Supply Chain Module 11: Export Operations
group 1
Intercoms that apply to any mode of transportation (7)
Group 2, FAS, FOB, CFR, CIF
Intercoms that only apply to sea and inland waterways. (4)
Group F
- A buyer avoids the challenges of moving goods inside the country of origin where he or she may have limited experience - However, control could be maintained for the rest of the journey
freight theft
- A multi-billion dollar problem for companies and it is still growing - Organized crime syndicates target high-value electronics, apparel, alcoholic beverages, and pharmaceutical products
establish accountability
- Documentation must identify the "importer of record" because that party is responsible for using reasonable care to enter, classify, and determine the value of imported merchandise
letter of credit
- Guarantees the seller will receive payment as long as the delivery conditions are met - protects the buyer and the seller
accurate
- Import duties and quotas are based on the information contained in the documents - Suspected paperwork errors will lead to customs inspections and possible penalties
complex, success
- Incoterms are important and ______ - Incoterms increase chances for ______!
product damage
- International freight gets handled and stowed multiple times, increasing the potential for damage - Ocean transport exposes goods to salt water, high humidity, and sometimes a very rough ride
24, review, inspection, before
- Many countries require that carriers provide import manifest information electronically to the customs agency ______ hours prior to containerized freight being loaded onto an ocean vessel (The US was the first to adopt this requirement, followed by Canada, China, and the EU) - This advance notice gives the customs agency time to ______ the documentation and request ______ of questionable containers ______ they are loaded
available on time
- Many customs agencies require documents to be presented hours or days before goods arrive at the border - Late submission of documents often causes delays
negotiating the hard way
- Negotiate each export step and process individually - May miss important issues
Limited carrier liability
- On top of all these risks, there is a chance of not being reimbursed for the loss - As a bailee, the carrier is responsible for loss or damage to the freight from the carrier's negligence
Standardized Terms
- Provide a consistent level of knowledge - Offer protection to both parties - Save negotiation time - Clarify costs - Minimize confusion about responsibility - Help manage risks
Incoterms
- Three-letter acronyms accompanied by a specifically named place - Those three letters define when and where the transfer of responsibility takes place between the seller and the buyer Ex) FOB Oakland, CIF Antwerp, DAT Dubai
Incoterms (International Commercial Terms)
- created by the International Chamber of Commerce and recognized by the United Nations Commission on International Trade Law as the global standard for the interpretation of the most common terms in foreign trade - Use of these widely accepted terms can reduce or remove the uncertainties that arise from different interpretations of trade terms in different countries
shipment delay
- occur s due to port congestion, equipment availability issues, a lack of truck drivers, and misplacement or misrouting of the freight - Recovery can take a great deal of time during which the product value diminishes
available on time, accurate, establish accountability
Documentation must be (3):
Ex Works
EXW
international logistics service providers
Engage the expertise of ______ ______ ______ ______ in planning incoterm choice
international rules
Even if the carrier is found to be liable for the loss, damage, or delay, ______ ______ limit their financial risk
Group E
a departure term where the buyer has full responsibility from the door to the seller
absolves carrier of liability
freight lost to: Storms Terrorist attacks Improper packaging ...
negotiation
incomplete without a discussion of the supply chain issues and cost responsibilities
certificate of origin
Usually signed through a semiofficial organization, such as a local chamber of commerce
Certificate of origin
Verifies the country in which the goods were manufactured
Rail
2 hours prior to arrival at US port of entry
prevention, opportunities, financial
3 Risk Mitigation Steps 1) focus on damage ______ 2) limit theft ______ 3) manage the ______ risk
contract of carriage, goods, title
3 bill of landing roles 1) Evidence of ______ ______ ______ 2) Receipt of ______ 3) Document of ______ to the goods
Air
4 hours prior to arrival in the US
total control
Group E provides ______ ______
Road, 30
1 hour prior to arrival in the US, ______ minutes for F.A.S.T participants
certificate of origin
Accuracy is critical as the country of origin affects import restrictions, duty rates, trade compliance, and quotas
28
Air cargo has a liability of approximately $______ or 22 Euros per kilogram
Group D
Arrival group where the seller takes full responsibility for getting goods to the buyer's location
Insurance Certificate
Assures the coverage of loss or damage to the freight during transit
Cost and Freight
CFR
Cost, insurance, and freight
CIF
carriage and insurance paid to
CIP
Carriage paid to
CPT
Delivered at Place
DAP
Delivered at Terminal
DAT
delivered paid duty
DDP
focus on damage prevention
Experts estimate that 80% of all cargo damage is avoidable with proper planning
Free alongside ship
FAS
Free Carrier
FCA
free on-board
FOB
Buyer
Group C --> ______ is responsible for getting goods through port of import and on to the final destination
total control
Group D --> Total responsibility =
buyer, seller
Group E --> Maximum responsibility for the ______ and minimum responsibility for the ______
seller
If a buyer has little experience or clout with international carriers, then it may be wise to let the ______ manage these issues
importer
If there are any paperwork availability or accuracy problems, the ______ is accountable for resolving the situation
buyer
In Group F, the ______ is responsible from the named place to their location
1 and 4
In comparison, road, rail, and air manifest information must be submitted between _______ ______ ______ hours prior to arrival at the entry border
automated commercial environment (ACE)
In the US, an ______ ______ ______ is an electronic platform intended to facilitate rapid flows of legitimate trade while targeting goods that present a security threat
Articulate the risks assumed by each party
Incoterms - Who is financially liable if something goes wrong? - Who must resolve issues that arise as product flows from origin to destination?
