Supply Chain Module 11: Export Operations

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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


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