TMW Basic-Liner Trade

TMW Basic Liner Trade
Liner Trade
This document contains a text extract of the e-learning course

“TMW Basic Liner Trade”.
We recommend that you complete the e-learning course for enhanced learning,
examples and illustrations.
The course is available in Maersk Learning Centre at http://mlc.apmoller.net
Copyright © 2005 A.P. Møller - Mærsk A/S, Centre Education.

Internal document. Not for distribution outside the A.P. Moller - Maersk Group.
Table of Contents
Actors .....................................................................................4
Actors – Introduction.............................................................................................................4
Actors – Main Actors.............................................................................................................4
Actors – Other Actors ...........................................................................................................4
Liner Trade and Network ......................................................6

Liner Trade and Network – Introduction ...............................................................................6
Liner Trade and Network – Containerisation ........................................................................6
Liner Trade and Network – Liner Trade vs. Tramp Trade ....................................................7
Liner Trade and Network – Liner Network ............................................................................7
Liner Trade and Network – Hub ports...................................................................................8
Liner Trade and Network – Vessel Scheduling.....................................................................8
Liner Trade and Network – Competitors.............................................................................10
Cargo and Containers.........................................................11

Cargo and Containers – Introduction..................................................................................11
Cargo and Containers – Commodities................................................................................11
Cargo and Containers – Container Types ..........................................................................12
Cargo and Containers – Container Sizes ...........................................................................12
Cargo and Containers – TEU/FFE......................................................................................14
Cargo and Containers – Container Seal and Number ........................................................14
Cargo and Containers – Load types and locations.............................................................14
Cargo and Containers – Transport modes .........................................................................15
Cargo and Containers – Locations .....................................................................................16
Freight and Charges ...........................................................17

Freight and Charges – Introduction ....................................................................................17
Freight and Charges – Freight and Charges ......................................................................17
Freight and Charges – Payment.........................................................................................17
Freight and Charges – Tariff / Service Contract .................................................................18
Freight and Charges – Quotation .......................................................................................19
Freight and Charges – Conferences...................................................................................20
Version 1.1. March 2005 Page 2 © A.P.Møller - Mærsk A/S, Centre Education
Not for distribution outside the A.P. Moller - Maersk Group
Processes and Documents ................................................22

Processes and Documents – Introduction ..........................................................................22
Processes and Documents – Sailing Schedule ..................................................................22
Processes and Documents – Origin Flow...........................................................................23
Processes and Documents – Origin Documents ................................................................23
Processes and Documents – Destination Flow ..................................................................25
Processes and Documents – Destination Documents........................................................26
Processes and Documents – Free Time ............................................................................27
Processes and Documents – Intermodal............................................................................28
Vessels and Planning .........................................................30

Vessels and Planning – Introduction ..................................................................................30
Vessels and Planning – Terminal Activities ........................................................................30
Vessels and Planning – Vessel Elements ..........................................................................31
Vessels and Planning – Stowage Co-ordination.................................................................33
Vessels and Planning – Vessel Size ..................................................................................33
Vessels and Planning – Vessel Deployment ......................................................................34
Vessels and Planning – Own/Charter Vessels ...................................................................35
Vessels and Planning – Strategic Co-operation .................................................................36
Organisation ........................................................................37
Organisation - Introduction .................................................................................................37
Organisation – Centre.........................................................................................................37
Organisation – Agents ........................................................................................................39
Issues and Challenges........................................................42

Issues and Challenges – Introduction ................................................................................42
Issues and Challenges – Trade Imbalance ........................................................................42
Issues and Challenges – Utilisation....................................................................................42
Issues and Challenges – Security ......................................................................................43
Issues and Challenges – Environment ...............................................................................45
Actors
Actors – Introduction
There are many parties involved in an international trade situation. This section
takes you through some of the actors who are often involved in a shipping process.
Actors – Main Actors

Three important actors that you must know are the Shipper, the Consignee and the
Carrier:
• The Shipper is the party who delivers goods for shipment. The shipper may
also be known as the Exporter, Seller or Vendor.
• The Consignee is the party who is entitled to receive the goods at destination.
The consignee may also be referred to as the Importer or Buyer.
• The Carrier is the party who transports the goods from origin to destination. The
carrier is also known as the Shipping Line or Transport Provider.
The shipper and consignee are the shipping line’s customers and often represent
the seller and buyer of goods. However, note that in some cases, traders or buying
agents are involved in the international trade transaction and if so, the actual seller
or buyer of the goods may not be involved in the shipping process at all. In such
case, it is the trader or buying agent who is the shipping line’s customer and will
appear on the paperwork as shipper and consignee.
Actors – Other Actors

Other parties in the shipping process include:
• Freight Forwarders – who are hired by some exporters and importers to assist
with shipping-related processes such as booking, documentation and cargo
consolidation.
• Banks - facilitate payment for goods between exporter and importer, e.g.
through a payment mechanism known as Letter of Credit.
• Customs House Brokers (CHB) – are licensed to assist exporters and importers
to clear goods through Customs.
• Terminal Operators - handle all activities in the port area on behalf of one or
more shipping lines, e.g. loading and discharging of containers.
• Government Authorities - create, administrate and enforce compliance with

legislation related to international trade, e.g. trade and security matters.
Liner Trade and Network

Liner Trade and Network – Introduction
In this section, you will learn about concepts such as containerisation, liner trade,
liner networks, hubports and vessel scheduling. There is also a short introduction
to the largest global ocean carriers.
Liner Trade and Network – Containerisation

The first container shipment took place in 1956.
Until then, general cargo was transported in cartons or on pallets which were
loaded onboard the vessels one by one. This type of transport is referred to as
“break-bulk” shipping and still exists today. The invention of the container has
however had enormous impact on the shipping industry and international trade in
general. Today, container shipping is the dominant way of transporting general
cargo by sea.
Break-bulk shipping
“Break-bulk” cargo consists of loose, non-containerised cargo, e.g. in cartons or on
pallets. It requires significant manual handling to load and discharge goods
onto/from the vessel’s cargo holds but may be needed if cargo is not suitable for
stuffing in a container, e.g. due to the cargo dimensions.
The disadvantages of break-bulk shipping is that it is labor-intensive and goods are

handled many times during loading/unloading, there is an increased risk of damage
or loss due to handling and weather and an increased risk of theft and pilferage.
Container shipping
A container is a steel/aluminium box. Its great advantage in shipping is that after
the merchant has stowed his goods in the container and the doors are closed, the
container can be loaded onto vessels, freight trains, trucks and other means of
transport without anybody touching the actual cargo. This is both cost-efficient and
safe.
The advantages of container shipping include that it is easy to transfer cargo

between different transport modes (vessel, road, rail); risks of damage, loss and
pilferage are reduced; load/unload operations in port are efficient and therefore
vessels spend shorter time in port (= less cost, faster transit).
The disadvantage of container shipping for the carrier is that it requires capital
investments in equipment and infrastructure (containers, cranes, etc.).
Liner Trade and Network – Liner Trade vs. Tramp Trade

A fundamental distinction in shipping is the difference between tramp trade and
liner trade.
Tramp vessels go wherever the cargo takes them while liner vessels operate on a
fixed route with a fixed schedule.
Maersk Sealand is a container shipping line, i.e. we operate container vessels on

liner trade basis.
Characteristics of tramp trade:

Tramp trade is a transportation situation similar to when you take a taxi – the
vessel goes where the customer wants to go. This also means that the carrier has
to manage the uncertainty of route and schedules for future sailings.
There are only a single or few commodities onboard and few shippers and
consignees per sailing.
Tramp trade is typically used for commodities such as oil, steel, grain etc.
Characteristics of liner trade:

Liner trade is similar to when you take the bus – vessels operate on a
predetermined route. There are many different commodities onboard and many
shippers and consignees per sailing.
Liner trade offers customers regular space between two ports at fixed intervals and
is the most common type of operation for container vessels
Liner Trade and Network – Liner Network

Shipping lines typically operate vessels in one or more trade lanes, providing
ocean transport that follows the major cargo flows in international trade. In this
way, shipping lines can serve exporters and importers with regular sailings
between ports world wide.
Major trade lanes in container shipping follow the North-South, East-West and
intra-regional trade patterns of the world.
Within each trade, a carrier may operate a number of services or so-called

