Chapter 9
International Transportation
Extent and Magnitude of Trade
 Foreign trade is related important in Taiwan
because Taiwan is a small island, which is not
with fertile resources.
 Trade with US., Japan, Europe, Mainland China
International Transportation
From the shipper’s perspective, the management of
international transportation involves the planning,
implementation, and control of the procurement and use
of freight transportation and related service providers to
achieve company objectives.
 Managing the international transportation process is
more complex than that of domestic transportation
because of the many differences between the trading
nation’s transportation and customs regulations,
infrastructure, exchange rates, culture, and language.
Buyer-Seller Agreement
 The agreement between the buyer and seller
determines the specific transportation criteria the
seller must meet. These criteria include the
product to be shipped, financial terms, delivery
requirements (date and location), packing, the
transportation method(s) to be used, and cargo
Order preparation
 Order preparation involves either picking items
ordered from inventory or manufacturing them.
In either case, the seller must make sure the
item prepared for shipping matches exactly what
is ordered.
 Failure to comply with the product specifications
contained in the buyer’s purchase order
indicates the buyer’s refusal to accept the
shipment or to pay the invoice.
 International shipments movement is controlled
by paper; without proper documentation the
shipment does not move.
 A missing or incorrect document can delay a
shipment and/or prevent the shipment from
entering a country. These documents are
governed by the customs regulations of the
shipping and receiving nations.
Export License
 No special authorization is needed to export, but
the president of the United States is authorized
to control exports for national security, foreign
policy, and items in short supply.
 In addition, licensing by a federal agency having
jurisdiction over a commodity can exercise
licensing requirements for a given product, such
as the Department of Agriculture having
jurisdiction over grain.
Sales Documents
 Three sales documents are generally used in
international trade
A pro-forma invoice
A commercial invoice
A consular invoice
 All three contain essentially the same
information: buyer, seller, product descriptions,
payment terms, selling price, and other
information requested by the buyer, bank, or
importing country.
Sales Documents
The pro-forma invoice is issued by the seller to
acquaint the importer and import government authorities
with details of the shipment. It may be required to obtain
necessary foreign exchange information and/or an
import license or permit.
 The commercial invoice, issued by the seller, is a bill
of sale for the goods sold to the buyer, a basis for
determining shipment value and importing duty
assessment, and a requirement for clearing goods
through customs.
 The consular invoice is the same as the commercial
invoice except it is a special form prescribed by the
importing country and it must be completed in the
language of the importing country.
Financial Documents
 In the buyer-seller agreement, the credit
extended by the seller to the buyer is delineated
and takes the form of either a letter of credit or
 The letter of credit, issued by the buyer’s bank,
is a guarantee by the buyer’s bank to the seller
that payment will be made if certain terms and
conditions are met. These conditions include, for
example, documentation, shipping date, time
limits, and so on. If these conditions are not met,
payment will be withheld.
Financial Documents
 The draft is credit extended by the seller directly
to the buyer. It is a written order for a sum of
money to be paid by the buyer on a certain date.
Upon presentation of the draft to the buyer’s
bank, the buyer’s bank collects the money from
the buyer, releases the shipment documentation
to permit the buyer to receiver the shipment, and
remits the money to the seller.
Transportation Documents
 As with domestic shipment, international
shipments require a bill of lading.
 The bill of lading acts as a contract of carriage, a
receipt for the goods, and provides carrier
delivery instructions. For water shipments, an
ocean bill of lading is used; an airway bill is used
for air carrier shipments.
Transportation Documents
In addition to the bill of lading, most international
shipments require a packing list that provides detailed
information of the package contents, dimension, and
 A dock receipt is issued by a water carrier when the
goods arrive at the dock, but are not loaded onto the
ship immediately; this transfers accountability, or liability,
form the domestic carrier to the international carrier.
 The transportation elements include the
selection of carriers, ports/gateways,
intermediaries, and the acquisition of insurance.
 At lease three carriers are involved in an
international shipment: a domestic, an
international, and an foreign carrier.
