U.S. Grains Council – Importer Manual, Chapter5

U.S. Grains Council – Importer Manual, Chapter 5
 
 
U.S. Export Facilities and Ocean
Transportation

 
 U.S. grains are exported from every coast in the country, as well as
from the St. Lawrence Seaway in Canada. Each of the five export
ranges that handle feed grains exports has a unique relationship with
one or more interior producing regions. This relationship is
characterized by the principal mode of transportation used to bring
those feed grains into an export position.  
 
 
Mississippi
River/Center
Gulf


Long before the first European explorer reached the majestic sweep
of the Mississippi River, Native Americans were using it for travel
and trade. The Mississippi River has evolved since then into a
transportation gateway to the interior of the United States.  
 
A fleet of over 10,000 barges, towed by as many as 2,000 towboats,
ply the river with many different kinds of cargo. There are nearly
6,000 miles of navigable river in the Mississippi River Basin serving
the Mississippi, Missouri, Ohio, Illinois, Arkansas, Tennessee,
White, Cumberland, Alabama and Minnesota Rivers.  
 
Through this system, river transportation reaches into every Corn
Belt state, providing easy access to 80 percent of U.S. corn
production, more than 33 percent of sorghum production and up to
15 percent of barley production. Hundreds of river terminals receive
feed grains by truck or rail and transfer it into barges, each carrying
approximately 1,500 tons, which are collected into tows of six or
more barges and moved downriver to New Orleans or another river
port. 
 
Barge transportation is traded actively between suppliers and users,
quoted in percentage of tariff, and a cost schedule established with
prices for each river shipping point.   

Although price varies over time with supply and demand variables,
the average cost of transportation has been remarkably stable from
the mid-1980s to the present.  
 
Once in port, fast, modern, export terminals transfer feed grains
from these barges into storage or waiting ocean vessels. There are a
dozen such terminals along the lower Mississippi from Baton
Rouge, La. to the Southwest Pass. Several of them can load more
than 50,000 MT in a single day, drastically reducing the time a
vessel spends in port and, consequently, the cost of moving cargo
for the importer. 
 
And, most importantly, this capacity is rarely taxed by demand. 
U.S. exporters have vastly overbuilt handling capacity over the
years. This ensures the importer fast, efficient service at a fraction of
the cost it would take to handle grain anywhere else in the world.
 
Some grain does move to the Center Gulf by rail. Trains of up to
120 cars, or 10,000 MT, carry feed grains to these same export
facilities when economics warrant. However, rail movement must
compete with cheap barge transportation to move grain from the
same geographic regions that these barges serve. Rail rates are
generally much higher and not only contingent upon the value a
railroad places on its service in moving the loaded railcars to export,
but also on the value of the cars themselves which are leased on a
long or short term basis. 
 
Although there are over 35,000 covered hopper cars in the United
States capable of carrying feed grains for export, many of them are
tied up in domestic hauls or in areas that do not have to compete
with the barge market for export share. Nonetheless, in a given year,
10 percent of the grain delivered to Center Gulf ports arrives by rail. 
 
 
 
Texas or
West Gulf


There are several ports that handle feed grains along the Texas coast. 
Although they are principally wheat facilities designed to receive the
trains of hard winter wheat that originate in Kansas, Oklahoma,
Nebraska and Texas, they do service for feed grains, principally
sorghum, grown in these states as well.  
 
This grain arrives mostly by rail, except for truck deliveries that
originate in coastal areas of Texas where sorghum and corn are both
produced. Rail in multi-car units moves along the BNSF, Missouri
Pacific, Southern Pacific and Union Pacific railroads to facilities in
Brownsville, Corpus Christi, Galveston, Houston and Beaumont in
Texas. Occasionally, in times of extreme transportation squeezes at
U.S. Grains Council – Importer Manual, Chapter 5 64
the Center Gulf because of river problems or concentrated demand,
corn will move from Nebraska and Iowa to Texas, but this is quite
unusual.
 