“strings”, i.e. vessel routes between predetermined ports. For easy reference, each
service/string is typically given a name or number. For example, Maersk Sealand’s
AE1 and AE2 strings run between Asia and Europe.
By connecting the strings/services in the different trade lanes and transshipping

cargo at major hub ports, the carrier creates a network that offers customers
transport to and from a high number of locations world wide.
The main strings cover major ports and are served by large, so-called Mother
vessels. Smaller container vessels suitable of calling smaller ports are deployed to
carry containers to and from the large ports. They are called Feeder vessels
because they “feed” cargo to the mother vessels.
Liner Trade and Network – Hub ports

Ports at which containers are transshipped from one vessel (one string) to another
are referred to as Hub ports.
Some hub ports have minimal hinterland of their own but just happen to be well-
positioned geographically to support the liner network at a point where it is efficient
to let vessel routes cross, e.g. Tanjung Pelepas in Malaysia or Balboa and
Manzanillo in Panama.
Other ports, e.g. Rotterdam in Europe, are not only important hubs but also act as
gateways for export and import of cargo from/to many inland locations.
Cabotage legislation
In some countries, e.g. USA and Brazil, so-called cabotage laws prevent foreign
vessels from carrying local cargo between two local ports. In the USA, due to
cabotage legislation known as the Jones Act, global carriers are generally not able
to tranship US-cargo from one vessel to another in a US port. This is why Maersk
Sealand does not consider US ports “major hub ports”.
Liner Trade and Network – Vessel Scheduling

When deciding which ports to call and which routes to sail, the shipping line takes
a number of elements into consideration.
Customer requirements
The basis for vessel scheduling is essentially the customers’ requirements.
When deciding which ports to call, the shipping line must consider:
• Trade patterns and demand: Where from/to is cargo moving?
• Transit time: How many days are the customers expecting or willing to accept?
(limits how many ports can be included in the rotation)
• Customer demands: For example, is arrival on a certain day of the week

required?
Profitability
The shipping line also considers the profit potential in serving a particular route:
• Is there enough cargo on a regular basis?
• Is it a stable market?
• How many other carriers are operating in the market?
• How competitive is the market?
Vessel availability
If a route/trade is deemed attractive from a demand and profitability perspective,
the next step is to consider vessel availability:
• Which vessel type(s) would be suitable for this route/string?
• Do we have vessels available?
• Can we make vessels available?
Port availability
It is also necessary to decide which exact ports to call:
• Which are the best located ports compared to the market?
• Can the ports accommodate the vessels that we plan to deploy (size)?
• What are the costs of calling a particular port?
Scheduling
When the strategic decisions regarding routes and ports have been made, it is time
to plan the vessel schedules at a more detailed level, for example:
• How long does it take to go from one port to another?
• When can a berth be made available at the port?
• Do we need to pass through any canals at a certain time?
• Do we have to consider tide?
• Is arrival on a certain week day required? (In some parts of the world,
businesses close on Sundays. In others, Friday is a day off).
Strategic planning
All in all, many elements are taken into consideration in the scheduling process
and it is an important part of a shipping line’s strategic planning.
Shipping lines will continuously monitor the market situation and make regular
adjustments to their services and port rotations.
Especially when new routes are opened or decisions are made to move vessels
from one service to another, careful planning is required.
Liner Trade and Network – Competitors

Maersk Sealand is one of the world’s largest liner shipping companies but operates
in a competitive market with many players. A number of carriers compete with
Maersk Sealand on a global scale, offering services to ports worldwide, while some
smaller carriers compete with Maersk Sealand on a smaller scale by serving niche
trades or regional markets.
Especially if you are involved in sales, you must be familiar with the major players.
In January 2005, the 20 largest global carriers were (in order of nominal fleet size
(TEU) operated):
1. Maersk Sealand (incl. Safmarine)

2. Mediterranean Shipping Company (MSC)
3. Evergreen Marine Corp.
4. P&O Nedlloyd
5. CMA-CGM
6. APL
7. Hanjin Shipping (incl. Senator Lines)
8. Nippon Yusen Kaisha Line (NYK)
9. Cosco Container Lines
10. China Shipping Container Line (CSCL)
11. Orient Overseas Container Line (OOCL)
12. Kawasaki Kisen Kaisha Ltd (K-Line)
13. Zim Shipping
14. Mitsui O.S.K. (MOL)
15. Compañia Sudamericana de Vapores (CSAV)
16. CP Ships (incl. CanMar, Cast, ANZDL, Contship, Lykes Line, TMM Line, Italia
Line)
17. Hapag-Lloyd
18. Yang Ming
19. Hamburg Süd (incl. Hamburg Süd, Columbus Line, Alianca, Ellerman)
20. Hyundai Merchant Marime (HMM)
(Source: Alphaliner, January 2005)
Cargo and Containers

Cargo and Containers – Introduction
Cargo and containers are fundamental elements of shipping. Additionally, this
section will go through different load types.
Cargo and Containers – Commodities

Containerised shipping allows many different cargo types to be carried on the
same vessel. In this way, Maersk Sealand and other shipping lines are able to
accommodate transport needs of many different customers.
Some commodities require special containers, handling or documentation and

therefore customer must advise the commodity type. Generally, we refer to four
cargo types: General, Hazardous, Out of Gauge and Reefer cargo.
General cargo
Normal merchandise and goods, often packed in boxes/cartons or bags, e.g.
clothing, furniture, toys, components, plastic products and much more. This type of
cargo includes both raw materials, components for manufacturing and finished
goods.
Hazardous cargo
Goods of a dangerous nature, e.g. explosives, chemicals and firecrackers. The
International Maritime Organisation (IMO) operates with 9 classes of dangerous
goods. The class determines special handling, documentation and stowage
requirements and level of precaution.
Out of Gauge cargo (OOG)

Odd-sized goods that do not fit into a standard container, e.g. windmills and large
machinery.
Reefer cargo
Goods requiring a temperature- or humidity-controlled environment during
transport are carried in special reefer containers, e.g. fresh fruit, fish and other
perishable products. Leather products may also be carried in reefer containers
(requires humidity control).
Cargo and Containers – Container Types

Different types of cargo require different types of containers. Most cargo is carried
in standard dry cargo containers, i.e. closed aluminum or steel boxes with doors at
one end. But the cargo type or cargo dimensions may require that different
equipment types are used.
The shipping line that has special equipment available and is able to handle such
shipments onboard its vessels has an advantage over others.
Some of the main container types are:
Dry freight / standard containers

A dry freight container is a closed box with one set of doors, and is designed for
general cargo. Maersk dry containers are made of aluminium or steel and are
equipped with inside plywood lining.
Reefer containers
A reefer container is a container equipped with lining and machinery that can
maintain and control temperature, humidity and ventilation during shipment.
Flat rack containers

A flat rack container is a unit which consists of a base frame and two end walls, or
alternatively, four individual corner posts. Flat racks are ideal for transporting
heavy machinery and pipes, since they can be loaded from the top or from the
sides. The end walls/corner posts can be either fixed or collapsible. Maersk
Sealand flat rack containers are available in 20’ and 40’ lengths.
Open top containers

An open top container of aluminium or steel allows cargo to be lowered into the
container by means of a crane if the cargo is not suited for loading through the
doors. Rather than having a permanent metal roof, the open top container is
equipped with removable roof bows and a tarpaulin cover. Also the door header
can be removed. Bullrings for securing are mounted on the floor.
Open top containers are designed primarily for heavy loads requiring top loading,
and of course for over height cargo.
Cargo and Containers – Container Sizes

Containers also exist in different sizes to accommodate different customer needs.
Length and Height

In international shipping, containers follow standard measurements which allows
for efficient handling in terminals and onboard vessels.
Standard lengths are 20 and 40 foot. Additionally, 45 foot containers may be

available.
Standard height is 8 feet and 6 inches. Additional height is added to some 40’ and
45’ containers which are then referred to as High Cube containers.
Payload and Capacity

