Titchfield High School

Fort George, Port Antonio

Portland

Business Department
Logistics and Supply Chain Operations Discussion Sheet

Characteristics of tramp and liner Shipping

Tramp Shipping

 Vessels predominantly carry full shiploads of bulk cargo - homogeneous cargo transported in large
consignments.

 No fixed schedules or routes - contract to carry goods between two ports or ranges.

 Freight rates are not advertised/published as a tariff as the freight market is regulated by supply and
demand.

 Vessels are usually individually contracted under negotiated terms set out in a Charter Party for a particular
period (time charter), voyage (voyage charter) or cargo.

 Companies are comparatively smaller than liner companies and mostly individually owned and operated.

 Mostly bulk carriers including tankers and the ships tend to be a little older.
Liner Shipping

 Vessels predominantly carry passengers and/or general cargo - heterogeneous cargo includes bales and
motor vehicles.

 Vessels ply between predetermined ports on set schedules and routes.

 Charging fixed advertised freight rates, and each shipping line has an established freight rate.

 Agreement for hire of a cargo-liner is recorded in a contract of carriage (affreightment), and a Bill of Lading,
which records details and may act as legal evidence of the existence of a contract of carriage, and a Seaway
Bill are issued.

 Operated by large companies and may be within conferences.

 Mostly RO/RO, container and multipurpose vessels that are flexible enough for heterogeneous cargoes.

Types of Charters
 Voyage Charter. The basic hiring of a vessel and its crew for a voyage between the port of loading and the port
of discharge is known as a voyage charter. ...
 Time Charter. A time charter refers to the hiring of a vessel for a specific period of time. ...
 The Demise Charter. ...
 Contract of Affreightment.

Reasons for chartering rather than owning a vessel:

 Reduces risks given that the shipping industry is prone to peaks and troughs

 Is a quicker way of replacement where there are tonnage requirements or out-of-service vessels.

 Complies with a capital conservation policy to hire rather than own

 Avoids return ballast voyages (voyages without cargo that stabilize the vessel using ballast).

Characteristics of demise (bare-boat) charter:

A demise charter is the same as leasing the vessel. In a demise (bare-boat) charter:
- The charterer hires an unmanned vessel (bare vessel) and therefore provides the cargo and crew, and takes full
responsibility for vessel operation.
- The ship owner pays only insurance and depreciation unless otherwise agreed in the charter party.
- A charter may range from a few weeks, months, years, or for the entire life of the vessel.
- Oftentimes, the charterer is given the option to buy the vessel at the end of the lease.

Characteristics of a non-demise charter:

A non-demise charter is either a voyage charter or time charter. In a non-demise charter:
- Chartering is for a stated period for pre-arranged hire – freight money (charged per tonne dwt per calendar
month)
- The ship owner provides the vessel and crew
- The ship owner continues to pay operating costs of vessel (crew, maintenance and repair, stores, lubricants,
insurance and administration)
- Where the charterer breaches the contract, he must compensate the owner.

Time and voyage charter

A time charter is a type of vessel chartering whereby the ship owner leases the ship for a set length of time. A
voyage charter is a type of vessel chartering whereby the ship owner leases the ship for the duration of a specific
voyage

Characteristics of time and voyage charter

Time Charter
 A contract where the charterer agrees to use the ship and her crew for a specific period of time within the agreed trading
limit.

 Charterer directs commercial operations of the vessel, and pays all voyage expenses and cargo handling costs.

 Vessels carry general cargo and shipowner is compensated with hire.

 Shipowner provides a warranty regarding the vessel’s performance in terms of speed and fuel consumption and
terms of hire will be adjusted if not met.

 Charter party sets out ‘off hire’ (when not required to pay hire) when the charterer is not required to pay for
the vessel, for example, emergency repairs.

 Charterer is required to compensate vessel owners for damages to vessel beyond normal ‘wear and tear’.

Voyage Charter
 A contract to use the ship and her crew to carry a specific cargo under an agreed voyage; and where there is
breach the charterer must compensate the owner.

 Shipowner directs commercial operations on instructions of the charterer. Usually, except for freight charges,
all costs are paid by the shipowner (gross terms), unless otherwise agreed in the charter party. For example,
loading and discharge expenses (liner terms and f.i.o.).
FIO means Free In/Out; which when used from a liners perspective means that the client (shipper or consignee)
are responsible for the loading (In) and discharging (Out) costs at the Port of Load and Port of Discharge
respectively.. The lines responsibility and costs commences/ceases when the cargo passes the ships rail. .

