Malaysian Freight Forwarders in for hard times

GEORGE TOWN: Freight forwarders are bracing for hard times as they experience a downtrend resulting from the global economic turmoil.

They said business has dropped by at least 8% for the second consecutive year as the forwarders handle less cargo, forcing them to tighten their operational costs.

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Penang Freight Forwarders Association president Joachim Loo said the situation was due to global market forces, especially in the United States and Europe.

“We are now in the final quarter of the fiscal year when demand for goods should be on the increase for Christmas and New Year markets. Manufacturers and retailers in the two regions, however, are placing less orders.

“The most affected business are electronics, garment and medical products. While operational costs have gone up, our members are struggling to survive as we try to fill up our lorries with consignments,” he said.

The total aircargo throughput at the Penang International Airport last year was 158,812 tonnes compared to 172,668 tonnes in 2006.

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Up to August this year, the forwarders only handled a total of 99,529 tonnes of cargo.

Cargo handling in Kuala Lumpur also saw a down trend with forwarders recording 646,529 tonnes of goods last year compared to 657,836 tonnes in 2006.

“Right now, we are tightening our belt. Many of us are not hiring new workers and some of our members have already told their workers not to expect any bonus this year,” he said.

Meanwhile, the Federation of Malaysian Manufacturers (FMM) northern branch said factories here were expected to feel the heat of the global meltdown by December or early next year.

Its chairman Datuk O.K. Lee said the branch was now looking into ways to help factories here cushion the impact and take remedial measures.

A survey would be conducted to find out how members had been affected by the world economic turmoil as Penang is home to many multinational companies.

“The effect is still not that strongly felt here. But we anticipate a chain reaction as it is only a matter of time before it hits us,” he said yesterday.

Lee said industry players complained that demand for their products had softened while the sharp rise in electricity tariff, transportation fees and gas also did not help the current situation.

Source: Star Online

Malaysian logistics sector may consolidate further

KUALA LUMPUR: The fragmented local logistics industry is expected to enter into a consolidation period with inefficient and smaller players exiting the industry or being merged or acquired amid the current slowing global economy, according to analysts and industry players.

Being a highly sensitive industry that grows in tandem with the overall economy, they said the local logistics industry, which mainly consists of medium and smaller scale players, was expected to shrink amid the current economic slowdown.

Consumption of goods, regardless of whether they are automobile, electronics and electrical, and fast-moving consumer goods, would normally be lower during any slowdown, leading to less movement of cargo, said one industry player.

Trans-Asia Shipping Corporation Bhd (TASCO)’s chief executive officer Lee Check Poh expected more manufacturers to consolidate their logistics suppliers and appoint one or two logistics players to serve them.

“They normally look for logistics players with total logistics services like us (including air, sea, land and warehouses) whereby they are able to negotiate in bulk and in turn reduce cost and minimise administration hassle,” he told The Edge Financial Daily.

He said based on his observations during the 1997/1998 financial crisis, more manufacturers would look to total logistics players to design and improve their supply chain management to reduce their transit lead time and maintain minimum inventories, which in turn, would improve their cash flow.

Coupled with the high fuel prices and electricity tariffs, an analyst said the logistics players would face even tougher times ahead as they were unlikely to be able to fully pass through costs to their customers in view of the highly competitive nature of the industry.

He said the shrinking profitability might actually bode well for the bigger players, as they would be able to leverage on their economies of scale to reduce the impact of higher operational costs.

Moreover, the analysts said the bigger players, especially those with cash surplus in hands, might take the opportunity to expand their market shares via mergers and acquisitions (M&A), which in turn, enlarge their customers base.

An industry player said there would also be a shift towards outsourcing of logistics related activities among manufacturers due to cost-cutting pressures.

Source: The Edge Financial Daily

GPS software helps save money

This report from Businessweek supports this blog's previous post on a Malaysian-proprietary GPS software that is being used for logistics companies in Malaysia.

FOR ONE OR TWO TRUCKS: A number of free online calculators can help you cut your fuel costs. At aaa.com you can plug in your Zip Code and the site will find the cheapest gas in your area. Google (GOOG) Maps not only provides directions but also will predict traffic patterns for the times you'll be traveling.

FOR SMALL FLEETS THAT RACK UP A LOT OF MILEAGE: Get yourself a GPS system. At the very least, they'll cut down on the time spent lost. TomTom can now find the best route to your destination and allow for the day of the week you're traveling. For $14.95 a year, TomTom sends updates to your Bluetooth-compatible phone on the cheapest place to buy gas. Another option is Sprint, which can get the best route to your drivers via its Nextel walkie-talkie phones. The phones cost about $50; the Web-based route optimization service is about $55 per month per phone.

FOR BIG FLEETS: For $1,500 plus $300 a year, Rand Mcnally'S Intelliroute is one of the most complete route-finding services, figuring your lowest-cost destination by including everything from tolls to construction to your vehicles' highway mileage. UPS offers Roadnet, aimed at big operators, and Roadnet Anywhere, for fleets of ten or less trucks, a service that helps optimize routes for multiple deliveries. Roadnet Anywhere is $110 per month per vehicle.

Source: Businessweek

Crisis of confidence hits global shipping

SYDNEY: The intensifying credit crisis has spread to international trade with reports emerging of banks refusing to honour letters of credit from other banks, said Moody's Economy.com's economist Matt Robinson.

"With reports of sellers' banks deciding they don't trust the financial institutions named in buyers' letters of credit have come alarming anecdotes of cargo ships being stuck in home ports.

"With ships not moving, stocks have been piling up and exporters have grown desperate for income from idle inventory. Importers of raw materials for production are also feeling the pinch as supplies dwindle," he said in a statement yesterday.

Robinson suggested that this could lead to price distortions as demand - despite being subdued by slowing economic conditions - outstripped supply as shipments were delayed, while consumers also faced potential supply shortages as shipments of foodstuffs and grain lay stranded overseas.

"Add this to the lower demand that Asian exporters already face and you start to see how much of a problem this credit fallout could be for the region if it persists," he said.

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Robinson said Japan recorded its first-ever seasonally adjusted monthly trade deficit in August, as demand for high-tech electronics and motor vehicles by US and European consumers plummeted.

He said South Korea had recorded a string of trade deficits this year - a sharp turnaround from historical results - while the trade ledger in neighbouring Taiwan had been in deficit for two of the past three months.

"Singapore has slipped into recession. Its monthly exports have fallen by double digits compared with shipments a year earlier. Declining commodity prices for some of Asia's key commodity exporters, including Malaysia and Indonesia, aren't helping their trade balances either.

"Meanwhile, growth of the giant Chinese economy has been humbled by the deteriorating external environment," Robinson said. "Most worrisome for Asia's export-oriented economies, global shipping has been hit as exporters and importers struggle to secure letters of credit," he said.

A letter of credit is a formal document guaranteeing payment by an issuing bank on behalf of a buyer (an importer) to a third party (the producer of the goods being produced) for a specific amount of money, provided certain conditions are met.

Letters of credit reflect the financial obligations generated through the contract of sale, and ensure that the exchange of funds occurs when the specified quality and quantity of goods have been satisfactorily delivered.

"With the credit crisis causing banks to shy away from lending to one another for much longer than overnight, there have been reports of banks refusing to honour letters of credit from other banks.

"Banks have also tightened lending conditions considerably by imposing more onerous requirements on importers and exporters before issuing letters of credit," Robinson said, adding that this seemingly esoteric issue could have serious implications for global trade.

"The whole global trade production line relies on letters of credit. No letters of credit, no transactions - and no transactions mean no international trade."