There is a limit to how much a container can carry in terms of weight and volume.
It is primarily the volume of cargo to be shipped (cubic metre / square feet volume)
and the cargo dimensions that determine which container size is used but weight
must also be considered. Heavy containers may require special handling during
terminal operations, container stacking and transport by road.
“Payload” is the maximum cargo weight the container is built to carry (depends on
the size of the container and which type of materials it is built of, e.g. aluminium or
steel).
“Capacity” is the absolute maximum cubic capacity of the container (CBM or Sq.
Feet) but note that if cargo is e.g. palletised or packed in boxes, the loading
capacity is often less. For example, the maximum capacity of a 20’ container is
approx. 33 CBM (if you filled it with water) but the “true cargo maximum” is
probably closer to 28 CBM.
Standard container sizes and payload/capacity
20 foot container (20’)

• Length: 20’
• Height: 8’6”
• Payload: up to 28.3 tons
• Capacity: Max. 33 CBM
40 foot container (40’)

• Length: 40’
40 foot high-cube container (40HC)

• Length: 40’
45 foot high-cube container (45HC)

• Length: 45’
Cargo and Containers – TEU/FFE

Within container shipping, the number of containers that a carrier owns or
operates, the number of containers that a vessel can carry, or the number of
containers that a customer ships per year is expressed in so-called TEU or FFE.
TEU means Twenty-foot Equivalent Unit (one 20’ container).
FFE means Forty-Foot Equivalent unit (one 40’ container).
40HC and 45HC containers are also referred to as FFE.
Cargo and Containers – Container Seal and Number

All containers have their own unique identification number which consists of 4
letters and 6-7 numbers (e.g. MAEU8564592).
The container number enables carriers to keep track of their containers at all times
and customers to follow their shipments, e.g. via the carriers’ internet tracking
systems.
Container Seal
To make sure that nobody interferes with the cargo during transit, a seal must be
affixed to the container doors at the time the cargo is stuffed into the container and
must not be broken until the container reaches its final destination.
A seal is a numbered locking device. The seal number is recorded in the carrier’s
IT systems and on relevant shipping documents.
Seals minimize the risk of unauthorised access to the container contents and
therefore reduce the risk of theft, pilferage as well as other interference such as
placement of contraband (illegal or non-declared goods).
Seals are in the interest of all parties in the shipping process.
Cargo and Containers – Load types and locations

Within shipping it is common to refer to FCL and LCL shipments, and CY and CFS
locations.
Full Container Load (FCL)
A container which is loaded by the shipper is referred to as a Full Container Load

(FCL).
In this type of scenario, the shipper loads the container and delivers it as a single
unit to the transport provider. The transport provider does not physically handle the
cartons, pallets or other packages – only the container.
Less than Container Load (LCL)

Shippers who do not have enough cargo to fill a container on their own will deliver
their goods in cartons, pallets or other packaging to the transport provider or a
freight forwarder.
The transport provider or freight forwarder will consolidate the goods into a
container together with other shippers’ cargoes going to the same destination.
This is called a Less-than-Container Load (LCL) shipment.
Container Freight Station (CFS)

A container freight station (CFS) is a facility / warehouse at which a freight
forwarder or transport provider receives small cargo lots from shippers for loading
into containers, or where the freight forwarder / transport provider unloads cargo
from containers and delivers to consignees.
You may also hear the word “CFS” used to represent cargo that is delivered loose
(LCL) to the transport provider.
Container Yard (CY)

A container yard (CY) is a facility at which the carrier receives/delivers full and
empty containers from/to shippers and consignees.
Cargo and Containers – Transport modes

You may hear shipments referred to as CY/CY, CFS/CY or CFS/CFS. The terms
illustrate the handling and interaction with the customer at origin and destination.
CY/CY
The transport provider receives a full container from the shipper and delivers the
full container at destination. Also called FCL. In this scenario, the transport provider
never physically sees the cargo that the shipper has stuffed into the container. He
only handles the container.
CFS/CY
The transport provider receives loose cargo from the shipper at origin. The
transport provider arranges to consolidate it into a container for shipment together
with other cargo for the same consignee. At destination, the transport provider
delivers the full load container to the consignee at destination.
CFS/CFS
The transport provider receives loose cargo (not containerised) from the shipper at
origin and delivers the cargo loose to the consignee at destination. Also called
LCL. The transport provider consolidates LCL cargo from multiple shippers into a
container for shipment. At destination, the transport provider de-consolidates the
container and delivers the different LCL cargoes to the various consignees.
Cargo and Containers – Locations

Carriers such as Maersk Sealand arrange shipments from port to port but may also
offer the customer to arrange the collection and delivery of the container from/to
inland points.
The place of receipt and delivery can therefore be either the port or an inland point.
In order to plan the shipment and quote the right price for it, the carrier must know
where from and where to the customer wants to ship his cargo.
We refer to four main locations: Place of Receipt, Port of Loading, Port of

Discharge and Place of Delivery.
Place of Receipt is the port or inland location where the carrier receives the
container from the shipper and the Carrier’s responsibility for the shipment starts.
Place of Delivery is the port or inland location where the carrier’s responsibility for
the shipment ends and the consignee takes delivery of the container.
The specific combination of a container’s place of receipt and place of delivery

(point A to Point B) is referred to as a Corridor. A customer may move cargo in one
or more corridors.
Freight and Charges
Freight and Charges – Introduction

This section covers matters relating to freight and charges.
Freight and Charges – Freight and Charges

The total price of a container shipment consists of different charges. Some are
quoted in USD and some are quoted in local currency.
The price paid by the customer to the carrier for the transport of a container
between two ports is referred to as the Freight Rate. It is typically quoted in USD.
On top of the freight rate, a carrier may be entitled in some trades to add so-called
BAF and/or CAF because it is customary within shipping that the customer carries
part of the burden of fluctuating oil prices (bunker prices) and fluctuating currency
exchange rates.
BAF means Bunker Adjustment Factor.

CAF means Currency Adjustment Factor.
Additionally, the carrier will charge the customer fees that are specific to the local
services provided at origin and destination, e.g. documentation, haulage (trucking)
and terminal handling charges. The additional charges are usually quoted in local
currency and depend on local costs and market practices.
Other surcharges are also used, for example: Toll and canal fees, equipment
cleaning charges, security fees, and many more depending on the particular
shipment.
Freight and Charges – Payment

It can be either the shipper or the consignee who pays all the applicable charges
for a shipment, or they agree how to split the charges between them. Therefore,
carriers may issue invoices and collect payments both at origin and destination.
Unless the customer has signed a credit agreement with the carrier, payment must
take place before the shipping documents or cargo are released by the carrier to
the shipper/consignee.
Prepaid / Collect charges

Prepaid Charges are the charges that are paid by the shipper at origin, usually
before the goods are shipped or before the carrier releases the shipping
documents to the shipper.
Collect Charges are charges that are paid by the consignee at destination, usually
before the goods are released by the carrier to the consignee.
It is quite common that the shipper pays the local origin charges and the consignee
pays the local destination charges (but it is not a definite rule). So, the local origin
charges are often invoiced on pre-paid basis to the shipper and local destination
charges are often invoiced on collect basis to the consignee. Whether the ocean
freight is prepaid or collect depends on the agreement between the shipper and the
consignee. They must advise the carrier of the agreed terms at time of booking.
Freight and Charges – Tariff / Service Contract

Maersk Sealand maintains tariffs (lists) of standard rates and charges that apply to
all shipments in a particular corridor. The tariffs are used when new and existing
customers request price quotes for future shipments and are updated regularly in
accordance with market developments.
In some cases, Maersk Sealand negotiates special rates with strategically

important clients. If so, these rates are documented in so-called Service Contracts.
Tariffs
The tariff is a carrier’s list of standard rates and charges to be applied for
shipments in a specific corridor. The tariff is adjusted frequently in accordance with
the changes in the container market.
The tariffs form basis for all rate quotations. Even if Maersk Sealand decides to
negotiate special rates with some customers, the tariff will be the guideline /
starting point.
Service Contracts
If a carrier agrees special rates and charges with a customer, they are documented
in a Service Contract. Service Contracts are primarily negotiated with large,
strategically important customers, usually on an annual basis.
The carrier and the customer commit to using the agreed rates and charges for a
period of time regardless of how the container market develops. In other words, the
rates are “locked” which provides cost reliability for the customer and income
reliability for the carrier.
Signing a service contract is an advantage for the carrier if the general market
rates decrease but an advantage for the customer if the general market rates
increase.
Freight and Charges – Quotation

