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I.B.O.-5
INTERNATIONAL MARKETING
LOGISTICS
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Attempt all the questions.

Q. 1. (a) Outline the structure of civil aviation in India and discuss the role of AAI and DGCA in the
functioning of air services in India.
Ans. Civil aviation has three structural and functional entities–regulatory, operational and infrastructural.
 Operational entities are IA, Alliance Air (subsidiary of IA) and scheduled private airlines and air taxies
serving domestic market and Air India serving international market.
 Infrastructure support is provided by AAI [resulted as a merger of NAA and IAAI in 1995]. Its subsidiary,
HCI provides inflight catering services and operating hotels near major airports. Indira Gandhi Rashtriya
Uran Academy (IGRUA) provides ground and flight training.
 The regulatory entity in India is Directorate of Civil Aviation (DGCA). It regulates domestic, regional and
International air services, provides aircraft registration and certificate of airworthiness to civil aircrafts in
India.
Role of AAI
Airport Authority of India (AAI) was formed in 1995 by merger of NAA and IAAI to control of air space and
provide safe and efficient air traffic services. Its goal is modernization of facilities and up gradation of infrastructure.
AAI undertook up-gradation of airport cargo complexes at Delhi and Mumbai in terms of capacity, layout keeping
in mind the needs of international market. Similarly, hinterland airports like Jaipur, Agra were recognized to have
export potential and were upgraded. AAI also invested in developing air stripes in remote areas like North East, J &
K and Andaman & Nicobar islands. It identified 12 airports for renovation, expansion of runways and other
communication facilities.

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 AAI under Ninth Plan, planned upgradation and expansion of new airports. It includes augmentation of capacity
and infrastructure of international airports (Delhi and Mumbai) and construction of terminal buildings of state of
architecture and technology at domestic airports at Mumbai and Delhi. AAI also plans to improve communication and
navigation facilities in interest of safety. The private agencies were set to encourage increased participation in ground
handling facilities.
Other than AAI, the Directorate General of Civil Aviation (DGCA) is regulatory entity for civil aviation. It is
entrusted to undertake the following tasks to ensure smooth working of airlines:
1. Regulation of air operations (to and from) India
2. Civil aircraft registration
3. Formulating standards of airworthiness and to grant certificate of airworthiness
4. Licensing of pilots, aircraft maintenance engineers and flight engineers
5. Licensing of aerodromes
6. Investigation of air accidents
7. Implementation of bilateral air services agreements with foreign players
8. Render advice/consultancy on matters of air transport
9. Processing of aviation legislation
10. Training and supervision of air clubs
11. Development of lighter aircrafts, winches and gliders
12. Certification of aircraft for operations and training
The Directorate General of Civil Aviation (DGCA) also regulates all functions with International Civil Aviation
Organization.
(b) What do you understand by the conference system in liner shipping operations? Explain its utility
and concept of pooling arrangements.
Ans. Ship-owner’s Point of View: Liner operators have fixed routes, fixed schedules and fixed ports of call
irrespective of availability of cargo at a given point of time. The common carriers accept cargo from shippers of all
types, irrespective of fact that the users for their services are big or small, regular or casual. If a liner has to operate
individually, they are highly dependent on adequate cargo availability to run their services regularly. To overcome this
challenge, liner shippers have formed conferences for pooling resources and setting freight rates for sustainable
operations.
A conference is a voluntary association of two or more liner shipping companies which operate in a defined trade,
on a fixed route in certain geographical limits, agree to quote same freight rates and adhere to a set rules and
regulations for mutual benefit. It is also called rate agreement.
The introduction of steamers intensified the competitions, resulting in higher supply than the market demand. It
deteriorated the business interest of shippers resulting in overall trade economy imbalance. To tide over freight rates
competition, the liner shipping companies came together to form cartel or conferences, for the first time in 1875 for
UK-Calcutta trade.
The primary purpose of these conferences is to eliminate unhealthy price war between members. To curb
competition from non-members, these conferences enter into loyalty agreements with shippers, wherein which the
shippers are offered ‘deferred rebate’ for loyalty.

