JNB365 Ship Chartering

Introduction

The naval freight transport operations have to major components namely the voyage estimation and the regulatory or contractual procedure within the charter party and owner. The purpose of this essay is to discuss these two factors for two chosen case. The first case is a decision making situation where there are 2 options for voyage and the owner has to select any one of them for securing maximum profitability. The second case study is about a violation of Bill of Loading regulation by the owner and the agents’ role in guiding the owner to solve the issue to ensure relationship with charter party while avoiding further regulatory issues.

Estimation of Option 1 for voyage plan

Route plan: Puerto de Manzanillo à Port of Long Beach (USA) à Brisbane (Australia)

Puerto de Manzanillo à Port of Long Beach (USA)

Distance = 1490 nm

Speed laden/ballast = 13 knots

Time required on sea = 4.8

IFO Fuel required 20.5 tonnes ballast = 4.8 x 20.5 = 98.4 tonnes

MDO Fuel required 1 tonnes/day = 4.8 x 1 = 4.8 tonnes

Bunker cost for IFO180 at 380/mt = 98.4 x 380/1000 = 37USD

Bunker cost for MDO at 580/mt = 4.8 x 580/1000 = 3 USD

Total bunker cost 37 + 3 = 40 USD

RC cost at DRC 4950 USD = 5 x 4950 = 24750 USD

Total Cost = 24790 USD

Port of Long Beach (USA) à Brisbane (Australia)

Distance = 18887 nm

Speed laden/ballast = 13 knots

Time required on sea = (18887/13)/24 = 60.5 days

IFO Fuel required 22 tonnes laden with additional 20% = 60.5 x 22 = 1597 tonnes

Total IFO Fuel required = 1597 tonnes

IFO Fuel Capacity = 1410.4 tonnes

DMO Fuel Capacity = 181.2 tonnes

Constant with FW = 500 tonnes

DWT Tropical = 109143 tonnes

4 Cranes = 4 x 50 = 200 tonnes

Cargo Capacity = (109143-500-181.2 – 200 -1410.4) = 106851.4

Allowable cargo load 100,000 and 10% MOLCHOPT

Final Cargo loaded 106851.4 Tonnes

Loading port time with rate 9500 t per day = 106851.4/9500 = 11.2 days

Discharging port time with rate 9000 t per day = 106851.4/9000 = 11.8 days

Total Time = 60.5 + 23 = 73.5 days

Total Port time = 11.9 days+11.2 days= 23 days

MDO requirement for port = 23 x 5 = 115 tones

MDO requirement for sea = 60.5 x 1 = 60.5tones

Additional MDO = 40

Total MDO required = 215.5 tonnes

Bunker cost for IFO180 at 380/mt = 1597 x 380/1000 = 606.86USD

Bunker cost for MDO at 580/mt = 215.5 x 580/1000 = 123 USD

DRC of 4,950 for 73.5 days = 4950x73.5 = 363825 USD

Total cost = 606.86 + 123 + 363825 = 364554.86USD

Cost per day in laden = 364554.86/73.5 = 4960

Total cost considering ballast and laden = 364554.86+24790 = 389344.86 USD

Final Cargo loaded 106851.4

Break Even Point = 389344.86/106851.4 = 3.65 USD/t

Comparison of Two Options

As per the above break-even estimation of voyage, it can be found that in order to gain profit from the option the voyage plan option 1 the fright price must be above 3.65 USD/t

It has been found that voyage charter is willing to pay 6% of additional with break even value. Hence, the payment per tonne will be 3.65 + (3.65)6% = 3.87USD

It has been found that commission will be 4% for the voyage plan option 1. Therefore, the estimated return from the voyage will be = 3.87 – (3.87*4%) = 3.71 USD/tonne

Considering the 3.71 USD/tonne of price and the Final Cargo loaded 106851.4 Tonnes, the total return from the option 1 will be 106851.4x3.71= 396418.69 USD

As per the above voyage estimation it can be found that total voyage cost will be 389344.86USD

Hence, the profit from the option 1 voyage plan will be = (396418.69-389344.86) = 7073.83 USD

For option 2 the time charter will hire a MV Gavitoh at 17,050 USD for 65 days of voyaging. Therefore, the total cost of hiring a MV Gavitoh for 65 days will be = 17050 x 65 = 1108250 USD.

