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Choosing a Logistic Partner (07/31/2006) OK, You’ve finally made that overseas sale. You’ve agreed on the “terms of sale” and have either received a wire transfer or a Letter of Credit. Now what do you do? Well, if you’ve been doing your homework, you’ve already talked to a “Logistics Partner” and can now take the next step... If not, we need to talk... A ”logistics partner”? That’s a phrase we have been using to describe a service company that can simplify your export program by taking over much of the detail of moving your merchandise from your warehouse to your customer’s front door. You have various options open to you and, ,I hope to give you a brief overview in this presentation... OPTION ONE Do it yourself- While it’s important to be familiar with the details of how your merchandise gets to market, unless you have extensive experience in international shipping, documentation, export regulations, letters of credit, Customs regulations , etc. , “Doing it yourself” could be time-consuming, frustrating and could actually create unexpected problems. While You are not obligated to use a logistics partner , we highly recommend you consider one, especially at the outset……. Let’s discuss some of the other options…… FREIGHT FORWARDER (That’s US !!!) People and companies that coordinate shipping for others have been around for a few hundred years. The process of moving cargo across national borders can be complicated and the Forwarding Industry has grown throughout the world as a result. In the United States, Ocean Freight Forwarders must be licensed by the US Federal maritime Commission and must be bonded as a requirement of that license. The FMC now refers to Freight Forwarders as “Ocean Transport Intermediaries” or “OTI’s” and all OTI’s are required to have their license number prominently displayed on stationery and in their offices. The licensing process includes a background investigation for experience and financial responsibility. A forwarder that handles Air Freight should be recognized by IATA . (International Air Transport Association) who also does an extensive background check into experience and finances. Your Freight Forwarder will coordinate the movement of the order from your location to your customer’s destination, per the terms of sale. The Forwarder/OTI organizes and completes all required documentation including Bills of Lading or Airwaybills, Export Declarations, and also organizes and completes all required documentation for Letters of Credit, including drafts and presentation to the bank. The Forwarder also can assist with interpretation of Export Regulations and can provide a complete transport cost analysis, usually in advance of any shipment. All this for a simple negotiated fee per shipment. What a bargain ! Because of a daily involvement in shipping and trade, the Forwarder builds relationships with carriers and regulatory agencies and is familiar with the latest changes and best options. The Forwarder is not tied to any particular carrier so, he can find and negotiate the best rates for his client. Think of your relationship with your CPA or Attorney... NVOCC The Non-Vessel-Operating-Common-Carrier or NVOCC is commonly referred to as the “Shipless Shipline”. Simply stated, an NVOCC is similar to a Freight Forwarder except that the NVOCC is authorized to issue its own Bills of Lading and accepts Common Carrier Liability for shipments handled under its own BLs ,……….similar to a vessel Operator. In order to be authorized by the FMC, this company must undergo the same background investigation as a Freight Forwarder/OTI ,file a tariff in Washington with the FMC, and post a larger Surety Bond. The bond is there to protect the public. By the way, vessel operators, even those that are foreign owned, don’t have to file a bond. The NVOCC operates by contracting for space on vessels operated by other carriers. The NVOCC by consolidating the volume produced by his clients, can guarantee a volume sufficient to secure a substantial discount from the going rates . He then re-sells the space to clients at a rate somewhat lower than the client would have to pay if they did business directly with the vessel operator. Essentially, the NVOCC splits the savings to produce his profit. Most Freight Forwarders/OTI’s are also licensed as NVOCC’s. Seariders is also an NVOCC in certain offshore trades..... INTEGRATOR The Integrator (FedEx, UPS, DHL, etc.) is familiar to most of us as the company that gets the documents to their destination “overnite” and has become a viable alternative to the U.S. Postal Service. The Integrator is usually a larger company that has a significant capital investment in trucks, terminals, aircraft and people. This company depends upon large volumes of freight to support its network and acts as a “One Stop Service”, providing documentation, trucking, air freight, Customs Brokerage and Delivery. In short, a BIG company. HOW DO I CHOOSE ?? Generally speaking, the services offered by Integrators have evolved from the original business model which was based upon courier services for documents and small package shipments. Recently, Integrators are moving into the large package and full container business both by Air and by Ocean. The Freight Forwarder/OTI has been doing this from the outset. The major difference you can expect between the utilization of an Integrator vs. a licensed Freight Forwarder/OTI really boils down to size vs. personal service. Shipments quick, small and simple with no personal service required, the Integrator might be a good initial choice. You can always switch over to a Forwarder if problems occur. If you’re looking for a long-term relationship with a company that will become familiar with your needs and requirements, a company that will become intimately familiar with your business