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 There are two types of conferences:
1. Open Conferences: In open conferences, a liner can join conference having demonstrated the ability to
provide berth space and appropriate tonnage.
2. Closed Conferences: In closed conferences, existing members control the entry of new members.
These conferences, work to set common freight rates (published as tariff) which are decided by considering
competition from tramp trade and non-conferences. These conferences enter into pooling arrangements like cargo
sharing, berth pooling; etc.
Q. 2 (a) What are the major aspects of strategic logistics planning? Explain these aspects and enumerate
the factors that influence logistics planning.
Ans. Strategic Logistics Planning: Strategic logistics planning comprises of physical distribution planning and
manufacturing planning.
Manufacturing planning includes aspects like location, number, capacity of manufacturing plants, type of production
plan, vertical integration, products to be produced; etc.
Physical distribution includes aspects like warehouse location, capacity, number, mode of transport to be used,
carrier selection, material planning; etc.

Major Aspects of Strategic Logistical Planning

Strategic logistics planning involves leveraging logistics system. The system impact is evaluated and incorporated
for supporting overall corporate strategic plan.
1. Leveraging Logistics: It considers the aspects of how logistics can be used to render distinctive and
competitive advantage. In other words, it shows how logistics/distribution system can be used by company to
distinguish itself from competitors.

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 2. Evaluating Impact: The proposed corporate plan is evaluated in terms of feasibility and efficiency of
physical distribution executives who also help in improvement of plan.
3. Supporting Corporate Strategic Plan: It involves development of a logistics plan that supports corporate
plan and enables efficient working of the system.
Customer service has several aspects and since it is an important consideration for success of any physical
distribution system. Every firm must design and enforce ‘customer service policy’. Physical distribution system has
following aspects from customer’s point of view:
1. Stock Availability: Stock must be available on time as it tends to increase sale and customer service. Inventories
must be centralized to reduce cost of inventory handling/management.
2. Delivery Frequency: Since retail stores have limited space and cannot accommodate large consignments.
Therefore frequent orders must be placed.
3. Order Cycle Time: Period between placement of order and its fulfilment is called order cycle time. It has
three phases:
(1)inbound communication;
(2)order process and packaging time;
(3)outbound communication (transportation of goods).
4. On-schedule /Timely Delivery: Timely delivery is necessary especially in retailing. In this cost are generally
not transferred on distributor if only one client is served. If however multiple clients are involved, deliver time and
variables tend to conflicting. The cost in later case can be transferred to clients.
5. Delivery Reliability: Frequent delivery to certain set of clients, helps the distributor in fixing delivery patterns
and reduce costs. In such situations, vehicle routing and scheduling are simplified to larger extend saving involved
time and cost.
Strategic logistics planning involves leveraging logistics system. The system impact is evaluated and incorporated
for supporting overall corporate strategic plan.
1. Leveraging Logistics: It considers the aspects of how logistics can be used to render distinctive and
competitive advantage. In other words how logistics/distribution system can be used by company to distinguish
itself from competitors.
2. Evaluating Impact: The proposed corporate plan is evaluated in terms of feasibility and efficiency by
physical distribution executives who also help in improvement of plan.
3. Supporting Corporate Strategic Plan: It involves development of a logistics plan that supports corporate
plan and enable overall efficient working of the system.
(b) What is Maritime Fraud? State the various factors that lead to commitment of maritime fraud.
Ans. Maritime Fraud: Maritime fraud refers to unjust and illegal practice of obtaining goods or money of one
party by another, which have otherwise undertaken financial or trade specific obligation. At time several parties may
collectively work to defraud the other. Some the categories of maritime fraud on basis of involved parities are:
1. Fraud by a trader against bank, shipper, insurer, shipowner or another trader
2. Charter against ship-owner
3. Shipowners and trader against insurer
4. Charter and shipowner against trader
5. Barratary and unlawful seizure of ships and their cargo (defined by Inter-Government Maritime Consultative
Organisation Assembly).

