Guaranty Trust Company of New York.

Shipping's share in foreign trade; fundamentals of ocean transportation online

. (page 1 of 3)
Online LibraryGuaranty Trust Company of New YorkShipping's share in foreign trade; fundamentals of ocean transportation → online text (page 1 of 3)
Font size
QR-code for this ebook


Shipping's Share in Foreign Trade

Fundamentals of Ocean Transportation

i F

Guaranty Trust Company
of New York

Shipping's Share in Foreign Trade

Fundamentals of Ocean Transportation

Shipping's Share in Foreign Trade

Fundamentals of Ocean Transportation


u Guaranty Trust Company of New York

i .

140 Broadway


Fifth Avenue and 43rd Street 32 T Lombard Street, E. C.

5 Lower Grosvenor PI., S.W.


Madison Avenue and 60th Street Rue des Italiens, 1 and 3






Frontispiece 6

More than twenty new cargo carriers being equipped
with engines at a shipyard in Newark Bay 8

Products of fields, factories, and mines reaching the
port of New York for distribution to the four corners
of the earth 10

The constant stream of traffic along the waterfront of
New York 11

Huge floats, propelled by tugs, transporting freight
cars loaded with goods for foreign markets to ter-
minal warehouses in New York City 12

Giant cranes swinging freight aboard a trans-atlantic
liner 13

Loading cargo for countries south of the Equator 14

Training Recruits to man our New Merchant Marine 16-17

A freighter, shepherded by puffing tugs, proceeding to
her dock at New York 18

Loading cotton for export at one of our southern ports 20

American cotton on lighters in the harbor of Barcelona,
Spain 21

Along the docks at Liverpool 22

The picturesque port of Havre, France 23

The busy harbor of Genoa 24

The port of Buenos Aires 26

The harbor of Valparaiso, Chile 27

Shanghai, overlooking the Soochow River 29
American goods en route to their destination in China 30

Before the Civil War
America led the mari-
time nations of the
world. American clip-
per ships outsailed all

Photograph by Edwin Levick

Today, for the first time in more than half a century, the United States is in sight
of the long-desired goal of transportation American products in American owned
and operated vessels.

Shipping's Share in Foreign Trade

Fundamentals of Ocean Transportation

THE necessity for the expansion of our
foreign trade is as vital as any con-
fronting American industry today. In-
creased productive capacity created by
the war for war's needs cannot be elimi-
nated with the coming of peace without the
gravest consequences to the commercial,
financial, and economic welfare of the en-
tire nation. The machinery assembled to
meet the demands of war cannot and
should not be wholly dismantled, but
must, in large part, be turned into new and
permanent channels of production. Capi-
tal cannot scrap its investments, nor labor
its new-found scale of employment. The
country cannot consume all it produces on
the present basis of output, and an outlet
must be found for the surplus. Commer-
cial salvation lies in greater foreign trade
through the development of new markets
and the expansion of o.ld ones.


Transportation is the link between the
producer and the consumer the means of
1) ringing the goods to the ultimate buyer.
More than ninety per cent, of the exports
and imports of the United States are car-
ried by w r ater. America's future prosper-
ity, therefore, lies largely on the seas.
Shipping is the prime factor of interna-
tional trade, and that nation is best
equipped for such trade that has the best
ocean-carrying facilities. For the first
time in more than half a century the
United States is in sight of the long-desired
goal of transportation for the bulk of
American products in American owned
and operated vessels.

Before the Civil War America led the

maritime nations of the world. American
clipper ships outsailed all others. Amer-
ican shipyards stood first in quantity and
quality of output. American tonnage was
the greatest in volume.

Before the present war, however, ship-
ping conditions were very different.
Ninety per cent, of the foreign trade of the
United States was then transported in for-
eign vessels. American sea-going tonnage
represented barely two per cent, of the
world's total. American shipyards were
turning out about one ship to Great Brit-
ain's six, and producing only about one-
tenth of the world's output. Seven-
eighths of the registered American ship-
ping was engaged in lake, river, and coast-
wise trade. Transfer of tonnage from
American to foreign registry was increas-
ing steadily.


