Importances of shipping on indian economy

Introduction

Shipping has played a huge role in the Indian economy. Geographically, almost half of India’s border is covered with sea. Talking in terms of international trade, the amount of trade done by land and air is very limited. Ninety percent of India’s in terms of volume and seventy seven percent in terms of value are carried by sea. This shows the amount of India’s dependence on shipping. The initial scenario where India’s balance of trade mostly showed higher imports as compared to the exports is now changing. India’s exports as compared to imports have increased to eight six percent in 2001-02 as compared to seventy five percent in 1990-91. In the year 2002 according to the reports of the WTO, India achieved fifteen percent growth rate in exports of merchandise goods which made it second highest in the world. Over 90% of world trade is carried by the international shipping industry. Without shipping the import and export of goods on the scale necessary for the modern world would not be possible. There are around 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality. Ships are technically sophisticated, high value assets (larger hi-tech vessels can cost over US$150 million to build), and the operation of merchant ships generates an estimated annual income of over US$380 billion in freight rates, representing about 5% of the total global economy. For a country’s economy, the transportation sector is often viewed as an important barometer of growth. As more goods are consumed within a country, the transportation sector must grow accordingly in order to accommodate the transport of additional goods. And as the wheels of commerce turn with ever greater speed, so does the volume of passenger traffic. As a corollary, the location of manufacturing facilities and distribution centres can have a major impact on the growth of a country’s transportation sector and transportation infrastructure. The relative location of these manufacturing facilities and distribution centres can dictate whether the country becomes a hub within a logistics network or a spoke in the wheel, serving in effect as a transit corridor. Such matters are of particular importance to emerging economies where transport and logistics infrastructure is in process of rapid development.

If we look at the main drivers of Global Trade, they are Profitability i.e. price difference amongst various markets, Risk Spread which reduces the dependencies on one market, Uneven distribution of natural resources, Difference in level of technologies wherein some countries have higher level of technology and some have low, Difference in cost of production because at various places various industrial inputs are comparatively cheaper e.g. labour, electricity, technology, etc.

If we closely look at exports, a country exports a particular thing which it may have naturally, for e.g. oil, or which it produces a lot for e.g. wheat, etc. But the more a country exports, the more foreign income it gains especially in the case of developing countries which increases its foreign reserves and ultimately resulting in the country’s more buying power and thus helping it to develop. Thus exports prove to be a boon for a country. If we talk about the total worldwide exports from the year 1980 to 2006, worldwide exports were valued at

Countries have to rely on other countries for some goods which it does not have. So to import these goods, a country needs to have foreign exchange and for that a country relies on its exports. Generally a countries balance of trade should always be positive, i.e. its exports should be more than its imports.

Thus shipping playing a huge role, the flow of cargos in the ports are huge. All the imports and exports of the whole country are being done by 12 major ports. Thus the movement of cargo in these ports is huge. To add on to this, imports and exports have to go through thorough checks and a lot of documentation. All cargo goods imported into the country or exported out of the country by sea, air, land or rail routes are governed by the provisions of the Customs Act, 1962 and other laws of the country related to entry/ exit from the country. Customs ensures that the import and export of goods are in compliance with the Customs Act and other laws in force. Accordingly, customs procedures are intended to provide definite, predictable methods by which the goods can enter the country and get cleared on payment of applicable import duties, fulfilling the requirements of the law of the land. Thoroughly going through all goods that are to be imported or exported requires great deal of time and all this results into congestion at ports resulting into slow movement of the cargo and ships. These bottlenecks prove to be harmful for the country’s total international trade. To help remove congestion at ports, Government supports facilities such as C.F.S (Container Freight Stations) which prove to be dramatically useful in removing congestion at ports. The C.F.S helps a lot in reducing the total dwell time of cargo and its associated costs.

CFS is a place where containers are stuffed, de-stuffed and aggregation/ segregation of export/import cargo takes place. With the growing volume of international trade, the need for expeditious clearance of goods at the port within the minimum possible time has been gaining importance. This is more so when the ports are facing congestion at their premises. Further, for optimal utilization of existing infrastructure, space, equipment, goods that are landed at ports need to be evacuated straight away without any loss of time. Accordingly the concept of Container Freight Stations (CFS) has grown in importance along with the development and growth of ports.

A C.F.S proves to be beneficial for the importer, exporter, the port, and the country itself. It is helpful for the importer in terms that when goods arrive, the importer can directly take his goods to the C.F.S and do all the documentation while hi goods are the C.F.S. This helps him in saving paying penalties in terms of demrage if the clearance of goods takes more time than usual. It helps the exporter in terms that an exporter can stuff his container at the C.F.S premises and thus the container becomes ready to ship as soon as it reaches the port. This can save him from paying extra penalties if the normal stuffing took more time when being stuffed at the port itself. It is helpful for the port because it acts as an extended arm of the port and the regular activities like stuffing and destuffing of containers can be done at the C.F.S. The clearance of goods can be done while the goods are at the C.F.S and all this results into very low congestion at the port which makes the port functions smooth and easy. The vessels can be loaded and unloaded faster, which increases the total turnaround of the port. At present, when India’s total international trade is on boom, if the port can increase its efficiency, then it the total trade can dramatically increase which in turn benefits the country as a whole. Technology plays a huge role. Role of EDI. Exports now account for more than 10% of India’s $ 661 billion economy and the rate it growing continuously.

C.F.S & The Import Export Procedure.

A C.F.S is a common user facility with public authority status equipped with fixed installations and offering services for handling and temporary storage of import/export laden and empty containers carried under customs control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export. Transshipment of cargo can also take place from such stations.

