Understanding international modes of transport

The main means of transport are maritime and land (roads and rail) for volume, and air for value. Export or import companies choose their mode of transport according to cost, speed and security.

Table summarising the characteristics of each mode

	Expensive	Slow	Secure
Air	+++	+	+++
Sea	+	+++	+++
Road	++	+	++
Rail	+	++	+++

From least "+" to most "+++"

Air transport | Maritime transport | Land transport | Rail transport | Express transport service

Air transport

The advantage of air transport is its rapidity and security. On the other hand, the cost is higher but the frequency of flights allows for frequent deliveries.

Organisation

The different stakeholders in air transport are:

The carrier, the airline company that often carries passengers and goods, sometimes only goods.
The air freight agent, the freight forwarder who organizes the main transport, takes care of the transport procedures and formalities and possibly import and/or export customs procedures.
The sender who entrusts his goods to the the freight forwarder.

Two contracts are used, the commission contract between the sender and the freight forwarder and the contract of carriage between the freight forwarder and the carrier. As regards the equipment used, there are two types of crafts involved in international carriage of goods:

Passenger airplanes, which carry both passengers and freight.
Cargo airplanes, which carry only goods, freight.

Contract of Carriage

The contract of carriage is signed by the carrier (airline company) and the freight forwarder. The contract takes the form of an Airway Bill. The Airway Bill is produced by the freight forwarder in the name of the company. The AWB attests to the existence of a carrier contract, receipt of the goods by the carrier and the terms of carriage. The carrier's commitment implies responsibilities: The goods are in the care of the carrier, the company, from receipt up to handing over to the freight forwarder. In case of delay, the claim must be made within 21 days following the delivery of the goods. For loss or damage, the claim must be made within 14 days of receipt. The claim is made by registered letter by the sender to the freight forwarder.

Pricing System

The pricing is based on the ratio between the weight and the volume bearing in mind that 1 ton = 6m3. Therefore, the real volume is divided by 6 to get a fictitious weight to use as a basis for the pricing.

The IATA rate, in principle obligatory, could be the basis of reductions depending on the volume. It is a rate based on a weight bracket, with a rapidly sliding scale, which changes from one country to the next with minimum tax is levied for small shipments. Airline companies apply the rule of "paying a higher weight break", which taking into account the rapidity with which the rate decreases, comprises of paying for a higher weight to the real weight.

Special rates = Specific Commodity rates = Corates. These are preferential rates calculated according to the category of shipped goods, minimum 100 kg and 300 or 500 kg for others. (reduction for newspapers and increase for live animals).

The price suggested by the freight forwarder is negotiable and competition should be the rule.

Maritime transport

Sea transport has secured a choice position in International Trade. It is the least expensive but delivery times are the longest.

Organisation

The different stakeholders in maritime transport are:

The carrier, the shipping company or ship-owner.
The freight forwarder (shipper) who organizes the main transport, takes care of the transport procedure and formalities and possibly import and/or export customs procedures.
The sender who entrusts his goods to the the freight forwarder.

Two contracts are used, the commission contract between the sender and the freight forwarder and the contract of carriage between the freight forwarder and the carrier. More than 85% of international traffic is done in containers carried by container ships. There are four types of shipments by containers:

FCL/FCL (FCL = Full Container Load)
The company loads its own goods in the container, seals it and it is delivered straight to the client without being opened (except Customs check).
LCL/LCL (LCL= Less than a container load)
If the shipments are not sufficient to fill a container, the company delivers its goods to a consolidation center. The goods are put in the container with other goods destined to go to the same port where they are separated and delivered to the client. This is groupage (bundling).
FCL/LCL
Several lots for the same destination. The company loads them, the container is taken to the loading harbor. Separation of goods is carried out upon arrival at the off-loading harbor and goods are made available to receiving parties.
LCL/FCL
For imports, the company receives deliveries from different points of origins. The suppliers deliver them to the same consolidation center then together to the residence of the client who off-loads them.

Special goods are transported on two different types of vessels:

Vessels specialized in one type of goods: freighters, oil tankers or grain carriers and polymer vessels for carrying perishable commodities. The use of these vessels is often subject to a direct contract between the shipper and the ship-owner, the charter party.
Non-specialized vessels such as regular cargo-ships, which could have their own handling means.

There are other types of vessels:

Roll on and off ships with an access ramp making it possible to handle carriages, trucks, trailer-tractors or trailer-trucks. This technique is also called Ro-Ro: (roll on-roll off).
The mixed vessels Ro-Ro + container combine the attraction of containers and that of roll on-roll off.
The barge carriers for combined river-sea transportation.