 Vessel is hired to carry specific cargoes between specific ports for a prearranged freight.

 Vessel owner is responsible for the operational conditions of the vessel and where the vessel is not sea-worthy
or is less than it is contracted, the charterer may invoke the ‘off-hire’ clause.

 Charter party sets out ‘off hire’ (when not required to pay freight).
Entry into force
In law, coming into force or entry into force (also called commencement) is the process by which legislation,
regulations, treaties and other legal instruments come to have legal force and effect. The term is closely related to
the date of this transition

Entry into force is a specific date when a required number of states have approved a convention. This approval
requires government’s obligations to put convention measures in place. Possible implications of entry into force
include:

 National law often has to be enacted or amended to enforce the provisions of the convention.

 Special facilities may have to be provided in some cases.

 An inspectorate may have to be appointed or trained to perform functions under the convention.

 Adequate notice must be given to relevant stakeholders (shipbuilders, shipowners, and other interested parties)

Public/Private partnership:

Public/private partnership is a relationship between the public and private sector, in which the private sector
manages and operates the business that is normally owned by the government.

Merits of Public/Private Partnership for Port Operations:

 Greater access to capital to aid investments: expand and modernize the port so that greater efficiency can be
achieved.

 Retention of highly skilled and qualified staff with salaries based on industry standard: better quality of service
and high levels of productivity.

 Allows the port administration to compete in international shipping: better quality of shipping lines calling at the
port.

 The quality of port services would improve through the acquisition of quality equipment and services: greater
productivity and improved vessel turnaround time.

 Reduction in industrial relations problems: to have a more satisfied workforce which will improve efficiency and
productivity and satisfy international customers.

Roles of harbour master/port captain:

 Takes care of the ships and other customers, to make sure that the quays are used in the best way, without
more delays than necessary for the customers.

 Supervises the official depths of the channel entrance and harbour basins.

 Supervises lights and buoys.

 Supervises the harbour areas and quays to keep the installation in good order, including safety equipment.

 Ensures that the harbour area is used according to the harbour regulations.

 Takes care of ships and commodity dues, and other port charges (light, harbour and tonnage dues).

 Supervises the pilots and hydrographic surveyors.

Factors aiding inefficiency and uncompetiveness of port:

 Excessive Government control and bureaucracies – slows down the rate at which work is done; it adds to
duplication, errors and costs; and it discourages the private sector and oftentimes promotes corruption (that is, it
is anti-trade facilitation).

 Poor infrastructure development – slows down the turnaround time of cargo and vessel through ports. This
significantly adds to the vessel cost. This may serve as a deterrent to vessel call.

 Weak institutional development and the non-implementation of key international maritime standards and
customary practices – exasperates low operating standards (that is, prevents conformity to national preventative
practices and prevents a port from being internationally competitive).

 Lack of effective channel maintenance and the provision of requisite port equipment, high port charges such as
light, harbour and tonnage dues. This serves to repel international lines from using a port as it means that calls to
these ports are extremely high.
 A heavy dependence on tidal conditions to facilitate the movements of ships in and out of the port thereby
resulting in unnecessary delays and the attracting of demurrage charges. (The term demurrage means the charge
that the merchant pays for the use of the container within the terminal beyond the free time period). This serves to
make time in port long and costly, rendering such ports unattractive.

Measures to address problem of piracy and armed robbery:

 The fostering of bi-lateral relations through collaboration for surveillance and information sharing.

 Increased surveillance in the territorial waters of the lateral and coastal state.

 Encourage inter-sector collaboration and information sharing.

 Inform IMO and solicit technical cooperation.

 Invert more sophisticated patrol boats and surveillance equipment.

 Improve the capability or capacity of the coast station by investing in more up-to-date technology.

Importance of port services:

(i) Port reception facilities: In keeping with international maritime standards as reflected in the MARPOL
Convention, the coastal state must provide reception facilities for garbage and other waste. This
facility is requested by ships calling the port. In the absence of the facility, ships may be left with the
only alternative which is to pollute the waterways by dumping garbage and other substances.

(ii) Aids to navigation: Aids to navigation are essential for giving guidance to seamen as to the ship’s
channel and to serve as a guide, whether it is a buoy or beacon to ships entering or leaving the port.
One of the principal navigational aids is the country’s lighthouse. Navigational aids are regarded as one
of the critical port services for the facilitation of domestic and international commercial shipping.