A CFS is an extended arm of Port/ ICD Complex, where import/ export goods are kept till completion of their examination and clearance. The imported goods can be immediately shifted from the port to CFS which also helps in the reduction of port congestion. All the activities related to clearance of goods for home consumption, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export and transshipments take place from such stations. Therefore, clearance of goods from CFS is an important point of consideration for trade in respect of export/ import Cargo as it is the final Customs contact point. The Main function of CFS is receipt, dispatch and clearance of Containerized Cargo, up-to-date inventory control and tracking system to locate containers/cargo. The goods received at ports are brought to CFS and stacked in CFS after verification of the seal by Customs Officers. C.F.S are bonded and secure areas, strategically located close to container ports, where multiple value added activities can be carried out at all stages of the supply chain logistics of containerized freight. These include container stuffing and de-stuffing, re-assembling in factory units machinery and vehicles which have been broken down into kit parts for shipping, goods labelling and packaging, full container handling and storage, temperature controlled storage, bonded storage, long term warehousing, road and rail transport services, cross docking and cargo handling consultancy.

C.F.S & I.C.D

There is a difference between Container Freight Stations (CFS) and Inland Container Depots (ICD). In both the places, the imported goods or export goods are ordinarily kept before clearance by the Customs and where filing of Customs manifests, the same procedure is followed for the bills of entry, shipping bills and other declarations, assessment and all the activities related to clearance of goods for home consumption, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export, transshipment, etc, take place. Functionally there is no distinction between an ICD/CFS as both are transit facilities, which offer services for containerization of break bulk cargo and vice-versa. These could be served by rail and/ or road transport. An ICD is generally located in the interiors (outside the port towns) of the country away from the servicing ports. CFS, on the other hand, is an off dock facility located near the servicing ports which helps in decongesting the port by shifting cargo and Customs related activities outside the port area. CFSs are largely expected to deal with break-bulk cargo originating/terminating in the immediate hinterland of a port any may also deal with rail borne traffic to and from inland locations. Thus the main difference between the both is their location. A C.F.S would be strategically located near a port. For a C.F.S to get certified, the first major thing it has to do is to locate itself within 200 kilometers radius to a port. Thus if goods are imported, they can directly be taken to a C.F.S within a short period. Whereas in the case of an I.C.D, it does not have any regulations as to its distance from any port. So a person can open an Inland Container Depot in Delhi but cannot open a C.F.S in Delhi. The only difference between them is the clause of C.F.S being close to a port.

Functions OF CFS’s

The primary functions of CFS may be summed up as under:

1. Receipt and dispatch/delivery of cargo.

2. Stuffing and stripping of containers.

3. Transit operations by rail/road to and from serving ports.

4. Customs clearance.

5. Consolidation and desegregation of LCL cargo.

6. Temporary storage of cargo and containers.

7. Reworking of containers.

8. Maintenance and repair of container units.

The operations of the ICDs/CFSs revolve around the following centre’s of activity:-

1. Rail Siding (in case of a rail based terminal)

The place where container trains are received, dispatched and handled in a terminal. Similarly, the containers are loaded on and unloaded from rail wagons at the siding through overhead cranes and / or other lifting equipments.

2. Container Yard

Container yard occupies the largest area in the ICD.CFS. It is stacking area were the export containers are aggregated prior to dispatch to port, import containers are stored till Customs clearance and where empties await onward movement. Likewise, some stacking areas are earmarked for keeping special containers such as refrigerated, hazardous, overweight/over-length, etc.

3. Warehouse

A covered space/shed where export cargo is received and import cargo stored/delivered; containers are stuffed/stripped or reworked; LCL exports are consolidated and import LCLs are unpacked; and cargo is physically examined by Customs. Export and import consignments are generally handled either at separate areas in a warehouse or in different nominated warehouses/sheds.

4. Gate Complex

The gate complex regulates the entry and exist of road vehicles carrying cargo and containers through the terminal. It is place where documentation, security and container inspection procedures are undertaken.

BENEFITS OF CFSs

The main benefits from CFS’s

1. Concentration points for long distance cargoes and its unitization.

2. Service as a transit facility.

3. Customs clearance facility available near the centers of production and consumption

4. Reduced level of demurrage and pilferage.

5. No Customs required at gateway ports.

6. Issuance of through bill of lading by shipping lines, hereby resuming full liability of shipments.

7. Reduced overall level of empty container movement.

8. Competitive transport cost.

9. Reduced inventory cost.

10. Increased trade flows.

11. In transit storage in a secure environment

Revenue

The revenue model of the C.F.S revolve around the following activities

* Container H&T

* Ground Rent

* Storage Charges

* Empty Container Storage

* Other Services.

Container H&T (Handling & Transportation)

The container handling and transportation are the charges that are charged by the C.F.S to the importer/exporter. These are the charges with respect to handling and transportation of the container from the port to the C.F.S in case of import and from the C.F.S to the port in case of export.

Ground Rent

Ground rent is the amount that the C.F.S gets with respect to the number of days a container remains lying at the C.F.S premises. It keeps on increasing with the more number of days the container is lying at the C.F.S. It is earned only in the case of import containers as once the container gets cleared from the C.F.S and gets ‘Out Of Charge’, it is the duty of the importer/CHA to get the goods removed from C.F.S whereas in the case of export, once the container is sealed and is ready to export, it is the duty of C.F.S to transport the container to the port.

Storage Charges

The storage charges include the warehousing charges that are levied upon depending on the nature and the requirement of the goods. For e.g. some goods require covered storage, refrigerated storage, or can be stored in the yard. In case of refrigerated containers, power outlets are provided and charged accordingly. It is earned in both the cases i.e. import as well as export. The goods are stored in the C.F.S premises and is charged accordingly.

Empty Container Storage

C.F.S also provides the facility of empty container storage for the container leaser company. Once a container is imported, cargo is destuffed and then till the next export consignment is assigned to that particular container, the owner of the container has to take it to some place to store it. He can take it anywhere he wants, for e.g. his own container yard but if it is too far, then he would have to bear huge transportation costs. Instead he could store his empty container in the C.F.S itself and pay its normal empty container rent, and when he receives the next consignment, he can shift his container to that particular C.F.S/ICD or he could even get that consignment in that particular C.F.S itself. If he gets a consignment there itself, then he would have to bear zero transportation cost.

