Intermodal Transportation Curriculum for Secondary Education – Pilot Study

1. 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

2. Module 3: Learning Outcomes • Describe the basic business activities and related terms used in international shipping. • Discuss the various documents related to international shipping • Learn about the process of international shipments. • Understand supply chain logistics providers such as 3PL, 4PL, customs brokers, freight forwarders • Role of Logistic providers in intermodal operations

3. 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

4. Session 1: Understand the terms used in international shipping – Incoterms 2011

5. 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

6. INCOTERMS 2012

7. 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.

8. 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.

9. 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.

10. 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. 

11. 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.

12. 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.

14. 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

15. Session 2: Get familiar with various documents related to international shipping

16. 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 includes- often 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

17. 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

18. 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

19. G B A Sales ContractCIF Japanese PortDocuments Against Payment C E F D F 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 American Exporter JapaneseImporter Exporter’s U.S. Bank(Remitting Bank) CollectingBank

20. 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.

21. Session 3: Know how to prepare – Bill of Lading, Letter of Credit etc.

22. 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

23. 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.

24. 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.

25. 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

26. Session 4: Learn about the process of international shipments

27. 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.

28. 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

29. 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

30. 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

31. 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.

32. 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.

33. 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.

34. 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.

35. 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.

36. 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.

37. 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.

38. Session 5: Understand supply chain logistics providers such as 3PL, 4PL, customs brokers, freight forwarders,

39. 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.

40. 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.

41. 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 freight- they 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.

42. 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

43. 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

44. 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.

45. Session 6: Role of Logistic providers in intermodal operations

46. 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

47. 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

48. 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

49. 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

50. Questions? Thanks