Many of these facilities are, except for their reliance on rail delivery,
as fast and efficient as their Center Gulf counterparts. They are also
extremely fast in loading vessels and keeping waiting time to a
minimum.  
 
 
The U.S.
Atlantic
Coast


Much like the Texas Gulf, elevation capacity on the U.S. Atlantic
Coast has been contracting - elevators in Philadelphia and Norfolk
have been shut down or destroyed. Still the Atlantic Coast has the
capacity to elevate more than 18 MMT of grain. Facilities in
Baltimore, Md.; Norfolk, Va.; Charleston, S.C.; and Savannah, Ga.
can receive grain by rail and truck for export. 
 
The export facilities in Norfolk compete with both the Center Gulf
and Great Lakes ranges for corn origination out of the states of
Illinois, Indiana, Michigan and Ohio.
 
When importers from Europe or North Africa are active corn buyers,
the Atlantic Coast has an advantage over the Gulf because of its
physical proximity to these destinations. For the most part, high rail
transportation costs consume this freight advantage the Atlantic
Coast has over the Gulf. Furthermore, each of the elevators that
handle feed grains on the Atlantic has some kind of draft or vessel
size restriction.  
 
 
Pacific
Northwest


The Pacific Northwest export range facilities have a freight
advantage over the other ranges to destinations in the Pacific Ocean. 
This advantage works the same way as the advantage the Atlantic
Coast has to destinations in that ocean. The much shorter distance
from the Pacific Northwest to Asian destinations allows importers to
pay a substantially higher price for feed grains delivered from that
coast.  
 
Again, like the Atlantic, the Pacific Coast range must compete with
the Mississippi River system to originate feed grains for export.
Even though the Pacific Coast has a large, consistent ocean freight
advantage, it is still a long way from feed grains production areas. 
The reach of the Pacific Northwest (PNW) does not begin to cover
the bulk of feed grains production. The ocean freight advantage can
only cover a limited amount of ground in competing with the
interior river system. 
 
 
The Great
Lakes


The Great Lakes comprise a unique inland waterway. Access to the
Lakes' ports is through the St. Lawrence Seaway which consists of a
lock system connecting Lake Superior and Lake Huron at Sault St.
Marie and lakes Erie and Ontario (bypassing Niagara Falls) via the
Welland Canal. The fresh water draft in the Welland of 7.9 meters
(26 feet) restricts many vessels from entering the lakes and most of
those that do from leaving fully laden.   
 
A separate class of vessels has been built, since the completion of
the Seaway, with the specific intention of plying the waters of the
Great Lakes. Naturally, they have shallow drafts and narrow beams
that just allow them to pass through the lock system. They are called
Lakers and can carry about 25,000 MT of heavy grain. Grain loaded
in these specialty vessels at lake ports is then discharged at export
facilities in the St. Lawrence River.  
 
Importers can charter a vessel to go into the seaway and load grain
at a lake port, buy a portion of their cargo in the lakes (usually two-
thirds) and load the balance at a St. Lawrence facility (the final
third) or lift the entire cargo from a St. Lawrence facility. 
Differences in Laker freight, ocean freight, vessel size and port
discharge capacity will determine which is most economical. One
significant difference from the other ranges is that the buyer must
decide whether the grain will be purchased on certificates issued at
the interior lake port, or based on a new inspection (and/or new
weighing) as it is transshipped. Although inspectors for the United
States Department of Agriculture’s (USDA) Federal Grain
Inspection Service (FGIS) (see Chapter 4) are located in Canada,
ordinarily a new inspection at the time of transshipment is not
undertaken (and not unless specifically requested by the buyer). If a
new inspection is not performed, the shipment is traded based on the
original grade issued at the first load port; this is commonly known
as “Western Inspection.” This is, for the most part, a matter of
indifference, but a buyer should be aware that a Western Inspection
will be used unless a Seaboard Inspection at the time of
transshipment is specified.
 
