The 7 Steps of International Shipping
Transportation of goods
between countries takes place for many reasons. The majority, however, is for
reasons of increasing the value of the goods. With the rapid growth of
e-commerce, a large number of smaller business now require international
transportation. Shipping lines, booking agents, freight forwarders, customs
house brokers; there are many players involved in international transportation.
The shipper is the party
of the shipment at the origin; it could be we or a factory or seller that we
buy a product from. The consignee is the receiver of the cargo; this again
could be we or someone that we are selling a product to.
The shipping line is the
company carrying our cargo at sea. We are likely not to ever speak with them or
even see documents or correspondence from them. Freight forwarder, however, is
the logistics provider we will be dealing with. They can arrange the
transportation from a shipper to a consignee – of which one of them is we.
In the movement of goods
from shipper to consignee, there are five physical steps and two documentation
steps, which must all take place for every single shipment. With each step
there is a cost associated which must be settled by someone, typically the shipper
or the consignee. If we want to avoid cost surprises and unnecessary delays in
our supply chain, make sure we have clear agreement of who exactly pays for
each of these 7 steps every time we book a shipment. If in doubt, look to the
contract between the shipper and consignee. If it is a sale of goods, often the
handover of liability for the goods is agreed in a contract, which will then
also be the source for establishing who pays for what.
The first part of the
transportation is export haulage. This relates to the movement of the cargo
from the shipper’s to the forwarder’s premises. The forwarder’s premises in the
case of less than container load shipments (LCL) is always an export
consolidation center (an origin warehouse) where the forwarder either has their
own people or nominated agents in their control. The goods would typically move
on road (by truck), rail or a combination. If it were agreed that the shipper
is responsible for this part of the transportation, it would typically be arranged
through a local transportation company. If, however, the consignee is
responsible, it often makes most sense to use a freight forwarder who can offer
export haulage as part of the international transportation. Handling of the
cargo (loading onto a truck) at the shipper’s premises is not considered part
of export haulage, as off-loading of the truck at the forwarder’s premises is
normally not part of export haulage.
Export
customs clearance
For every shipment
leaving a country, customs formalities must take place to meet regulatory
requirements. Customs clearance is a transaction whereby a declaration is
developed and required documents are submitted to authorities, and can only be
performed by companies holding valid customs licenses, so-called customs house
brokers. Export customs clearance can either be performed by a freight
forwarder with a valid license or an agent appointed by the freight forwarder.
Alternatively, it can be performed by a customs house broker appointed directly
by the shipper, who does not necessarily take any other part in the shipping
process. The export customs clearance step must be completed before the cargo
can leave the country of origin, and if not performed by the freight forwarder,
often required to be completed before the cargo enters the forwarders origin
warehouse.
Origin
handling
Origin handling covers
all physical handling and inspection of the cargo from receiving it at the
origin warehouse till it is loaded on a ship in a container. There are many
steps carried out under origin handling by many different parties, but all that
is coordinated and the responsibility of the freight forwarder, or an agent
appointed by the freight forwarder. In short, when the cargo is received, it is
inspected (tallied), planned for loading, consolidated with other cargo,
stuffed into a container and moved to the port where it is loaded onto a ship. While
it is always ultimately the freight forwarder performing origin handling, it
can be paid by either shipper or consignee, regardless of who actually buy the
freight forwarding. For example, if a consignee has decided to user Forwarder A
for their import shipments, and agreed with the shipper that the shipper must
pay for origin charges, automatically the shipper will buy origin charges from
Forwarder A too. This situation can create some friction in case a shipper
believes the price for origin handling is not at market levels, as they are
forced to user Forwarder A in this case.
Ocean
freight
The freight forwarder
decides on a shipping line to perform the ocean freight from origin to
destination in order to meet the required timeline for the shipments. The
freight forwarder and the shipping line has a contract of carriage for the
container, and the shipper or consignee in this case is not subject to any
direct interaction with the shipping line. The cost of the ocean freight will
ultimately be charged to the shipper or the consignee. Ocean freight, however,
is never the entire costs of shipping from port to port. There are multiple surcharges
levied in the industry, such as bunker adjustment factor and currency
adjustment factor, which will all be passed to the shipper or the consignee.
Import
customs clearance
Import customs clearance
can typically begin before the cargo arrives at its destination country. As for
export customs clearance, it is a formality where a declaration is developed
and submitted together with relevant documents enabling authorities to register
and levy any customs duty on the shipment. Import customs clearance is
performed by the freight forwarder or an agent of the freight forwarder, or by
a customs house broker appointed by the consignee. The import customs clearance
process must be completed prior to the cargo leaving a customs bonded area in
the country of destination. Typically, that means before the cargo leaves the
destination warehouse of the forwarder or the forwarders agent.
Destination
handling
As for the origin, cargo
handling is also required in the destination before it can be released to a
consignee. In short, destination handling includes transfer of the container
from the ship to shore and from the port to the forwarder’s destination
warehouse. It also includes un-stuffing of the container and preparing the
cargo for the consignee to collect. Destination handling is covered by
multiple destination charges and always performed by the freight forwarder or
an agent appointed by the freight forwarder. It can be charged to the shipper
or consignee, but will always need to be paid in full before the cargo can be
surrendered to the consignee. Again, if the agreement is that the shipper pay
for ocean freight, and the consignee pay for destination charges, it is in fact
the shipper deciding on who the consignee must buy destination handling from.
As discussed for origin charges that can create some friction or surprises for
the consignee who has not planned for it.
Import
haulage
The last leg of the
transportation is the actual delivery of the cargo to the consignee. It can
either be performed by the freight forwarder or a local transportation company
appointed by the consignee. If this part of the transportation is being
arranged by the shipper, it would normally make sense to use a freight
forwarder which can also arrange for import haulage. The import haulage
typically covers transportation to a specific address, but not unloading from
the truck, which is the responsibility of the consignee.
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