Exercises: Essentials of Freight Forwardingciffa.boostlms.com/resources/EFF Exercises.pdf ·...

Exercises:

Essentials of Freight Forwarding

Table of Contents International Payments, Part 1

Exercises 1.1 (Question) ............................................................................................................ 7 Exercises 1.2 (Question) ............................................................................................................ 9 Exercises 1.3 (Question) ...........................................................................................................12 Exercises 1.1 (Answer) .............................................................................................................15 Exercises 1.2 (Answer) .............................................................................................................18 Exercise 1.3 (Answer) ...............................................................................................................21 International Payments, Part 2 Exercises 2.1 (Question) ...........................................................................................................25 Exercises 2.2 (Question) ...........................................................................................................28 Exercises 2.3 (Preface) .............................................................................................................29 Exercises 2.3 (Question) ...........................................................................................................30 Exercises 2.4 (Preface) .............................................................................................................37 Exercises 2.4 (Question) ...........................................................................................................47 Exercises 2.1 (Answer) .............................................................................................................53 Exercises 2.2 (Answer) .............................................................................................................57 Exercises 2.3 (Answer) .............................................................................................................58 Exercises 2.4 (Answer) .............................................................................................................60 APPENDIX ‘A’ ...........................................................................................................................62 APPENDIX “B” ..........................................................................................................................71 Export Packaging and Warehousing Exercises 3.1 (Question) ...........................................................................................................73 Exercises 3.2 (Question) ...........................................................................................................74 Exercises 3.3 (Preface) .............................................................................................................75 Exercises 3.3 (Question) ...........................................................................................................82 Exercises 3.4 (Question) ...........................................................................................................84 Exercises 3.1 (Answer) .............................................................................................................85 Exercises 3.2 (Answer) .............................................................................................................86 Exercises 3.3 (Answer) .............................................................................................................88 Exercises 3.4 (Answer) .............................................................................................................95 Commercial Documentation and Regulatory Compliance Exercises 4.1 (Question) ...........................................................................................................97 Exercises 4.2 (Question) ...........................................................................................................99 Exercises 4.3 (Question) ......................................................................................................... 103 Exercises 4.4 (Question) ......................................................................................................... 107 Exercises 4.5 (Question) ......................................................................................................... 111 Exercises 4.6 (Question) ......................................................................................................... 115 Exercises 4.1 (Answer) ........................................................................................................... 120 Exercises 4.2 (Answer) ........................................................................................................... 124

Exercises 4.3 (Answer) ........................................................................................................... 127 Exercises 4.4 (Answer) ........................................................................................................... 130 Exercises 4.5 (Answer) ........................................................................................................... 133 Exercises 4.6 (Answer) ........................................................................................................... 136 Cargo Insurance Exercises 5.1 (Question) ......................................................................................................... 139 Exercises 5.2 (Preface) ........................................................................................................... 140 Exercises 5.2 (Question) ......................................................................................................... 141 Exercises 5.3 (Preface – Determining the Insured Value and Premiums)................................ 142 Exercises 5.3 (Preface – Duty and Taxes) .............................................................................. 145 Exercises 5.3 (Insured Value and Premiums) (Question) ........................................................ 147 Exercises 5.4 (Preface – Insurability, Exclusions of Coverage, Insurance Certificates) ........... 148 Exercises 5.4 (Question) ......................................................................................................... 154 Exercises 5.5 (Question) ......................................................................................................... 156 Exercises 5.6 (Question) ......................................................................................................... 160 Exercises 5.1 (Answer) ........................................................................................................... 163 Exercises 5.2 (Answer) ........................................................................................................... 166 Exercises 5.3 (Answer) ........................................................................................................... 169 Exercises 5.4 (Answer) ........................................................................................................... 171 Exercises 5.5 (Answer) ........................................................................................................... 172 Exercises 5.6 (Answer) ........................................................................................................... 174 Cargo Security and Dangerous Goods Exercises 6.1 (Cargo Security) (Question) .............................................................................. 177 Exercises 6.2 (Dangerous Goods) (Question) ......................................................................... 179 Exercises 6.3 (Cargo Security) (Question) .............................................................................. 182 Exercises 6.4 (Dangerous Goods) (Question) ......................................................................... 183 Exercises 6.1 (Cargo Security) (Answer)................................................................................. 185 Exercises 6.2 (Dangerous Goods) (Answer) ........................................................................... 189 Exercises 6.3 (Cargo Security) (Answer)................................................................................. 194 Exercises 6.4 (Dangerous Goods) (Answer) ........................................................................... 195 Costing and Quoting Exercises 7.1 (Question) ......................................................................................................... 199 Exercises 7.2 (Question) ......................................................................................................... 200 Exercises 7.3 (Question) ......................................................................................................... 202 Exercises 7.4 (Air Export) (Question) ...................................................................................... 203 Exercises 7.5 (Ocean Export) (Question) ................................................................................ 207 Exercises 7.6 (Air Import) (Question) ...................................................................................... 211 Exercises 7.7 (Ocean Import) (Question) ................................................................................ 215 Exercises 7.1 (Answer) ........................................................................................................... 219 Exercises 7.2 (Answer) ........................................................................................................... 222 Exercises 7.3 (Answer) ........................................................................................................... 225 Exercises 7.4 (Air Export) (Answer) ........................................................................................ 226 Exercises 7.5 (Ocean Export) (Answer) ................................................................................. 229 Exercises 7.6 (Air Import) (Answer) ........................................................................................ 232 Exercises 7.7 (Ocean Import) (Answer) .................................................................................. 235

Alternative Transport Solutions Exercises 8.1 (Question) ......................................................................................................... 239 Exercises 8.2 (Question) ......................................................................................................... 241 Exercises 8.3 (Question) ......................................................................................................... 242 Exercises 8.4 (Question) ......................................................................................................... 243 Exercises 8.5 (Question) ......................................................................................................... 244 Exercises 8.6 (Question) ......................................................................................................... 245 Exercises 8.7 (Question) ......................................................................................................... 246 Exercises 8.8 (Question) ......................................................................................................... 247 Exercises 8.9 (Question) ......................................................................................................... 248 Exercises 8.10 (Question) ....................................................................................................... 249 Exercises 8.11 (Preface) ......................................................................................................... 252 Exercises 8.11 (Shipment Information) ................................................................................... 257 Exercises 8.11 (Question) ....................................................................................................... 263 Exercises 8.1 (Answer) ........................................................................................................... 266 Exercises 8.2 (Answer) ........................................................................................................... 269 Exercises 8.3 (Answer) ........................................................................................................... 271 Exercises 8.4 (Answer) ........................................................................................................... 272 Exercises 8.5 (Answer) ........................................................................................................... 273 Exercises 8.6 (Answers) ......................................................................................................... 274 Exercises 8.7 (Answer) ........................................................................................................... 275 Exercises 8.8 (Answer) ........................................................................................................... 276 Exercises 8.9 (Answer) ........................................................................................................... 277 Exercises 8.10 (Answer) ......................................................................................................... 279 Exercises 8.11 – Calculations (Answer) .................................................................................. 282 Exercises 8.11 (Answer) ......................................................................................................... 297

Questions International Payments, Part 1

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Exercises 1.1 (Question)

1. List the four modes of settlement available in international transactions.

2. List three instances when it is not advisable or possible to sell to a foreign buyer on an open account.

3. Explain the process of a documentary collection and list the two important

documents involved.

4. What are the exporter’s disadvantages when choosing a documentary collection

to receive payment for his goods?

5. When using documentary collection as the method of payment on an ocean

freight shipment, how would you consign the bill of lading?

6. Define a bill of exchange.

7. What is a sight bill of exchange?

8. What is a term bill of exchange?

9. On a bill of exchange, who is the drawee and who is the drawer?


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10. Briefly define the following terms:

Drawer: _______________________________________________________

Drawee: _______________________________________________________

Tenor: ________________________________________________________

Remitting bank: ________________________________________________

Collecting bank: ________________________________________________

Direct collection: _______________________________________________

What is meant by “acceptance”?

What is meant by “documents on acceptance”?

Under documentary collections a ____________ trust has been established

between the _______________ and the _______________.

Also, the _________________ must contract an adequate ___________

_________________ in order to secure the abroad accounts receivables.

An air waybill _________ be consigned ______________ because

it is a ______________________ document.

The ________________ usually pays the banks’ fees for documentary collections.

Name the two basic types of documentary collections.


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1. Complete a direct bank collection form letter.

Shipper: United Seed Company Ltd. 125 Portage Street Winnipeg, Manitoba R2V 4G1, Canada

Buyer: Empire Grain Importers Ltd. 1 Main Street FK17, Grangemouth, Scotland

Consignment: 1 x 20-ft container of canola seed, 15,300 kg.

Shipped Montreal February 5, 2017. per mv K.D. Obukhova to Liverpool.

Value EXW Winnipeg: CAN $150,000.00 Canadian bank: Bank of Nova Scotia U.K. bank: Barclays Bank, London Terms of payment: 90 days sight

Questions: i) What kind of documents would you send with the direct bank collection letter? ii) Complete the direct bank collection form for the ocean shipment in this

assignment, including the bill of exchange. You have to consider that the ocean carrier should only release the container after the buyer accepted the bill of exchange presented to him by Barclays.


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THE BANK OF NOVA SCOTIA

Ontario International Banking Centre 181 University Ave., Suite 1916 Toronto, ON Canada M5H 3M7

DIRECT

COLLECTION

Always Quote Reference Number

D.C. 1152 /18572

Date _______________________

Mail to: (Collecting Bank)

Drawee: (Name and Address)

WE ENCLOSE THE FOLLOWING DRAFT(S) AND/OR DOCUMENTS FOR COLLECTION AND REMITTANCE AFTER FINAL PAYMENT ONLY. PLEASE HANDLE THIS COLLECTION AS IF RECEIVED DIRECTLY

FROM THE ABOVE OFFICE OF THE BANK OF NOVA SCOTIA TO WHOM YOUR ACKNOWLEDGEMENT. ALL REPORTS AND PAYMENT IS TO BE DIRECTED ALWAYS QUOTING THE ABOVE REFERENCE

NUMBER. THIS COLLECTION IS SUBJECT TO THE UNIFORM RULES FOR COLLECTIONS (1995 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 522.

From Drawer (Name and Address)

Drawers Ref. No. Tenor

Currency & Amount

Covering shipment of:

Vessel or Carrier

Bill of Lading No.

ENCLOSED DRAFTS BILLS OF LADING INVOICES INSURANCE

CERTIFICATE CERTIFICATE OF ORIGIN

PACKING LIST

AIR WAYBILL

ORIGINAL HH COMMERCIAL CUSTOMS CONSULAR

FIRST MAIL

SECOND MAIL

OBSERVE INSTRUCTIONS MARKED “X” BELOW

DOCUMENTS DELIVER AGAINST PAYMENT DELIVER AGAINST ACCEPTANCE HOLD FOR ARRIVAL OF GOODS

PROTEST PROTEST NON-PAYMENT PROTEST NON-ACCEPTANCE DO NOT PROTEST

ALL CHARGES FOR ACCOUNT DRAWER FOR ACCOUNT DRAWEE WAVE CHARGES IF REFUSED BY DRAWEE

INCLUDING EXCHANGE, INCURE NO CABLE EXPENSE COLLECT THE BANK OF NOVA DO NOT WAIVE CHARGES

STAMP, TAXES, ETC. SCOTIA CHARGES OF $23.00 WITHOUT FURTHER INSTRUCTIONS

INTEREST COLLECT INTEREST AT ______________ % PER ANNUM FROM ______________________TO ______________________ FOR DELAY IN PAYMENT COLLECT INTEREST AT ____________ % P.A. FROM DO NOT WAIVE WITHOUT

DUE DATE LISTED, APPROXIMATE ARRIVAL OF PROCEEDS AT DEST. FURTHER INSTRUCTIONS

ALLOW DISCOUNT OF ______________________ IF PAID _____________________________________________________

FATE ADVICES

BY AIRMAIL ACCEPTANCE NON-ACCEPTANCE NON-PAYMENT BY CABLE ACCEPTANCE NON-ACCEPTANCE NON-PAYMENT

REMIT PROCEEDS AIRLINE PRIME BANKERS DRAFT ON TORONTO (Cdn. funds) NEW YORK (U.S. funds)

IN THE CURRENCY

OF THE CALBE/TELEX/SWIFT AT DRAWERS EXPENSE AT DRAWEES EXPENSE

COLLECTION BY

LOCAL CURRENCY IN THE EVENT FOREIGN EXCHANGE IS NOT IMMEDIATELY OBTAINABLE, A PROVISIONAL DEPOSIT IN LOCAL CURRENCY MAY

BE ACCEPTED WITH DRAWEE’S WRITTEN UNDERSTANDING TO ASSUME ALL EXCHANGE PRICES TO EXPECT FULL SETTLEMENT IN THE CURRENCY OF THE COLLECTION. DO NOT SURRENDER DRAFT UNTIL FINAL SETTLEMENT FOR FACE AMOUNT IS RECEIVED FOR REMITTANCE.

IN CASE OF NEED WHO WILL ENDEAVOUR IN HAVING DRAFT

REFER TO HONOURED AS DRAWN

WHOSE INSTRUCTIONS MAY BE

ACCEPTED IN EVERY RESPECT

SPECIAL INSTRUCTIONS

PREPARED BY (NAME OF FORWARDER)

SIGNATURE


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SPACE BELOW FOR ACCEPTANCE STAMP FORWARDING BANK’S

DUE _______________________ NUMBER

______________________________ 20 __________

_________________________ AFTER DATE, FOR VALUE RECEIVED.

PAY TO THE ORDER OF _____________________________________________ THE SUM OF

_______________________________________________ DOLLARS $ ________________ RECEIVING BANK’S

NUMBER

TO ________________________________

________________________________

________________________________ ______________________________


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1. 1. Complete a direct bank collection form letter.

Shipper: Canadian Manufacturing Inc. 20 Royal York Rd. Mississauga, Ontario L5S 2R5, Canada Buyers: Osterreichische Fabrikationsbetrieb GmbH Vorarlberg Str. Linz 4020, Austria Consignment: 1 crate of barbeque parts, 675 kg - 2.5 m3 February 5, 2017, AC AWB 014-1234 4321 Value EXW Montreal: CAN $31,000.00 Canadian bank: Bank of Nova Scotia Austrian bank: Wiener Handelsbank AG, Vienna Terms of payment: Cash against documents For this air freight shipment you have the option to either use the traditional bank channel or you suggest a different, possibly a more efficient manner of following shipper’s C.O.D. instructions, especially considering that it is air freight and time is of the essence.

Questions: i) If you use a direct bank collection method, how would you consign the air waybill? ii) How would you forward the completed direct bank collection letter? iii) What kind of documents would you send with this direct bank collection letter? iv) What other option do you think you may have to comply with shipper's instructions

for you to arrange for the C.O.D.? Explain.


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DIRECT

COLLECTION


D.C. 1152 /18572

Date _______________________

Mail to: (Collecting Bank)

Drawee: (Name and Address)




From Drawer (Name and Address)

Drawers Ref. No. Tenor

Currency & Amount

Covering shipment of:

Vessel or Carrier

Bill of Lading No.


CERTIFICATE

CERTIFICATE

OF ORIGIN

PACKING

LIST

AIR

WAYBILL


FIRST MAIL

SECOND MAIL










FATE ADVICES



IN THE CURRENCY

OF THE CALBE/TELEX/SWIFT AT DRAWERS EXPENSE AT DRAWEES EXPENSE

COLLECTION BY









SIGNATURE


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DUE _______________________ NUMBER

______________________________ 20 __________




NUMBER

TO ________________________________

________________________________

________________________________ ______________________________

Answers International Payments, Part 1

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Exercises 1.1 (Answer) 1. List the four modes of settlement available in international transactions.

1. Advance payment.

2. Open account.

3. Documentary collection.

4. Documentary credit (or letter of credit).

2. List three instances when it is not advisable or possible to sell to a foreign buyer on an open account.

1. When there are currency restrictions, import permits or quotas or where open accounts are prohibited.

2. In countries where political instability or economic instability make it an unreliable way of receiving payment for your goods.

3. When you feel that the buyer will not pay as agreed.

3. Explain the process of documentary collection and list the two important documents involved.

The exporter engages a bank to do the collecting at destination via a corresponding bank. All shipping documents and a bill of exchange are given to the bank who will not release the goods to the importer until they have collected the commercial invoice amount or obtained an accepted term bill of exchange. The two important documents are the bank collection form and the bill of exchange.

4. What are the exporter’s disadvantages when choosing a documentary collection to receive payment for his goods?

The bank acts as a collection agency. The goods will arrive at destination and if the importer cannot pay, the exporter will have to decide if he pays to bring back the goods or try to sell them to another client, possibly at a loss.


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5. When using documentary collection as the method of payment on an ocean freight shipment, how would you consign the bill of lading?

Consigned: to order blank.

6. Define a bill of exchange.

An unconditional order in writing where one party undertakes to pay another party a named sum of money at presentation or at a given date.

7. What is a sight bill of exchange?

A bank draft payable upon presentation.

8. What is a term bill of exchange?

A bank draft payable at a specified later date. It is accepted by the signature of the drawee.

9. On a bill of exchange, who is the drawee and who is the drawer?

Drawee: the party that has to pay.

Drawer: the party that wants the money.

10. Briefly define the following terms:

Drawer: The party requesting payment or issuing the bill of exchange (exporter).

Drawee: The party specified in the bill of exchange from whom payment is demanded (importer).

Tenor: The time allowed to the importer for payment of an accepted bill of exchange.

Remitting bank: The bank acting on behalf of the exporter.

Collecting bank: The bank in the importer’s country, collecting payment.

Direct collection: There must be trust between the exporter and importer and no restrictions in the country of import. Payment against presentation of documents.


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11. What is meant by “acceptance”?

The drawee accepts the bill of exchange, thereby agreeing to pay at the date of maturity of the bill of exchange. Acceptance is done by the drawee, signing over the face of the bill of exchange the word “accepted” along with the date.

12. What is meant by “documents on acceptance”?

The collecting bank (drawee’s bank) releases the transport documents to the drawee, after the drawee has properly accepted a term bill of exchange.

13. Under documentary collections a mutual trust has been established

between the exporter and the importer. Also, the _exporter _must contract an adequate _credit insurance policy in order to secure the abroad accounts receivables.

14. An air waybill _must_ be consigned _to a party or bank because

it is a _non-negotiable_ document.

15. The _importer__ usually pays the banks’ fees for documentary collections.

16. Name the two basic types of documentary collections.

1. Documents against payment.

2. Documents against acceptance.


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Exercises 1.2 (Answer)

1. Complete a direct bank collection form letter. Question i) You must send, as a minimum, the freight controlling document i.e.,

the bill of lading and a commercial invoice. Additional documents, like insurance policy or packing list, etc. depend on buyer's specifications. The bill of lading should be consigned to order.

Question ii) Refer to completed direct bank collection form.


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DIRECT

COLLECTION


D.C. 1152 /18572

Date February 4, 2017

Mail to: (Collecting Bank) Barclay’s Bank London

Drawee: (Name and Address) Empire Grain Importers Ltd., 1 Main Street, FK17 Grangemouth, Scotland




From Drawer (Name and Address) United Seed Company Ltd. 125 Portage St., R2V 4G1 Winnipeg, Manitoba, Canada

Drawers Ref. No. Tenor 90 days

Currency & Amount CAN $150,000.00

Covering shipment of: 1 x 20-ft canola seed 15,300 kg

Vessel or Carrier

K.D. OBUKHOVA

Bill of Lading No.

101


CERTIFICATE

CERTIFICATE

OF ORIGIN

PACKING

LIST

AIR

WAYBILL


FIRST MAIL 1 2/3 1 2 _ _ _ _ _ _

SECOND MAIL 1 1/3 1 1 _ _ _ _ _ _










FATE ADVICES



IN THE CURRENCY

OF THE CABLE/TELEX/SWIFT AT DRAWERS EXPENSE AT DRAWEES EXPENSE

COLLECTION BY









CIFFA Forwarder CIFFA Forwarder’s Signature

SIGNATURE


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__________________________ DUE 90 days after NUMBER

Sight

February 4, 2017 c.c. 1152/18572

_____ __________ AFTER DATE, FOR VALUE RECEIVED.

PAY TO THE ORDER OF The Bank of Nova Scotia THE

SUM OF

____One hundred fifty thousand CAD DOLLARS $150,000.00 CAD_________ RECEIVING BANK’S

NUMBER

TO Empire Grain Importers Ltd. United Seed Co. Ltd.

Grangemouth, Scotland

________________________________ Exporter’s/Drawer’s Signature


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Exercise 1.3 (Answer)

1.

Question i) The AWB must be consigned to the collecting bank (Wiener

Handelsbank) or in your option to your agent in Linz with appropriate instructions.

Question ii) Since this is an air freight shipment, you cannot, of course, forward

the direct bank collection form separately by mail. The direct bank collection letter should travel with the shipment in an envelope attached to the air waybill.

Question iii) There should at least be a commercial invoice included. Additional

documents would be subject to buyer’s prior specification. Question iv) Instead of using the bank channel, you could use your agent in Linz

to collect as C.O. D., i.e., a bill of exchange for CAN $31,000.00 made out to Canadian Manufacturing Inc. Especially for air freight this would be the more efficient way. You and your agent could collect a fee - at least the equivalent what both, the Canadian remitting bank (BNS) and the collect bank (Wiener), would charge.

This method to use your agent is safe in this case when terms of payment are cash against documents. In case a term is involved you may prefer the bank channel because you would have to collect first the signature of acceptance on the bill of exchange and later when the term is due, present the bill of exchange for payment.


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DIRECT

COLLECTION


D.C. 1152 /18572 Date February 4, 2017

Mail to: (Collecting Bank) Wiener Handelsbank AG Vienna, Austria

Drawee: (Name and Address) Osterreichische Fabrikationsbetrieb GMBH Vorarlberg Str., 4020, Linz, Austria




From Drawer (Name and Address) Canadian Manufacturing Inc. 20 Royal York Rd. Mississauga, Ont., L5S 2R5, Canada

Drawers Ref. No. Tenor Sight

Currency & Amount CAN $31,000.00

Covering shipment of: 1 crate barbeque parts 675 kg

Vessel or Carrier

AC AWB 014-1234 4321

Bill of Lading No.


CERTIFICATE

CERTIFICATE

OF ORIGIN

PACKING

LIST

AIR

WAYBILL


FIRST MAIL 1 _ _ 2 _ _ _ _ _ 1

SECOND MAIL 1 _ _ _ _ _ _ _ _ _










FATE ADVICES



IN THE CURRENCY

OF THE CABLE/TELEX/SWIFT AT DRAWERS EXPENSE AT DRAWEES EXPENSE

COLLECTION BY









CIFFA Forwarder

CIFFA Forwarder’s Signature

SIGNATURE


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__________________________ DUE NUMBER

February 4, 2017 c.c. 1152/18572

_____AT SIGHT__________ AFTER DATE, FOR VALUE RECEIVED.

PAY TO THE ORDER OF The Bank of Nova Scotia THE

SUM OF

____Thirty One Thousand CAD DOLLARS $31,000.00 CAD_________ RECEIVING BANK’S

NUMBER

TO Osterreichische Fabrikationsbetrieb Canadian Manufacturing Inc.

GmbH, Linz

________________________________ Exporter’s/Drawer’s Signature


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1. What are the main reasons why a letter of credit may be chosen as a form of

International payment?

2. Name some advantages of a letter of credit.

3. The letter of credit deals with documents and not with goods, what risk does

this pose to the buyer?

4. What kind of risks is the exporter exposed to under the usance letter of credit?

5. Name (5) five main parties involved in the letter of credit.

6. Which party instructs the bank to open a letter of credit?

7. Which party draws up and issues the letter of credit and then makes payment

according to the conditions outlined in the letter of credit?

8. Which party receives payment as stipulated in the letter of credit?

9. Does the advising bank take on any payment obligations to the beneficiary

under a letter of credit?

10. What does the Uniform Customs and Practice for Documentary Credits (UCP)

outline?

11. What is the current version of the UCP rules used by commercial bankers and

commercial parties in the execution of a letter of credit?

12. What is the bank’s responsibility under Article 5 of the UCP 600 rules?


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13. Is a CIFFA freight forwarder liable for his/her documentation in a letter of credit transaction?

14. As a CIFFA freight forwarder it is your responsibility to comply with the

requirements of the letter of credit. What will the failure to do so result in?

15. As a CIFFA freight forwarder what is a good way to avoid any lack of attention or mistakes going through the documentary requirements?

16. The UCP 600 rules provide room for some interpretation; as a CIFFA freight forwarder what should you do if you are in doubt?

17. What date do the banks look for if the credit prescribes an on board bill of lading and a latest shipping date?

18. Under the UCP 600 rules, which date do you use to present the documents to the paying bank?

19. If a bill of lading indicates a place of receipt different from the port of loading, what should be included in the “on board notation”?

20. Under the UCP 600 rules, Article 23, is a house air waybill acceptable?

21. Unless specified by name in the letter of credit, is a house bill of lading covered in the UCP 600 rules?

22. Is it possible to assign to another party all or part of the proceeds of a drawing/payment under a credit?

23. As a CIFFA freight forwarder you should guard yourself against the risk of non-

payment. How can you ensure payment from your client?

24. Name (3) three types of letter of credit.

25. What is the difference between a revocable and irrevocable letter of credit?


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26. If there are spelling errors in the credit instructions, what should the CIFFA

freight forwarder do?

27. Name some of the most common errors and/or deficiencies in the execution of

a letter of credit.


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2. Using the diagram below, and the numbers assigned to each step, describe a typical letter of credit procedure.


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Exercises 2.3 (Preface) For this exercise you are required to deal with a letter of credit in an air export shipment. The idea is for you to learn how to recognize and select from a letter of credit the pertinent instructions or details you need in order to complete an air waybill and the draft correctly. In view of the fact that the draft is made out to the order of the beneficiary, the beneficiary - i.e., you for the beneficiary - must endorse that draft. UCP 600 You can find the UCP 600 Articles in the Appendices of the CIFFA Essentials of Freight Forwarding textbook. You are not expected to memorize the rules, however it is essential that you familiarize yourself with these Articles, especially Articles 19-24 pertaining to transport documents. These Articles will be referenced throughout this section. There is no need for an explanation on how to complete the air waybill for an air freight shipment. Just observe the requirements of Article 23 in the UCP 600 for an air transport document.


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1. Export Air Freight Shipment Sold against Letter of Credit

a) Complete the air waybill strictly based on the instructions contained in the letter of credit.

Shipment: 51 cartons of barbeque parts. Total weight: 883 kg The dimensions of each carton: 0.48 m L x 0.48 m W x 0.48 m H Available flight: Air Canada, from Toronto to Tokyo Date shipped: January 24, 2017 Rate: CAN $4.00/kg/vol.

b) Establish the chargeable weight and the air freight payable. Use both figures in your air waybill. (Refer to conversion tables in Appendix “B”).

c) Special task:

There are two special documentary items in the air freight letter of credit which you are to discover and then make a comment on how to handle the items.

Question: which are these two items and what would you propose to do? General comment: usually shippers expect you to complete and furnish any and all documents required in a letter of credit.

Normally, you would use a neutral form for the commercial invoice generated by your computer system or perhaps you still use an overlay system. Generally, there is no need to use shipper's stationary.

In this activity you are not required to complete the commercial invoice. This comment is made so you know how to deal with the subject of a commercial invoice, packing list, etc.

d) Complete the draft in accordance with the instructions of the letter of credit. Sign the draft.


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LIVE!!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! Req by: TOR AUTOLCT In: AUT PRT 1/1/17 07:40 page 1 INC CA 911030-00830-000 Que: CA TOR LCT ADMR pri: 150 Dup: N Msg Type: Received Pos Dup: Pri: Time Created: 1/1/17 01:33 Completion: Message Active Exception: Correspondent: 0039388 II Amount: 58,000.00 Name: SANWA BK LTD., OSAKA Owner Office: TOR/LCT Address: Unavailable for this MSG City: Cntry: PC: Parent ICN: Input test: N Swift OSN:30ROT202081 Service: SWF Ref: 30SANWJPJSAXXX68675 Sequence:2081 Test Result: Tested TO ROYAL BANK OF CANADA - Toronto OSN 02081 ONTARIO, CANADA RECEIVED 0135/30

3 RN 30SANWJPJSAXXX68675 SENT 1536/30

FROM SANWJPJSAXXX

SANWA BK LTD. OSAKA N/A OSAKA JAPAN CIF # 0339388 II UID:

MT 700 ISSUE OF DOC CREDIT PRIORITY 02 27 / SEQUENCE OF TOTAL: 1/1 40A/ FORM OF DOCUMENTARY CREDIT:

IRREVOCABLE 20 / DOCUMENTARY CREDIT NUMBER 41 2360927-209 31C/ DATE OF ISSUE: 170101

CANADA 31D/ DATE AND PLACE OF EXPIRY: 170201

CANADA


2017 Page | 32

LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! Req By: TOR AUTOLCT In: AUT PRT 1/1/17 07:40 Page 2 INC CA 911030-00830-000 Que: CA TOR LCT ADMR pri: 150 Dup: N 50 / APPLICANT:

YAMAMOTO BARBEQUE CORP OSAKA

59 / BENEFICIARY: CANADIAN MANUFACTURING INC. 5678 MISSISSAUGA RD. MISSISSAUGA CANADA

ICN: CA 911030-008830-000 Que:CA TOR LCT ADMR Pri: 150 Dup: N 32B / AMOUNT: 58,000.00 US DOLLAR 41D / AVAILABLE WITH ... BY ...

ANY BANK BY NEGOTIATION

42C / DRAFTS AT ... SIGHT

42D / DRAWEE:

SANWA BANK LTD. OSAKA

43P / PARTIAL SHIPMENTS: ALLOWED 43T / TRANSHIPMENT: ALLOWED 44A / PORT OF LOADING/AIRPORT OF DEPARTURE

TORONTO AIRPORT 44B / PORT OF DISCHARGE/AIRPORT OF DESTINATION

OSAKA INTERNATIONAL AIRPORT 44C / LATEST DATE OF SHIPMENT: 170125 45A / DESCRIPT OF GOODS AND OR SERVICES

BARBEQUE PARTS CIP OSAKA INSURE TO BE EFFECTED BY SHIPPER


2017 Page | 33

LIVE!!!! LIVE!!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! Req By: TOR AUTOLCT In: AUT PRT 1/1/17 07:40 PAGE 3 INC CA 911030-00830-000 Que: CA TOR LCT ADMR pri: 150 Dup: N 46A / DOCUMENTS REQUIRED: +CLEAN AWB CONSIGNED TO THE SANWA BANK LTD MATSUBARA BR MARKED FREIGHT PREPAID

NOTIFY THE APPLICANT AND KINTETSU EXPRESS

+SIGNED COMMERCIAL INVOICE IN TWO COPIES +INSURANCE POLICY OR CERTIFICATE IN DUPLICATE ENDORSED IN BLANK FOR 110-0/0 OF THE INVOICE VALUE INCLUDING: INSTITUTE CARGO CLAUSE A (ALL RISK) INSTITUTE WAR CLAUSE INSTITUTE STRIKES RIOTS AND CIVIL COMMOTIONS CLAUSES CLAIMS TO BE PAYABLE IN JAPAN IN THE CURRENCY OF THE DRAFT

+CERTIFICATE OF ANALYSIS IN TWO COPIES 47A / ADDITIONAL CONDITIONS: AIR WAYBILLS MUST INDICATE THE NUMBER OF THE CREDIT. ONE SET OF NON-NEGOTIABLE DOCUMENTS MUST BE ATTACHED TO AIR WAYBILL 71B / CHARGES: ALL BANKING CHARGES OUTSIDE OF JAPAN FOR SHIPPERS ACCOUNT 48 / PERIOD FOR PRESENTATION:

DRAFTS MUST BE PRESENTED FOR NEGOTIATION WITHIN 16 DAYS AFTER THE DATE OF AWB OR OTHER DOCUMENTS, BUT WITHIN THE CREDIT EXPIRY

49 / CONFIRMATION INSTRUCTIONS: WITHOUT 78 / INSTRUCTIONS PAY/ACCEPT/NEGOT BANK:

T.T. REIMBURSEMENT IS ACCEPTABLE NEGOTIATING BANK MUST SEND DOCUMENTS TO US IN TWO CONSECUTIVE REGISTERED AIRMAILS AND DRAFTS TO DRAWEE BANK


2017 Page | 34

LIVE!!!! LIVE!!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! Req By: TOR AUTOLCT In: AUT PRT 1/1/17 07:40 PAGE 4 INC CA 911030-00830-000 Que: CA TOR LCT ADMR pri: 150 Dup: N SPECIAL INSTRUCTIONS TO THE ADVISING BANK: IN SETTLEMENT YOU ARE AUTHORIZED TO DEBIT OUR TOKYO ACCOUNT WITH YOU 57D / ADVISE THROUGH BANK:

THE ROYAL BANK OF CANADA MAIN BRANCH

72 / SENDER TO RECEIVER INFORMATION: THIS CREDIT IS OPERATIVE AND SUBJECT TO UNIFORM CUSTOMS 2007 REVISION PUBLICATION 600 MAC AUTHENTICATOR RESULT/FBCBEB8D SAC AUTHENTICATION SUCCESSFUL CURRENT KEY

END OF MESSAGE LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!!


2017 Page | 35

Shipper’s Name and Address Shipper’s Account Number Not negotiable

Air Waybill:

Issued by:

_________________________________________________________________ Copies 1, 2, ands 3 of this Air Waybill are originals and have the same validity.

It is agreed that the goods described herein are accepted in apparent good order and condition (except as noted) for carriage SUBJECT TO THE CONDITIONS OF CONTRACT ON THE REVERSE HEREOF. THE SHIPPER’S ATTENTION IS DRAWN TO THE NOTICE CONCERNING CARRIER’S LIMITATION OF LIABILITY. Shipper may increase such limitations of liability by declaring a higher value for carriage and paying a supplemental charge if required.

Consignee’s Name and Address Consignee’s Account Number

Issuing Carrier’s Agent Name and City Accounting Information

Agent’s IATA Code Account No.

Airport of Departure (Addr. Of First Carrier) and Requested Routing To By First Carrier Routing and

Destination

To By To By Currency CHGS Code

WT/VAL Other Declared

Value for

Carriage

Declared Value for Customs

$

Airport of Destination Flight/Date For Carrier Use Only Flight/Date Amount of Insurance

INSURANCE – If carrier offers insurance, and such Insurance is requested in accordance with the conditions thereof, indicate amount to be insured in figures in box marked “Amount of Insurance”.