Selection of the port or gateway involves consideration
of handling, carrier availability, handling equipment
availability, convenience, frequency of damage, and
freight rates.
 Cargo insurance is usually purchased for international
shipments because of the complexity of international
claim settlement associated with multinational laws. The
buyer-seller agreement defines whether the buyer or
seller is responsible for securing cargo liability
International Transportation
 Will emphasize ocean and air transportation
 Attention is given to the transportation
intermediaries who are critical components in
most international shipments.
Ocean Transportation
 Specific types of carriers that transport U.S.
ocean-borne trade are
Private vessels
 Liners are ships that ply fixed routes on published
schedules. They typically charge according to
published tariffs that are either unique to the ship
line or are made by several lines in a particular
trade route.
 Freight must be moved to the liner company’s
terminal at the port after the shipper has arranged
for the freight booking or reservation. This freight
is loaded by machine if bulk or crane if
containerized and stowed in accordance with ship
weight and balance requirements.
Container movement is gaining over the traditional
break-bulk method of ocean carriage.
 When goods have to be heavily crated and packaged
for break-bulk movement, a container often provides
much of that needed protection.
 Further, whereas a break-bulk ship might require many
days to unload and load its cargo by small crane and
manpower, an entire container ship can enter, unload,
load, and clear a port in less than 12 hours.
 Because a ship is only earning revenue at sea, it is
easy to see why containers have become a dominant
form of packaged good shipping.
 Container service, while saving port and ship
time, has brought about different operating and
management concerns for the ship company.
 For one, this service requires a large investment
in containers because, while some are at sea,
many others are being delivered inland or are
being loaded there for movement to port.
 Although a ship might carry 1,000 containers, an
investment of 1,500 to 2,500 containers is
necessary to support that ship.
 Another concern is control over the containers.
Previous shipping line managements were portto-port-oriented. With inland movement of
containers, control over this land movement
becomes a necessity.
 The container itself is a large investment and is
attractive to thieves in areas of warehouse or
housing shortages.
The lighter-aboard ship (LASH) is a liner that carries
barges that were loaded at an inland river point and
moved to the ocean port via water tow.
 Another type of ship found in liner services is a rollon/roll-off ship, often referred to as a RORO ship.
These ships carry trucks, trailers, and construction
equipment much like a multilevel ferryboat. When in
service with trailers, a RORO ship is like a container
ship except that it has the wheel chassis attached to the
trailer body en route. RORO ships are especially useful
in carrying heavy construction equipment because they
are unable to maintain an even keel while the
equipment is being loaded and unloaded.
The tramp ship is one that is hired like a taxi or leased
auto. That is, it is a bulk or tank ship that is hired on a
voyage or time basis.
 On a voyage basis, a U.S. exporter of grain will seek a
tramp ship that will become empty at a desired U.S. port.
It will then be hired for one-way movement to a foreign
port. Port fees, a daily operating rate and demurrage,
will be part of the charter contract.
 Time charters are usually longer-term charters in which
the shipper will make or arrange for more than a oneway move. Such charters are made with or without
crews being provided by the ship owner.
Private Vessels
Private ships are ships that are owned or leased on a
long-term basis by the firm moving the goods.
 Another element of interest in international shipping is
that of ship registry. Although a ship might be owned by
an American and ply a route between the U.S. and the
Persian Gulf, it might be registered in and fly the flag of
Liberia or Panama.
 The owners derive certain benefits of taxes, manning,
and some relaxed safety requirements by being
registered in those countries, rather than in the United
States, Canada, or wherever.
Air Carriers
 Just as with domestic moves, air transportation
offers the international transportation user speed.
 Four types of air carriers are available for
international shippers:
Air parcel post
Express or courier
Air Parcel Post
 Air parcel post service is provided by the postal
service of a country and is designed to handle
small packages.
 There are restrictions as to the size and weight
of the shipment handled by air parcel post, and
these restrictions vary by country.
 In the US, the maximum size permitted is 108
inches of length and girth and no more than 70
pounds of weight.
