2021 Maritime EconomicsGrade 12 Step Ahead Learner Document Finale

CURRICULUM GRADE 10 -12 DIRECTORATE NCS (CAPS) LEARNER SUPPORT DOCUMENT GRADE 12 MARITIME ECONOMICS STEP AHEAD PROGRAMME 2021 Page 1 of 35

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https://ultradeep.co.za PREFACE This support document serves to assist Maritime Economics learners on how to deal with curriculum gaps and learning losses as a result of the impact of COVID-19 in 2020. It also captures the challenging topics in the Grade 11 and 12 work. Activities should serve as a guide on how various topics are assessed at different cognitive levels and preparing learners for informal and formal tasks. It will cover the following topics: 1. MARINE PROPULSION 2. INTERNATIONAL EMPLOYMENT OF SEAFARERS 3. DATA ANALYSIS & INTERPRETATION 4. SHIP REGISTRATION 5. INCOTERMS 6. SHIP CHARTERING 7. MARINE INSURANCE, GENERAL AVERAGE 8. PRINCIPLES OF FAIR TRADE Acknowledgements All notes and activities contained in this document were sourced from www. maritimesa.org, Grade 12 Maritime Economics study guide and textbook. Page 2 of 35 https://tvetpapers.co.za

https://ultradeep.co.za TOPIC 1- MARINE PROPULSION SYSTEMS NOTES: Types of marine propulsion There are three types of propulsion system that we study which exist as a result of the evolution of marine propulsion systems throughout the passage of time. 1. Sail wind-powered propulsion Before the existence of steam or motor engines vessels merchant vessels used sail ships that depended on winds and currents for propulsion. Wind-powered propulsion Advantages Disadvantages It was a clean form of energy; wind power does It is unreliable as the availability, speed and not have negative environmental effects direction of winds is not in the control of sailors It was the cheapest form of energy because wind Wind dependent sail ships were slow resulting in is a natural renewable form of energy longer voyages Sail ships could be easily over-powered and driven ashore by heavy seas and winds Sails required a lot of man-power to control the ship Sails took up a lot of space aboard the ship that could have been used for cargo Voyages of sail ships were not direct Coal-fired steam propulsioni Coal-fired steam propulsion was introduced as an improvement from wind-powered sail ships. Advantages Disadvantages Steam ships were faster than sail ships It is unclean form of energy; it produces a lot of carbon dioxide which pollutes the air Page 3 of 35 https://tvetpapers.co.za

https://ultradeep.co.za Their routes were more direct Coal-fired engines make the ship prone to fire hazards They were more reliable as they were not Bunker storage took up space that could have dependent on winds and currents been used for commercial space on ships Any suitable fuel can be used to make steam Steam ships had to bunker frequently It requires stokers and trimmers More man-power is required More of energy is required to make steam Diesel-engine powered propulsion  Most modern merchant vessels are diesel-powered vessels. This type of propulsion is an improvement from wind-powered propulsion and steam propulsion. Advantages Disadvantages Less frequent bunkering required resulting in a Expensive to buy, maintain and manufacture greater range Uses cleaner form of energy Adjustments for stricter environmental output required by new legislation Less space for bunkers Faster and more powerful Less man-power needed as a result of automation Recent developments in marine propulsion Due to growing need in the ship industry for ships to be eco-friendly while improving their efficiency, there have been key developments which are: Hull design  Ship builders have developed hulls that are more hydrodynamic  Marine paints used on the hull are more eco-friendly Fuel engineering  Fuel engineers are engineering fuels that have a low sulphur content to reduce greenhouse gas emission Page 4 of 35 https://tvetpapers.co.za

https://ultradeep.co.za  Fuel manufacturers are looking into using Liquefied Natural Gas (LNG) or Bio-diesel cause they are more eco-friendly and cheaper  Propellers are design to have a larger diameter and less blades which gives the ship more thrust through the water and less resistance  Installation of scrubber technology in ships helps in reducing sulphur and carbon emissions ACTIVITY 1 1.1 define the following terms: 1.1.1 propulsion system (2) 1.1.2 azipods (2) 1.1.3 thrusters (2) 1.1.4 multi-directional propulsion (2) 1.1.5 marine propulsion (2) ACTIVITY 2 2.1 Name TWO types of propulsion system (4) 2.2 Give THREE disadvantages each for 2.1 above (6) ACTIVITY 3 3.1 Discuss the effect on shipping operations of the change from sailing ships to steam propulsion and from steam- powered ships to motor-ships. (12) 3.2 Some modern ships have been fitted with sails which can be used in addition to their engines. Why have these been introduced and what is the basic purpose behind the invention? (4) 3.3 Give two measures that have been taken by ship’s engine manufacturers & Fuel companies in recent years to make ships more environmentally friendly. (4) 3.4 Give two ways (other than matters relating to ship’s engine & fuel) in which shipowners are making their vessels more efficient in terms of their operation. (4) 3.5 What type of fuel is usually used in the main engine of a large tanker? (2) 3.6 What type of engine does a large, Modern containership have? (2) Page 5 of 35 https://tvetpapers.co.za