Other Services

Apart from the above mentioned services, C.F.S provides with services like stuffing/destuffing of containers, charges for custom examination, palletisation, shrink wrapping, repair and maintenance of containers, cleaning the containers, etc. Due to the container’s usage, it may get damaged as it is involved in activities like stuffing and destuffing, transportation and handling in the vessel and by road transportation. So it is common for containers to get damaged which involve minor dents to major cracks. These issues are taken care in the C.F.S and are repaired. Many times heavy cargo is loaded in the container which is very solid in nature, to prevent the container taking damage from it, plywood sheets are fixed inside the floor of the container. This is being done at the C.F.S too.

THE BILL OF ENTRY

The document on the strength of which clearance of imported goods can be effected is known as the Bill of Entry (B/E), the form of which has been standardized by the Central Board of Excise and Customs. The Bill of Entry should be type-written.

TYPES OF BILL OF ENTRY

All goods discharged from a vessel, from foreign or coastal ports, are cleared on Bills of Entry in the prescribed forms presented under the Bill of Entry Regulations, 1971.

* Goods entered for home consumption are cleared on ‘White’ Bills of Entry.

* Goods entered for warehousing are removed into bond on ‘Into Bond’ Bills of Entry (‘Yellow’ Bills of Entry).

* Goods cleared ex-bond for home consumption on payment of duty on ‘Ex-Bond’ Bills or ‘Green’ Bills of Entry.

WHEN TO PRESENT BILL OF ENTRY ?

It should be presented for ‘noting’ in the import department of the Customs House after the Import General Manifest which gives a detailed description item-wise of the goods brought by the concerned vessel is filed by the ship’s agent. A facility has been afforded to the ship’s agents to lodge this manifest 14 days in advance prior to arrival of the vessel. This concession has been given to facilitiate the importer’s Custom House Agent to keep the documents ready so that immediately on arrival of the vessel and landing of the cargo, the same could be cleared on examination and payment of duty thereon without any loss of time. The date of presentation of the Bill of Entry is very important as the rate of duty applicable to the imported goods will be the rate which is in force on the date of presentation.

FEATURES OF THE BILL OF ENTRY

Salient features of the Bill of Entry which is to be presented for clearance of goods for home consumption are mentioned below :

(1) Origin & Vessels Particulars: The importer or his Clearing Agent has to give relevant particulars of the origin of the consignments and the vessel e.g. port of Shipment, country of origin (and country consignment if different), vessel’s name and rotation number and also Bill of Lading date.

(2) Particulars of the Goods: In regard to the goods covered by the Bill of Entry, certain basic information has to be furnished by the importer which includes (I) Number and description, as well as marks and numbers of the packages; (ii) weight/volume/or number in so far as quantity is concerned;(iii) Description of the goods imported – details to be given separately for each separate class of goods; (iv) Gross weight and total number of packages have also to be given.

(3) Value: The importer has also to indicate assessable value in terms of Section 14 of the Customs Act, 1962. For arriving at this assessable value he has also to give further break-up of invoice value, freight, insurance, exchange rate, loading and local agency commission, miscellaneous charges and landing charges (taken into consideration for the assessable value)

(4) Duties Leviable: The form has separate columns for indicating Customs tariff heading and exemption notification No. if any applicable. For purposes of contravening duty, there is separate column indicating the value, the rate and amount and the total amount of duty on the goods both in figures and words to be indicated by pin-point typewriter.

(5) Codes: For certain statistical purposes (which is the basis of Foreign Trade Statistics), certain code numbers have also to be indicated by the importer while filing the Bill of Entry which include Port Code, Custom House Agent Code, Importer Code, Country of origin/Consignment Code, Unit Code, Currency Code, etc.

(6) Declaration of Importers/Clearing Agent: Besides the information of the type referred to above, certain declarations have to be furnished by the importer and his authorized Custom House Clearing Agent wherever the Bill of Entry is processed through a Clearing Agent. Some of these declarations have to be signed by the importer himself. These specifically include declaration about correctness of the contents of the goods described in the Bill of Entry (being in accordance with the invoice and other documents), corrections of the price/value. Declaration whether the goods have been purchased on outright purchase/consignment basis and whether the importer has any connection with the supplier/manufacturer.

Importer’s declarations are furnished and signed by him on the reverse of the Bill of Entry. In cases when an importer clearing his goods through a Custom House Agent, does not have his office at the port, the declarations may be signed by the importers on a separate sheet of paper which may be attached to the reverse of the bill of entry. The Appraiser may make the final assessment after the C.H.A pastes the declaration on the reverse of the Bill of Entry.

Bill of Lading

The Bill of Lading is the document which proves that the goods are being loaded at the P.O.O (Port Of Origin). In case of imports, the importer has to show the Bill Of Lading which proves that the goods were actually loaded in the vessel. The Bill Of Lading is signed by the master of the ship who represents the vessel’s owner.

The main function of the B/L is that it proves that an actual valid contract is being carried out and that the vessel owner knows about the cargo that is loaded in his vessel.

Import Procedure with respect to C.F.S

The import procedure for containerized cargo is done in two ways. They are

1. Doc. Destuffing

2. Factory Destuffing

Doc. Destuffing

In Doc. Destuffing, the destuffing of the containerized cargo happens at the C.F.S premises.

* The Importer/Exporter/CHA first submits copies of IGM (Import General Manifest) & OBL to the C.F.S authorities along with a request for movement of Imported(Loaded) Containers in advance.

* After the arrival of the containers, permission is taken from the AC/DC (Assistant Commissioner/Deputy Commissioner) and then the goods are allowed to be moved to the C.F.S.

* Then the C.F.S will arrange for transportation of the Imported Containers from the Customs area in the port. If the container seals are found to be broken, then first the port authorities check it and only after their permission, the goods are allowed to be dispatched from the port to the C.F.S. All the Custom formalities that include the physical examination of goods are then carried out at the C.F.S premises.

* After this, the B/E (Bill of Entry) is being filed, the Assessing Officer in appraising group assesses the duty liability, notes any exemption if any and checks whether there are no restrictions on the goods being imported.

* Then the containers are destuffed. It is being done in the presence of the Custom Officer after verifying the Container number and the seal number. Then a destuffing sheet is prepared which verifies the cargo in the container with the IGM and it is being signed by the Custom Officer, the Importer/CHA, and the C.F.S representative as a legal proof.