Source: The Edge Financial Daily

More shipping lines to switch to Malaysia within the next decade

KUALA LUMPUR: More shipping lines are expected to switch hubs to Malaysia within the next five to 10 years, drawn by Malaysian ports’ attractive pricing and capability in handling cargo volumes.

Westports Malaysia Sdn Bhd director Ruben Emir Gnanalingam told The Edge Financial Daily that while Singapore has more shipping line hubs currently, the island state had limited capacity and prices in Malaysia were still substantially cheaper.

Singapore is also currently the largest handler of trans-shipment cargo volume in the Southeast Asian region, doing 28 million twenty-foot equivalent units (TEUs) of the 50 million in Southeast Asia while Malaysia does 15 million TEUs. Of the 15 million TEUs, Westports is aiming for five million TEUs this year, Ruben said.

Asked if he saw strong competition from other Southeast Asian countries, Ruben said that there was little threat. “The three main ports for trans-shipment cargo currently are Westports, the Port of Tanjung Pelepas and Singapore. We don’t foresee any particular new threat and there are no new ports being built in the region for some time yet.”

He added that trans-shipment cargo volume in the Southeast Asian region was growing between 10% and 15% a year with an estimated 55 million TEUs in 2008.

“The market is growing fast and there is a lot of room for growth, we can all grow together,” he said.

Earlier, Ruben told reporters that Westports expected its new 600-metre berth to be fully operational by the fourth quarter of this year.

The berth is part of CT5; a new container terminal Westports is constructing as part of its RM800 million three-year expansion plan to boost annual capacity by some 30%. The ports operator breached the four million TEU mark in 2007.

He was speaking after the announcement of Westports’ RM800 million-sukuk musyarakah medium term notes programme to finance its RM800 million expansion plan.

The sukuk will be utilised to refinance Westports’ existing bank borrowings, to finance the construction of new container terminals and acquiring machinery and equipment. The first issuance, targeted for mid-March, will be based on a book build basis.

Source : Edge Daily

Asian shipping hit by global crisis

The ports and shipping lanes of Asia, the arteries of world trade through which goods and commodities surged in the boom times, are starting to seize up as the financial crisis strangles demand.

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The Baltic Dry Index, a signpost of economic trends which tracks the cost of moving goods across the oceans, has set off alarm bells by plummeting 85 percent from its peak in May to a six-year low.

Share prices of some major shipping companies, which haul bulk freight such as iron ore, coal and grains destined to be turned into manufactured goods, have fallen 50-70 percent in the past few months.

"The global economic slowdown will push some shipping lines into bankruptcy," Marc Faber, a famed investor and editor of the "Gloom Boom & Doom" report, told AFP.

Standard & Poor's also said this week that the Asian shipping market has suffered double-digit declines on the US-Asia route in June and July, as well as being hit with higher operating costs.

The industry had been expecting an upturn after the Beijing Olympic Games ended and factories chugged back to life, after an enforced holiday to help improve air quality. But instead disaster struck on global markets.

There are reports of idle vessels being put to anchor, and question marks over the many orders for new ships that were placed in brighter times, years ahead of expected completion dates.

"Pain levels could be high for companies that agreed to pay 2007 top-dollar prices for dry bulk ships, or who agreed to pay high long-term charters," said an article in the Far Eastern Economic Review this month.

Port Klang hit by decline in cargo handling

Container shipping was hit first earlier this year as demand for Asian-made goods in the US and Europe dropped off, a casualty of the sub-prime mortgage crisis and poor consumer confidence.

In a chain reaction, the countless Asian factories churning out electronics and consumer items for the US and European markets began lowering output, and the need for raw materials declined.

Container shippers, bulk operators and port authorities across the region are reporting slowdowns.

Malaysia's Port Klang said it had been hit by a decline in cargo handling since the start of October, blaming a retail downturn and lower vehicle sales in the United States and Europe.

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Shanghai International Port said that growth in cargo traffic dropped sharply to 9.9 percent in the first half of 2008 on the "increasingly grave global economy and trade situation".

"Faced with the severe economic situation at home and abroad, the port industry has met with the most complicated operation environment in recent years," it said.

Hong Kong, which is sensitive to any drop in demand for toys, gadgets and clothes made in the factory-belt of China's southern Guangdong province, said that after an increase of 6.7 percent in container traffic in August, growth dropped suddenly in September to just 1.2 percent.

"Given the global gloomy economic outlook, Hong Kong is expected to face a much tougher export trade environment," said Hong Kong Container Terminal Operators Association chairman Alan Lee.

In Taiwan's seven harbours, volumes fell 2.23 percent in the nine months to September, and in southern Kaohsiung city, business was down 1.76 percent.

"We are seeing a rapid decline in the volume of exports," an official with the Japanese Shipowners' Association said of the decline in demand.

Situation akin to 1997 Asian financial crisis

The Baltic Dry Index which hit 11,793 in May is now under around 1,300, approaching rates not seen since the Asian financial crisis in 1997-1998, and tipped to slip below 1,000 as commodity prices fall.

A so-called capesize vessel, most commonly used to carry coal and iron ore, now costs under US$11,000 a day to hire, about half the charge in May.

The index's decline has alarmed observers as an indication of the damage the credit crisis has already wreaked on the world economy, even if action to revive financial markets is successful.

Container shipping lines have said they expect cargo demand on the US-Asia route to fall by as much as eight percent in 2008.

"It's a safe statement that no carrier is operating profitably in the eastbound transpacific market today," said Ron Widdows, chairman of the Transpacific Stabilisation Agreement - a forum of major shipping lines.

However, the group said vessels are still running at 90 percent capacity as firms cut costs by consolidating routes and returning chartered vessels, and take advantage of the downturn to lay up ships for repairs.

Widdows said the industry was confident that government efforts to unclog global finance would be effective, restoring confidence and paving the way for a shipping recovery in late 2009.

Source: Malaysiakini

Malaysia suggests curb on ships in Straits of Malacca

KUALA LUMPUR, Oct 21 Malaysia today proposed limiting the number of vessels that can enter one of the world"s busiest shipping lanes amid worries that rising congestion could spark accidents.

More than 70,000 vessels passed through the Malacca Straits last year travelling from Europe and the Middle East to East Asia, a sharp increase from about 44,000 in 1999, said Deputy Prime Minister Datuk Seri Najib Razak.

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The narrow waterway is shared by Malaysia, Indonesia and Singapore and is used by vessels carrying half the world's oil and more than a third of its commerce.

-Malaysia believes there is an ultimate tipping point for maritime transit in the straits, beyond which further increases would become not only risky but also too dangerous and costly," Najib said while launching a Malaysian maritime research institute.

Najib said some researchers estimate that 120,000 vessels might use the Malacca Straits annually by 2015 if curbs are not introduced.

Malaysia will discuss the issue with Indonesia and Singapore, he said.

It was not immediately clear how any restrictions might be enforced.

Najib said security in the straits has improved significantly in recent years because of anti-piracy patrols conducted by the three neighbouring countries. There have been no pirate attacks so far this year, compared to 75 in 2000, Najib said.

Source: The Malaysian Insider (from AP)

Credit facility for expansion still available

FINANCIAL institutions in Malaysia are still willing to offer credit facilities to finance shipping companies’ expansion despite the global economic crisis.

This could be because a majority of local shipping players support the oil and gas (O&G) industry and are seen to be somewhat sheltered by the downtrend in the global liner and dry bulk markets.

The international container shipping market is hardest hit by the trade slowdown and the looming over-capacity that have slashed freight rates by more than 60%.