https://ultradeep.co.za Notes Concept Explanation Propulsion is to push forward or drive an object forward Dynamic positioning Is a system used to ensure the accuracy of the positioning of a ship during system operations? It is used specifically in the offshore oil industry and during surveys. Azipods is a marine propulsion unit consisting of a fixed pitch propeller mounted on a steerable gondola which contains the electric motor driving propeller Multi-directional propulsion is a system that allows a vessel to move in any direction Scrubbers are systems of diverse air pollution control device that is used to remove particulates or gases from exhaust streams Thrusters are propeller system fitted on the bow and stern part on the ship which are assisting in the manoeuvrability of the ship Propulsion system is a source of mechanical power Marine Propulsion Is a mechanism or system used to generate thrust to move a ship or boat across water. ACTIVITY 4 4.1 Coal burning steamships were replaced by ships that either had oil- fired boilers that produced steam that turned a turbine, or by ships that were powered by internal combustion engines using heavy fuel oil. How did this change in propulsion affect the design and operation of ship? (8) 4.2 Later developments surroundings ships’ engines have led to several improvements relating to environmental issues. Give THREE measures that have been taken by ships’ engine manufacturers and fuel companies in recent years to make ships more environmentally friendly (6) Page 6 of 35 https://tvetpapers.co.za

https://ultradeep.co.za 4.3 until the 1930s, Port X used to be an important coal bunkering place for ships trading between Port A and Port B. 4.3.1 Explain why ships seldom call at Port X now that no ocean-going ships use coal as fuel. (6) 4.3.2 How will this change have affected the economy of Port X (6) 4.3.4 Some shipowners are investigating alternative means of propulsion for their ships. 4.3.4.1 List TWO means of propulsion that are of interest to some shipowners. (4) 4.3.4.2 Give TWO reasons why some shipowners are investigating other means of propulsion for their ships. (4) 4.3.4.3 Besides alternatives means of propulsion, give TWO ways in which shipowners are trying to make their ships more “environmentally friendly”. (4) ACTIVITY 5 5.1 Briefly describe six disadvantages of using sails as main type of propulsion. (6) 5.2 Port X used to be major coal bunker port for many ships long time ago. In the past years there haven’t been much ships calling Port X for coal bunkering 5.2.1 What type of engine did the ships calling at Port X for coal bunker have? (2) 5.2.2 Why has there been a decrease in the number of ships calling at Port X for coal bunkers (2) 5.2.3 Mention two disadvantages of using coal as ship bunkers. (4) 5.2.4 At 08:00 05/Nov, a Steamer started taking on 400 tons of coal as bunkers at Port X. She was bunkered at a rate of 35 tons per hour. When did she finish taking on bunkers? (6) TOPIC 2 – INTERNATIONAL EMPLOYMENT OF SEAFARERS NOTES: Concept Explanation Seafarer is a person who have been employed by a ship-owner to perform ship services on board a ship at sea. Convention is a written agreement with several parts which governed by International Maritime Organization (IMO) Cabotage the transport of goods or passengers between two ports within the same country. STCW 95-2010 is the International Convention on Standards of Training, Certification and Watch keeping for Seafarers Page 7 of 35 https://tvetpapers.co.za

https://ultradeep.co.za Countries that are major suppliers of seafarers  The Philippines  Croatia  Ukraine  Russia  India  Romania Reasons for the decline in the supply of seafarers from western/ developed countries  Some seafarers prefer the retirement benefits onshore  There are more employment opportunities onshore for developed countries  Some shipping companies chose to register their ships in developing countries where they can enjoy cheaper tax and labour, thus decreasing opportunities for seafaring careers in developed countries  Labour costs of seafarers in developed countries are high Reasons for western shipping companies employing foreign seafarers  Some foreign seafarers are not unionised  They are reliable and well trained  They speak English  They from countries white listed according to STCW  Their cost of labour is low How can the promotion of seafarers as a career benefit the country?  It can boost the country’s GDP or the economy  Increase employment/ create job opportunities  The country will gain skills How can a government promote maritime career?  Providing tax incentives to shipping companies who operate in South Africa  Providing incentives to shipping companies that provide maritime training  Remaining on STCW whitelist  Offering bursaries to study maritime  Introducing maritime as a subject to more schools  Attract more ships on the south African Shipping Register  Introducing Cabotage Page 8 of 35 https://tvetpapers.co.za

https://ultradeep.co.za  Funding maritime career expos Page 9 of 35 https://tvetpapers.co.za

https://ultradeep.co.za Activity 1 State whether the following is TRUE or FALSE- if false, provide the correct answer. 1.1 The majority of the world’s crew is sourced from the Philippines. (2) 1.2 Seafarers do not need to know how to speak or understand English to work on an international ship. (2) 1.3 Steam engines were initially fuelled by coal. (2) 1.4 The propeller was replaced by the paddlewheel on ocean going vessels once the steam engine became redundant. (2) 1.5 The Maritime Labour Convention stipulates the working conditions for seafarers working on board ships. (2) 1.6 The minimum age of a seafarer is 21. (2) 1.7 The diesel engine is more efficient than the steam engine. (2) 1.8 Solar power uses the energy from the wind for propulsion. (2) 1.9 There are many advantages for a seafarer working on board a ship that is flagged on a Flag of Convenience. (2) 1.10 The Department of Home affairs issues Certificates of Competence to South African seafarers. (2) ACTIVITY 2 Page 10 of 35 https://tvetpapers.co.za

