A
wide range of services are essential to the smooth functioning
of international trade. International freight forwarders are the
intermediaries between sellers (exporters) and air, ocean, truck
and rail carriers. Freight forwarders make all the necessary
arrangements for these modes of transport. They coordinate the
transportation, any needed warehousing, finance, and insurance.
A freight forwarder can also clear goods for import into the US
if the company is a licensed Customhouse Broker. Forwarders are
licensed to handle international ocean shipments by the Federal
Maritime Commission, and by the International Air Transport
Association for international airfreight.
In
recent years, the forwarding industry has incorporated revenue
management and cost control systems, electronic data interface
(EDI) systems, and on-site and overseas services as clients’
needs have increased. Many forwarders have been at the forefront
of the technological advances in computer telecommunications and
shipping. Other major developments include the growth of
information and liability issues, global competition, major
market shifts, intermodalism, and professional certification.
A
seller must build a strong relationship with its forwarder by
providing information quickly, allowing adequate time for
shipments to be processed, paying invoices quickly, and,
establishing one person with the forwarder’s organization to
handle emergency situations. In order to avoid delays in
shipping, consider providing your forwarder a supply of blank
company stationery, commercial invoices and packing lists in
case last-minute changes to your original documents are
required. Discuss the legal implications with your attorney
before doing this.
With
power of attorney, a forwarder acts as your agent. The forwarder
prepares (or assists you in preparing) the documents involved in
a shipment to ensure they are complete, accurate, and in
compliance with both US and import destination legal
requirements.
At
your request, the forwarder will also distribute all documents
and will submit the entire package of documents to your bank to
expedite payment. They will also advise you of the foreign
marking and labeling that may be required for shipping
containers.
The
services a forwarder offer must include:
-
Logistic options to
destination
-
‘Delivered’ services to
exporters
-
Letter of credit
services
-
Electronic exchange of
documents
-
Internet tracking for
shippers, consignees and service providers
-
Compliance reviews
-
Cost analysis
-
Hazardous materials
audits
-
Marine insurance
-
Logistics options based
on customer goals
-
A single source for
knowledge about the export process
Compliance is a growing management issue. Government audits,
fines, and penalties are alerting exporters to the liabilities
involved in international transportation. Freight forwarders are
well-positioned to act as the exporter compliance officer. The
expertise available from reputable international freight
forwarders is invaluable to the success of an exporter’s
international trade business.
Freight forwarders will continue to expand their
services to manage the requirements of numerous governmental
entities that control various aspects of the export process. For
example, the US Department of Transportation controls transport
of hazardous material and the US Department of Commerce controls
the sale of sensitive technology to undesirable parties in
foreign destinations.
Most freight forwarders will find it necessary to encourage
exporters to interface their document preparation with the
forwarder’s automated programs. Internet tracking and the
ability to download shipment data will be a necessity for many
exporters. Duplicate keystroking is becoming an increasingly
significant cost issue. Both exporters’ and forwarders’ staff
will little time to devote to re-keying data.
Automated Export System (AES) is a central point through which
export shipping data that is required by multiple agencies can
be filed electronically with Customs, using Electronic Data
Interchange (EDI). Errors can be detected and corrected at the
time of filing. AES is a nationwide system and is operational at
all ports, for all methods of transportation. AES assures
compliance to export laws, improves the accuracy of trade
statistics and reduces duplication of reporting to numerous
agencies.
- The forwarder makes the
shipping arrangements and transmits the export data using AES.
- AES system validates the
data against editing tables and government agency requirement
files.
- A confirmation or error
message is generated and sent to your forwarder.
- Corrections as needed are
transmitted back to AES.
A
particular benefit to exporters is the increased reliability of
US export data as a research tool for information about foreign
markets.
Automatic electronic document sharing between the exporter and
forwarder will become increasingly important to both as they
seek to streamline the export process and manage export costs.
AES
is a joint venture between US Customs, the Bureau of Census
Foreign Trade Division, the Bureau of Export Administration, the
Office of Defense Trade Controls, other federal agencies, and
the export community.