* Then the B/E is again presented to the Shed Appraiser for physical examination of the goods.

* After destuffing the cargo, the goods will be stacked in the import warehouse or the container yard wherever they are to be kept as per the request of the importer.

* Then the importer/CHA pays the duty on the imported goods according to the rate of duty of the goods. If the Importer/CHA fails to pay the duty within 7 days period (from the date of of Bill of Entry to him).The Importer/CHA shall obtain freshchallanof payment of duty along with interest accrued there on. For the dispatch of the goods from the C.F.S, the importer/CHA has to clear all the custom duties and the charges of C.F.S.

* After all the payment is made, the Appraiser/Superintendent endorses the Out Of Charge. From here the importer can take his goods from the C.F.S and can have it delivered. He can have the cargo delivered to him loose or can have the cargo loaded in the container while being delivered to him as per his wish. For the cargo to come inside the container, he has to pay extra charges to the owner of the container.

* The empty containers arising out of destuffing can be stored in the C.F.S and can taken out once the container owner/container leasing companies produce the proof of export of the container and can thus take their containers to other C.F.S or ICD’s for stuffing.

Assessing Officer

The basic function of the assessing officer in the appraising groups is to determine the duty liability taking due note of any exemptions or benefits claimed under different export promotion schemes. They have also to check whether there are any restrictions or prohibitions on the goods imported and if they require any permission/license/permit etc and if so whether these are forthcoming. Assessment of duty essentially involves proper classification of the goods imported in the customs tariff having due regard to the rules of interpretations, chapter and sections notes etc., and determining the duty liability. It also involves correct determination of value where the goods are assessable on ad valorem basis. The assessing officer has to take note of the invoice and other declarations submitted along with the bill of entry to support the valuation claim, and adjudge whether the transaction value method and the invoice value claimed for the basis of assessment is acceptable. He also takes note of the contemporaneous values and other information on valuation available with the Custom House.

Cargo not taken by importers

After notice to importer and approval of customs for valuation, cargo not removed within 60 days is sold through public auction and proceeds are used to recover costs of auctions, customs duty and company’s charges.

Factory Destuffing

Factory Destuffing is a procedure wherein the importer wants to unload the cargo from the container at his own premises. In this, the container can be brought directly to the importer’s premises to unload. For factory destuffing, the importer has to take prior permissions from the CEDC and from the port authorities. In this, the procedure is same as to Doc. Destuffing till its being brought to the C.F.S. Once inside the C.F.S, the Custom authorities verify the container seal number. Generally, the seal is not broken here but if the Custom authorities have any doubt, then they can open the container and verify. After this, the container is being transported to the importers premises and can be opened there. But it can be only opened in the presence of a CEDC authority. A CEDC representative personally goes to the importer’s premises and then only in his presence, the seal is verified and then it is broken. Then destuffing happens and the CEDC personnel signs the destuffing document along with the importer. Here the C.F.S’s role is to transport the container from the port to the C.F.S and then all the documentation and the payment of duty is done there and the Seal verification by the Customs is also done there itself. Thus the C.F.S charges the importer accordingly. Various permissions have to be taken by the importer for Factory Destuffing and has a lot of regulations involved in it even when the cargo is being loaded at the port of origin. It is useful for cargo that is delicate, that requires special care when it is loaded/unloaded and gets damaged when frequently shifted.

In the case of factory destuffing, the importer after taking prior permissions from the customs, files the line D.O with the port authorities. He has to file the B/E accompanied by all necessary documents including invoice, packing list, bill of lading, import license, declaration under rule 10 of the customs valuation rules 1988, OGL declaration, chartered engineers certificate etc. One separate set of essential documents like invoice, packing list, bill of lading, importer declaration under rule 10 of customs valuation rule 1988 etc. shall be pasted on the reverse of original Bill of Entry. He has to file the Bill of Entry for Home Consumption.

Export Procedure with respect to C.F.S

* First the exporter files Shipping Bills to the port authorities, and to the C.F.S authorities as well.

* The shipping bill is submitted in the system and is marked by the Superintendent(Exports)

* After verifying the value of the goods that are being exported, AC/DC call in for the samples that are being exported and if being felt necessary, then they will put those samples to test.

* After checking and approval of samples by AC/DC, export documents are to be filed i.e. invoice, packing list, quality certificate, buyer’s order, etc. to the Noting Clerk and he will then assign a serial number to the Shipping Bill.

* Then the Shipping Bill is passes on the Appraiser. The Appraiser notes down the content of goods being exported and if any benefits are to be provided to the exporter under any scheme. For e.g. DEPB.

* Then the shipping bill is presented the Examination Officer/Inspector who examines the goods that are to be exported in presence of the CHA/Importer with their packing list. First the loose cargo is brought into the C.F.S and on the receipt of Goods, the Shed in charge records landing certificate on the Shipping Bill itself.

* After examining the goods, the ‘Let Export’ order is given to the shipping line and goods are allowed to be stuffed in the container.

* Then cargo is stuffed into the empty containers. The empty containers can be lying inside the C.F.S which could be of any container leaser or can be brought inside the C.F.S. The stuffing of container is known as carting. The carting takes place in the warehouse or the container yard depending upon the nature of cargo.

* After the stuffing has taken place in front of the Custom Officer, the container is sealed with Customs One Time Keyless Bottle Seal. This seal is key less and the seal has to be broken to open the container to maintain safety. After this seal has been put on, the container is ready to be exported and the C.F.S arranges for the container’s transportation to the port.

* On arrival of the container at the port, if the seal is found to be broken, then again the container has to be taken back to the C.F.S and again cargo verification is done by the Customs and after that a new seal is being put on it.

Containerisation and the types of containers

Container is a large size metal box used to store and carry goods. In terms of International Organization for standardization (ISO), a container is an article of transport equipment which is of

– Permanent character and strong enough to be sustainable for repeated use.

– Specially designed to facilitate the carriage of goods by one or more modes of transport.

– So designed as to be convenient to stuff and dyestuff.

