
$ < = ; Ê 0# 1 AIGO is a global leader in providing
high performance adhesion and surfacing solutions, being the first manufacturer of synthetic
resins from melamine, phenol and urea. It is the specialist for film resins, insulation resins,
glues for the chipboard and plywood industries as well as for glues and hardeners for the
furniture industry and load bearing wooden structures.
The company is represented by highly qualified team works on innovative solutions
for clients with the aid of state-of-the-art laboratories, global know-how and future oriented
technologies and the high quality of products and services are attested by ISO 9001, ISO
14001 and Responsible Care certifications.
c
The company can be contacted at: 18F, No.397, Jiaozhou Rd.(No.1088,Wuding Rd.),
200040, Shanghai, or office@aigo.com.
$"
;/Ê0¦0#1it is a custom agent, which offers complete
service on custom requirements: cargo declaration for export, primary custom declarations,
custom clearance and warehouse. It also fills EUR certificates, bills of lading and pays custom
duties at the clients` order. The middleman can also arrange for the carriers of the cargo (as in
the transport presented by this case study), even if this is not a necessary condition, because
the exporter is entitled of choosing his own transportation company.
DANAU CHEM LTD, the producer company presented by this study case, hires a
middleman because, under the negotiated terms, the delivery conditions fall under FOB
Incoterms 2000, which specifies that the exporter is in charged with export custom clearance.
The company can be contacted at: 22, Cobuz Street, 205200, Calafat, Dolj County, or
office@bogfil.ro.
$$ * /0>7 %6Ê Ê7 &7¦: 0#1 since 1997, BALKAN
SHIPPING is a member of Ship Agents and Brokers Association of Romania. The company
has 40 years of service to the shipping community worldwide, we have extensive experience
in all aspects of liner agency, ship broking, sale and purchase, ships agency, and bunkering
and freight forwarding. Nowadays the company developed overseas and created both branch
offices and subsidiaries in Germany, Greece, Belgium and Singapore.
The company`s headquarter is located at: 132, Mircea cel Batran Street, 900132,
Constanta, Constanta County.
$'
;& &% &Ê7%: it cooperates with the port authority
to move cargo through a port at a contracted minimum level of productivity. They may be
state-owned (particularly for port authorities) or privately run (like the one used in this case).
The work involves managing the movement of cargo containers between cargo ships, trucks
and freight trains and optimizing the flow of goods through customs to minimize the amount
of time a ship spends in port. Maintaining efficiency involves managing and upgrading
waterways, storage facilities, communication equipment, computer systems and dockworkers'
union contracts. The port operator also manages paperwork, leases, safety and port security.
EUROEST disposes of all necessary equipment in order needed in loading and unloading
activities and it is contracted by the producer company for loading the cargo exported to
China.
cc
The company can be contacted at: 16, Nicolae Grigorescu Street, 900636, Constanta,
Constanta County, or office@euroestct.ro.
$
This study will be based on analyzing the transport of chemical fertilizers (specifically
Carbamide) directly from Romania to China, following the route: Constanta (Romania) ±
Istanbul (Turkey) ± Port Kelang (Malaysia) ± Nansha (China) ± Shekou (China) ± Ningbo
(China) - Shanghai (China).
As attested by the %

; ( see annex 1), cargo was ready to
be loaded at the 1st of July 2010, in Constanta port. The port operator is responsible for
loading the cargo and makes sure everything is settled until the departure moment.
Considering the fact that the producer company is located in Turnu Magurele and the
loading is made in Constanta, I want to clarify that the internal transport (from Turnu
Magurele to Constanta) is made by rail.
Regarding the external transport, ³Xin Shan Tou´ is the name of the ship, which will
be transporting the cargo from Romania to China. The moment the ship arrives to Constanta
port, it is berthed and loaded, thus ready for departure. After that, the estimated duration
period until destination is considered to be 21 ± 25 days.
$"¦