As your
agent, a full service forwarder should be able to carry out the
following functions, to help keep your costs, volume of
paperwork and staff involvement to a minimum:
-
Ocean freight:
Supervise ocean shipments from your
facility to the foreign port of import and, if requested by
you or the importer, on to the customer’s location in the
export market.
-
Airfreight:
Expedite regular (and emergency) air
shipments (when your customer requests immediate delivery of
critically-needed spare parts).
-
Consolidation:
Combine several sellers’ goods into
a larger container to reduce your shipping costs. They should
be able to consolidate without unnecessary delays.
-
Banking:
Prepare and present documents to your bank
for collection and deposit to your account.
Importing: It may be
advisable to work with a forwarder who is also a licensed
Customhouse Broker. You may decide to import foreign goods as
new additions to your own product line, as components in your
current products, or in payment for some foreign orders (Countertrade).
Credit terms: A
forwarder may ask you to pay within seven days after receipt of
their invoice. They may be on seven to ten day terms with the
carriers they contract with for shipment of your goods. Clarify
your payment terms at the very beginning of your relationship.
Operating hours: Ocean
freight shipments: forwarder need only be open during normal
business hours. International cargo flights: usually depart in
the evenings- the forwarder should have someone available
overnight.
Local, National, International:
You may frequently need to deliver
last-minute documents, forms and merchandise in emergency
situations. Using a forwarder with an office near your facility
will reduce costs and time lost in travel, faxes and telephone
calls.
A
forwarder with other offices (branches or affiliates) in the US
is important for securing the most economical freight rates and
for tracing delayed or misrouted shipments.
In
emergency situations, it is very useful to have a forwarder with
offices or affiliations in foreign markets. When needed,
shipments can be traced quicker through the original forwarders,
without involving third parties.
References: Contact
references to learn how routine, non-routine and emergency
shipments are handled. In addition to the references provided by
the forwarder, talk to other service providers such
international bankers, who also have working relationships with
various forwarders through their export clients.
Choose two or three forwarders to meet with personally and
select one to work with. File information on the other
forwarders that rated highly. If your initial forwarder does not
meet expectations, you will have a ready list of screened
alternates for review.
Modes Of Transportation

|
MODES OF TRANSPORTATION |
PRO
|
CON
|
|
COURIER SERVICES
|
DHL, UPS offer efficient
service for shipments generally under 400 lbs.
From major trade lanes.
|
Extremely high cost. Some
evidence of poor Customs compliance. |
|
AIR FREIGHT
DIRECT |
Book directly with airline.
Priority transit.
Quick transit. |
Expensive particularly at
“book” rates. |
|
AIRFREIGHT CONSOLIDATION
|
Book with forwarder who may
match your freight with others. Transit time variable. |
Cost is significant but much
less than courier and “book’” rates. Some risk of “bumping.” |
|
AIRFREIGHT
‘EMERY’ |
‘Emery’ type service that
allows you to choose service level. More control over costs
and still preserve most of the benefits of airfreight. |
Significant cost savings and
higher probability of “bumping.” |
|
AIRFREIGHT/OCEAN COMBINATION
|
Somewhat popular with
Chinese freight.
Air to Korea; Ocean into US |
Considerable cost savings
but longer lead-time. Be sure that you control the service
provider. |
|
OCEAN FREIGHT
DIRECT |
The default choice for most
products. |
Inventory management must
account for shipping lead times. Advantageous only if you
are moving a container. |
|
OCEAN FREIGHT CONSOLIDATION |
Similar to airfreight but
with ocean transit, |
Wide range of services
available from incompetent to excessively expensive.
Interaction by freight forwarder /broker is essential.
|
|
OCEAN FREIGHT TRANSLOAD* |
Cargo is laden on board one
vessel, which takes the goods to another port for loading
onto a vessel bound for named destination. |
Longer transit time.
Increased handling = higher risk of loss. Sometimes
unavoidable. |
|
OCEAN FREIGHT
LAND BRIDGE
|
Ocean and rail combined. |
Periodic rail congestion. |
|
OCEAN FREIGHT
‘ALL WATER’
|
Ocean to closest port. Less
expensive where available. |
Relatively slow. |
|
TRUCK |
Mexico, Canada |
Wide range of competencies. |
Basic Shipping Documents
Bill of Lading
A document
signed by the captain, authorized agents or owner of a vessel as
a contract for the transportation of merchandise from a named
point or points to some other point or points of destination. It
is both a receipt and a contract for delivery of merchandise.