Handling Information:

SCI

No. of Pieces RCP

Gross Weight

kg Rate Class Chargeable Weight

Rate/Charge Total Nature and Quantity of Goods

Commodity Item No. (incl. Dimensions or Volume)

Prepaid Weight Charge Collect Other Charges

Valuation Charge Tax Total Other Charges Due

Agent

Shipper certifies that the particulars on the face hereof are correct and that insofar as any part of the consignment contains dangerous goods, such part is properly described by name and is in proper condition for carriage by air according to the applicable Dangerous Goods Regulations.

Signature of Shipper or his Agent

Total Other Charges Due

Carrier

Total Prepaid Total Collect

Currency Conversion Rates CC Charges in Dest. Currency Executed on (Date)at (Place) Signature of Issuing Carrier or its Agent


2017 Page | 36


DUE _______________________ NUMBER

______________________________ 20 __________




NUMBER

TO ________________________________

________________________________

________________________________ ______________________________


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Exercises 2.4 (Preface)

For this exercise you are required to deal with a letter of credit (L/C) in an ocean export shipment. The idea is for you to learn how to recognize and select from a L/C the pertinent instructions or details you need in order to complete the bill of lading (B/L) and the draft correctly. In view of the fact that the draft is made out to the order of the beneficiary, the beneficiary – i.e., you for the beneficiary – must endorse that draft. UCP 600 You can find the UCP 600 Articles in the Appendices of the CIFFA Essentials of Freight Forwarding textbook. It is essential that you familiarize yourself with these Articles, especially Articles 19-24 pertaining to transport documents. These Articles will be referenced throughout this section. Banks will accept the signature of the B/L issuer also for the on board purpose. Guide for Completing Marine B/Ls (on Basis of a L/C) This is intended for the novice forwarding student, who attempts to complete a B/L, for a L/C, the first time. Never forget, however, that for any real-life L/C, you must strictly and only follow the specific instructions for each particular L/C separately. This guide only covers those boxes in the B/L for which you must pick up the data and instructions from the L/C. All other boxes are not relevant in this context. Refer to the B/L at the end of the guide for the location of the box numbers. BOX 1: SHIPPER Insert the name of the beneficiary as shown in the L/C, usually in line 59. Always use the spelling of the name, address, including the postal code, only as shown in the L/C, even if it is incorrect or misspelled, and in variance with shipper’s stationery. If there are variances, regardless how minor, all other documents required under the L/C must be consistent and show the same version. When the need arises, put aside the shipper’s stationery and instead use your computer-generated form or your overlay type form. Both are generic types of forms and the bank will accept them unless prohibited in the L/C.


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BOX 2: CONSIGNEE Under the words “Required Documents”, usually in line 46A, a L/C specifies how the B/L is to be made out. It may say, for example, “to order” or “to order of shipper”. Insert exactly what the L/C prescribes at line 46A. BOX 3: NOTIFY Under the words “Notify ...”, usually in line 46A, the L/C specifies whom to notify, usually the applicant. Again, you must follow the particular instructions in the L/C. The name and address of the applicant is in line 50. If an address is incomplete or missing, use only whatever is provided in line 50. Never insert the word “applicant”. If the L/C doesn’t contain any notify address, insert buyer’s name or address. SPECIAL COMMENT - BOXES 4, 5, 7, 8, 9 To complete these boxes correctly, you must be strictly guided by the type of B/L required in the L/C. Articles 19 to 24 of UCP 600 specify different requirements for the 6 types of transport documents. The following covers only two types of the B/L. - Marine/ocean B/L - Combined transport B/L. Note that a marine or ocean B/L is prescribed probably in more than 95% of all ocean L/Cs. You may substitute a forwarder’s transport document when the L/C requires a marine/ocean or combined transport B/L, etc., provided you complete that forwarder’s transport document exactly in the same way as the UCP 600 requires you to prepare a marine/ocean or combined transport B/L, etc. Below you can find, for each of the boxes 4 to 9, a comment for both marine/ocean B/L and a combined transport B/L. It is up to you to read the L/C and choose the correct option. BOX 4: PRE-CARRIAGE BY

Insert either “truck” or “rail”. There is no direct instruction in the L/C.

Marine/Ocean B/L For a port-to-port (loading port/discharge port) B/L you do not need to complete box 4. When you have a marine/ocean B/L but the container is delivered not at port but at an inland container terminal or to the consignee’s door (place of receipt or box 5), complete box 4 with “truck/rail”.


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Combined Transport B/L The most common occasion will arise when the L/C requires, in line 46A, by name a “combined through transport B/L”. Not all B/L forms may use in print the title “combined through transport B/L”, nor is this required as per Article 19 of UCP 600. Whenever a “combined through transport B/L” is required, all you need to do is complete box 4 as explained above, plus box 5 and box 9 if need be. Article 19 of the UCP 600 defines a Multimodal Transport Document as covering at least two different modes of transport. Therefore, you must identify the second mode of transport, usually “truck/rail”. The vessel is the other mode of transport. You will notice that boxes 4 and 9 carry an asterisk in the B/L form which is defined at the bottom of the B/L form: “applicable when document issued as combined through B/L”. BOX 5: PLACE OF RECEIPT This usually means the inland container terminal (CY) of the carrier, but there are some possible exceptions required in a L/C, e.g., “Ontario” instead of the actual name of a city. Marine/Ocean B/L The name of the place/port etc. specified in a L/C in line 44A saying “loading/dispatch/taking” in charge from can never be put in box 5. That named place/port etc. in line 44A, if a marine/ocean B/L is specified, can only be put into box 7 (port of loading). However, you put in addition to the required name of place or port in box 7, in box 5 the name of the container terminal (city) at which the container was received. This is acceptable as per Article 20 of UCP 600 provided shipment is (a) containerized and (b) covered by one through B/L. Combined Transport B/L For this type of B/L the name of the place specified in line 44A of a L/C must show in box 5. (Note of caution: This is only valid if the L/C referring to a combined transport B/L does not mention the word “onboard”. If the word “onboard” appears in conjunction with a named combined transport B/L, the rules for a marine/ocean B/L automatically apply.)

BOX 7: PORT OF LOADING Marine/Ocean B/L You must show here the named port of line 44A in a L/C. In fact, before doing anything, you must request a copy of the L/C from the shipper and then check first if line 44A (and line 44B for discharge port) is in fact a port, and second, if there is a carrier providing there is actually a service from the required port (of loading) to the required port (of discharge). If there is a carrier you should check if the rate of that carrier tallies with your prior quotation, if any.


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In the event you cannot find the required service, you have basically two options. Option 1 Request amendment through the shipper to match the actual port(s) served. Option 2 Sometime it may be possible to persuade a carrier to issue you the required B/L for the L/C even though that B/L then does not correspond to the actual service. For instance, a carrier may agree to show Montreal in box 7 when vessels sail from Halifax. You have to investigate this possibility at time of booking with a responsible person at the agent of the carrier so that you have no let down at time the actual B/Ls are issued by the carrier. Combined Transport B/L You simply show the name of the actual port of loading for the vessel service you have chosen. The name of the loading port is irrelevant in the context of the L/C. For the L/C the important box in terms of line 44A for combined transport B/L is box 5 (place of receipt).

BOX 8: PORT OF DISCHARGE Marine/Ocean B/L You must show here the named port of the line 44B in the L/C. In terms of general explanation, the same detail applies for box 8 as explained for box 7 (port of loading). It must be clearly understood that the named place in line 44B should be an actual port. In the event it is an inland destination beyond the discharge port you could not comply when the L/C requires a marine/ocean B/L. In such a case an amendment is necessary. Usually you cannot persuade a carrier to show in box 8 a foreign inland place. Transshipment This needs a special explanation because the UCP rule in Article 20b, c, is frequently or easily misunderstood. First, Article 20b clearly defines transshipment to be from vessel to vessel. Now 20c(ii) says banks will accept a B/L evidencing a transhipment, even if transshipment is prohibited in the L/C, provided shipment is covered by a container and is on a through B/L.


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Since most shipments are in a container and on a through B/L, Article 20c is commonly understood or interpreted that you would have no problem in case of a transshipment. Unfortunately there are frequent problems. The reason for these frequent problems is the style or format of all B/Ls. When you have transshipment the carrier on the B/L identifies that transshipment by completing box 8 with name of transshipment port whereas the port of final destination you need shows up in box 9. Box 9 is described in all B/L as place of delivery. But article 20 for a marine/ocean B/L requires that the port of destination shows up in box 8. If you could create a B/L form which describes box 9 as final port of discharge, the bank would accept your transshipment B/L on the basis of article 20c. For the great majority of container lines a transshipment takes place on most routes. The feedering from transshipment port to port of final destination is usually a vessel also owned/controlled by your carrier. Many carriers do not even bother anymore to identify a transshipment port in the B/L. If a transshipment is still identified by a carrier it is rarely a problem to persuade the carrier to omit the transshipment port and simply show in box 8 the final port of destination as discharge port. The point is, whenever a L/C prohibits transshipment you have to ensure with the carrier at time of booking that the carrier will indeed issue you the B/L you require for the L/C. When a carrier is unwilling to omit the showing of the port of transshipment in the B/L, there is sometimes another possible solution before requesting an amendment. Try to persuade the carrier to show the fact of transshipment and the name of the port of transshipment as a separate line in box 19 whereas you request the carrier to show in box 8 the port you require in accordance with your L/C. Combined Transport B/L You simply show the name of the actual port of discharge for the vessel service you have chosen. The name of the discharge port is irrelevant in regard to line 44B in the context of the L/C. For the L/C the important box at destination is either box 8 or more often box 9 as place of delivery. You show the named place in line 44 b in box 8 if the named place is a port and if the named place in line 44B is a place beyond the port of discharge, you show that name in box 9 (place of delivery). BOX 9: PLACE OF DELIVERY This is normally a place of destination or delivery beyond the port of discharge.


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Marine/Ocean B/L Since line 44B is required to be shown as port in box 8, port of discharge, there is normally no need to complete box 9 for a marine/ocean B/L. However, if in spite of the L/C requirement in line 44B the client wishes delivery of the container at an inland place, you may complete box 9 (place of delivery) in addition to box 8 (port of discharge). Combined Transport B/L Insert the name of the final destination provided it is other than the port of discharge in box 9, corresponding to line 44B in the L/C. If the line 44B for combined transport calls for an actual port of discharge, leave box 9, place of delivery, blank. BOX 10: FORWARDING AGENT: Insert the name of your forwarding company. BOX 11: MARKS AND NUMBERS, QUANTITY OF PACKAGES Insert, in detail, the container number, seal number, container size, and number of containers, as well as any markings, if the L/C stipulated so. BOX 12: DESCRIPTION OF PACKAGES AND GOODS This is probably the most important box: 1) Description a) You should use strictly the exact description or wording used in the L/C, usually in line 45A. You must copy the description truly and faithfully with all mistakes, if any. b) You should include any additional wording seemingly not pertaining to the description block of line 45A, e.g., “warranted packed in seaworthy cases” or any similar wordings even when it is obvious to you they are not really part of a description. You can always insert additional descriptive information, as you are required for hazardous goods or tariff rating purposes. The descriptions in the B/L should match the L/C exactly. Note that according to UCP 600, Article 14e, only the commercial invoice must correspond exactly with the L/C. Other documents may describe the goods in general terms not inconsistent with the description in the L/C.


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The proviso “not inconsistent with” is really a dangerous phrase because it allows for a judgmental assessment by the bank. Also, bear in mind that the UCP rules are for the bank usage toward the documents. Always bear in mind that the journey of the cargo also involves different authorities, such as customs, insurance company or surveyor that might delay the shipment process or even reject some documents if the description on all documents does not match. Therefore, you are well advised to stick rigidly to the L/C description also for the B/L. There are two possible occasions when you may wish to make use of the proviso of Article 37C:

Descriptions of excessive length, which do not fit into existing B/L forms without an attachment sheet. We recommend the use of a RIDER page where you can include the complete compliant description. Carriers will also issue the same RIDER page on their stationary paper.

Descriptions, which contain the actual value of the shipment. In such cases some carriers may wish to assess an ad valorem ocean freight rate. If and when the need for these two occasions arises and no amendment is possible, you first need to check with the carrier whether or not a higher ocean freight rate would apply and you need to check with the bank in advance of booking, perhaps with a sample B/L form your propose, if the bank accepts your version of the description. A simple B/L sample may not be enough, you may have to send copies of the other documents required so the bank can judge if they are consistent with each other.

2) Annotations per L/C

a) When a L/C uses the word “marked” or words to a similar effect, that is an order for you to put the relative information in box 12. The full instructions are usually marked “freight prepaid or collect”. In that case it is not good enough to complete only box 24 in the B/L simply with the name of your city at origin or use the word “payable at destination”.

b) You also must show all important on board clauses. Carrier B/Ls frequently do not provide for the required style of on board notation, therefore you have to ask the carrier to add it in for you.

Marine/Ocean B/L When it is a pure port-to-port B/L and you only complete box 7 (port of loading) and box 8 (port of discharge) you only need to mark in box 12 “on board (with a date)”. When you completed in addition to box 7, box 5 (place of receipt), the style of the on board notation in box 12 must be:

On board vessel XYZ. From loading port ABC (with a date).

You must repeat the name of the vessel and the name of the loading port even though both are already shown in box 6 and box 8. The background explanation is in Article 20 a (ii).


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c) In the event the L/C demands that all documents show, for example, the L/C number, it is in box 19 where you put it. Sometimes other “number” information is required to be shown in the L/C, such as order numbers, import permits, customs tariff item, etc. You must carefully scrutinize each L/C for such additional instructions and follow them accordingly. BOX 13 & 14: SHIPMENT WEIGHT AND VOLUME: As in all previous B/Ls, insert the shipment gross weight and shipment volume. Always check to see if there are any stipulations in the L/C regarding shipment weight or volume. BOX 15: NUMBER OF ORIGINALS This will almost always be 3 originals, with either 3 or 4 non-negotiable copies. BOX 16: SIGNATURE Refer to the Preface of this exercise for the specific format the signature authentication is required to be acceptable under the UCP 600. Carrier’s B/Ls frequently do not provide for the specific signature authentication required. Therefore, you have to instruct the carrier in which exact manner he must authenticate the signature on the B/L. BOX 99: ENDORSEMENT This refers to the back of the B/L. Whenever a L/C requires that B/L in box 2 is made out "to order" or "to order of shipper", that shipper must endorse the B/L. You do this by typing the name of the shipper’s company on the top of the back of the B/L and sign your name over the shipper's name.


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Carrier:

BILL of LADING

Multimodal Transport or Port to Port Shipment

Shipper: Carrier References: B/L-No.:

BOX 1

Export References:

CONSIGNEE: (Non-Negotiable Unless Consigned to Order) Forwarding Agent:

BOX 2 BOX 10

Consignee’s Reference:

Notify Address (Carrier not responsible for failure to notify: see clause 20(1) hereof): Place of Receipt:

BOX 3

Pre-Carriage by: BOX 4 Place of Receipt by Pre-Carrier: BOX 5

Place of Delivery:

Ocean Vessel: BOX 6 Port of Loading: BOX 7

Port of Discharge: BOX 8 Place of Delivery by On-Carrier: BOX 9

Container Nos., Seal Nos., Marks and Nos. Number and Kind of Packages; Description of Goods Gross Weight (kg) Measurement (cbm)

BOX 11 BOX 12 BOX 13 BOX 14

Above Particulars as declared by Shipper. Without responsibility or warranty as to correctness by carrier (see clause 11(1) and 11(2)

Total No. of Containers/Packages received by

the Carrier:

Shipper’s declared value (see clause 7(1) and 7(2)

hereof):

Received by the Carrier from the Shipper in apparent good order and condition

(unless otherwise noted herein) the total number or quantity of containers or other

packages or units indicated in the box opposite entitled Total No. Of

Containers/Packages received by the Carrier” for Carriage subject to all the terms and

conditions hereof (including the Terms and Conditions of the Reverse hereof and the

Terms and Conditions of the Carrier’s Applicable Tariff) from the Place of Receipt of

the Port of Loading, whichever is applicable, to the Port of Discharge or the Place of

Delivery, whichever is applicable. One original Bill of Lading, duly endorsed, must be

surrendered by the Merchant to the Carrier in exchange for the Goods or a delivery

order. In accepting the Bill of Lading the Merchant expressly accepts and agrees to

all its terms and conditions whether printed, stamped or written or otherwise

incorporated, notwithstanding the non-signing of the Bill of Lading by the Merchant.

In Witness whereof the number of original Bills of Lading Stated below all of this tenor

and date has been signed, one of which being accomplished the others to stand void.

Movement Currency

Charge Rate Basis WT/MEA/VAL Payment Amount

Place and Date of Issue:

Freight Payable at: Number of original Bs/l: BOX 15

Total Freight Prepaid Total Freight Collect Total Freight Signature by Carrier or Agent BOX 16


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GENERAL OBSERVATIONS When in doubt, follow the principles below: In most cases, it does not help at all to question the bank for explanation. Always keep in mind that a bank is not experienced in any shipping matter at all. All the bank can do, and is required to do under the UCP, Article 5, is to judge if all documents submitted appear to be in accordance with the terms of the L/C. In fact, you may alert the bank to a problem. Never forget that it is the bank’s money which is riding directly on their judgement of your documents being L/C compliant, therefore the bank is bound to be conservative. Their guidance is strictly the UCP 600. Whenever problems regarding compliance arise, consult your experienced manager in your forwarding organization. If no solution seems possible, your shipper must request an amendment. Amendments delay shipping, are costly for your shipper and annoy buyers. Only ask shippers to request an amendment if there is truly no other choice. Questions to the advising bank should only pertain to an item on which it is possible for the bank to make a clear decision. When preparing documents for a L/C, always insist to do this by reading from the actual original L/C. Faxing or photocopying of L/Cs can cause “errors” in spelling. You must insist, in the interest of the shipper, that shipper is furnishing you the original or, if need be, you should insist to retrieve the original from the advising bank holding the original copy of the L/C. It is all right, however, to use a fax or photocopy of a L/C for consulting purposes.


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1. Export Ocean Shipment Sold against a Letter of Credit

a) Complete the ocean bill of lading strictly based on the instructions contained in the letter of credit (see next 3 pages).

Shipment: 15 pallets of automotive filters. Total weight: 11,500 lb The dimensions of each pallet: 48 in L x 42 in W x 42 in H Available vessel: Maersk Penang V. 123 Closing Toronto, Canada: January 31, 2017 Sailing Montreal, Canada: February 5, 2017 ETA Auckland, New Zealand: March 24, 2017 Maersk will transship in Singapore, but Maersk usually makes no reference of the fact of transshipment in their bills of lading issued.

b) Check first if this shipment fits into a container and if it does, state size of container required. Make up a container serial number and a seal number to be used in the bill of lading.

c) Complete the draft in accordance with instructions in the letter of credit.

Sign the draft.


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LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! Req By: TOR AUTOLCT In: AUT PRT 1/5/17 07:29 Page 1 ICN: CA 910212-025712-000 Que: CA TOR LCT ADMR Pri:200 Dup: N Msg Type: RECEIVED Poss Dup: Pri:H Time Created : 1/4/17 22:11 Completion: MESSAGE ACTIVE Exception: Correspondent: 0049817 II Amount: 38,460.30 Name: NATL BK OF NEW ZEALAND, H.O +AOS Owner Office: TOR/LCT Address: UNAVAILABLE FOR THIS MESSAGE City: Cntry: PC: Parent ICN: Input Test: N Swift OSN: 12ROT297405 Service: SWF Ref:13NBNZNZ22AXXX47388 Sequence:7405 Test Result: TESTED BANK OF MONTREAL TORONTO, CANADA RECEIVED 1/69417

SRN 13NBNZNZ22AXXX47388 SENT 1/5/12

FROM NBNZNZ22AXXX NATL BNK OF NEW ZEALAND, H.O. +AOS POB 1791 WELLINGTON NEW ZEALAND CIF# 0049817 II UID:

MT 700 ISSUE OF DOC CREDIT PRIORITY 01 27 / SEQUENCE OF TOTAL 27A / FORM OF DOCUMENTARY CREDIT:

IRREVOCABLE 30 / DOCUMENTARY CREDIT NUMBER DCNTBWZ09268 31C / DATE OF ISSUE: 170101 31D / DATE AND PLACE OF EXPIRY: 170415

CANADA


2017 Page | 49

LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! LIVE!!!! Req by: TOR AUTOLCT In: AUT PRT 1/5/17 07:29 Page 2 ICN: CA 910212-025712-000 Que: CA TOR LCT ADMR Pri: 200 Dup: N 50 / APPLICANT

AUTOMOTIVE SPARES N.C. LTD PO BOX 4711 NEW PLYMOUTH NEW ZEALAND

59 / BENEFICIARY

CANADIAN CAR CARE PRODUCTS LTD. 100 RAILROAD ST. MISSISSAUGA, ONTARIO CANADA

32B / CURRENCY CODE,AMOUNT USD38,460.30 41D / AVAILABLE WITH ...BY...

ANY BANK BY NEGOTIATION

41C / DRAFTS AT ...

DRAFTS AT 60 DAYS AFTER SIGHT 42D / DRAWEE:

THE NATIONAL BANK OF NEW ZEALAND LIMITED INTERNATIONAL BRANCH WELLINGTON

43P / PARTIAL SHIPMENTS: ALLOWED 43T / TRANSHIPMENT: ALLOWED 44A / PORT OF LOADING/AIRPORT OF DEPARTURE

ANY NORTH AMERICAN PORT 44B / PORT OF DISCHARGE/AIRPORT OF DESTINATION

AUCKLAND, NEW ZEALAND 44C / LATEST DATE OF SHIPMENT: 170215 45A / DESCRIPTION OF GOODS AND/ OR SERVICE:

FILTERS


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46A / DOCUMENTS REQUIRED: FCA TORONTO

COMMERCIAL INVOICE IN DUPLICATE INSURANCE BUYERS CARE CERTIFICATE OF ORIGIN

FULL SET CLEAN ON BOARD MARINE BILLS OF LADING TO ORDER AND BLANK ENDORSED MARKED FREIGHT COLLECT 71B / CHARGES: ALL CHARGES OUTSIDE NEW ZEALAND FOR ACCOUNT OF BENEFICIARY (INCLUDING ADVISING COMMISSION, ACCEPTANCE COMMISSION AND DISCOUNT CHARGES FOR TERM CREDITS. 48 / PERIOD FOR PRESENTATION

DOCUMENTS MUST BE PRESENTED WITHIN 20 DAYS FROM DATE OF ISSUANCE OF THE TRANSPORT DOCUMENTS, BUT NOT LATER THAN THE EXPIRY OF THE CREDIT 49 / CONFIRMATION INSTRUCTIONS: WITHOUT 53A / REIMBURSEMENT BANK:

PHILADELPHIA INTL BK, NEW YORK I.C.S. CLEARANCE ACCOUNT 55 BROAD STREET NEW YORK NEW YORK

78 / INSTRUCTIONS PAY/ACCEPT/NEGOT BANK: ONE COMPLETE SET OF DOCUMENTS IS TO BE FORWARDED BY THE

NEGOTIATING BANK AIRMAIL (THE REMAINING DOCUMENTS BY FOLLOWING AIRMAIL) DIRECT TO THE NATIONAL BANK OF NEW ZEALAND LIMITED, INTERNATIONAL BRANCH WELLINGTON, PO BOX 1791, WELLINGTON NEW ZEALAND.

57D / ADVISE THROUGH BANK:

BANK OF MONTREAL 234, SIMCOE STREET 3RD FLOOR TORONTO ON, CANADA

72 / SENDER TO RECEIVER INFORMATION: THIS CREDIT IS OPERATIVE AND SUBJECT TO UNIFORM CUSTOMS 2007,

REVISION PUBLICATION 600 AUT AUTHENTICATOR RESULT:/CO8B SAC AUTHENTICATION SUCCESSFUL CURRENT KEY


2017 Page | 51

Carrier:

BILL of LADING

Multimodal Transport or Port to Port Shipment Shipper: Carrier References: B/L-No.:

Export References:




Pre-Carriage by: Place of Receipt by Pre-Carrier: Place of Delivery:

Ocean Vessel: Port of Loading:

Port of Discharge: Place of Delivery by On-Carrier:

Container Nos., Seal Nos., Marks and Nos. Number and Kind of Packages; Description of Goods Gross Weight

(kg)

Measurement (cbm)

Above Particulars as declared by Shipper. Without responsibility or warranty as to correctness by carrier (see clause 11(1) and 11(2)

Total No. of Containers/Packages received

by the Carrier:

Shipper’s declared value (see clause 7(1)

and 7(2) hereof):


(unless otherwise noted herein) the total number or quantity of containers or

other packages or units indicated in the box opposite entitled Total No. Of

Containers/Packages received by the Carrier” for Carriage subject to all the

terms and conditions hereof (including the Terms and Conditions of the

Reverse hereof and the Terms and Conditions of the Carrier’s Applicable

Tariff) from the Place of Receipt of the Port of Loading, whichever is applicable,

to the Port of Discharge or the Place of Delivery, whichever is applicable. One

original Bill of Lading, duly endorsed, must be surrendered by the Merchant to

the Carrier in exchange for the Goods or a delivery order. In accepting the Bill

of Lading the Merchant expressly accepts and agrees to all its terms and

conditions whether printed, stamped or written or otherwise incorporated,

notwithstanding the non-signing of the Bill of Lading by the Merchant.

In Witness whereof the number of original Bills of Lading Stated below all of

this tenor and date has been signed, one of which being accomplished the

others to stand void.

Movement Currency



Freight Payable at: Number of original Bs/l:

Total Freight Prepaid Total Freight Collect Total Freight Signature by Carrier or Agent


2017 Page | 52


DUE _______________________ NUMBER

______________________________ 20 __________




NUMBER

TO ________________________________

________________________________

________________________________ ______________________________


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Exercises 2.1 (Answer) 1. What are the main reasons why a letter of credit may be chosen as a form of International payment? Open account unsatisfactory, documentary collection unsatisfactory, foreign exchange issue in the importer’s country, political/economic instability, exporter’s request and fair/equal sharing of risk.

2. Name some advantages of a letter of credit.

The exporter is assured of payment as long as he/she complies with the terms of the letter of credit;

The letter of credit clearly defines the necessary documentation; Credit risk is transferred from importer to issuing bank; The exporter, with the help of a confirming bank, reduces the risk

of non-payment; The exporter minimizes collection time with the use of the letter of

credit; and The exporter’s foreign exchange risk is eliminated.

3. The letter of credit deals with documents and not with goods, what risk does this pose to the buyer? The risk of the exporter not shipping the goods as mentioned in the letter of credit still persists.

4. What kind of risks is the exporter exposed to under the usance letter of credit? The commercial risk of the issuing bank, political risk of the issuing bank’s country and foreign exchange risk.

5. Name (5) five main parties involved in the letter of credit.

The applicant (importer/buyer); The issuing bank; The beneficiary (exporter/seller); The advising bank; and The confirming bank.

6. Which party instructs the bank to open a letter of credit?

The applicant (importer/buyer).


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7. Which party draws up and issues the letter of credit and then makes payment according to the conditions outlined in the letter of credit?

The issuing bank.

8. Which party receives payment as stipulated in the letter of credit?

The beneficiary (exporter/seller).

9. Does the advising bank take on any payment obligations to the beneficiary

under a letter of credit?

No.

10. What does the Uniform Customs and Practice for Documentary Credits (UCP)

outline?

A set of rules on the issuance and use of letters of credit.

11. What is the current version of the UCP rules used by commercial bankers and

commercial parties in the execution of a letter of credit?

UCP 600.

12. What is the bank’s responsibility under Article 5 of the UCP 600 rules?

Banks only deal in documents, not in goods.

13. Is a CIFFA freight forwarder liable for his/her documentation in a letter of credit

transaction?

A freight forwarder (as a member of CIFFA) is clearly liable for the accuracy of the documents supplied within the definition of the CIFFA Standard Trading Conditions (STCs), whereby in case of fraud (or gross negligence) the protection of the STCs does not apply.

14. As a CIFFA freight forwarder, it is your responsibility to comply with the requirements of the letter of credit. What will the failure to do so result in?

The exporter will not get paid, the exporter depends on you to prepare at least the transport document without any fault.


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15. As a CIFFA freight forwarder, what is a good way to avoid any lack of attention or mistakes going through the documentary requirements?

Make a photocopy of the letter of credit and highlight the important or tricky portion of the credit - each clause once it has been completed and double-checked.

16. The UCP 600 rules provide room for some interpretation. As a CIFFA freight

forwarder, what should you do if you are in doubt?

Contact the bank immediately, as it is their interpretation of the rules that counts.

17. What date do the banks look for if the credit prescribes an on board bill of lading and a latest shipping date?

The actual on board or sailing date.

18. Under the UCP 600 rules, which date do you use to present the documents to the paying bank?

You must present at whichever date comes first, presentation deadline or expiry (a presentation date can under no circumstances be later then the expiry date).

19. If a bill of lading indicates a place of receipt different from the port of loading, what should be included in the “on board notation”?

The on board notation must include the name of the vessel, the voyage number and the port of loading.

20. Under the UCP 600 rules, Article 23, is a house air waybill acceptable?

No. The house air waybill is not acceptable because it is not a carrier document

21. Unless specified by name in the letter of credit, is a house bill of lading

covered in the UCP 600 rules?

No. A house bill of lading is not a carrier’s document, it is signed by the freight forwarder as an agent for the shipper and consequently is not a contract of carriage.


2017 Page | 56

22. Is it possible to assign to another party all or part of the proceeds of a

drawing/payment under a credit?

Yes, as per UCP 600, Article 39.

23. As a CIFFA freight forwarder you should guard yourself against the risk of non-

payment. How can you ensure payment from your client?

By setting up a direct separate payment or credit schedule, depending on the financial status of your client, you may want advance payment or failing that, possibly abstain from handling a shipment.

24. Name (3) three types of letter of credit.

Transferable letter of credit;

Revolving letter of credit;

Standby letter of credit;

Usance letter of credit;

Red clause letter of credit.

25. What is the difference between a revocable and irrevocable letter of credit?

If a letter of credit is revocable, the applicant has the right to modify or even cancel the credit at any time, up to the shipping date without the consent of the beneficiary. In the case of an irrevocable letter of credit one cannot annul, revoke, recall, cancel, amend, alter or change anything without the approval of the beneficiary or buyer.

26. If there are spelling errors in the credit instructions, what should the CIFFA

freight forwarder do?

There is no need to request an amendment, the forwarder merely writes within the documents the name misspelled as indicated in the letter of credit.

27. Name some of the most common errors and/or deficiencies in the execution of

a letter of credit.

Presentation after the expiry date, late bill of lading on board date, description differs, documents missing, consignee information incorrect and original credit missing.


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Exercises 2.2 (Answer) 1. Using the diagram below, and the numbers assigned to each step, describe a typical

letter of credit procedure. 1. A contract of the sale of goods is agreed upon between an importer and

exporter. The contract finalizes, among other things, the amount and method of payment.

2. The importer, providing necessary detailed information, instructs a bank (the issuing bank) to issue a letter of credit in favour of the exporter. At this time the importer becomes the applicant.

3. The issuing bank transmits the credit to the exporter through a bank (the

advising bank) in the exporting country. The issuing bank might ask the advising bank to add its confirmation to the credit (the confirming bank). At the time of acceptance of the letter of credit the exporter becomes the beneficiary.

4. The advising bank informs the beneficiary of the details of the letter of credit,

who carefully checks the letter of credit for its requirements. The advising bank informs the issuing bank of the acceptance of the letter of credit by the beneficiary.

5. The beneficiary prepares the required documents and the shipment as called

for in the credit and ships the goods to the importer.

6. The beneficiary presents the required documents to the negotiating bank.

7. The negotiating bank confirms that the documents fulfil the terms of the letter of credit, and if satisfactory, according to the terms, pays, accepts or negotiates payment.

8. The negotiating bank forwards the documents to the issuing bank.

9. The issuing bank confirms the fulfilment of the letter of credit, transfers the

title to the applicant and makes reimbursement to the advising bank according to the terms of the credit.

10. The issuing bank debits or secures payment from the applicant in the manner

agreed to prior to issuance of the letter of credit.

11. The issuing bank releases the documents to the applicant. The applicant uses the documents to take delivery of the goods.


2017 Page | 58


1. a) Shipper’s Name and Address Shipper’s Account Number Not negotiable

Air Waybill: 014-9874-1111

Issued by:

AIR CANADA _________________________________________________________________ Copies 1, 2, ands 3 of this Air Waybill are originals and have the same validity.

Canadian Manufacturing Inc. 5678 Mississauga Road Mississauga, Canada

It is agreed that the goods described herein are accepted in apparent good order and condition (except as noted) for carriage SUBJECT TO THE CONDITIONS OF CONTRACT ON THE REVERSE HEREOF. THE SHIPPER’S ATTENTION IS DRAWN TO THE NOTICE CONCERNING CARRIER’S LIMITATION OF LIABILITY. Shipper may increase such limitations of liability by declaring a higher value for carriage and paying a supplemental charge if required.

Consignee’s Name and Address Consignee’s Account Number

Sanwa Bank Ltd. Matsubara Br. Osaka, Japan Issuing Carrier’s Agent Name and City Accounting Information

CIFFA Forwarder

Toronto, Canada

Agent’s IATA Code Account No. Airport of Departure (Addr. Of First Carrier) and Requested Routing

TORONTO AIRPORT To

OSA

By First Carrier Routing and

Destination

To By To By Currency CHGS Code

WT/VAL Other Declared Value for Carriage

NVD

Declared Value for Customs

$ NCV Air Canada

CAD X

X

Airport of Destination

Osaka Intl. Airport

Flight/Date For Carrier Use Only Flight/Date Amount of Insurance

NIL

INSURANCE – If carrier offers insurance, and such Insurance is requested in accordance with the conditions thereof, indicate amount to be insured in figures in box marked “Amount of Insurance”.

Handling Information:

Notify: the applicant, Yamamoto Barbeque Corp, Osaka and Kintetsu Express.

Attached: SCI

No. of Pieces RCP

Gross Weight

kg Rate Class Chargeable Weight

Rate/Charge Total Nature and Quantity of Goods

Commodity Item No. (incl. Dimensions or Volume)

51 883 K 940 4.00 3,760.00 Barbeque parts CIP Osaka Insure to be effected by shipper letter of credit no.: 41 2360927-209

Prepaid Weight Charge Collect Other Charges

3,760.00

Valuation Charge Tax Total Other Charges Due

Agent

Shipper certifies that the particulars on the face hereof are correct and that insofar as any part of the consignment contains dangerous goods, such part is properly described by name and is in proper condition for carriage by air according to the applicable Dangerous Goods Regulations.

