An SME's guide to shipping internationally

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  • Customs clearance in Saudi example
  • I can never remember them all, so don’t worry about that.Short guide in the appendix of my handout to each oneObligation to pay follows responsibility in most cases, possible exception be FCA where the seller organises the carrier but the buyer pays
  • C example – CFR used to be C & F. Here seller organises and pays for the freight to a specified point in the transit. Buyer organises and pays for the insurance of the whole transit.D example – Very common terms are DAP. Seller pays for everything to defined delivery point except cost of clearance. DDP – covers everything, and seller is responsible for everything, including the cost of clearance and duties paid. Often used by multi nationals shipping between sites.Ex – works – once you have bought the goods from your supplier you are responsible for everything…Rover example…F example – FOB or free on board. Shipper’s forwarder to point of origin/export. Buyer’s forwarder rest of the way. Really Ocean freight term. Delivery complete when handed over.
  • Right partner for any particular jobJust because the badge and colours are the same as those you are used to doesn’t mean that the standards and service are the same…although it should.Every network has its weak spots. Some are very surprising. USA for TNT, France and Italy for just about everyone.Big co’s have rigid systems, if you fit, great. If you don’t it won’t work all that well.
  • Tennis balls!!ASIA - Pallet - £100 Sea 3 to 4 weeks, maybe longer. Airfreight - £100’s 4-7 days, Charter 10,000’s 1-2 daysEurope - Pallet - £100 Road freight 2-5 days, Airfreight 1-2 days 3-400, Dedicated vehicle 12-36 hours £ 1k+, Charter 2- 8 hours £ ‘000’sSecurity regime aimed at stopping terrorists, not necessarily securing your freight from pilferage.
  • Who’s had arguments with Insurance companies over claims?Newsflash – most transport co’s will try not to pay…don’t make it easy by packing poorly!If you value your product pack it properly.In a lot of the developing world the roads are poor, and I’m including the US in that statement…Your freight could be unsecured on an open truck on roads full of pot holes. When it falls off the back it needs to be safe!Marken delivery for cold chain.
  • Hands up who has tried to cut the cost by under declaring the value of the goods?Hands up those who have then struggled to get full value when something gets damaged?
  • Just be careful…It’s worth taking time to make sure that transport won’t cause a problem.
  • If I had a £1 for every customer that has tried to deliver in a country on a public holiday…can be done in most cases but costs.San Francisco is quite different to JFK…Processes can be very different…manual vs automated (China vs US). Open vs Restrictive (EU vs JP or US). It pays to understand these things as much as possible.Get paperwork right…or as right as can be. If you are shipping same material all the time should only have to do this once.Local buyers will try to use descriptions that save them money…if authorities unsure goods get held…LC’s – Temp control.
  • Anything with lactose or bovine origin material in it going to US needs permit. Weapons or things that are potentially part of a system.
  • Corrupt… what does that mean? Well paying a surcharge can get things moved along. Not uncommon…problem for Western co’s with anti bribery laws and Sarbanes Oxley.Don’t ask!China – common practice until they executed the Head of Customs a few years ago.
  • Big spenders can achieve this more easily.Need to be a massive spender to get big co’s to do this.Doesn’t mean to say that you shouldn’t adopt the principleGenerally find small specialists are strong in this area
  • An SME's guide to shipping internationally