The Dry Baltic Index, the barometer of dry bulk shipping rates, plunged 87.2% to 1,506 points on Oct 16 - the lowest in almost six years - from 11, 793 points on May 20.

In Malaysia, only a handful of companies are hit by the effects of the credit crisis: MISC Bhd and Halim Mazmin Bhd, which are involved in container shipping as well as Malaysian Bulk Carriers Bhd and Hubline Bhd, both are in the dry bulk market.

This is because almost 90% of our consumer goods for import and export as well as most of our palm oil are carried on foreign vessels.

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No impact

The credit squeeze emanating from the US to date has not caused traditional lenders in the country to restrict financing to the local shipping industry.

They are still issuing credit to the industry but they are doing so prudently.

Bank Pembangunan Malaysia Bhd president and group managing director Datuk Tajuddin Atan said the bank was not limiting its credit to the shipping sector at the moment.

“In fact, under Budget 2009, Bank Pembangunan was entrusted to manage an additional RM2bil Maritime Fund that will benefit shipping companies and shipyards.

“Application for financing under the said fund will be subject to a credit evaluation process and is dependent on the merits of each case,’’ he told Starbiz.

Providing financing to the maritime industry, Tajuddin added, was one of the bank’s mandated roles and it would continue to provide financing to the sector for vessels’ acquisitions.

Over the years, Bank Pembangunan had financed more than 300 vessels including tugs, barges, general cargo vessels, tankers, container vessels and other offshore support vessels.

He said the bank’s loan portfolio over the past three years (2005 to September 2008) had recorded a cumulative average growth rate of 51%.

Asian Finance Bank Bhd has also not cut down lending facilities to shippers.

Chief executive Datuk Mohamed Azahari Kamil said: “As shipping is a capital intensive industry, we have been prudent in extending financing. We conduct due diligence with respect to the terms of the charterer, valuation of the vessel, credibility and track record of the shipping operator to ensure ability of repayment.”

Azahari said the bank, via its RM1bil Safeena Islamic Marine Fund, practised risk management and high level corporate governance for its funding exercises.

The Fund, launched in June, is the first syariah-compliant marine fund in Malaysia and Southeast Asia. It provides a sale and lease back arrangement whereby the fund will own the vessel and lease it back to the vendors with a medium to long term contract.

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Maritime Institute of Malaysia’s senior fellow Nazery Khalid said despite the fact that the industry appeared to have weathered the financial storm well, the industry would inevitably feel the pinch of the credit crunch if it continued.

Traditional and seasoned players in ship financing would no doubt still lend albeit cautiously but newcomers of ship financing on the ther hand would be apprehensive to enter the fray.

On the outlook of the shipping sector, Tajuddin said: “The sector has grown steadily since 2003 and Bank Pembangunan remains bullish especially on local and intra regional trade as well as offshore support activities.

“At the same time, we are mindful of the current global economic situation, which will inadvertently affect international trade and hence the sector.”

Continued expansion

O&G support services player Tanjung Offshore Bhd will still continue with its expansion plans despite expectations that banks will be more cautious in lending due to the financial turmoil.

According to managing director Omar Khalid, the company planned to either draw down its loans or issue bonds to expand the business.

“We hedged our financing rates two months ago. We are comfortable with issuing bonds to expand our fleet,” he told StarBiz.

Despite the global financial crisis, Omar said the offshore support services industry would remain robust as oil majors continued with exploration and production activities even at prevailing oil prices.

Product and chemical tanker operator E.A. Technique (M) Sdn Bhd did not face any difficulties acquiring loans for fleet expansion and shipyard operations.

Managing director Datuk Abdul Hak Mohd Amin said the company had just received approval from banks for the loans it applied two months ago.

“So far, we have no problem in getting loans from banks,” he said.

Abdul Hak did not see any signs of a slowdown in the company’s business activities even though crude oil price currently stood at around US$73 per barrel.

“Most of our tankers are in long-term charter contracts and when we signed the agreement, oil price was at US$55 to US$65 per barrel,” he said.

According to an analyst, O&G service providers are not directly affected by the swings in oil price.

“Operationally, they are ‘more sheltered’ considering that a majority of their operations are in Malaysia and spearheaded by Petroliam Nasional Bhd.

“Most of their contracts are on a long term basis and the need for local-flagged vessels are still healthy,” he said.

According to several market experts, some international shipping players had cancelled and delayed their orders and this had affected shipyards that are largely located in Asia.

The demand in the Asian shipbuilding industry has been slowing down and this could adversely affect the business of some industry players.

Shipbuilders are also facing problems securing credit facilities as banks are tightening lending or reducing exposure to the shipbuilding industry.

Due to the pressing situation, affected shipyards will have difficulties delivering their orders, especially if they are involved in building ultra-sized ships.

The problems are apparent in China as it is striving to take over South Korea’s position as the largest shipbuilder in the world.

Furthermore, a lot of new shipbuilding companies in China are private limited companies and need funds for expansion.

Source: Star Online

Malaysian logistics players unfazed by crisis

Major Malaysian logistics players expect business to remain resilient despite sluggish trade activities especially in terms of exports to the US and Europe due to the global economic slowdown.

This is due to their diversified business portfolios that do not depend solely on the two major markets and bright prospects for intra-Asia trade which is still on the uptrend.

Nevertheless, industry players do not refute the fact that it is only a matter of time before the waves hit local shores.

This is strongly supported by the fact that Malaysia is an export driven country and the US is its major trading partner.

According to the International Trade and Industry Ministry, exports to the US dropped to 12% in August from 15% in the same month last year.

Export value to the US also fell to RM6.95bil in August from RM8.2bil a year ago due to a decline in exports of electrical and electronic products.

Nevertheless, Malaysia’s total exports has risen 11% to RM60bil to-date versus the same period last year. This is partly contributed by the country’s exports to Japan and South Korea that jumped 27% and 43% respectively in August as compared with the same month last year.

Asean accounted for RM16bil or 27% of Malaysia’s total exports in August, an increase of 23% from a year ago.

Century Logistics Holdings Bhd does not expect to suffer a drastic dent in its business from the onslaught of a worsening global economy.

Deputy managing director Dr Mohamed Amin Kassim told Starbiz that this was due to the company’s wide array of customers from varied industries thus minimising the impact of a slowdown in trade.

“We have strong alliances with strategic partners who are able to provide the resources such as trucks, handling equipment, vessels and warehouses to help us mitigate the volatility in demand.

“Our focus on Asian trade has also insulated us against the impact of a slowdown in trade with the West,” he said.

Nevertheless, Mohamed Amin said the company remained cautious as a new crisis might suddenly erupt and affect business.

“As an example, runaway inflation in certain countries may prevent us from investing in infrastructure,” he said.

Despite the global economic meltdown, he said, Malaysia should stay focused on improving its supply chain and ensuring that its multi-modal connections remained efficient.

“Our delivery systems and productivity must be further upgraded.

“The cost of doing business in our country must be competitive if we harbour any hopes of enhancing our position as a choice for value-added regional distribution hubs.

“The Government should review our policy and grant more favourable incentives to more logistics companies,” he said.

DHL, an international express and logistics company, manages to mitigate the impact of the sluggish economy via its strong presence in the Asia Pacific region where intra-Asia trade has remained healthy.

According to DHL Express (Malaysia and Brunei) country manager Sam Leong, the company’s portfolio of 42 countries in the region has enabled them to balance the shifting business cycles to a certain extent.

DHL Global Forwarding Management (Asia Pacific) chief executive officer (South Asia Pacific) Amadou Diallo said the Asia Pacific region had accounted for about 50% of its global forwarding unit’s total annual revenue in recent years with revenue continuing to grow at a rapid pace.

