IGNOU IBO 05 Free Solved Assignment 2022- Help first

IBO 05

International Marketing Logistics

IBO 05 Free Solved Assignment

IBO 05 Free Solved Assignment July 2021 & Jan 2022

Q. 1. (a) What are the various factors taken into consideration while selecting the mode of transportation for export cargo. Explain.

Ans. 1. Cost of Service: The cost of transportation adds to the cost of the goods so it should always be kept in mind. Rail transport is comparatively a cheaper mode of transport for carrying heavy and bulky traffic over long distances.

Motor transport is best suited and economical to carry small traffic over short distances. Motor transport saves packing and handling costs.

Water transport is the cheapest mode of transport. It is suitable to carry only heavy and bulky goods over long distances where time is not an important factor.

Air transport is the most costly means of transport but is particularly suited for carrying perishable. light and valuable goods which require quick delivery.

Speed of Transport: Air transport is the quickest mode of transport but it is costliest of all. Motor transport is quic than railways over short distances.

However, the speed of railways over long distances is more than that of other modes of transport except air transport and is most suitable for long distances.

Water transport is very slow and thus unsuitable where time is an important factor.

Flexibility: Railways, water and air transport are inflexible modes of transport. They operate services on fixed routes and at preplanned time schedules.

The goods have to be carried to the stations, ports and airports and then taken from there. Motor transport provides the most flexible service because it is not tied to fixed routes or time schedules. IBO 05 Free Solved Assignment

It can operate at any time and can reach the business premises for loading and unloading.

Regularity of Service: Railway service is more certain, uniform and regular as compared to any other mode of transport.

It is not much affected by weather conditions. On the other hand, motor transport, ocean transport and air transport are affected by bad weather such as heavy rains, snow, fog, storms etc.

Safety: The safety and security of goods in transit also influence the choice of a suitable means of transport.

Motor transport may be preferred to railway transport because losses are generally less in motor transport. Water transport exposes the goods to the perils of sea and, hence from safety point of view, sea transport is thought of as a last resort.

Nature of Commodity: Rail transport is most suitable for carrying cheap, bulk and heavy goods. Perishable goods which require quick delivery may be carried through motor transport or air transport keeping in mind the cost and distance.

Other Considerations: A number of special services such as warehousing, packing, loading and unloading are also taken into consideration while deciding about a mode of transport.

From the above discussion, it is clear that each mode of transport is suited for a particular type of traffic. Rail transport is particularly suited for carrying heavy and bulky goods over long distances. IBO 05 Free Solved Assignment

Motor transport is suitable for carrying small consignments over short distances. Air transport is suited to light and precious articles which are to be delivered quickly.

Ocean transport is appropriate for carrying heavy bulky goods over long distances at the cheapest possible cost.

(b) Describe the responsibilities of ship owners and the charterers under different forms of chartering arrangements.

Ans. In voyage charter, a ship is hired for single or consecutive voyages for shipment of specified quantity of cargo at specified rates and on mutually agreed conditions.

These ships carry full or part cargo and freight depends on quantity of cargo. The owner acts as carrier, appoints masters and also bears expenses related to repair, maintenance, wages, provisions, stevedoring charges, insurance, brokerage, commission, claims, etc.

The master of the ship has to report at a specified port, at specified time barring which it is at the discretion of charterer to cancel the contract or claim for loss incurred.

The charterer is entitled to pay freight to the shipowner which is either lump sum or calculated on per ton basis.

When freight is calculated on per ton basis, the charterer has to pay even for the unused capacity (dead freight) or the same space may be hired out to another charterer by the shipowner.

 IBO 05 Free Solved Assignment
IBO 05 Free Solved Assignment

If freight is charged in lump sum and capacity is under utilised, the charterer may hire another charterer, but at the ship-owner’s discretion.

In voyage charters, the owner acts as carrier and master appointed by the owner looks into the working of ship. IBO 05 Free Solved Assignment

These ships carry full or part cargo and freight depends on the quantity of cargo. The owner bears expenses related to repair, maintenance, wages, provisions, stevedoring charges, insurance, brokerage, commission, claims; etc.

The charter has to bear no expenses, unless stevedoring charges (full or partial) specified for by charter

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..

