Global Logistics—October 2009

Rotterdam Rules Inch Forward

Most trade conventions come and go. Others linger. When 15 countries, including the United States, ratified the Rotterdam Rules recently in the Dutch port city, the new UN maritime convention updated global standards for transporting ocean cargo initially laid out in The Hague Rules (1924), the Hague-Visby Rules (1968), and the Hamburg Rules (1978).

The convention provides more clarity about who is responsible for what, when, and where in maritime transport and how far responsibilities extend. Changes in global trade; the proliferation of technology, containerization, and third-party intermediaries; and countless other innovations have largely rendered the old treaties obsolete, necessitating new rules for engagement.

The Rotterdam convention specifically delineates responsibility and liability for stolen containers, stranded ships, and shipment damages. Unlike the old rules, other parties in the supply chain may now jointly be held accountable, along with the carrier. The carrier’s liability for damage to cargo has been increased and the shipper’s obligations—such as having goods ready and secured for transport in a safe and timely manner—are also more clearly defined.

Among other changes, the Rotterdam Rules address:

• Intermodal transport: The new convention applies to contracts for waterborne transit, as well as prior or subsequent transport over land. In this way, multimodal transport can be carried out under a single contract with one statutory regime.
• E-commerce: The Rules establish legal infrastructure for the development of e-commerce—including electronic documentation—in maritime transport. This will help increase the flow of goods and reduce processing costs and errors.
• Cargo flow: When a consignee fails to collect cargo within a predetermined time period, carriers and terminals have more options for storing cargo outside port areas, which can prevent port congestion and reduce supply chain costs.

Following initial ratification on Sept. 23, 2009, charter members now have to complete their own national procedures for activating the convention. The Rotterdam Rules will enter into force one year after the 20th country signs on.

Boeing, Damco: The Sum of Their Parts

Partnership has its privileges, especially when companies find complementary parts. Boeing and Danish logistics company Damco, part of the A.P. Moller-Maersk Group, recently signed a memorandum of understanding to leverage their respective resources and develop industrial and technological logistics tools for improving global supply chain management.

The arrangement marries competencies in freight forwarding and manufacturing that both interests hope will amplify their supply chain offerings.

Together they will explore opportunities to use Boeing’s Joint Logistics Command and Control Environment (JLC2E) modeling and simulation tool to expand into commercial markets and incorporate Damco’s expertise in supply chain management. Boeing’s JLC2E tool allows defense customers to experiment and evaluate supply chain tactics, processes, and technologies to support current and future defense missions.

"We look forward to integrating Damco’s optimization capabilities into Boeing’s experimentation environment," says Torbjorn Sjogren, vice president of Boeing International Support Systems. "We will quickly seek opportunities to deliver more effective outcomes within both defense and commercial supply chains."

Beyond the development of supply chain solutions, Damco will likely benefit from Boeing’s status as the largest exporter in the United States, as well as its global network of suppliers, by mining new freight forwarding opportunities. Boeing shipped more than $350 million in aerospace goods and services globally in 2008.

"Leveraging the logistics capabilities of the two companies creates a powerful platform for developing optimal supply chain solutions," adds Martin Thaysen, chief commercial officer, Damco.

"We are in the business of moving products, reducing costs, and improving service levels," he notes. "Working with Boeing’s supply chain experience and technology allows us to develop new ways of reducing cost and freeing up cash for customers—which is particularly important in these economically challenging times."

North by Northeast Passage

It’s amazing where a little fraternity and foresight can take global trade. For Beluga Shipping, the German project- and heavy-lift ocean carrier, they took shipments of power plant components from Ulsan, South Korea, to Yamburg, Siberia, through the Northern Sea Route.

The Beluga Fraternity and Beluga Foresight left Korea on July 23 and July 28, 2009, respectively, and entered the Northern Sea Route following inspections at Vladivostock. After transiting the Bering Strait, they met and convoyed with two Russian icebreakers before arriving in Siberia on Sept. 7, 2009. Components were then transshipped by barge farther inland to Surgut.

But the journey didn’t end there. The ships delivered another 3,500 metric tons of cargo to Rotterdam, becoming the first non-Russian commercial vessels to make it through the Northeast Passage from Asia to Europe.

Transiting the Northeast Passage, which currently can only occur during a six- to eight-week window in summer when the route is mostly ice-free, offers considerable time and cost advantages. Sailing from Asia to Europe via the Suez Canal and the Gulf of Aden, the most common route, adds up to 11,000 nautical miles. By contrast, using the Northeast Passage is approximately 3,000 nautical miles and 10 days shorter.

"The savings in voyage costs amount to almost $500,000 for each multi-purpose heavy-lift project carrier of the F-class, and, in time, nearly $900,000 for each traveling vessel of the new Beluga P-class," says Niels Stolberg, president and CEO of Beluga Shipping.

By using the Northern Sea Route, shippers and carriers can reduce bunker consumption of low-sulphur fuel by about 200 tons per unit. This amounts to $300,000 in fuel savings, as well as the daily $20,000 expense of operating smaller Beluga F-class vessels.

While debate over climate change and its potential impact on global transportation remains muddled, one thing is clear—using the Northeast Passage would, to small degrees, reduce shipping’s impact on global warming. "Just by using the Northeast Passage, we can reduce bunker consumption of fuel, and, in turn, significantly cut down emissions," says Stolberg.