International Transportation

1. International Transportation

2. NAFTA • North American Free Trade Agreement • Ratified by Congress in 1994 • Trade agreement between Mexico, Canada, & the United States • Purposes • Unimpeded flow of goods • Most-favored-nation (MNF) status • Enhancement of cross-border movement of goods & services

3. Issues with Mexico • Original agreement allowed U.S. or Mexican based carriers to either pick or deliver (but not both) in each country’s border states with their own equipment & personnel • Mexican regulations still do not allow US-owned trailers to operate more than 12.5 from the border without a specially-issued permit • US firm must post a bond for each trailer & bond fees are not refundable • Permit is good for only 30 days • Only good for one entrance & one exit for that trailer during life of permit

4. Issues with Mexico • Most US carriers employ a standard 53 ft. trailer • Although Mexican regulations allow 53 ft. trailers, overall combination tractor & trailer length is limited to 68 ft. • This only allows the use of 15 ft. tractors

5. INCOTERMS • International terms of sale • Developed by the International Chamber of Commerce • Define responsibilities of buyer & seller in any international contract of sale • 13 different INCOTERMS

6. INCOTERMS Cost Obligations

7. E Terms • Only E Term is Ex Works • Departure contract that gives buyer total responsibility for the shipment • Seller only has to make shipment available at its facility • Buyer agrees to take possession at the point of origin • Buyer bears all the costs & risks of transporting the goods to their destination

8. F Terms • 3 F INCOTERMS • Obligate seller to incur cost of delivering shipment cleared for export to carrier designated by buyer • Buyer selects & incurs cost of main transportation, insurance, & customs clearance

9. F Terms • Free Carrier (FCA) • Used with any transportation mode • Buyer assumes risk of damage once seller delivers goods to carrier designated by the buyer • Free Alongside Ship (FAS) • Only used in water transportation • Damage risk transfers when goods delivered on the dock • Buyer pays lifting (loading) costs • Free On Board (FOB) • Only used in water transportation • Damage risk transfers when goods cross the ship’s rail • Seller pays lifting costs

10. C Terms • 4 C INCOTERMS • Obligate seller to obtain and pay for the main carriage and/or cargo insurance • Cost and Freight (CFR) • Seller selects and pays for main carriage • Seller incurs all costs to port of destination • Buyer assumes damage risk once goods pass the ship’s rail • Only used for water shipments • Carriage Paid To (CPT) • Seller selects and pays for main carriage • Seller incurs all costs to port of destination • Buyer assumes damage risk once goods delivered to main carrier • Only for any transportation mode

11. C Terms • Cost, Insurance, Freight (CIF) • Requires seller to pay for both main carriage & cargo insurance • Damage risk same as CFR • Carriage and Insurance Paid To (CIP) • Requires seller to pay for both main carriage & cargo insurance • Damage risk same as CPT

12. D Terms • Obligate seller to incur all costs related to delivery to a foreign destination • Seller incurs all costs & risks of damage to destination port. • Delivered At Frontier (DAF) • Seller covers transportation costs to the frontier (borders) of the destination country. • Seller assumes risk of damage to this frontier • Buyer responsible for customs duties and inland transportation • Used with all transportation modes

13. D Terms • Delivered Ex Ship (DES) • Seller pays for main carriage • Risk of damage transferred on board ship just prior to import clearance • Buyer responsible for customs clearance & inland transportation • Only used in water transportation

14. D Terms • Delivered Ex Quay (or wharf) (DEQ) • Seller pays for main carriage • Risk of damage transferred on quay once goods have cleared customs • Buyer responsible for inland transportation • Only used in water transportation

15. D Terms • Delivered Duty Unpaid (DDU) • Seller covers all costs to destination except customs duties and inland transportation • Risk of damage transfers at named destination (duties unpaid) • Used with all modes of transportation

16. D Terms • Delivered Duty Paid (DDP) • Seller covers all costs to destination except inland transportation • Risk of damage transfers at named destination (duties paid) • Used with all modes of transportation

17. Documentation • Export License • No special authority necessary to export • President can control exports for national security, foreign policy, or for items in short supply • Federal agency may require export license for commodities over which it may have jurisdiction • Types of Licenses • Issued by Department of Commerce • Validated Export License • Required for commodities and/or destinations deemed important to national security, foreign policy, or for items in short supply • General Export License • Used in all instances when validated license not required • No actual license is issued