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 These usually involve documentation and are committed by people inside or on fringe of maritime community.
Dimensions And Causes: Liner shipping involves different types of cargo, collected from different shippers
and from various ports. At times multi-modal transport is involved as well. These aspects together make the cargo
vulnerable to risks and frauds , posing a threat to international business at large.
The notion of ‘apparent bargain’ is obvious. The buyer is initially attracted to the prices and terms & conditions as
quoted by the seller, in which the buyer often tends to overlook the inherent risks and possibilities of frauds. There are
many factors leading to maritime frauds as outlined:
Multiple parties are involved (buyers, sellers, shipowners, banks, insurers, agents, port authorities, custom
personnel and charterers)
Concerned governments are not very vigilant and have an indifferent attitude.
Instilling trust, which leads to non-verification of documents, overseeing involved risks.
Timely detection and lack of action.
Liner cargo type is complex due to non-uniform nature. Multi-modal transportation has further complicated
the situation.
Legal complexities in handling international disputes.
Lack of expert evidence and timely surveys.
Lack of information dissemination and sharing.
Q. 3. Briefly comment on the following:
(a) Warehouses add to the time and place value of goods.
Ans. Warehousing is critical indicator of economic development of any country. Warehousing helps in easy
distribution and movement of goods. It adds time and space value to goods. Warehousing is important on account of
below stated reasons:
1. It adds time and place value to goods.
2. Since the place of production and consumption are different, it necessitates warehousing of goods. This is
inter-spatial adjustment and warehousing helps in achieving the same.
3. Warehousing helps in inter-temporal adjustment arising due to difference between time of production and
consumption of goods.
4. Warehousing is important link in marketing as a whole. It helps to balance demand and supply.
Warehousing has following important functions as stated below:
1. Stockpiling: Warehouses can be used as reservoir for production outflows and balance supply with market
demand. It is needed to meet seasonal rise/fall in demand and level the production accordingly.
2. Product Mixing: Warehousing helps in product mixing as different manufacturers indulged into production of
different products at different places can economically bring their products together. For example a food manufacturer
has factories for various products at different location. These products can be brought at warehouse and mixed to
create product mix.
3. Consolidation: Consolidation refers to assembling of goods for their shipment to final destination. The
warehousing costs are compensated by reduced costs in mass shipments.
4. Distribution: Distribution involves pushing of product(s)/product mix to final customer. Consolidation and
distribution add time and place utility to the product by putting product at right place and when needed.

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 (b) During the last three decades Multi – Modal Transportation has made rapid progress.
Ans. During last three decades Multi-modal Transportation has made rapid progress. The aim of MMT is to
transport goods in minimum time with minimum cost from origin to destination, under a combined transport contract.
MMT has been widely accepted in countries like Europe, Japan and USA, MMT has enabled many inland countries
to ship goods under exporter's vigilance. It enables negotiating and sale proceeds, with a single bills of lading. In India,
the potential of MMT has not been fully realized. It is mainly used only for the movement of general cargo.
The government has taken several initiatives like establishment of CFS and construction of dry ports for fortifying
the system of multi-modal transport.
An Inland Containers Depots (ICD) or ‘dry port’, is a custom declared area for facilitating loading/unloading of
imports/export cargo through official gazette where containerized cargo is collected, consolidated along with stuffing
and de-stuffing of containers. The government has funded development of several dry ports during last three decades.
The Ministry of Railways has been working for establishment of dry ports at several sites by connecting Mumbai with
Chennai and Kolkata with Chennai.
The multi-modal transport has benefited the movement of merchandise through hinterland in various ways.
Though the overall prices are high, the MMT is preferred as it is time saving and convenient for shippers. The benefits
of multi-modal transport system are listed below:
1. Reduction in overall transport costs
2. Enhanced export of non-traditional goods
3. Simplified custom procedure and reduced paperwork
4. Faster movement of cargo
5. Reduced port congestion
6. Enhancement of export potential of hinterland countries
7. Optimal utilization of national infrastructure and resources
8. Reduced uncertainty in transport costs involved
9. Stable import it helps in reduces inventory levels
10. Generate foreign revenue and increase GNP through increased economic activity.
(c) The world economic situation and the world trade are very closely related.
Ans. The world seaborne trade continued to expand till 1996, when the world total cargo tonnage was 4.76
billion tons. In 1996, the growth rate recorded was 2.3%, which was slowest since 1985. There was only marginal
increase (1%) in shipping services in 1996 over last year. It was mainly due to recessional trend in economy as
seaborne trade is closely related to fluctuations in world economic conditions. Seaborne trade is very widely
exposed to world economic conditions.
The World Sea Trade Services (WSTS) forecasted the growth rate increase of 3.9% in total tonnage (4.9% for
tanker and 1.6% for dry bilk cargo) over next decade (2006). The containerized and other general cargo is expected
to increase to 6.6% by 2006. There was only marginal increase (1%) in demand of crude oil because of the shifting
of oil bases to non-OPEC sources, which resulted in changes in trade routes. The demand for oil products rose by
3.1% in 1996 over the last year. Dry Bulk cargo decreased by 1.3% collectively for coal, iron ore and grains.

