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.

 
Export haulage



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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