Distance from Puerto San Antonio to Darwin is 13955nm

It has been assumed that since the model is similar, the speed will be 13 knots. Therefore, for voyaging to Darwin and redelivering to Puerto San Antonio will require a time of: (13955/13)/24= 44.7 days.

For the option 2 it has been assumed that sheep model the same, it can be assumed that the ability of cargo loading will be similar, the loading unloading rate will be also similar.

Therefore, the loaded cargo will be 106851.4 Tonnes

Considering the Loading port rate of 9500 tonnes per day the loading port time will be = 106851.4/9500 = 11.2 days

Considering the Discharging port rate of 9000 tonnes per day the Discharging port time will be = 106851.4/9000 = 11.8 days

Total Time = 44.7 + 22 = 66.7 days

From the above data it can be found that the total time will be 66.7 days for voyaging to Darwin and redelivering to Puerto San Antonio. Firstly, the time required for this voyage crossed the limit of 65 days therefore, this voyage plan would not be a valid option.

For this analysis the total cost of voyaging will be double considering the rout plan that is voyaging to Darwin and redelivering to Puerto San Antonio. As per the above estimation it can be said that the total cost will be 364554.86USD

Therefore, Cost per day in laden = 364554.86/73.5 = 4960 USD

From the above details it can be found that for 66.7 days the cost will be = 4960 x 66.7 = 330832USD

Considering the both side journey the cost will be double that is 330832 x 2 = 661664USD

Total cost given for voyage is 1108250 USD

If the commission is 4.5% then the net return from the voyage will be = 1108250 -  (1108250x4.5%) =  1058378.75USD

Therefore, for option 2 the profit will be: 1058378.75-661664 = 396714.75USD

From the above analysis of profit for two voyage options it can be found that the option 1 will cause a profit of 7073.83 USD and the option 2 will cause a profit of 396714.75USD. From the above details it can be said that option 2 can ensure significantly more profit level than option 1. Therefore, to ensure more profit option 2 should be chosen for the final voyage plan.

Message to owner conserving the obligation under B/L issues

In order to guide the contract and the voyage commercial process to a proper direction the in-depth analysis of the problem situation will be required. You currently have a fixed capsize ship, which is currently under SHELLTIME 4 time charter contract for 4 months of period. Currently, the charter party is unable to pay for the next hire because the Bill of Lading was issued with a sign by the master of vessel instead of the owner. It can be said that in this situation there are several regulatory obstacles and ethical dilemmas for both charter party and ship owner. Therefore, proper understanding of the B/L obligations associated with this situation is needed.

A bill of lading, also known as a B/L or BOL, is a document that a carrier issues to recognize receipt of cargo for shipment. A bill of lading can now be used for any form of freight transportation, despite its previous association with sea freight. Bills of lading are one of three important documents used in foreign trade to guarantee that exporters get paid and importers get their goods (de Pablo-Sánchez & Herruzo 2019, 3). A policy of insurance and an invoice are the other two papers. A bill of lading can be negotiated, but neither a strategy nor an invoice can be assigned. Bills of lading differ from waybills in foreign trade outside the United States except that the latter are not applicable and do not grant title. Nonetheless, the UK Transportation of Goods by Sea Act 1992 gives the lawful owner of a bill of lading, or the delivery address under a sea waybill or a ship's delivery address, all privileges of suit underneath the carriage contract (Shakil & Mostafa 2018, p.65). Therefore, it can be seen that there is a fair chance of negotiation between you as an owner and the charter regarding the compensation associated with the major error in receipt signature.

