Shipping Internationally…

Key things you should be thinking about

A presentation for UKTIBy

Andy KingMonmouth Ventures Ltd

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

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

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

Shipping TermsTerms 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

Choosing the right partnerHorses 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

Mode of transportWhich 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

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 – ruleso Liquidso Temperature controlo Valueo Delicate or breakable

InsuranceHave some…you never know when you will

need it

Don’t try to cut your cost of trade by under-declaring 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

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 goodso Make sure you understand themo Follow them precisely…or else!o Make sure your partner has experience of

dealing with LC’s

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 Tsunamio Ash Cloudo SARS / Fluo Bad weathero Strikeso Fuel crisiso Traffic – accidents, busy routes/days

• Cost

Local knowledgeThe 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

Shipping DocumentsThere 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

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

Managing SuppliersIt 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

Useful Links• HMRC Import/Export helpline

o http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=iQ9MFQAxnZk

• Link to useful Government information about International tradeo https://www.gov.uk/browse/business/imports-exports

• Link to guide for Incotermso https://www.gov.uk/incoterms-international-commercial-terms

• Link to the RHA websiteo http://www.rha.uk.net/

• Link to the FTA websiteo http://www.fta.co.uk/

• Link to the AICES (Air express Association) websiteo http://www.aices.org/

• Link to the BIFA websiteo http://www.bifa.org/content/home.aspx

Appendices

Incoterms – “E & F” EXW (EX-Works)

◦ 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.

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)

◦ 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.

Incoterms – “C” CFR (Cost and Freight)

◦ 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.

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)

◦ 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.

Incoterms – “D” DAT (Delivered At Terminal)

◦ 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 (Delivered At Place)

◦ 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.

Andy KingMonmouth Ventures Ltd

www.monvts.com

E: andy@monvts.comP: + 44 7946 596 546