clarify the obligations of each party
Incoterms Who is responsible for each step in the process?
assign responsibility for payments
Incoterms Who must pay for packing, delivery, insurance, duties, and related expenses?
transport, individual terms, responsibilities and risks, control and costs
Incoterms Decision Process: - Decide on the main mode of ______ - Consider the 4 letter segments and the ______ ______ - Consider which option balances the ______ ______ ______ vs. the ______ ______ ______ benefits
e, f, c, d
Incoterms begin with either:
buyers and sellers
Incoterms clarify important issues for ______ ______ ______
contracting
Incoterms facilitate intelligent, transparent ______
freight management
Incoterms lay out specific rights and obligations regarding ______ ______ all along the supply chain
disputes
Incoterms provide clarity to avoid buyer-seller ______
freight theft, product damage, shipment delay, limited carrier liability
International Freight Risks (4):
evidence of contract of carriage
It details the type, quantity, and destination of the good being carried
e-freight
It is intended to replace the most widely used airway bills, invoices, certificates of origin, and other paper documents
commercial invoice
It looks like a bill of sale from the exporter, but it's used by customs agencies to determine the true value of the imported goods for the duty assessment
receipt of goods
It provides proof that the carrier has received the goods from the shipper or their agent in good condition
documentation of title to the goods
It serves as proof of ownership (title) of the cargo
ACE
It will require that all import and export manifest data be electronically transmitted to US Customs and Border Protection
bank
Letter of Credit --> In the event that the buyer is unable to make payment on the purchase, the ______ will cover the outstanding amount
Group D
Low-risk, easy option for the buyer, so it makes sense for a buyer that has little to no international trade experience
Group C
Main Carriage Paid group where the seller is responsible for getting goods through port of export and delivered to the port of import
Group F
Main Carriage Unpaid group where the seller is responsible for packing the goods and getting the goods to a named place, usually a port of export
bill of landing
Must accompany the shipped goods, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper, and receiver
commercial invoice
Must identify the buyer and seller and accurately provide: 1) Date and terms of sale 2) Quantity, weight, and/or volume of shipment 3) Type of packaging 4) Complete description of goods 5) Unit value and total value 6) Insurance, shipping, and other charges
500
Ocean carriers are only responsible for $______ per package
EXW
Only buyers with great expertise in global transportation should deploy the ______ option
negotiating the smart way
Standardized commercial terms (incoterms)
packing and shipping, transportation, in-transit
Supply Chain Issues and Cost Responsibilities - Responsibilities for ______ ______ ______ of goods - Payment of ______ fees and duties - ______ responsibilities
True
T/F: Typically, companies depend on only a few incoterms to minimize confusion
e-freight
The International Air Transport Association is creating a paper-free air cargo supply chain through an alternative initiative called ______
seller, I, buyer
The ______ only assumes the obligation for purchasing insurance if the letter "______" is present in the intercom, otherwise, the ______ assumes the risk of loss or damage to the goods or additional costs due to events occurring after dispatch (Group C)
commercial invoice
The key transaction document that contains information relevant to the transaction from start to finish
bill of landing
The primary transportation documentation that is required to move the freight
international shipments
The right paperwork, at the right time, in the right format, 100% accurate is essential for ______ ______
carriers, advantageous
The seller should be able to identify quality ______ and negotiate ______ rates
same time
The supply chain export planning process should occur at the ______ ______ that the seller and buyer negotiate the details of their contract
mode of transportation
The two main categories of intercoms 2010 are organized by ______ ______ ______ and are split into 2 groups
11
There are ______ different incoterms that can be used in a contract
FOB Origin and FOB Destination
There are typically 2 delivery terms used in most domestic contracts:
terms of trade, trade documents, loss or damage
These 3 activities must be completed before the company initiates the delivery process: (Export Preparation) 1) Negotiating the ______ ______ ______ 2) Preparing the ______ ______ 3) Protecting the freight against ______ ______ ______
both parties
These standardized terms provide a consistent level of knowledge and offer protection to ______ ______
electronic formats
To further security interests, many countries are converting key international trade documents to ______ ______
bailee
a person to whom the possession of goods is transferred without title to those goods
package
a point of contention between cargo owners and carriers
product specifications, quantity, price, discounts
the foundation of a solid agreement (4):
FOB Origin
where the buyer takes responsibility at the seller's location
FOB Destination
where the seller takes responsibility all the way to the buyer's location