The basic starting point for a rate quotation is the standard tariff which is based on
the general market rate levels and the carrier’s pricing strategy.
A number of elements influence the rate levels that the carrier offers or is willing to
negotiate with the customer. Sometimes the rate offered deviates from the
standard tariff.
A number of elements influence the quotation process:
Corridor
A very basic factor that influences the freight rate and charges is the corridor.
The carrier’s operating expenses, and therefore also the rates and charges that the
customer must pay for the carriage, depend on where from and where to the
customer wants to ship his cargo.
Furthermore, competition, market practice and the supply/demand situation within

the corridor and trade lane influence the rates and charges.
Volume (TEU/FFE)
Large customers who ship many containers (TEU/FFE) per year will typically
expect the carrier to be willing to negotiate better rates than those that are quoted
by the carrier to small customers.
And as in any other business, carriers may be willing to negotiate “volume

discounts” with large, regular and strategically important customers.
Service Requirements
Different customers also have different requirements and expectations when it
comes to what they want to receive from the carrier in exchange for their payment.
So pricing sometimes needs to be adjusted according to the customer’s service
requirements.
Service requirements vary from customer to customer. Some customers want top
service, vessel space guarantees, quality containers and fast transit times – and
are willing to pay for it. Others just want the lowest rates possible and are willing to
accept lower service levels.
Commodity
Typically, shippers of high-value commodities such as reefer cargo are generally
willing to pay higher rates than shippers of low-value cargoes (such as metal scrap
or waste paper). So the commodity type may also influence the rate quotation.
Freight and Charges – Conferences

In connection with rates and charges, you should be familiar with the concept of
Conferences and Discussion Agreements.
Definition
A “Conference” is an arrangement between a group of shipping lines to serve a
particular trade. Members meet to discuss changing market conditions and take
appropriate actions regarding tariffs and policies in order to secure a stable market.
In some trades, the carriers even publish and follow a common tariff with uniform
freight rates and surcharges for a specified range of loading and unloading ports.
In addition to the tariff rates, the individual carriers offer shippers independently
negotiated service contracts.
In US trades, “Discussion agreements” have taken over. Rate making is voluntary

and each member publishes its own tariff.
Conferences and Agreements

The first conference, the Bombay Steam Traffic Conference, was formed in 1875 in
the tea trade from India to the UK.
Today, there are about 150 conferences in the world covering virtually every trade,
for example:
o Trans Atlantic Conference Agreement, TACA
o Far Eastern Freight Conference, FEFC
o US Australasia Discussion Agreement, USADA
o Europe Middle East Rate Agreement, EMERA
o West Coast South American Discussion Agreement, WCSADA
Not every liner operator in a certain trade is a member of a conference or

agreement. Some carriers decide not to be part of conferences and some
conferences are closed and require an invitation to join from the existing members.
Maersk Sealand participates in conferences/agreements in some trades while in

others, we have decided not to.
Competition / Anti Trust Laws
Both the US and EU competition laws (antitrust laws) do not allow two or more
competing companies to meet and fix prices.
However, unique to the industry, conferences and discussion agreements between

shipping lines have so far been exempted from the antitrust laws under certain
conditions.
The practice is regularly discussed and disputed by various parties such as

shippers, legislators and competing shipping lines.
Purpose
A reason why conferences and discussion agreements are allowed to exist in
some form is a desire to create confidence that transport will always be available at
relatively stable prices and terms to both “easy” and “difficult”, small and large
ports, within a larger geographical scope than could be provided by individual lines.
Processes and Documents
Processes and Documents – Introduction

This section introduces the key processes and documents used in the shipping
process, at origin (at time of export) and at destination (at time of import).
Processes and Documents – Sailing Schedule

One of the first parts of the shipping process is for the customer – or the carrier on
his behalf - to identify when goods must be shipped from origin for them to arrive at
destination at the desired time.
Carriers publish their vessel sailing schedules on the internet, making it easy for
customers to access the information.
Sailing schedules show ETD (Estimated Time of Departure) and ETA (Estimated
Time of Arrival). Given the nature of shipping, exact departure and arrival times are
not guaranteed but punctuality is a key service element for shipping lines.
Voyage
A liner vessel will sail according to a fixed schedule in a rotation between a number
of fixed ports.
Each round trip is called a “voyage” and is given a “voyage number” to avoid any
confusion regarding which exact vessel sailing the carrier, customers and other
parties in the shipping process are referring to, e.g. during the booking process.
Cut-off
To make sure that vessels depart on time, carriers will stipulate a so-called “Cut-off
time” to the customers. The Cut-off or Closing time is the deadline before which a
shipper must deliver his cargo to the carrier’s terminal or depot prior to departure.
In some cases, a shipper may contact the carrier to ask if he can deliver the
container after the cut-off time due to a delay at the factory or on the way to the
terminal. If the carrier agrees to accept the container after the official cut-off time, it
is referred to as a “Late gate”. “Late gates” are only agreed to in some cases as
they may cause inefficient operations and delays.
Processes and Documents – Origin Flow

A booking is the first step in the shipping process. Carriers will take bookings from
customers in various ways, e.g. via email, telephone, fax or internet. In Maersk, we
encourage the use of our on-line booking option on the internet which saves time
and reduces the risk of communication and data quality errors.
After the booking, a number of other activities follow at origin until the container is
finally shipped.
Here’s a walkthrough of the main activities:
1. Booking: Customer needs transport and contacts MSL, advising details of the
shipment to be moved.
2. Booking Confirmation: MSL checks equipment and vessel space availability and
advises if MSL accepts the shipment.
3. Empty Dispatch: MSL allocates an empty container. Shipper loads the

container and it is taken to the port or carrier yard.
4. Receipt: MSL confirms that the container has been received at the port terminal
or container yard.
5. Shipping Instructions: Shipper advises details to MSL of cargo loaded in the

container and confirms shipping information.
6. Invoice preparation: MSL prepares documentation for the shipper and advises
prepaid charges.
7. Vessel Manifest: MSL prepares documentation and submits details to Customs

about the containers planned for loading.
8. Vessel Departure: Container is loaded and the vessel departs. The shipper
pays prepaid charges to MSL and the B/L is released.
Processes and Documents – Origin Documents

Documents and other messages that transfer information between the carrier, the
customer and other parties play important roles in the shipping process and you
are likely to hear them referred to by colleagues and customers often, if not daily.
Here’s a walkthrough of some of the major documents/messages in the process:
Booking
A booking is a request/message from the customer to the carrier via internet,
email, fax or telephone that he would like to ship a container at a specified time.
The booking lists origin, destination, equipment requirements, cargo type, shipper
name, consignee name (receiver of cargo), etc.
Booking Confirmation
The booking confirmation is a message sent by email or fax by the carrier to the
customer, advising that his booking has been accepted. The booking confirmation
re-states the booking details such as ETD, vessel sailing, origin, destination,
equipment size, etc.
Dock Receipt
A Dock Receipt is a document, stamp or message issued by the carrier or terminal
operator to confirm that the container has arrived at the terminal or container yard
(“the dock”). The dock receipt states the time of arrival to the terminal and confirms
that the container was received in good order and condition (if not, carrier must
make sure to make notation on the receipt).
Shipping Instructions
Shipping Instructions (S/I) is information provided by the customer to the carrier
about the shipment, in particular a description of the goods (type, volume, etc.) and
a confirmation of the container and seal number as well as the final sender/receiver
name and address. The information is included in official shipping documents.
Vessel Manifest
The Vessel Manifest is an official document submitted by the carrier to Customs
authorities before vessel departure, advising what will be or has been loaded
onboard the vessel. The manifest provides details of e.g. cargo types and
shipper/consignee details and is prepared by the agent in the port of loading.
Invoice – Prepaid Charges

At origin, the carrier will prepare an invoice to the shipper covering the relevant
prepaid charges. An invoice is a formal demand for payment and includes payment
terms, description of cargo and breakdown of charges.
Bill of Lading (B/L)