https://ultradeep.co.za 2.1 What is meant by BIMCO? (2) 2.2. According to BIMCO, which country is a major supplier of; 2.2.1 Ratings? (2) 2.2.2 Seafarers? (2) 2.3. Which African country on Table is supplying many Officers? (2) 2.4. The former Captain of Katrina S has suggested that South Africa should introduce Cabotage system to attract more foreign ships. 2.4.1. What is Cabotage? (2) 2.4.2. Give 2 advantages such a system would have for S.A. shipping & crewing. (4) 2.5. What role does the term STCW 95 Convention play in shipping? (2) TOPIC 3 – DATA ANALYSIS & INTERPRETATION NOTES Analyse and use graphic displays of information and text from a variety of sources Ship-owners and brokers need to keep up to date with trends around the world so they can respond by ensuring that there are ships available for transport in the right place and at the right time. They need information such as: shipping trends; harvests; mining products; market demands; locations of these mentioned. Global and local events cause ripple effects on the shipping industries, if the global economy grows then the demand for shipping grows, if not it shrinks. The effects of COVID-19 is a case in point. Ship owners need to be able to predict demand and respond effectively, to do so they use a variety of information. Where information comes from The information required is presented as a series of statistics; graphs and reports found from a variety of sources mostly accessed on the Internet. The following organisations provide information to their members: Source Description Baltic Exchange An independent source of maritime market information related to the trading and settlement of physical and derivative contracts. Most of the world’s shipping organisations operate according to a code of conduct overseen by this organisation Page 11 of 35 https://tvetpapers.co.za

https://ultradeep.co.za BIMCO Baltic and International Maritime Council is the world’s largest shipping organisation. It provides a any services including the supply of information Clarkson’s Galbraith’s Intercargo useful for bulk cargo carriers International Shipping Journals Intertanko an organisation of tank owners Lloyds an insurance agency that provides analyses of global trends How to Access Information Information comes in different forms such as statistics; graphs and texts. Below are some general tips on how to look for meaning from the information: 1. Always read the heading and the text accompanying the information as this will give you some hints as to what it is about. 2. Ask yourself – What is this about; what do I notice immediately; if I look more closely what can I learn from this. 3. Then read the examination questions (these are the kind of questions you should get used to asking yourself in the world of work) 4. Look at the information again and seek answers to the questions before beginning writing. Page 12 of 35 https://tvetpapers.co.za

https://ultradeep.co.za Look at the information relating to the port of Durban taken from the Port’s Regulator Website www.portregulator’s.org and from PORT OF DURBAN https://africaports.co.za/durban/, work through the pointers given, then answer the questions that follow: ACTIVITY QUESTION 1 Following is a set of graphs showing the Dry Bulk shipping capacity that has been demolished over the mentioned period. Study the graphs and answer the questions that 1.1 What two cargoes do capsize bulkers usually carry? (2) 1.2 Mention two facts that would make ship owners choose to demolish/scrap their ships. (4) 1.3 How many ships were demolished in October 2016? (2) 1.4 Explain the term DWT. (4) 1.5 In the year 2017, how much DWT was demolished? (4) 1.6 From the given graphs, which month had the least number of demolished bulkers? (2) 1.7 What was the ship demolishing “trend” from March 2016 to July 2016? (2) Page 13 of 35 https://tvetpapers.co.za

https://ultradeep.co.za ACTIVITY 2 [16 Marks] 2.1 Study the Graph provided below, showing the cargo handled at Port Y from 2012 to 2017. Now answer the questions below the graph. 2.1 Which type of a vessel is specifically designed to transport the cargo handled on the graph? (2) 2.2 Assume that each vessel can transport up to 17 192 TEUs 2.2.1 How many vessels would be needed to move all containers handled in 2016? (4) 2.2.2 If you were to load only FEUs how many would you load on each vessel? (4) 2.2.3 Differentiate between the TEU and the FEU (two answers a piece) (4) 2.3 What is the total number of containers handled in 2014? (2) Activity 3 [30] 3.1 The table below indicates the ships calling at Port X between the years 2012 and 2017, with the estimates for the 2018 year. Each of the VLCC’s brought about 240 000 tons of crude oil to the port for refining, and the product tankers (each of about 38 000 tons deadweight) took the oil products from refinery to other ports. SHIP TYPE 2012 2013 2014 2015 2016 2017 2018 PRODUCT TANKERS 125 130 124 176 208 244 222 VLCCs 75 69 72 114 128 132 141 3.1.1 How many product tankers berthed per week in 2016? (4) 3.1.2 What is the average number of VLCCs that call at Port X per year? (Exclude the Estimated values) (4) Page 14 of 35 https://tvetpapers.co.za

https://ultradeep.co.za 3.1.3 What does the term VLCC mean? (2) 3.1.4 Judging from the figures given, when was the extensions to the refinery at the port completed (2) 3.1.5 Looking at the figures for product tankers and compare them to those for the VLCCs. From these figures, how do you know that much of the product from the oil refinery is used locally? (2) 3.1.6 Can these product tankers carry oil cargo of 37 000 tons? YES or NO (2) 3.1.7 Give a reason for your answer in question 1.1.6. (2) 3.2 The following graph illustrates the net growth of the product tanker fleet. Study the graphs and answer the questions set: 3.2.1 Does the graph show that more tankers are built than demolished, or more tankers are demolished than built? (2) 3.2.2 Give two examples of cargo this fleet can carry. (4) 3.2.3 How much deadweight is estimated to be demolished this year? (2) 3.2.4 How does ship demolition affect spot freight rate? (2) 3.2.5 What was the annual net growth rate from year 2014 to 2015? (2) Page 15 of 35 https://tvetpapers.co.za