Express or Courier Service
 Express or courier service is provided by air
carriers and is generally restricted to small
shipments weighting less than 70 pounds.
Speed is the essential characteristic of this
service, with next-day or second-day delivery a
standard service level.
 Example of major carriers providing this service
include Federal Express, United Parcel Service
(UPS), DHL, and Emery.
Passenger Carriers
 Regularly scheduled international passenger
flights haul freight in the “belly” of the plane.
 These carriers focus on the movement of
passengers, but the excess capacity in the
nonpassenger compartment permits the
transporting of cargo along with passengers.
 Cargo capacity and cargo size are limited by the
size of each plane, but the regular schedules
afford the use of numerous flights between origin
and destination.
All-Cargo Carriers
All-cargo carriers specialize in the movement of freight,
not passengers.
 The airplanes are outfitted with larger hatch openings,
cargo compartments, and floor-bearing ratings.
 Many air cargo planes have mechanized materialshandling devices on board to permit the movement of
heavier cargo inside the plane.
 Some of the larger planes are capable of transporting a
40-foot container, trucks, and other motor vehicles.
 Generally, these carriers haul heavier shipments
weighing more than 70 pounds.
Ancillary Services
 Other service firms exist in addition to the basic
modes that are available to the international
transportation user. These ancillary service
companies provide a variety of functions that
offer the user lower costs, improved service,
and/or technical expertise.
Air Freight Forwarders
 International air freight forwarding firms operate in a
manner similar to domestic air freight forwarders.
 The air freight forwarder books space on an air
carrier’s plane and solicits freight from numerous
shippers to fill the booked space.
 The air freight forwarder offers the shipper of small
shipments a rate savings resulting from the advanced
purchase of space. In addition, the air freight
forwarder offers convenience to the shipper,
especially when more than one airline must be used
in an interline setting, or when ground transportation
is necessary at one or both ends of the air move.
International Freight Forwarders
These firms arrange movement for the shipper. They do
not necessarily act as consolidators or earn their
revenues in that manner like domestic forwarder.
 International freight forwarders act as agents for
shippers by applying familiarity and expertise with
ocean shipping to facilitate through movement.
 They represent the shipper in arranging such activities
as inland transportation, packaging, documentation,
booking, and legal fees.
International Freight Forwarders
 They charge a percent of the costs incurred for
arranging these services.
 They play an invaluable role for shippers who
are not familiar with the intricacies of shipping or
those who do not have the scale or volume to
warrant having in-house expertise in this area.
Nonvessel Operating Common
 Nonvessel operating carriers assemble and
disperse less-than-container shipments and
move them as full-container shipments.
 A shipper moving a small item would otherwise
have to move it via break-bulk ocean carrier or
air freight. The NVOCC consolidates this
shipment with many others and gains the
economies of container movement.
Ship Agents
 Ship agents act on behalf of a liner company or
tramp ship operator (either owner or charter
company) to represent their interests in
facilitating ship arrival, clearance, loading,
unloading, and fee payment while at a specific
 Liner firms will use agents when the frequency of
sailings are so sparse that it is not economical
for them to invest in their own terminals or to
have management personnel on-site.
Land, Mini-, and Micro-bridges
The land bridge system consists of containers moving
between Japan and Europe by rail and ship. That is,
originally, containers were moved entirely by ship
between Asia and Europe across the Pacific and
Atlantic Oceans and through the Panama Canal.
 Ship fuel and capital costs as will as trouble in Panama
created economies in moving the containers by water to
a U.S. Pacific Coast port, then by entire trainload across
the United States to another ship for transatlantic
crossing to Europe. This system reduces transit time
and liner company ship investment.
Land, Mini-, and Micro-bridges
 A mini-bridge is a similar system that is used for
movements between, say, Japan and New York,
Philadelphia, Baltimore, Charleston, New
Orleans, or Houston.
 Rather than move all-water routes from Asia to
these cities through the Panama Canal, a minibridge consists of transpacific water movement
to Seattle, Oakland, or Long Beach, California,
then by rail to the destination East Coast or Gulf
Coast city.