The Bill of Lading (B/L) is a very central document in the shipping process. It is a
cargo receipt issued by the carrier to the shipper when the container has been
received or shipped and confirms the date of receipt/shipment and the quantity and
condition of the container at the time when the carrier took custody of it.
The B/L also evidences a contract of carriage between the shipper and the carrier
and acts as the “key to the cargo” – at destination the carrier will release the
container to the party who submits an original B/L document.
The Bill of Lading is a central document exactly for that reason: because it serves
as the “key to the cargo”. A person who presents an original B/L document at
destination obtains release of the goods from the carrier.
The B/L is a so-called Document of Title which means that goods can be sold
during transit and as long as the new owner obtains an endorsed original B/L
document, he can receive the goods from the carrier at destination.
Sea Waybill (SWB)

If the shipper requests it, the carrier may issue a so-called Sea Waybill (SWB)
instead of a Bill of Lading.
The Sea Waybill works much the same way as the B/L but it is not a document of
title. In practical terms this means that goods shipped on a Sea Waybill can only be
released to the consignee that is listed on the document.
In other words: as long as a person can present proper identification that he/she
represents the consignee named in the Sea Waybill, the goods will be released to
that person at destination (whereas on a B/L, goods are released to the person
who presents an endorsed original B/L document to the carrier at destination).
Sea Waybills are often used where no sale of goods is expected during transit and
where the shipper and consignee trust that payment can take place and legal
ownership for the goods can change without the use of an original B/L document.
A Sea Waybill is only issued in “copies”, not originals, and sometimes it is not
printed as a physical document at all.
Advantages of Sea Waybills are less administration and fast/simplified release at

destination because exchange of original documents is not required.
Processes and Documents – Destination Flow

When the container is about to arrive at destination and after it has arrived,
important processes take place to make sure that the container is delivered to the
correct receiver.
When goods have been shipped on a Bill of Lading, the consignee must submit an
original B/L document to the carrier before the cargo can be released. The carrier
also wants to make sure that all outstanding charges are paid (unless credit has
been agreed).
Additionally, the carrier may be obliged to ensure that the customer is authorised
by Customs to move the goods into the country.
Here’s a walkthrough of the main activities at destination:
1. Arrival Notice: 3-7 days before vessel arrival, Maersk Sealand advises its
customers that their containers are about to arrive.
2. Manifest preparation: MSL declares cargo and vessel details to Customs.
3. Invoice preparation: MSL advises the consignee of collect charges.
4. B/L and Payment: Consignee submits an original B/L and pays outstanding
charges to MSL.
5. Customs Release: MSL receives notification from Customs or proof from

Consignee that goods are customs cleared.
6. Cargo Release: MSL releases the cargo to Consignee when all paperwork is in
order and collect charges have been paid.
7. Delivery: Container is taken to the consignee’s premises.
8. Empty Return: Consignee unloads cargo and the empty container returns to the
terminal.
Note that if the container was shipped on a Sea Waybill instead of a Bill of Lading,
the consignee does not have to submit a document to MSL (but will of course still
have to pay the outstanding charges).
If the consignee has a credit agreement with MSL, payment may take place after
container release / delivery.
Processes and Documents – Destination Documents

Here’s a walkthrough of some of the major documents/messages used during the
destination process:
Arrival Notice
The Arrival Notice is an email or fax notification to consignee containing arrival
information such as: Vessel name and voyage, Bill of Lading number and details,
ETA, Container number, Seal number and Charges due.
Vessel Manifest
The Vessel Manifest is an official document submitted by the carrier to Customs

authorities prior to vessel arrival, advising details of cargo onboard and containers
to be discharged.
The manifest provides details of e.g. cargo types and shipper/consignee details
and is prepared by the agent in the port of discharge.
Invoice – collect charges

At destination, the carrier prepares an invoice to the consignee covering the
charges for the shipment that must be paid to the carrier at destination before the
cargo is released (unless credit has been agreed).
Bill of Lading (B/L)

The cargo receipt that was issued to the shipper at time of shipment is the “key to
the cargo” and an original B/L must be submitted to the carrier as proof that the
person who collects the cargo represents the correct consignee.
Cargo Release
Cargo release is a term used to describe the confirmation by the carrier that the
container can be released to the consignee.
The cargo release is issued when outstanding charges have been paid and the
consignee has submitted a duly endorsed original B/L to the carrier at destination.
In some parts of the world, a physical document is issued (sometimes called a

Delivery Order). In other parts of the world, it is not a document as such but could
be a message via email or fax to the terminal operator, a check mark in an IT
system that confirms release, or a pin number given to the consignee that allows
him/her to collect the container at the terminal.
Processes and Documents – Free Time

After arrival at the port of discharge, the customer must collect his container from
the terminal within an agreed number of days, referred to as “Free time”.
Typical free time is 2-5 days but carriers may agree with some customers to extend
this period.
Demurrage
If the container is still at the terminal after expiry of the free time, the customer will
be liable to pay so-called “Demurrage” charges to compensate the carrier for the
cost of storing the container at the terminal.
Detention / Per Diem

When the customer takes delivery of the container at destination, he must unload
the container so it can be returned to the carrier and used for a new shipment.
If the container is not returned with the agreed free time, the customer may be
required to pay so-called “Detention” or “Per Diem” charges for each day the
container is in his custody. (Per Diem is the term commonly used in the USA while
Detention is the term commonly used in many other places).
Detention/Per Diem is an “equipment rental charge” which compensates the carrier

for not being able to generate income by using the container for a new shipment
right away.
Remember
It is important to remember that the container cannot leave the carrier’s terminal or
container yard at destination for delivery to the consignee until the consignee has
submitted an original Bill of Lading and paid freight and charges to the carrier.
Customs may also need to release the goods before the container will be allowed
to exit the terminal.
It is the customer’s responsibility to arrange for customs clearance, payment and

B/L submission within the free time or he will be liable to pay demurrage.
Processes and Documents – Intermodal

Shipping lines not only transport containers between sea ports but also offer their
customers to transport the container to/from inland locations in connection with the
ocean carriage. This is commonly referred to as intermodal transportation and
takes place using rail, barge or road transport.
Common concepts related to intermodal include:
Pre-carriage
The carriage of containers by any transport mode from place of receipt to the port
of loading.
On-carriage
The carriage of containers by any transport mode from port of discharge to final
place of delivery.
Mini-landbridge
A movement of cargo from one sea port to another over land, using road or rail
transport.
Haulage
A term commonly used to describe trucking but may in some cases also cover
other intermodal modes.
Chassis
A wheeled unit, which can be detached from the truck head, on which a container
is placed for transport by road.
Tri-axle chassis
A chassis with an extra set of wheels to support additional weight when carrying
heavy containers by road.
Genset
A generator that provides power for reefer containers during terminal storage and
vessel transit.
Vessels and Planning
Vessels and Planning – Introduction

This section introduces a few “technical” aspects of shipping related to terminals,
vessels and planning.
Vessels and Planning – Terminal Activities

The terminal is an area for loading and unloading of containers to and from vessels
as well as storage of containers in transit.
Reliable and efficient container handling operations is an important part of the

shipping process. Efficient terminal operations keeps costs down, reduces the time
spent by vessels in port and ensures that containers are shipped and delivered
according to plan.
Many activities related to the load/unload operations take place at the terminal.
Here are a few of the main ones:
Gate-in
Gate-in is a term used to describe when a container enters the terminal. The
shipper must have made a booking with the carrier before the container is allowed
to enter the area.
At time of gate-in, the terminal operator or carrier will check the external condition
of the container and make sure that the container is properly sealed. If not in order,
the container may be rejected or a notation will be made on the dock receipt.
Container Yard
An area is set aside for storage of full export containers waiting to be shipped and
for storage of full import containers waiting to be collected.
There is also an area where empty containers are kept.
Depending on the type of operation, containers may be placed on the ground,

placed on chassis (wheeled units) or stacked on top of each other.
Container Freight Station