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 21 charterers. The claims are some partially by the 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. IBO 05 Free Solved Assignment

At times, when there are uncertainties in market, the shipowners hire out their ships to liner companies, which have a 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.

Time Charter: In time tramping, the master is appointed by the owner, but owner does not acts like a carrier. The ship is hired for its full capacity for a specific time period.

As owner does not acts as carrier, hence operation charges like fuel, port charges, dunnage, ballast, brokerage, cleaning charges are borne by the charterer.

The owner bears charges related to maintain,repair, wages, provisions, store, supplies, overhead costs, depreciation; etc. The claims are borne partially by charterer, owner or both.

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. IBO 05 Free Solved Assignment

The charterer bears expenses related to payment of wages, provisions, stores supplies, equipment, oil, water, over! charges, dunnage, port, fuel charges and brokerage claims.

Bareboat Charter: In bareboat charters, masters are appointed by charterers. These ships are hired for full capacity and hire depends on duration of charter.

The owners donot act as carrier, but bears charges related to depreciation, insurance (if agreed), survey and brokerage (if any).

The charterer is entitled to payment of wages, provisions, stores, supplies, equipment, oil, water, overhead charges, dunnage, port, fuel charges and brokerage claims.

2 (a) Discuss briefly the various constraints faced by Indian shipping industry.

Ans. PROBLEMS OF SHIPPING INDUSTRY

Low Capital Base: The base capital for most shipping companies is low and they operate with only 1 to 2 ships, which constraints their competitive ability.

Ship Finance: Shipping needs high financing at all stages starting from acquisition, maintenance, operations, expansion or replacement.

Shippers have been found struggling these aspects due to non-availability of loans and complexities involved in obtaining funds from other sources.

Growing Competition from Foreign Flag Ships: Ships from open registry countries pose severe competition for Indian shipping companies in cargo carriage space.

Outdated Cost Plus Formula: The cost plus formula used in Indian shipping context is unfavourable in the interests of shippers who have acquired new ships or expanded the exiting base IBO 05 Free Solved Assignment

Non-uniform Taxation Policy: Foreign ships (with import cargo) are not taxed on freight earned, but Indian ships are tax liable for freight.

Cargo Support: With decanalisation of bulk commodities and better offers from foreign flagships, the cargo support is not much. (Earlier cargo was supported by “TRANSCHART’).

Non-classification of Shipping as an Infrastructure Industry: Though this issue has been highlighted from time to time, it has been rather ignored by the Government.

The necessity of State Support to Shipping: Shipping is risky and cyclical industry. It requires capital thrust in form of debt and equity support. The industry has witnessed increased regulations and rapid technological developments.

High Manning Levels: The cost of manning is still high in India as compared to other developed maritime nation continues to rise on account of increase in wages, salaries and incentives. IBO 05 Free Solved Assignment

(b) What is Maritime Fraud? State the various factors that lead to commitment of maritime frauds.

Ans. What is 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).

These usually involve documentation and are committed by people inside or on the fringe of the maritime community. IBO 05 Free Solved Assignment

DIMENSIONS AND CAUSES

Liner shipping involves different types of cargo, collected from different shippers and from various ports. At times multimodal 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 the 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. IBO 05 Free Solved Assignment

• Liner cargo type is complex due to its 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.

  1. Briefly comment on the following:

(a) “Objectives and policies for functioning of the supply chain are usually in conflict both within and accordance operational units.”

Ans. “Objectives and policies for the functioning of the supply chain are usually in conflict with both within and across operational units.

“The objectives of manufacturing, marketing, sales and distribution are often conflicting. To balance these the following cross-functional aspects must be considered:

1 Sales and marketing strategies, demand characteristics

2 Inventory management, procurement and manufacturing strategies, lead time (administrative and suppliers)

3 Product strategy, changes in demand and trends.

As logistics strategies are negotiable, these aspects must be considered collectively to attain the overall objectives of the logistics system. IBO 05 Free Solved Assignment

The systems must be integrated cross-functionally and vertically. A holistic approach to integration refers to the integration of organizational aspects both vertically and horizontally.

In horizontal integration various cross-functional systems/sub-systems like production, procurement, inventory, sales, demand/sales forecasting, and analysis are integrated.

In vertical integration the operational, tactical and strategic levels are integrated to enable timely decision-making.