Today this position is almost completely
reversed. The ocean-going tonnage of this
country is more than five times the pre-
war total, and about equal to the former
combined lake, river, and coastwise ship-
ping. American shipyards are producing
twice as many vessels as Great Britain,
and as many as the United Kingdom and
all other countries combined. The Amer-
ican tonnage total is within striking dis-
tance of England's, and is far greater than
that of any other nation. About forty per
cent, of the exports and imports of the
United States is being carried in American
vessels. Nearly half a billion dollars of
American private capital has been in-
vested in American shipping and ship-
building enterprises since the beginning


Photo by courtesy of The Rudder

More than twenty new cargo carriers being equipped with engines
at a shipyard in Newark Bay

of the war. Billions have been expended
by the Government in the creation of a
great merchant navy, and it is planned to
spend billions more. A huge organization
has been built up which represents hun-
dreds of shipways, thousands of ships,
hundreds of thousands of workers, and
millions of dollars in pay-rolls.

The use of different kinds of tons in the
official statements of ship destruction and
production made by the various Govern-
ments has led to much misunderstanding
regarding the actual tonnage holdings of
the different countries. The statements
of the United States Shipping Board are
made in deadweight tons, but the United
States Bureau of Commerce and Naviga-
tion, the British Admiralty, and other or-
ganizations use gross tons. In some other
countries the net ton is used as the stand-
ard. An understanding of the difference


in the various kinds of tonnage used in
shipping statistics is necessary in order to
make an intelligent comparison of the
maritime situation.

Gross tonnage represents the entire cub-
ical capacity of a vessel, in units of 100
cubic feet, including space occupied by
cabins, engines, boilers, and coal bunkers.

Net tonnage expresses in units of 100
cubic feet the vessel's carrying capacity,
the space occupied by cabins, machinery,
etc., being deducted.

Deadweight tonnage represents the
maximum weight of cargo, bunkers, con-
sumable stores, and all weight, including
passengers and crew.

Measurement tonnage is used to ex-
press the space cargo takes up rather than
its weight. The unit in this case is forty
cubic feet.

Displacement tonnage is used in the
case of warships to denote the actual
amount of water displaced by the vessel.

For conversion purposes, in dealing
with groups of tonnage, roughly, gross
tonnage is two-thirds of deadweight, and
net two-thirds of gross. For instance,
300,000 deadweight tons are the equiva-
lent of 200,000 gross tons. Gross tonnage
is most used for commercial purposes and
will be employed here, unless otherwise


How America's shipping has gained
during the war and subsequently, while
that of other nations has decreased is
shown by the contrast between sinkings
and seizures and new building. The fol-
lowing table (in gross tons) covers the
world, the Central Powers excepted:

United United Other

States Kingdom Countries World

At outbreak of War 7,900,000 19,250,000 15,250,000 42,400,000

. . . 900,000 9,000,000 5,100,000 15,000,000

Gross reduction to. 7,000,000 10,250,000 10,150,000 27,400,000
Added by building. 3,400,000 4,800,000 2,500,000 10,700,000
Added by seizures . 500,000 700,000 1,175,000 2,375,000

Tonnage November

11, 1918 .... 10,900,000 15,750,000 13,825,000 40,475,000
Added to April 1,

1919 (net esti-

.... 900,000 675,000 550,000 2,125,000

Tonnage, April 1,

1919 .... 11,800,000 16,425,000 14,375,000 42,600,000
Gain or loss . . . t3,900,000 -2,825,000 -875,000 t200,000

With the war losses of ships practically
restored the world over (the net deficiency
of the Central Powers is estimated at
about 2,500,000 tons) there remains to be
supplied, as already indicated, the normal
increase that would have occurred had not
the war intervened. This in the pre-war
period was at the rate of slightly more
than 2,000,000 tons annually, so that the
total deficiency to the beginning of 1919
was about ten million tons.

Of America's estimated total of nearly
twelve million tons up to April 1, 1919,
more than half is sea-going. In fact,

Edward N. Hurley, Chairman of the
United States Shipping Board, estimates
our ocean-carrying tonnage at nearly six
and one half million tons.


The growth of the American merchant
marine has been attended by a remark-
able increase in the foreign trade of the
country. From a total of about four and a
quarter billion dollars for the year ended
June 30, 1914, the aggregate of the coun-
try's foreign trade has now grown to more
than nine billion dollars annually, and
the excess of exports over imports from
half a billion dollars yearly to more than
three billions.