Classification of containers

A) By Construction

A container can be classified in terms of its materials used to construct it. They are built by different types of materials i.e. Steel, Plywood, Aluminum, etc. But majorly steel containers are widely used.

Advantages of Steel Containers

– To construct a container, steel proves to be the cheapest among all and proves to be the most strongest one too.

– They are more resistant to damages. While transporting, the containers face a lot of wear and tear, and thus steel is more preferred.

– It has better water tightness.

Disadvantages of Steel Containers

– As steel is more prone to corrosion, it has a limited life as compared to aluminum containers.

– They are heavier as compared to others. So they carry less payload of cargo.

Advantages of Aluminum Containers

– They are not as prone to corrosion as compared to steel.

– They have less tare weight thus more cargo can be stuffed.

Disadvantages of Aluminum Containers

– They are comparatively expensive

– They are more prone to damage.

Advantages of Plywood Containers

– They are very much resistant to corrosion.

– They have bigger internal cubic capacity because they have thinner panel structure.

Disadvantages of plywood containers

– They prove to be the most expensive owing to the high cost of raw materials being used and fabrication

– The tare weight is the huge. Same as compared to steel containers.

B) By Use.

Containers classified by the cargo stored in it.

General Purpose Cargo Containers – These type of containers are also called Dry Cargo Containers. They are the usual containers made up of steel and do not have temperature control in them. They have two full height doors at one side and are fully packed from all the other sides. The flooring is generally done with plywood so that the container takes less damage and thus to increase the life of the container. Of all the types of containers, the general containers are more widely used.

Thermal Containers – These type of containers have temperature control in them. They are used for carrying cargo that requires refrigerated or insulated storage. To prevent the container from getting hot, they are covered with low heat transfer materials such as polystyrene foam. Thermal containers are further divided into three categories.

1. Refrigerated Containers

2. Insulated Containers

3. Ventilated Containers

Refrigerated Containers – They are usually made up of aluminum. The refrigeration in the container is done by using electric power from the vessel’s generator or from the electrical points in the container itself. They are lined with plywood that helps in maintaining the required temperature varying from 0°C to -18°C. It is used to transport the frozen cargo varying from fish, meat, vegetables, etc. Refrigerated cargos are comparatively expensive. Continuous advancements are being made in refrigerated containers. Systems have been introduced wherein computerized controllers come into picture and maintain the ideal atmosphere by automatically sensing the products composition of oxygen and carbon dioxide.

Insulated Containers – In these type of containers, dry ice is used as the cooling medium. It suitable for perishable goods which require protection from temperature changes but do not require refrigeration. These containers carry goods like fruits and vegetable that do not require very cold refrigeration. These containers can be used as general cargo when they are not utilized as insulated containers. Dry ice is not being fitted in this case and thus it can be multi used.

Ventilated Containers – As the name itself suggests, Ventilated containers allow the air to come in by means of various apertures. They have a series of open air inlets along the top and bottom side rails to provide continuous ventilation. Thus they are used for cargos which require ventilation such as tea, coffee, cocoa, etc.

C) By Size

Containers are also classified by its size or dimensions. They are defined in multiples of 10 ft. i.e., 10ft., 20ft., 30ft. and 40ft. Generally 20 ft. and 40 ft. containers are widely used. Both of them are referred to as TEU’s and FEU’s i.e. Twenty Foot Equivalent Units and Forty Foot Equivalent Units. Most of the containers have a width of 8 ft., but the height of the containers vary from 8 to 8 ½ ft.

Thus to find out the inside volume of a 20ft. container,

20′(6.1 meters) Ã- 8′(2.4 meters) Ã- 8 ½'(2.6 meters) = 31 CBM or 1094 CFT.

Its cargo capacity is 18140 kg. (18.140 tones)

D) Other types of containers

Side Door Container

It is a container whose doors are on the side rather than its back as in usual cases. They are used when access to rear doors of the containers is very difficult and loading/unloading becomes very difficult, for e.g. when containers are transported by railways, these types of containers prove to be useful.

Garment Container

These containers have hangers installed in them which helps in loading large number of garments in the container. Otherwise these garments would have to be packed in cartons.

Hard Top Container

It is a normal full height container and its hard top is removable. It is very much suitable for heavy cargoes which are difficult to load from the rear two doors and can be easily loaded from the top with the help of a crane.

Pen Container

It is a container meant for the livestock. It has netted windows to provide the cattle with proper ventilation.

Container Markings

To identify containers, markings are being put up on them which shows

1. Owner code, Serial number and Check Digit

2. Country code and Type code

3. Maximum Gross and Tare weight.

Container Terminal

A container terminal consists of three major things. They are

* Container Berth

The berth is where the ship lands for unloading. The container berths the area where only containers are loaded/unloaded. They are equipped with hi tech. heavy gantries(cranes) that are required to handle containers. They are mounted on rails and can easily move to and fro covering the entire area of the container vessel so that container in each part of the ship can be removed.

* Container Yard

This is the area where the import/export containers are kept after unloading it from the vessel. In case of imports, the containers are unloaded from the vessel and stored here till they are taken to the C.F.S/ICD. Similarly in case of exports, containers are brought in from C.F.S/ICD and kept in the container yard prior to moving it to the vessel.

Concepts of FCL & LCL

FCL – Full Container Load consists of cargoes which are meant for one party i.e. the consignee only. The cargo is stuffed at shipper’s warehouse and is destuffed at consignee’s warehouse. The responsibility of stuffing and stowing of cargo inside the container is that of the shipper. Stuffing charges are on account of the shipper and destuffing is on the consignee.

LCL – Less than Container Load means the container which consists of cargoes meant for different parties. Cargo is being collected from the various shippers and the carrier stuffs them into the container. At the final port of final destination, the carrier’s agent destuffs the various goods belonging to different parties from the container and delivers it to them.

Freighting of Containerised Cargoes

There are three types of freighting system in containerisation.

