WHY A SHIPPERS COUNCIL?

The need for reliable, regular and economic transport is felt nowhere more acutely than in
the sphere of international trading. Such transport can be by sea or air, or by road, railways
and inland waterways crossing international boundaries. It is a complicated operation. Many
technical and legal requirements have to be fulfilled. The cost of transport, the terms of
shipment, packaging and storage, delivery schedules, etc. are no doubt important; equally
important are the procedures and documentation, domestic and foreign laws and
international conventions relating to the sale and carriage of goods, terms of payment, etc.

The carriers are comparatively fewer in number and well organized; the users on the
contrary are many times more and scattered all over. Very few users of international
transport have the expertise, much less the time of acquire such expertise, to enable them
to obtain fair and reasonable terms of transport. Shippers' Councils came to be established
to meet this long-felt need. Shippers' Councils were established in Europe in the 50s. The
movement gradually spread. In India and the other neighboring countries of South and
South-East Asia the shippers' councils were formed in the 60s and the early 70s.

The first ever monopoly organization of shipowners, viz shipping conference, was
established in India nearly 100 years ago and everyone of its members was a foreign
shipping company (mainly West European). With growing emphasis on exports, it became
evident that ship users in India also needed organizations to exclusively deal with problems
and issues of international transport. Some shippers' organizations were set up, but mostly
in port towns. It was found that policies and programmes had to be coordinated at the
national level; issues of national importance had to be discussed with the carriers and the
authorities; views had to be formulated and expressed on national legislation and
international Conventions on the sale and carriage of goods. This was possible only if there
was an apex body of shippers.

The All India Shippers' Council (AISC) was thus set up in 1967. It is a voluntary organization
registered under the Societies Act. Its membership structure is all India in character and
includes national business organizations such as the Federation of Indian Chambers of
Commerce and Industry (FICCI), several export promotion councils and commodity boards,
besides regional shippers associations.

Activities

Towards fulfilling the objectives, AISC undertakes a wide spectrum of activities. It brings to
bear the shippers point of view on Government policies, plans and legislation through
representations and active participation in Advisory Bodies. Conferences, Seminars and
Meetings organized by the AISC help highlight the problems faced by shippers as also the
emerging issues. Through submission of its considered views, it contributes to the creation
of favourable domestic laws and international conventions. In negotiations with shipping
conferences, if strives to safeguard shippers interests. The Council endeavours to bring
about amicable relationship with National Shipping Lines through regular dialogues. It also
serves as a focal point for collection and dissemination of information useful to shippers in
general. In the past, AISC Journal "Trade and Transport Digest" as also "All India Cargo
Service Directory" has proved valuable not only to the shippers, but also to policy makers
and concerned international organizations. The AISC had also planned programmes to
provide training to shippers in various aspects of shipping.

ORGANISATIONAL STRUCTURE
The affairs of the Council are managed by its Governing Council. The Chairman of AISC is its
executive head. He is supported by a Deputy Chairman. Both are elected by the Governing
Council.

A number of Committees, Working Groups and Task Forces are formed from time to time to
deal with specific issues. There is also a separate division which looks after matters relating
to Air Cargo.

Secretarial Facilities

The Council is serviced by a permanent Secretariat of which the Secretary is the

administrative head.

AISC is supported by the Secretarial infrastructure of the Federation of Indian Chambers of

Commerce and Industry (FICCI), including telephones, telex and fax. AISC also has access
to FICCI's conference facilities, computer center and a well-stocked library.

MEMBERSHIP

The AISC Constitution provides for four categories of members.

• Primary Members
• Ordinary Members
• Corporate Members
• Associate Members

The zonal shippers associations are the Primary Members of the Council, and their members
ipso facto became the Associate Members of the Council.

Any all-India organisation of trade and/or industry and export promotion council is eligible
to become an Ordinary Member of the Council. Any company or firm, including export
houses, trading houses and public sector corporations having an export-import turnover of
Rs. 10 million or more, is eligible to become a Corporate Member.

European Shippers' Council

The European Shippers' Council represents...

• The interests of companies trading in Europe as users of freight transport services.

• Companies who ship the vast majority of goods distributed by sea, road, rail, air and
inland waterways.
• The 12 national transport user organisations/shippers' councils from 12 countries.
• A number of key European commodity trade associations, such as CEFIC - The
European Chemical Industry Council and CEPI, the organisation of paper industries
• European industry interests as users of freight transport services on a variety of
international governmental and non-governmental organisations including: OECD,
the Consultative Shipping Group, International Maritime Organisation, the United
Nations, WTO and The International Chamber of Commerce.

