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Charter vessels; a savings or a risk?

Charter vessels; a savings or a risk?

In light of the continuing economic recession, many firms are trimming as many costs as possible. Some coffee importers have begun using charter ships to transport their coffee in the hopes that this plan will reduce company costs. But many carriers have told Tea & Coffee that the importer may not really be saving that much in money, and instead their actions may turn out to be a harmful and costly mistake.

Several carriers have banded together and joined a |conference' where they discuss rates and regulations, act on shipping industry problems and then file with the Federal Maritime Commission. Its purpose is to maintain rates compensatory to shipowners in the Northern and Southern hemispheres. Many coffee importers have felt these shipping rates for all carriers involved with the conference were too high and have complained bitterly.

"Not so," says one trade source who would only talk to Tea & Coffee after assuring him we would not mention names. "There have been three general rate increases and none, whatsoever have affected coffee. Coffee rates are lower than four years ago, he emphasized. "We've tried, but there's no pleasing those guys, he added. The conference accounts for 27% of all coffee exported to the U.S. The tea industry had left the conference some time ago, and the conference is trying to get them to return. But between the importers and the conference, each feel the other has been taken advantage of.

Brazil recently liberated certain commodities out of its pooling agreements, and now allows privately-owned vessels to enter the export trade - and charter vessels entered the picture. Charter vessels only deal with breakbulk coffee; they have no access to containerization, which is becoming more and more popular with the larger roasters in the U.S. and Europe. Tom Mathern, vice president of Ivaran Lines, which services South America and the U.S., said this type of carrying is a throwback to the old ways. There is more potential for damage and losses. Mathern feels the roaster will realize the lack of quality and judge accordingly.

Containerization has practically eliminated all physical contact. The coffee is filled into a container with a ventilated or non-ventilated lining. Cranes lift the containers on and off the vessel, and chances of contamination, theft, and mildew are non-existent.

Speaking with the Norton Lilly coffee group: Owen Kelly, Ron D'Ambrosio and Jim Durick, they told me breakbulk versus containerization is not a cost efficient method for transporting coffee. While roasters and commodity traders operate in a hi-tech environment, it seems unusual they would opt to return to old fashioned breakbulk shipping methods.

Charter routes run from Santos to New York or New Orleans. Inland charges can add up for the importers. Add dollar costs, double-loading costs and door-to-door costs and what the importer thinks may be a savings is actually very little, says Norton Lilly. Also, liability is a factor here. Increased insurance will be needed for non-containerized coffee for risk of contamination and theft.

Norton Lilly says while their rates are higher than charter, they aim to be competitive with the charters as well as offer a premium for their service, which includes quality control. In order to compete with the charters, Norton Lilly is now an agent for Pan American Independent Line, which is affiliated with Montemar, headquartered in Uruguay. Pan American is not tied in with the conference. The line offers 20 days direct service from Argentina to New York and 14 days direct service for coffee from Brazil. Norton Lilly are also agents for: Grancolombiana, Concorde Line, Network Shipping (DelMonte) which service every major coffee market. In India, they represent India (SCI), bring in tea from Brazil and Argentina with PAIL, and represent COSO in China and Thailand.

PHOTO : Norton Illy is representing Montemar, supplying carrier service from South America to the U.S.
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:transportation of coffee
Author:McCabe, Jane Phillips
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1991
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