Center for Logistics, Trade and Transportation
Intermodal Transportation Curriculum for
Secondary Education – Pilot Study
MODULE 3: Freight Forwarding and
International Shipments
WORKSHOP
October 22 & 23, 2012 - Trent Lott Center, University of Southern Mississippi
Prepared By:
Ms. Cole Bernstein
The Irwin Brown Company
Dr. Tulio Sulbaran, Dr. Mohammad Rahman, Dr. MD Sarder, & Dr. Chad Miller
Center for Logistics, Trade, and Transportation (CLTT) - The University of Southern Mississippi
Under the Supervision of:
Dr. Lemond Irvin & Mr. Brad Skelton
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Center for Logistics, Trade and Transportation
Module 3: Learning Outcomes
1. Describe the basic business activities and related terms used
in international shipping.
2. Discuss the various documents related to international
shipping
3. Learn about the process of international shipments.
4. Understand supply chain logistics providers such as 3PL, 4PL,
customs brokers, freight forwarders
5. Role of Logistic providers in intermodal operations
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Center for Logistics, Trade and Transportation
Learning Sessions
Session 1: Understand the terms used in international shipping
Session 2: Get familiar with various documents related to
international shipping
Session 3: Know how to prepare – Bill of Lading, Letter of Credit
etc.
Session 4: Learn about the process of international shipments
Session 5: Understand supply chain logistics providers such as
3PL, 4PL, customs brokers, freight forwarders,
Session 6: Role of Logistic providers in intermodal operations
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Center for Logistics, Trade and Transportation
Session 1:
Understand the terms used in international
shipping – Incoterms 2011
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Center for Logistics, Trade and Transportation
Trade Terms
• INCOTERMS are a set of three-letter standard trade terms most
commonly used in international contracts for the sale of goods. It is
essential that you are aware of your terms of trade prior to
shipment.
• Responsibilities of buyer and seller need to be negotiated.
• Trade terms used as a short hand for assigned responsibilities and
allocating when the risk passes from one party to another.
• Most commonly used in International Trade but can be used for
Domestic Movement of goods
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Center for Logistics, Trade and Transportation
INCOTERMS 2012
INCOTERMS 2012
EXW
EXWORKS (PLACE OF DELIVERY)
FCA
FREE CARRIER (PLACE OF DESTINATION)
CPT
CARRIAGE PAID TO (PLACE OF DESTINATION)
CIP
CARRIAGE AND INSURANCE PAID (PLACE OF DESTINATION)
DAT
DELIVERED AT TERMINAL (PORT OF DESTINATION)
DAP
DELIVERED AT PLACE (PLACE OF DESTINATION)
DDP
DELIVERED DUTY PAID (PLACE OF DESTINATION)
MARITIME-ONLY TERMS
FCA
FREE CARRIER (PLACE OF DELIVERY)
CFR
COST AND FREIGHT (PORT OF DESTINATION)
CIF
COST, INSURANCE & FREIGHT (PORT OF DESTINATION)
FAS
FREE ALONGSIDEE SHIP (PORT OF SHIPMENT)
FOB
FREE ON BOARD (PORT OF SHIPMENT)
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Trade Terms: E & F Terms
 EXW – Ex works: The seller's only responsibility is to make
the goods available at the seller's premises.
– The buyer bears full costs of moving the goods from there to
destination.
– Risk shifts to buyer when goods made available by seller at named
location.
 FCA – FREE CARRIER (… named place of delivery)
– The Seller delivers the goods, cleared for export, to the carrier
selected by the Buyer.
– The Seller loads the goods if the carrier pickup is at the Seller’s
premises.
– From that point, the Buyer bears the costs and risks of moving the
goods to destination.
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Center for Logistics, Trade and Transportation
Trade Terms: C Terms
 CPT – Carriage paid to: The seller pays for moving the goods
to destination.
– Risk shifts to buyer when goods are transferred to the first carrier.
– Buyer must procure own insurance.
 CIP – Carriage & insurance paid to: The seller pays for
moving the goods to destination.
– Risk shifts to buyer when goods are transferred to the first carrier.
– Seller must purchase cargo insurance; buyer can claim on policy.
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Center for Logistics, Trade and Transportation
Trade Terms: D Terms (I)
 DAT – DELIVERED AT TERMINAL (… named terminal at port or
place of destination)
– The Seller delivers when the goods, once unloaded from the arriving
means of transport, are placed at the Buyer’s disposal at a named
terminal at the named port or place of destination.
– “Terminal” includes any place, whether covered or not, such as a
quay, warehouse, container yard or road, rail or air cargo terminal.