Land, Mini-, and Micro-bridges
 The steamship company can turn the ship
around and return it to Europe faster than before.
In fact, ship option enables the steamship
company to offer weekly service between
Europe and Houston using one less ship than is
used in the all-water route. That ship can be
redeployed onto another route altogether. The
mini-bridge gives the steamship company
effective freight-hauling capacity while saving the
investment in one ship.
Land, Mini-, and Micro-bridges
 Micro-bridge is an adaptation of mini-bridge,
only it applies to interior nonport cities such as St.
Louis.The origin or destination of the shipment is
a U.S. interior, nonport city.
 Micro-bridges operate similarly to the NVOCC
system. A container is loaded at the interior point
for transference to the ship at the port. This
avoids truck movement to the port for actual
loading of the container at the port terminal.
Shipping Conferences
 A steam ship conference is a voluntary
organization of vessel-operating carriers whose
main function is to set acceptable rates for
steamships and shippers.
 The goal of the conference is to maintain a
stable market and fair competition among
 Another important element of the steamship
conference is to administer operating rules that
guarantee the shipper a consistent level of
service from participating lines.
International Air
 The differences between International Air and
domestic movement lie primarily in institutional
factors relating to national agreements and the
International Air Transport Association(IATA). This is
an international air carrier rate bureau for both
passenger and freight movement.
 Prices for both passenger and freight traditionally
tend to be set at sufficient levels so as to cover
most costs of the higher-cost or lower-load factor
carriers. This system enhances a supply of service
and brings a stability to the rate structure.
Air Cargo Rate
Air cargo rates are based on
the value of service or the
cost of service.
 The value of service is
demand-based and
considers the sensitivity of
the cargo being shipped to
freight rates. The less
sensitive cargo is to rates,
the higher the rate will be.
On traffic lanes where
demand is strong and plane
capacity is limited, the air
rates will be high, and vice
versa for traffic lanes where
supply exceeds demand.
 Also, products with high
prices or emergency
conditions surrounding the
move will be charged high
rates because the freight
rate is a small portion(less
than one percent) of the
landed selling price.
Air Cargo Rate
Three types of international air carrier rates are based
on the commodity shipped: general cargo, class, and
specific commodity rates.
 The general cargo rate is a standard rate that applies
to commodities for which there is no other applicable
rate (class or specific).
 The general cargo rate is available for any commodity,
can vary with distance and direction, and/or is
applicable between specific origin-destination pairs.
 Discounts are available for larger shipment sizes and
may or may not include ground transportation to and
from the airport.
Air Cargo Rate
 The class rate is applicable to cargo grouped
into classes.
 The rate for a particular class expressed as a
percentage of the general cargo rate, is usually
lower than the general cargo rate and can be
door-to-door or airport-to-airport.
Air Cargo Rate
 The specific commodity rate is applicable to a
specific commodity between a specific origindestination pair. The specific commodity rate is
generally lower than the general cargo rate.
 A high minimum weight is usually required for
each shipment. Because the air carrier utilizes
the specific commodity rate to attract freight and
to enable shippers to penetrate certain market
areas, it may have a time limit.
Air Cargo Rate
Container rates are also available for cargo shipped in a
container. The rate is cost-based, rather than value of
service- or commodity-based.
 The rate applies to a minimum weight in the container.
Some carriers offer a container rate discount per
container shipped over any route of the individual carrier.
The discount is deducted from the tariff rate applicable
to the commodity being moved in noncontainerized form
and a charge is assessed for returning the empty
Liner Rate Making
 Costs
Liner operation, as with most ship operation, is largely
fixed and common in nature. It has been estimated that
roughly 10 to 20 percent of the total costs of ship
operation is variable and is in fuel, loading, and
unloading costs.
The liner ship is often specifically constructed for a
particular trade route. That is, such things as ship size
and type, dimension, hatches, cargo space configuration,
and engine type are designed around the ports to be
visited, cargoes to be moved, and even the wave
patterns experienced in a particular trade.