(b) “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.

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. IBO 05 Free Solved Assignment

The world fleet expanded by 3.2% The major tonnage carriers are oil tankers and bulk cargo (35.8% and 36% respectively in 1996).

Maximum growth was so for the container ships (11.2%), while tonnage for tankers has decreased continuously 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 an only a marginal increase in bulk cargo which was mainly for open registry countries.

 IBO 05 Free Solved Assignment
IBO 05 Free Solved Assignment

(c)”Shippers-Ship owners consultation arrangements in India leave much scope for Improvement.”

Ans. In India, All India Shipper’s Council, regional level shipper’s associations and concerned Government department like Ministry of Commerce (Infrastructure Division) regularly consult shippers.

Shippers-shipowners consultation in India leave much scope for improvement. This is true considering the following aspects: IBO 05 Free Solved Assignment

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 a 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 the 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 the Chamber of Commerce approach authorities directly. This hampers the growth and repute — associations.

(d) The rate of return from warehousing business is low and the gestation period is rather long.

Ans. The Rate of Return (ROR) from warehousing business is low and the gestation period is rather long.

Warehousing has several strategic decisions like number of warehouses, warehouse capacity, their location, and type of ownership (leased or owned). These involve heavy investments.

A warehouse is involved in various functions like assortment, storage of goods; etc. These start generating revenue over and above the investment made, as the warehouse change for consignment held, as per the time period.

The cost of owning of a warehouse involves initial cost and financing the same. Similarly, owning more warehouses would mean better customer service, but involves ownership and maintenance costs. IBO 05 Free Solved Assignment

By making the product available at place where it is needed and when it is needed, the distribution system adds both time and place utilities to the product.

For achieving this, company must critically decide on number of warehouses and the type of type of transport system to be used for product delivery.

Q. 4. Distinguish between the following: (a) Domestic Logistics and International Logistics

Ans. There are three main factors on account of which Domestic and International logistics differ.

These are the logistics costs, business mechanics, and influence of political, institutional, and cultural factors. Each of these has been elaborated below:

Logistics Cost: As compared to domestic logistics, in international logistics, the overall logistics costs (as a proportinof overall distribution costs) are much higher.

This is mainly due to inland transport costs (mainly freight cost, as nearly 90′ the cargo is moved by sea) and tariffs. IBO 05 Free Solved Assignment

Costs like inventory costs and non-physical handling costs, which include staffing cu…, information system management costs, demand forecasting costs, permissions seeking costs, extensive documentation costs, order processing and dispatching costs; etc., are common to both.

The transportation cost in developing countries are twice as compared to developed counterparts. Other costs in international logistics are the tariffs.

Business Mechanics: International logistics is complex with several business mechanics intiricacies. It requires wide knowledge of trade policies, procedures, merchandise, international competitors, expertise to quote the deliveries, intensive documentation as compared to domestic shipments. Besides, international shipments face challenges at port, cargo aggregation points (switching points) which increase total transit time and increase overall logistics costs in return.

Political, Institutional and Cultural Factors: There are multiple risks associated with foreign trade. Some of these are currency risk, Government policies, control and regulation of foreign trades, country’s banking system, natural or intended damages, maritime frauds, capital and labour efficiency in country involved; etc.

In domestic logistics, such risks are spelled out.

(b) Inland Container Depots and Container Fright Stations

Ans. Inland Container Depots and Container Freight Stations (CFS): Inland Containers Deports (ICD) is a ‘dry port, where containerized cargo is collected, consolidated along with stuffing and de-stuffing of containers.

It is a custom declared area for facilitating loading unloading of imports export cargo through official gazette. IBO 05 Free Solved Assignment

ICDs have enabled the inland movement of marine containers. These container freight stations consolidate smaller shipments of LCL (Less than Container Load) from different destinations and origins into larger containers called FCL (Full Container Load).

Inland container deports are mainly meant for FCL. This consolidation enables small shippers to get export custom clearances. The objectives of establishing ICD are:

  1. Relieves, ports from congestion.
  2. Helps to maintains continuous flow of traffic and achieve economic cargo distribution.

Inland: An export shipment involves multi-modal transport. The containers are filled and sealed at CFS. These are them dispatched to center ICD hub via road and from there it is hauled by rail to gateway port for loading.

