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Krieger WorldwideExporting
Process Overview & Role of the Forwarder & Broker
Export Seminar SeriesExport Transportation & Logistics
Shipping in America
• No Customs regulations between states
• Goods are moved easily from origin to destination
• Our experience leads us to believe shipping outside the USA is the same
American Image of Shipping
International Shipping
• There are more than 100 countries in the world
• Each has its own export procedures• Each has its own import procedures• Despite the advertisements there is no
simple quick-fix solutions
Quick Overview
• Lets look at international shipping as a series of related steps
• This is a simplified view and covers the basic process only
FACTORY
INLAND TRANSPORT
FORWARDER WAREHOUSE
Origin to Port
PORT OF LOADING
CUSTOMS EXPORT
CLEARANCE
FORWARDER WAREHOUSE
Export
ORIGIN PORT CARRIAGE
DESTINATION PORT
International Shipping
Ocean Freight Options
• FCL - Full Container Load• Also flat racks even those out of gauge
• LCL - Less-than-Container Load also known as NVOCC
• Bulk - like ores, grains, or oil• RORO – roll on roll off such as autos• Breakbulk – tractors, yachts, etc.
Containerized Ocean Freight
Shipper loads & seals containerContainer transferred to carrier
FCL
Shipper loads truck for CFS CFS receives and loads container for NVOCCContainer transferred to carrier
LCL
Airfreight Options
• Consolidation (HAWB)• Direct airfreight (MAWB)
• Tendered as pieces• Tendered as shipping pallets• Tendered as ULD’s
Airfreight Rates
• By weight• Generally the greater the weight the lower
the rate per weight unit (LB/KG).• By size
• Size is converted to weight on the basis of 165 cu.in. = 1 pound.
• The consolidator or carrier will charge whichever yields the greater cost.
Advantages of Consolidation
• The consolidator has lower costs based on contracts or on higher volumes
• The consolidator is obtaining a lower rate per weight unit based on all the cargo moving on one MAWB.
• The consolidator shares part of these benefits in the form of lower rates than direct shipments.
Role of Freight Forwarder
• Usually arranges pickup from factory• Often acts as agent to file export
clearance paperwork for seller• Selects carrier and makes booking• In airfreight freight forwarders are
generally consolidators as well• Controls largest portion of costs
Additional Forwarder Services
• Packing & labeling• Letter of credit or draft negotiation• Export documentation• Cargo Insurance
DESTINATION PORT (CFS)
CONTAINER FREIGHT STATION
Arrival
DELIVERYCUSTOMS
CLEARANCECFS
Import
Broker as Coordinator
CustomsBroker
CFSCarrierCashierCustoms
ExamSite
ImporterPierTrucker
InlandCarrier
Role of the Customs Broker
• Assist importer in classification (how duty rates are determined)
• Prepare and file Customs documents• Coordinate paperwork between carrier,
CFS, and delivery trucker• Arrange Bonds & Insurance• Delivery and more
Other Broker Services
• Arrange inland delivery• Provide warehouse and distribution
services• Assist with Customs compliance
Overview
Factory
Warehouse
ExportCustoms
Loading
OriginPort
DestinationPort
Carrier
CFS
ImportCustoms
Exam
Inland Move
Warehouse
Origin Carriage Destination
Freight Forwarder Broker
Export Order Process Flow
• Determine export controls for product• Determine transport requirements.• Quote.• Review/Process Order.• Book shipment.• Prepare documents.• Ship goods & file customs formalities.• Process banking documents L/C S/D.
Export Requirements
• Is your commodity controlled—does it require a license?• ITAR• BIS (Bureau of Industry & Security)
• Are you able to ship to that consignee or that country?• BIS
• AES (Automated Export System)—filing your export declarations
Transport Requirements
• Dangerous goods?• Refrigerated?• Oversize or
overweight?• Perishable or
fragile?
Transportation Control
• If the seller has products with special conditions such as refrigerated, oversized, perishable, or dangerous goods the transportation arrangements will normally be more successful if the seller arranges them rather than the buyer’s freight forwarder.
Quote
• Determine the applicable INCOTERM• Always ask for packing and document
requirements to be specified by the buyer (this is your insurance card).
• Always stipulate your conditions for payment.
Review/Process Order
• Have payment conditions been met?• Can shipping terms/conditions be met?• Can document requirements be met?• Process order.• Ensure order and documents meet
conditions set by the parties.
Book Shipment
• Make sure all requirements/conditions are passed to carrier and confirmed.
• Ensure special conditions such as temperature control, dangerous goods, etc. are passed and confirmed.
Documentation
• Standard documents are:• Commercial invoice stating INCOTERM
with detailed description of goods.• Packing list showing cartons by number
and contents of each numbered carton.• Shipper’s letter of instruction and/or
Export Declaration (to forwarder only).• Other documents as specified by the
buyer.
Shipping
• Ensure that the goods are ready and meet the conditions of the order and the booking.
• Follow up with the carrier to ensure they are picked up.
• Ensure that the forwarder or carrier is filing AES (Automated Export System) on your behalf and obtain a copy.
Banking Documents
• If you are using your own forwarder it is more expeditious to have them file your letter of credit or sight draft documents.
• If you are using the client’s forwarder it is recommended that you complete the drafts and present them to the bank.
Export Issues
• Duty Drawback• Goods imported then re-exported• Fungible items• Complex—may not be worth the effort
• Export Controls• Controversial• Difficult to understand
Export Licenses
Carnet
• Avoids duties and taxes in each country goods pass through
• Covers many major countries• Covers:
• Tools of the trade• Demonstration equipment• Samples not for sale or distribution
FTZ Benefits
• Goods outside Customs Territory of US• Tariff shifts possible• Delays duty payment• Export without drawback headaches• Fix problematic goods• Reduce MPF
Who Arranges All This?
