Freight Forwarders & NVOCs – What is the difference?

Freight Forwarders act as agents of merchants/shippers. Many forwarders act as consolidators too, ie, combining small lots of cargo into big parcels/full container loads. Generally they issue forwarder B/Ls (House B/Ls) to each shipper. Under this B/L they accept responsibility as the agent of the shipper only. Incase of an issue, the holder of the B/L will have to take it up with the actual carrier.
 

NVOCCs (Non Vessel Operating Common/Container Carrier) –  When a forwarder acts as a carrier he is termed as a NVOCC. Though NVOCC is not the actual ship operator, his role is same as that of a principal and accepts the carrier’s responsibilities.
 

Both freight forwarders and NVOCCs are important customers of the lines. Their profit is the difference of freight rate received from shipping line and that charged to the shipper, plus the margins from pre/on carriage, documentation and other value added services.

Through Bill of Lading & Combined Transport Bill of Lading – Are they same ??

No, there is a significant difference between the Through B/L and Combined Transport B/L.

Through B/L -  Under a Through B/L the ocean carrier acts only as an agent for the shipper in arranging the pre and on carriage. The pre/ on carrier may be a feeder vessel or land transport (road/rail). The  ocean carrier will arrange the pre/on carriage and will charge merchant for the service. But, will not have any direct liability for any loss or damage to the cargo during those part (pre/on carriage) of the journey. The responsibility of the carrier is limited.  

Combined Transport B/L – Here the carrier accepts liability from beginning to end. This B/L is the requirement of container trade to facilitate door-to-door movement. In the case of a door-to-door movement of containers  there is carrier haulage at both ends, which combines various modes of transport, and it is logical that the carrier accepts liability from the shipper’s premises to the consignees’ premises.

New Gen Containers

Here is good news for shipping companies, congestion-hit container freight stations (CFSs), box terminals and the end users. Something interesting is happening in the box shipping world ! These new gen containers hopefully would address many of the current industry problems  and enable unimaginable cost benefits .

 

The Tworty Box

 

Two 20 ft containers that can be linked together to form a single 40 ft unit ! An innovative new ISO container design that allows a unit to be used either as a 40 ft or 20 ft box . It has doors at each end,  the second door opens to the inside and can only be locked from the inside. This door can be fixed to the container ceiling and, with the use of its special bonding elements, another Tworty Box can be joined up, thereby creating a 40 ft unit of full value and standard doors at both ends . According to the developer , Tworty Box  was designed to reduce the cost of repositioning empties caused by imbalances between supply and demand.

 

The first tworty box completed its maiden voyage from Hamburg to Montreal on the containership OOCL Montreal. Two containers joined together as a single unit were stuffed with 20 tonnes of breakbulk cargo, mainly car parts and granulate, for Canadian consignees. 

Also, Tworty Box prototypes have received full International Convention for Safe Containers certification for single and for coupled operation.

 

 Collapsible Plastic Shipping Container – The CargoShell
 

Mr Rene Giesbers, a heating-systems engineer from the Netherlands, has invented a collapsible plastic shipping container named as Cargoshell.
This is made of a fibreglass composite which weighs only three-quarters of a standard container and more importantly, when it is empty, it can be folded down to a quarter of its size. It is now reportedly undergoing tests to see whether it is strong enough to meet the requirements set by the International Organisation for Standardisation (ISO).

 

 

                                   

A collapsible shipping container has its uses.

-       The folding containers could create  more room for full containers on the carriers.

-        The port time of ships could be reduced by bundling together the boxes in groups of four

-       They would also take up less space on land, allowing depots to operate more efficiently.

According to Mr Giesbers, Cargoshell can be collapsed or opened in 30 seconds by a single person using a forklift truck. He has the ambitious aim of having a million Cargoshells plying the seas, rails and roads by 2020.

Summary of recommendations and suggestions formulated by various groups/committees to promote coastal shipping in India

India's coastal shipping has been a problem area for at least the last 3-4 decades. Lokpur Committee 1957 ( Rail Sea coordination committee) was the first to point out the issues , which even exist today. All other groups / committees formed ever since to carry out studies on coastal shipping and its issues repeated the same problems with slight variations.