CIFFA Forwarder Signature Signature of Shipper or his Agent

Total Other Charges Due

Carrier

Total Prepaid

3,760.00

Total Collect

January 24, 2017, Toronto, Canada Currency Conversion Rates CC Charges in Dest. Currency

Executed on (Date)at (Place) Signature of Issuing Carrier or its Agent


2017 Page | 59

b) Chargeable weight: 0.48 x 0.48 x 0.48 x 51 = 5.640 m3 x 1,000,000 ÷ 6,000 = 940 kg

Air freight charges: 940 kg x CAN $4.00 = CAN $3,760.00

c) Insurance policy - claims payable in U.S. Dollars in Japan.

Before starting, check with the underwriter's agent if the marine underwriter is able to comply with this condition and mark the policy accordingly. Do not take compliance for granted, always check with the party that makes the actual decision. Certificate of Analysis - shipper must supply this Certificate of Analysis. Check with shipper that it will be in fact available at the time of presentation to the bank.

d)


__________________________ DUE NUMBER

L/C number 41 2360927-209

January 24, 2017

_____AT SIGHT__________ AFTER DATE, FOR VALUE RECEIVED.

PAY TO THE ORDER OF Canadian Manufacturing Inc. THE

SUM OF

____Fifty Eight Thousand U.S. DOLLARS $58,000.00 USD_________ RECEIVING BANK’S

NUMBER

TO Sanwa Bank Ltd. Canadian Manufacturing Inc.

Osaka

________________________________ Exporter’s/Beneficiary’s Signature


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1. a) Carrier: MAERSK LINE BILL of LADING Multimodal Transport or Port to Port Shipment

Shipper:

Canadian Car Care Products Ltd. 100 Railroad St. Mississauga, Ontario

Carrier References: B/L-No.:

K 352318 Export References:


CIFFA Forwarder, Toronto, On., Canada TO ORDER



Automotive Spares N.C. Ltd. PO Box 4711 New Plymouth, New Zealand

Toronto, Canada

Pre-Carriage by: CN Rail Place of Receipt by Pre-Carrier: Toronto,

Canada

Place of Delivery:

Ocean Vessel: Maersk Penang Voy.

123

Port of Loading: Montreal, Canada

Port of Discharge: Auckland, New

Zealand

Place of Delivery by On-Carrier:

Container Nos., Seal Nos., Marks and Nos. Number and Kind of Packages; Description of Goods Gross Weight

(kg)

Measurement (cbm)

Meau 999669-1 1 20 ft container said to contain 5,216 kg 20.813 Seal #: 07543 15 pallets of filters freight collect Documentary credit no. DCNTBWZ09268 Shipped on board Maersk Penang V. 123 from loading port Montreal February 5/12 Shipped load, stow and count Above Particulars as declared by Shipper. Without responsibility or warranty as to correctness by carrier (see clause 11(1) and 11(2) Total No. of Containers/Packages received

by the Carrier: 1

Shipper’s declared value (see clause 7(1)

and 7(2) hereof):


(unless otherwise noted herein) the total number or quantity of containers or

other packages or units indicated in the box opposite entitled Total No. Of

Containers/Packages received by the Carrier” for Carriage subject to all the

terms and conditions hereof (including the Terms and Conditions of the

Reverse hereof and the Terms and Conditions of the Carrier’s Applicable

Tariff) from the Place of Receipt of the Port of Loading, whichever is applicable,

to the Port of Discharge or the Place of Delivery, whichever is applicable. One

original Bill of Lading, duly endorsed, must be surrendered by the Merchant to

the Carrier in exchange for the Goods or a delivery order. In accepting the Bill

of Lading the Merchant expressly accepts and agrees to all its terms and

conditions whether printed, stamped or written or otherwise incorporated,

notwithstanding the non-signing of the Bill of Lading by the Merchant.

In Witness whereof the number of original Bills of Lading Stated below all of

this tenor and date has been signed, one of which being accomplished the

others to stand void.

Movement

CY/CY

Currency

USD



Toronto, Canada, February 6, 2017

Freight Payable at:

Destination Number of original Bs/l:

3

Total Freight Prepaid Total Freight Collect Total Freight Signature by Carrier or Agent

Signed by the Carrier, Maersk Lines


2017 Page | 61

b) Container stowage:

20-ft container inside dimensions: 232 in L x 90 in W x 90 in H Pallet dimensions: 48 in L x 42 in W x 42 in H Container: 232 L x 90 W x 90 H Pallet: 48 42 42 = 4 x 2 x 2 = 16 Therefore, we can load 16 pallets into the 20-ft container. Since we only have 15 pallets, thus a 20-ft standard container is adequate.


__________________________ DUE NUMBER

L/C number DCNTBWZ09268

February 5, 2017

_____ 60 DAYS AFTER SIGHT_ AFTER DATE, FOR VALUE

RECEIVED.

PAY TO THE ORDER OF Canadian Car Care Products Ltd.____ THE

SUM OF

Thirty-eight thousand four hundred sixty 30/100 U.S. DOLLARS $38,460.30

USD_________ RECEIVING BANK’S

NUMBER

TO The National Bank of New Zealand Ltd. Canadian Car Care

International Branch Products Ltd.

Wellington

________________________________ Exporter’s/Beneficiary’s

Signature


2017 Page | 62

APPENDIX ‘A’


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Sample Instructions for Completion Applicable to the Irrevocable Documentary Credit

CANADIAN IMPERIAL BANK OF COMMERCE

1. Method of issuance - place an "x" in the appropriate box(es). Indicate as

Transferable only where it is intended that the Beneficiary may request the transfer

of the Credit or a part thereof to another party.

Note: The Bank will issue the Credit by Canadian Imperial Bank of Commerce,

Hong Kong Branch, if the Beneficiary is located in Hong Kong.

2. Expiry Date - indicate the last date on which drafts and/or documents may be

negotiated (usually, but not always in the country of the Beneficiary.) This date will

usually be a few days after the last date on which shipment may be made. The

extra few days allow the Beneficiary time to prepare and assemble the required

documents.

3. Applicant - indicate name, address and fax number (usually the importer).

4. Beneficiary - indicate name, address, contact name, telephone number, fax

number. If known, the name of the Beneficiary's bank may also be included.

Note: the Bank reserves the right to advise the documentary credit directly to the

Beneficiary through an Advising Bank of its choice. If it is imperative that the Credit

be relayed through the Beneficiary's bank, this should be noted in box 17 -

Additional Conditions.

5. Currency and Amount - indicate the full name of the currency. If the amount of

the Credit can be exceeded or reduced, indicate by what percentage.

6. Draft Requirements - indicate the term of draft(s), if required. (e.g. Sight, 60 days,

90 days, etc.). Note that the term of draft(s) has no bearing on the expiry date of

the Credit. Indicate if draft(s) are not required.

7. Partial Shipment(s) - place an "x" in the appropriate box. If left blank, partial

shipments will be prohibited.

Transhipment - place an "x" in the appropriate box. If left blank, transhipments will be

prohibited. Refer to current UCP which outlines the conditions under which banks

will accept documents indicating that transhipment may take


2017 Page | 68

8. place even though transhipment may be prohibited under the terms of the

Credit.

9. Shipment - insert the points of dispatch and destination if shipment is to be

effected by at least two different modes of transport, or insert the port of loading

and port of discharge if shipment is port to port. For all other modes of transport,

insert the shipment routing. Also, insert the latest date that the Beneficiary can

effect shipment in the country of origin, if known, under "Latest Shipment Date". If

a Forwarder's Cargo Receipt is required, a date inserted in the "Latest Shipment

Date" box will be interpreted as the date the goods are to be received by the

forwarder.

10. Covering - insert brief description of the commodity to be shipped (do not include

lengthy descriptions and details or attachments). If necessary, insert contract,

sales or order number(s) indicating whether they are the Applicant's numbers or

those of the Beneficiary. Details such as grades, quantity, base price, etc. should

be omitted.

11. Shipping Terms - a complete explanation of the shipping terms, including

detailed guidelines on the responsibilities of buyer and seller, are contained

in the current Incoterms, ICC Publication.

For port to port shipments - use only FAS (named port of shipment), FOB

(named port of shipment), CFR (named port of destination), CIF (named port of

destination), DES (named port of destination) and DEQ (named port of destination)

For Multimodal or all other modes of transport - use EXW (named place), FCA

(named place), CIP (named place of destination), CPT (named place of

destination), DAF (named place), DDU (named place of destination) and DDP

(named place of destination). Wherever possible include the specific version of

Incoterms (e.g. Incoterms 2000) referenced in the Sales Contract. Examples of

complete Incoterms are "CPT Toronto Incoterms 2000"or "FOB Hong Kong

Incoterms 2000".

Documents Required

12. Commercial Invoice - indicate number of copies required.

13. Canada Customs Invoice - indicate number of copies required.


2017 Page | 69

14. Transport Documents - indicate number of copies and type - "Marine Bills of

Lading (for port to port shipment only)", "Multimodal (Combined) Transport Bills of

Lading, Air Waybill", "Railway Bill of Lading", "Truck Bill of Lading". Note that a

"Forwarder's Cargo Receipt" is not a transport document under UCP.

Note: unless otherwise indicated, the Credit will be established as follows:

a. Multimodal (Combined) Transport Bills of Lading - Full set Multimodal

(Combined) Transport Bills of Lading consigned to shipper's order blank

endorsed marked "Notify (...Applicant's name and Address...)" and "Freight

Prepaid" or "Freight Collect".

b. Marine Bills of Lading - Full set on board Marine Bills of Lading consigned

to shipper's order blank endorsed marked "Notify (...Applicant's Name and

Address...)" and "Freight Prepaid" or "Freight Collect".

c. Forwarder's Cargo Receipt evidencing the date merchandise received for

shipment to Applicant marked "Notify (...Applicant's Name and Address...)"

and "Freight Prepaid" or "Freight Collect". If a date is inserted in the "Latest

Shipment Date" box it will be interpreted as the date the merchandise is to

be received by the forwarder.

d. Air Way bill consigned to Applicant marked "Notify (...Applicant's Name and

Address...)" and "Freight Prepaid" or "Freight Collect".

e. Railway Bill of Lading consigned to Applicant and marked "Notify

(...Applicant's Name and Address...)" and "Freight Prepaid" or "Freight

Collect".

f. Copy of Truck Bill of Lading consigned to Applicant and marked "Freight

Prepaid" or "Freight Collect".

g. Parcel Post Receipt addressed to Applicant.

Conditions other than those above must be clearly stipulated.

Insurance - if insurance is to be covered by Applicant, state such. If covered by

Beneficiary, indicate Insurance Policy/Certificate required together with the risks that are

to be covered and percentage of coverage required. Unless otherwise


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15. stipulated, insurance coverage must be for at least 110% of the CIF or CIP

value of the goods (Refer to current UCP).

16. Other documents - indicate any other documents that may be required including

the number of copies of each and content.

17. Additional Conditions - if the amount of the Credit represents a percentage of

the total cost of the goods, indicate this (e.g. represents 60% of invoice value, etc).

Any other special conditions may be stated here.

Note: In the absence of your instructions to the contrary, the Credit will be issued

instructing the negotiating bank to forward all documentation to CIBC in one

mailing.

18. Banking Charges - indicate which party (Applicant or Beneficiary) is responsible

for banking charges other than the Issuing Bank's charges. The Applicant is

responsible for the Issuing Bank's charges unless otherwise agreed. The

Advising Bank however retains the right to claim from the Issuing Bank any

charges which it cannot recover from the Beneficiary and these will be

considered as for the account of the Applicant (refer to current UCP).

19. Period for Presentation - under UCP, unless stipulated otherwise, banks will

accept documents up to 21 days after the date of shipment or until expiry date

(whichever is earlier) regardless of length of transport. The length of the voyage

should be considered when determining this figure.

http://www.cibc.com/ca/trade-finance-int/letters-credit/instr-compl-ltr-crd-appl.html

Note: This is a sample form only, referencing the old Incoterms.

http://www.cibc.com/ca/trade-finance-int/letters-credit/instr-compl-ltr-crd-appl.html


2017 Page | 71

APPENDIX “B”

CONVERSION TABLES

LENGTH CONVERSION FACTORS

To From

INCHES (in)

FEET (ft)

CENTIMETRES (cm)

METRES (m)

INCHES (in)

N/A ÷ 12 x 2.54 ÷ 39.37

FEET (ft)

x 12 N/A x 30.48 ÷ 3.2808

CENTIMETRES (cm)

÷ 2.54 ÷ 30.48 N/A ÷ 100

METRES (m)

x 39.37 x 3.2808 x 100 N/A

Examples: - To convert inches (in) to feet (ft), the Conversion Factor is ÷ 12

90 inches ÷ 12 = 7.5 feet - To convert metres (m) to feet (ft), the Conversion Factor is x 3.2808

3.5 metres x 3.2808 = 11.4828 feet

VOLUME CONVERSION FACTORS

To From

INCHES (in3)

FEET (ft3)

CENTIMETRES (cm3)

METRES (m3)

INCHES (in3)

N/A ÷ 1,728 x 16.3871 ÷ 61,023.744

FEET (ft3)

x 1,728 N/A x 28,316.847 ÷ 35.3147

CENTIMETRES (cm3)

÷ 16.3871 ÷ 28,316.847 N/A ÷ 1,000,000

METRES (m3)

x 61,023.744 x 35.3147 x 1,000,000 N/A

Examples: - To convert cubic feet (ft3) to cubic inches (in3), the Conversion Factor is x 1,728

120 ft3 x 1,728 = 207,360 in3 - To convert cubic metres (m3) to cubic feet (ft3), the Conversion Factor is x 35.3147

50 m3 x 35.3147 = 1,765.735 ft3


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MASS CONVERSION FACTORS

To From

POUNDS (lb)

SHORT TONS (sh tn)

LONG TONS (tn)

KILOGRAMS (kg)

METRIC TONS (mt)

POUNDS (lb)

N/A ÷ 2,000 ÷ 2,240 ÷ 2.2046 ÷ 2,204.622

SHORT TONS (sh tn)

x 2,000 N/A ÷ 1.12 x 907.1848 ÷ x 1.1023

LONG TONS (tn)

x 2,240 x 1.12 N/A x 1,016.0470 ÷ 0.9842

KILOGRAMS (kg)

x 2.2046 ÷ 907.1848 ÷ 1,016.047 N/A ÷ 1,000

METRIC TONS (mt)

x 2,204.622 x 1.1023 x 0.9842 x 1,000 N/A

Examples: - To convert pounds (lb) to kilograms (kg), the Conversion Factor is ÷ 2.2046

100 lb ÷ 2.2046 = 45.3597 kg - To convert metric tons (mt) to short tons (sh tn), the Conversion Factor is x 1.1023

500 metric tons x 1.1023 = 551.15 short tons

Questions Export Packaging and Warehousing

2017 Page | 73


1. What are the two basic functions that packaging serves?

2. What is palletizing or unitizing of cargo?

3. What is the most common economical container/package?

4. What is the main problem with using wood packaging when shipping items

internationally?

5. Canadian warehouses operate under the laws of bailment. This means the

warehouse operator is ……..

6. Name the three categories of warehouses.

7. Name three functions of a warehouse.

8. Name three advantages of a private warehouse.


2017 Page | 74


1. Name five types of packages used in ocean freight shipments.

2. Describe the importance of marks and symbols.

3. What are two standard sizes of pallets for ocean freight shipments?

4. What details do you have to verify prior to stuffing an ocean container and an

airfreight container?

5. What points do you have to remember when loading an ocean and air freight

container?

6. What measures should be taken to prevent damage and losses?

7. Name at least three different types of public warehouses.

8. What is a private warehouse? Describe.

9. What are the advantages and disadvantages of using a public warehouse?

10. What are the advantages and disadvantages of using a private warehouse?

11. What is the warehouseman’s liability?

12. Describe a warehouse receipt and explain the difference between negotiable

and non-negotiable receipt.


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For many aspects of export crating the forwarder must rely mainly on the expertise of a properly qualified export crating company. The textbook covers some principles of export crating, but as a desk person in freight forwarding you rarely need to apply this art yourself. However, there is one aspect of export crating you should be able to deal with regularly. That is the matter of how to figure out on paper if and how a specific cargo quantity can be stowed best into a container of which size and type. Many of the cargo samples referred to in this assignment have already been dealt with in the International Transportation and Trade Program, under Ocean Freight. Consider this therefore a refresher. There is nothing better than to strengthen your confidence and expertise in the subject of container stowage calculation. Container Stowage Calculations First, when planning a container stowage, you need to be careful and conservative when considering inside dimensions, i.e., use the smallest of the range of each of the dimensions. Remember that the door height of a container is a little less (about 2 inches) than the inner height of a container. When it comes to open-top containers and the loading of big pieces, never guess. Consult the carrier’s individual container specifications to see if a "fit" is feasible. Remember, you only find the actual inside dimensions of any container when the box is sitting at the warehouse ramp of your client. Check the specifications for the details of an open-top container and notice that due to the different special shape of an open top container, the available inside dimensions for length, width and height as well as door height/width are less than for a standard container. When making a recommendation of a container stowage, especially when measurements of cargo/box look like a “tight fit”, point this out in advance to the client, in your very own interest. It is not unusual that the client may actually have to experiment whether or not the given cargo fits.

Now to the “fitting” or container stowage calculation or method itself: If you feel the need to make little sketches to help, you do so. A container loading plan will assist the people who are loading the container. Make sure to be accurate, and try to make the sketches to scale. To determine the container requirements, first, estimate, and then calculate to see how the cargo will actually fit. This is where sketching or drawing a stowage plan becomes helpful.


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It is always advisable to write at top of your working sheet the inside dimensions and size of the container type you intend to use. For example: 20-ft standard container: L 232 in x W 90 in x 90 in H 40-ft standard container: L 474 in x W 90 in x 90 in H When you do use the exact carrier container dimensions, you should never bother with fractional inside container dimensions, round down to the nearest full number in inches or centimetres. Similarly, it is wiser not to use fractional inches/cm of cargo but round as appropriate, usually up. Additionally, keep in mind the cargo weight. Examine the weight loaded per container and decide if your loaded weight is within the prescribed payload of a 20-ft or 40-ft container. In addition to payload permitted for the container itself you must check and decide if the weight you loaded is within the limits of road regulation, i.e., road regulation in Canada, any transit country like the U.S., or country of destination. 48,000 lb is not a problem in Canada if shipped by rail or road. It is not a problem via a U.S. state directly to U.S. port of loading, if by rail. It can be a problem if shipped by road through some U.S. states (each state is different). New York State has especially low road limits. You should also review permitted weights in the country of destination. For some destinations, the rate for container delivery is dependent on the gross weight of the loaded container. One word of caution: You should never fool around with the height of a cargo unit by thinking you can put a package on its side. The only possible exception to this rule would be if, from the contents of the cargo unit, it is obvious that there would be no problem. Turning cargo on its side should only be considered if shipper is willing to give you written instructions. It is suggested you make up your other samples of uniform packages to train and test your skills to calculate correct container stowage. Stowage of Automobiles Cars must be braced and secured inside the container. This work should only be done by people with the proper professional expertise. You should never consider mixing other cargo with cars inside a container. If you do, there is always the risk that the cargo portion will move around during the voyage and damage the cars. If mixing is ever contemplated, one needs to build a wooden wall or bulkhead behind the second car and perhaps even a deck on top of the cars. The space left in length after two cars are loaded is usually too small to warrant the cost of building a bulkhead and building a deck over the cars is even more risky. There is the potential for unusual stress


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through violent container/ship movements on the high seas so that such a deck, even if well built, can cave in. Because of that you should compare a container not to a truck, but perhaps to a roller coaster ride. Therefore do not contemplate mixing cars with other commodities. There is one possible exception to this non-mixing rule. This refers to household goods, when the owner, in view of cost, may insist on such mixing, in spite of your technical explanation. It would be a matter of company policy for each forwarder to decide how to proceed with such a mix, provided the building of the bulkhead and the stowing of the goods into such containers is strictly done by well-known reputable specialists in this field, such as a moving firm. Please take note that a letter of instruction by the HHG owner is of little value or protection for you if something goes wrong. Courts usually protect the small guy. Your best safeguard is, as it is always, first class quality work. Example: Pick-Up Trucks Total shipment of 10 pick-up trucks, with the dimensions of 195 in L x 84 in W x 78 in H. The calculation of stowage for cars is really no different than that for palletized cargo, except that you only need to consider the length of the vehicle. Given the length of these particular pick-up trucks and the following container dimensions, how many containers would you need? 20-ft standard container: 232 in L x 90 in W x 90 in H = 1 pick-up truck 40-ft standard container: 474 in L x 90 in W x 90 in H = 2 pick-up trucks Therefore, we would need 10 x 20-ft standard containers or 5 x 40-ft standard containers

(or a mixture thereof) to move the total shipment of pick-up trucks

Stowage: Averaging Method In this case you do not have the single dimensions of each carton. You must make a reasonable guess what volume in terms of m3 likely fits into one container and which size of container is expected to be the most suitable. The type of commodity usually gives you an idea. You should be aware of the fact that dense items would be in a relatively small-sized cartons and pretty heavy or dense in relation to their volume. In other words, dense items will stow well, making good use of inside container space. Items that are un-palletized make for better use of inside container space. Using the stated average inside container dimensions, make your estimate of how many m3 of items would fit into what size of container. Also, which container size is the correct one to choose and how many containers you need. In reality, you should however insist with your shipper to supply you with actual single dimensions of cartons or whatever unit of cargo. You should normally refrain from making


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such estimates. When asking you to do this here, it is strictly a theoretical exercise to sharpen your skills. Example: Books 1,000 cartons of books x 0.1 m3 = 100 m3 20-ft standard container = 28-30 m3 of un-palletized cargo 40-ft container = 55-60 m3 of un-palletized cargo Therefore, we would need 2 x 40-ft standard containers to move the total shipment of books. Stowage of Single Large and/or Heavy Items The main point here is for you to recognize that there is a problem with both, weight and dimensions. You know from your container specifications that all containers are only 8 ft wide outside. Therefore, the inside width of all containers is less than 8 ft. Open-top containers have an even less available width inside compared to a standard container. There is a similar situation for the height. The standard outside height of containers is 8 ft 6 in, but after allowing for thickness of floor and roof, you have always less than 8 ft inside height. Again, a special situation applies for open-top containers, as you may have no choice but to uncrate a large item for container stowage. Check your container specifications for inside dimensions of an open-top container, and compare it to the crated and uncrated item. Loading Procedure Technically, you have a problem to load this unit through the door. First, the door is neither wide, nor high enough. Second, you should realize that no regular forklift can handle this combination of length and weight. Even if the unit were a little smaller and fit through the door, you should never contemplate pushing it through the door into the container. How can the receiver unload such a unit? Such units must be loaded through the roof opening of the open-top container. Bracing It is essential that weight is evenly distributed within the container, i.e., a single heavy unit must be centred in the container and then braced at both ends to prevent any shifting. The centering and the woodwork required for bracing may prevent you in this case to load the reels as well into the same container. For a decision, you should depend on the expertise and advice of your export crater. If the cargo does not fit into an open-top


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container, you should examine other containers, e.g., flat rack, or possibly ship the cargo as break bulk, on a conventional vessel. Remember that there are two kinds of payload restrictions to consider, especially for extremely heavy and dense equipment such as an industrial mould or die (usually automotive industry). The standard allowable payload for a container is the maximum weight you are allowed to load inside a container. This payload is the difference between the gross weight of a container (container tare weight and load) and the container tare weight, both of which are marked on the door of any container. This regular payload assumes that you are spreading the cargo weight evenly over the entire inside length of the container. The second type of payload defines a maximum weight per running metre or foot of container inside length. This maximum weight is usually 4,500 kg/m for a 20-ft container and 3,000 kg/m for a 40-ft container. Many steamship agencies may be unaware of this special restriction, nonetheless if you are involved in a shipping situation in which the cargo does exceed the permitted weight per metre, you are obliged to report this to your client and propose a suitable alternative. The first choice should be to build a cradle or frame of heavy timber in order to redistribute the concentrated weight of a die from its own length to the total length of the floor of the 20-ft container (usually open top). In the event such redistribution still does not sufficiently reduce the weight of the die below the indicated maximum per metre or if the work/expertise of building a cradle involving securing it to the container floor is not available, the remaining alternative means first of all a crating of that mould or die and shipping as conventional break bulk cargo, either with a conventional vessel or, if need be, with RO-RO vessel service provided the RO-RO vessel is equipped with ships trailers or mafi for loading/unloading the RO-RO vessel. Stowage of Mixed Palletized Cargo for a Consolidation The difference when loading mixed cargo is that you have to use a floor plan control by adding the different length of the pallets, but stay within container inside length. Remember that you have to use a second tier of pallets. When the length of pallets in the bottom tier differs from the length dimensions in the second tier, it is the longer of the two lengths you must use to arrive at the total length of floor space actually used up. Another point is that you should make sure that the lightweight pallets of cargo get stowed on top of the heavier pallets of cargo. Metric versus Imperial Dimensions


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Canada is officially metric. Nonetheless, you will still find today that nearly in all cases involving Canadian export, the traditional shipper will supply you with imperial dimensions, i.e., feet and inches. In an import situation you probably deal with metric dimensions, i.e., metres and centimetres. It is strongly recommended not to convert the dimensions given to you by the client, at least not for the purpose of a container stowage calculation. Caused by inevitable rounding after any conversion, your results are likely to be inaccurate. Since the whole thing is a matter of basic arithmetic, i.e., dividing, it should not make any difference in which mode you work, even if you personally may feel uncomfortable with the imperial dimensions or vice versa. It is recommended to use the following solution: 1) If the client has given you the single dimensions of packages in inches, proceed

as follows: Do not convert each single dimension from inches into centimetres. For the division in L/W/H, simply stay in the inch mode. For the calculation of a cube, multiply the inches with each other – the result is in cubic inches, divide the result by 1,728 (1 ft3 = 1,728 in3), divide ft3 by 35.31 (1 m3 = 35.3146 ft3). In other words, you only convert once, i.e., the end total. You should memorize the two conversion figures. Example: 155 pallets, each 48 in x 42 in x 42 in Multiply 48 in x 42 in x 42 in, then x 155 pallets = 13,124,160 in3. Divide 13,124,160 by 1,728 (in3 in 1 ft3) = 7,595 ft3 Divide 7,595 by 35.3146 (ft3 per 1 m3) = 215.07 m3 2) If the client has given you single metric dimensions of a package, simply select a

conservative metric figure from your carrier’s container specifications for the container inside dimensions and then proceed in the same style and manner as explained earlier.

Conclusion Each case of container stowage planning you work out will have a different set of dimensions. Always try to achieve maximum use of container dimensions by interchanging length and width, even within one row if that achieves a better utilization of space. The first pattern of sizes you choose may not necessarily be the best option possible. Always double-check yourself by applying a different pattern of case placing.


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It is important for you to learn and understand the basic approach how to proceed correctly from the start. Any of your working papers must be set up in such a clear and transparent style that a colleague in your office can continue your file without any problem. You will calculate 5 different versions of container stowage. Use the following container specifications.

Average Inside Container Dimensions

Container Type Length Width Height Max. Payload

20-ft standard 232 in 90 in 90 in 20,000 kg

40-ft standard 474 in 90 in 90 in 25,000 kg

40-ft high cube 474 in 90 in 102 in 25,000 kg

45-ft high cube 534 in 90 in 102 in 25,000 kg

20-ft open top 232 in 90 in 94 in 20,000 kg

40-ft open top 474 in 90 in 94 in 25,000 kg

20-ft flat rack 220 in 96 in 90 in 20,000 kg

40-ft flat rack 462 in 90 in 78 in 25,000 kg

Average Inside Volume Capacity

Container Type Palletized Cargo Volume Un-palletized Cargo

Volume

20-ft standard 25 – 28 m3 28 – 30 m3

40-ft standard 45 – 50 m3 55 – 60 m3

40-ft high cube 50 – 55 m3 65 - 70 m3


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1. Uniform palletized cargo in standard containers. 155 pallets of TV monitors, each pallet weighs 1,200 lb, the dimensions of each pallet are L48 in x W42 in x H34 in.

How many containers of which size are required for this shipment? Work your answer out WITHOUT using a drawing. Stay within payload the container’s payload.

2. Un-palletized cargo with single dimensions of cargo units in standard container. 10 Jeep Cherokees, each weighs 2,000 kg, the dimensions of each are L4.2 m (165 in) x W1.79 m (70 ½ in) x 1.61 m (63 in).

How many containers of which size are required?

3. Un-palletized cargo based on a reasonable average volume per container in standard containers. This applies when single dimensions of cargo units are not available. 500 cartons of tents, total weight is 12,500 kg, total volume is 100 m3. How many standard containers of which size are required?

4. Open-top container for a special package in weight and dimensions.

One transformer consisting of main unit and 3 reels of cable. Main unit: Net measurement: L30 ft x W7 ft x H7 ft.

Weight: 22,000 lb. Gross measurements if crated: L32 ft x W8 ft x H8 ft. Weight: 24,250 lb.

Reels: 4 ft in diameter, width 2 ft.

Weight of each: 1,100 lb.

a) Can you load the “net” unit into an open-top container?

b) If yes, how? Through the door or the roof?


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c) Can you load the “gross” unit into an open-top container?

d) What is your comment in respect to the reels for loading with main unit into the same open-top container?

A mixed palletized cargo in a consolidation container. Consignee container consolidation: You are requested to load the following consolidation in Montreal into a container (all dimensions as LWH) Ex Edmonton: 2 pallets of pressure gauges, each 48 in x 45 in x 44 in, 1,800 lb. Ex Kitchener: 2 pallets of electric motors, each 45 in x 42 in x 42 in, 2,200 lb. Ex Montreal: 2 pallets of filter sheets, each 42 in x 42 in x 42 in, 200 lb. Ex Calgary: 2 pallets of assembly tools, each 46 in x 45 in x 42 in, 2,000 lb. Ex Winnipeg: 2 pallets of fittings, each 44 in x 44 in x 40 in, 200 lb. Ex Toronto: 1 crate of instrument panel, 8 ft x 5 ft x 6 ft, 1,150 lb.

a) What size container is required for the complete shipment?

b) Try to show how you arrived at your answer without making a drawing.

c) What is the total cube in ft3? In m3?

d) What is the total length used inside the container?


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Exercises 3.4 (Question) A good warehouse layout can increase output, improve product flow, reduce costs, improve service to customers and provide better employee working conditions. In the following exercise, complete the diagram outlay: Label the public warehouse layout in the order that would make this warehouse’s design truly efficient. Choose your labels from the following list:

Receiving area Packaging area Staging area Order pick storage area Bulk storage area Shipping docks area Office

Product Flow

Answers Export Packaging and Warehousing

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1. What are the two basic functions that packaging serves?

Marketing and distribution. 2. What is palletizing or unitizing of cargo?

Assembling packages on a pallet base and securing the load to the pallet. 3. What is the most common economical container/package?

Fibreboard box. 4. What is the main problem with using wood packaging when shipping items

internationally?

Wood packaging may contain pests which are harmful to the importing country, heat treatment is required (ISPM 15 compliance).

5. Canadian warehouses operate under the laws of bailment. This means the

warehouse operator is liable for damage or loss of goods arising out of his negligence.

6. Name the three categories of warehouses.

Private, public and contract. 7. Name three functions of a warehouse.

Inventory control; purchasing; order entry; receiving and inspection;

redistribution; put-away; storage; replenishment; customer order selection checking; packing and marking; staging; consolidation and shipping; and clerical and administrative.

8. Name three advantages of a private warehouse.

Control Flexibility Cost.


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1. Name five types of packages used in ocean freight shipments.

a) Fiberboard drums b) Nailed wooden boxes c) Crates d) Wire bound boxes e) Cleated plywood boxes f) Cardboard (fiberboard) boxes g) Steel drums h) Barrels i) Bales

2. Describe the importance of marks and symbols.

They identify the shipment/packages and give any special instructions on the handling of the cargo.

3. What are two standard sizes of North American pallets for ocean freight

shipments?

40 in x 48 in, 40 in x 40 in, 48 in x 48 in.

4. What details do you have to verify prior to stuffing an ocean container and an

airfreight container?

Inspect the container to see if it’s watertight, check fittings/tie downs, cleanliness, check door locks and seal, and basic general condition.

5. What points do you have to remember when loading an ocean and air freight container?

Observe weight limitations, avoid mixing incompatible cargo, observe hazardous material regulations, have all cargo and materials ready before beginning, plan for the loading and always remember that the unloading must be considered.

6. What measures should be taken to prevent damage and losses?

Pack the goods properly, secure the cargo to prevent shifting, use proper dunnage and stowage materials. You should also place hazardous cargo near the door. Always pack for the toughest leg of the journey.


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7. Name at least three different types of public warehouses.

a) General non-food warehouse b) Refrigerated warehouse c) Bonded warehouse d) Household goods warehouse e) Special commodity warehouse f) Dangerous goods warehouse g) Bulk storage warehouse

8. What is a private warehouse? Describe.

It is owned by a company and operated by their own personnel. It is generally designed to meet the specific needs of the company. Provided the volume is large, it means lower cost.

9. What are the advantages and disadvantages of using a public warehouse?

Advantages - no capital cost outlay, flexibility in required storage space. Disadvantages - no control, communication is usually harder, the facility might not be geared to a company’s specific needs.

10. What are the advantages and disadvantages of using a private warehouse?

Advantages - flexibility in the design, can meet specific needs, over a period of time it may become less costly than a public warehouse. Disadvantages - capital outlay, costs, it is a fixed asset.

11. What is the warehouseman’s liability?

Before a warehouse can be held liable, negligence must be proven. Normally the liability is 100 times one month’s storage charge.

12. Describe a warehouse receipt and explain the difference between negotiable

and non-negotiable receipt.

Acknowledgment on the part of the warehouse operator for the receipt of goods which are not his own and to place in storage in the warehouse. Negotiable receipt - a document of title to the goods. The goods can only be released upon the surrender of the negotiable receipt, properly endorsed. Non-negotiable receipt - a receipt for the goods, nothing else.


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1. Uniform palletized cargo in standard containers. 155 pallets of TV monitors, each pallet weighs 1,200 lb, the dimensions of each pallet are L48 in x W42 in x H34 in.

How many containers of which size are required for the total shipment? Work your answer out WITHOUT using a drawing. Stay within the container’s payload.

Solution: The first thing we notice is that the length and width add up to 90 in. Remembering our “concept of 90”, we can calculate how many groups of 4 skids we can load on the floor of a 40- and 20-ft standard containers. 40-ft standard container: On the floor of a 40-ft standard container: 474 : 90 = 5.26 or 5 groups of 4 = 20 pallets on the floor. To determine how many we can stack, we divide the height of the container with the height of our skid. 90 : 34 = 2.6 or we can stack 2 pallets high. We have also used up 450 in of floor length. 5 x 90 in = 450 in. This leaves us 24 in at the door and we cannot load another pallet at the door. Checking the weight, we find that: 40 x 1,200 lb = 48,000 lb = 21,773 kg, weight O.K. We can safely load 40 pallets of TV monitors into a 40-ft container.