In some terminals, you also find a Container Freight Station (CFS) where carriers
or freight forwarders load or unload cargo into/from containers on behalf of
shippers and consignees.
Equipment
To stack containers and to move them around the terminal area (for example, to
move containers to the quay for loading), some terminals use a so-called Straddle
Carrier which is a wheeled vehicle designed to lift and carry containers within its
own framework.
In other terminals, tractor-trailers are used to move containers around and

equipment is available to lift them on/off.
Quay-side crane
Only few container vessels are equipped with cranes nowadays so at the quay,
cranes must be available to lift containers on and off the vessels.
Some terminals use so-called Gantry cranes which travel on rails alongside the
vessel and each have a car that is movable horizontally in a direction transverse to
the rails – in this way able to reach across the wide container vessels.
Maintenance & Repair

Containers need regular maintenance and repair. Such work is carried out in
dedicated work shops or areas where spare parts are also kept.
Customs Authorities
Customs are also present in the terminal area and must authorise release of the
goods before a container is allowed to leave the terminal.
Customs check documents and may carry out a physical examination of the
container.
Gate-out
Gate-out is the term used to describe when a container leaves the terminal after
the container has been released by the carrier and by Customs.
At the gate, personnel will check that the truck driver is properly authorised to
collect the container and will record that the container has left.
Vessels and Planning – Vessel Elements

Container vessels are constructed to carry unitised cargo in the form of
standardised containers.
A typical container vessel is fitted with large hatches that lead to large box-shaped
holds. In the holds (below deck), containers are stowed in vertical cells on top of
each other, typically 6 to 9 containers high. On deck, on top of the hatches,
containers are stacked up to 6 high and secured with “twist locks” and lashing
equipment.
Some vessel elements are described below.
Engine room
The part of the vessel, mainly below deck, where the motors, engines and
propulsion machinery are located.
Bridge
The navigation and command post of the ship equipped with various navigation
equipment such as radars, GPS satellite navigators, echo sounder, nautical charts,
compasses and logs.
Cargo holds
The space and compartments below deck for stowage of cargo.
Container vessels are additionally equipped with cell guides (steel bars and rails to
steer containers during loading and unloading into the cargo holds).
Hatch (Hatchway)
An opening in the deck of a vessel through which cargo is loaded or unloaded from
the holds below deck.
Hatch cover
Watertight means of closing the hatchway of a vessel – a “lid” which may be lifted
off the vessel and placed on the quay during load/unload operations.
Flag
An indication of the country in which a vessel is registered which influences the
requirements that the ship owner must meet/follow in connection with certification,
crewing, tax, safety, etc.
Twist lock
A mechanical locking device placed in each corner of a container, used to secure
two containers stacked on top of each other.
Lashing equipment
Wires, ropes, chains, rods or straps used to hold and secure cargo in position on
deck.
Draft (draught)
The depth of the vessel, i.e. the vertical distance between the waterline and the
bottom of the keel of the vessel.
Beam
The width of the vessel.
Length
The length of the vessel, measured from the front stem to the aft stern.
Vessels and Planning – Stowage Co-ordination

Stowage of containers onboard the vessel must be carefully planned in order to
ensure the safety of vessel and cargo, improve vessel utilisation, keep operational
costs down and ensure fast and efficient loading and unloading operation in port.
Many elements must be considered and stowage co-ordination is therefore

handled by centralised functions where specialists are employed.
Some elements that must be considered include:
Weight distribution of the vessel – because it influences vessel stability, stress,

torsion, trim and draft and therefore the safety of the vessel.
Container weight – because it influences which and how many containers can be
stacked on top of each other.
Cargo destination – because it determines when a container needs to be taken off

the vessel at which time it should be easily accessible.
Container sizes – because containers must be stowed in suitable slots that fit the
length and height of the box.
Special cargo types – because Reefer, Dangerous and Out-of-Gauge cargo have
special stowage requirements.
Engine room – because heat is a problem for a few cargo types, e.g. cocoa butter,
which therefore cannot be stowed close by (relevant for few cargo types only).
Vessels and Planning – Vessel Size

Vessel size is expressed in terms of how much the vessel can carry, referred to as
capacity or tonnage, or its ability to pass canals and waterways which can be
restricted by the vessel’s draft and width.
Berthing in ports can also be restricted by the vessel’s draft (water depth), length
(turning/navigation) and width (cranes must be able to reach across).
Each carrier typically operates a fleet of different sized vessels to be able to sail
the most suitable routes and call the ports needed.
Terminology related to vessel size/capacity includes:
TEU capacity
The number of containers that the vessel is able to carry onboard, expressed in
units equivalent of a 20’ container.
FFE capacity
The number of containers that the vessel is able to carry onboard, expressed in
units equivalent of a 40’ container.
Tonnage
The cubic capacity (volume) of a vessel.
Deadweight (DWT)
The variable weights (cargo, bunkers, equipment, provisions, water, stores and
spare parts) that a vessel is designed to carry, expressed in tons.
Light Weight
The weight of the ship including hull, machinery, outfit, equipment and lubrication
oil in machinery.
Displacement
The total weight of the ship, equal to the water displaced. The sum of Deadweight
and Light Weight.
Panamax
The maximum dimensions of a vessel capable of passing through the Panama
Canal.
Post-Panamax
A term used to describe vessels that are too large to pass the Panama Canal.
Malacca-max
The maximum dimensions of a vessel capable of passing the Malacca Straits.
Vessels and Planning – Vessel Deployment

Operating a liner network requires many vessels.
For example, if a round trip between the ports in one service takes 6 weeks for a
vessel to complete and the carrier wants to offer his customers weekly port calls,
the carrier will need to deploy 6 vessels to run the service.
To call the port twice a week, 12 vessels would be needed.
To provide a fortnightly service (port call every two weeks), 3 vessels would be
needed.
Vessels and Planning – Own/Charter Vessels

The more services a carrier operates, the more vessels are needed. This involves
major investments.
Shipping lines such as Maersk Sealand invest in their own vessels but they
typically also charter (“lease”) vessels from other ship owners for shorter or longer
periods of time.
There are advantages and disadvantages to both owning and chartering vessels.
Own vessels
By owning vessels, a shipping line has full control and can manage their vessels as
they feel best. This provides flexibility when planning vessel schedules. For
example, the coordination of dry-docking (repairs), crew change, etc. can be
tailored to fit into the deployment of the vessel.
Buying (or building new) ships is expensive and requires good financing capability
but provides the carrier with the possibility of tailoring the vessel exactly to the
requirements of the service(s) in which they need to be deployed, e.g. in terms of
speed, draft or reefer plugs.
At the same time, it involves significant financial risks. Container ships are built to
last many years (15-25 years) and orders for newbuildings must be placed several
years in advance. It can be difficult to predict demand so far into the future.
Charter vessels
By chartering vessels, carriers are able to change their fleet composition relatively
easy to meet the changing market conditions.
Vessels are chartered for shorter or longer periods of time. Less than one year is
generally considered short-term.
The ship owner finances the purchase of the vessel and is generally responsible
for costs of crew, technical management, dry-docking, etc.
The price of charter tonnage (often a fixed rate, e.g. per day) fluctuates with the
demand for the specific vessel type/size. When charter rates are low, shipping
lines tend to try to secure vessels for longer periods of time, while they will tend to
go for short charter periods when the charter rates are high.
Maersk Sealand aims towards having a balanced mix of short- and long-term
charters to safeguard against market fluctuations while retaining some flexibility,
should demand or market conditions change.
Vessels and Planning – Strategic Co-operation

Sometimes carriers form strategic partnerships and co-operate with each other
with the purpose of reducing costs, improving efficiency and offering a wider range
of services to their customers.
There are several kinds of strategic co-operation between shipping lines, including
Slot Charters, Vessel Sharing Agreements and Alliances:
Slot charter
A slot charter is when a carrier buys space (container slots) onboard another
carrier’s vessels, either on a particular voyage or vessel string.
Advantages to the shipping line that purchases slots are that it enables connection
to ports otherwise not served and the arrangement can help alleviate space
problems on own vessels on the given route.
Advantage to the operating carrier is that the arrangement can help optimise
vessel utilisation and thereby reduce the average cost per container moved.
Vessel Sharing Agreement (VSA)