Voice of European shippers

ESC maintains an on-going dialogue and is regularly consulted by the European Commission
and other Community institutions on transport policy and logistics issues. The ESC also has
reciprocal representative arrangements with Business Europe (the European Employers
Organisation). Another unique aspect of the European Shippers' Council is that it is the only
multi-modal shippers organisation in Europe.

Cross-sector liaison

ESC maintains an on-going dialogue and is regularly consulted by the European Commission
and other Community institutions on transport policy and logistics issues. We are active in
numerous internaitonal governmental and non-governmental organisations includin: OEC,
the Consultative Shipping Group, International Maritime Organisation, the United Nations,
WTO, WCO, the International Chambers of Commerce, Business Europe and the
International Road Transport Union.

ESC regularly liaises with a wide variety of other transport industry representative groups
such as: shipowners, ports, freight forwarders, express carriers, intermodal/combined
transport operators and railways.

ESC is widely accepted to be the voice of European business as users of freight transport
services. This voice is often combined and co-ordinated with that of other shipper’
representative organisations from other regions of the world. Through the ‘Global Shippers’
Forum” (GSF) ESC annually meets with the US National Transportation League (NITL) and
the various Asian Shippers’ Councils to develop common strategies to the mutual benefit of
shippers in Europe, North-America and Asia.

The objectives of ESC

The prime objective of ESC is to promote efficient and competitive freight transport services
to enhance the competitiveness of companies conducting business in Europe.

In this respect the Council has three core purposes:

• to encourage and persuade transport policy makers to develop open and competitive
transport markets which enhance industrial competitiveness and efficiency.
• to promote industry best practice to encourage efficiency and improvements in
transport supply chains.
• to add value to the day to day business activities of its members by providing up-to-
date information on market developments.

Key actions to achieve ESC’s policy issues

Liberalisation/de-regulation of the liner shipping markets

• ESC is the principal body responsible for the successful campaign to repeal the EU
liner shipping block exemption Regulation; ESC is the lead organisation discussing
with the European Commission and the liner shipping industry how to prepare for a
more competitive liner shipping market in the post conference world (October 2008)
• ESC has mounted an urgent campaign to prevent undue exposure of shippers to
increased contractual liability threatened by proposals to implement a new
international convention on maritime cargo liability.
 • ESC is preparing business for further anti-terrorist security measures and procedures
and deterring bad legislation in this area.
• ESC is engaged with other stakeholders including freight forwarders and carriers to
improve information processes and procedures between the shipper and liner
shipping companies in order to increase business efficiencies and performance.
• ESC is lobbying for the alignment of port practices to better respond to changes in
the shipping market

Development of best practices

Today shippers are paying far greater attention to the performance of their transport and
logistics supply chains. For many manufacturers supply chain costs, including inventory and
investment costs, can represent 20/30 per cent of total company or product costs.
Transport and logistics costs are estimated to represent about 30 per cent of total supply
chain costs. Because of this magnitude of costs tied up in the supply chain, shippers now
require greater reliability and better performance in their transport and logistics supply
chain to give them enhanced competitive edge.

In light of this, the European Shippers' Council has taken the lead in assisting shippers to
improve the performance of their transport and logistics supply chains by working with
transport providers to encourage them to benchmark their services. To date some progress
has been made in the air cargo market with the launch in 1998 of the ESC Air Council's key
performance indicators and the publication of the ESC code of best practice in the dry bulk
shipping sector. Similar exercises are planned with regard to the rail, road and short sea
shipping sectors.

It should be stressed that we are only at the very beginning of implementing key
performance indicators and best practice in the transport sector. The first task has been to
raise the awareness of the need for continuous improvement in the transport sector through
best practice techniques, largely through promotion and dissemination of the ESC. The main
task is assisting in the implementation of the KPIs and the use of benchmarking in order to
measure the competitiveness and performance of one mode of transport over another. ESC
stands ready to play its full part in these developments.

The development of best practices and key performance indicators so far have focused on
the air freight industry, the bulk shipping industry and the European rail freight industry.

Air freight industry

Initiated by the UK Air Freight Forum, key performance indicators and best practices based
around service levels to the customer (ie the shippers and forwarders) were adopted and
promoted by the European Air Shippers' Council. This was in recognition of the council's
pre-eminent position as the voice of European shippers which could take the message more
effectively to a European and Global audience.

Bulk shipping voluntary code of best practice

ESC was mindful of the responsibility shippers had towards the safety of ships and their
crews moving their bulk products. ESC, with the full support of the European Commission
developed a voluntary code of best practice which European shippers should follow in order
to avoid contracting sub-standard and unsafe ships.
European rail freight industry

ESC's principle objective here is to develop KPIs and best practices in order to benchmark
railways performance. Therefore ESC has carried out a targeted survey of major shippers in
all parts of Europe to establish how freight is moving between the various modes of
transport, including road, rail, and short sea shipping. Initial findings involving over 10
million tonnes of regular freight flows have already established some clearly definable
freight corridors. There is clearly considerable work left to be done before 'generic' KPIs and
rail freight service level KPIs are developed which will enable European shippers to
accurately benchmark the performance of European rail freight services.