 

Below given are few  recommendations and suggestions given by about half a dozen of  study groups/committees formulated for the promotion of coastal shipping in India for the past 2 decades. From the literature review it is evident that

1.  All the committees / groups / institutions are of high calibre and repute and the reports are of good quality .
2. High degree of understanding of the difficulties / issues and problems of coastal shipping and reported in detail in their reports.
3. Also, though Government has formally accepted a number of recommendations given by them, adequate implementation did not happen. 

In the Indian context, this sector has a set of very complicated issues for the policy makers to deal with, especially in the rail / road competition area.

 

A. Afzalpurkar Committee (1993) and Pinto Committee (1997)

 

ü  Implementation of cabotage law, which reserves the movement of coastal trade of the country for its own flag vessels

ü  Enactment of a separate law for coastal shipping

ü  Development of specialized wings in financial institutions to fund coastal shipping

ü  Tax concession for fuel and spares

ü  Building a separate cadre of seafarers with qualifications , who are different from those who are operating for ocean-going vessel, to ensure an adequate talent pool for the latter.

ü  The need to make suitable amendments to the Merchant shipping Act or enact separate legislation for Coastal shipping , which have different specifications for coastal vessels as well as lower manning scales

ü  The need to design vessels such as RORO and silo vessels, which are suitable for transporting cement and food grains, to facilitate the movement of trucks across long distances.

B. Kakkar Committee (1999)

ü  Customs duty excemption for bunkers/fuel and spare parts

ü  Exclusive port area and hinterland connectivity

ü  Lowering of handling costs

ü  Fiscal incentives

ü  According of infrastructure status

ü  Review of coastal shipping legislation

ü  Cabotage law changes

ü  Development of minor ports

                C. Tenth plan Sub Group (2002)

ü  Establishment of coastal vessel traffic service (CVTS)

ü  Continuation of cabotage law, supported by suitable fiscal and financial incentives

ü  Earmarking of exclusive ports for coastal shipping on Indian coasts

ü  Exclusive berths earmarked for coastal ships at all major ports

ü  Laying down of less stringent construction, survey, load line and safety requirements for coastal vessels

ü  Review of minimum manning scales for coastal vessels, keeping in mind the need to encourage coastal traffic on a commercial basis

ü  Grant of customs duty exemption to ship owners and users at par with ship repair units, to enable them to import spare parts/equipment for coastal vessels

                  D. Tata Communication System Study (2003)

ü  An independent body such as the Tariff Authority of Major Ports to regulate ports

ü  Need for implementing an incentive plan based on budgetary support, linked to the quantum of cargo routed by the railways to sea transport, to be proposed.

ü   Setting up of  a special cell under the Dg of the shipping to guide and monitor the progress of the coastal industry and co-ordinate its activities with external agencies

ü  Need for the central Govt to finance the development of basic infrastructure for the 9 minor ports (Gopalpur, Cudddalore, Vizhinjam, Azhikal, Malpe,Karwar,Ratnagiri, Dharamtar and Magdalla), which would include capital dredging, breakwater, berths, back-up areas and wharves

ü  Setting up of an autonomous body at the state level to ensure that funds are only used for the development of minor ports

ü  Need for iport duty on bunkers and capital equipment and spares required for  vessels to be waived to encourage the growth of coastal shipping.

ü  Demand side incentives: Need for registered multimodal operators and shippers to be allowed  a deduction from their taxable income, based on traffic volumes, if they transport cargo through coastal shipping

ü  Integration of coastal shipping and Inland Water way transport to be promoted at Haldia and Cochin, where basic infrastructure is available, infrastructure to be created at Neendakara and TT shed at Kolkatta for such integration.  

E. Eleventh plan Sub-Group, 2007

ü  Coastal shipping development fund(CSDF)to be established for soft lending for the acquisition of coastal vessels

ü  Centrally sponsored scheme (CSS) proposed for the development of coastal shipping infrastructure.