Liner Rate Making
A majority of the total costs of operating a ship are fixed.
Because cargo loading, unloading, and fuel are the only
primary variable costs, the ship’s operation cost is roughly
the same regardless of the commodity hauled.
 The problem of determining a cost per pound entails a
difficult fixed cost allocation process, which can be
arbitrary at best. Ship operators will often determine unit
costs in terms of cost per cubic foot of ship space so as to
better evaluate and price for the range of commodities
Tramp Ship Cost Rate Factors
Tramp ships are generally not controlled by a specific
route with a single commodity. Large oil tankers that are
built for time charters for specific origin-destination
markets are the exception.
 The basic tramp vessel might haul coal, grain, fertilizers,
and lumber in the same year. Adaptability is necessary
to minimize lost revenue possibilities that will arise.
 These vessels might not always be of low-cost, optimal
design for any of the movements, but that is a basic
trade-off to being flexible.
 This general construction means general internal
features and hatches as well as the capability to enter
into most ports of the world.
Tramp Ship Cost Rate Factors
The economies of ship construction are critical to the
tramp vessel, especially the tanker.
 The nontanker vessel is generally built to hold between
5,000 and 8,000 tons of cargo.This is a good range for
a majority of cargo lot sizes shipped by firms.
 The tanker, on the other hand, is usually designed for
crude oil movements, and here the large tankers can
competitively move oil at costs much lower than small
 In fact, many 200,000 deadweight ton (DWT) tankers
have the same number of crew members as those
carrying only 40,000 DWT.
Tramp Ship Cost Rate Factors
 A major consideration of tramp owners is the
nation in which the ship is registered. The nation
of registry requires the shipowner to comply with
specific manning, safety, and tax provisions.
 Liberia, Greece, and Panama are nations
imposing relatively loose requirements in such
areas. For this reason, many of the world ships
are registered in these countries.
Tramp Ship Rate Making
Three primary forms of ship rental or chartering systems
are in use. These are the voyage, time, and bareboat or
demise charter.
 The voyage charter is one in which the shipowner
mans, operates, and charters the vessel, similar to a
 Shippers seek voyage charters for primarily one-way
and sometimes two-way trips. The owner is constantly
seeking charters subsequent to present charters to
minimize empty moves to the next charter.
Tramp Ship Rate Making
 The time charter is one in which the shipowner
rents the vessel and crew to a shipper for use
over a period of time that often includes use for
several shipments.
 The owner has his or her ship productively tied
up for a longer period of time than in the voyage
charter and the shipper might judiciously arrange
the moves, making the time charter more
economical than several voyage charters.
Tramp Ship Rate Making
 The bareboat or demise charter is one in which
the owner usually rents the vessel for a long
period of time while the chartering party supplies
the crew and performs the physical operation of
the vessel.
 In this setting, the owner is seeking to recoup
capital and interest costs and to be assured that
the ship will be safely operated.
International Air Regulation
 Matters of concern in international air carriage
relate to air safety and economic regulation.
 No single international regulatory body covers
rate and route matters in the international air
area. Instead, the pattern of route and rate
establishment has evolved from national policy,
use of the bilateral system of operating rights as
negotiated after World War II by many nations of
the world.
International air safety issues are addressed by the
International Civil Aviation Organization (ICAO), which
is part of the United nations.
 ICAO, headquartered in Montreal, is concerned with the
technical and safety issues of aircraft operation. The
organization has developed operating standards such
as navigating practices, rules of the air, navigation
charts, and communications.
 In addition, it is concerned with maintenance personnel
and practices, meteorology, search and rescue, air
accident investigation, and air traffic control.
Future of International
 International transportation will grow in importance as
more manufacturing and merchandising firms become
involved in overseas sourcing and marketing.
 Long-standing domestic firms in many industries face
competition against foreign-based manufacturers that
can produce and load goods at customer docks as
cheaply as the goods can be produced locally.
 This phenomenon is fostered by reduced trade barriers,
relative currency fluctuations, and the competitiveness
of ocean carriers.

Chapter 9 International Transportation