The advantages of ICD is that it minimizes the transport cost as CFS is connected to roads and railways which in turn are connected to gateway.

The ICD/CFS must be established at cargo sensitive ports, which may be in far interior at times. These facilities must be contemporary, efficient and scalable (expandable with requirement).

(c) Weight ton and Measurement ton.

Ans. The rates of individual commodities are expressed in different ways, namely, per weight ton (W), per measurement ton (M), and per weight ton or measurement ton (W/M), whichever gives higher revenue. IBO 05 Free Solved Assignment

According to gross weight, i.e., weight ton, which is indicated by “W” in the tariff. According to volume, i.e., measurement ton, which is indicated by “M” in the tariff.

The unit of measurement of different bases can vary.

For example, a weight ton is usually defined as either a metric ton (100 kg) or a long ton (1,016 kg) and a measurement ton in some trades, is defined as 40 cu. feet, while in others 50 cu. feet, or else, as is usually the case today, as 1 cu. meter i.e., 35.5 cu. feet.

According to normal practice, a commodity that is bei charged on a weight basis will pay according to its weight irrespective of the volume it occupies and a commodity charged according to the volume will do so irrespective of its weight.

(d) 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 IBO 05 Free Solved Assignment

There are two approaches for determining to reorder level: Perpetual Review System (P-system) Periodic Review System (Q-system)

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 the 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 an ongoing review of inventory level and thus, store records must be updated always.

In the 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 Ti System. The review time is decided by the administration and can be weekly, fortnightly or monthly as per the natur 8/ demand/consumption. IBO 05 Free Solved Assignment

If it is annually reviewed, the Economic Order Quantity (EOQ) is needed.

The reorder quantity in case is calculated on basis of the following formulae:

Average Consumption during Review Period + Lead Time Consumption The Periodic Review System has following shortcomings:

• The system does not consider inventory costs explicitly.

• The minimum or package quantity restriction is generally not possible to meet.

• The system may give a picture of abrupt /random rise in consumption and does not consider 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. IBO 05 Free Solved Assignment

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.

The formulae for calculating EOQ is as follows: EOQ = V(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:

Routine Simplification: If EOQ gives 13 reorders per year, this can be taken as 12, which means one order per month. IBO 05 Free Solved Assignment

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.

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.

Perishable Items: For perishable items, the EOQ figure must be reconsidered as excess amounts can lead to loss due to spoilage or deterioration.

Bulk Discounts: If bulk discounts are available, these should be compared with suggestive EOQ figure and one which is more cheaper must be considered.

Case of Imports: Due to problems like uncertain leads, import licenses, etc. EOQ cannot be applied practically to import orders.

Seasonal Articles: In case of seasonal items like sugarcane; etc., the purchase is more economical (cheaper) in a season than based on EOQ concept.

Example: Annual consumption of an item X is 12,000 units. The item costs Rs. 5 per unit. The cost of ordering is Rs. 20 per order. The inventory holding cost is 20% of average inventory costs. The EOQ for this can be determined as follows:

Optimal Order Quantity = Ö ((2 *12000×20)/.2×5)= 3,464 Units.

No of OrdersQuantity (Units)Value
Rs
.
Order Cost
Rs.
Holding Cost
Rs.
0+H Cost
Rs.
11200060002060006020
26000 6000 4030003040
34000 6000 6020002060
43000 6000 8015001580
52400 6000 10012001300
62000 6000 12010001120
71714 6000 140857997
81500 6000 160750910
91333 6000 180667847
101200 6000 200600800
111091 6000 220545765
121000 6000 240500740
13923 6000 260462722
14857 6000 280429709
15800 6000 300400700
16750 6000 320375695
17706 6000 340353693
18667 6000 360333693
19632 6000 380316696
20600 6000 400300700
IBO 05 Free Solved Assignment

Optimal Ordering Frequency = 12000/3464 = 3.5 order per year (equivalent to 4 orders per year)

When the firm purchases 3464 units per order placing 4 orders per year, the carrying cost is equal to ordering costs and the total cost is minimum.
In this case , EOQ is 3464 units per order or Rs. 17320 per order.