https://ultradeep.co.za TOPIC 4 - SHIP REGISTRATION NOTES Explain and discuss issues relating to the registration of ships and the role of classification societies Ship Registrations Ships are registered in a country and are subject to the laws of that country. Thus, a ship and its crew registered in South Africa would have to abide by the maritime safety laws of South Africa. We call this registration of a ship flagging. The ship then flies the flag of the country of registration at its stern and has the name of its port of registration written on its stern. Flags of Convenience Shipping companies may choose to register their ship in a country that is not their home country. When this happens say that the ship sails under a flag of convenience (FOC). Some countries have what is known as open registries they encourage the registration of foreign ships for the revenue it brings them. They may make it easy to register a ship in that country by offering online registrations and lower registration fees. Countries with open registers include: Panama (port Panama); Liberia (Monrovia); Marshall Islands (Majuro); Singapore (Singapore) and Hong Kong (ships registered in Hong Kong (Hong Kong) ships from here fly two flags Hong Kong and Chinese. The advantages of registering under a flag of convenience  The registration costs are lower than in the owner’s country  The rules and regulations might not be as strict as the owner’s country which brings savings  Foreign crews can be used which is cheaper. Philippine and Asian crew wages are less than those of Europe.  To get business in the country the owner may need to register in that country  It may be easier and cheaper to get a loan to buy ships in a country but the banks may require that the owner register the ship there as security. The disadvantages of registering under a flag of convenience  Some believe that ship owners register the ship under a flag of convenience to exploit the crew, paying them less. Page 16 of 35 https://tvetpapers.co.za

https://ultradeep.co.za  Cheaper crew are thought to be inferior thus flying a flag of convenience may mean reputation loss Today there are stringent international maritime laws that govern shipping and crewing which outweighs the disadvantages. The International Transport Worker’s Federation (ITC) has introduced a Blue Certificate. Ships having this certificate agree to standardise working conditions for their crew thus preventing exploitation of seafarers. The Role of Classification Societies In order to get registered and to become insured a vessel or marine platform, must have a classification certificate. These are issued by Non-Governmental Organisations known as Classification Societies. Classification societies set the technical standards for ship construction, continued maintenance and seaworthiness. The classification society Approves  all vessel plans before construction  Inspects the boat yards during construction to see standards are met  Ensures that the ship is seaworthy and conducts trials to test that everything works  Conducts surveys and inspections from time to time  Checks on the ship seaworthiness after accidents Some of the main international classification societies include Lloyd’s Register and the America Bureau of Shipping. ACTIVITIES ACTIVITY 1 1.1 Define the following terms: 1.1.1 Ship registration (2) 1.1.2 Flagging (2) 1.1.3 Flag State (2) 1.1.4 Flag of Convenience (2) 1.2 State two disadvantages and three advantages of flagging out. (10) Page 17 of 35 https://tvetpapers.co.za

https://ultradeep.co.za ACTIVITY 2 Oluwa is owned by Papadopoulos Ltd from Italy, Registered in Panama, and managed by ABC Ship Management Co. in India. 2.1 Is she flagged out? YES/NO (2) 2.2 What country flag will she fly on her stern in Richards Bay? (2) 2.3 Give three reasons for a ship being flagged out. (6) NOTES Flag state control (country of registry)  Approves the plan  Ensures construction is according to the specifications  Ensures vessel meets specifications before delivery to the owner  Does surveys periodical to ensure that ship is sea worthy  Approves any modification/changes  Must declare her sea worthy before she can sail or return to service after an accident  Register the ship  Check qualifications and competence of the crew  Ensures compliance to MARPOL Flag State Control Maritime countries have the responsibility of controlling the maritime rules and regulations, they have organisations that are designated to do this. These organisations inspect the ships registered in the flag state and ensure the regulations are carried out. In South Africa it is SAMSA (South African Maritime Safety Authority) in the USA it is the U.S. Coast Guard. SAMSA’s role is to:  Participate in the development and implementation of national and international maritime safety and marine environment protection standards  Enforce technical and operational standards for all shipping in South African waters and for South African registered ships (wherever they are). This means: o they oversee the standards of all ships built or modified in South Africa o they conduct trials on new ships to check for seaworthiness and stability as well as various other things o they check that ships adhere to the environmental regulations Page 18 of 35 https://tvetpapers.co.za

https://ultradeep.co.za o they conduct various surveys to check that the ships stick to safety rules and regulations o survey ships and sign them off every 5 years o They enforce the standards of training of seafarers and recreational boaters ensuring that the standards of the examinations conform to the IMO standards o They monitor maritime training facilities to ensure that they meet with the STCW 95- 2010 international standards o They approve and moderate the examinations ensuring they conform to the STCW 95- 2010 o They coordinate and control the location and rescue of people in maritime distress situations throughout the internationally agreed South African Search and Rescue Region; o They administer South Africa's voluntary ship reporting system (SAFREP) for identifying and tracking ships at sea for safety purposes o Provide a ships' database for responding to marine emergencies investigating maritime casualties etc. ACTVITY 3 3.1 Discuss the roles of Flag State Control (10) Port state control Each and every port has got its own control over ships calling their port South African port state control is SAMSA.  To ensure the safety of life at sea  To prevent and combat pollution of the marine environment by ships  Enforcing training standards and competency of seafarers  Develop and implement national and international laws  Check the seaworthiness  Check the compliance to MARPOL  Check the certificate of the ship  Check the qualification and competence of the crew  Detain / suspend the ship  Check stowaways Page 19 of 35 https://tvetpapers.co.za

