Understanding Shipping And International Trade

Shippers Guide is the learning page of MMS Plus. Here we answer the five W’s and H of several issues in the shipping industry. This week’s edition focuses on various issues at play in Shipping and International Trade, with a global overview. We shall however draw substantially from the Nigeria perspective as it relates to Import and Export trades.

The World Trade Organisation (WTO) is the United Nation’s agency that formulates policies that regulate world trades. Other are Economic blocks like the European Union (E.U), North Atlantic Free Trade Association (NAFTA) and the Economic Community of West African States (ECOWAS).

Although, the increasing trend is the globalisation of trade, without restrictions, barriers and protection, there are still however trades that function on Bilateral Agreements, elements of Counter Trade and aid programmes to mention a few.

Nations still regulate the direction of trade by way of Customs tariffs, Taxes and Dues as a way of protecting local industries and commerce. In certain cases, the instruments of Taxes and Tariffs are selectively applied for political reasons in dealing with the current political situation or in response to restrictions imposed between countries.

In the classical definition, it has been variously described as a statement of comparative advantage in the nature of goods and services between nations and people. International Trade generates cargo. The movement of cargoes between the point of production to the point of demand is facilitated by Shipping and all forms of Maritime transport. It is in this vein that some commentators have said that Shipping is a direct consequence of International Trade.

International Trade is linked with Marine Insurance, Banking and Finance, Ports and Maritime services, Haulage, Shipping and Forwarding Agency, Pre-shipment Inspection and a host of other Allied Shipping Operations.

The importation of goods will often involve the opening of a letter of Credit through Banks. The transaction could be financed either through a Commercial or Development Bank. Trade financed through Bilateral Trade Agreements are often processed through Export/Import Banks, for example, the African Development Bank (AfDB) or specialized funds established by International Agencies like NERFUND, IBRD, IMF and many others including Export Proceeds and those from private transactions through domiciliary Accounts are also to finance International Trade.

The linkage between shipping International Trade commenced when goods are presented by a Shipper to Shipping Agent which could be accepted or behalf of shipping lines on such terms and conditions to be agreed upon by the shipper.

The type and volume of cargo: the mode of packaging for transportation will be determined by the nature of the cargo. For example, cargoes whose state are subject to weather or climatic conditions are packaged and stored differently as compared with those that are compatible with other weather conditions, cocoa beans are affected by humidity while fresh fruits, marine life and daily products have to be kept under certain minimum temperature levels. These categories of goods are classified as refer or perishable cargoes.

Freight rates are applied either as a general or Contract Tariff based on the commercial standing of the Shipper. Some shippers enjoy discounts, rebates or some forms of special treatments as they are considered loyal or good supporters of their lines. In fixing shipment, particularly for large volumes or project cargo, ships employed for such services are either chartered for a single voyage or a defined period other otherwise described as TIME CHARTER – Liner shipments are also arranged for small parcels or limited consignments.

The contact of affreightment could either be fixed on a door to door basis covered by a through Bill of Lading (OTBL), a full Liner Bill of Lading or a free in and out stowed agreement. In the case of a Liner Shipment, the ocean Freight covers the whole cost of transportation and discharging or loading while cargoes under the through Door to Door shipment, the freight charges will include the element of Inland Transportation to the load port and from the port of discharge to Shipper’s warehouse often without local taxes and Customs duties.

The conditions and terms under which cargoes are booked and accepted by shipping lines are very important particularly those outlines on the Bill of Lading and cargo manifests established for the carriage of the goods and clauses embodied in the Bill of Lading. The clauses could determine the right and liability of the Shippers and receivers of the cargoes.

Full cellular carriers for containerized cargoes

Combo vessels, Tankers for wet cargoes

Bulk carriers for dry bulk cargoes

Refer vessels for perishable or fresh cargoes

Conventional vessels for general cargoes.

International Laws and conventions also  Shipping particularly those dealing with admiralty. The most prominent are Hague’s Rules, Hague’s Visby Rules and Hamburg Rules which specify claims limitations.

The issues of jurisdiction and Arbitration in cases of dispute are also important. Usually, the relevant and applicable laws and conventions are embodied either in the CHARTER PARTY in the case of chartered vessels or the Bill of Lading and Booking Note in the case of Liner Shipment.

The basic applicable law is the Carriage of Goods by Sea Act 1926 and as severally amended. Marine and Hull’s insurance is mandatory for all ships and cargoes shipped. The provisions of the Nigerian Classification Clause which limits the age of vessels that could be employed for certain Trades with Nigeria is very relevant hence booking a vessel to perform the carriage of goods generated by Nigeria’s International Trade is critical

The Nigerian Maritime Administration and Safety Agency (NIMASA) charge a levy of 3% on the Gross Freight earned by Shipping Operators.

The Nigerian Ports Authority (NPA) is empowered by law to control the berthing and sailing of ships into and out of Nigerian Ports.

The collection of duties on cargoes imported into Nigeria is assigned to the Nigeria Customs Services (NSC). There still exist some forms of prohibitions of cargoes allowed into and from Nigeria. Excise duties are still chargeable on certain categories of goods exported from Nigeria

However, various incentives have been put in place by the Nigeria Export Promotion Council (NEPC), the Nigerian Export Free Zone Authority and NPA to encourage Nigeria’s International Trade.

The Economy of the Nigerian nation depends substantially on foreign currency earned through the export of Crude oil and some non-oil commodities such as cocoa, solid minerals and other Agricultural produce.

Culled from a paper presentation titled “Shipping and International trade in Nigeria’s maritime domain”, delivered by the Chairman, Ports Consultative Council (PCC), Otunba Kunle Folarin at the annual Business Luncheon and magazine launch of Women’s International Shipping and Trading Association (WISTA) Nigeria in Lagos.