The price of lakes' freight, like barge and rail freight in the United
States, trades freely over time and determines how competitive
execution will be. Several the lakes’ ports also double as points for
delivery against the Chicago Board of Trade corn contract. 
 
The Lakes are closed for the winter, generally from mid-December
to early April, because of ice.
 

 
Freight
Options for
the Overseas
Buyer


The U.S. feed grains buyer is faced with an array of decisions that
must be made before that grain arrives at its destination and can be
consumed as feed or processed into new products. First, the buyer
must decide which feed grain best suits the buyer's needs. Next is
the question of how to get it to the importer's country. In nearly
every case this will be by bulk shipment in an ocean going vessel.  
 
Such questions may arise as: when and how important is the timing
of the grain's arrival; how large a vessel is required; does it need to
be geared or not; where will it take on fuel; who will insure the
vessel and its cargo; and so forth. The buyer chooses how involved
the buyer wants to be in these details by how the buyer purchases
the grain.  
 
The ultimate goal of any buyer is to bring goods to the intended
destination at the lowest possible cost. Since there are two principal
components to that landed cost - the value of the grain and the value
of the transportation (ocean freight) required to get it there - a buyer
would know the value of each before the buyer actually goes into
the market to purchase grain.
 
A buyer has three choices when deciding how to buy the intended
feed grain. Each choice has important implications for the division
of responsibilities between buyer and seller.
 
Free on Board (FOB): The grain is delivered "end spout." As the
grain is literally poured into the vessel’s holds, the seller's
responsibility ends. As contractually agreed, the seller will produce
the quantity of grain, as weighed by the Federal Grain Inspection
Service, during a specific period in a specific port or ports. The
seller may even be willing to agree to a specific elevator berth if the
buyer desires it.  The seller is obligated to produce a grade
certificate, again attested to by the Federal Grain Inspection Service,
which satisfies the contract with the buyer. This can mean grain
must be discharged for the seller's account if it does not meet
tolerance; however, this is very rare. The seller's obligations
generally end there.  The buyer must present a suitable conveyance
within the contracted shipment period. In the case of a shipment
moving by sea, this entails the chartering of an ocean going vessel.
If an importer buys grain FOB, the importer must present the vessel
and handle the logistical details in bringing the loaded cargo to
destination. This will include appointing agents to oversee loading
and documentation, monitoring the vessel's progress as it sails and
settling claims with the vessel loader in addition to chartering the
vessel.
U.S. Grains Council – Importer Manual, Chapter 5 67
    
Cost and Freight (CNF):  The seller contractually agrees to deliver
the grain to the destination of the buyer's choice, providing both
commodity and transportation. The buyer obligates to provide
discharge facilities, usually specifying, and guaranteeing, the port
conditions (draft, available berth and so forth) at destination. Title
passes upon the issuance of bills of lading even if the buyer has not
actually paid for the grain, though in most cases the seller will use
those bills of lading, along with the rest of the vessel's
documentation, to collect payment due under the contract. 
Effectively this means the importer "owns" the grain on board the
vessel even though it is still weeks from its destination and the buyer
has bought it delivered. Consequently, the buyer should insure the
value of that cargo against loss. Technically, though, the seller, as
vessel charterer, still controls the vessel's movements though the
buyer may already hold the bills of lading, which controls the
disposition of the cargo.  
 
Sound confusing? It is. Even today, several centuries into the
practice of maritime law, disputes still arise over the infrequent case
where a buyer and seller order vessel and cargo to move at cross
purposes. 
 
Cost, Insurance, Freight (CIF):  This is similar to buying grain
CNF except that the seller is responsible for insuring the value of the
cargo. In practice, grain sold CIF is usually done so under deferred
payment or credit terms where the seller is extending that credit and
retains title to the grain prior to discharge. Occasionally, an exporter
will load a cargo unsure of which sale it will fill or perhaps load a
cargo without a sale, hoping to find a buyer once the grain is afloat. 
On these occasions, the seller will be self-insuring the cargo value
and deliver it CIF at the appropriate time.  
 