https://ultradeep.co.za ACTIVITY 4 4.1 Discuss the roles of Port State Control. (10) TOPIC 5 - INCOTERMS What are Incoterms? Incoterms were drawn up by the International Chamber of Commerce. They are internationally recognised for all foreign cargo shipments. An incoterm refers to the following  Costs: It identifies who is responsible for the expenses (shipping costs, insurance, customs duties, storage, etc.) involved in a shipment from a given point in the shipment’s journey.  Control: It identifies who owns the goods at a given point in the shipment from one place to another.  Liability: It identifies who is responsible for paying damage to goods at a given point in a shipment’s transit. ACTIVITY 1 1. Define the following terms Incoterms, shipper, consignee, consignor, buyer, seller, Inland transport, sea transport, Port of loading, Port of discharge 10 x 2 (20) Frequently used Incoterms There are 13 incoterms, but we will look at only some of the incoterms that are used more frequently. EXW Ex Works This incoterm means that the shipper pays none of the costs. The consignee has to arrange and pay for the shipment of the goods from the shipper’s premises to his own. In our example this means that the consignee (Sainsbury’s) arranges the entire shipment from the cannery at Ashton to the Sainsbury’s premises in Britain. This includes insurance, shipping costs, and land transport costs from Ashton to Cape Town container terminal and from London Gateway container terminal to Sainsbury’s warehouse. Page 20 of 35 https://tvetpapers.co.za

https://ultradeep.co.za The diagram above shows that, if a consignment is shipped using the incoterm EXW, the consignee is responsible for all costs and insurance from the door of the shipper’s premises. FAS Free alongside ship This incoterm means that the shipper pays all the costs up to the time the cargo arrives at the container terminal. The consignee has to arrange and pay for the shipment of the goods from the time the cargo passes over the ship’s gunwale until it arrives at his own premises. In our example this means that the shipper (the cannery at Ashton) arranges and pays the costs of the moving the cargo from the cannery to the container stack in the Cape Town container terminal. The consignee (Sainsbury’s) pays for the costs of insurance, shipping costs, customs duties and land transport costs from the time the cargo passes over the ship’s gunwale, until it arrives at Sainsbury’s premises in Britain. This includes the transport costs from London Gateway container terminal to Sainsbury’s warehouse. Page 21 of 35 https://tvetpapers.co.za

https://ultradeep.co.za The diagram above shows that, if a consignment is shipped using the incoterm FAS, the shipper is responsible for all costs and insurance up to the time the cargo reaches the side of the ship. The consignee is responsible for all costs and insurance from that point until his own premises. FOB Free on Board This incoterm means that the shipper pays all the costs up to the time the cargo passes over the ship’s gunwale. The consignee has to arrange and pay for the shipment of the goods from the time the cargo has passed over the ship’s gunwale until it arrives at his own premises. In our example this means that the shipper (the cannery at Ashton) arranges and pays the costs of the moving the cargo from the cannery to it being loaded aboard the ship in Cape Town. The consignee (Sainsbury’s) pays for the costs of insurance, shipping costs, customs duties and land transport costs from the time the cargo is aboard the ship, until it arrives at Sainsbury’s premises in Britain. This includes the transport costs from London Gateway container terminal to Sainsbury’s warehouse. Because the consignee is paying for the shipping leg, the consignee can dictate regarding the ship on which the cargo will be shipped. The diagram above shows that, if a consignment is shipped using the incoterm FOB, the shipper is responsible for all costs and insurance from the door of the shipper’s premises until the cargo is “over the Page 22 of 35 https://tvetpapers.co.za

https://ultradeep.co.za gunwale”, i.e it is aboard the ship. The consignee is responsible for all costs and insurance from the time the cargo is aboard the ship until it arrives at his premises. CIF Costs of Insurance and Freight This incoterm means that the shipper pays all the costs until it arrives at the consignee’s premises. In our example this means that the consignee (Sainsbury’s) pays for the costs of insurance, shipping costs, customs duties and land transport costs from the cannery at Ashton, until it arrives at Sainsbury’s premises in Britain. Because the shipper is paying for the shipping leg, the shipper can dictate regarding the ship on which the cargo will be shipped. The diagram above shows that, if a consignment is shipped using the incoterm CIF, the shipper is responsible for all costs and insurance from the door of the shipper’s premises until it arrives at the port of discharge. The consignee is responsible for the costs and insurance until the cargo arrives his premises. DDU Delivered Duty Unpaid- This incoterm means that the shipper pays all costs (except customs duties) until the cargo arrives at the premises of the consignee. In our example, the cannery at Ashton pays all costs (except customs duties) until the cargo arrives at Sainsbury’s premises. DDP Delivered Duty Paid- This incoterm means that the shipper pays all costs (including customs duties) until the cargo arrives at the premises of the consignee. In our example, the cannery at Ashton pays all costs (including customs duties) until the cargo arrives at Sainsbury’s premises. Page 23 of 35 https://tvetpapers.co.za