All the ports of the country have shared
in the expansion of trade. How greatly
they have shared in it is indicated by the
following table, showing the value of the
combined exports and imports at the sev-
en leading ports for 1913, as compared
with 1917:

1913 1917

New York . . . $1,904,926,000 $4,391,319,000
New Orleans . 283,822,000 408,027,000
Galveston . . . 268,012,000 274,784,000
Boston and

Charlestown . 216,152,000 443,483,000
Philadelphia . . 161,665,000 573,957,000
Baltimore . . . 149,369,000 418,006,000
San Francisco . 130,486,000 286,917,000


To the shipper the question of freight
rates is a vital one in normal times. Under
the abnormal conditions of the war-per-
iod, delivery, not cost, was the first neces-
sity to be considered, and as a result of
this, coupled with the conversion of much
merchant tonnage to war service, and the
consequent scarcity of cargo space, rates
rose to record heights until regulated by
Government action. Cotton, for instance,
crossed the Atlantic at a carrying cost of


Photograph by K.l

Products of fields, factories, and mines reaching the port of New York for distribution
to the four corners of the earth

seventeen cents per pound, occupying less
room and paying more for its passage in
proportion than a steerage passenger did
before the war. Fortunes are reported to
have been made in some cases out of the
single voyage of a vessel.

An English estimate of the operation of
twenty million gross tons of British ship-
ping in 1916 places the gross earnings at
considerably more than a billion and
three-quarters dollars. A summary of the
returns indicates the effect of Government
regulation upon rates :

. per Gross

ton earnings

11, 000,000 tons at "Blue
Book Rates" (fixed

by the Government) . $45 $495,000,000

4,000,000 tons, partly
under directed rates;
i.e. care of sugar, wheat,
meat, iron ore, etc . . 110.00
5,000,000 tons free; i.e.,

at current market rates 1 80 . 00


20,000,000 tons

$98.75 $1,835,000,000

Many factors enter into the determina-
tion of rates beyond the question as to
whether the supply of tonnage is greater or
less than the volume of demand. The im-
portance of this condition as an influence
on rates is indicated by the fact that ex-
perts estimate that so small a variation
as two and one-half per cent, in the
amount of tonnage necessary for the
world's needs at a given time will result in
a rise or a slump in freight, accordingly as
the demand exceeds the supply, or the re-
verse. In terms of shipping, however,
a two and one-half per cent, variation in
the world's merchant fleets means more
than a million gross tons, the equivalent of
hundreds of vessels.

In determining ocean freight-rates the
chief basic items of consideration include
the interest on the cost of the ship, depre-
ciation of ship, insurance charges, operat-
ing expenses coal, supplies, wages, and
maintenance of crew, etc. port charges,
tonnage dues, and labor.

While agreements between ocean lines
tend to regulate competition and to play
an important part in the fixing of rates,
there is small probability of a point being
reached where anything resembling an
actual monopoly in ocean-carrying can be
effected. The character of charter-traffic,
in distinction from line-traffic, is an im-
portant element in the situation. Compe-
tition is unrestricted in charter- traffic,
except in a few regions of lesser impor-
tance, and the great volume of this tonnage
available must always act as an offset to
the operation of line-traffic on a more or
less non-competitive basis. Despite many
kinds of conference arrangements, compe-
tition between " tramp" vessels and
between "tramps" and the regular
lines continues unabated. And competi-
tion between rival ports and rival coun-
tries is also to be reckoned with. The lim-
it^ number of ocean lines makes the es-

tablishment of working agreements com-
paratively easy, a condition that does not
apply in the case of the thousands 'upon
thousands of "tramps" operating inde-

There have, at various times, been
agreements between groups of owners of
"tramp" vessels, but these have not been
of sufficient scope to have any material
effect upon the general situation.

In the case of the ocean lines, however,
agreements, conferences, and pools have
been successfully established and con-
ducted to the end of substituting cooper-
ative regulation for unrestricted competi-
tion. Practically all the leading lines ply-
ing to and from American ports operate
under agreements of various kinds. Be-
fore the war the German companies fig-
ured prominently in these arrangements.

Conferences constitute the organiza-
tions through which the ocean lines con-

Photograph by Edwin Levick, K. Y.

The constant stream of traffic along the water-front of New York


Photograph by Edwin Levick, N. Y.

