Abstract
In this chapter, we describe transactions in international trade transaction, and we zoom in on the ocean transport part of that transaction. We use transaction cost economics as our theoretical framework. We highlighted a number of ocean transport related processes that generate uncertainty and costs in logistics chains: the use of the container in pre- and on-carriage, the release process of the container in port, and the formalities related to the supervision on vessels coming into ports in the country of destination. A first estimate of the uncertainties and costs that follow from these processes (delays, additional time required for supervision) reveals that the uncertainties far outweigh the additional costs. This holds especially because companies take into account a certain degree of uncertainty in their logistics planning, even though the probability is very low. We extend this discussion with the fundamental problem of the information quality of the ocean carrier documentation, the ship manifest, which has negative consequences for risk assessment by Customs in Europe.
We conclude that specific processes that are connected to ocean transportation do result in time loss, uncertainty and, to a lesser extent, in additional costs that impact the efficiency of logistics and supply chains. The transaction costs are predominantly generated as additional charges on the ocean transport bill, as a result of supervision, and as a result of the use of the container. Transaction cost theory predicts that if such frictions exist, there will be a tendency to move from a market relationship to a more hierarchical relationship between parties involved in the transaction. We observe that international transportation by sea is in an intermediate position between market and hierarchy and we identify at least two important developments in the Port of Rotterdam and its European hinterland that can be recognized as a further shift towards more hierarchy as a result of the frictions we identified.
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Notes
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There are many other possibilities, such as temporary import, or temporary import for the purpose of processing, but we do not consider these arrangements here.
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See for instance www.maerskline.com.
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www.mymaerskline.com, visited dd. 21 May 2014.
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Official Journal L 145 4.6.2008, p. 1.
- 7.
Private communication with Dutch Customs.
- 8.
The total fee for a freight forwarder for administrative handling of a container in the port of destination is about € 35–55, and about € 25 of this amount is involved in regular activities. We estimate that of the remainder € 10 is involved in dealing with administrative issues related to Customs checks, and another € 5 for logistics preparation for scanning and inspections (see Veenstra et al. 2013).
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1.5 days average ship arrival delay, a maximum average delay due to physical inspection of 4 days and 6 additional days for demurrage and detention.
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An off the cuff calculation of this burden is: about 1 mln incoming B/L’s, of which 20 % requires additional information, that takes both the customs official and the freight forwarder about 30–45 min to process. Given an average hourly rate of € 30 for both the customs official and the freight forwarder, this amounts to an annual cost of about € 9 mln for the Port of Rotterdam alone.
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Veenstra, A. (2015). Ocean Transport and the Facilitation of Trade. In: Lee, CY., Meng, Q. (eds) Handbook of Ocean Container Transport Logistics. International Series in Operations Research & Management Science, vol 220. Springer, Cham. https://doi.org/10.1007/978-3-319-11891-8_14
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