18. Documentation • Sales Documents • Pro-forma invoice • Issued by seller • Provides shipment details to importer & import government authorities • Commercial invoice • Issued by seller • Serves as bill of sale • Serves as basis for determining shipment value & import duties • Required for customs clearance • Consular invoice • Same as commercial except prescribed by importing country and must be in language of the importing country

19. Documentation • Financial Documents • Letter of Credit • Issued by buyer’s bank • Guarantee by the bank to seller that payment will be made if certain terms & conditions are met • Documentation provided, shipment dates, time limits, etc. • Draft • Credit extended by seller, not the buyer’s bank • Written order for money to be paid by buyer on certain date • Draft is presented to buyer’s bank, bank collects money from buyer, bank releases documentation necessary for buyer to receive shipment, payment is remitted to seller

20. Documentation • Customs Documents • Export Declaration • Issued by seller • Controls export of restricted goods • Used to provide statistics regarding export activity • Certificate of Origin • Issued by buyer • Certifies the country in which the commodities were produced • Necessary when countries have special import duty treaties

21. Documentation • Transportation Documents • Bill of Lading • Contract for carriage • Receipt for goods • Provides delivery instructions to carrier • Water: ocean bill of lading • Air: airway bill • Packing lists • Detailed information about package contents, dimensions, and weight • Dock receipt • Used by water carriers • Transfers accountability from domestic carrier to international carrier prior to loading on the ship (I.e., while goods are still on the quay).

22. International Transportation Providers:Ocean Transportation • Liners • Ply fixed routes on published schedules • Charge according to published tariffs • Goods moved to liner’s terminal • Types of Liner Services • Break-bulk services • Freight is not containerized and must be loaded by machine • May take days to load & unload the vessel • Container services • Freight packed in standard containers & is loaded by crane • Typically takes less than 12 hours for container vessel to enter port, unload, load, and clear the port • Typical container ship can carry about 1000 containers • Must be support by 1500 to 2500 containers

23. International Transportation Providers:Ocean Transportation • Liners • Types of Liners • Container Vessels • Lighter-Aboard Ship (LASH) • Liner carries barges that were loaded at inland river port and moved to ocean port via water tow. • LASH carries the barges with their loads intact to destination port • Roll-on/Roll-off Ship (RORO) • Transport trucks, trailers, & construction equipment • In essence, the freight is rolled-on & -off the vessel, rather than lifted over the vessel’s rail

24. International Transportation Providers:Ocean Transportation • Tramp Ships • Hired like a taxi or leased auto • Hired on a voyage or time basis • Tramps do not run regular routes on published schedules like liners • Private Vessels • Ships owned/leased on long-term basis by firm moving the goods • Enjoy much the same economies as private motor carriers

25. International Transportation Providers:Ocean Transportation • Ship Registry • Vessels may be “flagged” or registered in the ship owner’s domestic nation, or in another nation • Vessel is taxed, manned, and operated under the rules & regulations of the nation under which it is flagged • Flags of Convenience • Nations that “flag” foreign-owned vessels • Most common are Liberia and Panama

26. International Transportation Providers:Air Transportation • Air Parcel Post • Provided by the postal service of a country • Designed to handle small packages • Air carrier hired to pick up and deliver parcel items from one country to another • Each nation sets its own limits on size & weight • US restrictions are 108 inches in length & girth; no more than 70 lbs of weight

27. International Transportation Providers:Ancillary Services • Air Freight Forwarders • Book space on air carrier’s plan • Solicits freight from shippers to fill booked space • International Freight Forwarders • Arrange movements for shippers • Represent shipper in arranging various activities • Inland transportation, packaging, documentation, booking, legal fees • Do not serve as freight consolidators

28. International Transportation Providers:Ancillary Services • Nonvessel Operating Common Carriers (NVOCC) • Assemble/disperse less-than-container shipments • Move them as full-container shipments • Ship Brokers • Acts as intermediaries between tramp ship owners and chartering shippers or receivers • Ship Agents • Represent liner or tramps in facilitating ship arrival, clearance, un/loading, fee payment at specific ports • Used when not economical to maintain permanent agent in particular ports

29. International Transportation Providers:Ancillary Services • Land Bridges • System of containers moving between Japan and Europe by rail and ship • Mini-Bridges • System of containers moving on specified route between US port locations (I.e., Seattle to New York) • Micro-Bridges • Essentially the same as mini-bridges, but routes are between port and non-port cities (I.e., New Orleans to Kansas City)