(iii) Harbour patrols: Harbour patrols are important for the supplementing of the surveillance offered by
the coast guard. This is usually implemented by the Harbour of Ports Authority, and it is often regarded
as invaluable to the safety and security regimes. They help in reducing incidents of petty theft and
armed robbery. It deters vandalism of navigational aids and ISPS initiatives.

Implications of inefficient dredging service: The implications of an inefficient dredging service for a port are very
serious. In cases where there are estuarial ports, the situation is even worse. The absence of scheduled
maintenance dredging may lead to the port being marginalized. It would prevent ship operators from benefitting
from economies of scale. Demurrage charges could be frequently very high. It limits vessel size and types that
call the port. An inefficient dredging service makes the port uncompetitive and hinders international trade.

An Analysis of the development of logistics in Antigua and Barbuda

Strategies for economic growth adopted by Antigua and Barbuda have varied over a period of time. During the
last few decades, global trade policy has focused on outward-oriented growth policies in which importance was
given to the establishment of Special Economic Zones as an instrument to boost employment, export and foreign
exchange. These Special Economic Zones have been the catalyst that have transformed Antigua and Barbuda into
a business hub. A complete rehabilitation of the port and cruise terminals is underway making the country a
maritime logistics hub in the Eastern Caribbean. Antigua and Barbuda’s development as an integrated logistics
hub will transform into a hub of business excellence by raising the productivity of economic sectors and
maintaining high production quality standards.

Added reading
As an island state, Antigua and Barbuda places emphasis on its shipping trade and possesses one of the most
important freight hubs of the Caribbean: St John’s deep water harbour is located in the state’s capital in Antigua
and is the main transit point for containerised cargo. A high number of bulk carriers, cargo vessels, containers and
other commercial vessels are located in the islands, with the CIA placing the country 9 th in the world in terms of its
merchant marine, although the majority of these are foreign-owned. Two entities run operations at the port – the
Antigua Port Authority provides shore-side labour with longshoremen and equipment operators, while local
shipping agencies provide the stevedoring onboard the ships and husbandry services for vessels. There is not an
active Shipping Association, but shipping agents meet regularly to discuss port matters affecting them and issues
relating to operation at the Port Authority. The main liner services in operation are CMA CGM lines (represented by
Bryson Shipping), Seaboard (represented by Carb Seas), Crowlet (represented by Caribbean Maritime Services),
Tropical Shipping (represented by Antigua Maritime Services) and Geest Line (represented by Francis Trading
Agencies Ltd).

The major freight centre for the country’s aviation, the V.C. Bird International Airport, is to be found on the island
of Antigua. The airport is served by a multitude of cargo plane connections, with the World Bank calculating the
level of air transport freight at 0.79 million ton-km (2010).

Antigua and Barbuda's trade policy is clearly not developed in isolation, but rather within a regional and global
trade context. Over the years, the number of commitments derived from participation in the World Trade
Organisation (WTO), as well as CARICOM, the OECS, and other regional trade fora has increased. As such,
documents that provide some insight into these regional and global policy frameworks have been included.

The emphasis in Antigua and Barbuda Trade policy, has evolved over time, changing from an inward looking
import substitution regime to a more outward orientation. The cornerstone of Antigua and Barbuda’s current
development policy is the encouragement of local and foreign direct investment

There are around 20 freight forwarders, cargo agents couriers operating in the islands, all based in the capital of
St John’s. International consultancy firm PwC has a presence on the islands. The Ministry of Finance is
responsible for shipping at the governmental level.

Plans to transform the country’s port into a global shipping hub are presently underway.

Port Manager Darwin Telemaque said discussions are taking place with experts from Jamaica – which houses
the only global seaport in the Caricom area – in a bid to set up a similar system at Deep Water Harbour.

Talks are presently underway with two port owners in Jamaica about building such a framework in Antigua.

Global hubs like the one in Jamaica receive cargo from all over the world and, according to Telemaque, following
these discussions the hope is to adopt a similar service which would then result in the twin island nation
expanding business with other countries.

Transitioning the port into a global hub will not only see an increase in the amount of cargo coming into Antigua,
but it would also increase revenue and offer opportunities for Antigua to become a hub for OECS countries whose
ports cannot operate such a service.

Benefits of logistics development to Antigua and Barbuda economy

Some general benefits of logistics in an economy

In business, success in logistics translates to increased efficiencies, lower costs, higher production rates, better inventory
control, smarter use of warehouse space, increased customer and supplier satisfaction, and an improved customer
experience.