– The Seller bears all risks involved in bringing the goods to and
unloading them at the terminal at the named port or place of
destination.
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Center for Logistics, Trade and Transportation
Trade Terms: D Terms (II)
 DAP – DELIVERED AT PLACE (… named place of destination)
– The Seller delivers when the goods are placed at the Buyer’s disposal
on the arriving means of transport ready for unloading at the names
place of destination.
– The Seller bears all risks involved in bringing the goods to the named
place.
 DDP – DELIVERED DUTY PAID (… named place)
– The Seller delivers the goods -cleared for import – to the Buyer at
destination.
– The Seller bears all costs and risks of moving the goods to destination,
including the payment of Customs duties and taxes.
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Center for Logistics, Trade and Transportation
Maritime-Only Terms
• CFR – Cost & freight: The Seller clears the goods for export
and pays the costs of moving the goods to destination.
– The Buyer bears all risks of loss or damage.
• CIF – Cost, insurance & freight: The Seller clears the goods
for export and pays the costs of moving the goods to the port
of destination.
– The Buyer bears all The Buyer bears all risks of loss or damage.
– The Seller, however, purchases the cargo insurance.
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Center for Logistics, Trade and Transportation
Maritime-Only Terms (cont’d..)
 FAS – FREE ALONGSIDE SHIP (port of shipment)
– The Seller delivers the goods to the origin port.
– From that point, the Buyer bears all costs and risks of loss or damage.
 FOB – FREE ON BOARD (port of shipment)
– The Seller delivers the goods on board the ship and clears the goods
for export.
– From that point, the Buyer bears all costs and risks of loss or damage.
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Load
on
Truck
Export
Docs
Move
to Port
of
Export
Unload
From
Truck
Center
for Logistics,
Trade and
Transportation
Load at Move to
Unload
Move
InsurImport
Port
Port of
at Port
to
ance Docs &
Import
of
Final
Duties
Import Dest.
EWR
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer Buyer
Buyer
FCA
Seller
Seller
Buyer
Buyer
Buyer
Buyer
Buyer
Buyer Buyer
Buyer
FAS
Seller
Seller
Seller
Buyer
Buyer
Buyer
Buyer
Buyer Buyer
Buyer
FOB
Seller
Seller
Seller
Seller
Buyer
Buyer
Buyer
Buyer Buyer
Buyer
CFR
Seller
Seller
Seller
Seller
Seller
Buyer
Buyer
Buyer Buyer
Buyer
CIF
Seller
Seller
Seller
Seller
Seller
Buyer
Buyer
Buyer Seller
Buyer
DAT
Seller
Seller
Seller
Seller
Seller
Seller
Buyer
Buyer Buyer
Buyer
CPT
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller Buyer
Buyer
DAP
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Buyer
CIF
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Buyer
DDP
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
Seller
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Center for Logistics, Trade and Transportation
Measurement of damages in CIF
contract
• Seaver v. Lindsay : U.S. rule: damages measured by the
market price of the goods at the port of shipment on that
date
• Sharpe & Co. v. Nosawa & Co.: English rule: damages
measured at date and location of delivery
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Center for Logistics, Trade and Transportation
Session 2:
Get familiar with various documents
related to international shipping
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Center for Logistics, Trade and Transportation
Documentation
• Invoice- typically the bill of sale that includes a detailed
description of the items, price/value, terms of sale
(INCOTERMS), names & address of buyer and seller
• Packing List- a detailed list of what the shipment includesoften which items are in which packages.
• Bill of Lading- this details the shipping information like parties
involved, steamship name and voyage, number of packages,
weight and measure as well as gives title of the merchandise
to a specified party.
• Financial Documents- Letter of credit, Documentary Transfer
Agreements, Payment Terms
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Center for Logistics, Trade and Transportation
Bill of Lading
• A document of title issued by a carrier to a shipper upon
receiving goods for transport; also serves as receipt for goods
delivered and contract of carriage.
• A negotiable bill of lading dictates that the carrier will only
release the cargo once they have received an original bill of
lading that has been endorsed by the consignee.
• The endorsement is similar to signing the back of a check
when you are depositing it to the bank.
