FREIGHT FIXING

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Have we ever thought how shipping freights are being fixed? The shipping services are divided in two. One is Tramp shipping and another is Liner shipping.
1) TRAMP SHIPPING:-
              Dry bulk, Oil and refined product, Chemical and Gas carriers freights are fixed under Tramp shipping. Pricing is fully governed by law of supply and demand. Ships are chartered under different terms and conditions including single voyage or consecutive voyage charter, COA, time charter, trip charter or bare boat charter. Charter rates are quoted on a competitive basis through brokers in various exchanges through out the world. Major elements which influence the fixing of specific rate are:-
  • Ship specification
  • Trade and route
  • General market condition
  • Terms of charter party i.e. distribution of cost between owner and charterer.
  • Urgency of charter
  • Duration of charter
A special situation applies to tanker chartering. It is according to world scale.

2) LINER SHIPPING :-
            General cargo and container ships freights are fixed under liner shipping. Liner services are provided on the basis of fixed schedules and itineraries until recently these services were controlled by cartels, called shipping conferences. A conference exists for each major trade route and it is conferences that draw up tariffs, scheduling freight rates at which goods will be transported. Two basic factors affect rate fixing in liner shipping:- a) Port and distance related factors.   b) Cargo related factors.
There are three types of conference rate including:-
  1. COMMODITY RATE :- Rates are quoted individually for several hundred commodities.
  2. CLASS RATE             :- Tariff specific commodities are grouped into limited number of classes
  3. COMMODITY-CLASS RATE :- Combination of above two
Liner freight tariffs are commonly based on liner terms under which carrier assumes responsibility of loading and discharging expenses as well as carriage of goods by sea. Tariffs are frequently amended in light of changes in relation of  currencies, US $ is the currency of international shipping, and the cost of bunker, through currency (CAF) and bunker (BAF) adjustment factors. In addition surcharges are commonly applied to published tariffs for unforeseeable reasons such as port congestion, excessive cargo weight or dimension and insurance to cover war risk.
GENERAL CARGO:-  Liner tariffs are assessed on either cargo weight measurement or value. Goods measuring 40 cu ft/ 1000 kg are charged on cargo weight basis, and above that measure by the measurement tariff scale. If goods are of very high value, they are charged irrespective of weight and measurement on an advalorem basis. 
CONTAINER SHIP:- 
1) Less than container load( LCL) -- Rates are usually same as those charged for conventional shipment.
2) Full container load ( FCL) -- For FCL containers there exists the principle of commodity box rates              (CBR). CBR is lump sum payable for the carriage of a container stuffed with particular commodity. Rate is based on average utilization of the box e.g. 13 tons in 20 ft. container. As a more recent development container carrier have introduced freight all kind (FAK) principle. FAK rates are non discriminatory by treating all commodities the same way. 
        Despite the existence of conferences and because of the increasing role of independent carrier in the liner trade, the rates actually charged vary widely and often deviate substantially from published tariffs. Carriers offer loyalty bonuses and apply rebates in violation of conference agreement. 

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