Contract of Carriage

Maritime transport can be categorized into 2 types of contracts:

Either a transport contract, that is to say the shipper commits to pay an established cargo and the carrier commits to take the goods from one port to another.
Either a charter party by which the contracting parties agree on the hiring of a vessel for a determined period of time.

Regarding the contracting parties:

The shipper must deliver in time his goods at the agreed location and pay the agreed amount.
The ship-owner must take delivery of the goods for carriage.
The ship-owner provides the shipping document: the Bill of Lading = B/L
The Bill of Lading is the contract between the shipper and the carrier. When it is in order, the bill of lading is a document proving of the ownership of the goods.

In the context of documentary credit, the real shipper's name should be clearly stated and the issue date could be essential. The remarks "on board" are obligatory to prove that the shipment has been loaded. The Bill of Lading has to be signed by the carrier. The remark "clean" is appreciable to certify that the delivery of the goods was without reservations.

Pricing System

Basic freight: basic freight is the class of goods and the mass or the volume equivalence: 1 ton = 1 m3. Minimum tax is levied for small shipments and special rules apply for certain big volume or heavy weight goods. Sea freight rates are in weight/measurement (W/M). This weight/measurement is the ton or the volume to the advantage of the carrier according to the 1ton = 1m3 rule. Freight in containers is billed in W/M in groupage and by the container in other cases. The price suggested by the freight forwarder is negotiable and competition should be the rule.

Land transport

Organisation

The carriers are private transport companies and self-employed truckers. Authorisation is required for very large volumes. Road transport uses 3 types of vehicles:

One piece vehicles (trucks)
Articulated vehicles (tractors + semi-trailer)
Articulated trucks (truck + trailer)

As regards international agreements, the Geneva convention known as the CMR Convention (Convention for the Carriage of Goods by Road) regulates the conditions of transport and the carrier's responsibility. The TIR Convention (International Road Transport) applies to trucks crossing countries which are signatories to the convention and which are not receivers of the goods being transported.

Contract of Carriage

The land transport contract takes form of a CMR consignment note. The carrier's signature entails a presumption of responsibility in the case of loss or damage.

Pricing System

The pricing system takes into account the weight, the type of goods and the distance traveled. The weight/volume ratio is equal to 1ton = 3m3. The road rate requires that the weight of the goods is rounded up to the 100kg. The paying a higher weight break rule (see above) also applies to road transport. The price suggested by the carrier is negotiable and competition should be the rule.

Rail transport

Organisation

The 1890 Berne Convention regulates rail transport. It includes the CIM Convention (International Goods Convention) and was reviewed by the 1985 Convention: the COTIF (Contract for International Carriage of Goods by Rail).

Contract of Carriage

The land transport document used for rail traffic takes form of a CIM consignment note. There are 2 forms: one for normal traffic and one for accelerated traffic. The original is given to the receiver, the sender will receive a leaf of the document set. The document will be filled in part by the sender and predominantly by the rail company.

Pricing System

The CIM convention does not provide for any rate in as far as the pricing rules are random from one country to the next. Rail transport pricing was therefore harmonized. This harmonisation is in 3 forms:

Multilateral pricing: it is a rate that is valid in more than 2 countries but concerns only one particular type of merchandise, ECSC products.
Bilateral pricing: these are rates applied between 2 countries and which concern all types of merchandise.
In the case where there is no common rate, the principle of "joint national tariffs" is applied. This tariff is calculated according to the calculation rules of each country. However, the transport costs will be subject to an exchange exercise.

The price suggested by the carrier is negotiable and competition should be the rule.

Express transport service

The advantage of express transport is not its rapidity but its reliability. This reliability is related to the organisation and the automatized process. On the flip side, the cost is much higher.

Organisation

The biggest express courier service companies FedEx, DHL Express, UPS, TNT or Chronopost are also referred to as the "integrators" because they ALL have an integrated transport chain, vehicles to pick up and and deliver to trailer-trucks and up to the international airplane. Often limited to 30kg, the packages are frequently handled but by automatic conveyors in automated processes. The reliability is to such an extent that a shipment delivered late is usually free of charge.

Contract of Carriage

The express courier service company's receipt has the same value as an AWB in air transport. Beware: Keep in mind that the express couriers provide a door to door service. This means that their service incorporates import customs in destination countries. Consequently, the receipt should be attached to the package to enable the service company to carry out the custom clearance procedures.

Pricing System

The other specificity of express shipments is that prices are non-negotiable. When asking a freight forwarder for a quote, the least expensive can be chosen or negotiations with the preferred one entered into; with express courier service companies, prices are published, one only has to consult them. On the other hand, the timings are very reliable.