“DHL Global Forwarding’s new regional focus on South Asia Pacific covering the South East Asian region, South Asia (including India) and the South Pacific clearly earmarks Malaysia as an integral component of this new trade landscape.

“Hence having identified the new structure, DHL Global Forwarding will enhance customer service, accommodate future growth and focus more on distinct regional priorities, particularly in Malaysia,” he said.

He added that as markets in North America and Europe cooled off, customers in Malaysia could rely on DHL to help them increase their intra-regional trade.

“This can be done through the expansion and development of new trade lanes within Asean, and connecting Asean with other high growth markets €“ particularly in South Asia and beyond,” he said.

Infinity Logistics and Transport Sdn Bhd has not experienced any direct effects of the economic slowdown.

Managing director Chan Kong Yew said this could be due to the company’s business which handled a lot of shipments to South East Asia, the Middle East, India and China.

“However, Malaysian logistics company will feel the pinch of the slowdown sooner or later but I hope that the impact will be minimal,” he said.

In anticipation of the impact, Chan said Infinity’s strategy is to cut down its credit exposure and concentrate on businesses that provided direct payment even if the returns were low.

“Concurrently, we have to slow down our expansion to avoid an oversupply in the market place.

“But, we encourage high operational efficiency that includes the disposal of non efficient vehicles and multi-tasking among our employees,” he said. Source: Star Online

Port Klang Authority offers TEU 3-day free storage period

The Port Klang Authority (PKA) will organise a trial run for the soon-to-be-implemented three-day free storage period for containers at Port Klang from November 1, with the cooperation of several members of the Selangor Freight Forwarders & Logistics Association.

"We are having the trial run to ensure that there are no hiccups in January when we fully implement the ruling ... it also gives us two months to refine it to make sure that it benefits the whole port community once it is implemented," PKA general manager and chief executive officer Lim Thean Shiang said in Port Klang last week.
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Come January, a new law reducing the period in which containers can be stored at Port Klang for free from five days to three will be enforced.

In July this year, PKA had set up a committee, which comprises representation from all trade associations, to come up with a standard operating procedure (SOP), detailing the role each party plays in the total logistics chain and the cut-off time for export and import shipments.

Lim said almost 100 per cent of the SOP of each logistics provider has been finalised to date.

The committee has also come up with three areas of improvement that need to be focused on.

Firstly, the need for an amendment to clause 65(3) of the Port Klang Authority Bylaws to exempt containers which are detained by Other Governments Agencies, and a change in calculation of free storage period from days to hours.
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The committee also suggested that the advance notification requirement to hauliers be reduced from 48 hours to 24.

PKA will consult with the Ministry of International Trade and Industry Development on the matter of the advance notification as the Association of Malaysian Hauliers has yet to agree to it.

Lim also said as part of the Ninth Malaysia Plan, PKA is looking at improving the connectivity bet-ween Northport and Westports due to the high cost of inter-terminal transfer of containers between the two ports.

The regulator is mulling the possibility of having a dedicated road for transporters between the ports, so as to reduce the number of accidents on public roads as well as to cut the handling costs between the two ports. Source: NST Online

PTP on track to hit six million TEUs

The Star Online reports that PORT of Tanjung Pelepas Sdn Bhd (PTP), one of two major terminals in Johor, is confident of achieving its volume target of 5.8 million to six million twenty-foot equivalent units (TEUs) this year despite the global economic slowdown.

Chairman Datuk Mohd Sidik Shaik Osman said PTP had already handled about 8 million teus in the first six months of this year. Already an established transhipment hub in South-East Asia where it ranks number 17 on the world’s most active ports list, PTP is expected to further enhance its portfolio via import and export boxes.
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"The percentage of local cargo for first six months has increased by 90.44% against same period last year,’’ Sidik said. "To enhance our local cargo operations further, we are working closely with some liners to promote the services at the port to local shippers."

PTP handled 5.5 million TEUs last year. On the prospect of handling more local cargo, he said, Iskandar Malaysia was poised to grow as investors throng into the area. "This will contribute to PTP’s local volume throughput," Sidik said.

PTP is 70%-owned by MMC Corp Bhd and 30% by APM Terminals, which manages about 40 ports worldwide. Besides PTP, MMC also owns another port in Pasir Gudang Johor Port Bhd in which it holds a 100% stake. Sidik said although PTP was confident of reaching its targeted growth this year, the slower economy would inevitably affect the port sector. "Ports, as an important component in the logistics and supply chain, will feel the pinch of sluggish trade," he said.

Sidik said despite the economic slowdown in the US and the negative impact on global trade following the increase in fuel price, ports in South-East Asia still managed to post growth in throughput volumes for the first six months of this year.

Ports in Asia are probably shielded from the global economic downturn as the trade within Asia was growing faster than that with other regions. Asia-Pacific accounts for over 50% of Malaysia’s trade compared with less than 20% with the US.

Based on that positive outlook, PTP is not slowing down on its RM3bil expansion plan. The port is currently constructing berth 11 and 12 that would provide another 720m of wharf space at the south of berth 10, bringing the total length to nearly 4.4km.

"Berth 11 is due for completion in May and berth 12 in September next year," Sidik said. He added that the two new berths were designed to carry four of the world’s largest and latest dual-hoist quay-side cranes. To provide sufficient power to drive all the cranes, PTP recently constructed a larger electrical substation with a capacity of 132 kV.

"The construction of the container yard behind these berths will start after the berths are completed. The 32ha yard will provide space for 40,000 TEUs," he said.

An additional 25 rubber-tyred gantry cranes as well as 60 prime movers and trailers are expected to be acquired to support the operations of the two berths.The total investment of the two berths and container yard is around RM750mil. PTP would commence the construction of berths 13 and 14 next year, said Sidik.

Century Logistics expects no immediate impact from financial meltdown

The Edge Financial Daily reports that Century Logistics Holdings Bhd does not expect the financial crisis gripping the world to have an impact on its freight forwarding business, at least in the immediate term.

Its deputy managing director Dr Mohamed Amin Kassim told The Edge Financial Daily that even if there was an impact, it would be minimal as consumers still had to spend on basic necessities such as food.

Food and beverages (F&B) companies are among Century Logistics’ biggest customers.

“I talked to some industry players — and, going forward, I think trade with the United States and Europe would slow down somewhat. Higher exchange rates have stopped the people from buying goods from them,” he said in a telephone interview.

Mohamed Amin expects Malaysia’s trade with China and India to continue to do well, as consumers would switch to lower priced goods from the two countries.

“The situation with Australia, which has invested heavily in the US, would be better because their resources are fully booked by other countries. Their trading is still going on well,” he added.

Mohamed Amin said the main concern of the industry was the reaction of banks. “Our banks might follow the step of other banks in their reluctance to give out loans,” he said.

“If they impose strict restrictions, it would be difficult for us to take out bank loans to run our businesses.”

Going forward, Mohamed Amin said Century Logistics would be cautiously watching the global scenario so as to take necessary action to prevent the worst situation from happening.

“We have strong customers, especially those from the food and beverages (F&B) sector. We would try to keep these customers,” he added.

To offset the higher fuel prices, Mohamed Amin said the company had reduced its operating costs and expanded its business into new segments.

Apart from freight forwarding, Century Logistics is also involved in transportation and distribution, warehousing as well as procurement and assembly services.

“We operate more than 300 trucks, but we only own about 180 of them. By doing that, we are able to minimise maintenance costs,” Mohamed Amin said.