20-ft standard container: On the floor of a 20-ft standard container: 232 : 90 = 2.6 or 2 groups of 4 = 8 pallets on the floor. We already know that we can stack 2 high. We have also used up 180 in of floor length. 2 x 90 in = 180 in.


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This leaves us 232 in – 180 in = 52 in at the door. Can we load another pallet at the door? Easily!! Checking the weight 20 x 1,200 lb = 24,000 lb = 10,886 kg. Weight is OK. We can safely load 20 pallets of TV monitors into a 20-ft container. 40-ft high cube container: We have already determined that we can load 20 pallets on the floor of a 40-ft container. How many can we stack in a 40-ft high cube container? To determine how many we can stack, we divide the height of the container with the height of our skid. 102 : 34 = 3 or we can stack 3 pallets high. Therefore, we can load 60 pallets into a 40-ft high cube container. Checking the weight, we find that: 60 x 1,200 lb = 72,000 lb = 32,659 kg. Weight is NOT O.K. We will concern ourselves with loading 20- and 40-ft standards. As we have 155 pallets to ship, we take our 40 pallets and divide that into the number of pallets we have to ship. 155 : 40 = 3.875 As the result has a decimal place greater than 0.5 we are forced to “go to” another 40. We will need 4 x 40-ft standard containers to ship the 155 pallets of TV monitors.


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2. Un-palletized cargo with single dimensions of cargo units in standard container. 10 Jeep Cherokees, each weighs 2,000 kg, the dimensions of each are L4.2 m (165 in) x W1.79 m (70 ½ in) x 1.61 m (63 in).

How many containers of which size are required?

We know that we can fit 2 Jeeps into a 40-ft standard container. 474 : 165 in = 2.87 (we cannot have 0.87 of a Jeep). Take the number of Jeeps divided by the number we can load into a 40-ft standard container and this will give us our container requirements. 10 : 2 = 5 x 40-ft standard containers required. Do not even consider a 45-ft container just because it allows loading 3 vehicles. A 45-ft high cube container is a specialized piece of equipment. Not every carrier owns this type of equipment, and it is not allowed on every trade lane.

3. Un-palletized cargo based on a reasonable average volume per container in standard containers. This applies when single dimensions of cargo units are not available. 500 cartons of tents, total weight is 12,500 kg, total volume is 100 m3. How many standard containers of which size are required?

All the information given is just total volumes and weights. As the cargo is relatively light we do not have to worry about the weight. We know that we can load 55 – 60 m3 of loose cargo into a 40-ft standard container. We would take our total volume and divide it by 55 m3, as a conservative estimate. 100 : by 55 m3 = 1.8 x 40-ft containers. We cannot have 0.8 of a container, therefore we need 2 x 40-ft standard containers. We can easily load all this cargo into 2 x 40-ft standard containers. NOTE: It is always a dangerous approach to calculate the total available m3 of inside airspace in a container and try to match this with your total cargo


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m3. This method might have tempted you to use just 1 x 40-ft HC plus 1 x 20 ft for the 100 m3 of tents. That would have been wrong and potentially embarrassing. This question emphasises that in a real life situation you should insist with your client to supply you with actual carton dimensions if an accurate or binding stowage calculation is required. But if you have to make an estimate, the relative estimated size of a carton would determine your estimate. The smaller the carton, the better the possibility to use the available space efficiently. If you have cartons of shoes, or other small sized cartons as you would have in a Far East import container, you probably can load a 40 ft to between 55 or 60 m3. A tent is probably a mid-sized carton, therefore guessing you might load 50 m3 per 40 ft is a very reasonable guess, and the right answer. Any larger carton approaching the size of a pallet would cause more stowage space loss similar to palletized cargo.

4. Open-top container for a special package in weight and dimensions. One transformer consisting of main unit and 3 reels of cable. Main Unit: Net measurement: L30 ft x W7 ft x H7 ft.

Weight: 22,000 lb. Gross measurements if crated: L32 ft x W8 ft x H8 ft. Weight: 24,250 lb.

Reels: 4 ft diameter, width 2 ft.

Weight: each 1,100 lb.

a) Can you load the “net” unit into an open-top container?

The un-crated transformer - the “net unit” can only fit into a 40-ft open-top container. The crated transformer has a width of 8 ft, which is the same as the outside width of 8 ft of any 40-ft standard or open-top container. Therefore, the “gross unit” (crated) cannot fit into a standard or open-top container. e) If yes, how? Through the door or the roof?

Loading must only be done through the uncovered top. You cannot load a unit of such length (30 ft) and weight (10 tons) through the door. Overhead cranes, either in house or rented, will be required to load this cargo. There is no forklift around capable of handling that length.


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f) Can you load the “gross” unit into an open-top container?

No!! As explained in answer a), the crated unit width is the same as the outside width of a container. Further, you should always check the roof opening with the carrier. The roof opening is generally 92 in wide.

g) What is your comment in respect to the reels for loading with main unit into the same open-top container?

3 reels should be shipped separately as LCL cargo. The transformer must be centred in the container and blocked and braced at both ends, with some form of a small bulkhead at each end to prevent shifting. As a result, there will be no or limited space left for any additional cargo (reels).

5. A mixed palletized cargo in a consolidation container. Consignee container consolidation: You are requested to load the following consolidation in Montreal into a container (all dimensions as LWH) Ex Edmonton: 2 pallets of pressure gauges, each 48 in x 45 in x 44 in, 1,800 lb. Ex Kitchener: 2 pallets of electric motors, each 45 in x 42 in x 42 in, 2,200 lb. Ex Montreal: 2 pallets of filter sheets, each 42 in x 42 in x 42 in, 200 lb. Ex Calgary: 2 pallets of assembly tools, each 46 in x 45 in x 42 in, 2,000 lb. Ex Winnipeg: 2 pallets of fittings, each 44 in x 44 in x 40 in, 200 lb. Ex Toronto: 1 crate of instrument panel, 8 ft x 5 ft x 6 ft, 1,150 lb.

a) What size container is required for the complete shipment?

1 x 20- ft standard container.

b) Try to show how you arrived at your answer without making a drawing.

Each of the two pallet lots has a width that allows stowage/placement side by side. The heights are such that stacking of cargo can be accomplished


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easily. The only exception is the Toronto crate, which does not allow for either stowage of other freight beside it or on top of it. To approach this problem you will gradually sum up the floor length used in the container as we “load” from the “nose” (front) to the door. You must remember, when we load cargo on top of other cargo, we do not use any additional floor length or space.

Cargo Loaded Floor Length Used

1. Load Edmonton on floor at nose. 48 in x 45 in x 44 in; side by side.

48 in

2. Load Kitchener on top of Edmonton. 45 in x 42 in x 42 in; side by side. No additional length used.

48 in

3. Load Calgary on floor next. 46 in x 45 in x 42 in; side by side. We used an additional 46 in of floor length (48 in + 46 in = 94 in)

94 in

4. Load Winnipeg on top of Calgary. 44 in x 44 in x 40 in; side by side. No additional length used.

94 in

5. Load Toronto next on floor, 8 ft x 5 ft x 6 ft. We used an additional 8 ft (96 in) of floor length (94 in + 96 in = 190 in).

190 in

6. Load Montreal on floor next, 42 in x 42 in x 42 in; side by side. 42 in of floor length is used (42 in + 190 in = 232 in).

232 in

Total floor length used 232 in

The floor length used is that of a 20-ft container. We have been able to do a stowage plan and calculation without the need of a drawing. Fortunately, all the pieces of the puzzle fit well. This is not always the case in your day-to-day operations. If you feel the need to do a “sketch”, then please do. It is not important as to how one determines a stowage plan, it is important that the result of the planning is correct.


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c) What is total cube in ft3? In m3?

Origin ft3 m3 Total Weight

Ex Edmonton

110 3.115 1,633 kg

Ex Kitchener

92 2.605 1,996 kg

Ex Montreal

86 2.436 181 kg

Ex Calgary

101 2.860 1,814 kg

Ex Winnipeg

90 2.549 181 kg

Ex Toronto

240 6.797 522 kg

TOTALS 719 20.362 6,327 kg

We have also checked that the cargo weight is within the allowable load for a 20-ft standard container. It is also advisable to make a chart similar to this when you are doing a first estimate to see what size of equipment you might need.

d) What is the total length used inside the container?

As per answer b) we have used 232 in of floor space. The entire container length.


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Questions Commercial Documentation and Regulatory Compliance

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1. Who issues an export permit?

2. What is the Area Control List?

3. Name five items on the Export Control List.

4. Who supplies the blank consular invoice forms, and who certifies them?

5. Name the parties who can sign the certificate of origin.

6. Give the most important reason why a certificate of origin may be required.

7. Do goods shipped under the NAFTA need a certificate of origin? If so what

kind?

8. Name three items for which an import permit is required.

9. When moving exhibition goods to two or more different countries, what

document would you recommend to make import and export procedures

easier?

10. A client approaches your company and wants to export a stuffed (taxodermied)

bear via air freight to Hong Kong. What must you do prior to proceeding?

11. Where would you get information on documentary requirements for a given

country?

12. Name two purposes of a commercial invoice.

13. List items that should be shown on the commercial invoice.

14. What are the three most common errors made on commercial invoices?

15. Name two purposes for the packing list.

16. Who issues an import permit in Canada?

17. Above what value for an export shipment must you issue an export declaration

(CAED or B13A)?

18. What is the function of the B13A? Where or with whom is it filed?

19. What is the HS code? Give the full name.


2017 Page | 98

20. Can you apply for an export permit if the exporter is not residing in Canada but

the goods are of Canadian origin and exported through a Canadian port?

21. What international convention regulates the traffic of endangered species?

22. What is CRF?


2017 Page | 99


Complete the commercial invoice, export declaration, and certificate of origin for the following shipment. Exporter: Nokov Toys Inc.

999 Jane Street Toronto, Ontario, L4T 2D4

Contact: John Smith Telephone: 416-555-1234 Importer: Scam Toys

10 Oden Strasse-12 Hamburg, Germany 09877

Contact: Hans Zimmermeyer Telephone: 011-49-987-5678 Shipment details: Commodity: Barbina dolls Value of the shipment: CAN $10,350.00 Number of cartons: 25, containing a total of 1,000 dolls Weight of each carton: 35 kg Dimensions of each carton: 12 in x 24 in x 35 in HS code for the shipment: 9503.90.00.89 Terms of delivery: FCA Nokov Toys Inc., Toronto, Incoterms® 2010 Country of origin for the dolls: Canada Pre-carriage: Transport Truck Lines, CAN $450.00 Mode of transportation: ocean freight via Commadore Lines Transportation details: vessel name – S.S. Louis Voy# 99 sailing from Montreal, January 25, 2017 Note: if you find that there are minor details missing, just make up a reasonable figure or date to complete the documents. Special Note: You have not been supplied with the HS number for this commodity. You will also not be supplied with the HS number of the commodity in the following questions. This was purposely omitted. The reason is that as professional forwarders, we should be able to use all our resources to accurately complete an export declaration. As you are a professional forwarder the task is also for you to establish the correct HS number that is required. (For confirmation on the interpretation of HS codes it is advisable to consult with your customs team).


2017 Page | 100

Commercial Invoice

1. Invoice Date 2. Sale Date 3. Invoice No. 4. Page

of

5. Consignee Name and Address 6. Other Address (e.g. buyer/bank)

7. Origin (country/province)

8. Destination (country/state)

9. Currency of Sale

10. Terms of Sale

11. Point of Export

12. Pre-carriage By

13. Exporting Carrier and Vessel

14. Mode of Transport From Point of Export

15. Terms of Payment

16. Number and Kinds of Packages

17. Marks and Numbers

18. Description of Item

19. Quantity

20. Unit of Measure

21. Unit Price

22. Total

23. Gross Weight 24. Net Weight 25. Sub-total

32. Signature 26. Packaging

27. Domestic Freight

28. International Freight

of Nokov Toys Inc. 29. Insurance

30. Other

33. Date 31. Invoice Total


2017 Page | 101

Canada Border Agence des services EXPORT DECLARATION PROTECTED (WHEN COMPLETED)

Services Agency frontaliers du Canada DECLARATION D’EXPORTATION PROTEGE (UNE FOIS REMPLI) C

Original Amended-Modifie Void-Nul Copy-Copie ______ of-de _____________ See completion instructions-PLEASE PRINT-Voir la facon de remplir le formulaire-EN LETTRES MOULEES S.V.P. Page of

1. Business no. 2. Export permit/licence no. (if applicable)-No du permis/de la licence d’exportation (s’il y a

lieu)No d’entreprise 123456789 RM 002

3. Exporter information (includes non-resident) – Renseignements sur l’exportateur (y compris les non-résidents)

Name – Nom

No. and street – No et rue

City – Ville

Province/state, country – Province/État, pays

Postal Code – Code postal

4. Consignee information – Renseignements sur le destinaire Name – Nom


City – Ville



5. Country of final destination – Pays de destination finale

9(a) Customs proof of report no. – No de la prevue de déclaration des douanes

6. Name of exporting carrier, freight forwarder, or consolidator-Nome du transporteur, du transitaire ou du groupeur de merchandises a exporter

7. Transport document no. – No due document du transport yyyy/mm/dd. time – 24hr, export reporting office code, reference no.

8. Mode of transport from place of exit – Mode de transport à partier du bureau de

sortie aaaa/mm/jj, heure – 24h, code du bureau de déclaration d’exportation, no de reference

Highway Rail Marine Air Routier Ferroviaire Maritime Aérien Other (specify) Autre (précisez) ________________________________

9(b) Goods inspected by customs – Marchandises inspectées par les douanes Yes - Qui

10. Vessel name (if applicable) – Nom due bateau (s’il y a lieu)

11. Date of export (yyy/mm/dd) – Date de’exportation (aaaa/mm/jj)

12. No. packages – No de colis

Kind of packages – Genre de colis

13. Place of exit – Bureau de sortie

Container no. – No de conteneur

14. Exporter reference no. (if applicable) – No de référence de l’exportateur (s’il y a lieu)

15. Conveyance identification no. (if applicable) – No d’identification du moyen de

transport (s’il y a lieu)

16. Origin - Origine 17. Item description – Description d’article 18. HS Commodity Code-

Code de merchandise du SH

19. Qty. & unit of measure Qté & unité de mesure

20. Value F.O.B place of exit Valeur f.à.b. bureau de sortie

Country Pays

Province

21. Currency used for declared value – Devise de la valeur declare

22. Gross weight – Poids brut 23. Total value F.O.B place of exit – Valeur totale f.à.b.

bureau de sortie

24. Freight charges to place of exit, estimated if unknown (included in field 20) – Frais de transport jusqu’au bureau de sortie, estimé si inconnu (compris à la zone 20)

25. If goods are not sold, state reason for export (if applicable). If a lease or rental, state period – Si les merchandises ne sont pas vendues, motivez le’exportation (s’il y a lieu). S’il s’agit d’une location ou d’un bail, précisez la periode.

26. Customs service provider information (if applicable) – Renseignements sur la fournisseur de services douaniers (s’il y a lieu)

Name – Nom Area code and tel. no.

Indicatif regional et no de tél.


City – Ville



27. I hereby certify that the information given above and on the continuation sheet(s), if any, is true and complete. Je certife qu les renseignements inscrits ci-dessus et sur les feuilles supplémentairs, s’il en est, son exacts et complets.

Name of person responsible for completion – Nom de la personne responsible de remplir le formulaire.

Company name – Nome de la compagnie


City – Ville



28. Status – Statut Exporter Other Exportateur Autre

Area code and tel. no. Indicatif regional et no de tél.

Signature Date


2017 Page | 102

1. Goods consigned from (Exporter’s business name, Reference No. Address, country) GENERALIZED SYSTEM OF PREFERENCES

CERTIFICATE OF ORIGIN

2. Goods consigned to (Consignee’s name, address, (Combined declaration and certificate) Country) FORM A

Issued in

(country)

3. Means of transport and route (as far as known) 4. For official use

5. Item number

6. Marks

and numbers of packages

7. Number and kind of packages: description of goods 8. Origin criterion

9. Gross weight or other quantity

10. Number and date of invoices

11. Certification 12. Declaration by the exporter It is hereby certified, on the basis of control carried out, that the declaration by the exporter is correct.

The undersigned hereby declares that the above details and statements are correct: that all the goods were produced in

____________________________ (country)

This area is generally where the local Chamber of Commerce will certify the document, stamp, sign and date.

and that they comply with the origin requirements specified for those goods in the Generalised System of Preferences for goods exported to

____________________________ (importing country)

______________________________ ___________________________ Place and date, signature and stamp of certifying authority Place and date, signature of authorised signatory


2017 Page | 103


Complete the commercial invoice, export declaration, and certificate of origin for the following shipment. Exporter: Canadian Manufacturing Inc.

5678 Mississauga Rd. Mississauga, Ontario, X1B 2B3

Importer: Preston Barbeque

967 Cleaver Avenue Rotterdam, Netherlands, 09900

Shipment details: Commodity: 374 barbeque parts Number of wooden crates: 34 Total gross weight of the shipment: 2,000 kg Total net weight of the shipment: 1,870 kg Dimensions of each crate: 54 in x 42 in x 66 in Terms of delivery: CPT Port of Rotterdam, Netherlands,

Incoterms® 2010 Factory price of each barbeque part: US $135.00 Mode of transportation: ocean freight Ocean freight charges: US $3,000.00, door Toronto-CY Rotterdam

(inclusive of CAN $150.00 for pre-carriage) Transportation details: Canadian Mediterranean Line, S.S. Star,

Voyage 14E, June 20, 2017


2017 Page | 104

Commercial Invoice


of




9. Currency of Sale

10. Terms of Sale

11. Point of Export

12. Pre-carriage By







19. Quantity

20. Unit of Measure

21. Unit Price

22. Total





of Canadian Manufacturing Inc. 29. Insurance

30. Other



2017 Page | 105




1. Business no. 2. Export permit/licence no. (if applicable)-No du permis/de la licence d’exportation (s’il y a lieu)

No d’entreprise 667786124 RM 003

3. Exporter information (includes non-resident) – Renseignements sur l’exportateur (y compris les non-résidents) Name – Nom


City – Ville



4. Consignee information – Renseignements sur le destinaire

Name – Nom


City – Ville






7. Transport document no. – No due document du transport

yyyy/mm/dd. time – 24hr, export reporting office code, reference no.

8. Mode of transport from place of exit – Mode de transport à partier du bureau de sortie

aaaa/mm/jj, heure – 24h, code du bureau de déclaration d’exportation, no de reference












16. Origin - Origine 17. Item description – Description d’article 18. HS Commodity Code-Code de merchandise du SH



Country Pays

Province



bureau de sortie







City – Ville







City – Ville



28. Status – Statut

Exporter Other Exportateur Autre


Signature Date

B13A (4)


2017 Page | 106

1. Goods consigned from (Exporter’s business name, Address, country) GENERALIZED SYSTEM OF PREFERENCES

CERTIFICATE OF ORIGIN 2. Goods consigned to (Consignee’s name, address, (Combined declaration and certificate) Country) FORM A

Issued in

(country)


5. Item number

6. Marks and numbers of packages






____________________________ (country)






2017 Page | 107


Complete the commercial invoice, export declaration, and certificate of origin for the following shipment. Exporter: Great Glass Works of Kitchener Inc. 1234 Schwaben Ave. Kitchener, ON, G6H 1S1 Importer: Francois Glass B.V. 321 Rue de la Fleur Brussels, Belgium, 10098

Shipment details: Commodity: glass figurines Number of cartons: 24, each box contains 18 figurines Dimensions of each box: 12 in x 24 in x 26 in Total actual weight of shipment: 300 kg Net weight of the shipment: 276 kg Terms of delivery: FCA Great Glass Works, Kitchener, Incoterms® 2010 Pre-carriage: Cartage Company, CAN $125.00 Cost of each glass figurine: CAN $4.00 Mode of transportation: air freight Transportation details: Lufthansa flight from Toronto on July 20, 2017, flight

LH365


2017 Page | 108

Commercial Invoice


of




9. Currency of Sale

10. Terms of Sale

11. Point of Export

12. Pre-carriage By







19. Quantity

20. Unit of Measure

21. Unit Price

22. Total





of Great Glass Works of Kitchener 29. Insurance

30. Other



2017 Page | 109







Name – Nom


City – Ville





City – Ville
























Country Pays

Province



bureau de sortie







City – Ville







City – Ville






Signature Date

B13A (4)


2017 Page | 110




Issued in

(country)


5. Item number







____________________________ (country)






2017 Page | 111


Complete the commercial invoice, export declaration, and certificate of origin for the following shipment. Exporter: Rain & Shine

432 Avenue Road Toronto, ON, M4Y 8Z3

Importer: Harrods of London 1 Nottingham Place London, W11 1BB, United Kingdom

Shipment details: Commodity: umbrellas Number of cartons: 16, each carton contains 72 umbrellas Total weight of the shipment: 425 kg Net weight of the shipment: 400 kg Dimensions of each carton: 36 in x 18 in x 16 in Terms of delivery: CPT LHR London, U.K., Incoterms® 2010 Pick-up charges: CAN $100.00 Factory price of the umbrellas: CAN $1,200.00 per carton Mode of transportation: air freight Transportation details: British Airways, flight BA642, direct to London

on March 15, 2017 You have sold the freight to your customer at a rate of CAN $2.50/kg.


2017 Page | 112

Commercial Invoice


of




9. Currency of Sale

10. Terms of Sale

11. Point of Export

12. Pre-carriage By







19. Quantity

20. Unit of Measure

21. Unit Price

22. Total





of Rain & Shine 29. Insurance

30. Other



2017 Page | 113







Name – Nom


City – Ville





City – Ville







yyyy/mm/dd. time – 24hr, export reporting office code, reference no.

8. Mode of transport from place of exit – Mode de transport à partier du bureau de sortie

aaaa/mm/jj, heure – 24h, code du bureau de déclaration d’exportation, no de reference
















Country Pays

Province



bureau de sortie







City – Ville







City – Ville






Signature Date

B13A (4)


2017 Page | 114




Issued in

(country)


5. Item number







____________________________ (country)






2017 Page | 115


Complete the commercial invoice, export declaration, and certificate of origin for the following shipment. Exporter: Ontario Baby Supplies Ltd. 147 Queen St. Brampton, ON, L7P 3S9 Importer: Bebes R Ci S.A. 134 Norde Calle Valparaiso, 2340000, Chile Shipment details: Commodity: baby formula Number of cartons: 1,200, 12 tins of baby formula per carton, 37 ounces per tin Weight of each carton: 30 lb Net weight of the shipment: 15,130 kg Terms of delivery: CPT Valparaiso, Incoterms® 2010 Factory price per carton: CAN $20.50 Mode of transportation: ocean freight Freight charges to Valparaiso: CAN $7,000.00 (inclusive of CAN $750.00 for

domestic freight) Transportation details: Dragon Lines, vessel S.S. Aldaris, voy # 56S,

November 5, 2017


2017 Page | 116

Commercial Invoice


of




9. Currency of Sale

10. Terms of Sale

11. Point of Export

12. Pre-carriage By







19. Quantity

20. Unit of Measure

21. Unit Price

22. Total





of Ontario Baby Supplies Ltd. 29. Insurance

30. Other



2017 Page | 117







Name – Nom


City – Ville




Name – Nom


City – Ville























Country Pays

Province



bureau de sortie







City – Ville







City – Ville






Signature Date

B13A (4)


2017 Page | 118




Issued in

(country)


5. Item number







____________________________ (country)






2017 Page | 119

Additional Comments for the Answer to Question 4. It should be noted that Canada has various free trade agreements set up with various countries. The proper document that should be completed in place of a certificate of origin is a Canada – Chile Free Trade Agreement Certificate. Copies of this form are available by ordering through the Migra’s Canadian Export Guide. If you are involved in exports you are probably familiar with countries that require a special certificate of origin. It is advisable for those working in export to check the documentation requirements of countries to which you are exporting for the first time before you dispatch the freight. You could save yourself and your company a lot of embarrassment.

Answers Commercial Documentation and Regulatory Compliance

2017 Page | 120


1. Who issues an export permit?

The Export and Import Controls Bureau (EICB) authorizes, under the discretion of

the Minister of International Trade (Global Affairs Canada) the import and export of goods restricted by quotas and/or tariffs.

2. What is the Area Control List?

The ACL is a list of countries for which export permits are required to export any and all goods.

3. Name five items on the Export Control List.

Export controls are in place to regulate such goods as:

Agricultural products: refined sugar, sugar-containing products and peanut butter

Textiles and clothing Military, strategic dual-use goods Nuclear energy materials and technology Missile, chemical or biological goods of non-proliferation concern Softwood lumber, unprocessed logs and certain other forest products Miscellaneous goods including goods of U.S.-origin, roe herring and certain

items with medical value All goods destined for countries on the Area Control List.

4. Who supplies the blank consular invoice forms, and who certifies them?

The consulate of the destination country. 5. Name the parties who can sign a general certificate of origin.

1. The exporter/shipper. 2. The forwarder as agent for the shipper/manufacturer. 3. The manufacturer. 4. The shipper’s/manufacturer’s legal representative. (The commissioner for

taking oaths witnesses the signature and stamps it and the Board of Trade or Chamber of Commerce authenticate it).

6. Give the most important reason why a certificate of origin may be required.

To obtain preferred import status for the merchandise and possibly a lower rate

of duty.


2017 Page | 121

7. Do goods shipped under the NAFTA need a certificate of origin? If so what kind?

Yes, they need a North American Free Trade Agreement (NAFTA) certificate of origin.

8. Name three items for which an import permit is required.

Certain dairy products

Certain agricultural products Certain textiles and clothing Certain carbon steels and specialty steels Specified endangered species of wild flora and fauna Any products thereof.

9. When moving exhibition goods to two or more different countries, what document would

you recommend to make import and export procedures easier?

A.T.A. Carnet. 10. A client approaches your company and wants to export a stuffed (taxodermied) bear via

air freight to Hong Kong. What must you do prior to proceeding?

Verify if an export permit as well as a CITES permit is required prior to shipment. 11. Where would you get information on documentary requirements for a given country?

Your company’s agent at destination, or Migra’s Canadian Export Guide.

12. Name two purposes of a commercial invoice.

1. It is the document against which the buyer (importer) pays the seller (exporter). 2. It is also the document used to provide information to:

The government of the country of export The government of the country of transit The government of the country of import.

As the document used by the buyer (importer) that will assist in the clearance of goods at the country of destination, it is also the basis for the Canadian Customs entry and is used to determine duties and taxes so long as it meets certain requirements.

13. List items that should be shown on the commercial invoice.

Exporter’s name and address Importer’s name and address Description of the goods, H.S. # if possible


2017 Page | 122

Weight of shipment Individual value of pieces along with the quantity of goods and the total value The currency of the transaction The terms of payment The terms of delivery MOST IMPORTANT - the commercial invoice should be dated and signed.

14. What are the three most common errors made on commercial invoices?

1. Missing currency designation.

2. Failure to sign. 3. Missing signature (although it is not always required).

15. Name two purposes for the packing list.

1. Identifies the location of goods within a shipment. 2. In the case of an insurance claim helps to identify the goods.

16. Who issues an import permit in Canada? Global Affairs Canada.

17. Above what value for an export shipment must you issue an export declaration (CAED or B13A)?

All shipments leaving Canada with a value above CAN $2,000.00. Note: A B13A is not required if the final destination of the goods is in the United States of America.

18. What is the function of the B13A? Where or with whom is it filed?

To provide governmental agencies with statistical information regarding what

goods are being exported to where, when and to whom. The document is filed with Canada Customs and remains in Canada.

19. What is the HS code? Give the full name.

The Harmonized Commodity Description and Coding System (HS) (example below)

forms the basis of the Customs Tariff. The HS was developed and is maintained by the WCO and it is the standard coding structure and related product descriptions used in international trade to determine appropriate duty rates, negotiate trade agreements, maintain trade statistics and identify goods and shipments that pose risk to the health, safety and security in Canada.


2017 Page | 123

20. Can you apply for an export permit if the exporter is not residing in Canada but the goods are of Canadian origin and exported through a Canadian port?

Yes, but then the agent acting on behalf of the exporter becomes responsible for any offences committed respecting the permit.

21. What international convention regulates the traffic of endangered species?

The Convention on International Trade in Endangered Species of Wild Fauna and Flora, referred to as CITES.

22. What is CRF?

Clean Report of Findings. An inspection certificate required by certain countries to allow importation and is issued by certain organizations. The inspection is done prior to the export of the goods.


2017 Page | 124


Commercial Invoice Nokov Toys Inc. 999 Jane Street Toronto, ON, L4T 2D4


January 10, 2017 January 5, 2017 EXE01-003 1 of 1 5. Consignee Name and Address 6. Other Address (e.g. buyer/bank)

Same as Consignee Scam Toys 10 Oden Strasse-12 Hamburg, Germany, 09877


Ontario


Germany

9. Currency of Sale

Canadian Dollars

10. Terms of Sale

FCA Nokov Toys Inc. Toronto, Incoterms® 2010

11. Point of Export

Montreal, Canada

12. Pre-carriage By

Transport Truck Lines


Commadore Lines S.S. Louis, Voy# 99


Ocean, containerized


Goods prepaid




19. Quantity

20. Unit of Measure

21. Unit Price

22. Total

Scam Toys

Barbina dolls 1,000 Pcs. 10.35 10,350.00

25 cartons Germany HS#: 9503.90.00.89

23. Gross Weight 24. Net Weight 25. Sub-total 10,350.00

875 kg 850 kg

32. Signature 26. Packaging N/A

27. Domestic Freight 450.00

Jane Doe 28. International Freight N/A

of Nokov Toys Inc. 29. Insurance N/A

30. Other N/A

33. Date January 10, 2017

31. Invoice Total 10,800.00


2017 Page | 125



Original Amended-Modifie Void-Nul Copy-Copie ______ of-de _____________

See completion instructions-PLEASE PRINT-Voir la facon de remplir le formulaire-EN LETTRES MOULEES S.V.P. Page 1 of 1

1. Business no. No d’entreprise 123456789 RM 002 2. Export permit/licence no. (if applicable)-No du permis/de la licence d’exportation (s’il y a lieu)


Name – Nom Nokov Toys Inc.


999 Jane Street City – Ville

Toronto Province/state, country – Province/État, pays

ON, Canada Postal Code – Code postal

L4T 2D4


Name – Nom Scam Toys


10 Oden Strasse-12 City – Ville

Hamburg Province/state, country – Province/État, pays

Germany Postal Code – Code postal

09877


Germany 9(a) Customs proof of report no. – No de la prevue de déclaration des douanes

yyyy/mm/dd. time – 24hr, export reporting office code, reference no. aaaa/mm/jj, heure – 24h, code du bureau de déclaration d’exportation, no de reference

6. Name of exporting carrier, freight forwarder, or consolidator-Nome du transporteur, du

transitaire ou du groupeur de merchandises a exporter Commadore Lines

7. Transport document no. – No due document du transport 111111111 8. Mode of transport from place of exit – Mode de transport à partier du bureau de sortie




S.S. Louis 11. Date of export (yyy/mm/dd) – Date de’exportation (aaaa/mm/jj)

2017/01/25


25 Kind of packages – Genre de colis

Cartons 13. Place of exit – Bureau de sortie

Montreal, Canada



15. Conveyance identification no. (if applicable) – No d’identification du moyen de transport (s’il y a

lieu)




Country Pays

Province

ON Barbina dolls 9503.90.00.89 1,000 pcs 10,800.00


Canadian Dollars 22. Gross weight – Poids brut

875 kg 23. Total value F.O.B place of exit – Valeur totale f.à.b. bureau

de sortie 10,800.00


$450.00



Name – Nom CIFFA Forwarder

Area code and tel. no.

Indicatif regional et no de tél. (416) 234-5100 No. and street – No et rue

1234 Islington Ave., #706 City – Ville


Ontario Postal Code – Code postal

M8X 1Y9


Name of person responsible for completion – Nom de la personne responsible de remplir le

formulaire. Jane Doe Company name – Nome de la compagnie

CIFFA Forwarder No. and street – No et rue



ON, Canada


M8X 1Y9




Indicatif regional et no de tél. (416) 234-5100

Signature

Jane Doe Date

January 22, 2017

B13A (4)


2017 Page | 126

1. Goods consigned from (Exporter’s business name, Reference No. Address, country) Nokov Toys Inc. 999 Jane Street GENERALIZED SYSTEM OF PREFERENCES

Toronto, ON, L4T 2D4, Canada CERTIFICATE OF ORIGIN 2. Goods consigned to (Consignee’s name, address, (Combined declaration and certificate) Country) FORM A

Scam Toys 10 Oden Strasse-12

Hamburg, 09877, Germany Issued in CANADA

(country)


Ocean freight Commadore Lines, Voy # 99

5. Item number





1 Scam Toys #1-25

Barbina dolls 25 fibreboard cartons HS#: 9503.90.00.89

1,000 pcs

EXE01-003

Date: 01/10/17 Generally, in this area is where a

Commissioner for Taking Oaths will stamp, sign and date, verifying the accuracy. Usually an accredited individual in a forwarder’s office.



_________Canada___________________ (country)



_________Germany___________________ (importing country)

_____Toronto, 01/20/17____________ ___Toronto, 01/19/17, Forwarder’s Signature_ Place and date, signature and stamp of certifying authority Place and date, signature of authorised signatory


2017 Page | 127


Commercial Invoice

Canadian Manufacturing Inc. 5678 Mississauga Rd. Mississauga, ON, X1B 2B3 1. Invoice Date 2. Sale Date 3. Invoice No. 4. Page

June 15, 2017 June 1, 2017 PP-060101 1 of 1 5. Consignee Name and Address 6. Other Address (e.g. buyer/bank)

Same as Consignee Preston Barbeque 967 Cleaver Avenue Rotterdam, Netherlands, 09900


Ontario


Netherlands

9. Currency of Sale

United States Dollars

10. Terms of Sale

CPT Rotterdam, Netherlands, Incoterms®

2010

11. Point of Export

Montreal, Canada

12. Pre-carriage By

Fishy Cartage


Canadian Mediterranean Lines S.S. Star Voy # 14E


Ocean


30 day sight Draft




19. Quantity

20. Unit of Measure

21. Unit Price

22. Total

Preston Barbeque

Barbeque parts 374 Pcs. 135.00 50,490.00

34 crates Netherlands HS#: 8540.20.90.00


2,000 kg 1,870 kg

32. Signature 26. Packaging 1,300.00


Jane Doe

28. International Freight 2,850.00

of Canadian Manufacturing Inc. 29. Insurance N/A

30. Other N/A

33. Date June 15, 2017



2017 Page | 128







Name – Nom Canadian Manufacturing Inc.


