International
Trade-Methodology II
By Alfonso Llanes
January 10, 2017
Abstract
In following with previous papers on international trade
technology, this paper will focus on the issues related to bulk trade of
commodities and exchanges such as the Baltic Exchange for contract bidding of
freight carriage. Ocean is by volume the largest mover of commodities and
finished goods around the world in dry, liquid or containerized cargo.
Navigable rivers as well as intra-costal waterways serve as the feeder means to
major ports that serve the continental trade across oceans also known as blue waters
such as the Mississippi river which runs through the heartland of grain
production to ports in the Gulf of Mexico for export. Other important assets to
the waterborne connections are the canals and the straits that become the
limiting factors to the size of ships needing to get thru either because water
depth or passage girth. A good example of this is the intra-coastal canal
system that runs around the fan that forms the US Gulf of Mexico except
Florida, and the eastern seaboard.
INTRODUCTION
The International
Monetary Fund (IMF) publishes a weekly tracking of market exchanges and trade
specifications for X-spot prices. With this information traders can then
contract a carrier via the Baltic Exchange and a delivery price to a buyer can
then be quoted to complete the trade. A note of importance that must be
considered is that most of these trades are not for immediate delivery but take
effect on a future date when a carrier has agreed to the lay-days of the ship
designated to meet the contract specifications and different bulk carrier
types.
CONTRACT OF CARRIAGE Reference:
UNITED NATIONS CONVENTION ON CONTRACTS FOR THE
INTERNATIONAL CARRIAGE OF GOODS WHOLLY OR PARTLY BY SEA
Chapter 1
General provisions
Article 1
Definitions
1. "Contract
of carriage" means a contract in which a carrier, against the payment of
freight, undertakes to carry goods from one place to another. The contract
shall provide for carriage by sea and may provide for carriage by other modes
of transport in addition to the sea carriage.
2. "Volume
contract" means a contract of carriage that provides for the carriage of a
specified quantity of goods in a series of shipments during an agreed period of
time. The specification of the quantity may include a minimum, a maximum or a
certain range.
3. "Liner
transportation" means a transportation service that is offered to the
public through publication or similar means and includes transportation by
ships operating on a regular schedule between specified ports in accordance
with publicly available timetables of sailing dates.
4. "Non-liner transportation" means any transportation that
is not liner transportation.
5. "Carrier" means a person that enters into a contract of
carriage with a shipper.
(a) "Performing party"
means a person other than the carrier that performs or undertakes to perform
any of the carrier's obligations under a contract of carriage with respect to
the receipt, loading, handling, stowage, carriage, care, unloading or delivery
of the goods, to the extent that such person acts, either directly or
indirectly, at the carrier's request or under the carrier's supervision or
control.
(b) "Performing party"
does not include any person that is retained, directly or indirectly, by a
shipper, by a documentary shipper, by the controlling party or by the consignee
instead of by the carrier.
7. Maritime performing party" means a
performing party to the extent that it performs or undertakes to perform any of
the carrier's obligations during the period between the arrival of the goods at
the port of loading of a ship and their departure from the port of discharge of
a ship. An inland carrier is maritime performing party only if it performs or
undertakes to perform its services exclusively within a port area.
8."Shipper" means a person that
enters into a contract of carriage with a carrier.
9."Documentary shipper" means a
person, other than the shipper, that accepts to be named as "shipper"
in the transport document or electronic transport record.
10."Holder" means:
(a) A person that is in possession of a
negotiable transport document; and (i) if the document is an order document, is
identified in it as the shipper or the consignee, or is the person to which the
document is duly endorsed; or (ii) if the document is a blank endorsed order
document or bearer document, is the bearer thereof; or
(b)
The person to which a negotiable electronic transport record has been
issued or transferred in accordance with the procedures referred to in article
9, paragraph 1.
11."Consignee"
means a person entitled to delivery of the goods under a contract of carriage
or a transport document or electronic transport record.
12."Right of control" of the goods
means the right under the contract of carriage to give the carrier instructions
in respect of the goods in accordance with chapter 10.
13."Controlling party" means the
person that pursuant to article 51 is entitled to exercise the right of
control.
14. "Transport document" means a
document issued under a contract of carriage by the carrier that:
(a) Evidences the carrier's or a
performing party's receipt of goods under a contract of carriage;
(b) Evidences or contains a
contract of carriage.
15. "Negotiable transport document"
means a transport document that indicates, by wording such as "to
order" or "negotiable" or other appropriate wording recognized
as having the same effect by the law applicable to the document, that the goods
have been consigned to the order of the shipper, to the order of the consignee,
or to bearer, and is not explicitly stated as being "non-negotiable"
or "not negotiable".