and provide a personal service, you might talk to a few Forwarders. The Forwarding company is usually smaller, may be family-owned and will provide a more personal service level. Better for complicated requirements, Letters of Credit ,and where quick access to an experienced person who knows your business is only a phone call away…. Obviously, we’re biased, we are a Freight Forwarding Company in business over 25 years.. OK, we’ve provided some options on professional “Logistics Partners” now, let’s discuss some of the details of your export shipment. First, the CONTRACT OF CARRIAGE. You may not know it but, a Bill of Lading is a contract between the Shipper (you) and the Carrier and has some very important legal language that affects your liabilities and your rights. Read the Back Most BLs are similar in the language that’s printed on the back. This language has evolved over hundreds of years, from the time ships had sails to the present . I’m sure you’ll find some archaic phrases inside but, believe me these phrases can help or hurt you. A short session with your freight forwarder will give you some idea of what they mean. Remember, Ignorance is no excuse or defense. THE AIRWAYBILL- Again, read the back. “Limited Liability” in this case will be somewhere around $20 per Kilogram... Now let’s discuss some interesting facts : COGSA (Carriage Of Goods by Sea Act) ALL shipments by sea that engage in the commerce of the United States are covered by this legislation that limits the liability of ocean carriers to “$500 per piece, package, or customary freight unit”. WOW ! You can ship a piece of equipment that’s worth $200,000 and if the carrier breaks or loses it, he only has to pay you $500 ? That’s right ! Also, if you load a container at your warehouse and, as a prudent businessperson , affix a seal before it leaves, that container could be determined to be a single freight unit and, no matter what’s in it, the Carrier’s liability could be limited to $500. Now, I suggest that you read the front of the Bill of Lading and the Airwaybill especially that part that says “Declared Value”, usually around the middle of the form. You have two choices: You can fill in the value of the shipment and the carrier will accept liability for the value of the shipment and will charge you an insurance premium that will be far greater than if you purchased cargo insurance on your own. If you choose this option and something happens to your shipment, you’ll have to file a claim with the carrier, wait for the carrier to process the claim, which can take quite while, and will require consistent follow-up, or You can arrange your own cargo insurance. (We’ll cover this in a minute) EXPORT DOCUMENTATION Export Documentation is a subject that can confuse the “new to market” exporter. It has been said that “the fuel of international trade is paper” and that’s not too far from the truth as you may have already discovered. A typical export transaction from the U.S will have: Commercial Invoice – produced by the exporter Certificate of Origin – produced by the Forwarder and legalized by the Chamber of Commerce Export Declaration- Freight Forwarder (Or, you can try it yourself thru the AES) Insurance Certificate Bill of Lading or Airwaybill Packing List Certificate of Free Sale (not always required but possible) If a Letter of Credit is involved there could be any number of additional documentary requirements that will add to the package. Additionally, export licenses may be required for certain items. So, as you can see “paper” becomes important. Your Logistics Partner will provide most of the required documents and the experience and knowledge to get it right... DESTINATION REGULATIONS You thought I was finished with Regulations and Compliance ? No chance ! There may be laws and regulations in the country of destination that will affect your ability to sell and ship your product. You need to be familiar with your customer’s local regulations in order to deliver a product without problems or delays………. Again, by utilizing destination agents, your Forwarder can provide valuable information and services. EXPORT ENFORCEMENT More good news ! Export Control and Licensing is ENFORCED and violations can be serious and costly. Your best resource is your local Commercial Service Office who will guide you through what can be a complex puzzle. Not all products are subject to export control in fact, most are not but, IT’S YOUR RESPONSIBILITY TO KNOW ABOUT YOURS. Your Forwarder can also assist. Penalties can be mind boggling. INSURANCE OK, we’re back to protecting your cargo and knowing your rights and liabilities. One of the best ways to simplify and minimize problems when a shipment goes astray is to have insured that shipment before it left. After the loss, it’s too late. If something happens to your uninsured shipment, you’ll have to file a claim with the carrier. (Remember the Limits of Liability ?) To paraphrase a saying, “It’s sometimes easier to pass a Camel through the eye of a needle than to file a damage or loss claim with some carriers.” The fact is, carriers hate to pay claims and they will do everything they can to pass liability on to someone else. Also, remember COGSA and Limits of Liability and the back of the Bill of Lading ? You might even have to file suit in order to collect, even if everything is in order.(read the back of the BL) Insurance premiums on general cargo (not high value or target cargoes like computers, etc.) will usually be less than 2% of value and are a real bargain when there’s a problem. CONCLUSION So, you can “Do it yourself” or… find a “Logistics Partner” that will become an integral part of your export program and allow you to concentrate on what makes you money…Marketing your Product SEARIDERS WANTS TO BE YOUR LOGISTICS PARTNER !
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