5678 Mississauga Rd. City – Ville

Mississauga Province/state, country – Province/État, pays


X1B 2B3


Name – Nom Preston Barbeque


967 Cleaver Avenue City – Ville

Rotterdam Province/state, country – Province/État, pays

Netherlands Postal Code – Code postal

09900


Netherlands 9(a) Customs proof of report no. – No de la prevue de déclaration des douanes



Canadian Mediterranean Line


111111111 8. Mode of transport from place of exit – Mode de transport à partier du bureau de sortie Highway Rail Marine Air Routier Ferroviaire Maritime Aérien Other (specify) Autre (précisez) ________________________________



S.S. Star, voyage 14E 11. Date of export (yyy/mm/dd) – Date de’exportation (aaaa/mm/jj)

2017/06/20



Crates 13. Place of exit – Bureau de sortie

Montreal, Canada







20. Value F.O.B place of exit Valeur f.à.b. bureau de sortie Country

Pays Province

ON Barbeque parts 8540.20.90.00 374 pcs 50,490.00


United States Dollars 22. Gross weight – Poids brut

2,000 kg 23. Total value F.O.B place of exit – Valeur totale f.à.b.

bureau de sortie 50,490.00

24. Freight charges to place of exit, estimated if unknown (included in field 20) –

Frais de transport jusqu’au bureau de sortie, estimé si inconnu (compris à la zone 20)

$150.00

25. If goods are not sold, state reason for export (if applicable). If a lease or rental, state

period – Si les merchandises ne sont pas vendues, motivez le’exportation (s’il y a lieu). S’il s’agit d’une location ou d’un bail, précisez la periode.








M8X 1Y9


Name of person responsible for completion – Nom de la personne

responsible de remplir le formulaire. Jane Doe Company name – Nome de la compagnie




ON, Canada


M8X 1Y9

28. Status – Statut Exporter Other Exportateur Autre



Signature

Jane Doe

Date

June 18, 2017

B13A (4)


2017 Page | 129

1. Goods consigned from (Exporter’s business name, Reference No. Address, country) Canadian Manufacturing Inc. 5678 Mississauga Rd. GENERALIZED SYSTEM OF PREFERENCES

Mississauga, ON, X1B 2B3, Canada CERTIFICATE OF ORIGIN


Preston Barbeque 967 Cleaver Avenue

Rotterdam, 09900, Netherlands Issued in CANADA

(country)


Ocean freight Canadian Mediterranean Lines

S.S. Star Voy # 14E 5. Item number


7. Number and kind of packages: description of goods

8. Origin criterion



1 Preston Barbeque

Barbeque parts 34 wooden crates HS#: 8540.20.90.00

2,000 kg PP-060101

Date: 06/15/17

Generally, in this area is where

a Commissioner for Taking Oaths will stamp, sign and date, verifying the accuracy. Usually an accredited individual in a forwarder’s office.



_________Canada___________________ (country)



_________Netherlands___________________ (importing country)



2017 Page | 130


Commercial Invoice

Great Glass Works of Kitchener Inc. 1234 Schwaben Ave. Kitchener, ON, G6H 1S1 1. Invoice Date 2. Sale Date 3. Invoice No. 4. Page

July 12, 2017 July 2, 2017 GGW-0715-X 1 of 1 5. Consignee Name and Address 6. Other Address (e.g. buyer/bank)

Same as Consignee Francois Glass B.V. 321 Rue de la Fleur Brussels, Belgium, 10098


Ontario


Belgium

9. Currency of Sale

Canadian Dollars

10. Terms of Sale

FCA Great Glass Works Kitchener, Incoterms®

2010

11. Point of Export

Toronto, Canada

12. Pre-carriage By

Cartage Company


Lufthansa air cargo


Air


Net 30 days




19. Quantity

20. Unit of Measure

21. Unit Price

22. Total

Francois Glass

Glass figurines 432 Pcs. 4.00 1,728.00

24 cartons Belgium HS#: 7013.99.00.95


300 kg 276 kg



Jane Doe 28. International Freight N/A

of Glass Works of Kitchener Inc. 29. Insurance N/A

30. Other N/A

33. Date July 12, 2017



2017 Page | 131







Name – Nom Great Glass Works of Kitchener Inc.


1234 Schwaben Ave. City – Ville

Kitchener Province/state, country – Province/État, pays


G6H 1S1


Name – Nom Francois Glass B.V.


312 Rue de la Fleur City – Ville

Brussels Province/state, country – Province/État, pays

Belgium Postal Code – Code postal

10098


Belgium 9(a) Customs proof of report no. – No de la prevue de déclaration des douanes



Lufthansa air cargo






2017/07/20




Toronto, Canada








Pays Province

ON Glass figurines 7013.99.00.95 432 pcs 1,853.00



300 kg 23. Total value F.O.B place of exit – Valeur totale f.à.b.



$125.00









M8X 1Y9







ON, Canada


M8X 1Y9





Signature

Jane Doe

Date

July 18, 2017

B13A (4)


2017 Page | 132

1. Goods consigned from (Exporter’s business name, Reference No. Address, country) Great Glass Works of Kitchener Inc. 1234 Schwaben Ave. GENERALIZED SYSTEM OF PREFERENCES

Kitchener, ON, G6H 1S1, Canada CERTIFICATE OF ORIGIN


Francois Glass B.V. 321 Rue de la Fleur

Brussels, 10098, Belgium Issued in CANADA

(country)


Lufthansa air cargo Flight :LH365

5. Item number





1 Francois Glass

Glass figurines 24 cartons HS#: 7013.99.00.95

432 pcs GGW-0715-X





_________Canada___________________ (country)



_________Belgium___________________ (importing country)



2017 Page | 133


Commercial Invoice Rain & Shine 432 Avenue Rd. Toronto, ON, M4Y 8Z3 1. Invoice Date 2. Sale Date 3. Invoice No. 4. Page

March 10, 2017 March 1, 2017 RS-067 1 of 1 5. Consignee Name and Address 6. Other Address (e.g. buyer/bank)

Same as Consignee Harrods of London Nottingham Place London, W11 1BB, United Kingdom


Ontario


United Kingdom

9. Currency of Sale

Canadian Dollars

10. Terms of Sale

CPT London, U.K.

11. Point of Export

Toronto, Canada

12. Pre-carriage By

Fast Cartage


British Airways


Air freight


Net 30 days




19. Quantity

20. Unit of Measure

21. Unit Price

22. Total

Harrods Umbrellas HS#: 9503.90.00.89

Packed: 72 umbrellas per carton

16 Ctns. 1,200.00 19,200.00

16 cartons U.K.


425 kg 400 kg



Jane Doe

28. International Freight 1,133.75

of Rain & Shine 29. Insurance N/A

30. Other N/A

33. Date March 10, 2017



2017 Page | 134







Name – Nom Rain & Shine


432 Avenue Rd. City – Ville



M4Y 8Z3


Name – Nom Harrods of London


1 Nottingham Place City – Ville

London Province/state, country – Province/État, pays

United KIngdom Postal Code – Code postal

W11 1BB


United Kingdom 9(a) Customs proof of report no. – No de la prevue de déclaration des douanes



British Airways



9(b) Goods inspected by customs – Marchandises inspectées par les douanes

Yes - Qui



2017/03/15




Toronto, Canada









Pays Province

ON Umbrellas 6601.99.00.00 1,152 pcs 19,300.00



425 kg 23. Total value F.O.B place of exit – Valeur totale f.à.b.



$100.00









M8X 1Y9







ON, Canada


M8X 1Y9





Signature

Jane Doe

Date

March 12, 2017

B13A (4)


2017 Page | 135

1. Goods consigned from (Exporter’s business name, Reference No. Address, country) Rain & Shine 432 Avenue Rd. GENERALIZED SYSTEM OF PREFERENCES

Toronto, ON, M4Y 8Z3, Canada CERTIFICATE OF ORIGIN


Harrods of London 1 Nottingham Place

London, W11 1BB, United Kingdom Issued in CANADA

(country)


British Airways Flight : BA642

5. Item number





1 Harrods Umbrellas 16 cartons HS#: 6601.99.00.00

425 kg RS-067





_________Canada___________________ (country)



_________United Kingdom_________________ (importing country)



2017 Page | 136


Commercial Invoice

Ontario Baby Supplies Ltd. 147 Queen Street Brampton, ON, L7P 3S9 1. Invoice Date 2. Sale Date 3. Invoice No. 4. Page

October 31, 2017 October 15, 2017 OBS-0863 1 of 1 5. Consignee Name and Address 6. Other Address (e.g. buyer/bank)

Same as Consignee Bebes R Ci S.A. 134 Norde Calle Valparaiso, 2340000, Chile


Ontario


Chile

9. Currency of Sale

Canadian Dollars

10. Terms of Sale

CPT Valparaiso

11. Point of Export

Montreal, Canada

12. Pre-carriage By

C.N. Rail


Dragon Lines S.S. Aldaris, Voy # 56S


Ocean


On account




19. Quantity

20. Unit of Measure

21. Unit Price

22. Total

Bebes R Ci S.A.

Baby formula HS#: 1901.10.90.90 Packed: 12 tins per

ctn.

1,200 Ctns. 20.50 24,600.00

1,200 cartons

Chile


16,330 kg 15,130 kg



Jane Doe 28. International Freight 6,250.00

of Ontario Baby Supplies Ltd. 29. Insurance N/A

30. Other N/A

33. Date October 31, 2017



2017 Page | 137







Name – Nom Ontario Baby Supplies Ltd.


147 Queen Street City – Ville

Brampton Province/state, country – Province/État, pays


L7P 3S9


Name – Nom Bebes R Ci S.A.


134 Norde Calle City – Ville

Valparaiso Province/state, country – Province/État, pays

Chile Postal Code – Code postal

2340000


Chile 9(a) Customs proof of report no. – No de la prevue de déclaration des douanes



Dragon Lines





S.S. Aldaris 11. Date of export (yyy/mm/dd) – Date de’exportation (aaaa/mm/jj)

2017/11/05


1,200 Kind of packages – Genre de colis


Montreal, Canada








Pays Province

ON Baby formula 1901.10.90.90 1,200 cartons 24,600.00



16,330 kg 23. Total value F.O.B place of exit – Valeur totale f.à.b.



$750.00









M8X 1Y9







ON, Canada


M8X 1Y9





Signature

Jane Doe

Date

November 1, 2017

B13A (4)


2017 Page | 138

1. Goods consigned from (Exporter’s business name, Reference No. Address, country) Ontario Baby Supplies Ltd. 147 Queen Street GENERALIZED SYSTEM OF PREFERENCES

Brampton, ON, L7P 3S9, Canada CERTIFICATE OF ORIGIN 2. Goods consigned to (Consignee’s name, address, (Combined declaration and certificate) Country) FORM A

Bebes R Ci S.A. 134 Norde Calle

Valparaiso, 2340000, Chile Issued in CANADA

(country)


Ocean freight Dragon Lines

S.S. Aldaris Voy. # 56S 5. Item number





1 Bebes R Ci S.A.

Baby formula 1,200 cartons HS#: 1901.10.90.90

16,330 kg OBS-0863

Date: 10/31/17

Generally, in this area is where a




_________Canada___________________ (country)



_________Chile_________________ (importing country)


Questions Cargo Insurance

2017 Page | 139


1. What is the meaning of utmost good faith?

2. Name two features of the term insurable interest.

3. Describe an insurance policy.

4. Describe an insurance certificate.

5. What is an open policy? Describe it.

6. Name examples of losses that may be excluded in an insurance policy.

7. FPA, what does it mean, what does it cover?

8. Risk of war, strikes, civil commotion, and mines are usually excluded on marine cargo policies. How would you obtain coverage?

9. Can war risks be covered when cargo is on land?

10. What does inherent vice mean? Is this covered in an all risks policy?

11. What does warranted goods surveyed prior to loading mean?

12. How would you explain general average to a customer?

13. When general average has been declared for a vessel arriving at the ocean port, what will an average adjuster require from you before your cargo is released?

14. Determine the:

i) CIP Toronto value, and

ii) the insurance premium on a shipment with the following charges:

Value of shipment FCA Hong Kong US $70,000.00

Ocean freight Hong Kong to Toronto US $1,050.00

Toronto terminals US $180.00

Local delivery US $155.17 (CAN $158.27)

Insurance rate is 0.75% of insured value.

Rate of exchange of USD to CAD is 1.02.


2017 Page | 140


The textbook defines insurable interest by quoting an excerpt from the Marine Insurance Act 1992, Article 7 (2). Incoterms® 2010 are often used to establish when an insurable interest attaches to the insured.

Export shipment from Canada: The following is a scenario that could happen in real life.

5 skids of paint from a Toronto manufacturer, sold FCA Toronto (Incoterms® 2010).

After the paint was loaded into the Cartage company truck, at the plant, the driver on the way to the export terminal in Toronto has an accident on the expressway. His truck “jack-knifes”, tips and crashes against the steel guardrail, busting the trailer doors open and spilling paint cans all over the highway, closing it for hours in both directions.

For this exercise it is not important or relevant to determine the cause of the accident, but to determine which party in this international transaction has an insurable interest. Examining the Incoterm used in this transaction, it is obvious that there is no specific named location. This leaves us with two possible situations:

Situation #1: If the buyer’s “nominated carrier” was moving the paint to the export terminal Toronto, then the buyer bears the risk, and all associated costs. This means that the buyer had an insurable interest in the goods. Please note that “nominated carrier” may also mean “local forwarder”, or “forwarder’s agent overseas giving instructions to their local agent” to collect the freight. The proper Incoterm for this situation would be FCA Paint Factory Toronto, local forwarder, Incoterms® 2010.

Situation #2: The seller decides to use their own in-house trucks to deliver the cargo to the export terminal. The only information provided to the seller are the booking details for the move. In this situation the seller has yet to deliver the goods in accordance with the Incoterm used. Thus, the seller has an insurable interest in the goods. The proper Incoterm for this situation would be FCA Export Terminal Toronto, local forwarder, Incoterms® 2010.

The given scenario might be a little extreme but it shows the importance of the need for proper Incoterms in assigning insurable interest. Also note that there is “no obligation” on either party to insure the cargo, but it is always advisable to do so. Imagine this scenario in reverse, and you have a customer buying goods, FCA Paint Factory Stuttgart, local forwarder, Incoterms® 2010, moving by truck for a vessel in Hamburg via the autobahn. Your customer buying the goods has an insurable interest in the goods from the moment they leave the factory in Germany.

You should always discuss with your customer not only the need for the accurate use of Incoterms, but also the importance of insurance coverage and insurable interest. You should be aware of the implications of each as it affects insurance. This refers back to our Incoterms. As complicated as they may seem, we have seen that responsibilities are clearly stated. DO NOT rely on the “information” written on the back of a bill of lading to provide “coverage” for your customer.


2017 Page | 141


1. SINKS Company in Kitchener buys valves from TAPS Company in Taiwan.

Terms of delivery: FCA TAPS, Taiwan, Incoterms® 2010

4 skids @ 310 kg each, ocean export LCL, cargo value US $6,500.00.

a) Which party is obligated to insure this cargo? b) To which party do you recommend insurance? c) While awaiting the arrival of the collecting truck at TAPS, a

forklift driver crushes the cargo. Who bears the loss? d) If CIFFA Forwarder’s Taiwan agent’s receiving terminal

(warehouse) burns to the ground and the valves are destroyed, who suffers the loss?

2. CHIPS Company in Toronto sells electronic connectors to DATA Company in Germany.

Terms of sale: CPT Frankfurt, Germany, Incoterms® 2010 20 skids @ 220 kg each, loaded in 1 x 40-ft container, value is CAN $36,000.00.

a) Who is responsible for contracting and paying the freight charges? b) If the container is washed overboard and the whole shipment is

lost at sea, who suffers the loss? c) Should the seller in Toronto insure the connectors? d) Why or why not?

3. KLEANH2O Company in Winnipeg sells water filters to FRESH Company in

Chile. Terms of sale: CIP Santiago, Chile, Incoterms® 2010 20 cartons each, dims 22 in x 24 in x 24 in @ 22 kg each, air export, value is US $15,000.00.

a) Is the airfreight charge prepaid by shipper or collect to consignee? b) If the truck burns up on Highway 1 en route to the airport, who

bears the loss? c) Who must buy/provide cargo insurance? d) What level of coverage is the obliged party to “take out”, and in

what amount?


2017 Page | 142

Exercises 5.3 (Preface – Determining the Insured

Value and Premiums)

The purpose of an insured value is to show an accurate value of goods at the point of destination. This value is always higher than the value of goods at factory, because by the time goods arrive at the destination money has been spent on various freight charges, handling, insurance and even duty/taxes. Example Question: Calculate the insured value and determine the premium for the following shipment

on 110% of CIP value, and complete the certificate of insurance. The insurance premium has been sold at 0.38% of insured value, all risk.

Seller: Compak Disks Ltd., Seoul, Korea Buyer: Kay-Tell Distributors, Woodstock, Ontario

Commodity: Compact Disk Players Price: US $95.00 each. Factory Korea. Quantity: 600 players Packaged: 600 cartons @ 46 cm x 36 cm x 24 cm @ 9 kg each

Terms of delivery: CIP Toronto, Incoterms® 2010 Mode of transport: ocean freight

Shipment details: Loaded: door Seoul Korea, 1 x 20-ft standard TRVA 168932-5 Port of loading: Busan, Korea Port of discharge: Vancouver, Canada Delivery: CY Toronto Vessel: S.S. Maruni, Voy: 803 Sailing: January 29, 2017. Freight charges: Inland cartage Korea: US $350.00 Ocean freight: CY Busan – CY Toronto, US $1,800.00 Documentation: US $75.00


2017 Page | 143

Step #1: Determine the “CIP” value of the shipment. What is the “CIP” value? It is the sum of the cost of the goods, plus the freight charges, to get the goods to the named destination, plus an estimated insurance premium. Determine the estimated insurance premium: Cost of the goods ................................... US $57,000.00 Cost of freight Inland cartage Korea .............................. US $350.00 Ocean freight .......................................... US $1,800.00 Documentation ....................................... US $75.00

Total ....................................................... US $59,225.00 Our estimated premium will be the cost of the goods, plus freight charges, multiplied by the insurance rate. Estimated premium (EP.) = US $59,225.00 x 0.38% or US $59,225.00 x 0.0038 Estimated premium (EP.) = US $225.06 Our “CIP” value is: Cost of the goods ................................... US $57,000.00 Cost of freight: Inland cartage Korea .............................. US $350.00 Ocean freight .......................................... US $1,800.00 Documentation ....................................... US $75.00 Estimated premium ................................ US $225.06

“CIP” value is ......................................... US $59,450.06 The question asks the insured value on 110% of the “CIP” value. Our insured value on 110% of “CIP” value = US $59,450.06 x 110% (or x 1.1) Therefore, our insured value on 110% of the “CIP” value is: US $65,395.07 Our insurance premium, which is based on 110% of the “CIP” value is: Insurance premium = (110% of “CIP” value) x the insurance rate = US $65,395.07 x 0.38% (or 0.0038) Therefore, our insurance premium = US $248.50 Summary: Insured value is US $65,395.07; insurance premium is US $248.50.


2017 Page | 144

Comments: In this case the insurance underwriter allows the customer to essentially insure the insurance. This is allowed for shipments that have the Incoterm “CIF” or “CIP” stated. However, this is usually stipulated in an agreement between the buyer and the seller. Generally, there is some form of statement in the purchase contract directing the buyer to insure the goods at the CIF or CIP value plus a given percentage. If these specific instructions are not given, then the minimum insurance requirements, as provided by Incoterms® 2010, will prevail. The generally accepted practice in calculating the insured value is: the cost of goods, plus the cost of freight, multiplied by 110% (adding 10% the total). This figure becomes the insured value to which the premium is applied. Examples would be “Ex-Works”, “FCA”, “DAT” shipments where there is no obligation to insure the shipment, but parties accepting the risk will want to insure their risk. This does, however, vary from commodity to commodity. Fine fashion clothing where the “mark-up” is 200% might be allowed to add this 200% to their cost of goods and freight, in place of the standard 10%. These are case-by-case issues that a professional forwarder will have to address as they arise. It is quite normal to round to the nearest full $100.00 for cost and freight value, and round up to the nearest full $1,000.00 for the insured value. The exception, of course, is for a letter of credit, where the value is generally stipulated.


2017 Page | 145

Exercises 5.3 (Preface – Duty and Taxes)

The previous example shows the calculation of insurance premium on the movement portion of the transaction, but what about the customs portion of the transaction? It is possible to insure the duties and taxes paid out upon the importation of the goods. The amount of money paid out in duties and taxes can be a large sum. Imagine if a large amount was paid out and the goods arrive at the warehouse damaged beyond repair. One would like to recover the money they have paid out. It is best then to insure the customs portion of the transaction. All underwriters will usually grant a special premium for the duty portion of the value for insurance, provided you declare the amount for duty/taxes separately in your declaration. Usually that reduced premium for duty is about 1/3 of the cargo premium.

Example: Duty and Taxes Premium calculation Using the details from the previous example, determine the insured value and insurance premium for the customs portion of the shipment. Quantity: 600 compact disk players Value: US $95.00 each Assume: rate of duty is 15%, rate of exchange is 1 USD = 1.02 CAD : Brokerage charges inclusive of taxes = CAN $107.00 : Rate of insurance is 12% Value for duty = 600 x US $95.00 = US $57,000.00 Canadian dollars = US $57,000.00 x 1.02 = CAN $58,140.00 Calculation: Import duties = value for duty x rate of duty = CAN $58,140.00 x 15% = CAN $8,721.00 Value for HST = value for duty + import duties = CAN $58,140.00 + CAN $8,721.00 = CAN $66,861.00 HST on imported goods = CAN $66,861.00 x 13% = CAN $8,691.93


2017 Page | 146

Therefore, the amount of money paid out by the importer at time of import is: Import duties .......................................... CAN $8,721.00 HST on goods ........................................ CAN $8,691.93 Brokerage. .............................................. CAN $107.00

Total ....................................................... CAN $17,519.93 The insured value for the customs portion is CAN $17,519.93. Insurance premium = insured value x rate = CAN $17,519.93 x 0.12 = CAN $21.02 Summary: Amount of insurance for the duties and taxes is: CAN $17,519.93 Insurance premium paid is: CAN $21.02


2017 Page | 147

Exercises 5.3 (Insured Value and Premiums)

(Question)

1. Calculate the insured value at CIP + 10% and state total premium payable.

Show your detailed method of calculation for all steps. 4 x 40-ft containers said to contain Jeeps and tents Value FCA Toronto ................................................................. CAN $105,000.00 Ocean freight Montreal-Lagos per 40-ft container .................. US $3,000.00 Canadian charges for inland freight from Toronto to Montreal, container placing, container loading, handling per 40-ft cntr ... CAN $1,500.00 All risk marine premium rate at 0.35% Use exchange rate 1 USD = 1.02 CAN

2. Determine the insured value at CIP + 10% and insurance premium for the shipment described below: Supplier: Winnipeg Windings Ltd. Goods sold: CIP Port Sao Paulo, Brazil, Incoterms® 2010 Transformer and parts (break-bulk shipment) Invoice value Winnipeg: CAN $110,000.00 Inland freight to New Orleans and port terminals: CAN $3,000.00 Export crating: CAN $1,000.00 Documentation, legalization, handling: CAN $1,100.00 Heavy lift charge port of New Orleans: US $2,000.00 Ocean freight to Sao Paulo, Brazil: US $5,315.00 All risk marine premium 0.28% Use exchange rate 1 USD = 1.02 CAD


2017 Page | 148

Exercises 5.4 (Preface – Insurability, Exclusions of

Coverage, Insurance Certificates)

The following is to cover and explain some of the basic aspects of insurability and exclusions of coverage, including an example of an insurance certificate and instructions on the completion. The section on Cargo Insurance touches only slightly on some of the fundamental issues. These issues are of concern to a forwarder when dealing frequently with arranging marine insurance cover. Therefore the forwarder, as an intermediary, needs to know exactly what the position of a marine underwriter is so that he can give the proper explanation to the client or shipper. i) Nature of losses All losses must be of a fortuitous nature which, loosely defined, means “of an unpredictable nature”. That is why the textbook tells you that an inherent vice - something predictable - IS NOT insurable. Another area in which you may be in conflict with the condition of underwriters that all losses must be of a fortuitous nature is the aspect of proper packaging, which, of course, includes export crating, proper stowage and bracing of container contents. It is a standard part of any marine insurance policy or certificate that damage caused by insufficient and unsuitable packing is excluded from coverage. The determination of insufficiency of packaging is usually made by the surveyor appointed by underwriters at destination. Frequently, insufficient packaging is self-evident. In any case, whenever such surveyor report indicates the cause of loss or damage to be the result of inadequate packaging, underwriters will not pay referring to their articles of exclusion in the policy/certificate.

The reason for these exclusion clauses is, of course, that damage for improperly

packaged goods becomes as good as predictable and any such damage is no longer

fortuitous in nature. That is why it is so important that the forwarder, in any discussion

about any shipment he is about to handle and arrange insurance coverage for, keeps a

sharp eye open for any indication of insufficient export packing or any lack of expertise to

load, stow and brace a container properly.

In the event there are such indications, it is the freight forwarder’s duty to counsel the client about the serious consequences which may result from improper packaging.


2017 Page | 149

Let us go a little beyond ordinary export packing or container stowage. Think about the exposure of any cargo shipped on a flat rack container or an open-top container when the tarpaulin is not replaced on the container due to the height protrusion of the cargo. Regardless of whether such cargo is within or outside the container gauges, flat-rack containers and open-top containers with extra height are usually stowed on board of the container vessel on the upper (outside) tiers of the container racks. That kind of stowage aboard the vessel exposes the container to all risk of weather and the seas. When the forwarder knows that cargo will be shipped on a flat-rack or high-cube container and he knows the specific commodity involved, which might be delicate machinery or other equipment, he has the obligation to point out these possibilities and potential influences to the client. It could very well be that as a result of the freight forwarder’s explanation, the quotation/suggestion for a flat-rack container, etc. is not accepted by the client. In which case such refusal should really be a challenge to the forwarder to find another alternative without such risk factors. ii) Exclusion of Coverage The exclusions discussed below all have their base on the principle of fortuity of losses. You should become familiar with the various exclusions for the different cargo classes. As we all know, all risk coverage is not necessarily “all risk”. Further, we will examine some practical areas you may frequently have to deal with.

Vehicles New vehicle underwriters will usually accept for ICC Clause (A) or all risk with the following general restrictions:

If shipped RO-RO, coverage only applies while the new vehicle is in custody of a public common carrier (truck or vessel). Marine coverage is usually not available while vehicles are driven under their own power. In such a case the regular public car liability insurance takes over.

Exception in coverage: a) Usually underwriters will insist on a deductible. The deductible is determined by

the value of the car and to some extent by the kind of vessel you intend to use and the destination. As a guide, you should generally allow for a deductible of 1% value.


2017 Page | 150

b) The problem of predictable and/or pre-existing damage for any items that are unpacked.

Therefore, in regard to vehicles, underwriters may, in addition to the deductible, insist on the exclusion of obvious and expected losses. The kind of losses are known by their abbreviation: ROD = Rust, oxidization, discolourization SCMD = Scratching, chipping, marring, denting You will have the ROD/SCMD exclusion also on uncrated items of steel, machinery, equipment, etc., for obvious reasons, of course. How to Deal with Used Machinery/Equipment It is always a problem to obtain an all-risk coverage for any used machinery or equipment. In the event you hide the fact that there is used machinery, or even if you are unaware of that fact, and the forwarder or the insured discover this fact, underwriters, in the event of claim, would refuse the claim. In such a case the forwarder or his shipper have broken a fundamental legal principle of marine insurance called “utmost good faith”. The reason used machinery is a problem for the underwriter regardless of whether that machinery is crated or not, is the fact that underwriters do not know the exact condition of such used machinery prior to commencement of the transit. It is possible to overcome this problem at least for larger shipments by arranging a pre-shipment survey, at the expense of the insured, by an underwriter-appointed local surveyor. The idea of the survey is to pinpoint exactly all existing conditions as well as acceptability of the packing. A survey is a very detailed process for each single piece of equipment and may include photographs. The usual daily fee of a surveyor can vary between CAN $450.00 – CAN $650.00 per day plus expenses for travelling, photos, etc. In the event there are claims later at destination, and even if a detailed pre-shipment survey was made, it is usually very difficult to determine at destination, which part is really a new transit claim and which part is really a pre-existing condition. The fact the pre-shipment survey and the damage survey at destination are usually in two different languages, does not make the process of identifying, so-called new damage, any easier. It is for all these reasons that you will find that most underwriters will simply only accept a coverage on basis of Institute Clause C, or what used to be called FPA, meaning coverage for total loss only.


2017 Page | 151

When a forwarder is involved in selling his client insurance coverage for such shipments of used machinery he is well advised to insist with the client that only a coverage on basis of Institute Clause C or FPA is available. In the event the forwarder fails to explain this situation in detail and there is a claim, the forwarder may well find that the client or the insured may hold him responsible. Geographical Limits Many CIFFA forwarders’ open policies will have geographical limits. Often the policy will state “from North America to the world, with some exceptions”. Caution is warranted when shipping to and from areas with political or civil conflicts or where the infrastructure is known to be of concern. There are legislative documents outlining geographical areas of concern. You should always check with your underwriter if you are unsure.

Marine Certificate

The certificate of insurance is a document presented by the insurance company or underwriter as evidence that insurance is in effect. Each underwriter and insurance company have their own certificates but the information provided on the form is generally the same. Normally there are 6 copies of the certificate. The first 2 are considered the original and duplicate. These can become part of the shipping documents and are to be used to make a claim, if necessary. You must always keep in mind that an insurance certificate is a negotiable document, and should not be treated lightly. Referring to the marine insurance certificate on the following page, below is the procedure to complete the certificate: “A” Forwarder’s name, they are the insurance broker. “B” Location where the certificate is issued, city and country, along with the date of

issuance. “C” Complete name and address of the insured party. “D” Certificate No.: supplied by underwriter, generally the forms are previously

numbered. “E” Open Policy No.: This is the forwarder’s policy number assigned by underwriter. “F” Name of any pre-carriage or local cartage company at origin. “G” Location and country where insurance coverage is to begin.


2017 Page | 152

“H” The amount of insurance coverage spelled out in words. “I” The amount of insurance coverage in figures, preceded by the unit of currency,

e.g., CAD – Canadian, USD – American, GBP – British Sterling “J” Name of ocean vessel with voyage number or airline with flight number. “K” Port or airport of departure.

“L” The scheduled date of departure. It is always best to write “on or about” prior to the departure date.

“M” Settling agent information provided by the underwriter. “N” City and country of seaport or airport of destination. “O” Destination city and country of any inland destinations. “P” Container numbers, bill of lading numbers, air waybill numbers. “Q” Enter accurately number and type of packaging, a complete description of the

insured goods. You may reference invoice number, PO numbers, and letter of credit number here.

“R” The city and country where any claims would be paid. It could be the origin,

destination or a third named country where a claims settling office would be located.

“S” In this area you would enter any express warranties, e.g., warranted professionally

packed, or excluding, marring, chipping and oxidation, or no risk after discharge, or any deductibles amounts that would apply.

“T” The forwarder would sign here in blue ink. “U” The company’s signature, usually this signature is actually part of the certificate. Please note that some underwriters do not demand an insurance certificate for every shipment, e.g., air cargo, land transportation, customs duties. Usually some type of monthly summary reporting form is used.


2017 Page | 153

S.O.S. MARINE UNDERWRITERS Underwriters for: MAYDAY INSURANCE COMPANY LIMITED 1243 Islington Ave. # 706, Toronto, Ontario, M8X 1Y9, CANADA.

MARINE INSURANCE CERTIFICATE BROKER “A” Issued at: “B” 20

THIS IS TO CERTIFY THAT:

Insured: CERTIFICATE NO: “D”

ORIGINAL: ORIGINAL AND DUPLICATE

“C” ISSUED, ONE OF WHICH

BEING ACCOMPLISHED,

THE OTHER TO STAND VOID.

Is insured subject to the conditions of Open Policy No. “E” against which the interest

hereunder has been declared.

Local Vessel or Conveyance

“F”

Local Port or Place of Origin Insured Value (in words) “H” “ I ” Currency Figures

“G”

Ocean

Vessel/Aircraft

“J”

Sea/Air Port of

Loading

“K”

Date of Departure

“L”

Claims Settling

Agent

“M”

Sea/Air port of Discharge Final Destination

“N” “O”

Marks/Numbers Number/Kind of Pkgs/Description of Goods Claims Payable at:

“P” “Q” “R”

Additional and/or Special Conditions:

“S”

CONDITIONS OF INSURANCE Subject to Institute Cargo Clauses (A) or Institute Cargo Clause (Air), whichever is applicable or unless otherwise indicated above (*). Including War, Strikes, Riots, and Civil Commotions as per Institute Clauses.

IMPORTANT This Certificate is subject to the terms of the Open policy, provided, however, that the right of a bone fide holder of this Certificate for value shall not be prejudiced by any terms of the Open Policy, which are in conflict with this Certificate.

SURVEY AND CLAIMS SETTLEMENT In the event of loss or damage which may involve a claim under this insurance, notice must be given immediately to the above noted Agents so they may appoint a Surveyor if required.

LIABILITY OF CARRIERS, BAILEES, OR OTHER THIRD PARTIES It is the duty of the Assured and/or their Agents, in all cases, to take such measures as may be reasonable for the purpose of averting or

minimizing a Loss and to ensure that all rights against Carriers, Bailees, or other third parties are properly preserved and exercised. In particular, the Assured, or their Agents, are required to follow the procedure as outlined.

This Certificate is not valid unless countersigned Signed on behalf of the Company by the Assured or their authorized Agent.

“T” “U”


2017 Page | 154


1. For the example question used for Exercise 5.3 (Preface), write up the insurance

certificate for this shipment. A blank insurance certificate is provided


2017 Page | 155

S.O.S. MARINE UNDERWRITERS Underwriters for: MAYDAY INSURANCE COMPANY LIMITED

1243 Islington Ave. # 706, Toronto, Ontario, M8X 1Y9, CANADA. MARINE INSURANCE CERTIFICATE

BROKER Issued at: 20


Insured: CERTIFICATE NO:

ORIGINAL: ORIGINAL AND DUPLICATE

ISSUED, ONE OF WHICH

BEING ACCOMPLISHED,


Is insured subject to the conditions of Open Policy No. against which the interest hereunder has been declared.


Local Port or Place of Origin Insured Value (in words) Currency Figures

Ocean

Vessel/Aircraft

Sea/Air Port of

Loading

Date of Departure

Claims Settling

Agent

Sea/Air Port of Discharge Final Destination







minimizing a Loss and to ensure that all rights against Carriers, Bailees, or other third parties are properly preserved and exercised. In particular, the Assured, or their Agents, are required to follow the procedure as outlined.

This Certificate is not valid unless countersigned Signed on behalf of the Company by the Assured or their authorized Agent.