    1. 1. Shipping Internationally… Key things you should be thinking about A presentation for UKTI By Andy King Monmouth Ventures Ltd
    2. 2. Major areas for consideration             Communication Shipping Terms Choosing the right logistics partner Modes of Transport Packaging Insurance Getting paid Transit times and lead times Local knowledge Documentation Regulation Managing Suppliers
    3. 3. Communication  English is THE international business language but understanding can vary  Keep it simple and clear, don’t use difficult or obscure words  Check for understanding  Confirm everything in writing
    4. 4. Shipping Terms  International trade is covered by 11 shipping or INCOterms.  Differences boil down to who is responsible at different stages of the journey  Obligation to pay follows responsibility
    5. 5. Shipping Terms  Terms that begin with “C” mean that the seller of the goods has responsibility for the shipping  Terms that begin with “D” mean that the seller’s responsibility ends at a defined point  Terms that begin with “E” seller’s responsibility ends when the goods leave  Terms that begin with “F” means that the seller has limited responsibility for the shipping
    6. 6. Choosing the right partner  Horses for courses  Big is not necessarily best, but are usually the cheapest and easiest to use  Small specialists will give a better service but will cost more  Tend to find out how good your partners are when something goes wrong
    7. 7. Mode of transport  Which mode should you use? Depends on a number of factors  Size, weight, nature of items being shipped, collection time, destination, desired delivery date  Lead time + material (nature, value) + location + size = cost  Quick = expensive, Big = expensive, Q + B = very expensive  The shorter the transit, the more secure the shipment
    8. 8. Packaging • International more demanding than domestic…pack accordingly • Quality and suitability of packaging is a key factor in claims • Nature of destination and local capabilities determines need • Nature of goods impacts choice of packaging o Hazards – rules o Liquids o Temperature control o Value o Delicate or breakable
    9. 9. Insurance  Have some…you never know when you will need it  Don’t try to cut your cost of trade by underdeclaring the value of your goods  Insurance claims will only be paid to the value declared on your invoices  Customs authorities have a pretty good idea of what most items are worth
    10. 10. Getting paid… • Logistics can play a big part in making sure you get paid • Agreements often have clauses and penalties for late delivery • Finance in the form of Letters of Credit (LC’s) often have specific terms relating to the transport and delivery of goods o Make sure you understand them o Follow them precisely…or else! o Make sure your partner has experience of dealing with LC’s
    11. 11. Transit times…True or false? • There are lies, damned lies and then there are transit times! • Leave as much time as possible • What can go wrong, will go wrong o Tsunami o Ash Cloud o SARS / Flu o Bad weather o Strikes o Fuel crisis o Traffic – accidents, busy routes/days • Cost
    12. 12. Local knowledge  The more you know, the more you will save  Everywhere is different, even within a country  Public holidays…  Understand the clearance process, especially in developing nations, and the USA
    13. 13. Shipping Documents  There is a minimum requirement depending on mode of transport  Invoice and packing list  Does your product need a licence or a permit? Import and/or export  Lots of good information on Government website  Logistics partner can add value here
    14. 14. Regulation  Increasing  Voted the biggest pain issue  Huge variation in rules and application  China – poor process, corrupt?  Russia – constant rule changes, corrupt?  USA – protectionist, lots of rules, very officious  India – bureaucratic, slow but can be speeded up  Latin America – chaotic, corrupt?  Africa – Corrupt?  Middle East – Restrictions, embargo  Lean on your partner, experience counts for a lot
    15. 15. Managing Suppliers It is a process  Specify what you expect and need  Consider a few alternatives  Check that reality matches claims  Monitor performance  Review with supplier  Demand corrective action  Repeat cycle  Working in partnership will consistently deliver the best results
    16. 16. Useful Links • HMRC Import/Export helpline o • Link to useful Government information about International trade o • http://www.fta.co.uk/ Link to the AICES (Air express Association) website o • http://www.rha.uk.net/ Link to the FTA website o • https://www.gov.uk/incoterms-international-commercial-terms Link to the RHA website o • https://www.gov.uk/browse/business/imports-exports Link to guide for Incoterms o • http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=iQ 9MFQAxnZk http://www.aices.org/ Link to the BIFA website o http://www.bifa.org/content/home.aspx
    17. 17. Appendices
    18. 18. Incoterms – “E & F”  EXW (EX-Works) ◦  FOB (Free On Board) ◦  One of the most commonly used-and misused-terms, FOB means that the shipper/seller uses his freight forwarder to move the merchandise to the port or designated point of origin. Though frequently used to describe inland movement of cargo, FOB specifically refers to ocean or inland waterway transportation of goods. "Delivery" is accomplished when the shipper/seller releases the goods to the buyer's forwarder. The buyer's responsibility for insurance and transportation begins at the same moment. FCA (Free Carrier) ◦  One of the simplest and most basic shipment arrangements places the minimum responsibility on the seller with greater responsibility on the buyer. In an EX-Works transaction, goods are basically made available for pickup at the shipper/seller's factory or warehouse and "delivery" is accomplished when the merchandise is released to the consignee's freight forwarder. The buyer is responsible for making arrangements with their forwarder for insurance, export clearance and handling all other paperwork. In this type of transaction, the seller is responsible for arranging transportation, but he is acting at the risk and the expense of the buyer. Where in FOB the freight forwarder or carrier is the choice of the buyer, in FCA the seller chooses and works with the freight forwarder or the carrier. "Delivery" is accomplished at a predetermined port or destination point and the buyer is responsible for Insurance. FAS (Free Alongside Ship)* ◦ In these transactions, the buyer bears all the transportation costs and the risk of loss of goods. FAS requires the shipper/seller to clear goods for export, which is a reversal from past practices. Companies selling on these terms will ordinarily use their freight forwarder to clear the goods for export. "Delivery" is accomplished when the goods are turned over to the Buyers Forwarder for insurance and transportation.
    19. 19. Incoterms – “C”  CFR (Cost and Freight) ◦  CIF (Cost, Insurance and Freight) ◦  This arrangement similar to CFR, but instead of the buyer insuring the goods for the maritime phase of the voyage, the shipper/seller will insure the merchandise. In this arrangement, the seller usually chooses the forwarder. "Delivery" as above, is accomplished at the port of destination. CPT (Carriage Paid To) ◦  This term formerly known as CNF (C&F) defines two distinct and separate responsibilities-one is dealing with the actual cost of merchandise "C" and the other "F" refers to the freight charges to a predetermined destination point. It is the shipper/seller's responsibility to get goods from their door to the port of destination. "Delivery" is accomplished at this time. It is the buyer's responsibility to cover insurance from the port of origin or port of shipment to buyer's door. Given that the shipper is responsible for transportation, the shipper also chooses the forwarder. In CPT transactions the shipper/seller has the same obligations found with CIF, with the addition that the seller has to buy cargo insurance, naming the buyer as the insured while the goods are in transit. CIP (Carriage and Insurance Paid To) ◦ This term is primarily used for multimodal transport. Because it relies on the carrier's insurance, the shipper/seller is only required to purchase minimum coverage. When this particular agreement is in force, Freight Forwarders often act in effect, as carriers. The buyer's insurance is effective when the goods are turned over to the Forwarder.
    20. 20. Incoterms – “D”  DAT (Delivered At Terminal) ◦  DAP (Delivered At Place) ◦  This term is used for any type of shipments. The shipper/seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal. DAP term is used for any type of shipments. The shipper/seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer. DDP (Delivered Duty Paid) ◦ DDP term tend to be used in intermodal or courier-type shipments. Whereby, the shipper/seller is responsible for dealing with all the tasks involved in moving goods from the manufacturing plant to the buyer/consignee's door. It is the shipper/seller's responsibility to insure the goods and absorb all costs and risks including the payment of duty and fees.
    21. 21. Andy King Monmouth Ventures Ltd www.monvts.com E: andy@monvts.com P: + 44 7946 596 546

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