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 The world fleet comprises of oil tankers , bulk carriers, general cargo carriers, container ships and other types
of specialized ships like LPG carriers, chemical carriers, ferries and other passengers ships. The world fleet ex-
panded by 3.2% in 1996. The major tonnage carriers are oil tankers and bulk cargo (35.8% and 36% respectively in
1996). Maximum growth was seen for the container ships (11.2%), while tonnage for tankers has decreased continu-
ously over the past years.
There has been significant decrease in number of general cargo ships.
The Distribution of World Fleet is described as follows: The world total for tanker declined only marginally
in 1996 and it was significant in Eastern and Central European countries. In case of developing countries, the tanker
fleet registered a marginal increase of 8.6% in 1996. There was only marginal increase in bulk cargo which was
mainly for open registry countries.
(d) Shippers – Shipowners consultation arrangements in India leave much scope for improvement.
Ans. There are two major types of consultative arrangements with respect to shipping trade. These are stated
below:
1. Legislative Arrangement: In legislative arrangement, the Government passes legislation to regulate the
activities of liner traders and protect interests of shippers. It has been adopted by developed countries like USA,
Canada, Australia and countries like India.
2. Voluntary Arrangements: In this type of arrangement, the shippers Voluntarily form associations/councils at
national and regional level to negotiate matters with representatives of conferences, without much support or intervention
of governments. Such kind of arrangement is seen in Western European Countries and UK.
Shippers-shipowners consultation in India leave much scope for improvement. This is true considering the following
aspects:
1. The consulting arrangements have been found to have inadequate secretarial staff and meeting space. These
associations largely depend on chambers for meeting space and staff.
2. There is lack of adequate resources to organize seminars, conferences, workshops for creating awareness.
3. Not all shippers represent themselves in association, hence negotiations and decisions represent only a part of
consultation.
4. The association has no representative on Board of trustees of ports.
5. They lack expertise to present the cases scientifically and objectively.
6. At times, Shippers and Chamber of Commerce approach authorities directly. This hampers the growth and
repute of associations.
Q. 4. Write short notes on the following:
(a) Strategic logistics Planning
Ans. Strategic logistics planning comprises of physical distribution planning and manufacturing planning.
Manufacturing planning includes aspects like location, number, capacity of manufacturing plants, type of production
plan, vertical integration, products to be produced; etc.
Physical distribution includes aspects like warehouse location, capacity, number, mode of transport to be used,
carrier selection, material planning; etc.

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 (b) Significance of Air Transport
Ans. Many developments have been made in air transport and it is considered to be the youngest among all other
means of transport. Today about 20-25 % (value terms) of the total world trade is handled by air transportation. This
is encouraged by the following factors:
1. Improvements in air technology.
2. Containerization air cargo.
3. Improvements in production process of many products.
4. Business dynamics like JIT, total distribution cost, have encouraged the use of air transport in recent times.
Now air transport is used for more and more items like machinery parts, electronic equipments, travel goods,
hand tools, garments; etc.
Though air transport is well: organized, its use for transportation depends on following factors:
1. Unit value of commodity,
2. Delivery time,
3. Nature of commodity (perishable/non-perishable),
4. Location of port in partner countries,
5. Location of port in originating country.
Advantages of Air Transport
1. Air transport takes least time for carriage
2. Preferable for perishable and high value items.
Disadvantages of Air Transport
1. High cost
2. Unsuitable for bulky commodities.
(c) Contract of Affreightment
Ans. ‘Contract of Affreightment’ is a contract for carriage of goods via sea that is signed between ship-owner
(consignee/shipping company) and the shipper (consignor). The former agrees to transport the carriage of the shipper
in consideration for payment in form of ‘freight’.
The Contract of Affreightment varies with type of carriage. It is Bills of Lading (BL) in case of liner shipping and
‘Charter Contract’ for tramp shipping.
Contract of Carriage/Affreightment
The Contract of Carriage/Affreightment is always made through Bills of Lading and is applicable to both liner and
tramp trades.
After carrier takes charge of goods, the Bills of Lading is issued. It has information about cargo, shipper, notified
party, consignee, printed terms and conditions, however it has not all stated terms and conditions of the contract.
The carrier is responsible for damage done to the goods more than 666.67 SDRs per unit (or two SDRs per kg.)
which ever is higher, unless the value of goods is explicitly stated and maximum amount in case of damage done is
mutually agreed upon.