2017 Page | 156


Cargo Insurance Guidelines

Open Policy No. 123456 (GGF-572) with Reputable Underwriter Inc.

Gotta Go Freight Inc. For Internal Use Only

The following terms are valid for shipments of new general merchandise shipped on approved steamer, aircraft and/or other conveyances to and from places in the world (except countries/places mentioned as, “On Application”). Valuation will be: invoice cost + freight + 10%. Duty and taxes, if applicable, should be declared and insured separately. These rates are applicable only when goods are stowed below deck or containerized. Oceangoing vessels are approved if classified “A1” American Record, “100 A1” or “B.S.” Lloyd’s Register or the equivalent. Vessels over 15 years of age must maintain a regular pattern of trading on an advertised schedule to load/unload at specified ports. Also, bulk or combination carriers and mineral oil tankers exceeding 50,000 GRT must NOT be over 10 years of age. (These requirements do not apply within the port area.) Rates include war coverage OCEAN AIR TRUCK

World to World: All-Risk .35% .25% . 20% F.P.A. (incl. total loss by theft or non-delivery) .175% N/A N/A Duty _____ .12% .08% 12% Minimum Premium per Certificate: $25.00 Minimum Premium per Declaration: $15.00 air, $25.00 ocean, $25.00 domestic shipment These countries are considered “On Application” (effective July 7, 2008). Call for approval and special rates for transit into or through these countries. Afghanistan_CIS _Georgia_Somalia__Angola (incl. Cabinda)_Chechnya_ (incl. Abkhazia)_Sri Lanka__Armenia_China (some interior destinations)_Haiti_Yugoslavia __Azerbaijan_Colombia_Iraq_ Liberia_ Montenegro)__Bougainville_El Salvador_Papua New Guinea_Zaire__Burundi_Ethiopia_Rwanda___


2017 Page | 157

CIFFA Freight Forwarding Company: Gotta Go Freight Forwarding Inc. Gotta Go is a full service international freight forwarder and regular CIFFA member. Gotta Go provides its customers with the opportunity to obtain insurance coverage on imports and exports under its open cargo policy (see the Cargo Insurance Guidelines above). Export Electronics Inc. is a new importer (for one year) and exporter (very recent) of cellular telephones and personal digital assistants (PDA).

Export Electronics imports from Malaysia, India and the Philippines for Canadian domestic distribution on a CIP Hamilton basis;

Very recently they also obtained distribution rights to Mexico, Argentina, Chile, Peru and Venezuela for its products and have begun to export to these countries;

Each phone and PDA is packaged in a retail cardboard carton weighing 0.5 kg and each order is palletized and shrink-wrapped by the shipping department at Export Electronics with country specific language instructions and labels. Each phone is valued at US $50.00 and each PDA at US $100.00.

Export Electronics Inc. estimates exports by ocean freight and air freight for 2017 will average:

Ocean export: 50 shipments/year - average value per shipment: US $40,000.00 Air freight: 20 shipments/year - average value per shipment: US $10,000.00

The following goods are NOT considered “general merchandise”. Call for approval and special rates for each shipment of these commodities. Alcoholic Beverages _ Firearms/Ammunition_ Marble__ Accounts: Money notes/ _Food (Fresh or Frozen)_ Metal Pates/Sheets/Bars/Beams _ Currency/Securities_ Furniture_ Metals, Precious __Antiques _Furs and/or Leather_ Motor Vehicles __Bagged Merchandise _Jewelry (costume & precious)_ Paintings __ Breakables _ Liquids _Personal Effects __Bulk Merchandise _ Livestock _Tobacco Products __ Drugs _ Lumber _Used Goods__ (Select the terms that best suit the client’s needs) Gotta Go Freight Inc. - Cargo Insurance Service - Internal Document – December 2016 E-mail: [email protected]

mailto:[email protected]


2017 Page | 158

Scenario A: Gotta Go Freight Forwarding visits Export Electronics during the early days of its South American distribution start-up to offer them freight forwarding services. Until now, Export Electronics has not yet shipped by ocean export and has dealt with the airlines directly for air exports. They have no cargo insurance, assuming that the carrier will pay for any damages. On the third air export shipment, they encounter a problem.

Export Electronics shipped its first order to Argentina via air freight from

Montreal’s Trudeau International Airport (YUL) to Buenos Aires (BUE):

100 cartons packaged on one shrink-wrapped pallet 100 PDAs Commercial invoice value: US $10,000.00 Actual weight: 100 @ 0.5 kg = 50 kg + 10 kg pallet = 60 kg Volume weight: 150 kg Air freight: CAN $5.00/kg (CAN $750.00) Terms of delivery: DAT Buenos Aires airport, Incoterms® 2010 When the goods were received at BUE by the importer, notations were made on the AWB that 60 cartons were received (loose, not palletized) and that of the 60 cartons received, 30 cartons were crushed.

1. Lost cartons valued 40 @ US $100.00: US $4,000.00 Labour cost of re-packaging goods for sale US $700.00 Replacement of damaged retail packaging US $500.00, including replacement

air charges.

2. Importer’s broker did file a “notice of claim” with the carrier within 24 hours of receipt of the shipment.

3. Importer has short-paid EE’s commercial invoice by US $4,700.00 to recover the

amounts the importer is out of pocket [see: #1 above re: the 40 lost cartons and the re-packing]

4. EE filed a claim in Montreal within 90 days after the AWB issue date with the

carrier for US $5,500.00. (Lost cartons + re-packaging/freight + labour + original air freight charges)

Consider the facts above, the material covered in the program and your knowledge to answer the following questions.


2017 Page | 159

1. What documents will Export Electronics need to submit for the claim to be considered by the airline?

2. Will the carrier pay the claim? Why – why not? 3. If the carrier pays the claim, how much will be paid? What is the basis of the

calculation?

Note: exchange rate: 1 SDR = US $1.05

Scenario B: the Gotta Go sales representative works with her air & ocean export managers and makes a presentation to Export Electronics for both inbound and outbound air and ocean freight. Included in the presentation is a scenario of what would have happened if they had utilized the services of Gotta Go for the air export, including cargo insurance cover under Gotta Go’s open policy (refer to the Guidelines). Gotta Go’s presentation covered the following:

Consider the facts above, the material covered in the program and your knowledge to answer the following questions. 1. What type of insurance coverage would Gotta Go recommend to Export

Electronics under its open policy?

2. Calculate the insurance premium Gotta Go would have charged them for this air freight shipment. (CIF + 10% x Premium)

3. Given that the claim is supported properly, what amount would the insurance

company pay to Export Electronics? Explain your answer. 4. What suggestions would Gotta Go make to Export Electronics to improve their

competitiveness and risk management on imports? 5. List some benefits Export Electronics would achieve if the CIFFA forwarder

provided insurance cover on imports and exports.


2017 Page | 160


Part of your duty as a freight forwarder is to handle the “intent to claim” by his customer. Timely submission to carriers or the forwarder’s advice to the customer about submission to carriers has to follow the process below. The handling procedures cover two scenarios: 1. Cargo insured by the forwarder (B). 2. Cargo insured under the customer’s own insurance (C). Complete the flow chart on the following pages, putting the steps below in the right order:

1. Customer carries own insurance.

2. File Intent to Claim with carrier.

3. Receive notice of claim from client.

4. Survey required.

5. Cargo insurance provided by forwarder.

6. Gather all required documents.

7. Intent to claim filed on time with carrier?

8. Follow up with insurer and customer to ensure payment received.

9. Send intent to claim and all other required documents to allow client to process claim.

10. Seek management advice: option 1: claim with carrier;

option 2: assist client to claim with carrier.

11. Arrange survey.

12. Submit claim and required documents to insurance provider (follow internal procedures).


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START

No

Yes

No No

Yes Yes

B C END

CARGO INSURANCE

CLAIMS HANDLING

PROCEDURES


2017 Page | 162

B C

Yes No

END

END

Answers Cargo Insurance

2017 Page | 163


1. What is the meaning of utmost good faith?

It is the full disclosure of all material facts to the insurance underwriter.

2. Name two features of the term insurable interest.

There must be an object exposed to an insurable risk. Insured party must have some legal relationship to the object.

3. Describe an insurance policy.

An insurance policy is the contract between the insurer and the insured. It states the perils against which the policy gives protection and in what amount.

4. Describe an insurance certificate.

It is a document, which acts as the contract between the insurer and the insured. The certificate provides details of insurance coverage as well as transportation details and particulars of the shipment.

5. What is an open policy? Describe it.

An open policy is a contract between the insurer and insured prepared in general terms covering specified goods on agreed conditions. Monetary limits are applied to any one conveyance or location. The specified goods are generally a wide range of goods to include as many shipments as possible.

6. Name examples of losses that may be excluded in an insurance policy.

Wilful misconduct of insured party, losses caused by delay of shipment, any inevitable loss, loss by inherent vice.

7. FPA, what does it mean, what does it cover?

Free of Particular Average, Cargo Clause “C”. Provides only minimum coverage. Coverage of total losses only caused by marine perils. Also covers general average losses. Partial losses are covered only if caused by fire, stranding, sinking, and collision of the vessel.


2017 Page | 164

8. Risk of war, strikes, civil commotion, and mines are usually excluded on marine cargo policies. How would you obtain coverage?

An express warranty or a specific additional agreement made with the insurance underwriter, must be written into the insurance certificate. For this additional coverage an additional premium is generally charged.

9. Can war risks be covered when cargo is on land?

Usually not unless an agreement is obtained with the insurance company.

10. What does inherent vice mean? Is this covered in an all risks policy?

A property within the cargo, which causes, or is liable to cause, loss or damage to the cargo without any insurable peril occurring, e.g., cargo which may spontaneously combust, or fruit, which may spoil over time.

11. What does warranted goods surveyed prior to loading mean?

During the loading of the container an insurance surveyor is on site to inspect and guarantee the goods were in good condition and properly loaded OR an independent surveyor will inspect the goods and complete a written report, submitted to the insuring party, verifying the value and condition of the goods prior to shipping.

12. How would you explain general average to a customer?

General average is a system founded on the principle of “justice to all”, making good marine losses, voluntarily incurred, for the safety of the entire venture, that is ship, freight, crew. The essential ingredients are: 1) A common adventure: ship, cargo, freight must be imperilled. 2) The expense sacrifice must be extraordinary in nature: calling for the tugboat assistance or throwing overboard of containers to save the vessel. 3) The voyage must come to a safe end. Essentially, part of the cargo is sacrificed in order to save the “rest” of the cargo. The costs of a general average are shared proportionately among all who had cargo aboard the ship. This includes those who lost cargo.


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13. When general average has been declared for a vessel arriving at the ocean

port, what will an average adjuster require from you before your cargo is

released?

If the goods are not insured, the average adjuster, prior to the release of the goods, will require a cash deposit for the share of the estimated average loss. If the shipment was insured, an unlimited underwriter’s guarantee is required for the release of the goods.

14. Determine the:

i) CIP Toronto value, and

ii) the insurance premium on a shipment with the following charges:

Value of shipment FCA local forwarder Hong Kong US $70,000.00

Ocean freight Hong Kong to Toronto US $1,050.00

Toronto terminals US $180.00

Local delivery US $155.17 (CAN $158,27)

TOTAL US $71,385.17

Est. ins. premium US $535.39 (US $71,385.17 x 0.75%)

Total CIP Toronto value US $71,920.56

Ins. premium = US $539.40 (US $71,920.56 x 0.75%)

Insurance rate is 0.75% of insured value.

Rate of exchange of USD to CAD is 1.02.


2017 Page | 166


1. SINKS Company in Kitchener buys valves from TAPS Company in Taiwan.

Terms of Sale: FCA TAPS, Taiwan, Incoterms® 2010

4 skids @ 310 kg each, ocean export LCL, cargo value US $6,500.00.

a) Which party is obligated to insure this cargo?

Under Incoterms® 2010 neither party is obligated to insure the cargo.

b) To which party do you recommend insurance?

You would recommend marine insurance to SINKS Company, as they have the most exposure to loss. They would have a legal relationship to the cargo from the moment the goods are loaded onto the receiving carrier at TAPS Company.

c) While awaiting the arrival of the collecting truck at TAPS, a forklift

driver crushes the cargo. Who bears the loss?

Goods are sold FCA TAPS Taiwan, Incoterms® 2010, the insurable interest is still with the seller. The seller bears the loss.

d) If CIFFA forwarder’s Taiwan agent’s receiving terminal

(warehouse) burns to the ground and the valves are destroyed, who suffers the loss?

Goods are sold FCA TAPS Taiwan, Incoterms® 2010. The goods have obviously been collected from TAPS Taiwan. As such, the buyer has an insurable interest in the goods under Incoterms® 2010 and the buyer will bear the loss.


2017 Page | 167

2. CHIPS Company in Toronto sells electronic connectors to DATA Company in Germany.

Terms of delivery: CPT Frankfurt, Germany, Incoterms® 2010 20 skids @ 220 kg each, loaded in 1 x 40-ft container, value is CAN $36,000.00.

a) Who is responsible for contracting and paying the freight charges?

Under Incoterms® 2010 CHIPS Company is responsible for contracting the carrier and paying the freight charges.

b) If the container is washed overboard and the whole shipment is

lost at sea, who suffers the loss?

Under Incoterms® 2010, the buyer, DATA Company, has an insurable interest in the goods and must bear the loss.

c) Should the seller in Toronto insure the connectors?

NO !!

d) Why or why not?

Under Incoterms® 2010 the risk, or insurable interest, has transferred to the buyer once the cargo has been given to the care of the first carrier. The seller does not have an insurable interest in the goods.

3. KLEANH2O Company in Winnipeg sells water filters to FRESH Company in Chile.

Terms of delivery: CIP Santiago, Chile, Incoterms® 2010 20 cartons each, dims 22 in x 24 in x 24 in @ 22 kg each, air export, value is US $15,000.00.

a) Is the air freight charge prepaid by shipper or collect to consignee?

Under Incoterms® 2010, the shipper/seller is obligated to pay the freight charges.

b) If the truck burns up on Highway 1 en route to the airport, who

bears the loss?

Under Incoterms® 2010, the risk, or insurable interest, is transferred to the buyer when the goods are delivered to the


2017 Page | 168

first carrier. As such, the loss is borne by FRESH Company, Chile.

c) Who must buy/provide cargo insurance?

Under Incoterms® 2010, CIP Santiago, Chile, the seller, or KLEANH2O Company, is obliged to insure the shipment.

d) What level of coverage is the obliged party to “take out”, and in what amount?

The seller is obliged to “take out” minimal coverage only. Minimal coverage is FPA Total Loss Only coverage. The amount of coverage is 110% of the invoice value of the goods. In this case it would be 110 % of US $15,000.00 or in the amount of US $16,500.00.


2017 Page | 169


1. Calculate the insured value at CIP + 10% and state total premium payable.

Show your detailed method of calculation for all steps. 4 x 40-ft containers said to contain Jeeps and tents Value FCA Toronto ................................................................. CAN $105,000.00 Ocean freight Montreal-Lagos per 40-ft container .................. US $3,000.00 Canadian charges for inland freight from Toronto to Montreal, container placing, container loading, handling per 40-ft cntr ... CAN $1,500.00 All risk marine premium rate at 0.35% Use exchange rate 1 USD = 1.02 CAD Value of goods FCA Toronto CAN $105,000.00 Ocean freight: US $3,000.00 x 4 = US $12,000.00 @ 1.02 = CAN $12,240.00 Inland charges: CAN $1,500.00 x 4 = CAN $6,000.00 Total CAN $123,240.00 Estimated premium = CAN $123,240.00 x 0.35% (marine premium rate) = CAN $431.34 110% CIP value = (CAN $123,240.00 + CAN $431.34) x 110 % = CAN $136,038.47 (our CIP Value + 10%) Insurance premium = (CIP Value + 10%) x premium rate = CAN $142,131.72 x 0.35% Insurance premium = CAN $476.14 (the amount paid for insurance)

Canadian Duty/Taxes In Canada the correct value for duty is the so-called transaction value. This means depending on the terms of delivery (Incoterms® 2010), value for duty can be either the FCA value or the CIP value, but when having a CIP value, Revenue Canada permits deduction of foreign freight charges before arriving at value for duty. Practically, you are back to square one or the FCA value at foreign port of export. Therefore, using the FCA value of goods as value for duty in the import sample of the exercises does reflect the proper basis for establishing cost of duty/taxes.


2017 Page | 170

This is not a customs broker course, nor are you expected to know the exact procedure for duty calculation. In a practical situation you would simply ask the customs broker or your customs department clearing your shipment for this information. It is hoped that you were alert in spotting the difference between a value for duty as opposed to a value for insurance without getting confused.

2. Determine the insured value at CIP + 10% and insurance premium for the shipment described below: Supplier: Winnipeg Windings Ltd. Goods sold: CIP Port Sao Paulo, Brazil, Incoterms® 2010 Transformer & parts (break bulk shipment) Invoice value Winnipeg: CAN $110,000.00 Inland freight to New Orleans and port terminals: CAN $3,000.00 Export crating: CAN $1,000.00 Documentation, legalization, handling: CAN $1,100.00 Heavy lift charge port of New Orleans: US $2,000.00 Ocean freight to Sao Paulo, Brazil: US $5,315.00 All risk marine premium 0.28% Use exchange rate 1 USD = 1.02 CAD Invoice value Winnipeg: CAN $110,000.00 Inland freight to New Orleans and port terminals: CAN $3,000.00 Export crating: CAN $1,000.00 Documentation, legalization, handling: CAN $1,100.00 Heavy Lift charge port of New Orleans: CAN $2,040.00 Ocean freight to Sao Paulo, Brazil: CAN $5,421.30 Total cost of goods, plus freight CAN $122,561.30 Estimated Ins. Premium (CAN $122,561.30 x 0.28%) CAN $343.17 CIP Value CAN $122,904.47 CIP Value + 10% CAN $135,194.91 Insurance Premium = CAN $135,194.91 x 0.28% = CAN $378.55


2017 Page | 171


S.O.S. MARINE UNDERWRITERS Underwriters for: MAYDAY INSURANCE COMPANY LIMITED

1243 Islington Ave. # 706, Toronto, Ontario, M8X 1Y9, CANADA. MARINE INSURANCE CERTIFICATE

BROKER CIFFA Forwarder Issued at: Toronto, Canada, January 18 20 17


Insured: CERTIFICATE NO: A-60952

Kay-Tell Disks Ltd. ORIGINAL: ORIGINAL AND DUPLICATE

65 Main Street ISSUED, ONE OF WHICH

Woodstock, ON, Canada BEING ACCOMPLISHED,


Is insured subject to the conditions of Open Policy No. CIFFA-987 against which the interest

hereunder has been declared.


Korean Trucking

Local Port or Place of Origin Insured Value (in words) Sixty-five thousand three hundred and ninety five US $65,395.00

Currency Figures Seoul, Korea

Ocean Vessel/Aircraft SS Maruni Voy 803

Sea/Air Port of Loading Busan, Korea

Date of Departure On or about January 29, 2017

Claims Settling Agent Mayday Insurance 46 Bay St. Toronto, ON Sea/Air Port of Discharge Final Destination

Vancouver, Canada Toronto, Canada


TRVA 168932-5 1-20 ft container said to contain 600 cartons of compact disk players Toronto, Canada


Institute Cargo Clause “A”, all risk, inclusive of wars, strikes, civil commotions.





minimizing a Loss and to ensure that all rights against Carriers, Bailees, or other third parties are properly preserved and exercised. In particular, the Assured, or their Agents, are required to follow the procedure as outlined. This Certificate is not valid unless countersigned Signed on behalf of the Company by the Assured or their authorized Agent.

CIFFA Forwarder Signature Co. President Pre-Printed Signature


2017 Page | 172


Scenario A:

1. What documents will Export Electronics need to submit for the claim to be considered by the airline?

Cover letter (dated, signed with statement of claim including dollar amount), bill of lading, MAWB, pro-bills, commercial invoice(s) for entire shipment, packing list, copy of delivery receipt (notated), repair invoice or other, copy of claim or intent to claim.

2. Will the carrier pay the claim? Why – why not?

Yes – within timeframe, all notices and documents completed, clearly their loss.

3. If the carrier pays the claim, how much will be paid? What is the basis of the

calculation?

Limited liability – 150 kg x 19 SDR = +/- US $3,000.00 x 70%/70 ctns @ 1.05 = +/- US $2,100.00 (40 cartons lost + 30 cartons damaged, so liability limited to 70 cartons)

Note: Exchange rate: 1 SDR = US $1.05

Scenario B:

1. What type of insurance coverage would Gotta Go recommend to Export

Electronics under its open policy?

A 2. Calculate the insurance premium Gotta Go would have charged them for this air

freight shipment. (CIF + 10% x Premium)

Estimated: $10,000 + 750.00 x 0.25% = $26.88; Actual: $10.750 + 26.88 x 110% = 11,854.57 x 0.25% = $29.64.


2017 Page | 173

3. Given that the claim is supported properly, what amount would the insurance company pay to Export Electronics? Explain your answer.

Full amount of claim – not limited as airline payout could be.

4. What suggestions would Gotta Go make to Export Electronics to improve their

competitiveness and risk management on imports?

Change terms of delivery to FCA origin and take out cargo insurance coverage.

5. List some benefits Export Electronics would achieve if the CIFFA forwarder

provided insurance cover on imports and exports.

Less administration, full coverage, claims handling assistance, claims could be paid in Canada, treated like a customer.


2017 Page | 174


START

Receive ‘Notice

of Claim’ from

client

Intent to

Claim filed

on time

with

carrier?

Yes

Cargo

insurance

provided by

forwarder?

Yes

B

No File ‘Intent to

Claim’ with

carrier

No Customer

carries own

insurance?

Yes

C

No

Seek

management

advice: options:

1. Claim with

carrier 2. Assist

client to claim

with carrier

END

CARGO INSURANCE

CLAIMS HANDLING

PROCEDURES


2017 Page | 175

B

C

Survey

required

? Send intent to claim

and all other required

documents to allow

client to process claim

Yes

Arrange survey

Gather all required

documents

Submit claim and required

documents to insurance

provider (follow internal

procedures)

Follow up with insurer and

customer to ensure

payment received END

Follow up with client to

ensure claim progressing

END


2017 Page | 176

Questions Cargo Security and Dangerous Goods

2017 Page | 177

Exercises 6.1 (Cargo Security) (Question)

1. Which Canadian Bill deals with terrorism and national security?

2. What is the name of the regulations involving international maritime security?

3. What is the name of Canada’s security program that helps reduce contraband,

smuggling, and terrorism?

4. What government agency administers the above program?

5. What do the Memoranda of Understanding in the above program focus on?

6. What is the similar program in the USA?


8. How does this program work?

9. Canada has a National Security Policy. What are the three (3) key elements

in this policy?

10. What are the three (3) core national security interests of this policy?

11. What are the key new measures that the government of Canada will invest in

to fulfill its security responsibilities and activities?

12. What is ACI?

13. When was marine mode ACI implemented?


2017 Page | 178

14. What are the three (3) main objectives of export reporting?

15. Who must report the exports?

16. What are the export reporting timeframes?

Vessel:

Aircraft:

Rail:

Other:

17. What are the four (4) methods of reporting?

18. When did the Canadian Government specify that the ISPS Code for port and

port facilities become operational?

19. What U.S. security initiative applies to maritime transportation?

20. Which Canadian ports are part of CSI?

21. What must a Canadian freight forwarder first sign to becomes part of the

Transport Canada Air Cargo Security Program?

22. What can you do to increase security at your facility?

23. What can you do to improve security access to your facility?


2017 Page | 179

Exercises 6.2 (Dangerous Goods) (Question)

1. What is the definition of dangerous goods?

2. What are two (2) other terms that may also mean dangerous goods?

3. What associations/agencies have devised regulations for the transportation of

dangerous goods?

4. What is the Canadian set of dangerous goods regulations?

5. What is the American set of dangerous goods regulations?

6. Name some transportation disasters involving dangerous goods.

7. For these three (3) activities: handling, offering for transport, transporting dangerous goods; which one(s) could apply to the following persons?

Shipper/exporter/importer:

Freight forwarder:

Carrier:

8. What are the two (2) main responsibilities of freight forwarders regarding

dangerous goods?

9. Under what conditions can a person legally handle, offer for transport, or

transport dangerous goods?

10. In Canada, how long is a dangerous goods training certificate valid for?

Air mode:

Ground mode:

Ocean mode:

11. In Canada, are there any situations when a dangerous goods training certificate would expire in a shorter period than in Question 10?


2017 Page | 180

12. In Canada, who must sign a dangerous goods training certificate to make it valid?

13. Who is responsible for identification of a dangerous goods shipment?

14. In what two (2) ways are dangerous goods identified?

15. How many Classes of dangerous goods are there, and what do they relate to?

16. What are the nine (9) Classes/Divisions of dangerous goods?

Class 1:

Class 2:

Class 3:

Class 4:

Class 5:

Class 6:

Class 7:

Class 8:

Class 9:

17. What are the three (3) Packing Groups, and what do they relate to?

18. What degree of danger does each Packing Group represent?

i) Packing Group I:

ii) Packing Group II:

iii) Packing Group III:

19. Other than the “diamond-shaped” hazard labels, what other labels/marks are

there for the transportation of dangerous goods by air?

20. Other than the “diamond-shaped” hazard labels, what other labels/marks/signs/placards are there for the transportation of dangerous goods by ocean?


2017 Page | 181

21. What are the four (4) types of documents that may be used for dangerous goods shipments?

22. Who is responsible to complete the above documents?

23. In Canada, what additional two (2) pieces of information must be indicated on the

transport document for dangerous goods?

24. What are the five (5) BASIC steps to follow during a dangerous goods

emergency?

25. Who/what is CANUTEC?

26. How do you contact CANUTEC during a dangerous goods emergency?

27. What two (2) reports may you have to make to Transport Canada regarding a

dangerous goods occurrence?

28. If found guilty of an offence under the TDGR, what punishment could be levied?

29. According to Transport Canada, how long must dangerous goods paperwork be

kept on file?


2017 Page | 182

Exercises 6.3 (Cargo Security) (Question)

1. i) Create a flowchart of all the companies involved in producing, shipping, and

transporting an Apple iPhone from the manufacturer to a Future Shop store in Canada.

Apple Shenzhen, China, assembles the hardware, holds inventory, and handles the picking, packing, and shipping. Parts are sourced from Singapore, Taiwan, and U.S.

ii) After completing your flowchart, list possible weak points regarding cargo security (theft and terrorism).

iii) Which Canadian or U.S. security programs may help create a more secure supply chain for the iPhone?


2017 Page | 183

Exercises 6.4 (Dangerous Goods) (Question)

1. Review the following excerpt from the International Air Transport Association’s

(IATA) Dangerous Goods Regulations and answer the following questions:

a) What details can you provide about UN1090? * Not everyone will get all these details, and you are not expected to. You all

should get the first 4 or 5.

b) What details can you provide about Acetylene silver nitrate?

2. Review the following excerpt from the International Maritime Organization’s (IMO)

Dangerous Goods Code and answer the following questions:

a) What details can you provide about UN1219? *Not everyone will get all these details, and you are not expected to. You all

should get the first 5 or 6.

b) What details can you provide about UN1463?

*Not everyone will get all these details, and you are not expected to. You all should get the first 5 or 6.


2017 Page | 184

IATA Dangerous Goods Regulations

Passenger and Cargo Aircraft

Cargo Aircraft Only

Ltd Qty

UN/ ID no.

A

Proper Shipping Name/Description

B

Class or

Div. (Sub Risk)

C

Hazard Label(s)

D

PG

E

EQ see 2.7

F

Pkg Inst

G

Max Net Qty/Pkg

H

Pkg Inst

I

Max Net Qty/Pkg

J

Pkg Inst

K

Max Net Qty/Pkg

L

S.P. see 4.4

M

ERG Code

N

1090 Acetone 3 Flam. liquid II E2 Y341 1 L 353 5 L 364 60 L 3H

IMO Dangerous Goods Code Packing IBC

UN No.

(1)

Proper Shipping Name (PSN)

(2)

Class or

division

(3)

Subsidiary risk(s)

(4)

Packing group

(5)

Special provisions

(6)

Limited quantities

(7)

Instruc- tions

(8)

Provisions

(9)

Instruc- tions

(10)

Provisions

(11)

1219 ISOPROPANOL (ISOPROPYL ALCOHOL) 3 - II - 1 l P001 - IBC02 -

1463 CHROMIUM TRIOXIDE, ANHYDROUS 5.1 6.1/8

II - 1 kg P002 PP31 IBC08 B2/B4

Answers Cargo Security and Dangerous Goods

2017 Page | 185

Exercises 6.1 (Cargo Security) (Answer)

1. Which Canadian Bill deals with terrorism and national security?

Bill C-36.

2. What is the name of the regulations involving international maritime security?

International Ship and Port Facility Security Code (ISPS Code).

3. What is the name of Canada’s security program that helps reduce contraband,

smuggling, and terrorism?

Partners in Protection (PIP).


Canada Border Services Agency (CBSA). 5. What do the Memoranda of Understanding in the above program focus on?

Intelligence; exchange of information; security and joint training/information initiative.

6. What is the similar program in the USA?

Customs-Trade Partnership Against Terrorism (C-TPAT).

7. What government agency(ies) administer(s) the above program?

Customs and Border Protection (CBP) OR Department of Homeland Security.

8. How does this program work?

In exchange for quicker trips through borders, businesses must take

significant steps towards policing themselves.


2017 Page | 186

9. Canada has a National Security Policy. What are the three (3) key elements in this policy?

1. A high-level federal-provincial-territorial forum on emergencies.

2. The National Security Advisory Council will give the government advice

on evaluating and improving the system.

3. A cross-cultural roundtable on security.

10. What are the three (3) core national security interests of this policy?

1. Protecting Canada and Canadians at home and abroad.

2. Ensuring Canada is not a base for threats to our allies.

3. Contributing to international security.

11. What are the key new measures that the government of Canada will invest in

to fulfill its security responsibilities and activities?

1. Enhancing intelligence capabilities.

2. Securing critical government information systems.

3. Fully implementing the RCMP Real Time Identification Project and

improving the national fingerprint system.

4. Implementing the Passport Security Strategy.

12. What is ACI?

Advance Commercial Information;

Key data on shipments must be transmitted electronically before goods and conveyances arrive in the country;

A targeting tool will detect high-risk shipments. Low-risk shipments will be cleared more quickly.

13. When was marine mode ACI implemented?

April 19, 2004.


2017 Page | 187

14. What are the three (3) main objectives of export reporting?

Control the export of strategic and dangerous goods, as well as other controlled and regulated goods;

Collect accurate information on Canadian exports;

Control the outbound movement of goods in transit through Canada.

15. Who must report the exports?

The holder of a business number for the purposes of exporting commercial goods or who has the legal right to cause them to be exported.

16. What are the export reporting timeframes?

Vessel: Not less than 48 hours before being loaded on the vessel.

Aircraft: Not less than 2 hours before being loaded on the aircraft.

Rail: Not less than 2 hours before the railcar containing the goods is

assembled to form part of the train for export.

Other: Immediately prior to exportation of the goods.

17. What are the four (4) methods of reporting?

Canadian Automated Export Declaration (CAED);

G7 EDI Export Reporting;

Summary Reporting;

Form B13A Export Declaration.

18. When did the Canadian Government specify that the ISPS Code for port and

port facilities become operational?

July 1, 2004.

19. What U.S. security initiative applies to maritime transportation?

Container Security Initiative (CSI).

20. Which Canadian ports are part of CSI?

Montreal, Vancouver, Halifax.


2017 Page | 188

21. What must a Canadian freight forwarder first sign to becomes part of the Transport Canada Air Cargo Security Program?

Terms and Conditions.

22. What can you do to increase security at your facility?

Possible solutions: Prevent unauthorized access - self-closing and self-locking doors and

gates; receptionist/personnel at main entry points; security key card

access for employees; all doors closed and locked; all external doors

designed to resist/prevent forced entry; security alarms on all external

doors; locking windows with bars or mesh and alarmed; ground floor

windows protected by anti-ram posts or physical barriers.

23. What can you do to improve security access to your facility?

Possible solutions: Prevent unauthorized access; challenge unauthorized persons;

passwords for computer systems.


2017 Page | 189

Exercises 6.2 (Dangerous Goods) (Answer)

1. What is the definition of dangerous goods?

Articles and substances capable of posing a significant risk to health, safety, property, or the environment.

2. What are two (2) other terms that may also mean dangerous goods?

Hazardous materials; restricted articles.

3. What associations/agencies have devised regulations for the transportation of

dangerous goods?

United Nations (UN);

International Atomic Energy Agency (IAEA);

International Civil Aviation Organization (ICAO);

International Air Transport Association (IATA);

International Maritime Organization (IMO).

4. What is the Canadian set of dangerous goods regulations?

Canadian Transportation of Dangerous Goods Regulations (TDGR).

5. What is the American set of dangerous goods regulations?

Title 49 of the Code of Federal Regulations (49 CFR).

6. Name some transportation disasters involving dangerous goods.

ValuJet air crash;

Mont Blanc/Halifax explosion;

Bow Mariner explosion and sinking;

Mississauga train derailment;

Kapitan Sakharov;

Malaysian Airlines.


2017 Page | 190

7. For these three (3) activities: handling, offering for transport, transporting dangerous goods – which one(s) could apply to the following persons?

Shipper/exporter/importer: handling, offering for transport, transporting.

Freight forwarder: handling, offering for transport, transporting.

Carrier: handling, transporting.

8. What are the two (2) main responsibilities of freight forwarders regarding

dangerous goods?

Protect the supply chain from undeclared dangerous goods;

Advise the shipper/importer/exporter of the correct procedures to follow and verify that the shipper/importer/exporter has followed the regulations.

9. Under what conditions can a person legally handle, offer for transport, or

transport dangerous goods?

The person must be adequately trained and hold a training certificate or be in the presence and under the direct supervision of a person who is adequately trained and holds a training certificate.

10. In Canada, how long is a dangerous goods training certificate valid for?

Air mode: 24 months Ground mode: 36 months Ocean mode: 36 months

11. In Canada, are there any situations when a dangerous goods training certificate would expire in a shorter period than as stated in the previous question?

If the regulations applicable to the person’s duties change before the training certificate expires.

12. In Canada, who must sign a dangerous goods training certificate to make it valid?

The employer and employee.

13. Who is responsible for identification of a dangerous goods shipment?

The shipper/exporter.


2017 Page | 191

14. In what two (2) ways are dangerous goods identified?

By Proper Shipping Name and by United Nations (UN) Number or Identification (ID) Number.