https://ultradeep.co.za The diagram above shows that, if a consignment is shipped using the incoterm DDP, the shipper is responsible for all costs, insurance and customs duty from the door of the shipper’s premises until the cargo arrives at his premises. Also shown is the arrangement that, if a consignment is shipped using the incoterm DDU, the shipper is responsible for all costs, and insurance (but excluding customs duty) from the door of the shipper’s premises until the cargo arrives at his premises. ACTIVITY 2 Explain the following Incoterms and state the responsibility of the consignee and consignor Ex Works, FAS, FOB, CIF, DDU, DDP 6 x 4 = (24) ACTIVITY 3 [18] A South African mining company wants to export 900 000 tons of coal to China via Richards Bay. In negotiations with the Chinese importer, the mining company agrees to instruct the shipbroker to arrange that the coal is shipped FOB. 1. Who is the shipper – the mining company or the Chinese importer? (2) 2. Who is the consignee – the mining company or the Chinese importer? (2) 3. Who will pay for the ocean leg of the transport chain – the mining company or the Chinese importer? (2) 4. Who will select the ships to move the cargo from Richards Bay to China – the mining company or the Chinese importer? (2) 5. If the shipments are made CIF, how will the shipping arrangements change in terms of payment and choice of ships? (4) 6. If the ships will carry 180 000 tons of coal, how many ships will be needed to move the cargo from Richards Bay to China? (6) Page 24 of 35 https://tvetpapers.co.za

https://ultradeep.co.za TOPIC 6 – SHIP CHATERING NOTES Concept Explanation Chartering To hire/ lease a ship Charter party The contract of hiring the ship between the charterer and the ship owner Charterer The person/ organisation that is hiring the ship Ship owner The person/ organisation that the ship is hired from Lay time The amount of time the ship is spending in port for cargo handling Lay time = Cargo handling + Delays Demurrage The amount paid by the charterer for exceeding lay time Dispatch The amount paid by the ship owner for saving lay time Cargo handling The process of loading/ discharging cargo Activity 1 Define the following terms; chartering, charter party, charterer, ship owner, lay time, demurrage, dispatch, cargo handling (8x2) [16] NOTES This section assumes that you have a knowledge of Ship Chartering as covered in the Grade 11 modules. In most voyage charter parties, loading and discharge times are stipulated (e.g., 72 hours or 38 hours, etc.). This time period is called lay time. If the cargo work takes more time than the time stipulated, demurrage is paid by the charterer to the owner at a rate that has been agreed in the charter party (e.g., $2100 per hour). If the cargo work takes less time than the time stipulated, dispatch is paid by the owner to the charterer at a rate that has been agreed in the charter party (e.g., $2000 per hour). Example A ship is loading grain. It was agreed that cargo work would take 27 hours but it has taken 36 hours. More time is spent loading than expected. Demurrage is payable on the difference in time according to the agreed rate (e.g. $2 000 per hour) 36 hours – 27 hours = 9 hours more (i.e. demurrage is payable) 9 hours x $2 000 = $18 000 (charterer pays ship owner) If the same ship managed to load the grain cargo in 22 hours, less time is spent loading than expected. Dispatch is payable on the difference in time according to the agreed rate (e.g., $2 000 per hour). Page 25 of 35 https://tvetpapers.co.za

https://ultradeep.co.za 27 hours – 22 hours = 5 hours less (i.e., dispatch is payable.) 5 hours x $2 000 = $10 000 (owner pays charterer) ACTIVITY 2 2.1 A ship is loading coal. It was agreed that cargo handling would take 30 hours but it has taken 32 hours. More time is spent loading than expected. Demurrage is payable on the difference in time according to the agreed rate (e.g., $1 500 per hour): 2.1.1 Explain the term demurrage. (2) 2.1.2 What is the agreed duration of cargo handling? (2) 2.1.3 What is the actual duration of cargo handling? (2) 2.1.4 How many hours of demurrage are payable? (6) 2.1.3 How much demurrage would be payable? (6) 2.2 If the same ship managed to load the coal cargo in 25 hours, less time is spent loading than expected. Dispatch is payable on the difference in time according to the agreed rate (e.g., $ 1500 per hour). 2.2.1 Explain the term dispatch. (2) 2.2.2 What is the agreed duration of cargo handling? (2) 2.2.3 What is the actual duration of cargo handling? (2) 2.2.4 How many hours of dispatch are payable? (6) 2.2.5 How much dispatch would be payable? (6) NOTES Some delays to loading or discharging cargo are not subject to demurrage. These include:  Rain during cargo operations when weather-sensitive cargo is involved (e.g., bagged cement; rolls of newsprint; grain; some minerals; bulk fruit, and others);  Very strong wind can sometimes disrupt cargo operations  Circumstances beyond the control of the charterer such as a shore side strike, civil unrest.  Ship’s machinery malfunctioning (e.g., crane breaking down, ship having a power blackout; hatch cover jammed; etc.) In such a case, the charterer will place the ship off hire until normal loading car resume Page 26 of 35 https://tvetpapers.co.za