16. "Non-negotiable transport
document" means a transport document that is not a negotiable transport
document.
17. "Electronic communication" means
information generated, sent, received or stored by electronic, optical, digital
or similar means with the result that the information communicated is
accessible so as to be usable for subsequent reference.
18. "Electronic transport record"
means information in one or more messages issued by electronic communication
under a contract of carriage by a carrier, including information logically
associated with the electronic transport record by attachments or otherwise
linked to the electronic transport record contemporaneously with or subsequent
to its issue by the carrier, so as to become part of the electronic transport
record, that:
(a) Evidences the carrier's or a performing
party's receipt of goods under a contract of carriage;
(b) Evidences or contains a contract of carriage
19. "Negotiable electronic transport
record" means an electronic transport record:
(a) That indicates, by such as "to
order", or "negotiable", or other appropriate wording recognized
as having the same effect by the law applicable to the record, that the goods
have been consigned to the order of the shipper or to the order of the
consignee, and is not explicitly stated as being "non-negotiable" or
"not negotiable"; and
(b) The use of which meets the requirements of
article 9, paragraph 1.
20. "Non-negotiable electronic transport
record" means an electronic transport record that is not a negotiable
electronic transport record.
21. The "issuance" of a negotiable
electronic transport record means the issuance of the record in accordance with
procedures that ensure that the record is subject to exclusive control from its
creation until it ceases to have any effect or validity.
22.
The "transfer" of a negotiable electronic transport record means the
transfer of exclusive control over the record.
23. "Contract
particulars" means any information relating to the contract of carriage or
to the goods (including terms, notations, signatures and endorsements) that is
in a transport document or an electronic transport record.
24. "Goods"
means the wares, merchandise, and articles of every kind whatsoever that a
carrier undertakes to carry under a contract of carriage and includes the
packing and any equipment and container not supplied by or on behalf of the carrier.
25. "Ship"
means any vessel used to carry goods by sea.
26. "Container"
means any type of container, transportable tank or flat, swap-body, or any
similar unit load used to consolidate goods, and any equipment ancillary to
such unit load.
27. "Vehicle"
means a road or railroad cargo vehicle.
28. “Freight"
means the remuneration payable to the carrier for the carriage of goods under a
contract of carriage.
29. “Domicile"
means (a) a place where a company or other legal person or association of
natural or legal persons has its (i) statutory seat or place of incorporation
or central registered office, whichever is applicable, (ii) central
administration or (iii) principal place of business, and (b) the habitual
residence of a natural person.
30. “Competent
court" means a court in a Contracting State that, according to the rules
on the internal allocation of jurisdiction among the courts of that State, may
exercise jurisdiction over the dispute.
POI POINTS OF TRADE AND COMMODITY SPECIFICATIOS. RATE SOURCES IMF PUBLICATION
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6-Jan-16
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Average
Weekly Prices for Non-Fuel and Fuel Commodities
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Commodities
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Units
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US $
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Food
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Cereals
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Price Specifications
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Wheat
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$/MT
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264.1
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U.S. No. 1 hard red winter,
ordinary protein, FOB Gulf of Mexico ports
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Maize
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$/MT
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175.7
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U.S. No. 2 yellow, prompt shipment,
FOB Gulf of Mexico ports
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Rice
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$/MT
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441.0
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Thai, white milled, 5 percent
broken, nominal price quotes, FOB Bangkok
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Barley
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$/MT
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130.0
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Canadian No. 1 Western Barley, spot
price
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Vegetable oils-protein meals
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Price Specifications
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Soybeans
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$/MT
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455.3
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Soybean futures contract Chicago
Board of Trade
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Soybean
meal
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$/MT
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456.8
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Soybean futures contract Chicago
Board of Trade
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Soybean
oil
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$/MT
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749.2
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Soybean futures contract Chicago
Board of Trade
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Palm
oil
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$/MT
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690.6
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Crude Palm Oil Futures Bursa
Malaysian
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Fish
meal
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$/MT
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2007.6
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Peru Fish meal/pellets, 65%
protein, CIF United Kingdom
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Sunflower
Oil
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$/MT
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997.9
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Sunflower Oil, crude, US export
price from Gulf of Mexico
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Olive
oil
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$/MT
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4136.6
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United Kingdom ex-tanker prices,
crude extra virgin olive oil,
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Groundnuts
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$/MT
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1932.5
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40/50 (40 to 50 count per ounce),
in-shell, cif Argentina
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Rapeseed
oil
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$/MT
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848.4
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Crude, fob Rotterdam
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Meat
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Price Specifications
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Beef
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cts/lb
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260.0
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Australian and New Zealand, frozen
boneless, U.S. import price FOB port of entry
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Lamb
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cts/lb
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132.1
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New Zealand, PL, frozen, wholesale
price at Smithfield Market, London
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Swine
Meat
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cts/lb
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113.4
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51-52% (.8 - .99 inches of back fat
at measuring point) lean Hogs, USDA
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Poultry
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cts/lb
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112.8
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Georgia docks, ready to eat whole
body chicken, packed in ice, spot price (USDA).