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 The implied undertakings are implied by the law and considered to be a part of contract, unless explicitly stated in
the contract itself.
(d) Privatisation of Ports
Ans. The Government of India has encouraged increased private sector participation by initiating several policy
amendments. The Government has identified several areas for private sector participation like leasing port assets,
pilotage, dredging, setting up of captive power plant, captive facilities for port based industries, construction of ship
repair and dry docking facilities; etc.
The government offers following incentives to private investors (in port development):
1. Tax holiday for 5 years, 30% rebate on earnings in next five years (in period of 12 years of project commission).
2. Infrastructural Development Finance Company (IDFC) has been established to provide concessional credit
to private players.
3. Allow external commercial borrowings.
4. Tax concession (40%) on income from infrastructure financing.
5. Tax relief for investors investing in equity/debt of infrastructure companies.
6. Automatic approval for up to 74% foreign direct investment (FDI) in infrastructure companies.
The maritime states have also taken several steps to encourage development of minor and intermediate ports, via
increased private sector participation under BOOT/BOT/BOST/ BOMT principles. Other steps include development
of captive facilities for refineries, power plants; etc.
The response from private enterprises has been very limited due to the following reasons:
1. Requirement for high investments
2. Project gestation period is long, due to delay in getting clearances, fulfilment of other complex formalities and
requirements.
3. Majority of ports in India are under the control of government.
4. Low rate of return (ROR).
Q. 5. Distinguish between the following:
(a) Reorder level (ROL) and Reorder Quantity (ROQ)
Ans. Techniques of Inventory Control: There are two important considerations to be made for inventory
control–when to buy (Reorder Level) and how much to buy (Reorder Quantity).
Reorder Level
The reorder level indicates stock into Implicitly it is an indicative of maximum consumption in lead time and safety
margin.
RO = (Max Consumption Rate  Max Lead Time) + Safety Margin
There are two approaches for determining reorder level:
Perpetual Review System (P-system)
Periodic Review System (Q-system)

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 In Perpetual Review System, when stock reaches reorder level (ROL), requirement is reviewed and accordingly
a fixed quantity is reordered, hence it is also called Fixed Order Size System/Two Bin System/Constant Cycle
System/Reorder Level Systems. The quality to be replished is determined with the following formulae:
(Max Level-ROL) + Lead Time Consumption
The Perpetual Review System has following shortcomings:
 Reorder quantity for items is fixed and it is not possible to obtain minimum order restrictions for a group of
items.
 It is insensitive to demand and thus can lead to over/under stock levels.
 It requires ongoing review of inventory level and thus store records must be updated always.
In Periodic Review System, stock is reviewed on particular date and consumption rate, demand and existing
stock level is determined. The reorder quantity is determined based on these factors to reach maximum level on date
of replenishment. Thus, in this system quantity varies , but the review date is fixed. This system is also called Fixed
Interval Order System or Fixed Time System. The review time is decided by the administration and can be weekly,
fortnightly or monthly as per the nature of demand/consumption. If it is annually reviewed, the Economic Order
Quantity (EOQ) is needed.
The reorder quantity in case is calculated on basis of following formulae:
Average Consumption during Review Period + Lead Time Consumption
The Periodic Review System has following shortcomings:
 The system does not considers inventory costs explicitly.
 The minimum or package quantity restriction is generally not possible to meet.
 The system may give picture of abrupt /random rise in consumption and does not considers the trends.
 The system may lead to frequent reordering, which must be avoided.