A bill of lading must've been transferable, and it serves three purposes. It's a definitive receipt, which means it confirms the items have been prepared. It includes or proves the terms of the commercial invoice. Subject to the contract details and clause, it acts as a document of title to the products. Incoterms terminology such as CIF, FOB, or FAS are often used in export transactions, allowing the exporter/shipper to deliver the products to the vessel, whether aboard or adjacent (Ziakas 2018, p.15). However, the charging is normally performed by the transporter or a third-party dock worker. A bill of lading is a have every documentation approval that can be endorsed and transferred or by regulatory transfer of materials with temporary possession. The Hague Rules, Hague-Visby Rules, or Hamburg Rules, which are required by the carrier to give the shipper a bill of lading specifying the type, quantity, condition, and leading marks of the goods, apply to the majority of sea shipments (Arabahmadi, Elsan & Nishadi 2019,p.35). In this case all these factors were mentioned apart from the signature of the owner. 

As per the described details of the case study a bill of lading in the in this case of transferring goods under SHELLTIME 4 the major identified fault that violates the regulatory constrain of B/L is a writing signed on behalf of the owner of the ship in which goods are shipped, accepting receipt, and promising to supply them at the end of the journey of voyage.  It should be the subject to such conditions as specified in the bill of lading. However, in this case the B/L has not mentioned anything regarding the voyage master before.  As a result, the bill of lading was created to include a receipt to the shipper in the event that the owners were not present, should be considered as the violation of the regulation. Despite the fact that the details of "bill of lading" is well-known and recognized by both of the parties it will make a further issue in the carrier procedure under SHELLTIME 4 in the near future. However, in that case transport paper can be used under the Articles 1:15 and 1:16 of the Rotterdam Rules, to overcome the current situation (Plomaritou & Voudouris, 2019,p.5).  In this case it has to be also considered that, it the new contract paper remains to be seen if shippers, carriers, and "maritime performing groups" works as another new Rotterdam Rules. Otherwise, the coinage would abandon the long-established contract under the regulatory constraints of "bill of lading." (global-document-library 2019).

Considering the above details, it can be said that as an owner you can directly contact with the charter party and send another paper or invoice using electronic media as a case transport paper, where the details of the error and the permission of the vessel master would be granted for this particular case of unloading. It is also major factor that, without having this evidence paper from your side, the charter party will not be able to pay for the next hire, which will cost additional money from owner side. Therefore, electronically the case transport paper should be delivered as soon as possible.

Conclusion

As per the above voyage commercial, timings and non-commercial evaluation it has been found that between both of the 2 options option 2 can ensure significantly more profit level than option 1. Therefore, to ensure more profit option 2 should be chosen for the final voyage plan and the charter party should be communicated accordingly. From the second case study analysis of Bill of Loading violation it can be found that to overcome the situation the owner should directly contact with the charter party and should send another paper or invoice using electronic media as a case transport paper, where the details of the error and the permission of the vessel master would be granted for this particular case of unloading, as soon as possible.

References

Arabahmadi, M. R., Elsan, M., & Nishadi, E. 2019. Comparative study of bill of lading function as title document. Journal of Civil Law Knowledge, vol .8 no.(1), pp.31-41.

de Pablo-Sánchez, C., & Herruzo, E. T. 2019. About the possibility of recovering a trade network from Bill of Lading data. In Proceedings of the 5th Workshop on Data Science for Macro-modeling with Financial and Economic Datasets (pp. 1-4).

global-document-library. 2019. BILL OF LADING STANDARD TERMS & CONDITIONS. Retrieved 13 May 2021, from https://www.msc.com/global-document-library/pdfs/terms-conditions/bl-standard-t-c.

Plomaritou, E., & Voudouris, I. 2019. The Relationships of Bill of Lading, Charterparty and Other Transport Documents. Journal of Economics, Management and Trade, vol.24 no.(6), pp.1-8.

Shakil, S. M., & Mostafa, K. A. 2018. An Analysis of the Advantages and Disadvantages of Using a Multimodal Transport System in the Carriage of Goods. International Journal of Law, Humanities & Social Science, vol .2 no. (4), pp.60-69.

Ziakas, V. 2018. Security Alternatives of Sea Waybill and Straight Bill of Lading. Journal of International Trade, Logistics and Law, vol .4 no.(2), pp.13-18.

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