Huge floats propelled by tugs, transporting to terminal warehouses in New York City,
freight cars loaded with goods for foreign markets

duct their pools, understandings, or agree-
ments. While the proceedings are largely
informal in some instances and mainly of
a consultatory character, in others elabor-
ate organizations are effected, with boards
of officers, stated and special meetings,
rules of procedure, and provisions for pen-
alties. In some cases officials of the con-
ference are empowered to fix freight rates,
commissions, and rebates applicable to all
members, and to have access to the books
of any or all of the lines. Boards of arbi-
trators are in some instances authorized to
settle any disputes among members.


Through pooling arrangements many
ocean lines take steps to strengthen the
cooperative system. Traffic pools and
money pools are conducted for the pur-
pose of assuring each member of a fair
share of freight and passenger business,
and an allotment of traffic may be pro-
vided for. Some agreements go to the
point of lumping the net receipts and di-
viding them on an agreed proportional

The "deferred rebate" system was
made illegal, so far as the United States is
concerned, by the Shipping Act of Sep-
tember, 1916. This system, used as a pro-
tection against the competition of non-

conference lines, offered to shippers at the
end of a specified period, a rebate of from
five to ten per cent, of their payments for
freight, on the stipulation that in the in-
tervening period they had given their en-
tire trade to the conference lines.

Complaints against the monopolistic
powers of the ocean lines operating under
agreement have been made at times.
Dominance over rates, slowness in settling
claims, indifference in handling freight,
refusal at times to publish classifications
and rates, and the granting of special rates
to favored shippers, are some of the mat-
ters that have been brought to issue. The
Shipping Act of September, 1916, how-
ever, has prohibited many of the features
complained of. In addition, the United
States Shipping Board has supervisory
powers over the entire administration of
ocean conferences.

Many advantages are claimed to have
resulted from the conferences. Among
them is the improved service effected. The
cost of operation, it is contended, is re-
duced, with the result that while the net
earnings of the lines are increased, the
shipper receives lower rates and greater
efficiency of service. Stabilization of rates
is another instance of the merits claimed
as due to the cooperative working of the

Any marked general reduction in rates
may be said automatically to stimulate
shipments. A high level usually results
in the holding back of large quantities of
freight on which urgent delivery is not re-
quired, and a sharp cut in rates is the
signal for pushing forward this class of
goods so that it can be laid down overseas
at a satisfactory total cost.

Charter-rates fluctuate much more free-
ly than line-rates because of the much
greater competitive element entering into
the operation of "tramp" tonnage. There
have been numerous instances, in fact,
where charter-rates have changed many
times in the course of a single day.


The following commercial terms are
most commonly used in connection with
the shipments of goods to other countries :

C. F., or C. and F. (Cost and Freight). The
goods are furnished and the freight paid but no
other expenses to place of delivery, as agreed,
by the seller. The buyer assumes all risks while
the goods are in transit.

C.I.F. (Cost, Insurance, and Freight). The
goods are furnished by the seller, who pays the
freight and insurance to the point of delivery.
All other risks while the goods are in transit are
assumed by the buyer.

F.O.B. Destination
(Free on Board). All
costs are paid and all
risks assumed by the
seller until the goods
reach the place of de-
livery as agreed.

F.A.S. Steamer (Free
Alongside). Goods are
to be delivered by the
seller alongside steamer
on lighter, or on the re-
ceiving pier of a steam-
ship company, in proper
condition. The buyer
assumes all subsequent
risks and expenses.

Giant cranes swinging freight aboard a
transatlantic liner

i ne cargo ion, weigiit or measurement,
was formerly the basis of ocean line freight
rates; but the system is no longer univer-
sal. Quotations on rates may be for the
long ton (2,240 Ibs.), metric ton (2,204.62
Ibs.), the short ton (2,000 Ibs.), or the
measurement ton (40 cubic feet) ; but spe-
cial commodity rates are growing in use.
These may be based on cubic feet, cubic
meters, 100 pounds, bushels, barrels, or
other specified quantities. (40 cubic feet
= 2,240 Ibs; one cubic meter- 1,000 kilos).
In case a rate is quoted "per ton, weight or
measurement, ship's option," the line re-
serves the right to charge on a weight basis
if the weight of the shipment is in excess of
its cubic measurement, or on a measure-
ment basis if the cubic measurement is in
excess of the weight. Frequent changes are
made by lines from weight to measure-
ment basis, and vice versa, this being done
in many cases to equalize rates with those
charged by other companies.