• The INCOTERMS agreed to between the buyer and seller specifies which party is responsible for each step
• Choosing the appropriate INCOTERM has very important benefits
FOB
EXW
CIF
CFRDD
U
INCOTERMS 2000
• Spells out obligations of seller for each term of sale
• Spells out obligations of buyer for each term of sale
INCOTERMS in Export
• EXW (ex-works)• FOB is commonly misused• FCA (free carrier)• CFR (cost and freight to)• CIF (cost, insurance, & freight to)• DDU (delivered, duty & taxes unpaid)• DDP (delivered duty paid—taxes to be
specified
FOB – Free On Board
• Applies only to ocean or inland cargo• Seller:
• Obtains licenses to export• Performs export customs formalities• Takes risk until good pass ships rail• Pays all costs up to goods passing ships
rail
FOB Challenges
• Loading costs are difficult to control.• The hand-off of goods from buyer to
seller is complicated.• Typically applies to large cargo with
special loading requirements such as yachts and large construction equipment.
EXW – Ex Works
• Exporter places goods at their premises for buyer to pick up. Buyer takes all risks, performs all customs formalities, obtains all licenses, provides labor to load goods, etc.
EXW Challenges
• Often conflicts with US export customs regulations as seller is the PPI.
• Impractical loading as seller normally cannot permit buyers contractor on property to load without waivers.
• Buyer is free to sell the merchandise anywhere—even in seller’s own market.
FCA – Free Carrier
• Seller has the obligation to deliver the goods and documents to carrier selected by buyer with the appropriate licenses and customs formalities for export.
FCA Challenges
• Seller must train multiple buyer’s carriers.
• Multiple truck pickups.• Buyer staff must learn multiple
carrier’s documents.• Scapegoating.• Buyer bears risk of refused shipment.
CFR – Cost & Freight
• Seller’s invoice includes cost and freight to destination.
• Seller arranges transportation.• Seller obtains export licenses and
performs customs formalities.• Buyer takes all risks of transportation.
CFR Points
• Seller uses forwarder who knows product and keeps shipping simple.
• Seller can use forwarder to file customs formalities with confidence.
• Seller is still at risk if buyer refuses shipment.
CIF – Cost, Ins. & Freight
• Similar to CFR except that seller takes the risk and obtains insurance to cover the shipment to destination.
CIF Points
• Seller uses forwarder who knows product and keeps shipping simple.
• Seller can use forwarder to file customs formalities with confidence.
• Seller’s risk for loss, except refusal, is covered by insurance.
DDU – Delivered Duty Unpaid
• Seller is responsible for transportation arrangements and costs to the named place including export customs formalities.
• Buyer is responsible for customs clearance arrangements and costs as well as unloading costs at destination.
DDU Points
• Seller is at risk for storage charges resulting from buyer’s agent speed of customs clearance.
• As the hand off is overseas from seller’s agents to buyers agents then back to seller’s agents and finally to buyer there are many opportunities for failure, cost, and liability
DDP – Delivered Duty Paid
• Seller is responsible to deliver the goods to the named place customs cleared without risk to the buyer.
• Seller arranges for export formalities• Seller arranges transportation• Seller arranges insurance• Seller arranges import clearance and
pays duties
DDP Challenges
• Seller must be able to legally file entry in seller’s name in a foreign country. If seller is unable to do so then buyer may insist on using their broker but seller still remains liable for service and costs.
• Seller must have assets in place to comply with the foreign country’s import regulations.
More DDP Challenges
• Seller is at risk for changes in duty and import requirements.
Can I Import? A DDP Issue
• Trade sanctions• Special limitations• Other government agencies• Additional documents
VISAS
FDA
DOT
EPA
USDA
Iran
Forwarders – Who Benefits?
For The Exporter• Reduces workload• Helps reduce
inland costs• Can assist in
preparing and filing documents
• Familiarity with product & special handling
For The Importer• Controls carrier
selection – cost and transit time
• Provides information about the location of the goods
Brokers – Who Benefits?
For Exporters• Exporters
generally derive no services or benefits from brokers
For Importers• Legally liable for
the documents filed by brokers
• Plays a vital role in coordinating all parties at arrival
How Do Forwarders Profit?
• Largest revenue source is freight profits
• Trucking and insurance provides some additional revenue
• Small amounts of revenue are from service fees
How to Brokers Profit?
• Charges fees based on work performed• Make additional profit from providing
insurance, trucking, or warehousing services
Typical Order of Costs
1. Cost of goods2. Transportation cost3. Warehousing & distribution4. Duties 5. Insurance & bonds6. Customs broker fees
Do The Math
• Importers use Landed Cost Analysis to calculate the true cost
• Exporters use only that portion of the Landed Cost Analysis that applies to their INCOTERM
Planning Is Key
• Know the transport needs of your goods
• Is export permitted?• Is import permitted?• Know the documentation requirements
for your goods
Where Do I Get Advice?
• Customs brokers• Freight forwarders• Government Export Promotion
Agencies• Logistics consultants
Customs-Trade Partnership Against Terrorism (C-TPAT)
Brief History
In 1965, Mr. Norman Krieger opened his first Customs brokerage office in downtown Los Angeles. Over the years, the company has grown from two employees to over 100. Today, his son Robert, is the President of Krieger Worldwide.
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Thank YouGary Stratton