Responsibilities of buyer and seller are very similar to those under
terms of a CNF contract. The title question is just as confusing,
though it generally passes to the buyer with the transfer of the bills
of lading. 
 
Every importer should consult a lawyer well versed in U.S. and
maritime law, as well as local statutes, before contractually agreeing
to buy feed grains under any terms. 
 

Chartering a
Vessel


There are two ways to charter, or contract to "hire," a vessel:  by
time charter or by voyage charter.  
 
Time Charter: In a time charter the vessel owner contracts to turn
over the ship, complete with its crew, to the disposition of the
charterer in return for a daily fee. Contractually the two parties agree
to many details - the most important being the daily rate, the period
of hire, where the vessel is delivered by the owner to the charterer
and where it is to be returned by the charterer back to the owner. 
Upon receiving the vessel, the charterer becomes the defacto owner,
responsible for giving the ship orders, providing fuel and livelihood
and paying any fees associated with the vessel's employment,
including port and canal fees, local taxes, wharfage and dockage
charges. 
 
Voyage Charter: A voyage charter is an agreement between owner
and charterer to carry cargo between two or more points at an agreed
upon price that is subject to certain covenants, all-inclusive. The two
negotiate the vessel's arrival time at load port, the amount of cargo
the vessel is to carry, the draft available to the vessel at load port and
the rate at which the charterer will load the vessel and then discharge
it upon arrival at destination, among other details.  
 
In theory, the offer by an owner of a voyage charter should equate to
what a charterer would pay if hiring the vessel on a time charter
basis and executing the cargo. Otherwise, charterers will find a
suitable vessel to time charter and handle the details and reduce their
costs of transportation. In practice, though, the time charter
represents a significant transfer of risk from the vessel owner to
charterer, as opposed to the voyage charter.  
 
The risks the charterer assumes with a time charter that can be
avoided with a voyage charter include:
 
• Time lost to weather
• Vessel time spent at loading
• Vessel time spent at discharge
• Fuel costs
• Cargo loss, potentially cargo damage
• Legal risks as owner 
 
Since the vessel is on a daily hire, any delays result in an increase in
cost for the charterer.  
 
If the charterer can control some of these risks better than the ship
U.S. Grains Council – Importer Manual, Chapter 5 69
owner, the time charter is a reasonable option. If load or discharge
conditions are complicated (multiple load or multiple discharge
berths and/or ports, for instance), the control of the vessel and the
associated costs would enable the charterer to freight the cargo for
less than if chartered on a voyage basis where he would have to
secure options from the ship owner to accommodate the different
variables.  
 
There is no secret to identifying the difference between a time and
voyage charter; the difference is in the risks. When the charterer can
calculate those risks better than the owner, it will be evident in the
difference in landed freight costs, and the choice for a time charter
will be clear. It is important that the charterer have a detailed
understanding of how to operate a vessel, including purchasing
bunkers, appointing agents and handling port charges, before the
charterer undertakes such a task.
 
There is nothing that says an importer has to charter one vessel or
one voyage at a time. When that buyer has a predictable import
program and feels ocean freight is undervalued, the buyer can book
multiple voyage charters or a long-term time charter for a period in
which the buyer can execute several voyages. Even if the charterer
does not use the time period vessel against the charterer's needs, the
charterer has secured price protection against an increase in ocean
freight levels.  
 
Multiple voyage charters satisfy the same purpose but liquidity is
much more limited. A time chartered vessel can be sent to any
number of destinations for any kind of bulk cargo. The voyage
charter, by its nature, is very specific and more difficult to relet.
 
