Predicted Exam Topics Review

Question 1

Explain the main differences between a bill of lading and a waybill. Give examples of how you would use these different documents

Answer 1

• A BL is a document of title, whereas a waybill is not
• Both serve as a receipt for goods and evidence of the contract of carriage, but only the BL allows for transfer of ownership
• BLs must be presented to the carrier for cargo release, whereas the named consignee on a waybill can take delivery upon identification
• BLs are typically used for international shipments where ownership may transfer during transit, or when LCs may be required, e.g. commodities
• Waybills are common on short-haul or time sensitive shipments where traditional BL requirements could cause a delay, e.g. express parcel deliveries

Question 2

Explain the main differences between a straight bill of lading and a ‘to order’ bill of lading. Give examples of how you would use these different documents

Answer 2

• A straight BL is non-negotiable, meaning the specified consignee must recieve the goods, whereas a ‘to order’ bill of lading is negotiable
• Straight Bill of Lading: The consignee box names a specific party (e.g., “ABC Ltd.”) and cannot be changed.
• ‘To Order’ Bill of Lading: The consignee box is marked as “To Order” or “To Order of [shipper/bank],” and ownership can transfer via endorsement on the back of the document.
• Straight Bill of Lading: Used for shipments where ownership is fixed, e.g., machinery sold to a single buyer.
• ‘To Order’ Bill of Lading: Used in transactions involving payment through a letter of credit, where banks require flexibility to secure payment before goods are released.

Question 3

Explain the main differences between a through transport (TT) bill of lading and a combined transport (CT) bill of lading. Give examples of how you would use these different documents

Answer 3

• A through transport bill of lading holds the issuing carrier responsible only for the sea leg, acting as an agent for pre-carriage/on-carriage
• A combined transport bill of lading makes the issuing carrier liable as principal for the entire journey, from origin to destination.
• Through Transport Bill: Limited liability for the carrier on multimodal routes; the shipper must deal with other service providers for non-sea legs.
• Combined Transport Bill: The carrier assumes end-to-end liability, simplifying claims and disputes for the shipper and consignee.
• Through Transport Bill of Lading: Used for shipments where the carrier does not control the entire transport chain, e.g., a freight forwarder arranges pre-carriage or delivery.
• Combined Transport Bill of Lading: Used for integrated door-to-door services offered by carriers, e.g., shipping electronics from a factory in inland China to a warehouse in Europe.

Question 4

Why might a carrier charge different rates for the same cargo on the same route, but shipped in opposite directions?

Answer 4

• Supply vs. Demand Imbalance:
• Freight rates are influenced by the demand for cargo space. If demand is higher from A to B than from B to A, rates for A to B will be higher.
• Example: Asia to Europe trade typically has higher demand than the return route, leading to higher rates for westbound shipments.
• Dominant vs. Non-Dominant Trade Legs:
• Dominant legs (e.g., Asia to North America) often have higher rates due to high demand, while non-dominant legs (return routes) may be discounted to reposition empty containers.
• Capacity Availability:
• Limited vessel or aircraft space on high-demand legs increases rates. Conversely, surplus capacity on low-demand legs reduces rates.
• Competition Levels:
• More competition on one leg (e.g., Europe to Asia) can lead to lower rates compared to a less competitive leg.
• Container Availability:
• A surplus of empty containers at one location may reduce rates to encourage repositioning. A deficit of containers at another location increases rates due to higher repositioning costs.

Question 5

Why might a carrier charge different rates for the same cargo when shipped directed compared to transhipment services?

Answer 5

• Transit Time:
• Transshipment services often have longer transit times, which may be less desirable for time-sensitive goods, leading to lower rates.
• Example: A direct service from Shanghai to Rotterdam will typically have higher rates than a service transshipping in Singapore.
• Risk of Delays:
• Transshipment services carry a higher perceived risk of delays or missed connections, which may reduce their value for shippers.
• Cost Differences:
• Transshipment involves additional handling and feeder costs, potentially increasing rates. However, lines may use transshipment services to consolidate cargo, reducing costs on the main leg and offering lower rates.
• Competitive Factors:
• The number of direct vs. transshipment options influences pricing. If many carriers offer direct services, transshipment rates may need to be lower to attract customers.
• Circumstantial Pricing:
• In some cases, transshipment services are cheaper due to economies of scale, while in others, direct services are more cost-effective.