1. Commodity Box Rate

2. Freight All Kinds

3. Tariff rate for Less than Container Load

Commodity Box Rate

It is the most used form of freighting. The Commodity box rate are usually quoted on FCL (Full Container Load). They can be on 20 ft. containers and 40 ft. containers as well. The tariff of the whole box depends on the kind of commodity to be loaded in it. If the commodity changes, the rate changes too.

Freight All Kinds

Freight All Kinds is more or less similar to Commodity Box Rate. The difference is that the tariff of the container here does not change according to the kind of cargo to be loaded in it. The rate of the container remains the same irrespective of the cargo to be loaded in it. It is usually done under highly competitive markets. It is just the rate of a container from moving from point A to B. Here in this type of freighting system, the shippers can take advantage and can load heavy goods like scrap and heavy metal parts for which rate are usually very high.

Tariff rate for Less than Container Load

The shippers who have limited quantity of cargo which is not able to fill a whole container, prefer for going for this type of freighting system in which the container line loads cargo of more than one party. The rates in this system are in Cubic metre and weight i.e. per tonne based on individual commodities. Here in this system, as there are goods of more than one person, more than one Bill of Lading, Bill of Entry, Packing List is prepared for one container. The carrier consolidates all the cargo in his container and at the port of destination, the carrier’s representative receives the container and destuffs it and the importer’s take their cargo’s delivery.

Advantages Of Containerisation

To the port

* Saves storage area in the port at the Container Yard.

* Reduction of port time of ships

* Improved working ratios of ships

To the exporter & importer.

* Reduction in damage to the goods

* Acts as a great protection to fragile goods

* Perishable goods can be traded easily through containers

* Faster and easier handling of the cargo

* Less chance of fraud

* The original quality of goods can be maintained

* Various type of cargo can be easily handled. For e.g. livestock, fragile goods, etc. frequent movement of this type of cargo can prove fatal, but due to containers, they can be easily handled.

* Reduction in freight rates

* Assured transit time

* Less chance of cargo damaging the vessel and the machines that handle the cargo.

* Transportation of cargo becomes overall less tedious.

Standard Operating Procedures

The following are the standard operating procedure for the C.F.S for the different activities that they perform and is laid out by the government and is a must for every C.F.S to follow. The standard operating procedures for some of their activities are as follows.

For Damaged Containers at C.F.S

* Purpose

To outline the method of effective reporting and survey of damaged containers/cargo.

* Scope

This procedure applies for survey system of damaged containers to cover the financial risk of any claims.

* Responsibility

The main responsibility of implementing this procedure is of the Sr. Executive Operations.

The C.F.S shift incharge will ensure that all required details are entered in the damage/survey report so that the liability can be fixed and communicate to the shipping line/CHA.

* Procedure

Container damage involved damage to the container and potential damage to the cargo. This is a huge risk for the C.F.S as if the cargo is loaded in the damaged container, the goods may get damaged or destroyed and the C.F.S will be held responsible as they are supposed to load/unload the container resulting in disastrous effect on their client relationship.

Damage can occur in three places.

1. Externally, prior to handling by the C.F.S

2. Within the C.F.S

3. Externally, after handling by the C.F.S

Containers should be inspected at the points of entry to and exit from the C.F.S at two main points. First when the containers are received at the IN gate by the surveyor and when delivering the container at the OUT gate by the surveyor.

It is a requirement to be followed by the C.F.S that whenever a damage is noted, it is recorded on the ‘Container Damage Form’ and the Container Line/CHA is informed immediately.

When the container/cargo is damaged in the C.F.S, then the following procedure is to be adopted

– Report such matters to finance

– Finance in turn in with consultation with the C.F.S operations department will arrange for the insurance surveyor’s visit for the inspection & assessment of the damage.

– Documentation to obtain the shipping bill from the agent/cargo owner in case of cargo damage & hand it over to finance to ascertain the insurance cover obtained therein.

– Then to hand over the survey report or any such report from the surveyor to Finance on receipt of the same.

– Then to forward the claim papers if any received from the shipping line in case of the damaged occurred to their cargo

* Records

The records that are to be maintained in this whole procedure of damaged container/cargo are:

1. Damage reports

2. Survey reports

3. Email correspondences with the insurance companies and also with the Container Line/CHA/Importer.

For Hazardous Cargo Process

* Purpose

The handling of Hazardous goods through the C.F.S as governed by the National & International Maritime Laws which are designed to minimize the risk of an incident and to safeguard the personnel of the C.F.S.

* Responsibility

The Manager (Operations) is responsible for the implementation procedure

The Shift Incharge will be responsible for handling the Containers/Cargo.

* Procedure

All hazardous containers/cargo being received into the C.F.S should be confirmed of the following

Export containers/cargo must have a Shipper’s declaration stating

1. Container Number

2. Vessel

3. Hazardous classification

4. Packaging details

5. Empty tank Containers, which have carried dangerous cargo previously must have a cleaning certificate.

Hazardous containers being received at the gate must be checked for labels on all sides. These labels must confirm to standards laid down in the IMDG code and must be fixed on all four sides of the container. On receiving, the condition of the container must be checked. If there are any leaking containers found at the IN gate, then they are not to be allowed inside the C.F.S.

Import Containers, which arrive from the port are delivered to the C.F.S for Custom examination. Special precautions are to be taken when inspecting hazardous containers. Before inspecting the container, various things are looked at. For e.g. it handling requirements, precaution in its handling, special equipment required in its handling, availability of emergency equipment, emergency procedures to be followed, etc.

* Fumigation of Containers

Fumigation of the container is done by the shipper’s representative at the request of the shipper. Containers in the C.F.S are fumigated as per the norms laid down by the IMDG. Containers are to be grounded in a place away from human activity. No person is allowed near the container during fumigation except the allowed personnel. Once the container is fumigated, the container must be properly ventilated prior to opening the container.

* Handling of the Chemicals/Hazardous Cargo

Due attention must be given while handling chemicals. PPE i.e. Chemical suits, gloves, glasses, shoes must be worn. Manufacturer’s instructions must be strictly followed. The personnel must be provided prior training as to how to handle the cargo. The precautions which need to be taken must be explained to them well in advance.