For its second-quarter ended June 30, 2008, the company’s net profit dropped 57.5% to RM2.5 million from RM5.9 million a year earlier due to the dry-docking of two floating storage units and weaker market sentiment. Its revenue for the quarter fell 17.6% to RM34.1 million from RM41.4 million previously.

Transport firms face fresh challenges

Star Online reports that the falling price of crude oil to about US$82.54 per barrel on Friday compared with the record high of US$147 per barrel in July is welcomed by all international transportation companies. But will this drop cushion the effects of crashing freight rates and lower demand due to the looming global financial crisis?

WHEN crude oil prices surged to record highs about three months ago, many transportation companies’ operational costs swelled, compounded by the hike in the price of raw materials.

But now, as the price of crude oil decreases which leads to a corresponding drop in the price of petrol, diesel, bunker oil and jet fuel prices, transport operators face greater challenges due to a global economic slowdown that affects trade.

Oil Price

According to Aseambankers (M) Bhd senior analyst of equity markets Liaw Thong Jung, the softening price of crude oil was a result of the global economic slowdown, which has affected demand for crude oil.

“The world now has excess inventory of oil,” he said.

Even the Organisation of the Petroleum Exporting Countries is concerned about the effects of the global financial crisis and its impact on world economic growth and the price of oil.

Notwithstanding that, Liaw said, the reduction in oil speculation also led to weakness in the price of oil.

“We take a view that the price of oil would stay at US$100 per barrel in the near mid-term level of 18 months,’’ he said.

Shipping industry

Maersk Line, the world’s largest container shipping firm, sees no significant impact on its operational cost due to the weak oil price.

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Managing director for Malaysia and Singapore cluster Omar Shamsie said while the price of oil had dipped slightly, bunker fuel increased more than 70% last year and has experienced a ten-fold increase over the last decade.

“Bunker costs now constitutes nearly half of a vessel’s total operating costs. It was only 20% ten years ago.

“We aim to run our business even more efficiently to lessen the impact,” he said.

He said Maersk Line would continue to employ more fuel-efficient solutions in its operations such as slow steaming journeys and improved vessel designs.

“Other solutions range from waste heat recovery systems on board vessels to a new software solution, QUEST, in Maersk Line’s refrigerated containers that can cut energy consumption (used for cooling) by up to 50%.

“In addition, Maersk Line recently introduced a new formula, the bunker adjustment factor (BAF). Our aim with the new formula is to provide a simple, fair and transparent BAF for our customers.

“BAF also allows us to share and recover the extraordinary costs caused by increasing bunker prices,” he said.

On freight rates, Omar said, in the Asia-Europe trade, the spot freight rate had decreased by as much as 50% in the last 12 months.

“Maersk Line’s strategy is to keep its position in the Asia-Europe trade by matching the market levels.

“Besides, we will continue to take the necessary measures to adjust the capacity according to the drop in demand,” he said.

Wilhelmsen Ships Service Malaysia, a renowned shipping agency, sees the current economic downturn having an adverse effect on business.

Managing director Winston Loo said shipping had always been a vital supporting service in the world’s trade growth.

“With 95% of the world goods being transported via the oceans, the shipping industry will always be one of the first to get hit in an economic downturn.

“Quite a large number of carriers have either suspended some of their services or re-jigged their services to minimize the negative impact on their bottomline due to the slowing demand for vessel space.

“It was reported that in the first seven months of this year, Asia-Europe westbound cargo volume only increased by 6% compared with 20% in the same period last year,” he said.

Loo said the flood of newbuildings of vessels would also compound the situation.

“Between now and the end of 2010, there will be 81 newbuildings of more than 10,000 TEUs (twenty-foot equivalent units) vessels to be delivered.

“Vessels of this size can only go to the Asia-Europe trade, which means the current fleet within this trade, with capacity ranging from 5,000 TEUs to 7,000 TEUs, will be displaced to the smaller trades.

“In a time of global economic slowdown, there is just not enough cargo to fill up all these ships,” he said.

Thus, Loo said, freight rates would be under more pressure.

Aviation industry

Malaysia Airlines Cargo Sdn Bhd (MASkargo) managing director Shahari Sulaiman said the reduction in the price of crude oil had brought down the price of jet fuel.

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"But the cost of jet fuel is still US$25 to US$35 higher than the crude oil price,” he said.

He said the recent reduction in jet fuel price had certainly reduced MASkargo’s operating costs.

“MASkargo has recently revised downwards its fuel surcharges based on the formula posted on our website. The cost of jet fuel for our freighters can be as high as 65% of the operating cost.

“With the drop in the price of jet fuel, we hope that fuel cost in relation to total operating cost can be brought down to 55%,” he said, adding that the current jet fuel price was still considered expensive.

On the challenges facing the industry, Shahari admitted it was the world economic downturn.

“Air freight is dependent on a robust global economy that increases trade and we anticipate that the next 12 months will be very tough for the players in the industry.

“If this is true, the current overcapacity situation will also get worse and put more pressure on the already declining yields,” he said.

In such challenging times, Shahari said, MASkargo had to ensure it had a high standard of service while keeping mishandling, pilferage and other discrepancies to a minimum.

“Our mishandling rate has seen some encouraging improvements recently. The rate has dropped to 0.06% compared with 0.12 % last year,” he said.

Going forward, Shahari predicted it would be even more challenging next year.

“Steps to counteract will include deciding on the right size of capacity to operate more effectively.

“Taking the first half of this year as an example, although we reduced our capacity by 5%, we recorded much higher revenue due to greater yields and load factors.

“This was possible due to the implementation of our revenue management system, revised selling strategies, improve processes and teamwork within the organisation,” he said.

Carriage of Goods by Sea

For a country with a significant sea-faring tradition and a substantial number of merchant fleets, Malaysia's maritime laws can appear to be anachronistic. The Malaysian Carriage of Goods by Sea Act ("MCOGSA") and Merchant Shipping Ordinance have hardly been reviewed since their respective enactments many decades ago. Moreover, by virtue of the Malaysian Civil Law Act, the English Bill of Lading Act (which dates back to the 19th century!) applies to Malaysia even though the United Kingdom has abandoned that statute in 1992.
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Some pertinent issues involving international trade and, specifically, carriage of goods by sea, include:-

Bills of Lading ("B/L")

B/Ls are issued by the carrier/shipowner. They are usually signed by ship’s master.

B/Ls have 3 principal characteristics. First, it is evidence of receipt of goods by carrier.Second, it is a contract of carriage: s.4 MCOGSA. Third, it is prima facie document of title to goods (this is a defeasible title only because the buyer still has the right to reject goods under the Malaysian Sale of Goods Act ("SOGA").

A “Clean” B/L means goods received in perfect condition. A “Claused” B/L means goods may have defects as specified.

Bills of Lading Act (UK)

Repealed in UK (by the Carriage of Goods Act 1992 ("UKCOGSA") but still valid for Peninsular Malaysia under s.5(1) Civil Law Act. The Bill of Lading Act may not be applicable to the states of Sabah and Sarawak due to the operation of s.5(2) Civil Law Act.

The Bill of Lading Act is disadvantageous to the position of the buyer for the following reasons. First, the buyer has no privity of contract with carrier. Second, the buyer only assumes risk to goods. This enables the buyer can insure the goods but the buyer has no contractual standing to sue carrier. There is no privity of contract since the privity is between the vendor and the carrier. Third, the buyer can only sue after receiving the B/L. This is disdvantageous in FOB delivery situation.