The Perpetual Review System is more suitable for low value items in category C and B. Similarly, for periodic
review, Periodic Review System is more apt for category A items. The vigilance to avoid stock-out is more required
in case of Periodic Review System than in perpetual review system.
Reorder Quantity
The most effective technique for determining reorder quantity is Economic Order Quantity (EOQ).
While reordering and purchasing inventory holding cost must be considered:
 Procurement /Purchasing Cost: These are costs involved in purchases and include costs like administrative
cost (order placement, scrutinizing, deciding supplier, issuing purchase order), cost of material inspection, cost
of receiving material, payment to supplier costs; etc.
The formulae for cost per order is:
Cost per order = Annual Purchasing Cost/ Total number of orders placed
 Inventory Carrying Costs : There are various costs involved in holding inventory like- insurance costs,
taxes, interest on fund blocked in fund, opportunity costs, product obsolescence, rentals, overheads, labour
costs, loss due shrinkage, evaporation, spoilage, pilferage or damage by natural agents like fire. These costs
can be 30% or more.
EOQ is defined as reorder quantity at which cost of inventory holding is equal to cost of procuring for
meeting annual requirement.

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 The formulae for calculating EOQ is as follows:
EOQ =  (2AP/UC)
Where,
A = Annual Consumption
P = Procurement cost per order
U = Unit Price
C = Inventory Carrying Costs (expressed as percent of value)
The above formulae is based on following assumptions and principles:
1. Routine Simplification: If EOQ gives 13 reorders per year, this can be taken as 12, which means one order
per month.
2. Package Sizes: Round figures must be considered for odd and fractional figures. For example, 11.5 units
should be taken as 12 units which can be equated to one dozen.
3. Economical Freight Rate: Full wagon rates are less and must be considered. For example, if EOQ gives
9.25, it must be taken as 10 to fully load the wagon.
4. Perishable Items: For perishable items, the EOQ figure must be reconsidered as excess amounts can lead to
loss due to spoilage or deterioration.
5. Bulk Discounts: If bulk discounts are available, these should be compared with suggestive EOQ figure and
one which is more cheaper must be considered.
6. Case of Imports: Due to problems like uncertain leads, import licenses, etc. EOQ cannot be applied practi-
cally to import orders.
7. Seasonal Articles: In case of seasonal items like sugarcane; etc., the purchase is more economical (cheaper)
in a season than based on EOQ concept
The reorder level is the stock level at which inventory must be replished. It is an indicative of maximum consumption
in lead time and safety margin.
Re-order quantity is the quantity at which it is most economical to place order as it minimizes the costs of ordering
and the carrying costs such as storage, insurance and interest on capital. It considers quantity to be ordered on basis
of cost involved rather than maximum usage in the maximum delivery period as in case of reorder level.

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 (b) Registration and Classification of Ships.
Ans. Registration of Ships: It is mandated by law, that ships operating within or outside territorial waters must
be duly registered. The purpose behind registration is to provide trade privileges to ship-owners.
There are two important considerations made in registration:
1. Evidence of ownership
2. Who would gain privilege as a result of registration.
Registration may be done in same country where the ship is built (as required by law in some countries) or
country to which the owner belongs.
Advantages of Registration:
1. Helps in getting custom clearance.
2. Helps the ship owners to limit their liabilities to specified tonnage in event of damage done or mishap.
3. Transaction such as mortgages, transfers, transmissions; etc., become easier if the ship is registered.
4. Underwriting is easier for registered ships. Besides the hassle in underwriting, premium charged for unregistered
ships is higher.
Classificatin of Ships: Classification refer to the process of certification of ship (by classification organizations/
societies) after having conducted checks on ships. These checks confirm if ship has been built, maintained and
repaired in accordance with the set standards and in confirmation with International Regulations.
Classification surveys are surveys conducted by the classification societies to ensure if a ship built and maintained
are in accordance with the set standards. The objective of registration survey is to check measurements, while that of
underwriter survey is to verify the expressed warranty.
Importance of Classification: Classification of ship is non-mandatory, but encouraged.
Classification enables bankers, underwriters, financers, brokers, merchants, shippers and other entities involved
in shipping to draw reliable information about ship without much hassles.
If a ship is not certified (or graded), underwriters are adamant to insuring the ships. The premium payed
depends on ship’s grade. A high grade implies that the ships confirms to the set industry standards and is
therefore premium for such ship is comparatively low.