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Seafood
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Price Specifications
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Fish
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$/kg
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6.1
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Fresh Norwegian Salmon, farm bred,
export price
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Shrimp
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$/kg
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N/A
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Mexican, west coast, white, No. 1,
shell-on, headless, 26 to 30 count
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Sugar
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Price Specifications
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Free
market
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cts/lb
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17.8
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Coffee, Sugar and Cocoa Exchange,
New York Board of Trade.
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United
States
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cts/lb
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26.5
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Coffee, Sugar and Cocoa Exchange,
New York Board of Trade.
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EU
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cts/lb
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27.8
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EU import price, unpacked sugar,
CIF European ports.
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Bananas
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Price Specifications
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$/MT
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994.5
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Central American and Ecuador, U.S.
importer's price FOB U.S. ports
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Beverages
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Price Specifications
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Coffee
milds
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cts/lb
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211.5
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International Coffee Organization,
Other Mild Arabicas New York cash price.
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Robusta
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cts/lb
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103.8
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International Coffee Organization,
Other Mild Arabicas New York cash price.
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Cocoa
Beans
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$/MT
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3292.8
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International Coffee Organization,
Other Mild Arabicas New York cash price.
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Tea
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cts/kg
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235.9
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Mombasa auction price for best PF1,
Kenyan Tea.
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Agricultural raw materials
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Price Specifications
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Cotton
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cts/lb
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73.8
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Middling 1-3/32 inch staple,
Liverpool Index "A", average
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Cts/lb five of fourteen styles, CIF
Liverpool
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Wool
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Price Specifications
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Fine
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cts/kg
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1078.5
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19 micron (AWEX, Australian Wool
Exchange) Sydney, Australia
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Coarse
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cts/kg
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1036.2
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23 micron (AWEX, Australian Wool
Exchange) Sydney, Australia
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Rubber
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Price Specifications
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cts/lb
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83.4
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Singapore Commodity Exchange, No. 3
Rubber Smoked Sheets.
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Hides
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Price Specifications
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cts/lb
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108.0
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U.S. Chicago packer's heavy native
steers, over 53 lbs., wholesale price, dealers, FOB
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Metals
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Price Specifications
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Copper
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$/MT
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6924.6
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London Metal Exchange, grade A
cathodes, spot price, CIF European ports
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Aluminum
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$/MT
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2008.5
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London Metal Exchange, standard
grade, spot, minimum purity 99.5 %, CIF U.K. port
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Iron
Ore
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$/MT
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111.83
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China import Iron Ore Fines 62% FE
spot CFR Tianjin port;
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Tin
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$/MT
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22390.8
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Malaysian, straits, minimum 99.85
percent purity, Kuala Lumpur Tin Market
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Nickel
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$/MT
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18576.9
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London Metal Exchange, melting
grade, spot price, CIF Northern European ports
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Zinc
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$/MT
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2283.1
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London Metal Exchange, high grade
98 percent pure, spot price, CIF U.K.
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Lead
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$/MT
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2220.7
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London Metal Exchange, 99.97
percent pure, spot price, CIF European ports.
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Uranium
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$/lb
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30.5
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Metal Bulletin Nuexco Exchange
Uranium (U3O8 restricted) price
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Energy
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Price Specifications
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Spot
Crude
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$/bbl
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100.6
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Average equally weighted
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U.K.
Brent
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$/bbl
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102.4
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Average of U.K. Brent (light) FOB
U.K.
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Dubai
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$/bbl
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102.2
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Dubai (medium) API, spot price, FOB
Dubai.
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West
Texas Intermediate
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$/bbl
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97.2
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West Texas Intermediate FOB Midland Texas
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Natural Gas
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Price Specifications
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U.S.
Domestic
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$/MMBTU
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3.9
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Natural Gas Spot Price, Henry Hub,
Louisiana
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Ship’s Size and Cargo Types
International Trade Cost Vertex
Source: Hofstra
University
Singapore as ground
zero for distance effect on rates.
Source: The author
FREIGHT RATE THEORY IN A EUCLIDEAN SPACE
This paper proposes Topological
transformation to study the effects of distance on rates for any mode of
transportation. If one considers a country’s area given in length and width by
a characteristic rectangle transformed into a geometric Euclidian space can be
generated for analysis of its inherent properties.