5 Write short notes on following: (a) Public Warehouse.

Ans. A public warehouse operates with license (obtained from a licensing authority). These warehouses offers warehousing service to many users on monthly contractual basis.

The broad objectives of Warehousing Corporation are as follows:

1 Create negotiable papers, which would serve as an instrument for expansion of credit available to producers, dealers, individuals and others.

2 Nation’s real income can be increased by minimizing wastages in handling and storage. It requires proper warehousing facilities.

3 Standardise warehousing process by introduction of standard equipments and warehouse receipt. IBO 05 Free Solved Assignment

4 Personnel training for management and running of warehouses.

5 Assisting Government and Government sponsored organizations in price control and price support schemes.

Warehousing Network in India: The Central Warehousing Corporation (CWC) and its 16 subsidiaries (State Warehousing Corporations, SWC) were set under the recommendations of Rural Credit Survey Committee, setup in early 1950.

The CWC started its work in 1957, with merely 7 warehouses with capacity of just 7000 MT. In 1998, there were 1835 public warehouses, of which 459 were operated by CWC and rest (1376) by SWC with capacity of 108.86 MT.

Madhya Pradesh has the maximum number of warehouses centres (312), while Haryana has least (4). Warehousing facilities in Punjab had the maximum capacity (28.37 MT).

(b) Commercial Shipping

Ans. Commercial shipping refers to use of ocean transport system for conducting trade and business. Ships are vehicles used in ocean transportation. These are broadly of two types – liner and tramp.

Commercial shipping requires certain standards and procedures to be followed, which include registration and classification of ships.

Registration is mandatory and helps in getting insurance and patronization for trade for ship. Classification of ships enables to gain a standard certification of built and operations.

SALIENT FEATURES OF COMMERCIAL SHIPPING

1 Commercial shipping depends on port facilities for cost and functional effectiveness.

2 Commercial shipping is exposed to cyclical changes in business (depression-buoyancy).

3 It is an international activity and hence influenced by global economic factors.

4 It is capital intensive that requires large financial investments and backups. Optimal utilization of capacity is must in commercial shipping in view of heavy investments made.

5 International trade increases competition, making business ventures more risky.

6 An adequate captive cargo base is must for stable liner shipping.

7 Diversification of trade makes it necessary to have promotional shipping service under the state. IBO 05 Free Solved Assignment

(c) Multi-Modal Transport Document

Ans. Multi-modal transport refers to the transportation of goods involving at least two different means of transport. The aim of MMT is to transport goods in minimum time with minimum cost from origin to destination, under a combined tran contract.

Though the overall prices may be high, the MMT is preferred as it is time saving and convenient for shippers.

Multi-modal transport helps in achieving the following:

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 reducing inventory levels. IBO 05 Free Solved Assignment

10 Generate foreign revenue and increase GNP through increased economic activity.

Multi-Modal Transportation of Goods Act, 1993 is based on Hamburg rules or UNCTAD/ICC Rules for multi-modal transport. The Director General of Shipping has authorized ‘Multi-Modal Transport Operator (MTO) for the carriage of goods.

When MTO enter into contract with consignee, the former issues a document of title called Multi-Modal Transport Document (MTD). The provisions of MTD specify the liabilities of MTO.

MTO is obligated to deliver goods to consignee or endorsee and is also liable for loss, damage or delay done in delivering the goods.

If the consignment is not delivered within 90 days from due date of delivery or as agreed upon or within reasonable the consignment is deemed to be lost.

The claims against MTO for loss, damage or delay must be filed within 9 months from expected/actual date of delivery. For claimable loss, law provides for different liabilities:

• If nature and value of goods has not been declared, and stage of transport where damage was done is unknown, the liability does not exceeds 2 Special Drawings per kg or 666.67 Special Drawings Rights per package or unit lost.

• If contract does not includes carriage by sea or inland waterways, the liability is limited to maximum of 8.3 Special Drawings per kilogram.

• If the stage of transport where damage done to goods is known liability is determined in accordance with the provisions of law applicable to that mode of transport.

• In case of loss due to delay, the liability is limited to freight payable for the consignment.

(d) Privatisation of Ports

Ans. The Government of India has encouraged increased private sector participation by initiating several policy amendments. IBO 05 Free Solved Assignment

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). IBO 05 Free Solved Assignment

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