If the transport document is not a B/L e.g. a document called a Mate’s Receipt, the buyer cannot rely on the Bill of Lading Act for protection.
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Comparison between the Hague, Hague-Visby & Hamburg Rules

Before 1924, the Common Law regime imposed ABSOLUTE liability for carriers, making carriers liable for the vessels' seaworthiness throughout the voyage. Unfortunately, during the deliberations to establish the Hague Rules, the merchant marine used their superior bargaining power to lobby for provisions that enabled carriers to contract out of common law liability. This was a set-back for international trade. This weakness was reflected in the Hague Rules (1924).

The Hague Rules were modified by amendments that became known as the Hague-Visby Rules which increased carrier's liability.

The most recent revamp was the Hamburg Rules that increased carriers' liabilities even further.

Readers should note that MCOGSA adopts Hague Rules while the UKCOGSA adopts Hague-Visby Rules. Countries like Singapore and Australia has adopted Hamburg Rules.

Contracting out of liability of carriers – Hague (may be possible to contract out), Hague-Visby & Hamburg does not allow. Hollandia Denning LJ said carriers cannot contract out of liability under H-V Rules.

• Duration of liability – Hague & Hague-Visby (only at time of commencement of voyage), Hamburg (throughout voyage – returns to common law position).
• Liability for deviation from route – Hague & Hague-Visby (no liability), Hamburg (liability).
• Liability of cargo-owner to inform about dangerous goods – Hague & Hague-Visby (no liability), Hamburg (cargo-owner liable for non-disclosure).
• Limitation period – Hague (1 year), Hague-Visby (1 year but can be extended by mutual agreement – must be clear, Hamburg (2 years).
• Liability of cargo-owner for freight & demurrage – Hague & Hague-Visby (cargo-owner liable even if B/L silent on this), Hamburg (cargo-owner not liable if B/L silent).
• Application to documents other than Bills of Lading – Hague (does not apply to non-bills of lading), Hague-Visby (can apply to any non-negotiable receipt but document must expressly say that H-V Rules apply), Hamburg (applies to any transport document for carriage of goods by sea).
• Particulars of goods in B/L – Hague (minimum requirements), Hague-Visby (more details than Hague), Hamburg (most number of particulars).
  

Observations

Malaysia’s reliance on the Hague Rules may be because it wants to protect the local merchant fleet. But if Malaysia aspires to be a modern maritime nation it must review the MCOGSA to adopt, at least, the Hague-Visby Rules. This will make Malaysian merchant fleet more attractive to foreign shippers/cargo-owners.

Since the Hamburg Rules protects the shippers/cargo-owners most countries with merchant fleet that adopt the Hamburg Rules may be the most attractive to shippers.

FREE ON BOARD (FOB)

Exporters of bulk cargo such as palm oil, oil and gas in resource-rich countries like Malaysia will typically receive purchase orders with a Free On Board (FOB) delivery term. These bulk goods are loaded onto large ships known as bulk carriers or tankers. Bulk carriers and tanker fleets flying the M'sian flag include those owned by the MISC, Tanjung Offshore, Global Carriers and Bumi Armada.

The M'sian legal framework on delivery terms for carriage of goods by sea is rather archaic. There may be valid governmental policy reasons for this laggard posture, namely, the liability risk protection of vessels flying the M'sian flag. The time may have arrived for M'sian policy makers to start examining and balancing the need to protect M'sian-registered vessels against the goal of making M'sian maritime companies more competitive in the international arena.

Furthermore, there are significant risk issues involving the relative liabilities of the shipping carriers, the insurer, the exporters and the overseas importer. Many companies tend to leave these matters in the hands of the lower management, supervisory and clerical staff when quarterly revews are probably necessary. These are tactical management issues to be considered.

This issue is a large one and, I am narrowing the discourse into a series of blog entries. This entry focuses on the FOB delivery term.

FOB: Delivery term

FOB is a standardized goods delivery term commonly used in international trade. The International Chamber of Commerce has standardized the definition of FOB through Incoterms.

The salient features of FOB sales under Incoterms 2000 are that, firstly, the seller merely delivers the goods to the ship. Secondly, the buyer is obliged to nominate the ship, if buyer fails to do so can nominate substitute ship within a reasonable time. And, thirdly, the risk for loss of or damage to goods passes from seller to buyer when goods cross ship’s rail (The Pyrene) or when loaded on board ship which deems delivery of goods by seller to carrier to be good delivery to buyer. Generally, neither party is obliged to arrange insurance.

In deciding on the case of Kwei Tek Chao, Devlin J. noted that an unusual feature of Cost, Insurance and Freight (CIF) sales is that there are 2 parallel “transactions”. First, there is a physical delivery of goods where the goods must either conform to sample or description failing which buyer has right to reject goods after examination. Second, it involves the delivery of shipping documents where the documents must conform strictly to the description in the letter of credit failing which the buyer has the right to reject the documents for non-conformity.

In the case of Ganda Edible Oil the M’sian Federal Court noted that in FOB sales that involve documentary credit payments, these 2 rights of rejection are also available to the FOB buyer.

Delivery of goods
Physical delivery of goods by seller to the ship completes the seller’s obligations with respect to physical goods. Consistent with Devlin J.’s finding in The Pyrene and Incoterms on the FOB seller’s delivery obligations – delivery is completed when goods cross the ship’s rail and loaded on board the ship.
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Bills of lading (B/L)
In addition to delivery terms such as FOB, the contract for the carriage of goods is important. This carriage contract is evidenced by issuance of the B/L. The B/L has 3 characteristics as explained by Mustill LJ in The Delfini namely, the acknowledgement of receipt of goods by carrier, a document of title and, a contract of carriage of goods.

Under M’sian law B/Ls are governed by the English Bills of Lading Act 1855 (UKBLA) but the UK has moved since 1992 to a completely revamped Carriage of Goods by Sea Act to govern B/Ls and other carriage of goods contracts.

The UKBLA suffers from several disadvantages. Firstly, it recognizes only the B/L as the only form of carriage contract. Other carriage documents, for example, a mate’s receipt, are not protected by the UKBLA and, therefore, the endorsee can’t sue carrier.

Secondly, it links the right to property with right to sue, where right to property is transferred using different mechanism than B/L the endorsee may lose right to sue carrier. This is one of the judicial propositions from The Delfini.

Thirdly, it does not recognize the rights of part owners of unascertained bulk goods without benefit of transfer of property can’t sue carrier: eg Re Wait, Re London Wines. In such a case the “ascertainment by exhaustion” formula applied by Mustill J. in The Elafi is not available.

Delivery of documents
In FOB sales where documentary credit is used, as noted in Ganda Edible Oil, the right of the seller to demand payment arises when the shipping documents are delivered, even when goods are still at sea and, even when the goods have been lost at sea: Manbre Saccharine. The rationale may be that the buyer has recourse to insurance. But there must be actual delivery of goods on board a ship. If there were never any physical goods, seller has no right to claim payment: Hindley & Co v East India Produce.

Passing of risk
Although statutes on the sale of goods presumes that risk passes with property, which applies to “simple FOB” sales, for example FOB Incoterms that doesn’t involve documentary credit, under the “strict/classic FOB” and “FOB with additional services” the risk and property may pass at different times. However, in all FOB sales, risk passes when the goods cross the ship’s rail on The Pyrene principle. This gives the FOB buyer recourse to insurance for damage to or, loss of goods provided the FOB buyer takes up insurance coverage.

Passing of property
Legal scholars like Atiyah have noted that modern FOB sales are very similar to CIF sales in that documentary credit is widely used which requires the seller to retain title to goods. Thus retention of title by the FOB seller, as noted by Atiyah, is a function of securing payment by the buyer.