If the importer has no strong opinion about price direction or the
size of the program that makes the importer’s own needs a threat to
liquidity, there is no rule against doing nothing about the importer's
future freight needs

 
 
Standard
Charter
Parties

 
THE TIME CHARTER
Like much about the maritime trade, the standard time charter form
or contract is old (1943), but it is used as a foundation by most
participants. Nearly every ship owner and charterer has terms that
they like to include in their negotiations. Many of these are included
in a common rider that each party customizes to the party's view. 
Below are some of the major points in the time charter contract:
 
1. Description of the parties involved: the owner, the charterer
and the name of the vessel. A detailed vessel description is
usually attached to the rider but charters can be negotiated
that allow for a generic vessel type, a specific vessel "to be
nominated" or TBN.
2. Establishment of the amount of time the named vessel is
under time charter.
3. Designation of the delivery point or range.
4. Stoppage of the time count if the vessel arrives at the initial
load port and is not ready for loading.
5. Specifications that the owner will pay for all provisions,
wages, insurance and regular maintenance.
6. Specifications that the charterer will pay all fuel costs and
customary port charges.
7. Establishment of an amount, in dollars-per-day, that the
charterer must pay the owner for the use of the ship, the
payment schedule and the method exchange.
8. Establishment of return conditions, including where the
owner regains control of the vessel after the time charter
expires and with what notice it shall be done.
9. Specifications of the time frame in which the vessel has to be
delivered from the owners to the charterer, for example, not
before April 1 and not after April 20. If the vessel is not
handed over on or before April 20, it is the charterer's option
to cancel the time charter.
 
THE STANDARD VOYAGE FREIGHT CONTRACT 
The standard form for a freight contract, or voyage charter, is called
the Baltimore Berth Grain Charter Party or BFC.  It too is an old
contract form, initially written in 1913, but it is the basis of most
grain charters from the United States. However, the BFC does not
cover many of the details in today's more complicated charter
parties. As can be seen from the sample in Appendix I, some
language in the BFC has been eliminated or changed and a rider is
attached with additional terms. The rider and the BFC form make up
the complete charter party. Most of the recommended terms of the
charter party are self-explanatory.
 
Non-Negotiable Terms:
 
1. Name of the parties entering into the contract and the vessel
("TBN" is acceptable but a negotiable term).
2. Type of commodity. For grain it will be HSS - Heavy
grains/Soybeans/Sorghum; for light grains, such as barley, it
is simply barley.
U.S. Grains Council – Importer Manual, Chapter 5 71
3. All cargoes must be loaded under the inspection of the
National Cargo Bureau (NCB) in order to ensure proper and
safe loading and stowage.
4. Payment of freight is made upon presentation of the signed
bills of lading, which is made immediately upon completion
of loading.
5. A vessel is considered load ready when it has been entered at
the local customs house and has passed the NCB and FGIS
inspections. When either the charterer or the charterer's
agents are notified of the vessel's readiness to load (which
must be before 1600 hours on a weekday or 1200 hours on a
Saturday), the vessel's laytime begins the following morning
at 0700 hours (see laydays - item two under negotiable
terms).
6. A charter party can be cancelled by the charterer if the vessel
has not been presented as load ready by 1200 hours on the
last day of the shipment period. However, the charterer has
to absorb the difference in the chartered rate and the
replacement value - what the charterer has to pay for a vessel
to replace the original charter. This can be either a loss or a
gain.
 
NEGOTIABLE TERMS 
Size of the Ship:  This generally refers to the size of the cargo and
the tolerances, but the actual deadweight size of the vessel can be
negotiated too. It is critical to ensure that the charter party tolerances
match the grain purchase contract tolerances. If the importer charters
for a larger tolerance than the charterer has on the charter's FOB
grain purchase, the charterer might be liable to the vessel owner for
deadfreight. The tolerance on a charter party is the owner's option.
 
The charterer should try to obtain a small tolerance and if a specific
vessel is being considered, it is even possible to charter a specific
quantity - no more and no less.  This would be expressed, for
example, as 25,000 MT min/max.
 