Carbamide (urea) or is an organic compound with the chemical formula (NH2 )2CO.
The molecule has two amine (-NH2) residues joined by a carbonyl (-CO-) functional group.
It serves an important role in the metabolism of nitrogen-containing compounds by
animals and is the main nitrogen-containing substance in the urine of mammals. Being solid,
colorless, odorless (although the ammonia which it gives off in the presence of water,
including water vapor in the air, has a strong odor), neither acidic nor alkaline, highly soluble
in water, and relatively non-toxic, urea is widely used in fertilizers as a convenient source of
nitrogen. Urea is also an important raw material for the chemical industry. The synthesis of
this organic compound by Friedrich Wöhler in 1828 from an inorganic precursor was an
important milestone in the development of chemistry.
It is a raw material for the manufacture of many important chemical compounds, such
as:
1. Various plastics, especially the urea-formaldehyde resins.
c-
2. Various
, such as urea-formaldehyde or the urea-melamine-formaldehyde
used in marine plywood (the case of our importer company ± AIGO LTD) .
3. Potassium cyanate, another industrial feedstock.
4. Urea nitrate, an explosive.
More than 90% of world production of urea is destined for use as a nitrogen-release
fertilizer. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in common
use (46.7%). Therefore, it has the lowest transportation costs per unit of nitrogen nutrient.
Because it absorbs moisture from the atmosphere is has to be stored either in
closed/sealed bags on pallets, or, if stored in bulk, under cover with a tarpaulin. As with most
solid fertilizers, storage in a cool, dry, well-ventilated area is recommended.
Regarding the Romania ± China transport, cargo (chemical fertilizer, urea, having the
custom code 31021010) will be transported in bulk, meaning that it is transported unpacked
and in large quantities. More specific the quantity of urea which will be transported is
1244,519 MT (according to ¦

document, see annex 2).
According to the ¦
?
(see annex 3), cargo is described as: prilled,
white colour, free flowing, free from harmful substance, product treated against caking. The
substance contains: 46.2 % Nitrogen, 0.93 % Biuret and the rest of 0.40 % moisture.
The Certificate of Quality also mentions the validity period of four months from
delivery date, only in case of adequate storage conditions: closed spaces, without humidity.
Concerning the quantity of urea transported, the ¦
?
(see annex 3)
attests a net weight of 1244.519 MT. The total quantity of cargo loaded is also attested by the
#
% , which calculates the exact quantity of cargo at discharge (see annex 5).
Cargo transported also has a box to be filled in the ¦
Ê (see annex
4). Thus, we observe that minimum 90 % of the urea transported has a 1 ± 4 mm
granulometry, and maximum 10 % less than 1 mm and more than 4 mm granulometry (it is
used in the qualitative and quantitative evaluation of the free-floating).
We can see from the commercial invoice that the unit price for urea is 208, 17 Euro,
meaning that the total value of transported cargo is 259071, 52 Euro. This unit price is one of
the determinants of the custom duties the exporter is obliged to pay.
$$

Sea freight calculations can be divided into two main components: break-bulk and
containerized. As the cargo transported by our company is bulk loaded, I will apply the first
c*
calculation method: in this case, cargo is measured along the greatest length, width and
weight of the entire shipment. Shipping lines quote bulk cargo per ³freight ton´, which is 1
metric ton or 1 cubic meter, whichever yields the greatest revenue.
In order to determine freight level, the ship owner considers all factors which
determine the transportation cost and also the assumed profitability. Thus, freight level is
determined by: running expenses (operating expenses related to the vessel), including wages,
fuel costs, port taxes, charter commissions, costs depending on the chosen route, hazard risks
are also to be considered, together with the season when the transport is performed.
For this practical situation, freight level will be established according to the capacity
or weight of the transported cargo, represented by 1.244, 519 MT of chemical fertilizers. As
an additional clause negotiated between parties, freight costs will be computed according to
the delivered weight.
Considering the price per metric ton of cargo transported (208, 17 euro), transportation
cost has been agreed to 12 $ per metric ton loaded. This cost includes: expenses related to
vessel`s operation, crew member`s wages, fuel costs (calculated bellow), charter
commissions, expenses related to the chosen route (35 % for crossing the Bosphorus Strait)
and insurance.
As mentioned earlier, a very important determinant of freight level is the amount of
fuel consumed. The vessel`s activity is measured in a special unit measurement, referred to as
K. the number of K`s can be computed by the following relation:
>@<&A?=B> B¦C))), where