The general rule is that property passes in FOB sales when shipping documents are delivered and paid for by the buyer: The Aliakmon. Part payment is not good enough to transfer property in goods: Mitsui & Co v Flota Mercante. But since the seller arranges the carriage of goods, the B/L is issued in seller’s name, the seller has to indorse the B/L in favour of the buyer. This assumes that the goods are ascertainable.

First, where goods are unascertained, there must be an unconditional appropriation of the goods to enable property to pass from the seller to the buyer. Such issues often arise when the seller gets into financial or insolvency problems. One example is Carlos Federspiel where bicycles assembled and marked with buyer’s identification but remained at seller’s premises, the property couldn’t pass because FOB sales require goods to be delivered to ship. The appropriation was still conditional in that the seller could still change his mind. In contrast, in Hendy Lennox, the assembly of generators at seller’s premises in a Ex-Works sale with markings in favour of buyer was regarded as unconditional appropriation because all that was left was for buyer to arrange to collect the goods.

Second, the problem is made worse in bulk goods sales with several sub-buyers such as Re Wait and Re London Wines where part ownership of bulk goods are unappropriated & unascertained. Even if ascertained by the statutory sale of goods formulas, the sub-buyers can’t exercise independent rights of suit or obtain greater property rights. In UK the law reform in 1995 created a statutory formula to enable part owners of bulk goods to be given the statutory rights of “owners in common” of bulk goods. The legal anomaly still applies to M’sia.

Third, in international trade, sale of goods statutes operate to reserve title to property with seller. This was shown in the M’sian judicial decision in Shanti Kant where B/Ls made “to order” of timber logs could not pass to Indian buyer with a dubious claim. This allows the seller to ensure that payment is received before property in the goods is passed.

Fourth, in The Delfini, the buyer and seller had contractually agreed that property in the goods would pass upon delivery to the ship & that indemnities provided by the buyer would allow delivery of the goods. This is a situation similar to a “simple FOB” sale. Thus a sub-buyer on CIF terms could not claim against the carrier because it had no privity of contract in relation to the carrier. The B/L issued by the carrier was regarded by the English court of appeal, including Mustill LJ, as being a mere receipt for the goods. Since the goods had been delivered, the B/L could not be regarded as a document of title. In any case, property had passed to the buyer who could pass title to the sub-buyer independent of the B/L.

The Delfini was one of the cases that led to the repeal of the UKBLA in favour of the Carriage of Goods by Sea Act in 1992 that corrected the injustice in cases like The Delfini. M’sia remains under the UKBLA regime with all its defects.

Law reform proposition
There is a need for M’sia to consider adopting the statutory formula in the UK Sale of Goods Act and substitute UKBLA and Malaysian Carriage of Goods by Sea Act (which adopted The Hague Rules) with statutes for carriage of goods governing transport documents similar to the UK Carriage of Goods by Sea Act (which adopted The Hague-Visby Rules).

COST, INSURANCE & FREIGHT (CIF)

This is a term used in the international sale of goods. CIF only specifies delivery terms and sets out the obligations of the seller and buyer respectively. CIF is, thus, only a part of the sale contract that pertains to delivery terms.

The norm is for the buyer and seller to rely on the International Commercial Terms also known as Incoterms prepared by the International Chamber of Commerce, ICC. Incoterms reflect current trade custom and practice and, it applies only to seaborne transportation of goods.

The CIF seller must arrange and bear cost of carriage of goods, marine insurance, customs clearance. All these costs will form part of cost of goods to the buyer.
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Delivery of goods and delivery of title via shipping documents
CIF terms deal with the delivery of goods. But it also deals with the delivery of shipping documents. This was confirmed by the case authority of Kwei Tek Chao by the judge, Lord Devlin.

This is a good and practical mercantile law because it enables the buyer to re-sell goods upon receiving documents even before the physical goods arrive. And, the buyer can use shipping documents as security for banks to issue trade finance facilities such as the Letter of Credit to pay for the goods.

In the CIF-type situation, the buyer has 2 rights of rejection. First, the buyer can reject goods . Second, the buyer can reject documents.

Note that the right of rejection must be based on material non-conformity. If the non-conformity is too insignificant, the de minimis rule applies.

Most countries have laws that gives the buyer right to examine goods for conformity with description, or sample.

Note also that most countries have laws that imply a condition on quality, fitness and merchantability.

Shipping documents
Shipping documents referred to in the CIF clause includes the Bill of Lading, marine insurance certificate and invoice.
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The Bill of Lading has 3 important characteristics. First, it is a document of title – but title is defeasible until payment is received for the goods.

Second, the Bill of Lading is regarded as evidence of receipt of the goods by carrier. In most cases, the Letter of Credit will be paid based on the condition that the Bill of Lading must be clean which means that the goods were received in good condition by the carrier.

Third, the Bill of Lading is the contract of carriage. Since the Bill of Lading is issued to the seller, the issue tends to be whether buyer has privity of contract to sue carrier if goods damaged.

Passing of Risk
Both buyers and sellers should note that risk passes to the buyer when the goods cross the ship’s rail. This was decided in the case of The Pyrene by Lord Devlin.

Receipt of shipping documents by the buyer gives the buyer a defeasible right to property until payment made. Deafisible means a qualified right of ownership that is subject to the payment being fully made for the goods bought. But defeasible title is enough for buyer to secure trade finace facilities using the shipping documents with a bank for the Letter of Credit.

Sale of goods laws in most countries state that where goods shipped using Bills of Lading, the seller is deemed to reserve right of disposal and the title does not pass to the buyer until full payment is received by the seller.

Under the CIF arrangement, risk passes from the buyer to the seller only when title in the goods have passed. And, as explained above, under CIF arrangements final title or ownership passes only when the seller receives full payment.

GPS devices to combat container trailer theft

Malaysian container hauliers are having a torrid time with the theft of container trailers. Each container trailer has an average replacement cost of 30,000 Ringgit (USD9,000). This phenomenon is, of course, not unique to Malaysia.

The team at Logistics Malaysia has worked with affiliates to customise GPS technology to combat container trailer theft. GPS devices are now capable of being installed in container trailers to enable real-time tracking.

GPS-installed trailers that stray into unathorised locations in the vicinity of scrap yards or known chop shops are monitored by the Logistics Malaysia affiliated-GPS tracking centre. An ALERT will then be promptly sent to haulier clients for immediate action.

Logistics Malaysia has also enabled geo-fencing parameters to the GPS tracking centre to track errant container trailers that travel beyond authorised geographic areas. These unauthorised breaches are communicated to container haulier clients as ALERTS within minutes of any breach. These features are expected to reduce the incidence of trailer thefts which have proven to be costly to hauliers' bottom-lines.

These GPS devices have batteries that are designed to last for time-periods specified by haulier clients.

Interested parties can contact the principals at Logistics Malaysia. Contact particulars of our Principals, CT Choo and Ben Choo are at the right-side of this blog page.

IMO: A force for shipping regulation and sustainable development

AFTER 60 years in the service of shipping, the International Maritime Organisation (IMO), the organization responsible for the regulation and sustainable development of the shippng industry, is still going strong.

The most encouraging development of recent years is the industry’s growing awareness of how shipping affects the environment and the initiatives that have been put in place in limiting operations that negatively impacts it.

IMO secretary-general Efthimios E Mitropoulos said the awareness was illustrated by the wide acceptance of IMO’s environmental standards and the initiatives that the industry itself has put in place to prevent its operations having a negative impact on the environment.

“The environmental consciousness also stems from the organisation’s eagerness to challenge and reverse shipping’s unwarranted negative image.

“This is done through a variety of media, enhancing its environmental credentials, highlighting its ever-improving record and contribution to the sustainable development of the industry,” he said in his message in conjunction with the 31st celebration of World Maritime Day recently.