• Express Bills of Lading cannot be used in a documentary
transfer type of financial relationship because the goods have
already been pre-released to the buyer/consignee
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Center for Logistics, Trade and Transportation
Documents
• Documentary Sale:
– Buyer is required to pay upon presentation of NEGOTIABLE
DOCUMENT OF TITLE by seller
– Document of title: evidences ownership of goods: dock
receipts, warehouse receipts and bills of lading
– Documents transfer ownership of goods, while goods may
stay with bailey
– Negotiability: ability of document to be transferred legally
from one party to another in return for value
• Control of the documents = Control of goods
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Center for Logistics, Trade and Transportation
G
Japanese
Importer
B
A
Sales Contract
CIF Japanese Port
Documents Against Payment
E
Collecting
Bank
American
Exporter
C
F
D
F
Exporter’s U.S.
Bank
(Remitting Bank)
A. Sales contract calls for documentary sale
B. Documents prepared - export license obtained - goods delivered to carrier
C. Negotiable bill of lading, insurance policy, certificates of origin, invoice with
draft attached presented to remitting bank
D. Documents forwarded for collection through International banking system
E. Documents presented for negotiation on payment
F. Payment remitted and exporter’s account credited
G. Importer claims goods and makes entry
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Center for Logistics, Trade and Transportation
• Letter of Credit
– A negotiated agreement between buyer and seller about the terms
and conditions that must be met for money to transfer for the
purchase of goods.
– This is a bank document and the banks of the parties involved are the
ones who must sign off on the deal.
• Like all financial transactions, this one still has risks.
• Letter of Credit Assessment
– One of the critical roles a Freight Forwarder can play is to look over
the Letter of Credit to see if the transportation terms can be met.
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Center for Logistics, Trade and Transportation
Session 3:
Know how to prepare – Bill of Lading,
Letter of Credit etc.
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Center for Logistics, Trade and Transportation
Key Terms in Documents
• Parties:
–
–
–
–
–
–
Exporter/Seller- party with original ownership of the goods.
Consignee/Buyer- party who is purchasing and receiving the goods.
Forwarding Agent- Freight Forwarder
Notify Party/Intermediate Consignee- Often the Customs Broker.
Bill To Party- If different from the Consignee.
Related Parties- this may effect the declared value of the goods.
• Reference Numbers & Terms
– Invoice #’s, PO #’s, File #’s should be on the invoice for reference.
– Transportation Terms (FCL/LCL), INCOTERMS & Payment Terms should
all be outlined as well on the Invoice
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Center for Logistics, Trade and Transportation
Key Terms in Documents (cont.)
• Cargo:
– Marks & Numbers- the boxes in your shipment may be marked in a
specific way with seal #’s etc.
– Number of Packages- usually expressed in cartons, barrels, etc
– Description of Commodities in Schedule B detail- detailed description
of goods being shipped
• Schedule B is a number assigned to a commodity that helps keep track of
what is being exported. It can also assist in import classification.
– Gross Weight & Measurement- most commonly expressed in
kilograms (kg) and cubic meters (cbm).
• Metric weights and volumes are standard in international trade.
– Packing Lists should have detailed information about what cargo is in
what package. This is critical if you are splitting up a shipment
between multiple delivery locations.
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Center for Logistics, Trade and Transportation
Key Terms in Documents (cont.)
• Carrier Information:
–
–
–
–
Exporting Carrier- steamship/airline vessel
Booking Number- carrier reference number
Port of Loading- port of origin where goods are loaded onto the vessel.
Port of Unloading- destination port though may not be the original
port of arrival.
– Dates- sailing dates/date of export.
– Type of move-LCL or FCL
– Terminal information- specific warehouses or piers
• Financials:
– Declared Value- what the goods are worth at time of sale.
– All charges for tax, shipping, packaging may be listed on invoice, but
customs values are only for the goods themselves.
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Electronic Data Interchange (EDI)
• Trade documents filed electronically
• Faster transmission; parties can track goods and
adjust documents as necessary; reduce preparation
of multiple copies
• Security issues:
–
–
–
–
Digital signature laws should help
Unauthorized access problem
Liability issues
Lack of standardization for electronic documents
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Center for Logistics, Trade and Transportation
Session 4:
Learn about the process of international
shipments
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Beginning the Transportation Process
• Range of Complexity
–
–
–
–
–
Email
FedEx/small box
Large package
40’ Container
Project Cargo
• Importing vs. Exporting
– Paperwork & Permits
– Freight Costs
• Control of the Goods
– INCOTERMS help
determine the contract
between the buyer and
seller for the movement
of the goods.
