10/21/2013
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Presenter:
Marilyn Gettinger, C.P.M., CPSM
The Total Landed Costs of
Offshoring in 2013
Marilyn Gettinger, C.P.M., CPSM
• Credentials – C.P.M., CPSM, MBA
• Customized training and consulting in supply
chain management since 1994
• Course developer and instructor for SCM
certificate programs at Bergen, Union County,
and Middlesex County Colleges as well as at
William Paterson University
• International Trade and Importing at Baruch
University
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Presentation Objectives
• Review of the importing process
• Identification of information resources
• Import cost factors
• Total landed cost model
• Impact of regulations
• Total landed cost reduction opportunities
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What Will We Talk About?
• Worth the work
• Definitions
• Challenges
• Resources
• Import regulations
• TLC model framework
• Keeping up with events
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Worth the Work
• Poor return on investment
• Net losses
• Quality Issues
• Disruptions
• Incorrect pricing models
• Return to onshoring or insourcing
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Definitions
• International sourcing
• Global sourcing
• Offshoring
• Near shoring – Canada and Mexico
• Total landed cost or total delivered cost
• Total cost of ownership
• Trade and other U.S. agreements
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Challenges
• Data difficult to gather
• Time constraints preclude adequate analysis
• Lack of resources to maintain cost inputs
• Silo mentality
• Focus on low wages rather TLC’s
• Push from senior management
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Resources
• Code of federal regulations – www.ecfr.gov
• Harmonized tariff schedule of the United
States – www.usitc.gov
• Customs Border and Protection Agency –
www.cbp.gov
• International Commercial Terms 2010
– http://www.iccwbo.org/
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Import Regulations
• Labeling and marking requirements
• Import licensing, registrations, permits
• 24-hour rule
• Import security filing – 10+2
• Container screening initiative
• Certifications
– Lacey Act
– Wood fumigation
– Seals
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Getting Started
Questions
Prohibited Items Fish, Wildlife
Meats, Livestock, Poultry
Restricted Items Fish, Wildlife
Food
Plants and Seeds
License or Registration Agency Identification 40 Possible Agencies
FDA, USDA, EPA
Markings and Labeling
Made in America
Code of Federal
Registration
Title 19
Federal Trade Commission
Embargoed Country OFAC – The Office of
Foreign Assets Control
Cuba, Iran, Sudan
Quotas Absolute
Tariff Rate
Country of Origin Code of Federal
Registration 10
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Import Flow
IMPORTER/SHIPPER Purchase Order
CONSOLIDATOR / NVOCC Freight Receipt
Master & House Bills of Lading
Local/Ocean Transportation* Ship Manifest*
CUSTOMS BROKER Import Entry
Duty Payment Cargo Clearance
Local Transportation*
FACTORY Production In-country
Transportation*
FOREIGN PORTS/ TERMINAL OPERATORS
Longshore Labor
U.S. PORTS/ TERMINAL OPERATORS
Longshore Labor
FREIGHT FORWARDER
Document Packet Original Bill of Lading (OBL)
In-country/Ocean Transportation*
OCEAN CARRIER Vessel Availability
Port Landside Operations Ship Manifest
TRUCKING COMPANIES/RAIL LINES
Local Distribution
FINAL DESTINATION
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Getting Started - Pre-Transaction Costs
• Manpower
• Research
• Country study
• Onsite visit
• Overhead placement
• Cost analysis evaluation
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Payment Terms
• Prepayment
• Deposit
• Letter of credit – 2-3% of the value of the LOC
• Confirming bank
• Local bank
• Draft
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Currency Fluctuations
• Agreement in Euros = €1,000,000
• €1.5 = $1.00 = $ 666,666.66
• €1 = $1.00 = $1,000,00.00
• €2 = $1.00 = $ 500,000.00
• Agreement in Dollars = $666,666.66
• €1.5 = $1.00 = €1,000,000.00
• €1 = $1.00 = € 666,666.00
• €2 = $1.00 = €1,333.332.00
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Service
EXWEx-Works
FCAFree
Carrier
FASFree
Alongside Ship
(ocean only)
FOBFree
Onboard (ocean only)
CFRCost of
Goods & Freight (ocean only)
CIFCost
Insurance & Freight
(ocean only)
CPTCarriage Paid To
CIPCarriage
Insurance Paid To
DAPDelivered At Place
DATDelivered
At Terminal
DDPDelivered Duty Paid
Warehouse Services
Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Export Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Loading at Point of Origin
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Inland Freight Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Port Receiving Charges
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Forwarder Fees Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Ocean/Air Freight
Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller
Charges in Foreign Port;
Foreign AirportBuyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller
Custom Clearance
Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller
Customs Duties Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller
Delivery Charges to Final
DestinationBuyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller
OBLIGATIONS AND CHARGES
Incoterms 2010Responsibility Matrix - Obligations of Importer (Buyer) and Exporter (Seller)
"E"Departure
"F"Main Carriage Unpaid
"C"Main Carriage Paid
"D"Arrival
INCOterms
• Ask the right questions:
• What does that include?