Laydays:  This specifies the time period in which the vessel must be
ready to load the cargo. Typically, laydays are from 6 to 20 days. 
Narrower laydays are better for the charterer because the charterer
will have greater control over the actual shipment period of the
cargo. For example, if the laydays are April 20 to 30, the vessel
must be ready to load no later than April 30. The earliest that time
can start counting for the charterer is April 20, even if the vessel is
ready five days early.
 
U.S. Grains Council – Importer Manual, Chapter 5 72
If the vessel is not ready to load on or before April 30, the charterer
may cancel the charter party. There is, however, no recourse for the
charterer if the market freight level is higher than when the charter
party initially was fixed.
 
Commodity:  This specifies the types of products that are loadable
at the freight rate in the charter party. Different commodities will
take up more space per metric ton than others. For instance, the
specific weight of corn is greater than barley; therefore, it stows
better, taking up less space.  
 
In some charter parties, the charterer can convert from paying a
freight rate per metric ton to making a lump sum payment. The
"conversion" gives the charterer the right to load commodities not
covered in the charter party, such as seeds.
 
Load/Discharge Ports:  This stipulates how many load ports/berths
and discharge ports/berths are included in the freight rate. Since
more complicated load conditions - for example, three load ports
compared to one - prolong the length of time the vessel is tied up in
the charter, multiple port/berth options demand premium rates.
 
Typically, feed grains charters require only one berth at the loading
point and one or two discharge ports/berths at the destination. 
Options for multiple discharge ports/berths at the destination are at a
negotiated premium, declarable, for example, when the vessel
completes loading.
 
From a freight standpoint, lifting a large cargo is more economical. 
Since the marginal cost of operating a 65,000 ton deadweight vessel
is little different in these modern days than a 20,000 ton deadweight
vessel. It is necessary for the charterer to combine as much cargo as
is possible, putting different products, even destined for different
discharge ports (within geographic reason), on the same vessel. In
most cases, the premium for multiple load or discharge ports/berths
will be much less than the savings from chartering the larger vessel.
 
Freight Rate:  This is expressed in dollars per metric ton, or long
ton. Also defined in the freight rate is who arranges and pays for the
trimming of the cargo. A few definitions follow:
 
• FIOT:  Free In/Out Trimmed - the charterer pays all of the
trimming expenses.
 
• FIOST:  Free In/Out Spout Trimmed - the charterer pays all
of the trimming expenses except when special machine or
U.S. Grains Council – Importer Manual, Chapter 5 73
hand trimming is required.
 
• Gross Load - the vessel owner pays all of the trimming costs.
 
The most common way to charter in the feed grains trade is FIOST,
since the vast majority of vessels used are self-trimming bulk
carriers and only require spout trimming. Tween-deckers and
tankers require special machine trimming and consequently cost the
charterer extra trimming charges.
 
Demurrage/Despatch: Demurrage is the daily penalty rate the
charterer pays the owner if the vessel has not been loaded within the
time allowed in the charter party. Despatch is the daily rate the
owner pays the charterer on the number of days/hours the vessel is
loaded faster than the time allowed. To some extent, demurrage
rates reflect the daily value of a vessel and will, over time, vary with
the freight market. For example, a 50,000 MT vessel with a daily
value of approximately 14,000 USD should reflect a demurrage rate
of about 12,000 USD to 20,000 USD per day. When the freight
markets are depressed, the demurrage rate could be only 8,000 USD
to 9,000 USD. The standard despatch rate is half of the demurrage
rate and gives the charterer the incentive to load the vessel as
quickly as possible.
 