                      F. ICC report 2010 & Draft Coastal Policy, DG Shipping, 2011

ü  Promoting River-Sea Vessels

ü  Infrastructural facilities

ü  Financial incentives including subsidies

ü  Manning relaxation without compromising on the safety

ü  Cabotage policy support

ü  Declaration of IV limits in different states

ü  Modal shift in cargo from rail and road

ü  Data-base and communication infrastructure

ü  Legal issues

                        G. XII^th five year plan sub-group report, 2011

ü  Winning over road/rail traffic

-       promote multimodal transport

-       Strengthen existing non-major ports along the coast

-       Promote Ro-Ro based coastal traffic

-       Set up dedicated warehouses for coastal cargoes

ü  Waive service tax on coastal/inland sea-freight as well as charter hire of coastal/inland vessels

ü  Exemption on  service tax for ship building

ü  Infrastructure status for coastal shipping under section 80IA of the Income Tax Act

ü  Simplify customs procedures for coastal movement

ü  Giving carbon credit benefits to the shipping companies

ü  Enhancing competitiveness of Indian-flagged ships via-a-vis foreign flagged ships

ü  Waive Duties and VAT on Bunker sales to coastal ships

ü  Promotion of River-Sea vessels

ü  Declaration of Inland Vessel (IV) limits for different states

ü  Manpower issues including manning scales

ü  De-link port tariff for coastal vessels from FG vessels and reducing it further by 30%

ü  Brining Non-Major Ports on par with Major Ports in the matter of extending lower tariffs to coastal shipping

ü  Establishing a Coastal Development Fund for coastal ships

ü  SRU status to individual ships

ü  Exception of customs duty on import of certain categories of vessels (Tugs, pusher crafts, dredgers and floating docks/cranes/production platforms etc)

ü  Cabotage policy support

                        H. Joint report of INSA, CII & Ernst & Young, 2011

ü  Tax incentives

 

Direct – Review of the taxability of capital gains on the sale of qualifying ships and applicability of Minimum Alternate Tax (MAT) on profit on sale of qualifying ships

 -       Review of the taxability of income from funds parked in short-term instruments pending its utilization for the acquisition of new ships.

Indirect – Review of duty on spares and bunker fuels

-       Waiver of customs and excise on marine fuels(IFO& HFHSD) for a period of seven years

-       Conferring the “Declared Goods” status on marine fuels, capping VAT at 4%

 

ü  Infrastructure Support

 

-       Development of several minor and intermediate ports along the Indian coast at regular intervals of 150-200 miles with the following

Ø  Ability to handle vessels with a draft of upto 5m

Ø  Adequate facility for a vessel turn around of 15-18hrs

Ø  Adequate connectivity to roads/highways for efficient first and last mile connectivity

Ø  Reduction of port tariffs applicable to coastal vessels to the bare minimum

Ø  Waiver of wharfage for coastal/domestic cargo

Ø  Investment in improving the first and last mile connectivity to facilitate coastal shipping movement and reduce the effect of double handling

 

ü  Funding Incentives

-       Setting up a fund to finance deserving investment plans

-       Soft loan and interest rate schemes(similar to those for the small and medium enterprise sector) to purchase coastal ships

-       Loan structure and interest rates for coastal ships/river-sea vessels in line with established global norms for ship financing:

Ø  Margin: 10%-15%

Ø  Interest rate : 5% per annum

Ø  Loan tenure : 15 years

-       Relaxation of external commercial borrowing (ECB) guidelines to enable the acquisition of used vessels

 

ü  Regulatory support

 

-       Reviewing outdated provisions; emphasizing the need for a separate coastal shipping directorate and moving ports out of the state list

-       Including various coastal shipping trades in the amendments to the Merchant Shipping Act

-       Integrating river-sea vessels operating within 12 miles of India’s territorial waters outside the UNCTAD, UN and UNCLOS

-       Reviewing the river-sea vessel notification to further reduce operating expenditure to the bare minimum

-       Widening the net of the river-sea vessel notification to bring more classes and sizes of vessels under its purview

-       Extending RSV trading limits to include India’s EEZ

-       Relaxing the minimum technical and manning specifications for coastal vessels

-       Extending access to the insurance schemes of overseas insurers

-       According coastal vessels an “infrastructure status”

-       Setting up a coastal shipping central monitoring centre to monitor all coastal vessels from the perspective of customs ,immigration, health, pollution (including ballast water), safety and security.

-       Introducing accelerated learning and performing systems that will ensure manpower availability for coastal shipping both ashore and on board.