VSA is an agreement whereby two or more carriers join forces and pool their
vessels in different trades. It typically includes slot exchanges, sharing of terminals
and sometimes interchange of container equipment.
VSAs are often centered on singles services or trade lanes and the parties
involved retain their own identity, marketing and pricing.
Advantages to the participants are that each carrier can offer a regular service to
its customers but need fewer vessels (= less investment) and that it helps optimise
vessel utilisation (= reduce average cost per container moved).
Alliances
An alliance is similar to a VSA arrangement but often cover the entire geographical
scope of the involved parties.
Members of alliances retain their own brand, marketing and pricing but typically
share or jointly operate vessels, terminals and equipment. Some alliances even
include joint inland arrangements and asset investments.
Organisation
Organisation - Introduction
A global shipping line delivers its services to customers as a combined effort
between a corporate organisation and a number of local agencies.
Maersk Sealand’s corporate headquarters is also referred to as the Centre and sets
the overall strategy for the business. The customers are served through a network
of Agents who take on a number of operational tasks based on an Agency
Agreement with Maersk Sealand.
This section will go through some of the main activities of the Centre and the
Agents respectively.
Organisation – Centre
Maersk Sealand’s corporate organisation is often referred to as Centre and
represents the owners and top management of Maersk Sealand.
Maersk Sealand is the trading name for the liner trade activities of the shareholding
company A.P. Møller - Mærsk A/S.
A.P. Møller - Mærsk A/S is the legal entity that is considered the so-called “principal
carrier”, i.e. the entity who is ultimately responsible for the cargo carried under a
Maersk Sealand B/L.
The activities and responsibilities of the Centre organisation include:
Strategy
Centre sets overall strategy for Maersk Sealand.
Policies and procedures

Centre develops policies and procedures to be followed by agents, e.g. cargo
acceptance policies, reporting and accounting procedures, HR policies, security
procedures, etc.
Investments
Centre manages the significant investments in vessels and containers made by

A.P. Moller - Maersk.
Fleet Management (Vessel Operations)

Centre is responsible for the daily deployment of Maersk Sealand’s fleet of vessels
and daily operational matters related hereto.
This includes allocation of vessels and capacity to individual strings/services,

scheduling, chartering vessels to Maersk Sealand’s network, including extra-
loaders and vessels for positioning of empty equipment.
It also involves coordination of procedures for handling of dangerous cargo and co-
ordination with cargo coordinators/terminals concerning cargo stowage planning.
Equipment Management
Centre is responsible for the management of Maersk Sealand’s fleet of containers,
totalling in excess of 1.5 million TEU, gensets, chassis and power packs.
This includes purchase of new equipment, leasing and redelivery to ensure that the
stock is in line with requirements, (fleet management), inter-regional positioning of
the container equipment fleet to ensure optimal use of equipment employed (flow
management), co-ordination of sale of containers and procedures for same, as well
as Maintenance & Repair (compliance, cost control, advice, etc.)
IT & Systems
Maersk Sealand is interested in having an effective and efficient network of
agencies and therefore invests significantly in the development of IT systems and
e-commerce initiatives to support the business.
At Centre, the Global Information Systems department manages this part of the
business.
Sales & Marketing

Centre is responsible for overall sales and marketing strategy, guidelines and
procedures.
The corporate Sales & Marketing department determines the overall guidelines for
PR, branding and external communication to ensure global consistency, conducts
strategic analysis of market trends, competitors, etc. (market intelligence), analyses
and decides on target market and customer segments, prepares global sales
strategy and is involved in sales management for global key accounts.
Finance & Risk Management
Centre Finance & Accounting is responsible for consolidation of accounts,

management reporting, investment analysis, hedging, business audits (to make
sure procedures are followed), etc.
Claims Management
Centre Claims sets procedures and provides legal advice for matters relating to
claims and the Maersk Sealand B/L.
Organisation – Agents
Agents are individual companies appointed by Maersk Sealand to perform services
according to an Agency Agreement and Agent’s Manual.
Agents can be fully independent companies but are most often “own agents”, i.e.
either fully owned by Maersk Sealand or operated in partnerships or joint ventures.
Some key tasks of the Agencies are:
Sales/Marketing
All agents must perform energetic and systematic sales and marketing work,
exchange information and sales leads about customers and cargo movements,
follow the trade and market situation in their area closely and make regular follow-
up to control that actual performance is matching the projections made in respect of
total trade and market share budgeted for Maersk Sealand.
Agents report findings about competition and keep abreast of development in other
markets and trades than those Maersk Sealand currently serves, and make timely
suggestions to Centre in respect of any new business opportunities.
Service Delivery
Activities related to customer service and operations on behalf of Maersk Sealand
and in accordance with the Agent’s manual, including bookings, documentation,
and operational coordination:
Booking
Agents take bookings on behalf of Maersk Sealand and by doing that, make a
commitment to customers that their cargo will be carried by Maersk Sealand.
Agents must endeavour to book the most profitable cargo but must also pay due
respect to important shippers and consignees as well as adhere to the mutually
agreed marketing plans.
Agents must follow the acceptance policies and space allocation principles of
Maersk Sealand, assist in controlling the flow of containers and special equipment
and report weekly bookings to Maersk Sealand.
Documentation
Agents issue Bills of Lading (transport documents) on behalf of Maersk Sealand
and register cargo / shipment / invoicing details in applicable systems in a timely
and accurate manner.
Agents prepare and release the cargo manifest for each vessel arrival/departure
and coordinate as required with local authorities as well as the agents in the next
port of call. A proper recording system of containers received and delivered must
also be maintained.
Equipment co-ordination
Agents must ensure that container equipment is always in a safe and cargo worthy
condition. Agents are responsible for the fastest possible turnaround of containers
which involves that Agents are responsible for equipment control (physical
control/inspection of containers, chassis, gensets and other equipment located
within any agent's area of responsibility) and must arrange maintenance/ repair as
required in order to minimise the time the container is out of service due to damage.
To control cost the agent must ensure that the most efficient and economical repair
shop is used.
Vessel co-ordination
Agents coordinate with port authorities, terminal operations, pilots, bunker suppliers
and other service providers on behalf of Maersk Sealand to ensure a smooth,
timely and efficient unloading/loading operation.
Agents must co-ordinate loading of vessel in accordance with stowage instructions

received from Maersk Sealand’s cargo co-ordinators and must assist the Master
and crew of the vessel as required.
Terminal co-ordination
Agents are responsible for negotiating and maintaining contracts and agreements
for terminal, stevedoring and CFS operations in accordance with instructions from
Maersk Sealand and monitor/report expenses related hereto. Where possible, the
agent should work together with the contractor to make the operation more efficient
at all times. Agents should also be alert to new developments, including changes in
port policies, which might be of interest/importance to Maersk Sealand for strategic
and overall long-term planning purposes.
Intermodal co-ordination
Agents are responsible for providing arrangements for inland transportation to and
from all inland points served by Maersk Sealand in a timely and cost-efficient
manner. Agents negotiate contracts on behalf of Maersk Sealand according to
standards and procedures provided.
Finance
Agents must follow procedures and requirements as laid out in the Agent’s manual
concerning revenue and cost control, accounting and financial reporting related to
the activities/services performed on behalf of Maersk Sealand.
Finance-related activities include freight collection, cost control, accounting and

reporting:
Freight Collection
Agents must ensure that all Maersk Sealand's freight revenue - payable within the
Agent’s area - is promptly and fully collected from the customers.
Cost Control
It is the overall responsibility of the agent that expenses charged and paid on behalf
of Maersk Sealand are strictly in accordance with valid tariffs and contracts, as
approved by Centre, and that the services invoiced and paid for exactly tally the
services rendered by the suppliers in question. Agents must ensure proper control
of expenses to minimise costs and maximise efficiency. Costs paid by the Agents
on behalf of Maersk Sealand are reimbursed through the so-called Current
Account.
Accounting
Agents are required to follow good accounting practice and adhere to Maersk
Sealand’s procedures. Local accounting legislation applies for agency-related
revenue and costs. Accounting for Maersk Sealand revenue and costs have to be
recorded according to the Danish Bookkeeping Act (as A.P. Møller - Mærsk A/S is
a Danish company).
Reporting
Agents must prepare and submit to Maersk Sealand financial data/reports for
inclusion in budgets, monthly reports, the Annual Report, etc.
Issues and Challenges
Issues and Challenges – Introduction