ESC is lobbying the European institutions to ensure that the restructuring of transport
charges and taxes should under no circumstances increase total transport costs. The
objective should be to restructure transport taxes and charges in a way that results in
adequate price signals, without hurting competitiveness.

Annual flagship event

ESC organises an annual Shipper Conference, bringing together Europe's leading users of
freight transport services to discuss the principal issues of interest and concern to buyers of
freight transport services.

Definition of freight:

Charges paid for carriage or transportation of goods (cargo) by air, land, or sea. Goods may
be transported (shipped) on freight-prepaid or freight-collect basis:

(1) If the freight is paid by the consignor (as under C&F and CIF terms) the goods remain
the consignor's property until their delivery is taken by the consignee upon their arrival at
the destination, and payment of the consignor's invoice.

(2) If freight is paid by the consignee (as under FOB terms) the goods become the
consignee's property when handed over to the carrier against a bill of lading. Also called
freightage, it may be charged on the weight or volume of the shipment (depending upon its
nature or density) and also varies according to the mode of shipment, such as bulk, break
bulk, containerized.

Calculation of Freight:

Seafreight calculations can broadly be divided into two main components; breakbulk and
containerised. In this section we deal with how you should calculate the freight costs of both
of these two types of seafreight.

Break bulk cargo calculations

Break bulk cargo, is cargo that is unitised, palletised or strapped. This cargo is measured
along the greatest length, width and height of the entire shipment. The cargo is also
weighed. Shipping lines quote break bulk cargo per "freight ton", which is either 1 metric
ton or 1 cubic metre, which ever yields the greatest revenue.
Example:
A case has a gross mass of 2 Mt.
The dimensions of the cargo are:
2.5 X 1 X 2 metres
The tariff rate quoted by the shipping line is: USD 110.00 weight or measure (freight ton)

Step 1

Multiply the metres 2.5 X 1 X 2 = 5 metres Compare to the mass = 2 Mt.

Step 2

Calculate the freight with the greater amount either the mass or the dimension. 5 X USD
110.00 = USD 550.00

Freight would be paid on the measurement and not the weight. All shipping lines carrying
cargo in a break-bulk form insist on payment based on a minimum freight charge which is
equivalent to one freight ton, one cubic metre or one metric ton.

Full Container load calculations and surcharges

Freight rates for containers are based on the container as a unit of freight irrespective of the
commodity or commodities loaded therein, (FAK) Freight All Kinds. The shipping lines quote
per box (container) either a six or twelve metre container. From time to time, abnormal or
exceptional costs arise in respect of which no provision has been made in the tariffs. For
example a shipping line cannot predict the movement of the US Dollar or the sudden
increase of the international oil price. These increases have to be taken into account by the
shipping line in order to ensure that the shipping line continues to operate at a profit. These
increases are called surcharges. All shipping lines accordingly retain the right to impose an
adjustment factor upon their rates taking into account these fluctuations. All surcharges are
expressed as a percentage of the basic freight rate. Surcharges are regularly reviewed in
the light of unforeseen circumstances, which may arise and bring cause for a surcharge
increase.

Bunker Adjustment Factor (BAF)

"Bunkers" is the generic name given to fuels and lubricants that provide energy to power
ships. The cost of bunker oil fluctuates continually and with comparatively little warning.

Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ BAF 5.2%
US Dollar 1 250.00 X 5.2% = US Dollar 65.00
Add the two amounts together
Freight rate: U S Dollar 1 315.00

Currency Adjustment Factor (CAF)

The currency adjustment factor is a mechanism for taking into account fluctuations in
exchange rates, these fluctuations occur when expenses are paid in one currency and
monies earned in another by a shipping company. The currency adjustment factor is a
mechanism for taking into account these exchange rate fluctuations. It is always expressed
as a percentage of the basic freight and is subject to regular review.

Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ CAF 6.3%
US Dollar 1 250.00 X 6.3% = US Dollar 78.75
Add the two amounts together
Freight rate: U S Dollar 1 328.75

War Surcharge

The outbreak of hostilities between nations can have a serious effect upon carriers servicing
international trade even though they may sail under a neutral flag. Carriers sailing within
the vicinity of a war zone may impose a war surcharge on freight to compensate for the
higher risks involved and the higher levels of insurance premium, which they may be
obliged to pay.

Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ WAR 5%
US Dollar 1 250.00 X 5% = US Dollar 62.50
Add the two amounts together
Freight rate: U S Dollar 1 35.50

All of the above surcharges may be applied to a single freight rate.

Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ BAF 5.2%
+ CAF 6.3%
+ WAR 5%
Total amount of surcharge 16.5%
US Dollar 1 250.00 X 16.5% = US Dollar 206.25
(add to freight rate)
US Dollar 1 456.25

Port Congestion Surcharge

Congestion in a port for a period of time can involve considerable idle time for vessels
serving that port. When a ship lies idle, this creates a huge amount of loss for the ship's
owner. Shipping lines therefore have the right to impose a surcharge on the freight to
recover revenue lost. Another factor which influences port congestion surcharge would be
labour disputes. Port congestion surcharges are calculated as a percentage of the freight
rate as expressed in the previous examples.

Consolidation services
The consolidator or groupage operator hires a container from a shipping line and then sells
that space to his clients/exporters. The benefit for the exporter is that small quantities
which, would not fill a full container load, can be shipped by sea freight in a shipping
container as an alternative to air freighting the goods. The consolidator would charge per
metric ton or cubic metre, which ever yields the greatest. Example: US Dollar 89.00 Weight
or Measure. The shipping line would have a contract of carriage with the consolidator and in
turn the consolidator would have a contract of carriage with the exporter. The consolidator
would be issued with an combined through bill of lading from the shipping line and then
present the exporter with a house bill of lading (See bill of lading below)

The bill of lading

The bill of lading performs the following functions:

• A contract of carriage between the shipper of the cargo and the carrying shipping
company.
• The name of the shipper and the receiver of the goods the consignee.
• The contents of the packages as declared by the shipper.
• Shipping details such as: port of loading and the port of discharge.
• The bill of lading is a freight invoice and indicates if the freight costs have been
prepaid by the exporter or will be paid by the importer, "freight collect".
• The bill of lading states the number of packages, weight and dimension of the
shipment.
• It is a document of title to the goods stated thereon.

Every original bill of lading signed by or on behalf of the shipping company is a document of
title to the underlying goods. This special function of a bill of lading is achieved by a form of
words which state: "In witness whereof the undersigned on behalf of the shipping company
has signed three bills of lading all of this tenor and date, one of which being accomplished
the others to stand void". "Accomplishing" the bill of lading requires the surrender to the
shipping line or its agents in the port or place of destination one of the signed original bills
of lading duly endorsed by the consignee/importer. Unless and until one of the original bills
of lading as described above is surrendered, the shipping line will not release the cargo to
the consignee/importer. Upon surrender of any one of the originals the other originals bills
of lading become void.

Endorsed Bills of Lading

Bills of lading can only be issued with the words "shipped on board", if the cargo has
actually been loaded onto the named vessel at the port of loading. By insisting that the
exporter supplies the importer with a "shipped on board" bill of lading, the importer obtains
conclusive evidence that the goods have been loaded on board the intended vessel.

Some importers insist that the exporter presents "shipped on board" bills as a condition for
payment. "Received for shipment", bills of lading can be issued as soon as the goods have
been delivered into the custody of the carrying shipping company or its agent either at the
point of receipt or at the port of loading. Thus, a 'received for shipment", bill of lading will
only indicate the ship in which the cargo is intended to be loaded on. The risk remains that
the loading may, for many reasons delayed or the cargo may not be loaded at all.
Banks responsible for the payment of funds in payment for goods under letters of credit will
not release the funds if the bill of lading has been endorsed "received for shipment".

Sea freight payment terms

Liner terms

Liner operators quote their freight rates on a liner term basis. A series of highly specialised
operations are required in the process of loading cargoes efficiently into a ship, and securing
those cargoes in the ship's hold for safe transportation to the port of destination. Another
series of equally highly specialised operations must take place in order to extract the cargo
from the ship's hold and place them safely on the quayside at the port of destination. All
these costs are collectively known as terminal handling charges - THC.

Payment of freight

The word "freight" has two alternative meanings: it may be used to refer to the movement
of the cargo; by road, rail sea or air, or it may be used to denote the charge raised by the
carrier for the service of transportation.

Freight currency

In the context of international carriage by sea, the "tariff currency", is the United States
Dollar. It is common practice in the shipping industry that freight is payable as the
consignment/cargo is loaded on board the intended vessel.

Immediately the cargo has been placed on board, the shipping company is entitled to full
payment, even though the ship may sink along the quayside at the loading berth. The
amount of freight due is paid either at the port of loading in exchange for the issuance of
the original bills of lading, or at the port of discharge in exchange for the release of the
consignment from the shipping company's custody. When freight is paid in any currency
other than the "tariff currency", the amount due in that "tariff currency", will be converted
at the rate applicable on the date of shipment or such other date as agreed upon by the
carrier.