15. How many Classes of dangerous goods are there, and what do they relate to?

9 Classes; they relate to the type of hazard they represent.

16. What are the nine (9) Classes/Divisions of dangerous goods?

Class 1: Explosives Class 2: Gases Class 3: Flammable liquids Class 4: Flammable solids, etc. Class 5: Oxidizers and organic peroxides Class 6: Toxic and infectious substances Class 7: Radioactive material Class 8: Corrosives Class 9: Miscellaneous

17. What are the three (3) Packing Groups, and what do they relate to?

Packing Groups I, II, and III; they relate to the degree of danger they represent.

18. What degree of danger does each Packing Group represent?

Packing Group I: high danger Packing Group II: medium danger Packing Group III: low danger

19. Other than the diamond-shaped hazard labels, what other labels/marks are there for the transportation of dangerous goods by air?

Magnetized materials;

Cryogenic liquids;

Cargo aircraft only;

Package orientation;

Keep away from heat;

Lithium battery;

Environmentally hazardous substances mark;

Limited quantities mark.


2017 Page | 192

20. Other than the diamond-shaped hazard labels, what other labels/marks/signs/placards are there for the transportation of dangerous goods by ocean?

Elevated temperature;

Marine pollutant;

Fumigation warning;

Danger is only used on trucks.

21. What are the four (4) types of documents that may be used for dangerous

goods shipments?

IATA Shipper’s Declaration for Dangerous Goods;

Bill of lading;

Multimodal Dangerous Goods Form; and

FIATA Shipper’s Declaration for the Transport of Dangerous Goods.

22. Who is responsible to complete the above documents?

The shipper/exporter.

23. In Canada, what additional two (2) pieces of information must be indicated on the

transport document for dangerous goods?

24 hour number (for emergencies); and

Emergency Response Assistance Plan and Number (if applicable).

24. What are the five (5) BASIC steps to follow during a dangerous goods

emergency?

1. Do not come in contact with any spilled or leaking material. 2. Isolate the package. 3. Notify your immediate supervisor or manager. 4. Notify the appropriate emergency services and CANUTEC. 5. Report the accident or incident to Transport Canada.

25. Who/what is CANUTEC?

The Canadian Transport Emergency Centre. Part of Transport Canada, and

will assist emergency response personnel in dealing with dangerous

goods emergencies.


2017 Page | 193

26. How do you contact CANUTEC during a dangerous goods emergency?

613-996-6666 (collect) OR *666 (cell phone).

27. What two (2) reports may you have to make to Transport Canada regarding a

dangerous goods occurrence?

1. An immediate report. 2. A written report within 30 days.

28. If found guilty of an offence under the TDGR, what punishment could be levied?

Up to CAN $50,000.00 for the first offence;

Up to CAN $100,000.00 for each subsequent offence;

Up to 2 years imprisonment.


2017 Page | 194

Exercises 6.3 (Cargo Security) (Answer)

1. i)

Possible solutions:

Parts from Singapore manufacturer, freight forwarder, trucks, steamship lines, truck to Shenzhen assembly facility;

Parts from Taiwan manufacturer, freight forwarder, trucks, steamship

lines, truck to Shenzhen assembly facility;

Parts from U.S. manufacturer, freight forwarder, trucks, steamship lines, truck to Shenzhen assembly facility;

Finished iPhones from Shenzhen assembly facility, freight forwarder, trucks, steamship lines, trucks to Canadian distribution centre; and

Finished iPhones from Canadian distribution centre to Future Shop store.

ii) Possible solutions:

Any time the iPhone is in assembly or packing it is vulnerable; and

Any time the iPhone is being transferred between parties, it is vulnerable.

iii)

Possible solutions:

U.S. – Container Security Initiative (CSI), Automated Manifest System (AMS), Customs Trade Partnership Against Terrorism (C-TPAT), TSA Air Cargo Security (if applicable); and

Canada – Advance Commercial Information (ACI), Partners In Protection (PIP), Air Cargo Security (ACS) Program (if applicable).


2017 Page | 195

Exercises 6.4 (Dangerous Goods) (Answer)

1.

a) What details can you provide about UN1090?

United Nations Number UN1090;

Proper Shipping Name is Acetone;

It is a Class 3, Flammable liquid;

It requires a Flammable liquid hazard label;

It is a Packing Group II;

EQ code is E2;

As a limited quantity shipment on a passenger and cargo aircraft, the shipper must use Packing Instruction Y341, with a maximum of 1L per package;

As a shipment on a passenger and cargo aircraft, the shipper must use Packing Instruction 353, with a maximum of 5 L per package;

As a shipment on a cargo aircraft only, the shipper must use Packing Instruction 364, with a maximum of 60 L per package;

There are no Special Provisions; and

The Emergency Response Guide Code is 3H.

b) What details can you provide about Acetylene silver nitrate?

It is forbidden by air.

2.

a) What details can you provide about UN1219?


Proper Shipping Name is Isopropanol (or Isopropyl alcohol);



There are no Special Provisions;

In limited quantities, the maximum of 1 L per package;


2017 Page | 196

For packings (smaller packages), shipper must use Packing Instruction P001, with no provision; and

For intermediate bulk containers (large containers), the shipper must use Packing Instruction IBC02, with no provisions.

b) What details can you provide about UN1463?


Proper Shipping Name is Chromium trioxide anhydrous;


It has Subsidiary Risks of 6.1, Toxic, and 8, Corrosive;


There are no Special Provisions;

In limited quantities, the maximum of 1 kg per package;

For packagings (smaller packages), shipper must use Packing Instruction P002, with a Provision of PP31; and

For intermediate bulk containers (large containers), the shipper must use Packing Instruction IBC08, with a Provision of B2/B4.


2017 Page | 197

IATA Dangerous Goods Regulations

Passenger and Cargo Aircraft

Cargo Aircraft Only

Ltd Qty

UN/ ID no.

A

Proper Shipping Name/Description

B

Class or

Div. (Sub Risk)

C

Hazard Label(s)

D

PG

E

EQ see 2.7

F

Pkg Inst

G

Max Net Qty/Pkg

H

Pkg Inst

I

Max Net Qty/Pkg

J

Pkg Inst

K

Max Net Qty/Pkg

L

S.P. see 4.4

M

ERG Code

N

1090 Acetone 3 Flam. liquid II E2 Y341 1 L 353 5 L 364 60 L 3H

IMO Dangerous Goods Code

Packing IBC

UN No.

(1)

Proper Shipping Name (PSN)

(2)

Class or

division

(3)

Subsidiary risk(s)

(4)

Packing group

(5)

Special provisions

(6)

Limited quantities

(7)

Instruc- tions

(8)

Provisions

(9)

Instruc- tions

(10)

Provisions

(11)

1219 ISOPROPANOL (ISOPROPYL ALCOHOL) 3 - II - 1 l P001 - IBC02 -

1463 CHROMIUM TRIOXIDE, ANHYDROUS 5.1 6.1/8

II - 1 kg P002 PP31 IBC08 B2/B4


2017 Page | 198

Questions Costing and Quoting

2017 Page | 199


1. What basic knowledge should you have prior to quoting a customer?

2. What factors influence the price quoted?

3. Freight forwarders set their rates based on tariffs obtained from carriers. What

should a freight forwarder look at when quoting these tariff rates?

4. Why is it important to encourage the sharing of information throughout the

different departments in a freight forwarding company?

5. Apart from the obvious charges included in the freight costs, what should be

considered when quoting a customer?

6. When presenting alternative routing to a client, what are some considerations

one has to keep in mind?

7. Why is consolidation so important to a freight forwarder?

8. What is the factor against which the freight rate is calculated for different modes

of transport?

9. What are the typical weight ratios for air and ocean?

10. What are the standard rules for “rounding off” freight volumes?

11. When weighing and measuring cargo, the carriers make allowances for certain

weights and projections. Name at least two allowances.

12. Name areas in which a freight forwarder increases their revenue.

13. How is profit calculated on a revenue tonne?

14. To avoid a “bidding war” with a client, what are some things a freight forwarder

can do?

15. What is a break-even point when calculating profit?

16. Name some service revenue streams generated by a freight forwarder.


2017 Page | 200


1. A carrier quotes you a rate of US $60.00 per revenue ton. A crate of parts

weighs 850 kg and measures 1.3 m L x 1.2 m W x 0.70 m H. What will be the ocean freight charged by the carrier?

2. You have 4 slabs of granite to ship. Each is strapped to a pallet. The shipping dimensions of each pallet are 42 in x 48 in x 18 in, and the shipping weight of each pallet is 710 kg. The carrier has given you a rate of US $75.00 per revenue ton. How much will you pay the carrier?

3. You have a weekly consolidation service Hong Kong – Vancouver, with direct costs as follows: Ocean freight: US $1,650.00/40-ft standard container Container loading in Hong Kong: US $8.00 per revenue ton Vancouver unloading: CAN $10.50 per revenue ton Exchange rate is US $1.00 = CAN $1.02 From past experience your marketing department has determined that you need to load 50 m3 of cargo into a 40-ft standard container, in order to quote your clients an all-inclusive rate of US $58.00 per revenue ton.

As we are not given any weights, we will have to base all our calculations on the measure or volume of the freight, in other words, the m3.

a) Last week you only loaded 40 m3 in your container. What was your profit or loss? Show your calculation.

b) This week you loaded 60 m3 in the container. What is your profit or loss? Show your calculation.


2017 Page | 201

4. For a consolidation service from Montreal to Hamburg your costs are:

Ocean freight: US $1,385.00/40-ft standard container Container loading in Montreal: US $8.50/revenue ton De-stuffing in Hamburg: US $9.50/revenue ton Rate of exchange: US $1.00 = CAN $1.02 Base your answer on the fact that sales and marketing has declared when loading 50 m3 you can quote CAN $80.00 per revenue ton.

a) This week you are loading 48 m3 in the container. What is the profit/loss?

b) If you have 60 m3 in the container, what is the profit/loss?


2017 Page | 202


1. What is the most important purpose of a quotation?

2. What information should a quotation contain?

3. Once you have presented a quotation to a client, what is the most important

thing to remember to do?

4. Each quotation should have on it one or more provisos. What is a “proviso”? State 4 or more examples of a “proviso”.

5. What system should you employ to ensure that you invoice the client as per quotation?


2017 Page | 203

Exercises 7.4 (Air Export) (Question)

Your customer, Canadian Manufacturing Inc., will be sending barbeque accessories (non-hazardous) to a new customer in Paris, France. The Purchasing Manager, Mr. John Smith, has requested an air export rate for the following: Commodity: barbeque accessories. Dimensions: 4 pieces, 70 in L x 100 in W x 5 in H each piece. Weight: 100 kg each piece. Terms of delivery: CPT CDG airport Paris France, Incoterms® 2010. Quote totals in Canadian Dollars Your pricing desk provides the following buy rate. Your suggested sell rate is plus US $0.25 on the air freight per kilo rate.

Note: for all exercises, use the following information:

Make up the quote number;

All rates are quoted on December 31, 2016 and the validity is to January 31, 2017; and

Use the following contact information.

Canadian Manufacturing Inc. Tel. No.: (123) 123-1111 Fax No.: (123) 123-1111 e-mail: [email protected]

CIFFA Freight Forwarder 1234 Mississauga Rd. Mississauga, ON, A1B 2C3 Tel. No.: (123) 456-7890 Fax No.: (123) 456-7890 Cell. No.: (416) 123-4567 e-mail: [email protected]

When presenting a quotation, always show a detailed breakdown. Fluctuations in fuel and currency will directly affect the calculation which may cause issues in the final calculation for a customer.

mailto:[email protected]


2017 Page | 204

Buy rate:

CHARGES CURRENCY MINIMUM +100 KG +300 KG

Air freight CAD $4.50/kg $4.15/kg

Fuel CAD $0.15/kg $0.15/kg

Security CAD $0.08/kg $0.08/kg

CANADIAN LOCAL CHARGES

Handling CAD $45.00 per shipment

B13A preparation $17.50 per shipment

NavCan fee $7.00 $0.07/kg

Pick up fee $50.00 $0.20/kg

Terminal handling charge $10.00 $0.04/kg

Prepare the following:

a) A cover letter/e-mail explaining your quote.

b) A quotation.

c) The total cost for the above shipment. a)


2017 Page | 205

b) To: From: Attn:

Fax:

Phone:

Email:

Quote No.:

Quote Date:

AIR EXPORT RATE QUOTATION

Via: Mode:

From: To:

Destinations Curr. Min. +45 kg +100 kg +300 kg +500 kg +1,000 kg Fuel Security

Canadian Local Charges: Rate Validity: Transit time: Insurance: Remarks 1.

Rates are subject to change with or without notice

2.

Origin charges are to the account of the shipper

3.

Weight/volume ratio : 6,000 cm3 or 366 in3 = 1 kg

4.

Rates are subject to space and equipment availability

5.

Rates do not include insurance, customs clearance, duties or taxes

Signature:

All business is accepted by Canadian International Freight Forwarders and its affiliates subject to the Standard Trading Conditions of the Canadian International Freight Forwarders Association Inc. dated June 16, 2016 (and any amendments thereto) which define and limit the obligations and liabilities of the freight forwarder. In engaging the services of Canadian International Freight Forwarders and/or its affiliates, the customer accepts and agrees to be bound by these conditions. Copies of the conditions can be obtained on request from Canadian International Freight Forwarders or from the Secretary, Canadian International Freight Forwarders Association Inc.


2017 Page | 206

c) TOTALS IN CANADIAN DOLLARS


2017 Page | 207

Exercises 7.5 (Ocean Export) (Question)

Your customer, Canadian Manufacturing Inc., will be sending barbeque accessories (non-hazardous) to a new customer in Basel, Switzerland. The Purchasing Manager, Mr. John Smith, has requested an ocean export rate for the following: Commodity: barbeque accessories. Dimensions: 20 pieces, 70 in L x 100 in W x 5 in H each piece. Weight: 100 kg each piece. Terms of delivery: CPT CFS Basel Switzerland, Incoterms® 2010. Your pricing desk provides the following buy rate. Your suggested sell rate is plus US $25.00 on the per cbm ocean freight rate. Quote totals in Canadian Dollars. Exchange rate: CHF (Swiss Franc) 1.00 = CAN $1.02 US $1.00 = CAN $1.02 Buy rate:

CHARGES CURRENCY MINIMUM LCL

Ocean freight USD $125.00 $125.00/cbm

FRC (fuel recovery charge)

USD $17.00 $17.00/cbm

CAF USD $5.00 $5.00/cbm

ORIGIN LOCAL CHARGES

ACI CAD $30.00 per shipment

Handling charge CAD $60.00 per shipment

Export Declaration fee CAD $17.50 per shipment

Inland pick up CAD $150.00 based on the shipment request

DESTINATION LOCAL CHARGES

Handling CHF 50.00 per shipment

Terminal handling CHF 10.00/cbm or minimum CHF 20.00

Customs clearance CHF 75.00 flat fee

Delivery CHF 150.00 based on the shipment request

Prepare the following: a) A cover letter/e-mail explaining your quote. b) A quotation. c) The total cost for the above-mentioned shipment.


2017 Page | 208

a)


2017 Page | 209

b) and c)

TOTALS IN CANADIAN DOLLARS


2017 Page | 210

To: From: Attn:

Fax:

Phone:

Email:

Quote No.:

Quote Date:

OCEAN EXPORT RATE QUOTATION

Via: Mode:

Origin: Destination:

Commodity: Charges

Currency Minimum LCL 20’ 40’ 40’ HC 45’ HC Reefer

Rates are subject to the following: Origin Local Charges: Destination Local Charges: Insurance: Validity: Transit Time: Provisos: 1.


2.

Rates are subject to change of GRI, PSS, BAF & CAF as per steamship lines or the industry

3.

Rates are subject to space & equipment availability

4.

Rates are inclusive of current GRI & PSS

5.

For LCL, 1 CBM = 1000 kgs, Minimum chargeable is 1 CBM

6.


Signature:



2017 Page | 211

Exercises 7.6 (Air Import) (Question)

Your customer, Canadian Manufacturing Inc., would like samples imported from a new supplier in Hong Kong via air freight. The Purchasing Manager, Mr. John Smith, is requesting air freight rates. This is the information he provides: Chargeable weights: 550 kg and 1,000 kg.

Commodity: barbeque parts (non-hazardous).

Terms of sale: FCA air carrier Hong Kong, China to Door Toronto GTA

(delivery, handling in Canada to be paid for by Canadian Manufacturing Inc. Duties and taxes to be determined once the orders are secured).

Your pricing desk provides the following buy rates and requests you add US $0.25 to the air freight rate.

Mr. John Smith wants the quotation all in USD. Exchange rate: US $1.00 = CAN $1.00

Buy rate:

CHARGES CURRENCY 500 KG 1,000 KG

Air freight USD $4.75/kg $3.50/kg

Fuel USD $0.20/kg $0.20/kg

Security USD $0.05/kg $0.05/kg

ORIGIN CHARGES

Pick up fee USD $0.10/kg; min. $50.00

$0.10/kg; min. $50.00

Handling USD $45.00 per shipment

$45.00 per shipment

Terminal handling charges USD $0.04/kg; min. $10.00

$0.04/kg; min. $10.00

DESTINATION CHARGES

Handling CAD $45.00 per shipment

$45.00 per shipment

Terminal handling CAD $0.08/kg; min. $45.00

$0.08/kg; min. $45.00

NavCan fee CAD $0.07/kg; min. $7.00

$0.07/kg; min. $7.00

Delivery CAD $0.30/kg; min. $50.00

$0.30/kg; min. $50.00


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Prepare the following: a) A cover letter/e-mail explaining your quote.

b) A quotation.

c) The calculations for totals for each weight break. a)


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b) To: From: Attn:

Fax:

Phone:

Email:

Quote No.:

Quote Date:

AIR IMPORT RATE QUOTATION

Via: Mode:

From: To:


Origin Charges: Rate Validity: Transit time: Insurance: Remarks 1.


2.


3.


4.


5.


Signature:



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c)

TOTALS IN U.S. DOLLARS 550 kg

1,000 kg


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Exercises 7.7 (Ocean Import) (Question)

Your customer, Canadian Manufacturing Inc., has found a new supplier in Hong Kong. For landed cost purposes the Purchasing Manager (Mr. John Smith) is requesting container rates on a FCA Ocean Carrier Container Yard Hong Kong, China basis for full container loads to Door Mississauga. The following is the information he provides: Total volume of containers: he has no idea as they are in the initial stages of

negotiation with their supplier.

Commodity: barbeque parts (non-hazardous).

Equipment: type: 20-ft std., 40-ft std., 40-ft HC.

Terms of sale: FCA Ocean Carrier Container Yard Hong Kong, China (delivery, handling in Canada to be paid for by Canadian Manufacturing Inc. Duties and taxes to be determined once the orders are secured).

Your pricing desk is unable to negotiate competitive pricing and are awaiting information pertaining to the total anticipated volume. Mr. John Smith wants the quotation all in USD. Exchange rate: US $1.00 = CAD $1.00 Sell rate: suggested sell rate is US $50.00 on the ocean freight

for a 20-ft std. and US $100.00 on the ocean freight for a 40-ft std. and 40-ft HC.

Buy rate:

CHARGES CURRENCY 20 FT 40 FT 40 FT HC

Ocean freight USD $2,000.00 $2,400.00 $2,550.00

FCR (fuel recovery charge)

USD $250.00 $330.00 $330.00

CAF (currency adjustment factor)

USD Included Included Included

Carbon tax USD $4.50 $9.00 $9.00

CANADIAN LOCAL CHARGES

Handling CAD CAN $60.00 per shipment

Terminal handling CAD Included

Delivery GTA CAD CAN $375.00 per container


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Prepare the following: a) A cover letter/e-mail explaining your quote.

b) A quotation.

c) The calculation for totals for each container type in USD.

a)


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b)

To: From: Attn:

Fax:

Phone:

Email:

Quote No.:

Quote Date:

OCEAN IMPORT RATE QUOTATION

Via: Mode:

Origin: Destination:

Commodity: Charges


Canadian Local Charges: Insurance: Validity: Transit time: Provisos: 1.


2.


3.


4.


5.


6.


Signature:

All business is accepted by Canadian International Freight Forwarders and its affiliates subject to the Standard Trading Conditions of the Canadian International Freight Forwarders Association Inc. dated June 16, 2016 (and any amendments thereto) which define and limit the obligations and liabilities of the freight forwarder. In engaging the services of Canadian International Freight Forwarders and/or its affiliates, the customer accepts and agrees to

be bound by these conditions. Copies of the conditions can be obtained on request from Canadian International Freight Forwarders or from the Secretary, Canadian International Freight Forwarders Association Inc.


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c)

TOTALS IN U.S. DOLLARS 20-ft STD

40-ft STD

40-ft HC

Answers Costing and Quoting

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1. What basic knowledge should you have prior to quoting a customer?

One should know how to calculate the chargeable weights for air, ocean and land transportation. A firm understanding of Incoterms is a necessity as the responsible parties (buyer/seller) are clearly defined.

2. What factors influence the price quoted?

Routing; value of the goods; packaging; volume; contracts; weight; dimensions; negotiating power with the carriers; credit.

3. Freight forwarders set their rates based on tariffs obtained from carriers. What

should a freight forwarder look at when quoting these tariff rates?

Be aware of the fact that temporary supply and demand issues can significantly influence the carrier's price quoted (e.g., peak season surcharges).

4. Why is it important to encourage the sharing of information throughout the

different departments in a freight forwarding company?

To gain a better understanding of the clients’ needs. You may only be providing the customer with one service and this is an opportunity to gain more business.

5. Apart from the obvious charges included in the freight costs, what should be

considered when quoting a customer?

The credit terms (freight forwarders are not banks) and time (remember the amount of time spent faxing, e-mailing and on telephone calls all cost money).


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6. When presenting alternative routing to a client, what are some considerations

one has to keep in mind?

Currency fluctuation; frequency of the carriers; hidden costs that are included by carriers; the customer’s requirements (sometimes the time sensitivity of cargo outweighs the cost).

7. Why is consolidation so important to a freight forwarder?

To obtain the benefit of bulk freight rates from the carrier; or for the forwarder's own convenience when he is required to forward a number of smaller shipments to the same destination".

8. What is the factor against which the freight rate is calculated for different modes

of transport?

The gross weight against the total volume, whichever is greater.

9. What are the typical weight ratios for air and ocean?

1 m3 or 1,000 kg ocean (always check with the carrier); and

6,000 cm3 or 1 kg air (always check with the carrier).

10. What are the standard rules for “rounding off” freight volumes?

a) Where parts of a centimetre occur, such parts below 0.5 cm are to be ignored, and those of 0.5 cm and over are to be rounded up to the next full centimetre.

b) When calculating cubes of individual packages, the calculation should be taken to six places of decimals but then rounded off at the third decimal for a single package.

c) For multiple packages of like dimensions, the cube on one package to six decimals is to be multiplied by the number of packages and then the total cube rounded off to three decimal places.


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11. When weighing and measuring cargo, the carriers make allowances for certain weights and projections. Name at least two allowances.

Lifting aids, e.g., fitted hooks, lug eyes and rings, bumpers and exhaust pipes on unpacked motor vehicles.

12. Name areas in which a freight forwarder increases their revenue.

Freight charges (buying at wholesale and selling at retail); stuffing; de-stuffing; local cartage; packaging; marine insurance; warehousing; customs brokerage, etc.

13. How is profit calculated on a revenue tonne?

By subtracting costs from revenue.

14. To avoid a “bidding war” with a client, what are some things a freight forwarder can do?

One way to avoid such a predicament is to "stick to your guns”. Try to sell the service aspect rather than to participate in eroding rate levels. Another way is to look for a better mix of cargo in order to maximize the load factor.

15. What is a break-even point when calculating profit?

Your break-even point is the amount of revenue tons you must load before making a profit.

16. Name some service revenue streams generated by a freight forwarder.

Document preparation; insurance; handling fees; consulting; and special requests by a customer, such as labelling, etc.


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1. A carrier quotes you a rate of US $60.00 per revenue ton. A crate of parts

weighs 850 kg and measures 1.3 m L x 1.2 m W x 0.70 m H. What will be the ocean freight charged by the carrier?

Rate: US $60.00/m3/1,000 kg. Volume: 1.3 x 1.2 x 0.7 = 1.092 m3 Weight: 850 kg. Based on volume: Charge = US $60.00 x 1.092 m3 = US $65.52 Based on weight: Charge = US $60.00 x 0.850 = US $51.00 Charge will be based on volume = US $65.52

2. You have 4 slabs of granite to ship. Each is strapped to a pallet. The shipping dimensions of each pallet are 42 in x 48 in x 18 in, and the shipping weight of each pallet is 710 kg. The carrier has given you a rate of US $75.00 per revenue ton. How much will you pay the carrier?

Rate: US $75.00/m3/1,000 kg. Based on volume: Volume of 1 pallet = [(42 x 48 x 18)/1728] : 35.3147 = 0.594653 m3 Total volume = 0.594653 m3 x 4 pallets = 2.378612 = 2.379 m3 Charge = US $75.00 x 2.379 m3 = US $178.50

Based on weight: 710 kg x 4 pallets = 2,840 kg/1,000 = 2.840 x US $75.00 = US $213.00 Charge = US $75.00 x 2.840 = US $213.00 Charge will be based on weight = US $213.00

3. You have a weekly consolidation service Hong Kong – Vancouver, with direct costs as follows: Ocean freight: US $1,650.00/40-ft standard container Container loading in Hong Kong: US $8.00 per revenue ton Vancouver unloading: CAN $10.50 per revenue ton Exchange rate is US $1.00 = CAN $1.02


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From past experience your marketing department has determined that you need to load 50 m3 of cargo into a 40-ft standard container, in order to quote your clients an all-inclusive rate of US $58.00 per revenue ton.

As we are not given any weights we will have to base all our calculations on the measure or volume of the freight. In other words, the m3.

a) Last week you only loaded 40 m3 in your container. What was your profit or loss? Show your calculation.

Total revenue = total volume loaded x freight rate = 40 m3 x US $58.00/m3 = US $2,320.00 “A” Total costs = ocean freight costs + loading costs + unloading costs Ocean freight = US $1,650.00 Loading costs = 40 m3 x US $8.00/m3 = US $320.00 Unloading costs = 40 m3 x CAN $10.50/m3 = CAN $420.00 = USD $411.77 Total costs = US $1,650.00 + US $320.00 + 411.77 = US $2,381.77 “B” Total profit = total revenue “A” – total costs “B”

= US $2,320.00 – US $2,381.77 = - US $61.77 TOTAL LOSS THIS WEEK IS - US $61.77.

c) This week you loaded 60 m3 in the container. What is your profit or loss? Show your calculation.

Total revenue = total volume loaded x freight rate = 60 m3 x US $58.00/m3 = US $3,480.00 “A” Total costs = ocean freight costs + loading costs + unloading costs Ocean freight = US $1,650.00 Loading costs = 60 m3 x US $8.00/m3 = US $480.00 Unloading costs = 60 m3 x CAN $10.50/m3 = CAN $630.00 = US $617.65 Total costs = US $1,650.00 + US $480.00 + 617.65 = US $2,747.65 “B”


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Total profit = total revenue “A” – total costs “B” = US $3,480.00 – US $2,747.65 = US $732.35

TOTAL PROFIT THIS WEEK IS US $732.35.

4. For a consolidation service from Montreal to Hamburg your costs are:

Ocean freight: US $1,385.00/40-ft standard container Container loading in Montreal: US $8.50/revenue ton De-stuffing in Hamburg: US $9.50/revenue ton Rate of exchange: US $1.00 = CAN $1.02 Base your answer on the fact that sales and marketing has declared when loading 50 m3 you can quote CAN $80.00 per revenue ton.

a) This week you are loading 48 m3 in the container. What is the profit/loss?

Total revenue = 48 m3 x CAN $80.00 = CAN $3,840.00 or US $3,764.71 Total costs Less ocean freight: US $1,385.00 Less loading (48 m3 x US $8.50) US $408.00 Less unloading (48 m3 x US $9.50) US $456.00 Total profit (revenue – costs).................. US $1,515.71 b) If you have 60 m3 in the container, what is the profit/loss? Total revenue = 60 m3 x CAN $80.00 = CAN $4,800.00 or US $4,708.88 Total costs Less ocean freight US $1,385.00 Less loading (60 m3 x US $8.50) US $510.00 Less unloading (60 m3 x US $9.50) US $570.00 Total profit (revenue – costs) US $2,240.88


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1. What is the most important purpose of a quotation?

It is an opportunity to project the image of your company, sell your company’s services and, most importantly, win new business.

2. What information should a quotation contain?

The reason for the quote; date of quotation; client’s name, to which party the quote is addressed to; origin and destination of the cargo; routing and mode of transportation; description/type of goods; the total weight, volume, pieces of the shipment; what services your quotation included; the currency used in the final figure; any provisos; validity date; whom to contact for further information or booking; signature of the person preparing the quotation.

3. Once you have presented a quotation to a client, what is the most important

thing to remember to do?

You should always follow-up with a phone call or visit.

4. Each quotation should have on it one or more provisos. What is a “proviso”? State 4 or more examples of a “proviso”.

There is many provisos that can appear on a quotation. The MOST IMPORTANT one is the proviso that references “your company’s adherence to the Standard Trading Conditions as set out by CIFFA”. Below are just a handful of provisos that may appear on a quotation.

Marine insurance not included, available upon request; all prices quoted are based on currently valid tariffs and are subject to change with or without notice; rates based on non-hazardous cargo only; rates valid for 30 days; customs duties, brokerage and taxes not included, available upon request; cargo subject to dimensional verification; any special handling or equipment requirements will be subject to additional charges; 2 hours free time to load, after which a waiting time charge will apply.

5. What system should you employ to ensure that you invoice the client as per quotation?

Open an operational file, make sure that all the details are filled in

correctly, and when in doubt ask the sales and pricing department for a

copy of the quote supplied to the client.


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Exercises 7.4 (Air Export) (Answer)

a)

CIFFA Freight Forwarder 1234 Mississauga Rd. Mississauga, On., A1B 2C3 Tel.: (123) 456-7890 Cell: (416) 123-4567 Fax: (123) 456-7890 Email: [email protected]

December 31, 2016 VIA FACSIMILE: (123) 123-1111 Canadian Manufacturing Inc. 5678 Mississauga Rd. Mississauga, On., X1B 2B3 Attention: Mr. John Smith Dear Mr. Smith, We would like to thank you for this opportunity to quote on your air export to Paris, France. Please note that we have based our final costing on the dimensions and weight that you have provided. Our quotation shows the breakdown for costing on a CPT CDG Paris, France costing. Should there be any variation in the dimensions or weight of your shipment we will prepare a revised quotation. This quotation is valid up to January 31, 2017. We would appreciate your feedback and will be more than willing to answer any questions you may have. Yours very truly, Jane Doe


2017 Page | 227

b)

To: Canadian Manufacturing Inc. From: CIFFA Freight Forwarder Attn:

Mr. John Smith (Purchasing Manager) 1234 Mississauga Rd.

Fax:

(123) 123-1111 Mississauga ON A1B 2C3

Phone:

(123) 123-1111 Tel: (123) 456-7890

Email:

[email protected] Fax: (123) 456-7890

Prepared by: CIFFA Freight Forwarder

Quote No.: AE 12345 Cell: (416) 123-4567

Quote Date:

December 31 2016 Email: [email protected]

AIR EXPORT RATE QUOTATION

Via: Air Gateway Service Mode: Air

From: Canadian Manufacturing Inc. ,Mississauga ,Ontario CPT CDG Paris, France

To: Paris, France (CDG)


Paris CAD NA NA 4.75/kg 4.40/kg NA NA 0.15/kg 0.08/kg

Canadian Local Charges: Pick-up fee: CAN $0.20/kg or minimum US $50.00 Handling: CAN $45.00 per shipment Terminal handling charges: CAN $0.04/kg or minimum US $10.00 B-13 Export Declaration: CAN $17.50 per shipment NavCan: CAN 0.07/kg or minimum $7.00 Rate Validity: January 31, 2017 Transit time: 2-4 days Airport - Airport Insurance: Available upon request Remarks 1.


2.


3.


4.


5.


Signature: Ciffa Forwarder



2017 Page | 228

c) TOTAL costing based on the following shipment: Dimensions: 4 pieces, 70 in L x 100 in W x 5 in H each piece. Weight: 100 kg each piece. Chargeable weight: 400 kg. Total charges CPT CDG airport, Paris, France

Origin pick up fee: CAN $0.20 x 400 = CAN $80.00 CAN $80.00

Origin handling fee: CAN $45.00 CAN $45.00

Origin terminal handling charges: CAN $0.04 x 400 = CAN $16.00 CAN $16.00

NavCan: CAN $0.07 x 400 = CAN $28.00 CAN $28.00

B13A Export Declaration: CAN $17.50 CAN $17.50

Air freight: CAN $4.40 x 400 CAN $1,760.00

Fuel: CAN $0.15 x 400 CAN $60.00

Security: CAN $0.08 x 400 CAN $32.00

TOTAL

CAN $2,038.50


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Exercises 7.5 (Ocean Export) (Answer)

a)


December 31, 2016 VIA FACSIMILE: (123) 123-1111 Canadian Manufacturing Inc. 5678 Mississauga Rd. Mississauga, On., X1B 2B3 Attention: Mr. John Smith Dear Mr. Smith, We would like to thank you for this opportunity to quote on your ocean export to Basel, Switzerland. Please note that we have based our final costing on the dimensions and weight that you have provided. Our quotation shows the breakdown for costing on a CPT Basel, Switzerland basis. Should there be any variation in the dimensions or weight of your shipment we will prepare a revised quotation. This quotation is valid up to January 31, 2017. We would appreciate your feedback and will be more than willing to answer any questions you may have. Yours very truly, Jane Doe

b) on the following page


2017 Page | 230

To: Canadian Manufacturing Inc. From: CIFFA Freight Forwarder Attn: Mr. John Smith (Purchasing Manager) 1234 Mississauga Rd.

Fax: (123) 123-1111 Mississauga ON A1B 2C3

Phone: (123) 123-1111 Tel: (123) 456-7890

Email: [email protected] Fax: (123) 456-7890


Quote No.: 1201001-AK (normally companies have an internal quote number) Cell: (416) 123-4567

Quote Date: December 31 2016 Email: [email protected]

OCEAN EXPORT RATE QUOTATION Via: MLB Service Mode: Ocean

Origin: Mississauga, ON, Canada Destination: Basel, Switzerland

Commodity: barbeque parts (non hazardous) Charges


Ocean Freight USD 150.00 150.00/cbm - - - _ _

FRC (fuel recovery) USD 17.00 17.00/cbm - - - _ _

CAF (currency AF) USD 5.00 5.00/cbm - - - _ _ Rates are subject to the following: Origin Local Charges: ACI CAN $30.00 per shipment Handling charge CAN $60.00 per shipment Export Declaration fee CAN $17.50 per shipment Pick up fee CAN $150.00 per shipment Destination Local Charges: Handling CHF 50.00 per shipment Terminal handling CHF 10.00/cbm or minimum CHF 20.00 Delivery CHF 150.00 based on the shipment Customs clearance CHF 75.00 flat fee Insurance: Available upon request Validity: January 31, 2017 Transit time: 25 days Provisos: 1.