For Auction Process

* Objective

To facilitate Auction proceedings as per Indian Customs Act 1962

* Responsibility

Auction Executive

To document the information of carting, stuffing sealing and movement of the container

* Procedure

1. A list is prepared for those cargo/containers lying un-cleared/un-claimed for more than 30 days.

2. Notices are issued to concerned importers intimating that their cargo is lying un-cleared for more than 30 days and the same should be cleared within 10 days of receipt of notice by the party. Copy of this notice is also given to the concerned shipping line for information.

3. All such cargo lying un-cleared, un-claimed for more than 60 days is got valued from the DGFT approved Valuers. Simultaneously, a letter is given to the Customs seeking N.O.C for auction of un-claimed, un-cleared cargo/containers.

4. Till the N.O.C is received from the customs, the list generated is checked to verify whether the importer has cleared the cargo or not. This is a continuous process as the importer can come and clear the cargo any time till the date of auction.

5. If the importer clears the cargo after its valuation, the valuation/auction charges are levied on him along with the custom duties, C.F.S charges and with the demurrages.

6. A final reminder is sent to the importer before the auction if the cargo still remains un-cleared.

7. Once the receipt of N.O.C comes from the Customs, the weighment is done.

8. The sales tax/VAT rates applicable for cargo are taken from the sales tax consultants. The rates are then declared in the auction catalogue.

9. With the co-ordination of the auctioneer, an advertisement is given in various newspapers at least 10 days prior to auction. The auction charges are bared by the C.F.S for the time being. Once the auction is done, this cost is recovered from the auction price.

10. Auction catalogues are printed and prospective bidders will be allowed to inspect the goods for at least two days prior to auction day.

11. The date fixed for auction is intimated to the Customs in advance so that they can depute their representative at the time of auction.

12. Bidders register themselves and thus the auction process begins. The bidder bid their price. Once a lot is knocked down in the favor of the highest bidder, 25% of the bid price is collected in advance as a spot payment.

13. After the full payment is received, all the costs that are being incurred are paid for, the customs are paid their duty, sales tax and VAT are being paid for, the transportation and handling charges, and the C.F.S charges are all being paid. The remaining amount if any is paid back to the customs.

For Disposal of Waste

* Objective

To maintain a healthy/ safe working environment and the environment free of hazards and pollution.

* Responsibility

Sr. Executive Operations/Shift In-charge – Primary responsibility

Executive Operations – Observe & Control

* Procedure

The waste generated at the C.F.S are of the following type.

1. Packing materials like carton boxes(damaged), plastic sheets, plastic bands, steel bands, wooden pieces, papers, covers, leftover scrap, etc

2. Wooden pallets broken due to wear and tear

3. Spillage of material during handling

The things mentioned in the first point gets disposed off by the Contractor’s workforce. The wastes generated are cleared by them and the material is dumped in the garbage which is to be shifted to the dumping yard.

The broken wooden pallets are removed from the warehouse and stored at an open area and are to be cleared later on.

The wastes generated by the spillage of material during handling are cleared by the house keeping sub-contractors.

Containerisation – The Global & the Indian Scenario.

Factors for Growth in Containerisation

Global trade drives containerization

Robust growth in world containerisation has driven the number of container fleet worldwide in the last couple of years. In 2005, the container fleet has witnessed an estimated growth rate of around 7.7% to around 20.8m TEUs. The fleet ownership is split between container lessors and sea carriers. In 2005, the container fleet owned by sea carriers accounted for around 55% of total world container fleet and the remaining by the lessor’s fleet. In 2005, fleet owned by lessors had registered a growth rate of 7.1%, while fleet owned by sea carriers registered 8.1%.

Asia region has emerged as a major hub with around 48.1% share of world container traffic. Burgeoning trade growth in China and India has played a pivotal role in Asia’s dominance of container trade in the world. From the last four years, the world container traffic has been growing at 9.2% per annum.

Increasing containerization of cargo

Movement of cargo through containers have been increasing and is growing at a fast pace as compared to the overall growth in export import trade. The share of containerised cargo to total cargo has also increased from 7.8% in 1994-95 to 14.3% in 2005. Auto components, electric goods, garments, metal scraps, agro products, granite and leather products are now exclusively transported in containers.

PERFORMANCE OF CONTAINER TERMINALS IN INDIA AND FUTURE POTENTIAL

India’s container traffic growing at CAGR of 12.5%

Burgeoning trade is driving container traffic at major ports in the country. In the last five years, India’s container traffic has increased at CAGR of 12.5% from 2001-02 to 2005-06 There has been a sea change in accepting containerised trade in the region, which has played a crucial role in this high growth rate. Remarkably, India’s container traffic is growing faster than the global container traffic during the last 6-7 years. The country’s growing external trade particularly textile, automotive, auto ancillary, engineering and capital goods have boosted containerisation in India. India’s growing domestic market is one of the major strengths for containerisation. With economic liberalization, India has become one of the major markets for global players.

(Source: Indian Port Association & Cygnus research)

Containerisation to contribute about 22.7% to total cargo by 2010-11

The robust growth of India’s manufacturing industry has pushed up India’s containerisation. India’s containerisation has over 70% of total exported cargo, and around 40% imported cargo. Containerisation at major ports of India contributed about 11% of total cargo handled at those ports in 2000-0. It increased to 16% in 2005-06 and is estimated to further increase to 22.7% by 2010-11.

Despite its booming export-led economy, India lags behind some other markets in terms of container traffic. Containerisation of cargo in India is at about 45-50%, compared to an average of 65%-75% in developed economies. Indian container trade is expected to grow 15% year on year over the next decade, driving demand for more Container Freight Stations.