 An economic environment that attracts foreign firms – this has been the major compound for expanding Antigua and
Barbuda’s economy through foreign direct investment (FDI), and by making the environment attractive to facilitate ease of
doing business.

 The availability of the country’s exclusive economic zone (EEZ) supports several marine economic sectors that contribute
significantly to the national GDP. Built around a port and airport – this has helped to facilitate trade within and outside
Antigua and Barbuda and has helped to connect Antigua and Barbuda to the world through an effective and efficient
transportation network.

 Provision of living standards to meet the demands of a large expatriate population – a theory of society is that emerging
economies and/or newly industrialized economy will attract or become attractive to different tourists (business and non-
business) alike. This one factor accounts for the reason why the tourism industry in Antigua and Barbuda has developed so
well in the logistics and supply chain industry.

 Track record of port and airport operator managing complex processes - This has resulted in the following:

- Efficiency of the clearance process (that is, speed, simplicity and predictability of formalities) by border control
agencies, including Customs.
 - Quality of trade and transport related infrastructure (for example, ports, railroads, roads, information technology)

- Ease of arranging competitively priced shipments - Competence and quality of logistics services (for example,
transport operators, customs brokers).

- Ability to track and trace consignments. - Timeliness of shipments in reaching destination within the scheduled or
expected delivery time.

(a) Government policies:

The development of the logistics and supply chain industry needs government attention as government policy needs to
address identified deficiencies in market integrity, tax policy, and logistics park development, and to eliminate
administrative barriers and create policies that favour local logistics enterprises in order to get their buy in. The areas of
policy attention can be divided into infrastructure, market regulation, transport and logistics practices, and policy
framework. To support the development of the logistics industry, government policy would clarify regulatory functions and
responsibilities among different agencies, streamline interactions, and integrate business processes as quickly as possible. In
addition, government policy should consider using financial incentives to promote logistics development. Government
policy should also introduce guidelines to promote the development of small and medium-sized logistics enterprises and
support development of logistics enterprises of all sizes so that they can be on an equal footing with large logistics
companies. Variations in logistics and supply chain between Panama and Antigua and Barbuda stem from differences in the
quality and cost of infrastructure services as well as in government policies, procedures, and institutional frameworks.
These policies and procedures have a significant effect on trade competitiveness. In Antigua and Barbuda for example,
despite its reliance on marine sectors, less than 1 per cent of the marine waters of Antigua and Barbuda marine waters are
under environmental protection. As a Small Island Developing State (SIDS), Antigua and Barbuda faces significant
environmental and infrastructural challenges including effective waste management infrastructure, water management (a
major concern due to limited natural freshwater resources), deforestation (including mangroves), sargassum blooms, a
decline in fish stocks, and plastic pollution. Linked to heavy reliance on tourism, Antigua and Barbuda is among the top 30
global plastic polluters per capita.

Key challenges facing the transport and ports sector include the need to grow and shift existing infrastructure to be climate
resilient and carbon neutral, to protect against extreme weather events, and to ensure that coastal development does not
lead to environmental damage. 

(b) Private sector policies:

The private sector in logistics and supply chain is mostly composed of shippers, traders, manufacturers and consignees who
require access to efficient and effective logistics services to support their market competitiveness. The logistics service
industry is therefore critical to private sector competitiveness enhancement as it offers optimal logistical solutions based on
existing infrastructure and institutional framework. Infrastructure and institutional framework is the context in which the
logistics industry operates. A supporting and facilitating context for the logistics industry will greatly benefit the private
sector in terms of access to competitive logistics services.

Panama's logistics sector is seen as highly developed on a regional scale. The aviation sector and maritime sector, made up
by the Panama Canal and different port terminals on both the Pacific and the Atlantic Ocean, form the backbone of the
logistical sector of the country. The Panama Canal allows for cheaper and easier methods to transport cargo and
commercial goods between the Pacific and Atlantic Oceans. It eliminated the need for ships to sail around Cape Horn and
the southernmost parts of South America to reach their destinations.

Logistics services available in Panama are a reflection of the economic development achieved by the country, with more
sophisticated services available in the country. Logistics service providers in Panama provide extensive logistical and supply
chain services, whereas providers in Antigua and Barbuda provide improved logistics services such as trucking, warehousing,
or customs brokerage, import and export of different types of cargos needed worldwide. However, customers have become
more demanding in Panama because of the availability of more updated global logistics services providers offering their
integrated services.