Air
Waybill 
A receipt and contract signed by an airline
company or its authorized agent, signing as the carrier for the
transport of merchandise to a specific place of destination. By
its nature an Air Waybill is not a negotiable instrument. It is
a common requirement that the Air Waybill show the flight number
and date.

Certificate of Origin
A signed
statement sometimes required in connection with shipments of
merchandise from one country to another for tariff purposes or
simply for confirmation of the origin of the goods. Usually it
is required that such a statement be made by a specific
independent party like a Chamber of Commerce. For some countries
the signature of the Consul of the importing nation may also be
required.
The NAFTA Certificate of Origin is
required for qualifying products traded in the NAFTA territories
(US, Canada, Mexico) to certify the goods qualify for
preferential tariff treatment accorded by the North American
Free Trade Agreement. Only importers who possess a valid NAFTA
Certificate of Origin may claim preferential tariff treatment
for originating goods.

Shipper’s Export
Declaration
A statement
prepared for the US Government on a specific form, used for
statistical purposes, which lists the merchandise being exported
from the US.
Transfer Of Title
And Risk Of Loss
Title or
Ownership of Goods
The
ownership of goods (title transfer) passes from the seller to
the buyer at some point in every transaction. When title
transfers, risk of loss or damage to the goods is also
transferred. We would advise every shipper to discuss this
important issue with his or her attorney.
In
many contracts for the sale of goods the parties involved do not
express their intention as to when, how or under what conditions
title to the goods is to be transferred. Title to the goods may
not even be discussed in the negotiations. It is implicit or
taken for granted. The parties are more interested in reaching
agreement on matters such as price, quantity, quality,
warranties, delivery schedule credit terms, discounts, and other
important features. Seldom does the abstract concept of title
enter into discussions.
Transfer of title to goods which have been identified to the
contract of sale passes from the seller to the buyer in any
manner and on any conditions agreed upon by the parties to the
contract of sale.
The rule is that
title to the goods passes when the parties intend it to pass.
Where parties have no explicit agreement as to the transfer of
title, then title passes to the buyer:
-
At the time and place at
which the seller completed his performance with reference to
delivery of the goods.
-
At the time and place of
shipment, if the contract authorizes shipment but does not
require the seller to deliver the goods to the buyer at
destination.
-
Upon tender of the goods
to the buyer at destination, if the contract requires delivery
at destination.
-
Upon delivery of a
document of title where the contract calls for delivery of
such document without moving the goods.
-
At the time and place of
contracting where the goods at the time are identified to the
contract, no documents are to be delivered, and delivery is to
be made without moving the goods.
-
Title can only be
transferred on existing, specific, identified goods. Title
cannot pass under a contract of sale prior to their
identification.
After
formation of the contact of sale, the seller obtains,
manufactures, prepares or selects goods with which to fulfill
his obligation under the contract. Once the goods have been
identified, relative to the contract, title to the goods may
pass to the buyer. Title need not pass to the buyer at this
point in the transaction! However, once the goods have been
identified to the contract of sale, the buyer assumes a
special property interest in the goods.
-
This special property gives the buyer an insurable interest
in them, even though, in fact, they may not conform to the
contract of sale.
-
Identification
of the goods to the contract does not shift the risk of loss.
-
After identification, the seller may under the contract have
duties to perform with respect to the goods.
Risk Of Loss
According to the general rule, the risk of loss or damage to
goods is borne by the person who is the owner at the time of the
loss or damage. This is true in every case.
-
Even
where the buyer may have assumed risk of loss, the holder of
title to the goods still bears risk of loss.
-
There is nothing to prevent both the buyer and seller at the
same time carrying insurance on goods in which they both have
a property interest (title, security interest or special
property).
Risk
of loss, as the term is used in the law of sales, means
placement of the ultimate loss upon the buyer or the seller. If
placed upon the buyer, he is under a duty to pay the price for
lost or damaged goods even though he never received them or
became owner of them. If placed upon the seller, he has no right
to recover the purchase price from the buyer.