Types of Goods Imported/Exported at various Ports

The main goods that India exports/imports from all the ports depends on port to port. India’s chief imports in containerized cargo are wood, furniture, scrap, paper waste, paper products, etc. While its chief exports are Retail goods which contributes a huge amount, rugs, sheets, towels, agricultural products like wheat, rice, spices, cotton, onions, potatoes, tea coffee,etc. The nature of cargo that comes more in a specific port depends on the kind of location it is at. For e.g. Kandla port and the Chennai port are the only two ports which can prove to be cost effective for northern part of India. Thus for places like Delhi, these two ports are very useful. Delhi and its surrounding areas have huge number of wood related factories. The demand for raw materials which can be domestically fulfilled is taken care of, but some wood species for e.g. pine, gurjan, keuring, etc. which has to be imported are brought here because after landing at these ports, they have to be transported all the way to north. Thus to reduce the transportation costs, these two ports have the maximum amount of wood imports. Pine, which is wood of tender in nature cannot be shipped directly into the vessel as the loading/unloading and handling will damage it. So it is imported in containers only.

The scrap that is imported is brought in through containers. The nature of scrap is such that it becomes very difficult to handle when it is loose. Damages to the handling machines and the transporting vehicles increases tremendously. India is a huge market for scrap. Damages caused due to transporting scrap to the containers are also huge. That is why freights for scrap is generally high.

Opportunities For C.F.S

There is a huge potential for containerization in India and some potential factors are given below:

Textile contributes over 18% of India’s total export, which is expected to grow over 25% in the next five years. Post Multi Fibre Agreement (MFA) has rejuvenated India’s textile sector, which in turn will increase containerisation in India.

Globally, the average level of containerisation is above 70%, while in India, it is around 30-35%. The level of containerisation in India can improve rapidly if required infrastructure facilities are provided.

According to A T Kearney, India’s retail industry is estimated to be over US$200 billion, which is expected to grow at a CAGR 30% over the next five years. Containerisation accounts for over 50% of world merchandise trade and is expected to go up further.

The Government of India has set the target of achieving India’s export share of 1.5% to world merchandise trade by 2009 and this will create huge opportunities for containerisation in the country.

Container traffic is expected to increase by 16% in the next 4-5 years

With the booming Indian economy and liberalisation, India’s container traffic is poised for a big leap in the next four to five years. It is estimated that India’s container traffic will grow at CAGR of 16% in the next four years to reach around 10m TEUs by 2010-11 from 4.91m TEUs in 2005-06 (chart 13). The manufacturing industry and auto and auto component sector in particular will intensify India’s containerisation. India’s manufacturing industry is growing at around 10% per annum, while auto and auto component industry is growing over 15% per annum.

Challenges:

The increasing container traffic has to be coped up with building up with new container terminals. Presently, the terminals being working at full capacity can only manage to handle the total traffic.

Congestion: Worldwide, container traffic is growing rapidly and post-WTO, the phenomenal growth of world seaborne trade has put tremendous pressure on existing port infrastructure. Moreover, inefficient inland transportation is contributing to congestion at world’s major gateway ports.

Port infrastructure is the major concern in container movements

Inadequate port infrastructure in India is a major bottleneck for containerisation in the country. India’s contribution to global containerisation is insignificant (just over 1%). JNPT handled the highest container traffic in India i.e 2.37m TEUs in 2004-05. It stands at 32nd position in handling container traffic globally. Port capacity has to be enhanced to handle the projected container traffic in India. During 2005-06, cargo handled by major ports was 423.41m tonnes; while total capacity was 440.2m tonnes, which indicates about 96% of port utilisation .India still lacks deep water in many ports with only Mundra Port having a draft in excess of 14 meters. Inadequate road infrastructure is one of the important challenges for the growing containerisation in India. There has been a rapid change in the size of vessels with 15,000 TEUs and most of the ports in India are not in a position to receive those bigger vessels provided they increase the drafts and modify the channels in the port

(Source: Indian Port Association & Cygnus research)

Another important bottleneck for container terminals in India is timely evacuation of containers. Generally, container evacuation is done through railways unlike in the West where road transport is the major mode of evacuation. The efficiency at container terminal would definitely improve if the ports have adequate railway corridors.

The regulation of tariff by Tariff Authority for Major Ports acts as a key constraint on the efficiency of the port operation. The port operators should be given enough freedom to regulate the tariff based on the ceiling rates and apply or negotiate tariff below the maximum allowed limit rather than a fixed rate.

In India there has been an improvement in productivity in terms of ship turnaround time which was 3.53 days at major ports and average pre-berthing waiting time was 6.03 hrs in 2004-05. But the performance is very low as compared to international standards. For instance, the turnaround time at Hong Kong Port was just 13 hours; Colombo Port was 16.5 hours in 2004. Despite, huge potential, Indian ports are not well equipped with international standards to handle the container traffic. High percentage of non-working time at berth per vessel is one main reason for low performance by Indian ports. Moreover, container handling cost in India is about 70% higher than other developed countries, despite availability of cheaper labour.

Indian ports are losing huge container cargo to other Asian ports

India is the largest country in the Indian Ocean and has considerable maritime power. However, its port operation is much lower than Hong Kong, Singapore, China, and Dubai. Colombo Port is emerging as a major transshipment hub in South Asian region and about 70% of containers handled at Colombo are of Indian origin, causing an estimated loss of Rs1,000 crore per annum to Indian ports. It is imperative for the Indian Government to take major initiatives to create port infrastructure of International standards.

JNPT, India’s largest container terminal, handles over 65% of India’s total container traffic handled by all major ports together. All major ports should have sufficient container terminals to handle the growing demand. As of now, it is mainly concentrating to Western Coasts. For example, to send a containerised cargo from Cochin or Chennai to JNPT increases transportation costs; this in turn increases final price of the product. Container traffic handled in India is just 4.9 million TEU’s as against 291 million TEU’s globally.

In view of the current globalisation scenario, container traffic in India is all set for a big stride. As of June 2005, there were 11 container terminal projects with estimated cost of Rs13,155 crore at various stages of implementation. Acceptance of container trade in India, although very low, is picking up exponentially. The huge potential of containerisation in India has to be harnessed through various measures by the Government of India. Riding high with booming economy, India is becoming the most preferred destination for manufacturing outsourcing in the world, offering greater potential for containerisation. The growing industrialization in India will boost containerisation in the country, which offers immense private and public investment opportunities in port infrastructure development.

EDI ASSESSMENT- In the EDI system, the cargo declaration is transferred to assessing officer in the groups elec