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Center for Logistics, Trade and Transportation
Types of Contracts:
Shipment and Destination
• Shipment Contract: Contract calls for seller to ship
goods by carrier, but not to deliver goods to named
location
– Most common in international trade
– Presumption in favor of shipment
– Risk of loss passes when goods handed to carrier
• Destination Contract: Contract calls for seller to
deliver goods to particular destination
– Greater responsibility on seller
– Risk passes when goods tendered to buyer at destination
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Center for Logistics, Trade and Transportation
Risk of loss under contracts
• Shipment contract: risk
passes when goods are
given to the first carrier
• Presumption of shipment
contract if not specified
• Destination contract: risk
passes when goods are
given to buyer at
destination point
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Center for Logistics, Trade and Transportation
Before You Buy (or Sell)
• Sourcing
– Free Trade Agreements
• Shipping Lanes
– Moving things over land is expensive.
– Traditional lanes provide lower costs.
• Permits & Restrictions
– There are 10 categories of restricted items for export from the US.
• Most have to do with military use, technology and crowd control.
– In addition to US restrictions, foreign governments have their own
requirements:
• Used items
• Vehicles
• Meat
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Plan the Transit
• Delivery Location
– Single or multiple deliveries?
– Inland trucking/rail/barge?
– Carrier delivery or separate
firm?
• Cargo Insurance
– Determine from INCOTERM
who is responsible for cargo &
therefore how much insurance
coverage you need.
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Freight Forwarding
• Book Shipment
– Contracts with Steamship Lines
– Work with NVOCC’s on LCL shipments.
– Charter a vessel for commodity shipments.
• Coordinate Movement of Goods
– To and From the Ports
• Ensure that the cargo gets to each of its destination points.
• Create Export Documentation
– Shippers Export Declaration- tells the US Government what is being
sent, the parties involved and the quantity.
• This information is how we get trade statistics.
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Loading the Cargo for Sailing
• Importer Security Filing (ISF)
– US Customs Security Measure
• Right now ISF’s are only required for US Ocean imports.
• Europe has a similar filing but only for carrier, not importer.
– 24 hours before sailing
• Ensuring the Cargo Loads
– Capacity Issues
• Container weight is something that is watched carefully as it affects not
just steamships but highways, truckers, and the railroad.
– Delays & Limited Sailings
• Certain destinations may have limited sailings so the cargo will be
transloaded from one vessel to another so the containers are aggregated.
• Weather, politics and infrastructure can all affect the movement of goods.
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Sailing & Tracking
• Tracking the Cargo
– Be alert for unplanned stops.
• Cargo may be rerouted for some reason or be mistakenly delivered
to the wrong port.
• Keeping updated on the status of your container can help get your
cargo moved faster and combat human error.
– Know when the cargo arrives & make sure it is picked up
on the other end.
• Even if your responsibility only lies in getting the goods on a vessel,
knowing your cargo has been picked up and cleared through
Customs can ward off unexpected liability.
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Government Agencies
• Documentation
– Other government agencies may require additional documents or
certain codes to be submitted on the customs import or export forms.
• Permits
– Agencies like ATF may require permits to be filed before a shipment
can be imported/exported to prove the legality of the sale.
• Inspections
– US Customs, USDA & FDA are the most common inspectors of cargo.
Often the bills for the storage are charged to the party who is paying
the local charges.
• Payment of Duties, Taxes & Fees
– This can be done directly by the importer/exporter or through the
Customs Broker.
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Delivery
• Delivering the cargo can bring up a number of
considerations:
– Warehousing
• Split Shipments
• Labeling/Packaging
– Multiple Delivery Locations
– Commercial vs. Residential
• Many trucking companies do not deliver or pick up cargo from residential
addresses.
• Loading dock speciation's may be different from the trucker’s equipment.
– Specialized Equipment
• Lift gates, fork lifts, and other equipment may be required for the
unloading of cargo.
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Center for Logistics, Trade and Transportation
Final Verification
• Check goods upon delivery:
– Accurate shipment
– Damages
– Happy customer
• Check total charges for the goods including
transportation:
– Make sure you made the profit you wanted/expected from the sale
even with all of the charges, expected and unexpected.
– Transportation costs must factor into your profit margin or you may be
losing money.
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Center for Logistics, Trade and Transportation
Session 5:
Understand supply chain logistics
providers such as 3PL, 4PL, customs
brokers, freight forwarders,
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Center for Logistics, Trade and Transportation
Classifying Logistics Companies
• Providers of logistics services grown both in scale and services
• Own account transportation:
– When a company provides its own transport services
• Logistics service providers:
– Freight carriers: e.g. hauliers, trucking companies, train companies,
airlines, shipping companies
– Freight forwarders: make bigger transportation arrangements.
– NVOCC (non-vessel-owning common carrier)
• Consolidate smaller shipments – ‘Groupage or Consolidated shipments’
• Form full container load collecting shipments from various consignees.