Q= the quantity of loaded cargo
E= unit equivalent (barge)
&@0B</AB=B!,2, where
L= unit length (barge length)
B= unit width (barge width)
T0= weight in accordance with the draft
Km= route kilometers
Cs (sector coefficient)= represents the degree of difficulty of the route.
For determining fuel consumption, the number of K`s is multiplied with a specific
amount of fuel, established by each of the companies. In this case, the coefficient is settled at
2.30 ± 2.40 kilograms of fuel per K (the vessel`s activity measurement).
câ
! % $ .
/ 01 *2 3)4) 225/ 01 41 )/ )
6/ )3 *) *-54*224) &*222/ 0-* 2

! % .
64¦/ 0-* 24) / *1 -) (
Past experience related to hazard risks influenced the international transportation and
insurance market, considering the fact that no transport is performed nowadays without
concluding an insurance contract: in our case, the importer will be responsible for insuring the
vessel and also the cargo transported.
Marine Insurance covers the loss or damage of ships, cargo, terminals, and any
transport or cargo by which property is transferred, acquired, or held between the points of
origin (Constanta) and final destination (Shanghai).
This contract offers coverage in the event of a marine loss. Marine loss is damage or
destruction of a ship's hull and the ship's cargo, as the result of the occurrence of an insured
peril (risk). Perils insured against include collision of the ship with another ship or object; the
ship sinking, capsizing, or being stranded; fire; piracy; jettisoning (throwing overboard of
property to save other property); barratry (fraud or other illegal act by a ship's master or crew,
resulting in damage or destruction of the ship and/or cargo), and various other liability
exposures. To be covered, an act cannot involve prior knowledge by the owner of the ship or
its cargo. Excluded are wear and tear, dampness, decay, mold, and war.
The cost of the insurance will also be included in the transportation cost (freight),
which at its turn, is part of the custom value, needed to be paid by the importer.
$'#

This study case assumes that the producer company ± DONAU CHEM LTD,
concluded an agreement with BALKAN SHIPPING AGENCY (internal and international
forwarding agency), in order to transport chemical fertilizers from Romania to China.
The port operator took care of receiving and loading the cargo, under the FOB
delivery, in accordance to the conditions imposed by Incoterms 2000.
Free On Board clause assumes that the seller delivers when the goods pass the ship's
rail at the named port of shipment ± Constanta port. This means that the buyer has to bear all
costs and risks of loss or damage to the goods from that point. The FOB term requires the
cù
seller to clear the goods for export and makes the buyer responsible for all the costs incurred
after the cargo has been loaded on board.
In our case, the exporter will have to pay a pre established price, negotiated with the
middleman, for preparing the custom documents. Loading expenses also fall on the exporter`s
responsibility.
In the same time, the importer, AIGO LTD, will be responsible with concluding the
charter contract (see Annex 10) with the shipping agency, which is, in our case BALKAN
SHIPPING AGENCY.
For import cargo clearance, the shipper is requested to present the following documents:
&(
¦
Ê
In order to transfer the property right from the seller to the buyer, an external invoice
has to be issued. This document is prepared by the exporter and it synthesizes all the relevant
clauses of the contract (see annex 4).
This type of primary contract includes the following elements:
1. Name and address of the seller, its identification data (legal form, object of activity,
phone number, registration number from the Trade Register Office);
2. Name and address of the buyer;
3. Issuance date and number of the invoice;
4. Commercial denomination of the cargo transported;
5. Packaging description;
6. Transportation cost (freight);
7. Means and conditions of payment;
8. Transaction value, by specifying the unit price and the total value;
9. The bank to which the payment will be made
10.Premium and insurance type
Besides the property right transfer from the seller to the buyer, the external invoice
shows the fact that the merchandise has been sold, thus it serves at obtaining the counter value
of the merchandise, by being part of the compulsory documents requested by the bank for
proceeding the import payment.
¦

Represent a very important document in international transactions, because it verifies
the nature, the quantity of the delivered goods, but also the manufacturing place. It also
includes a declaration asserting the origin country of the goods.
This document has the following functions:
co
1. Allows the importer to obtain some custom formalities; in this way, whenever partner
countries share agreements that provide preferential tariffs, the importer will first have
to demonstrate through the certificate of origin its right to a lower custom duty or even
an exemption.
2. Assures the compliance with the measures of commercial policies from the importing
country;
3. Assures the protection of certain intellectual property rights, as for example the origin
denomination.
The Certificate of Origin contains the weight and the type of the cargo, the quantity
transported, the invoice number, importer`s and exporter`s name.
" ¦
?