To be in business, a global carrier must be able to handle a number of strategic
and operational issues. In this section, we will introduce a few of them briefly:
Trade imbalance, Utilisation, Security and Environment.
Issues and Challenges – Trade Imbalance

A challenge that all carriers spend time dealing with is the effect of the imbalance of
global trade patterns. Some areas of the world export more than they import, others
import more than they export.
Due to this imbalance, empty containers must be moved from import areas back to
the export areas where cargo is waiting to be shipped. This is referred to as empty
container positioning and is a significant cost to the carrier.
Container Surplus/Deficit areas

A net exporting area (export > import) becomes a Container Deficit area. For
example, Asia is generally considered a container deficit area because the region
exports more than it imports.
A net importing area (export < import) becomes a Container Surplus area. For
example, North America is generally considered a container surplus area because
the region imports more than it exports.
Head-haul / Back-haul trades

The predominant direction in a trade is referred to as the Head-haul trade.
Back-haul is the opposite term.
To avoid or reduce the costs of positioning empty containers from container surplus
areas back to container deficit areas, carriers actively seek customers that have
cargo loads moving in the back-haul trade and may offer lower rates here than in
the head-haul direction.
Issues and Challenges – Utilisation

Utilisation is a keyword in shipping.
A carrier’s ability to increase vessel and container utilisation is a key parameter in

his ability to reduce costs, improve profitability and be competitive in the market.
Vessel utilisation
The costs of running a container vessel are high and many are fixed, i.e. many
costs must be paid regardless of how many containers are onboard the vessel.
The more containers a carrier is able to load onboard a vessel, the lower is the
average cost per container. Carriers therefore follow vessel utilisation closely.
Vessel utilisation is a measurement of the number of containers carried in

percentage of total vessel capacity.
Container utilisation
Similarly, carriers will follow the utilisation of containers closely by monitoring how
many cargo loads each container carries per year (on average).
In other words, how many times a year is each container shipped with a cargo
loaded inside for which a customer pays freight to the carrier.
The more cargo loads each container carries per year, the less containers a carrier
must invest in to run his operation and meet customer demand (= less costs).
Issues and Challenges – Security

A matter which has attracted increasing attention in recent years is security. As a
transport and logistics provider, Maersk plays an important role in the security and
safety of international trade.
Security is protection against illegal acts caused by other people, consciously or

unconsciously.
The importance of security

We need to focus on security in order to safeguard our employees, customers and
suppliers – as well as secure the transportation infrastructure against misuse.
Carriers and other transport and logistics providers can be misused for carriage of
goods (or people) intended for illegal purposes across borders. Also, a “hurt or
broken” transportation infrastructure can have far-reaching consequences,
preventing international trade and thereby hurting economical developments
associated herewith.
Maersk is committed to show constant care to prevent breaches of security

associated with operations and we rank security considerations equally with
commercial and operational factors in managing our business and operations. We
cooperate closely with authorities and take all measures necessary to maintain the
highest security standards in the organisation, the shore facilities as well as
onboard our vessels, thereby providing the highest levels of security for our
customers and employees.
Security initiatives
A number of security-related programmes and initiatives in recent years with direct
impact on the shipping industry include e.g.:
• US/Canada Customs’ 24-hour Advanced Manifest Rule

• C-TPAT (Customs-Trade Partnership against Terrorism)
• ISPS (International Ship and Port facility Security code)
24-hour Advanced Manifest Rule

The 24-hour Advanced Manifest Rule is a rulemaking by US Customs, published in
2002. Canada has implemented the same rule and over time, other countries may
follow.
The US rulemaking requires carriers to file complete vessel manifests for all cargo
onboard vessels that will call a US port. The manifest must be filed latest 24 hours
before the cargo is loaded at the foreign load port.
Based on timely and correct manifests, the carrier will receive permission to
discharge cargo in the USA. Failure to provide timely and correct manifests will
result in fines and/or the carrier will not be allowed to discharge the cargo for which
the information is filed late or inaccurately.
In Maersk, we therefore operate with strict procedures and deadlines for input and
release of documentation and shipment details.
C-TPAT (Customs-Trade Partnership against Terrorism)

C-TPAT is a joint initiative between US Customs, carriers, logistics providers,
terminal operators, customs brokers, importers and other supply chain parties.
C-TPAT partners make self-assessment of their security, adjust security standards

where necessary, communicate these and share best practices.
Maersk Sealand as well as other Maersk entities such as Maersk Logistics, APM
Terminals, Safmarine and Bridge Terminal Transport are C-TPAT partners.
ISPS (International Ship and Port facility Security Code)
ISPS is an international convention that requires governments, shipping companies

and port facilities to carry out risk assessments and reduce security vulnerabilities
in ports and on ships.
Issues and Challenges – Environment

Maersk Sealand is also committed to the protection and conservation of the
environment and places high priority on environmental considerations in managing
our business.
New steps and initiatives are continuously taken in this respect, for example by
designing and operating vessels and containers in an environmentally friendly
manner.
Examples of what Maersk Sealand has done include:
Fuel/oil consumption
Improved fuel efficiency through innovative design of vessels and engine systems
as well as efficient stowage of cargo and focus on ballast water, trim of vessel, etc.
Vessel design and materials

Use of environmentally friendly paint and coating as well as materials that can be
recycled at the time the vessel needs to be scrapped.
Vessel operations
Save storage of sewage and garbage in tanks and secure controlled discharge, as
well as control ballast water to minimise transfer of micro-organisms.
Container design and materials

Use of CFC-free cooling systems in all new reefer containers.

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TMW Basic Liner Trade

This document contains a text extract of the e-learning course

The course is available in Maersk Learning Centre at http://mlc.apmoller.net

Copyright © 2005 A.P. Møller - Mærsk A/S, Centre Education.

Liner Trade and Network ......................................................6

Cargo and Containers.........................................................11

Freight and Charges ...........................................................17

Processes and Documents ................................................22

Vessels and Planning .........................................................30

Issues and Challenges........................................................42

Actors – Main Actors

Actors – Other Actors

• Government Authorities - create, administrate and enforce compliance with

Liner Trade and Network

Liner Trade and Network – Containerisation

The disadvantages of break-bulk shipping is that it is labor-intensive and goods are

The advantages of container shipping include that it is easy to transfer cargo

Liner Trade and Network – Liner Trade vs. Tramp Trade

Maersk Sealand is a container shipping line, i.e. we operate container vessels on

Characteristics of tramp trade:

Characteristics of liner trade:

Liner Trade and Network – Liner Network

Within each trade, a carrier may operate a number of services or so-called

By connecting the strings/services in the different trade lanes and transshipping

Liner Trade and Network – Hub ports

Liner Trade and Network – Vessel Scheduling

• Customer demands: For example, is arrival on a certain day of the week

Liner Trade and Network – Competitors

1. Maersk Sealand (incl. Safmarine)

(Source: Alphaliner, January 2005)

Cargo and Containers

Cargo and Containers – Commodities

Some commodities require special containers, handling or documentation and

Out of Gauge cargo (OOG)

Cargo and Containers – Container Types

Some of the main container types are:

Dry freight / standard containers

Flat rack containers

Open top containers

Cargo and Containers – Container Sizes

Length and Height

Standard lengths are 20 and 40 foot. Additionally, 45 foot containers may be

Payload and Capacity

Standard container sizes and payload/capacity

20 foot container (20’)

40 foot container (40’)

40 foot high-cube container (40HC)

45 foot high-cube container (45HC)

Cargo and Containers – TEU/FFE

TEU means Twenty-foot Equivalent Unit (one 20’ container).

FFE means Forty-Foot Equivalent unit (one 40’ container).

40HC and 45HC containers are also referred to as FFE.

Cargo and Containers – Container Seal and Number

Seals are in the interest of all parties in the shipping process.

Cargo and Containers – Load types and locations

Full Container Load (FCL)

A container which is loaded by the shipper is referred to as a Full Container Load

Less than Container Load (LCL)

This is called a Less-than-Container Load (LCL) shipment.

Container Freight Station (CFS)

Container Yard (CY)

Cargo and Containers – Transport modes

Cargo and Containers – Locations