RIDERS
Riders are contract extension clauses which are attached to standard
contracts. They may include the following provisions:
  
1. Clause 1 in the Baltimore Grain Charter Party (BFC)
specifies all situations in which the vessel owner is not
responsible for damage to the cargo. Therefore, often times a
rider will include that marine insurance is required.
2. The rider will specify who is to appoint agents at the load
and discharge ports. In either case, the owner pays all agent
fees.
3. The BFC Saturday clause is used in all charters originating
in the United States and specifies the conditions under which
Saturdays may count as laydays. Saturdays ordinarily are not
considered laydays unless stated as such in a rider.
4. The "lighterage" clause specifies the maximum weight the
vessel is allowed to have at its destination.  If the vessel is
too heavy, the owner must pay the cost of lightening the
vessel. If conditions have changed at discharge so the vessel
cannot unload, it is the charterer's responsibility to pay for
lightening the vessel.
U.S. Grains Council – Importer Manual, Chapter 5 74
5. The owner must pay for any securing and strapping of the
cargo. Only natural separations are allowed; charterers pay
for artificial separations.
6. Overtime is paid by whoever orders it - owners or charterers,
unless ordered by the port, in which case the charterer pays
for it.
7. The vessel cannot be loaded or discharged in Cuba, Libya or
North Korea, and cannot enter into ports in those countries
before or during the charter party.
8. Any dispute between the owner and charterer is to be settled
by a three-person arbitration panel. Each party appoints one
commercial arbitrator. Together, the parties and the
arbitrators then appoint a third arbitrator. The three make a
final decision. 
 

 
Role of the
Agent

A charterer generally appoints an agent to execute an FOB contract.
The agent's responsibilities include the following:
 
1. With local authorities:
• customs requirements
• immigration
• plant protection and quarantine (PPQ)
• hold inspection
• pilots, tugs, lines and so forth 
• U.S.C.G. (United States Coast Guard)
• documentation
 
2. With owners:
• bunkers
• crew business
• repairs
• cargo
• invoices and documentation
 
3. With charterers:
• cargo
• documentation
• invoices
 
The following charges, including agents' fees, are normally paid for
by the shipowner:
• pilots
• tugs
• lines
U.S. Grains Council – Importer Manual, Chapter 5 75
• customs
• immigration
• plant protection and quarantine (PPQ)
• inspection
• repairs
• bunkers
• tonnage tax
 
An important part of the agent's work is to discuss with the master of
the ship specific issues of the cargo, such as the stow plan of the
vessel, load rotation (when the vessel will go into berth) and
expected cargo lift. The agent will also obtain the master's
permission to sign bills of lading.
 
Sometimes two agents will be involved - one appointed by the
charterer and one appointed by the owner to protect his interests. 
The owner's agent will be involved with the specific issues of the
vessel owner, such as repairs, crew and bunkers. 
 
One of the agent's most important jobs is to secure the
documentation necessary to permit the cargo to be loaded onto the
vessel. This documentation includes:
 
National Cargo Board (NCB) Loading Pass: When the vessel
arrives at port, the first vessel inspection is by the NCB which
studies the master's stow plan and inspects the vessel to ensure that
the vessel is structurally safe to load. The NCB also checks the
stability of the cargo based on the stow plan and judges if the
stowage is safe for the voyage. If all is to the satisfaction of the
NCB, it issues a pass allowing the vessel to load the cargo.
 
USDA Pass: After the NCB inspection, USDA inspects the cargo
spaces for cleanliness. If the space is clean to the USDA's
satisfaction, it issues a pass to the vessel's agent.
 
NOR (Notice of Readiness):  After the vessel has passed the NCB
and USDA inspections, it will tender its NOR to the charterer's
agent and the agent will then file an application for berth with the
loading elevator. This has to be done by 1600 hours on weekdays or
0900 hours on Saturdays, and time will commence for the charterer
the following workday at 0700 hours. The agent passes the NOR to
the loading elevator.
 