Regarding the quality compliance, within international trade activities, a certificate of
quality is requested, together with other documents, by the exporter`s bank, in order to charge
the counter value of export. This document is issued by the producer company, but it can also
be attested by any institution specialized in quality control.
In order to collect the payment from the importer`s bank, the certificate`s content has
to correspond exactly with the provisions stipulated by the contract, on the quality of goods
$

#
In our case, due to the fact that the cargo is transported by water, the transportation
document takes the form of a
(see annex 6). It represents the evidence that a
valid contract of carriage, or a chartering contract, exists, and it may incorporate the full terms
of the contract between the consignor and the carrier by reference to the existing contract.
This type of document has to comprise the following mentions:
1. Name of the exporter;
2. Name and address of the consignee;
3. Cargo denomination and its weight;
4. Packaging type ;
5. Name of the vessel;
6. Name and complete address of the exporter, and also his signature;
7. Date and place the bill of lading has been issued.
' ¦ #

It represents the act whereby a person indicates the wish to place goods under a given
customs procedure as provided for by the Community Customs Code (CCC) (Articles 4 (17)
and 59 to 78 CC). Generally, this task is performed by the owner of the goods or a person
c
acting on his behalf (a representative). It may also be performed by the person having control
over the goods. These persons may be individuals or companies, as well as in certain cases
associations of persons.
According to Article 201 CCIP, the declaration is to be presented to the official
customs office, authorized with supervising the place where the exporter is established and
the cargo is packed and loaded for the export transport.
One of the most important elements mentioned in the custom declaration is the custom
value of transported cargo (see annex 7). The custom value at export is the calculation basis of
the custom rights the Chinese company will have to pay when transportation reaches its
destination. Besides the custom rights, custom value also includes other taxes provided by the
national legislation of the importing country (China). According to the delivery condition,
other costs will be added: insurance, transportation costs ± freight, expenses related to cargo
handling.
2

It represents the proof that all transportation documents have been delivered to the
master (commander) of the vessel (see annex 8). It is the same for
, only that
the person who receives the documents is the vessel`s mate (deputy commander) (see annex
9).
, 0 ¦
Right next to the condition of delivery from the commercial invoice, is the payment
condition, the name and the address of the bank which will be collecting the counter value of
the cargo transported, from the importer. The attached commercial invoice in this
transportation simulation mentions as payment method the letter of credit.
It is a binding document that a buyer can request from his bank in order to guarantee
that the payment for goods will be transferred to the seller. Basically, a letter of credit gives
the seller reassurance that he will receive the payment for the goods. In order for the payment
to occur, the seller has to present the bank with the necessary shipping documents confirming
the shipment of goods within a given time frame. It is often used in international trade to
eliminate risks such as unfamiliarity with the foreign country, customs, or political instability.
For a better interpretation of the process, I have added bellow the so called letter of
credit life cycle.
-

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i i ittil t t ti i t i t t i t tl
t

© C & it i l t' i t t i i

t t
ll i i
l t lit i i t
&t
i t lit
t lli t
ii'© B t ti t Ci t t i i

i i llit t t B©
t ti t Ctt lli
llt i i
i i llit t t ll
© i i
t t t l tti t
i t
t ll it i t i i ti 1t t t t

tii6 t t t t i t © t
t i
t t
t ll © ll t t t i t
ttiit t tt
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t t i t t t
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tt t tt tt t iti tiltit C