• Documentation?
• Insurance?
• Carriage?
• Port fees?
• Licensing?
• Value added taxes?
• Province taxes?
• Packaging?
• Material costs?
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Documentation
Customs bond
Insurance document
Bill of lading
Commercial invoice
Customs invoice
Entry Summary (7501)
Immediate Entry Summary (3461)
Proforma invoice
Letter of credit
Country of origin
Entry Manifest 7533
Packing list
Certificates
Permits
Customs bond
Insurance document17
Total Landed Cost Factors – Unit Price
Country of Origin
• Letter of credit
• Fumigation
• Seal closure
• Province taxes
• VAT – Value added
tax
• Inland transportation
• Certifications
• Export documents
• Importer security
filing (10+2)
• Container screening
• QC inspection
• Shipping loading
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Total Landed Cost – In Transit
Country of Destination• Ocean freight
• Packaging
• Maritime insurance
• Ship unloading
• Port fees
• Import
documentation
• Customs review
– $0.21% of value of
goods with $25 min
and $450 max
• Harbor maintenance
fee
– 0.125% of the
entered value of
goods
• Customs duties
Total Landed Cost -
• Freight forwarder
• Customs broker fees
• Drayage to location
• Customs bond
– $45/$1000 with
– $45 minimum
• Container screening
– $450.00
• Pipeline inventory
– Unit Price x
.0075/week carrying
cost x lead time in
weeks
– Ex. $100 x .0075 x 6
weeks = $100 + $4.50
= $104.50
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Customs Broker Fees
• Customs Entry Form (7501) $125.00
• In-bond entry $ 70.00
• Routine messenger $ 20.00
• Additional classifications $ 7.50
• Additional invoices or BOL $ 20.00 each
• FDA, USDA, other agency $ 20.00 each
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Cost Considerations
• Offshoring – up to 25% overall savings
Offshoring – Actual savings realized 4-6%
Total cost of ownership supply chain costs
3-5% locally to increase to 35% globally
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Electronic Transfer
• U.S. Custom’s Automated Commercial System
(ACS)
• Automated Commercial Environment (ACE)
• FAST – Free and Secure Trade
• Automated Broker Interface (ABI)
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Importer Security Filing (ISF) (10+2)
• January, 2010
• Electronic filing 24 hours prior to loading
container
• Up to $85 per transaction
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Importer Security Filing – 10 Elements
• Importer of record
• Consignee number
• Ship to party
• Manufacturer/
• Supplier
name/address
• Country of origin
• Commodity HTS-6
• Container stuffing
location
• Consolidator
(Stuffer) name and
address
Importer Security Filing - +2
• ASAP, but NLT 24
hours to arrival
• Foreign port of
lading
• Place of delivery
• +2
• Vessel stow plan
• Container status
message data
• NLT 48 hours after
departure
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Customs-Trade Partnership Against
Terrorism (C-TPAT)• A voluntary certification program
• Secure international import processes
• CPB approval
• Average implementation costs
– $38,471
• Average maintenance costs
– Security personnel $40,441
– Salaries and Expenses of personnel $28,454
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Keeping Up With Events
• Customs brokers
• Smart containers
• Sustainability and green initiatives
• Emerging seaports
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Keeping Up With Events
• Intermodal growth
• Bunker fuel
• Harbor maintenance tax
• Prince Rupert Seaport
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Keeping Up With Events
• The big ships
• Natural gas
• The Panama Canal
• Inland ports
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Keeping Up With Events
• Food & Drug Administration
• Chassis
• Transloading
• Global trade management
Keeping Up With Events
• Drayage trucking
• Foreign trade zones
• Duty drawback
• Bonded warehouses
• Future regulations
10/21/2013
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Thank you For Learning With Me Today
• For additional questions, please contact me
Marilyn Gettinger at:
• 908-709-0656
Survey
www.tinyurl.com/lc3s3fm