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Center for Logistics, Trade and Transportation
Classifying Logistics Companies (contd..)
Logistics Service Providers
• Couriers: developed in 1980s and 1990s
– Respond to immediate delivery of products
– Works within and between large urban areas and service organizations
• Integrators: includes FedEx, United Parcels Service (UPS)
– Offer a seamless (i.e. integrated) end-to-end service from consignor (Sender)
to consignee (receiver)
– National and International (global)
– ‘Tack and Trace’ freight as products move along transport chain
• Agencies: follow NVOCC concepts
– A number of individual companies combine together to form an agency to
gain buying power and reduce freight transport rates.
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Third Party Logistics (3PL)
• Distinguishing LSPs and 3PLs:
– Any company provides logistics services are defined as logistics service
providers (LSP)
– LSPs that provide multiple logistics services, often in an integrated
fashion, are the Third Party Logistics (3PL) companies
• Third Party Logistics providers are like general contractors for your freightthey hire and coordinate multiple LSP’s.
Notes:
• Many companies do not perform their own logistic activities.
• Therefore, it needs to find service providers and select criterion to
choose a particular service provider.
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Third Party Logistics
• Some services provided by 3PL:
– Transportation – often using multiple modes
– Warehousing – include capacity for seasonal, other fluctuations
– Pick and Pack – picking multiple different Stock Keeping Units (SKUs)
and packing these into a single unit.
– Vendor Managed Inventory – acts as a distribution point.
– Customs Clearance – associated with regulatory requirement,
hazardous goods clearances.
– Managing Reverse Logistics – managing repair and return
– Critical Parts Distribution – automotive spares, medical tech
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Center for Logistics, Trade and Transportation
Third Party Logistics
• Some services provided by 3PL:
– Transportation – often using multiple modes
– Warehousing – include capacity for seasonal, other fluctuations
– Pick and Pack – picking multiple different Stock Keeping Units (SKUs)
and packing these into a single unit.
– Vendor Managed Inventory – acts as a distribution point.
– Customs Clearance – associated with regulatory requirement,
hazardous goods clearances.
– Managing Reverse Logistics – managing repair and return
– Critical Parts Distribution – automotive spares, medical tech
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Center for Logistics, Trade and Transportation
Fourth Party Logistics (4PL)
• 4PL - new concept emerged
– Called companies total outsource solutions
– 4PL is a supply chain integrator that assembles and
manages the resources, capabilities and technology of its
own organization, with those of complementary service
providers, to deliver a comprehensive supply chain
solution (Accenture, 1996)
• Incredibly Useful - outsourcing companies (if company that outsource
some of its recourses
• 3PL + Managing resources, capabilities and technologies etc.
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Center for Logistics, Trade and Transportation
Session 6:
Role of Logistic providers in intermodal
operations
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Rise of Intermodal Logistics
• The growing flows of freight are the main reason to promote
Intermodal transportation in order to find large turnover
capacity, speed and safe transportation
• The rise of intermodalism is due to emergence of technology
and management requirements for freight such as containers,
swap bodies, pallets or semi-trailers.
• Logistics Service providers, 3PL and 4PL promote intermodal
transportation due to increasingly complex needs of the
supply chain
• Business utilize the benefits that intermodalism provide
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Logistics Providers and Intermodal
Transportation
• Vast array of information processing / logistics changes due to
globalization and international trade
• Many Logistics Companies offer a complete line of
international shipping and documentation service, integrate
with intermodal transportation
• Intermodal also has changed the way manufacturing
companies operate and do business.
– Prompt services from start to finish
– Individually tailored service vices
– High turn over due to containerization
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Intermodal Transportation
• The reliability of distribution measured in terms of the
availability of the ordered goods and the frequency at which
orders are correctly serviced in terms of quantity and time.
• The flexibility of distribution in terms of possible adjustments
due to changes in the quantity, the location or the delivery
time.
• The quality of distribution concerns the condition of
delivered goods and if the specified quantity was delivered
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Center for Logistics, Trade and Transportation
Logistic Services










Warehousing
Kitting
Assembly
Pick and Pack
Distribution (B2B)
Fulfillment (B2C)
Media Replication
Worldwide Shipping
Reverse Logistics
Returns
Import Documentation
Consolidation Services
Insurance Program
Door to Door Service
Customs Clearance
Electronic ABI transmissions
FDA, USDA Processing
Letter of Credit
Personal Effects Entry
Tracking Capabilities
Specialized Classification
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Center for Logistics, Trade and Transportation
Questions?
Thanks
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