The characteristic perimeter of
the rectangle can be transformed into an ellipsis with major axis √7 and minor
axis √2 defining the longest and shortest distance limits in the two circles of
radius 1 within the geometry of the ellipsis which substitutes the length and
width of a country. This symmetry is
represented in the( x,y) plane as
X²/a²+Y²/b²=1 and interpreting the rates along the (a) axis being lower
than along the ( b) axis because
fixed costs are spread over a longer segment of space.
SOLOW GROWTH MODEL
The simple form
of the model assumes no technological progress, depreciation of capital, and no
labor force growth, which implies diminishing returns that at some point the amount of new capital
produced is only just enough to make up for the amount of existing capital lost
due to depreciation. At this point, because of the assumptions of no
technological progress or labor force growth, we can see the economy ceases to
grow. However, injections of foreign
investment in this model can upset the low saving rates of the model which
simplifies to GDP, investment and consumption.
The model
predicts that the income levels of poor countries will tend to catch up with or
converge towards the income levels of rich countries if the poor countries have
similar savings rates for both physical capital and human capital as a share of
output. However, savings rates vary widely across countries. In particular,
since considerable financing constraints exist for investment in schooling,
savings rates for human capital are likely to vary as a function of cultural
and ideological characteristics in each country. Here again exogenous factors such as foreign direct investment can
offset low savings rates for a given country. Also, technology transfer in the
form of capital investment which helped Japan and Germany pull out of the
devastating effects of WWII.
In order to
understand what the model depicts when comparing differences and similarities
one could choose two countries with equal populations, same capital stock and
same depreciation level as similarities. The differences in this particular
model are saving rates and innovation as factors of production affecting GDP
considering that consumption is the left over GDP after investment. Two typical
countries in this model will have the following characteristically differences
in GDP investment between innovation and savings. In essence and economy is
more productive with a highly innovative labor force by a factor of two than an
economy with high savings rates.
LEONTIEF INPUT-OUT MATRIX
The input–output matrix is as a quantitative economic technique represents
the interdependencies between different sectors of a national economy.
The model represents inter-industry relationships within an economy,
showing how output from one industrial sector may become an input to another
industrial sector. In the inter-industry matrix, column entries typically
represent inputs to an industrial sector, while row entries represent outputs
from a given sector. This
model indicates how dependent each sector is on every other sector of a given
economy.
Francois Quesnay has been credited with developing an early version of
this technique called Tableau économique. Other contributions made it the
forerunner of the economics of general equilibrium theory which influenced
generalization of Leontief’s seminal concept.
Sample Economy of Steel Production by Sector.
CLOSING REMARKS
This paper suggests that another way to rate freight is
by embedding costs-- fixed and variable-- into a matrix of (Commodity-Ton-Mile)
where distance, direction of trade, geography, stowage, value and quantity
etc., become columns and rows of an (m x n) matrix that must fit in a given
dimensional space (transportation vehicle). In order to account for all these
different dependencies of variables, these values need to be decoupled and set
as vectors in (A-λI)X=0 to be transformed into eigenvalues and eigenvectors of matrix ij. These values can then be used for
quoting a freight rate for a specific commodity in an origin-destination
scenario on a per Ton-Mile basis.
REFERENCES
Spear, S. E.; Young,
W. (2014). "Optimum Savings and Optimal Growth: The
Cass–Malinvaud–Koopmans Nexus". Macroeconomic Dynamics. 18 (1): 215–243.
Collard, David A. (2011). "Ramsey, saving and the
generations". Generations of Economists. London: Routledge. pp. 256–273.
ISBN 978-0-415-56541-7.
Romer, David (2011). "The Solow Growth Model".
Advanced Macroeconomics (Fourth ed.). New York: McGraw-Hill. pp. 6–48. ISBN
978-0-07-351137-5.
Breton, T. R. (2013). "The role of education in economic
growth: Theory, history and current returns". Educational Research.
Dietzenbacher, Erik and Michael L. Lahr, eds. Wassilly
Leontief and Input-Output Economics. Cambridge University Press, 2004.
ten Raa, Thijs. The Economics of Input-Output Analysis. Cambridge
University Press, 2005.
US Department of Commerce, Bureau of Economic Analysis .
Regional multipliers: A user handbook for regional input-output modeling system
(RIMS II). Third edition. Washington, D.C.: U.S. Government Printing Office.
1997.
Disdier, A & K Head (2008), ‘The Puzzling Persistence of
the Distance Effect on Bilateral Trade,’ The Review of Economics and
Statistics, 90 (1), 37-48.22. Djankov, S, C Freund & C Pham (2006),
‘Trading on Time’, World Bank.