Mitropoulus said the shipping industry concern for the environment was demonstrated by its determination to limit and control ships’ exhaust emissions and the reduction of other greenhouse gas emissions.

“This will lower the impact on the atmosphere and contribute to worldwide efforts to address the phenomena of climate change and global warming,” he said, adding that the organization’s standards shaped the industry today.

“Indeed, the comprehensive body of IMO conventions (50 in total), supported by literally hundreds of codes, guidelines and recommendations, govern just about every facet of the industry from the design, construction, equipment and operation of ships to the training of seafarers, or from the drawing board to the scrapyard,” Mitropoulos pointed out.

Many of the main IMO treaties, for example, SOLAS (safety of life at sea), the tonnage and load lines conventions, collision regulations, the STCW (standards of training, certification and watchkeeping for seafarers) convention and annexes I and II of MARPOL (marine pollution) have been ratified by states that are, collectively, responsible for more than 98% of the world’s merchant marine fleets.

He said this was because of the extensive network of global regulations that IMO had developed and adopted over the years.

“Now, we can say with confidence that, today, shipping is a safe and secure mode of transport; clean; environmentally-friendly; and very energy-efficient,” Mitropoulos added.

Among the milestones of the organization this year, March 6 is the 60th anniversary of the adoption of the IMO convention by a conference in Geneva while March 17 was the 50th anniversary of the convention coming into force.

This June also saw the convening of the 100th session of the IMO Council, which is the executive organ responsible for work between sessions of the organization.

Mitropoulos said the strength of the IMO’s measures were derived from a number of factors such as in-depth research by maritime experts and meetings between these experts and IMO members.

“The process also benefits hugely from the contribution of specialist non-governmental organisations and inter-governmental organisations,” he said.

Source: Star Online

Piracy: Angry AK-47-totting pirates

There were tears and laughter when crew members of MISC’s tankers were reunited with their family members yesterday. (Top) Imran Hamid embracing his mother, Rosnah Abu Bakar, outside her home in Rawang. (Below) Salwadi Mamat greeting his father, Mamat Osman, at the Ismail Petra Airport in Pengkalan Chepa. — Pictures by Mohd Radzi Bujang and Fathil Asri

KUALA LUMPUR: A friendly wave is normally reciprocated in kind, but when two crewmen of Bunga Melati Dua waved at what they thought was a harmless fishing trawler, they were greeted with a hail of bullets instead.

Relating the events which led to the hijacking of the MISC tanker on Aug 19, second officer Nuzaihan Abdul Rani said the two crewmen were jogging at the aft section of the tanker when they spotted the trawler.

"The crew members waved at the trawler and were shocked when bullets started flying in their direction. They quickly made their way to the accommodation room and informed the duty officer," he said at a press conference in Wisma Dayabumi.

"As rehearsed in drills, the crew immediately began gathering on the bridge and the accommodation doors were also secured. Many of the younger, inexperienced crew members were trembling with fear."

Despite the captain's best efforts at defensive manoeuvring, the pirates' three trawlers comfortably matched Bunga Melati Dua knot for knot and eventually pulled up alongside it.
The pirates used light ladders with hooks to board the tanker and before long, several heavily armed pirates were onboard. They went to the bridge where the doors had been locked.

"They gestured angrily at us through the glass and used the rifle butts of their AK-47s to emphasise their point. As the glass was not bulletproof, we allowed them onto the bridge," Nuzaihan said.

"Their first command was to order us to bring the tanker to a complete stop. Although we did that, the ship's momentum meant we were still moving, so they fired two shots."

Tragically, one of the shots hit a Filipino crewman in the head.

The pirates directed several crew members to give their injured colleague medical attention but he died 90 minutes later. His body was taken to the tanker's cooler room.

Nuzaihan said it was evident that the pirates did not mean to hurt anyone as they asked the crew to save the man.

Asked if he ever gave up hope during his days in captivity, he said: "I prayed daily and accepted death as fate. But throughout the whole ordeal, I never gave up."

On board Bunga Melati Lima, which was hijacked on Aug 29, Captain Maheswaran Muniandy was gripped by fear every time a gun was pointed at his head.

This was a tactic to force him to relay the pirates' demands to the negotiating team.

"They wanted to scare me into calling the office and relaying their threats. For instance, at one time they said they were going to beach the vessel as they wanted a quick decision on the ransom."

Maheswaran said as days passed, the crew came to the conclusion that the pirates were not going to kill anyone. Overall, the crew was treated well.

"Their treatment was not consistent, though. But there was no physical contact because we surrendered. We had to. They were armed with AK-47s and pistols.

"We were not trained to handle arms but we were prepared for a situation like this. It also helped that we had a drill before entering the hostile waters," he said.

The first group of six pirates who boarded the vessel instructed him via sign language to head towards Somalia.

Bosun Yusof Hamid said he was prepared for any eventuality.

"We did everything we were supposed to do. We raised the alarm but the younger crew members were visibly shaken. The pirates acceded to the crew's request to be allowed to pray and break fast.

"We ate sparingly and rationed our supplies as we did not know how long we would be in captivity."

Malaysia Freight Transport Report Q3 2008

A ruling by the International Court of Justice (ICJ) in May on Malaysia and Singapore’s long-running territorial dispute over small islands in the Straits of Singapore/South China Sea – an area of great strategic importance to world shipping - clarified some issues but left others still to be decided. The ICJ ruled that Singapore had sovereignty over the islet of Pula Batu Puteh (known in Singapore as Pedra Branca), while on the other hand recognising Malaysia’s sovereignty over the smaller Middle Rocks.

Singapore operates a lighthouse on Pula Batu Puteh that provides a key navigations aid to ships approaching the island-state’s main port, the world’s busiest container facility. But the ICJ left ownership of a third rocky outcrop, known as South Ledge, open for negotiation, depending on ownership of territorial waters around it. Malaysia has since claimed sovereignty over this group of rocks, which is only visible at low tide. It is calculated that around 40% of world trade passes through the Straits. The islets are separated by only 600 metres of water. Abdul Ghafur Hamid at Malaysia’s International Islamic University told Reuters that ‘the crucial thing is the two countries should delimit their territorial waters.

Otherwise there will be so many problems and confusion’. BMI’s newly released Malaysia Freight Transport Report predicts that in terms of freight carried, shipping traffic will grow by an average 7.6% per year in 2008-2012. The total number of containers handled at Malaysia’s ports will grow more strongly by 10.9% per year. The continuing export drive and the dynamism of China and other regional trading partners will underpin strong demand. We now expect total freight carried, measured in million tonnes-km (mntkm), to grow by an annual average of 7.2% over the 2008-2012 period. Total road freight turnover is expected to grow at an average annual rate of 6.6% in 2008-2012. The cross-Malaysia railway link project is being revived, but will not become operational until after 2011.

We expect rail freight traffic to perform reasonably well, with annual growth averaging 6.6%. Air freight will grow by a strong 7.8% per annum, with pipeline throughput not far behind at 6.9%. Malaysia scores moderately on our overall freight rating at 48.3 out of a theoretical maximum of 100, having slipped since our last report because of a fall in its country risk rating. It is nevertheless at the top end of the spectrum in terms of expected freight transport growth and scores well as far as long-term economic risk, transport infrastructure growth and the regulatory and competitive environments are concerned. For the 2008-2012 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole by a small margin. It will achieve average annual growth of 5.6%, versus 5.5% for overall GDP. The total value of the transport and communications sector will rise to US$20.7bn in nominal terms by 2012, representing 7.4% of Malaysia’s GDP.

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