-ë

¦

Last year, in February 2009, the Romanian Competition Council launched a very
useful investigation for better understanding the Romanian maritime market. The
investigation was mainly based on analyzing the functioning mechanisms of the transportation
market and identifying certain dysfunctional elements related to its non competitive character.
Thus, following this analysis, it was considered that a national strategy should be prepared
and applied to the maritime sector.
This strategy should be based on supporting Romanian ship owners, on stimulating
ship construction, by using bank loans, promoting the national flag and bringing to line the
national legislation to the one of the Community.
Entering the Romanian market of maritime transport services is rather difficult,
because of the large investment needed for building or acquiring a ship, to which one should
also add the lack of concrete support from the local authorities.
This market is considered to be a competitive one, due to the large number of shippers
as compared with the reduced volume of cargo available for transport. Domestic demand for
maritime transportation is represented by the economic agents belonging to energy sector,
extractive industry, agriculture and forestry, processing industries, but also to the construction
and trade sectors. In the same time, shipping supply at the Romanian ports level is represented
by foreign ship owners and foreign maritime companies. Unfortunately, the number of
national ship owners is so reduced, that it could not be taken into account. It is the same
situation for the vessels registered under the national flag.
Due to the low volume of transported cargo, the lack of stable ship owners, the
maritime transportation market is characterized by opacity and misleading information. In
over to overcome this issue, a very important role will be played by ship brokers and shipping
companies, because they best meet the requests of demand and supply.
Another specific aspect of the Romanian maritime market is represented by freight
dependence and practiced tariffs at the level of national maritime ports, but also freight level
and tariff policies adopted at global level. This is due to the lack of a national merchant fleet
and consequently a domestic freight market.
By analyzing the market of maritime services, a series of other connected markets are
regarded, as for example the services market that deals with loading and unloading activities,
navigation market or navigation market. As a result, there were also identified some issues
related to this connected markets.
-
In this situation, it is best recommended the adoption of specific measures by the
Romanian Minister of Transport, in order to erase this problems generated by different legal
regimes applied to the same service.
As observed in Chapter 1, Chart 1.2.Total merchandise traded in EU major ports
(2009), page 13, on the services market related to cargo loading and unloading in the
Romanian ports, we deal with a very small number of port operators specialized in handling
certain categories of merchandise, which indicate dominant or even monopolistic positions on
this market. Only 1,5% of the total merchandise handled in the European Union`s major port
has been loaded or unloaded in the Romanian ports. Unfortunately, at this moment, there is no
sufficient evidence to support the practice of an anti competitive practice.
-c
BIBLIOGRAPHY
Books:
1. Alexa, C.: ^©

! ", Editura ASE, Bucureşti, 2001;
2. Batranca, G. Ä¦ ©
´, Editura AIT Laboratories, Bucuresti, 2004;
3. Beziris, A.: Ä© © ´, vol. 1,
Editura Tehnica, Bucuresti, 1988;
4. Branch, A.E.: Ä ½&! © 3 ´,
Witherby and Co. Ltd., London, 1987;
5. Branch, A.E.: Ä ½´, 8th edition, published by Abingdon, Oxon,
2007;
6. Caraiani G., Sorescu M.: Ä© ´, Editura Lumina Lex, Bucuresti,
1998;
7. Orams, M: ³ © ´, published by Routledge, New York, 1999;
8. Popa, I.: ^© ¦ ", Editura Economică Bucureşti,
2008.
9. Popescu, A.I.: Ä! © ´, Editura CIMER-ES, Bucureşti, 2008;
10.Stopford, M.: Ä ´, 3rd edition, Abingdon, Oxon, 2009;
Articles:
1. Business Inteligence Journal, Ä½ ½ ©

´, 2nd volume, August, 2009;
2. Maritime Transport Policy, Ä! ¦% ½ ½
½´, released by the European Commission, 2006;
3. National Strategy for the Marine Transportation System, Ä3 $ ( 3´,
released by the Committee on the Marine Transportation System, July, 2008;
4. Revista de Transport si Logistica, Ä ¦ ©
¦´, editia nr. 43/mai, 2010;
5. Revista de Transport si Logistica, Ä )2*2´,
editia nr. 40/februarie, 2010;
6. UNCTAD, Trade Logistics Branch of the Division on Technology and Logistics,
ÄReview of Maritime Transport´, New York and Geneva, 2009.
--
Internet sources:
1. http://www.waterencyclopedia.com/index.html
2. http://www.mt.ro/statistici/maritim.html
3. http://ec.europa.eu/taxation_customs/customs/procedural_aspects/general/declaration/i
ndex_en.htm
4. http://www.customs.ro/
5. http://www.wto.org/English/tratop_e/serv_e/transport_e/transport_maritime_e.htm
6. http://ec.europa.eu/transport/strategies/2018_maritime_transport_strategy_en.htm
7. http://www.transport-business.ro/
8. http://www.businessintelligence.com/articles.asp
9. http://www.nissoana.com/
10.http://people.hofstra.edu/geotrans/eng/ch3en/conc3en/ch3c4en.html
-*

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Table 1.1. World Merchandise Trade (2000-2008)

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Table 1.1. World Merchandise Trade (2000-2008)

Source: WTO,´å $     $          ´(2000-2008),

t   it  i l ll it  i 

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