In computing the measurement of pack-
ages, the shipper should bear in mind that
the steamship companies in most instances
measure in a rectangular way. The cause
of this is that it is not easy to stow irregu-
lar shaped packages compactly, because
of the difficulty of finding packages that
will fit the vacant spaces. It then be-
comes necessary, in
order to prevent
shifting of cargo, to
utilize dunnage, or
timber, for the un-
filled spaces.

One condition
which operates in
favor of those who
ship goods abroad
through the port of
New York, although
largely curtailed
during the war
period, is the free



Loading cargo for countries south of the Equator

lighterage privilege extended to export
freight in carload lots. By taking care to
bill to New York "lighterage free," ship-
pers avoid the payment of cartage charges
from railroad to steamship pier, and ferri-
age as well if the transfer has to be made
from New York to New Jersey, or from
New Jersey to New York.

The "free lighterage" regulations at the
port of New York are as follows:

"On carload eastbound 'Lighterage Free'
freight (except lumber) three free export lighter-
age deliveries or one free domestic lighterage
delivery will be made from any one car; any
additional lighterage deliveries from the same
car will be subject to a charge of three cents per
100 pounds with a minimum of $6 for each
lighterage delivery, except that any remainder
of freight from the same car may be delivered
in one lot, at one time, at any one regular station
of the railroad company within the "free light-
erage" limits, subject to a charge of SI.


"When more than one lighterage delivery from
any one car of lumber is made, the charge for
each lighterage delivery, after one free delivery,
shall be three cents per 100 pounds with a mini-
mum of $6 in addition to the freight charges.

"The free lighterage limits extend from the
Battery to 135th Street on the North River (New
York side), from Bergen Point, Shooters Island,
or Clifton to Fort Lee (on the New Jersey side) ;
on the East River from the Battery to Jerome
Avenue Bridge (New York side), and from
Astoria to 69th Street, Bay Ridge (on the
Brooklyn side.) This territory takes in all the
usual piers at which steamers load or discharge."

Certain commodities are excepted from
the "free lighterage" privilege, such as
bulk freight, or those of an unusually
bulky or heavy character.

Freight rates given by the steamship
companies are for packages of not more
than two tons in weight, except in cases
where special arrangement has been made.
If the weight limit is exceeded the shipper
must arrange to have a hoisting company

load the goods or pay hoisting charges to
the steamship company.


Transportation service for ocean freight
falls into three chief classifications :

1. "Tramp" or chartered. This is given by
vessels equipped to carry rough and bulky cargo
to any destination, unless prevented by legal
requirements or insufficient port facilities.
"Tramps" may be chartered for single trips or
stated periods, and are sometimes placed "on
the berth," for whatever cargo may offer. They
have a wide range of activity, being tied to no
fixed routes. They are constructed with a view
to economy and cargo capacity, and not for
speed. Compared with the regular line service,
they have the advantage of no overhead expense
caused by the maintenance of permanent offices
and dock facilities, and they also benefit by
securing their cargoes chiefly through ship brok-
ers, thus avoiding the cost of operating an elabor-
ate freight soliciting organization. Their dis-
advantages lie in the fact that they do not carry
the better paying high-class cargo that the regular
lines can handle in broken lots and which calls
for speedy carriage. Nor have they the money-
making opportunities offered by the carrying of
mails, passengers, and express goods. Their pa-
tronage is also more irregular than that of the
other classes of cargo-carriers.

2. Regular lines, These give a fixed service
to established points on schedule. Some carry
freight only, others passengers as well, and still
others passengers only. The freight-carriers are
sometimes placed "on the berth" at low rates
to obtain part cargoes, in order to avoid carrying
ballast, from which, of course, no profit is derived.
They are also in a position to compete with the
"tramps" for the carriage of bulky goods. They
are usually larger, speedier, and better equipped
than the "tramps," and, unlike the latter, prac-
tically all are fitted with engines, whereas, many
"tramps" are dependent on their sailing power

1 3

Online LibraryGuaranty Trust Company of New YorkShipping's share in foreign trade; fundamentals of ocean transportation → online text (page 1 of 3)