Ocean transport and the facilitation of trade

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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.
Original languageEnglish
Title of host publicationHandbook of ocean container transport logistics
EditorsC.Y. Lee, Q. Meng
Place of PublicationBerlin
PublisherSpringer
Pages429-450
ISBN (Print)978-3-319-11890-1
DOIs
Publication statusPublished - 2015

Publication series

NameInternational Series in Operations Research & Management Science
Volume220
ISSN (Print)0884-8289

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