Final USDA Pass:  As the cargo is being loaded, USDA (or its
designated state inspectors) supervises the weighing and grading and
issues weight and grade certificates for the completed cargo.
U.S. Grains Council – Importer Manual, Chapter 5 76
 
Mate's Receipt:  As soon as loading is completed, the master of the
ship issues a mate's receipt and signs it. The mate's receipt is a
temporary title of ownership to the cargo given to the seller. The
seller surrenders it to the agent who in turn issues the bill of lading
(B/L). The charterer pays the freight cost against a release of a
signed B/L.
 
Bills of Lading:  While the cargo is being loaded on the vessel at
the port elevator, the agent will draft bills of lading. The B/L
specifies the amount of goods delivered to the ship, the parties
involved, load port and destination, and the date of vessel
completion. The B/L date determines the shipment date. As soon as
the owner's agency confirms freight payment, the agent signs the
B/L and releases it to the seller who in turn surrenders the mate's
receipt.
 
In buying CNF or CIF, the buyer avoids all of the complications of
chartering vessels, arranging logistics and executing an FOB
purchase. The buyer only has to specify the shipment period and
discharge terms; the seller arranges the rest. It is clearly an easier but
not necessarily economical way to purchase grain.
 
 
Ship Types
Car Bulkers: These are designed to transport vehicles, but they can
also transport grain in a way similar to a self-trimming bulk carrier. 
A car bulker might bring cars from Japan to the United States,
remove the cars and load U.S. grain for the return trip to Japan. 
 
Oil/Bulk/Ore Carriers (OBO): These are used to transport these
three commodities. A special trimming cost would be incurred if an
OBO transported grain. Before chartering a vessel, one should pay
special attention to the type of cargo carried previously. For
example, if the vessel carried oil, it might require special cleaning
procedures.
 
Self-Trimming Bulk Carriers (STBC): These are the most
commonly chartered vessels in the U.S. grain trade business. They
are specially suited for grain transport because their bulkheads slope
at an approximate 45-degree angle to the horizontal, preventing
empty spaces from developing in the wings of the hold.  
 
The self-trimming bulk carrier is the most economical vessel to
charter because the holds are easy to clean and loading does not
require special trimming, which would make stevedoring expensive. 
U.S. Grains Council – Importer Manual, Chapter 5 77
Some vessels are referred to as PANAMAX type, which simply
means the vessels can transit the Panama Canal. The term is
typically reserved for bulk carriers in the 50,000-70,000 MT dead
weight tonnage (DWT) range.
 
Tankers: As vessels designed to transport petroleum products,
chemicals or other liquids, tankers are rarely used to transport grain
because their design makes loading bulk grain difficult and
expensive. The charter rate of a tanker would have to be at a
substantial discount to that of a STBC to allow the charterer to
recoup the costs.
 
Tween-deckers: These vessels are suited for loading general cargo,
not necessarily grain. They have two decks which are separated,
allowing for multiple products transport. The disadvantage is that
loading and discharging a tween-decker takes longer and costs more
than loading an STBC that is the same size.
 
Vessels are built under the supervision of a classification society
which approves the builders' plans, supervises the actual
construction and certifies the vessels. This extensive supervision is
done for safety and insurance reasons. The most active class
societies are Lloyds Register, London, United Kingdom; American
Bureau of Shipping, New York City, USA; Norski Veritas, Oslo,
Norway; Bureau Veritas, Paris, France. The societies also inspect
the vessels annually.
 
SHIPPING AGENCIES AND SHIPPING BROKERS
Shipping agencies can be located in the Transportation Telephone
Tickler, published annually by the Journal of Commerce, Inc. For
more information, contact the Journal of Commerce at (973) 848-
7082, or This e-mail address is being protected from spambots. You need JavaScript enabled to view it. .
 
For information regarding shipbrokers, the Shipbrokers Register
provides a list of brokers in most countries. Orders can be placed to:
 
The Shipbrokers Register
P.O. Box 2
261-22 Landskrona, Sweden
Phone: 46-418-76660
FAX: 46- 418-76667
Email:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it.
Website: www.shipbrokers-register.org
 
 

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