Question 6

Why might two different carriers charge different rates for the same cargo/route?

Answer 6

* Volume Differences:
- Larger shippers with high cargo volumes often negotiate better rates due to economies of scale.
* Contract vs. Spot Business:
- Shippers with long-term contracts typically pay lower rates than those shipping on a spot basis.
* Customer Importance:
- Carriers may offer preferential rates to strategically important customers who provide multi-trade support or regular business.
* Regularity and Reliability:
- Shippers with consistent shipment schedules may secure lower rates due to predictability and lower operational risks for the carrier.
* Competitive Pressures:
- Shippers facing aggressive pricing from competitors may negotiate lower rates from carriers to remain competitive in their markets.

Question 7

In the last ten years, the major container lines have taken delivery of a number of ships with capacities of between 18,000 teu and 24,000 teu. Explain the reasons why container lines have been buying ships of this size.

Answer 7

Reasons for Buying Larger Ships:
1. Reducing Unit Costs:
o Larger ships benefit from economies of scale, lowering the cost per container carried.
o Helps container lines remain profitable in competitive markets.
2. Staying Competitive:
o Ensures parity with other major lines that have already invested in ultra-large vessels.
o Prevents losing market share on key routes (e.g., Asia to Europe).
3. Catering for Trade Growth:
o Anticipated growth in global trade volumes requires higher-capacity ships to meet demand efficiently.
o Aligns with long-term shipping trends favoring larger vessel deployment.

Question 8

In the last ten years, the major container lines have taken delivery of a number of ships with capacities of between 18,000 teu and 24,000 teu. Explain the issues container lines may have faced after buying ships of this size.

Answer 8

1. Limited Trade Routes:
   o Only a few trades, such as Asia–Europe, can consistently generate the cargo volumes needed to fill these ships.
   o Ships deployed on unsuitable trades operate below capacity, reducing cost efficiency.
2. Port and Terminal Constraints:
   o Few ports have the infrastructure (e.g., deep berths, large cranes) to handle ships of this size.
   o Congestion risk increases at ports capable of accommodating ultra-large ships.
3. Operational Challenges:
   o Filling these vessels may require calling at additional ports or feeder services, increasing transit times and costs.
   o Cargo handling at ports with limited capacity can lead to delays and inefficiencies.
4. Market Saturation:
   o Overcapacity in certain trades due to the influx of large ships can depress freight rates, impacting profitability.

Question 9

Is it likely that more ships larger than 24,000 teu will be ordered in the next five years? Give reasons to support your answer.

Answer 9

Arguments in Favor:
1. Trade Growth:
o Continued expansion in global trade, particularly on high-volume routes like Asia–Europe, could justify larger ships.
o New trade agreements or supply chain shifts may increase demand for ultra-large vessels.
2. Competitive Advantage:
o Larger ships further reduce unit costs, giving early adopters a competitive edge.
o Lines may see value in being the first to secure such cost advantages.
3. Port Infrastructure Development:
o Investments in port upgrades (e.g., deeper berths, advanced handling systems) make it more feasible to handle larger vessels.
o Expansion projects at major ports like Rotterdam, Singapore, and Shanghai support this trend.

Arguments Against:
1. Limited Trade Deployment:
o Larger ships can only operate effectively on a few routes (e.g., Asia–Europe), already dominated by large vessels.
o Over-reliance on one trade route increases risk.
2. Diminishing Cost Economies:
o Marginal cost savings diminish as ship size increases beyond 24,000 TEU, reducing the incentive to build larger vessels.
3. Port Congestion:
o Larger ships create more concentrated peaks of container handling, exacerbating congestion and increasing turnaround times.
o Additional port investments may not be sufficient to mitigate these challenges.
4. Risk of Early Adoption:
o Being the first to invest in larger vessels may lead to operational and market challenges, with uncertain returns.

Conclusion:
* Unlikely: Given the limited trade routes, diminishing economies of scale, and operational challenges, it is unlikely that ships larger than 24,000 TEU will be ordered soon.
* Conditional Possibility: However, rapid trade growth or significant port infrastructure development could change this scenario.