https://ultradeep.co.za ACTIVITY 3 3.1 Assume that Bergenzee begins discharging at 14:00 on the day of arrival and each of the two units can discharge 1200 tons of rice per hour. 3.1.1 How many hours will it take to discharge the ship? (Be careful and round off to the next hour!) (6) 3.1.2 Breaks in discharging the cargo total 4 hours. If the master hopes to sail six hours after completing discharging, what is the ship’s ETD from Fremantle? (6]) 3.1.3. List three procedures that will need to be done in the six hours between completion of cargo and the vessel sailing. (3 x 2: 6) TOPIC 7 – MARINE INSURANCE AND GENERAL AVERAGE NOTES To replace a ship or to repair damage to a ship can cost a lot of money, even millions of dollars. Similarly, to replace damaged or lost cargo (which in some cases can be of higher value than the ship) can also be very expensive, while the consequences of a serious accident (e.g., an oil spill) can cost billions of dollars in extreme cases. A ship can be damaged or become a total loss in many ways  She can go aground  She can be involved in a collision with another ship  She can catch fire (or the cargo can catch fire)  She can collide with a jetty or a floating object such as a buoy. Page 27 of 35 https://tvetpapers.co.za

https://ultradeep.co.za  She can be damaged (or sink) as a result of a severe storm. Structural damage or cracking can result from heavy seas. A ship can be exposed to insurance claims (lawsuits) that result from other forms of difficulty. Some examples are given below  Her cargo can be damaged or the cargo can shift or even go overboard in a storm.  Because of malfunctioning of equipment on board, cargo may be damaged, e.g., the frozen fish in a c reefer container is spoilt because the power to the reefer container failed while the container was aboard, or the cable on a ship’s crane broke and cargo fell, causing damage to that cargo, other cargo or injury to people.  A crewmember may become ill or be injured on board and the sip may have to divert to land him at the nearest port.  A visitor to the ship may be injured while on board.  A ship may break down and have to be towed into port. The cost of chartering a tug to tow her can run to a large sum.  A ship may be responsible for oil pollution, such as an oil spill while bunkering, or an oil spill might cause if the ship has an accident. Cleaning up a large oil spill and other damage caused by an oil spill can cost billions of dollars! ACTIVITY 1 On her voyage from Brisbane (Australia) to Mombasa (Kenya), the bulker Sea Master (value $36 million) hits a drifting container that makes a small hole below the waterline in number one hold that becomes Page 28 of 35 https://tvetpapers.co.za

https://ultradeep.co.za flooded. She diverts to Darwin (Australia) where repairs are carried out. The value of the cargo is $100 per ton. The cargo in number one hold is declared unfit for animal consumption and is discharged at Darwin where it will be destroyed. She is ballasted accordingly before resuming her voyage to Mombasa. The entire diversion and repairs cost $1.2 million. The container was retrieved by a salvage company and investigations reveal that it had been one of 24 containers lost overboard from the containership Kookaburra during a severe storm. 1. Refer to the extract above. 1.1 What type of insurance covers? (2) 1.1.1 The damage to Sea Master? (2) 1.1.2 The cargo that was in the containers that fell overboard from Kookaburra? 1.1.3 The containers that sank after falling overboard form Kookaburra? (2) 1.2 The damage to Sea Master was caused by a floating container. Whose insurance will eventually pay for each of the following? 1.2.1 The damage to Sea Master? (2) 1.2.2 The damaged the cargo in Number 1 hold aboard Sea Master? 2. General average is declared. 2.1 Who declares general average? (Owner or Charterer or Agent) (2) ACTIVITY 3 On her voyage from Brisbane (Australia) to Mombasa (Kenya), the bulker Sea Master (value $36 million) hits a drifting container that makes a small hole below the waterline in number one hold that becomes flooded. She diverts to Darwin (Australia) where repairs are carried out. The value of the cargo is $100 per ton. The cargo in number one hold is declared unfit for animal consumption and is discharged at Darwin where it will be destroyed. She is ballasted accordingly before resuming her voyage to Mombasa. The entire diversion and repairs cost $1.2 million. The container was retrieved by a salvage company and investigations reveal that it had been one of 24 containers lost overboard from the containership Kookaburra during a severe storm. Page 29 of 35 https://tvetpapers.co.za

https://ultradeep.co.za 3.1 Calculate the portion of the costs that would need to be paid by the ship owner. (The value of the cargo is given, and note that the value of the bunkers aboard is $1.25 million. The bunkers are owned by the ship owner.) 3.1.1 Now calculate the portion that the cargo owner would have to pay towards the costs of salvage and repair in terms of General Average. We simply substitute the value of the cargo where we have the value of ship as the numerator in the calculation. (i.e., where we have the figure marked *) TOPIC 8 – PRINCIPLES OF TRADE NOTES Concept Explanation Fair Trade Trade between developed and developing countries is fair in that the developing countries get an equal chance and a fair price is paid for goods so that workers earn a living wage Human Rights A basic right that each person living has, for example the right to life and food Dumping markets Products that were meant for somewhere else are sold in a country upsetting local production Subsidy The government supplements the production costs by offering reductions on services or pays over a sum to help the manufacturers Customs and Excise Levies the Government imposes on imported goods Notes Fair Trade and Human Rights People in developing countries like those in Africa and Asia often work for low wages or as subsistence farmers farming crops that are sold cheaply so they remain poor. People from wealthy overseas countries may exploit them by buying their goods really cheaply in order to become richer. Because the people in developing countries need the money, they accept this. Fair trade is when producers in developing countries are paid a fair price for their goods by the buyers in developed countries. The key principles of fair trade include:  Trading practices are fair and not one-sided. Page 30 of 35 https://tvetpapers.co.za