There
are specific rules that impose risk of loss upon the buyer or
the seller irrespective of title or ownership of the goods:
Agreement of the parties.
Delivery to a carrier.
-
If
the contract does not require the seller to deliver the goods
at a particular destination, risk of loss passes to the buyer
upon delivery of the goods to the carrier. If the seller is
required to deliver them at a particular destination, risk of
loss passes to the buyer at destination upon tender even
though the goods are in the possession of the carrier.
Goods and possession of bailee
(warehouseman) to be delivered without being moved.
-
Where the goods at the time of the contract are held by a
bailee and are to be delivered without being moved, the risk
of loss passes to the buyer on his receipt of a negotiable
document of title covering the goods or receipt of a
non-negotiable document of title or other written direction to
deliver the goods unless the buyer reasonably objects.
Goods not to be shipped by
carrier.
-
If
they are in the possession of the seller, buyer or other
bailee, if they are in the possession of the third party
bailees, the contract may provide for delivery to the buyer
either without moving the goods or by moving them.
Transfer of title is essential to a sale of goods. Transfer
of title is not essential to the imposition of risk of loss to
the goods.
Risk
of loss may follow ownership of the goods but this is not
necessarily so. Risk of loss may exist independently of
ownership of the goods.
A
determination of whether title to goods has been transferred is
important with respect to liability for taxes, duties, inventory
management and it’s effect on the balance sheet.
There
are many costs to consider that
may or may not apply to a particular shipment. To a great
extent, most of these costs can be ascertained. Some cannot be
anticipated. Others might occur and may or may not be within
your ability to control. Expenses might change in response to
changes in fundamental factors such as the price of oil,
political changes, labor strikes, or natural disasters. Most of
these cost factors can affect any shipment, domestic or
international. But, the cost
factor most effecting the international shipment is that it must
travel longer distances, over a greater period of time, and
across international borders. This increases the probability of
an unfavorable event occurring that will adversely affect
customer service levels on an export shipment or, cost of goods
sold for an imported product.
Some
you will see on every shipment (ocean freight for goods shipped
by ocean). Others may never appear, such as detention.
Cost Factor Analysis
Check List
|
COSTS*
|
Who pays? Importer
or Exporter?
|
|
Cost of Letter of Credit
|
A |
X
|
|
Cost of the product |
A |
X |
|
Packing and loading |
S |
X |
|
Delivery from Factory door
to Port of Lading |
S |
X |
|
Ocean Freight, Air
Freight, Truck |
S |
X |
|
Terminal Transfer fees |
S |
X |
|
Container restriction |
S |
X |
|
Inland transportation from
Port of Unlading to Customs clearance point
|
S |
X |
|
Customs examination
charges |
T |
X |
|
Local cartage to Customs
exam site |
S |
X |
|
Customhouse clearance fees
|
T |
X |
|
Bond premiums
|
A |
X |
|
Marine Insurance
|
A |
X |
|
Duty |
A |
X |
|
Special duties |
A |
X |
|
Merchandise processing
Fees |
A |
X |
|
Harbor Maintenance Fees |
A |
X |
|
Delivery costs to
destination |
S |
X |
|
Credit Insurance |
A |
X |
|
VAT (Value added Tax) |
A |
X |
|
Excise Taxes |
A |
X |
|
Permits |
T |
X |
|
Detention
|
T |
X |
|
Terminal fees
|
T |
X |
|
Handling charges
|
T |
X |
|
Document Transfer fees |
T |
X |
*T(transactional)
S (shipment) A (ad valorum)
Who Pays These Fees?
It is
the exporter who can guide the negotiations to determine which
costs are paid by the exporter and which are paid by the
importer.
The
fees might be divided into three subgroups:
Costs associated with the purchase of the goods. The shipment may be 1
cubic meter of imported goods or 20 containers. Transactional
costs are relatively inflexible as to the size of the shipment.
For instance, our service fees would remain about the same
(small increases might result from multiple duty classifications
or delivery orders) whether the shipment was a single container
or several dozen containers. Other costs that are transactional
in nature are: terminal fees, handling charges, document
transfer fees, and, most importantly, the cost of the product.
|