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 Also, merchants are reluctant in transporting merchandise in uncertified, uninsured ships.
Important Checks for Ships (as done by Classification Societies)
1. Survey and measurement of ship.
2. Survey of entire ship and its machinery.
3. Survey of registration machinery and appliances.
4. Survey of safety appliances and emergency gates.
5. Supervision of laying of keel.
6. Supervision of checking on anchor chains.
7. Supervision of steel and material used in building the ship body and boiler. In case of large ships , the boilers,
castings and forgings are also checked.
Important Classification Societies
1. Indian Registrar of Shipping
2. American Bureau of Shipping
3. Bureau Veritas
4. Norske Veritas
5. Registro Italiano
6. Llyods of London
7. Japanese Marine Corporation.
(c) General Cargo Rates and Specific Cargo Rates
Ans. General Cargo Rates and Specific Cargo Rates: A specific cargo rate is defined for a specific commodity.
It depends on cargo value, route to be covered, storage, competition and are negotiated between shipper and carrier.
It is also called commodity rate. If rates have not been specified for a given commodity, it falls under the general
cargo rate specification. The general cargo rates are given in NOE (Not Otherwise Enumerated) or NOS (Not
Otherwise Specified).
(d) Time Charter and Bareboat Charter
Ans. Time Charter: In time charter, ship is hired for a fixed period of time for carrying out operations between
safe ports or in a defined territory as in the interest of the shipowner.
In time tramping, owner appoints the master, but does not acts like as carrier. The ship is hired for its full capacity
for a specific time period. The owner bears charges related to maintenance, repair, wages, provisions, store supplies,
overhead costs, depreciation; etc. Operation charges like fuel, port charges, dunnage, ballast, brokerage, cleaning
charges are borne by the charterer. The claims are borne partially by charterer, owner or both.
When voyage expenses are unpredictable or rising due to factors like port congestions, market fluctuations,
fluctuation in fuel costs, dock strikes; etc., shipowners prefer to take time charters, as in voyage charters the shipowner
has to bear these expenses.
The shipowner has to deliver the ship, at the agreed port on stipulated time in contemplated operational conditions.
The charterer, on the other side has to re-deliver the ship under the same conditions, leaving the normal ware and tear.

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 At times, when there are uncertainties in market, the shipowners hire out their ships to liner companies, which
have shortage of funds for buying ships for their fleets. Only such ships are hired which have minimum costs for
modifying their operations in liner trade.
Bareboat Charter: In bareboat charter, the shipowner lets out a bare ship for full capacity to the charterer,
leaving the responsibility for manning and operating the ship on charterer. During the charter period, the charterer
virtually becomes the owner and also appoints the master, and civil engineer, subjected to the approval by the owner.
The shipowners have minimum responsibility during the charter period and hence bareboat charter is also called
demise charter. The shipowner is paid a pre-fixed amount in advance at rate per ton of deadweight on summer free
board per calendar month. The charterer bears expenses related to payment of wages, provisions, stores supplies,
equipment, oil, water, overhead charges, dunnage, port, fuel charges and brokerage claims.
Though bareboat and time charters are much similar, these differ in few aspects. In both time and bareboat
charter, the owner does not acts like carrier and lends out the ships for a specific time period (for full capacity) to
single charterer. The responsibility of manning and operating the ship rests with the charterer in both time and
bareboat charter. A time charter is differs from bareboat charter in following respects:
(i) In time tramping, the master is appointed by the owner, whereas in bareboat he is appointed by the charterer.
(ii) In time charter, the owner pays the wages, provisions, maintenance and repair charges. In bareboat charter,
the owner may or may not agree to pay depreciation and insurance charges, but has to pay survey and
brokerage charges if any.

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