 Prices paid are fair and workers to earn enough to meet their day-to-day needs. Payments are often made in advance to ensure the supplier can fulfil orders. Producers and workers have a voice in organisations that look after their rights Safe working conditions, non-discrimination and welfare of children are ensured Dumping or flooding markets with cheap products Some international companies or countries want to get rid of goods that were rejected by other countries, they then flood the market of a developing country with “cheap” products. However, this undermines the local industry and may lead to job losses. Example Up until 2014 South Africa had its own thriving chicken industry providing food for the country and many jobs. However, Brazil was unable to sell her chickens in the US and Europe due to food safety concerns so the country flooded the South African market with cheaper chickens than our local suppliers could produce. This forced many of our producers out of business and resulted in over 6 000 people losing their jobs. State Subsidies and Fair Trade Countries may subsidise certain industries. This means that they offer these industries benefits such as cheaper electricity, lower taxes or reducing customs and excise on certain goods. This makes these businesses profitable where they may not have been without this. The government does this to keep jobs and to protect industries that are seen as important. A portion of the cost of car manufacture and the customs and excise of importing car parts and exporting cars is subsidised by the S.A. Government Page 31 of 35

Source Mail and Guardian: S.A motor industry’s sweet deal 1st Feb 2019 In South Africa the motor industry is subsidised as it employs many people, and brings in revenue from exports. These motor industry subsidies have a positive impact in South Africa on shipping, as car parts are imported and cars are exported keeping harbours like Durban and Port Elizabeth busy giving work to stevedores, tug masters, ship brokers, customs officials, marine insurance surveyors and so on. Other transport sectors are stimulated too as cars are transported by road and rail to the harbours. Subsidies can prevent fair trade working against developing countries such as South Africa. In Europe farmers are heavily subsidised, this means for example that fruit produced in Spain can be sold more cheaply in the United Kingdom than South African fruit which negatively affects our fruit industry. This impacts on other sectors, for example there would be less need for reefers from South Africa to the UK so shipping too is affected. Customs and excise duties can be used to protect local industry that are seen as important to the country. An example of this is the clothing industry. There have been job losses through cheap imports from India and China so the government places high import duties on these items to encourage local production. Often the government does this to protect other linked industries. For example, import duties on clothes not only protects clothing manufacturers but textile manufacturers and designers as well. Page 32 of 35

1.3 The Effect of International Trade on Local Employment Opportunities Trade is important to the economy of a country. 1. It allows for imports of goods that we cannot produce ourselves example, we cannot run the country without oil which we import 2. It allows for imports of goods that are used in local industries, for example we import palm oil for the manufacture of soap, and cocoa for the manufacture of chocolate, these industries create jobs 3. It allows for the export of goods we have produced such as cars which creates jobs 4. It encourages the transport industry creating huge numbers of jobs in trucking, in harbours, and directly in shipping When trade declines such as during the COVID-19 pandemic then the economy shrinks and jobs are lost. Not only that but there is less tax paid which means that the Government has less money to spend on development programmes which means further job losses. Page 33 of 35

Activity 1 Match column A and B by writing only the corresponding letter. Example:1.1 K Column A Column B 1.1 Subsidy A A basic right that each person living has, for example the right to life and food 1.2 Customs and Excise B The government supplements the production costs by offering reductions on services or pays over a sum to help the manufacturers 1.3 Fair Trade C Levies the government imposes on imported goods 1.4 Human Rights D Products that were meant for somewhere else are sold in a country upsetting local production 1.5 Dumping markets E Trade between developed and developing countries is fair in that the developing countries get an equal chance and a fair price is paid for goods so that workers earn a living wage Activity 2 R10m worth of fake Nike, Lacoste items seized in Western Cape blitz Cape Town - Customs officials of the SA Revenue Service (SARS) seized suspected counterfeit goods worth more than R10 million in the Western Cape over the weekend. "SARS Customs officials intercepted suspected counterfeit clothing and shoes valued at approximately R10 722 364 in the Western Cape over the weekend," SARS said in a statement. "Customs officials decided to search a truck carrying two vessel containers, one 20ft, the other 40ft, en- route to Johannesburg from Cape Town. "After opening the 20ft container, officers discovered what seemed to be second-hand truck tyres and rims. "They then opened the 40ft container where they found heavy machinery, heavy boxes of unbranded goods, rubber sheets etc. "However, further inspections revealed boxes containing branded clothing and footwear hidden at the back of the container. "There was a total of 86 boxes containing the following brands and quantities: * 1500 pairs Lacoste Takkies * 2200 pairs Nike Takkies * 1936 Adidas T-shirts * 96 pairs John Foster shoes "The goods were confiscated and detained for further investigation," SARS said. SOURCE IOL @TheCapeArgus Page 34 of 35

2.1 Dumping of counterfeit goods affect our domestic market, it can affect the revenue earnings of a country and can cause job losses. 2.1.1 Explain the term Dumping? (4) 2.1.2 How can the government protect our local clothing market from trade dumping? (6) 2.1.3 The World Fair Trade Organisation have created 10 principles of trade to ensure that human rights are protected and job opportunities are created, list 5 principles of fair trade. (10) 2.1.4 What type of vessel was used to bring in these counterfeit goods from China? (2) i Page 35 of 35