What follows is a cost equation, where the waterborne transport cost (the model-dependent variable) is assumed as equal to the marginal cost of service, multiplied by the markup of shipping companies. This reflects the costs in US dollars of transporting 1 ton of product k from foreign port i, located in country I, to port j in the US, located in customs district J. The markup is a function of the elasticity of demand faced by liner companies covering sea lines between country I and customs district J for product k.