2.


3.


4.


5.


6.






2017 Page | 231

c) TOTAL costing based on the following shipment: Dimensions: 20 pieces, 70 in L x 100 in W x 5 in H each piece. Weight: 100 kg each piece. Chargeable weight: 11.471 m3 Total charges CPT: CFS Basel Switzerland Exchange rate: CHF (Swiss Franc) 1.00 = CAN $1.02 US $1.00 = CAN $1.02

CHARGES

CURRENCY AMOUNT CAD

ORIGIN CHARGES

Origin pick up fee CAN $150.00 based on the shipment request

$150.00

Origin handling fee CAN $60.00 per shipment $60.00

ACI fee CAN $30.00 per shipment $30.00

B13A Export Declaration

CAN $17.50 per shipment $17.50

OCEAN FREIGHT CHARGES

Ocean freight USD $150.00 x 11.471 = $1,720.65 $1,755.06

FRC USD $17.00 x 11.471 = $195.00 $198.91

CAF USD $5.00 x 11.471 = $57.35 $58.50

DESTINATION CHARGES

Destination handling CHF 50.00 per shipment $51.00

Terminal handling CHF 10 x 11.471 = 114.71 $117.00

Delivery CHF 150.00 based on the shipment request

$153.00

Customs CHF 75.00 flat fee $76.50

TOTAL $2,667.47


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Exercises 7.6 (Air Import) (Answer)

a)


December 31, 2016 VIA FACSIMILE: (123) 123-1111 Canadian Manufacturing Inc. 5678 Mississauga Rd. Mississauga, On., X1B 2B3 Attention: Mr. John Smith Dear Mr. Smith, We would like to take this opportunity to thank you for including us in your RFQ (request for quotation). Please find attached a detailed quotation that is valid until January 31, 2017. In order to simplify the calculations we have shown each weight break separately and indicated the total USD rate. Please keep in mind that confirmation of the actual rate is based upon the weights and dimension we receive and any variation will directly affect the rate. If you have any questions or comments with respect to the above, please do not hesitate to contact us. Yours very truly, Jane Doe


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b)

To: Canadian Manufacturing Inc. From: CIFFA Freight Forwarder Attn:

Mr. John Smith (Purchasing Manager) 1234 Mississauga Rd.

Fax:

(123) 123-1111 Mississauga ON A1B 2C3

Phone:

(123) 123-1111 Tel: (123) 456-7890

Email:

[email protected] Fax: (123) 456-7890



Quote Date:

December 31 2016 Email: [email protected]

AIR IMPORT RATE QUOTATION

Via: Air Console Service Mode: Import Consolidation

From: FCA Air Carrier Yard Hong Kong To: Toronto GTA


Toronto USD N/A N/A N/A N/A $5.00/kg $3.75/kg $0.20/kg $0.05/kg

Origin Charges: Pick-up fee: US $0.10/kg or minimum US $50.00 Handling: US $45.00 per shipment Terminal handling charges: US $0.04/kg or minimum US $10.00 Destination Charges: Handling: CAN $45.00 per shipment Terminal handling: CAN $0.08/kg or minimum CAN $45.00 Navcan fee: CAN $0.07/kg or minimum CAN $7.00 Delivery: CAN $0.30/kg or minimum CAN $50.00 Rate Validity: January 31, 2017 Transit time: 3-4 days Airport - Airport Insurance: Remarks 1.


2.


3.


4.


5.





2017 Page | 234

c) 550 kg

Origin pick up fee: US $0.10 x 550 = US $55.00

Origin handling fee: US $45.00

Origin terminal handling charges: US $0.04 x 550 = US $22.00

Airfreight charges: US $5.00 x 550 = US $2,750.00

Current fuel charges: US $0.20 x 550=US $110.00

Security charge: US $0.05 x 550 = US $27.50

Destination handling: CAN $45.00

Terminal handling: CAN $45.00 min

NavCan: CAN $0.07 x 550 = CAN $38.50

Destination delivery GTA: CAN $0.30 x 550 = CAN $165.00

TOTAL: US $3,303.00

1,000 kg

Origin pick up fee: US $0.10 x 1,000 = US $100.00

Origin handling fee: US $45.00

Origin terminal handling charges: US $0.04 x 1,000 = US $40.00

Airfreight charges: US $3.75 x 1,000 = US $3,750.00

Current fuel charges: US $0.20 x 1,000 = US $200.00

Security charge: US $0.05 x 1,000 = US $50.00

Destination handling: CAN $45.00

Terminal handling: CAN $0.08 x 1,000 = CAN $80.00

NavCan: CAN $0.07 x 1,000 = CAN $70.00

Destination delivery GTA: CAN $0.30 x 1,000 = CAN $300.00

TOTAL: US $4,680.00


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Exercises 7.7 (Ocean Import) (Answer)

a)


December 31, 2016 VIA FACSIMILE: (123) 123-1111 Canadian Manufacturing Inc. 5678 Mississauga Rd. Mississauga, On., X1B 2B3 Attention: Mr. John Smith Dear Mr. Smith, We would like to take this opportunity to thank you for including us in your RFQ (request for quotation). Attached, please find a detailed quotation that is valid until January 31, 2017. In order to simplify the calculations, we have broken down each container costing and provided the USD rate. Please keep in mind that upon receipt of the information on actual dimensions and weight of you cargo we will be able to base our costing on your exact shipment. If you have any questions or comments with respect to the above, please do not hesitate to contact us. Yours very truly, Jane Doe

b) on the following page


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To: Canadian Manufacturing Inc. From: CIFFA Freight Forwarder Attn: Mr. John Smith (Purchasing Manager) 1234 Mississauga Rd.

Fax: (123) 123-1111 Mississauga ON A1B 2C3

Phone: (123) 123-1111 Tel: (123) 456-7890

Email: [email protected] Fax: (123) 456-7890



Quote Date: December 31 2016 Email: [email protected]

OCEAN IMPORT RATE QUOTATION

Via: MLB Service Mode: Multimodal

Origin: FCA Ocean Carrier Container Yard Hong Kong Destination: Mississauga Door

Commodity: Barbeque Parts (non-hazardous)

Charges


Ocean Freight USD _ _ $2,050.00 $2,500.00 $2,650.00 _ _

FRC (Fuel recovery) USD _ _ $250.00 $330.00 $330.00 _ _

CAF (currency AF) USD _ _ Included Included Included _ _

Carbon Tax USD _ _ $4.50 $9.00 $9.00 _ _

Canadian Local Charges: Handling CAN $60.00 per shipment Terminal handling Included Delivery GTA CAN $375.00 per container Insurance: Available upon request Validity: January 31, 2017 Transit time: 24 days – Port to Port with weekly frequency Provisos: 1.


2.


3.


4.


5.


6.






2017 Page | 237

20-ft STD

Ocean freight: US $2,050.00

Fuel recovery charge: US $250.00

Carbon tax: US $4.50

Handling charge: CAN $60.00

Delivery GTA: CAN $375.00

TOTAL: US $2,739.50

40-ft STD






TOTAL: US $3,274.00

40-ft HC






TOTAL: US $3,424.00


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Questions Alternative Transport Solutions

2017 Page | 239


1. What ability sets the true international freight forwarder apart from carriers and

customs brokers?

2. What is the most important action a forwarder can take in choosing the correct

transportation alternative?

3. How do you keep informed about occurrences in foreign countries, which may

require that you look for an alternative?

4. What client needs must you identify, and take into account before deciding on

transportation alternatives?

5. Name the basic elements you must take into account when working out a possible alternative?

6. Prior to offering an alternative to your client, and after assessing the information that your client has provided, what “other” important element must you take into account?

7. What occurrences may force you to look for an alternative?

8. Your 40-ft container shipment from Toronto is booked with an ocean carrier that has a rail interchange agreement with Canadian National Railway. The planned routing is to rail the container to the Port of Montreal, then by ocean to Antwerp.

One day prior to the planned loading of the container, at the seller’s warehouse, C.N.R. workers declare a strike, and walk-out, thereby halting all C.N.R. rail traffic, coast to coast.

What alternative could you offer your customer?


2017 Page | 240

9. The port of Vancouver is closed because of a strike. Name two suitable ports which are able to accommodate container vessels and should be considered as an alternative.

10. You have regular ocean shipments to Frankfurt, Germany, which you usually route through Bremerhaven, and then inland to Frankfurt. Suddenly, the shipping lines have suspended service to Bremerhaven due to severe congestion. What other ports are available as alternatives.

11. List advantages air freight has over ocean freight other than speed.

12. A customer has called and has indicated that they have a shipment to Madrid, Spain. Madrid is an inland destination. What are two ports that you can use as a gateway to Madrid?

13. What possible disadvantages are there when traffic intended for a Canadian

destination is routed through an American port?

14. When looking for an alternative for your client who thinks ocean freight

movements are too slow and air freight is too fast, what alternatives could you offer your client? Why?


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1. Is it more common to move containers from Eastern to Western Canada and vice versa by rail than by truck? Give at least two reasons why.

2. You have to move 120 cartons by air from point A to point B. Gross weight is 600 kg, volume 4.5 m3. Which of the two following alternatives would you choose? a) You can move it under the general cargo rate at CAN $4.00/kg chargeable

weight. b) You can load the cartons, at your own expense, into a ULD type LD3, for which

the cargo is CAN $2,000.00 lump sum up to 600 kg (pivot weight) and CAN $2.50/kg for each kg chargeable weight over 600 kg.

3. What are the prime guideline when assessing any alternative for a client?

4. When looking only at alternative routes and modes of transportation, what must be

your foremost concerns?

5. Because of problems of routing traffic through U.S. ports, you have decided to route a

40-ft container of consolidation freight via Vancouver. The container contains 52 m3 of freight, and weighs 11,400 kg, ex Taipei and is intended for the Toronto area. We have two choices: 1. MLB Taipei-Toronto.

All-inclusive cost: US $3,100.00 Estimated transit time: 25 days.

2. To Vancouver only, unloading in Vancouver then re-shipping by truck to

Toronto. Ocean freight to Vancouver: US $1,750.00 Transfer/reloading in Vancouver: CAN $6.50/m3 Trucking: CAN $8.00/100 lb Estimated transit time: 24-25 days Exchange rate: US $1.00 = CAN $1.30

a) What is the cost for each route? Show calculation.

b) What route would you choose? What might cause you to use the

other route instead?


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1. What should you consider when deciding transportation alternatives? Name

3.

2. You are moving 80 cartons from Montreal to London, U.K. by air. Total weight is 500 kg and total volume 5.5 m3. Which alternative would you choose to move this freight?

a) Move by air at the rate of CAN $3.50/kg chargeable weight.

b) ULD with pivot weight of 600 kg for CAN $2,200.00 and CAN $2.00/kg

for each chargeable weight over 600 kg.


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1. Name possible alternative ports for traffic going to Switzerland?

2. Your customer has called complaining that his freight must always wait until the Sunday night flight from YUL to MXP. The customer has deemed that they must have accessibility to daily flights as they are losing potential business. You have inquired as to how the cargo is packaged. You have been able to determine the following: Every shipment consists of 180 cartons, dimensions of each carton are 14 in x 12 in x 12 in and the weight of each carton is 15 lb. When the customer moves the freight, they will unitize 60 cartons onto a plastic skid, resulting in a shipment consisting of 3 skids (this is how they have been shipping the product to the USA). The dimensions of the plastic skid are 48 in x 42 in x 6 in and weighs 10 lb. You have also determined that there are daily flights utilizing an A340 aircraft, yet the Sunday flight utilizes a B767-300 Freighter. The maximum height for the lower deck pallets is 64 inches. The daily A340 has no upper-deck capacity. What would you recommend to the customer?


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1. You have to move 120 cartons of spare parts by air from Calgary to Hong Kong.

Each carton weighs 9 kg and has dimensions of 46 cm x 30 cm x 30 cm. Based on price, what is the least expensive alternative to offer your client?

a) You can move it under the General Cargo Rate at CAN $2.95/kg chargeable weight.

b) You can load the cartons, at your own expense, into a ULD-type

LD3, for which the cargo is CAN $2,000.00 lump sum up to 600 kg (pivot weight) and CAN $2.50/kg for chargeable weight over the pivot weight.


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1. You have an urgent shipment of car engine parts from Montreal to Libreville,

Gabon. The shipment consists of 5 small crates with a chargeable weight of 828 kg. You have already identified two possible alternatives. Alternative 1

Montreal – New York – Libreville (Direct freighter, Air Gabon via JFK) Freight rates: Montreal – JFK: express truck, CAN $14.50/100 lb. JFK – LBV: +500 kg - US $10.08 Alternative 2 Montreal – Paris – Libreville (Own consolidation to Paris, then your French agent’s consolidation to Libreville) Freight rates: YUL – CDG: +300 kg - CAN $3.26 CDG – LBV: +500 kg - EUR 6.83 Exchange rate: US $1.00 = CAN $1.02

EUR 1 = CAN $1.39

a) Calculate the freight charges for alternative 1.

b) Calculate the freight charges for alternative 2.

c) Based solely on freight charges, which alternative would you offer your customer?

d) You have concluded that the Montreal - New York – Libreville

alternative is actually 1 day faster in scheduled transit time, however both alternatives meet the customer’s requirements for delivery dates. What would you consider a “safer/more secure” routing?


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1. Your regular customer has approached you asking for an ocean freight rate for

10 cartons of hand tools, from Calgary to Dusseldorf, Germany. The carton dimensions are 18 in x 12 in x 12 in, and each carton weighs 6 kg. You have been able to determine the following:

a) Ocean freight: Pre-carriage: CFS Calgary – CFS Montreal: US $85.00/m3 (minimum 2 m3) Ocean freight: CFS Montreal - CFS Dusseldorf: US $165.00/m3 (minimum US $275.00) Transit time: 21 days

b) Air freight:

Terminal Calgary – Terminal Dusseldorf: minimum: CAN $120.00 - 45 kg – CAN $9.80 + 45 kg – CAN $8.08 + 100 kg – CAN $4.00 Transit time: 4 business days

Exchange rate: US $1.00 = CAN $1.02 What might you recommend to your customer?

.


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1. A re-seller of mining machinery, located in Sturgeon Falls, Ontario, calls a CIFFA Forwarder, inquiring about shipping a used Frobenius 165XL Grader, to San Antonio, Chile. The overall dimensions of the Grader are 26 ft x 8.5 ft x 7 ft, and it weighs 36,000 lb. As an astute forwarder, you ask the company to send you a schematic drawing of the Grader such that you can visualize the piece you have been asked to ship. Upon examining the drawing, you notice that the front bucket, which is removable, is 8.5 ft wide, 4 ft high and 3 ft deep. The remaining portion of the grader is only 6.5 ft wide and 7 ft in height. You have been able to determine the following:

a) Trucking Grader from Sturgeon Falls to the Port of NY/NJ CAN $6,000.00 all in.

b) Container drayage Sturgeon Falls from Toronto: CAN

$1,400.00.

c) Break bulk ocean freight NY/NJ – San Antonio: US $115.00/m3

d) Terminal charges NY/NJ to be US $6.00/2,000 lb.

e) Ocean freight CY Toronto – CY San Antonio US $3,500.00/40-ft Standard or High Cube.

Exchange rate: US $1.00 = CAN $1.02 What will you recommend/discuss with your customer? Provide monetary alternatives.


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1. Your customer has approached you informing that they have 5 skids of widgets

to move from their regular supplier in Tokyo Japan, to a manufacturing facility in Berlin, Germany. Each skid is 1.211 m3 and weighs 195 kg. Your customer is concerned about price as well as transit time. You are able to determine the following: (1) LCL Ocean Freight: CFS Tokyo – CFS Berlin (over Hamburg). Rate at

US $115.00/m3 Scheduled transit time is 28 - 30 days from sailing Tokyo.

(2) LCL Ocean Freight: CFS Tokyo – CFS Vancouver. Rate at US

$85.00/m3. Scheduled transit time is 11-12 days from sailing Tokyo. (3) Air Freight: Terminal NRT – Terminal TXL (Berlin). Rate at +100 kg –

YEN 1,472.00/kg. Scheduled transit time is 2-4 business days. (4) Air Freight: Terminal YVR – Terminal TXL. Rate at + 100 kg – CAN

$4.54/kg. Scheduled transit time is 3-5 business days. Exchange rate: US $1.00 = CAN $1.02

YEN 1.00 = 0,0122 CAD Determine the best option to offer your customer, with the given information. Keep in mind their concern about price and transit time.


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1. Your customer, Entropy Inc., in Toronto, has a large number of wankel engine

parts for a geo-thermal project in Murmansk, Russia. The company is operating under a strict time line, as these were parts that were not ready at the time of the initial shipment and the project is in jeopardy of being delayed and a penalty clause may apply. Entropy Inc. has asked for your help, and advice! Entropy Inc. has provided you with the following shipment information: 320 cartons, the dimensions of each carton are 18 in x 12 in x 12 in and each carton weighs 12 kg. Entropy Inc. is willing to unitize the cargo onto 10 pallets, with a pallet dimension of 42 in x 48 in x 54 in, with each skid weighing 394 kg (this includes the weight of the pallet). Cargo is ready to ship April 2. Cargo must arrive on site by May 22. You have been able to determine the following: Exchange rate: US $1.00 = CAN $1.02

EURO 1.00 = CAN $1.39 LCL Cargo Local cartage Toronto: CAN $2.53/100 lb Ocean Freight: CFS Toronto – CFS Helsinki: US $85.00/m3 Trucking CFS Helsinki – Door Murmansk: US $4,000.00 Sailing details: Closing Toronto every Wednesday. Scheduled sailings Halifax the following Monday. Transit time to Helsinki approximately 19 days from sailing. LCL cargo is transshipped in Gothenburg. Allow 12 days for trucking to Murmansk (inclusive of 4 days to transfer cargo).

FCL Cargo

Local container drayage Toronto: CAN $325.00 Ocean Freight: CY Toronto – CY Kotka: US $1,800.00/20 ft,

US $2,175.00/40 ft Container trucking Kotka – Murmansk: US $5,285.00


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Sailing details: Closing Toronto every Tuesday. Scheduled sailings Montreal the following Thursday. 9 days transit to Bremerhaven, must allow an additional 1 day to transfer the cargo. Weekly sailings from Bremerhaven every Friday. Transit time to Kotka approximately 6 days. Allow 8 days for container delivery to Murmansk (inclusive of 1 day to transfer cargo). Air Cargo Local cartage Toronto: CAN $2.53/100 lb Air Freight: YYZ – SVO: CAN $8.00/kg SVO – MMK: EUR 6.00/kg Flight availability: YYZ – SVO: 747 freighter every Sunday, capacity is not a problem. SVO – MMK: one flight daily, A340 service, cargo allocation 1 – LD7 pallet per flight. Allow 1 day for transfer in Moscow. Allow 1 day for delivery to door Murmansk, no Saturday or Sunday delivery available. Using the above information, what advice will you, the professional freight forwarder, offer Entropy Inc. Use the following month calendars to assist in evaluating alternatives. APRIL

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We recommend that you do this exercise after you have completed the Costing and Quoting section of the program. The following task is an excellent exercise to prepare for something you might like to call a “worst case scenario”. It is suggested to use the following guidelines: 1. Container Stowage Calculations Whenever such a need or request arises it is the stowage calculation, which should be number one on your agenda. Remember the result of a container stowage calculation determines the number/size/type of container(s) required for a given situation. The number/size/type of container(s) in turn determines the element of freight costing regardless whether any rates are supplied as part of the assignment or whether you have to obtain such rates from the appropriate carrier in a real-life situation.

Your time table Do take your time when making a container stowage calculation. Do not rush, but think carefully and proceed methodically. Remember drawings may be helpful. Once you have completed the stowage calculations for all consignments in this exercise, it is suggested that you double-check your approach, calculations and results for inherent possible mistakes. Remember the stowage calculation is so to speak the foundation of the house you are building. When the foundation is built correctly it will support the superstructure of container size and freight costing. Your next step is to proceed with the actual costing. 2. Costing a) Use of spread or working sheets

The section on costing/quoting provided you with a sample of a spreadsheet to organize your costings. Try and develop your own spreadsheet for this exercise. The point is that you must learn to prepare the appropriate kind of working sheet for each task separately and as you judge it most useful.


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The secret of success in this kind of task is an orderly, systematic, legibly written approach. The request for a clear and legibly written style is primarily for your own benefit so your own messy figures columns and notes do not confuse you. Once you have learned to master this approach, any task, no matter how complex or dissimilar in its specific detail or circumstance, would represent little problem for you.

b) Separate export spreadsheet

For this exercise you need to prepare a separate spreadsheet just for the export portion of the task. Use one page, start with the long side (11") across the “top”, create a column for both routes (Hong Kong and Rotterdam) side by side - listing for both routes all the required costing elements step by step. Write down for each step or line of your listing the exact required details of container size or volume in cubic metres, applicable rates, name of currency and rate of exchange used and then list the appropriate freight or charge per step in one uniform currency. Decide now whether to use Canadian or U.S. Dollars, then simply total the listed freights or charges in the currency chosen for a grand total in dollars. It is strongly recommended to write down the listing of items in a descending order of their natural occurrence in shipping, i.e., from point of origin step by step to point of destination. Once you have completed this export spreadsheet, you again must double check for omissions, rates, currencies and extensions. It is for your own benefit to prepare such spreadsheets legibly and in a clear transparent style. You should prepare your spreadsheets in such a way so that someone else - skilled in freight forwarding - but unfamiliar with the particular case/shipment can follow your figures and calculations easily. This would be necessary, for instance, in case you would be sick and someone else in your office has to take over your file and finish your work.

c) Separate import spreadsheet

For this exercise you need to prepare another separate spreadsheet just for the import portion of the task. For the import shipments the required suitable layout of the spreadsheet must be in a totally different format from the export shipment. This import spreadsheet should have on one page, starting again with the long side of the paper (11"), eight separate columns side by side for each of the four required Canadian destinations, i.e., four columns for Rotterdam and four columns for Hong Kong. Put these 8 columns to the right of the page leaving enough room on the left side to list the proper details of costing. Again, list the various costs in the order of occurrence as explained under 2b) for the export spreadsheet.


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3. Shipping Timetable Prepare two separate timetable working sheets. One for export, one for import. Use the calendar page provided and determine the various schedule details explained in the assignment. Again, prepare this timetable step by step by listing on the right side of the page the ports or points of transit. Then show in the middle of the page opposite the named ports or places the actual days of transit or duration of work for each segment. Then identify on the left side of the page again for each segment the actual day of the week. Make sure you allow properly for weekends, especially for transshipment work. Then you add up the number of days in the middle of the page and the total will be the total number of estimated days of transit. You must, of course, prepare one shipping schedule for each of the two routings. Transfer these total dates of transit to your spreadsheets, especially for import. Now you should have on one spreadsheet both the time and cost factors and you make the appropriate correct selection of the fastest route in accordance with the shipper's instructions. 4. Quotation In regard to this exercise, make a careful assessment in your own mind of the conditions requested by the shipper. Do not simply consider throwing out everything you do not like or items you may feel uncomfortable with. You must learn to assess:

if the required services are available; if you can arrange for these services; and if the price of the services required as covered by your quotation includes

a reasonable return or remuneration for you as freight forwarder. Remember, for most segments you must rely on your subcontractors chosen by you and/or other agents for their respective performance and their liability towards your client and/or yourself. Therefore, for you to assess the standard of quality of your subcontractor or your agents based on available information or usual experience is part of this process of preparing a quotation. You must also keep in mind you are required to earn your living as freight forwarder for your employer. You must be able to secure business under competitive conditions and still earn a reasonable dollar for your employer. When trying to decide if you can and should accept shipper’s required conditions, you must consider in your mind if you can reasonably either supply the conditions in part by yourself or if you can arrange to meet the conditions with the help of others you choose or if you can figure out a way to control the aspects the shipper requires. You do not


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necessarily have to accept every single condition. It is obviously in your favour if you can accept as many conditions as possible without undue risk. In this context it is important for you to realize that you as freight forwarder can never control the sailing time of any vessel. Therefore you should never promise any definite time/date of delivery at destination. As forwarder you supply merely a schedule of sailings with estimated times of arrival. Always add the little all-important word "about" when referring to a vessel arrival date. "Undue" is a big word. There is no business without risk and a business to be undertaken must balance your expected gross profit with your risk or exposures along with your ability to control conditions/circumstances. Now make a calculation of your expected gross profit and consider your time you would likely spend looking after this shipment. Also try to assess the money value of any risk or condition you plan to accept. Once you have these figures in front of you, then make a decision what kind of quotation you want to make. Some of the choices in style of quotation available to you would be:

a) One lump sum amount including a fee. b) Itemized costing plus a separate fee, i.e., items of costing marked up or not,

depending on your own decision. There are no rules which style is best or right. Best is what you can successfully and competitively sell to a client. Answers will differ for each personality and/or shipment. Terms and Conditions In any quotation you do or as an imprint on your letterhead, you must clearly refer to the fact that you (your employer) only works on the basis of Standard Trading Conditions, a copy of which is in your textbook. In addition, you should clearly spell out which cost items are not included and which specific conditions of the shipper you do not accept.

Outline of Quotation Before you actually set out to compose the actual letter of quotation you will find it helpful to prepare for your own guidance and clarification notes on an outline, which is another working paper containing the essential elements you must cover in headline form. Do it separately, of course, for export and import. The main points to be covered would be as follows (for both): 1. Explanation of available choices in routing. 2. Your recommendation of a route. 3. Shipping time schedule. 4. a) Actual dollar freight quote.

b) Separate insurance quote with your comments on exclusions of coverage, if any.


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5. Special points: acceptance/declining of required condition or possibly a short remark emphasizing that you would act in this business strictly as an agent. Any other general clause, which restricts or limits your quotation in any way, should be spelled out here under special conditions.


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Exercises 8.11 (Shipment Information)

The Cheap 'n' Cheerful Clothing Company in Toronto is a nationwide chain of inexpensive but fashionable clothing stores. They have four major distribution centres: Vancouver, Edmonton, Toronto and Montreal. The retail outlets’ cash registers automatically trigger shipping orders at the distribution centres. Timely deliveries are crucial to this company, which keeps inventories at a bare minimum. In an effort to stay competitive, they have decided to set up a factory on the island of Mahe in the Seychelles, where there are no taxes, plenty of cheap labour and the beaches are the best in the world. Once the plant is set up, fabric will be shipped there for cutting and sewing, and the finished product will be shipped to Canada. The Seychelle Islands are in the Indian Ocean, north of Madagascar and east of Kenya. There is a port at Victoria on Mahe Island and only two shipping lines serve this tiny island. One is West Africa Lines, which serves Europe via the Suez Canal, and the other is West Asia Lines, which serves the Far East. Both handle only 20-ft containers and break-bulk cargo on a weekly basis. Seychelle Airlines is the only airline serving the island with weekly flights to Bombay, India and Athens, Greece. Neither the air, nor ocean carriers serve North America. Access is possible only by re-loading and transshipping via Europe or Asia, through your agents. The Cheap 'n' Cheerful Clothing Co. (CCC for short), will be shipping an emergency power generator, textile machinery and a start-up supply of textiles to set up their plant. Their production manager has volunteered to move there for five years and will be shipping his personal effects as well. You are invited to make a proposal on the export movement, as well as the import traffic of finished garments. You should not work on the basis of price alone, but must consider the customer's needs as well. The following details the goods to be shipped to and from Mahe, as well as CCC's terms and conditions.


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The Cheap 'n' Cheerful Clothing Co. Toronto, Ontario

Invitation to Quote

EXPORT A) 1 crate emergency power generator

Dimensions: 21 ft long 7 ft wide 6 ft high

Gross weight: 10,000 kg CIP value: CAN $50,000.00

B) 12 boxes cutting tables (knocked down) Dimensions each: 18 ft long

7 ft wide 6 in high

Gross weight each: 100 kg CIP value: CAN $2,000.00

C) 684 cartons industrial sewing machines Dimensions each: 15 in long

12 in wide 14 in high

Gross weight each: 20 kg CIP value each: CAN $500.00

D) 1 crate personal effects to contain books, clothing, personal computer, sound equipment, TV, VCR, compact discs, video cassettes, kitchen utensils, table ware, sofa, bed, chairs.

Dimensions: 9 ft long 7 ft wide 6 ft high

Weight: 1,000 kg CIP value: CAN $25,000.00

E) 120 rolls fabric Dimensions each roll: 45 in long

12 in wide/high Weight each roll: 15 kg CIP value each roll: CAN $250.00

The above cargo is available now at CCC's warehouse in Toronto.


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Cheap 'n' Cheerful Clothing Co. Toronto, Ontario

Invitation to Quote

IMPORT F) Product: men’s and ladies' shirts

Weekly quantity: 750 dozen

Packing: 5 dozen to a carton

Dimensions each carton: 24 in long 18 in wide 24 in high

Gross weight each carton: 20 kg

CIP value each carton: CAN $300.00

Distribution: one shipment every week to either Vancouver, Edmonton,

Toronto or Montreal, as needed.

TERMS AND CONDITIONS 1) Please quote one lump sum rate in Canadian Dollars for the export shipment

Toronto/Mahe. Describe your routing. Cargo must arrive latest July 1, 2017. 2) Please quote your import rate and transit time from Port Victoria, Mahe to terminal

Vancouver, Edmonton, Toronto and Montreal in Canadian Dollars. Describe your routing. Please note that total transit time from origin to destination must be the shortest possible.

3) Please quote marine insurance and describe coverage offered. 4) If an import shipment is delayed while in your possession, you must airfreight at

your own expense. Sincerely, Jane Brown Traffic Manager, Cheap ‘n’ Cheerful Clothing Co.


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Since there is no direct service to or from Mahe, you send a message to your agents in Hong Kong and Rotterdam asking for trans-shipping costs. Following are the best rates they quote you: A) From Hong Kong to Mahe:

break-bulk: US $80.00/m3 containers: US $1,200.00/20-ft container

From Mahe to Hong Kong: break-bulk: US $70.00/m3 containers: US $1,000.00/20-ft container

Frequency of service: every Monday, Hong Kong and Mahe Transit time: 14 days

Transhipping charges including unloading and re-loading containers, terminal and handling charges: US $20.00/m3

B) From Rotterdam to Mahe:

break-bulk: US $40.00/m3 containers: US $800.00/20-ft container

From Mahe to Rotterdam:

break-bulk: US $30.00/m3 containers: US $500.00/20-ft container

Frequency of service: every Friday, Rotterdam or Mahe Transit time: 21 days

Transhipping charges including unloading and re-loading containers, terminal and handling charges: US $20.00/m3


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Following are the best intermodal ocean freight costs to/from Canada with the fastest shipping line: A) Toronto to Hong Kong: US $2,000.00/20 ft container

US $3,000.00/40-ft STD or O.T. container Frequency of sailings: every Monday Transit time: 21 days Toronto to Rotterdam: CAN $1,500.00/20 ft container

CAN $2,500.00/40-ft STD or O.T. container Frequency of Sailings: every Wednesday Transit time: 14 days

Above rates include container positioning at shipper's door.

B) Hong Kong to Vancouver: US $1,000.00/20-ft container

US $1,500.00/40-ft container

C) Hong Kong to Edmonton: US $1,500.00/20-ft container (via Vancouver) US $2,800.00/40-ft container

D) Hong Kong to Toronto: US $2,000.00/20-ft container

or Montreal:(via Vancouver) US $3,000.00/40-ft container Frequency of sailings from Hong Kong is every Wednesday Transit time to Vancouver: 14 days

Edmonton: 16 days Toronto: 21 days Montreal: 22 days

E) Rotterdam to Montreal: CAN $1,200.00/20-ft container

CAN $2,000.00/40-ft container

F) Rotterdam to Toronto: CAN $1,500.00/20-ft container (via Montreal) CAN $2,500.00/40-ft container

G) Rotterdam to Edmonton: CAN $2,000.00/20-ft container (via Montreal) CAN $3,000.00/40-ft container

H) Rotterdam to Vancouver: CAN $2,500.00/20-ft container (via Montreal) CAN $3,500.00/40-ft container

Frequency of sailings from Rotterdam is every Thursday

Transit time to: Montreal: 7 days Toronto: 9 days Edmonton: 14 days Vancouver: 17 days


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I) Marine Insurance Cost:

Institute Cargo Clauses A: CAN $0.25/$100.00 insured value.

Institute Cargo Clauses B: CAN $0.20/$100.00 insured value.

Institute Cargo Clauses C: CAN $0.15/$100.00 insured value.

IMPORTANT NOTES AND HINTS 1. Give one day for transhipping operations (unloading and reloading) in both Hong

Kong and Rotterdam. Saturday/Sunday are not working days. 2. Exchange rate: US $1.00 = CAN $1.40 3. 1 m3 = 35.3146 ft3

1,728 in3 = 1 ft3 4. Use following container inside dimensions:

Container L W H 20 ft = 232 in 90 in 90 in

40 ft = 474 in 90 in 90 in


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1. Make a container stowage calculation for items A-E and separately for item F

(import). Result should determine the container size or type required and how many containers for the export shipment, resp. import shipment. Show for each container: a) What you are intending to load, per container. b) Number of containers for each item A-F.

2. Calculate the m3 or ft3 for each item A-F.

3. Compare the cost of moving the shipments via Rotterdam and via Hong Kong.

Then compare the total transit times. Do not forget the time required to unload/re-load at the transshipment port and take into account the connection dates. Which route or combination of routes is ideal?

4. Now you are ready to make your quotation to CCC. Pay attention to all the

terms and conditions previously outlined. Do not forget to mention any of your own terms and conditions on your offer. How much profit margin have you included?

5. Which term(s) and condition should you NOT agree to? Why?

6. Assuming that during transshipping of the import shipment, your agent accidentally omits to load 1 carton into the container. At an air freight cost of US $3.00 per kilo, what is your cost exposure? Should you absorb it? Or should you bill CCC?

7. Assume that the shirt container is delayed at the transhipment port of Rotterdam or Hong Kong due to shortage of vessel space. (a) Whenever anything out of the ordinary happens, especially when you act

as an agent, what is really your first duty?


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Hint: you find a reference to the required answer in the CIFFA STCs, Article 5. You need not know clauses in the STCs, but the fundamental principle of this clause you must know and always act upon. (b) Express or calculate your liability in actual dollar terms based on the

CIFFA STCs.

8. Assuming that the shirt container is delayed at the transshipment port because you forget to send handling instructions to your agent, what is your liability to CCC under CIFFA STCs? How much does it work out to?

9. CCC needs an emergency shipment of 100 dozens shirts by air freight to their

Toronto distribution centre within a week. Your options are to airfreight via Athens or via Bombay by Seychelle Airlines. TACT rate is US $4.00/kg of chargeable weight and the route is Mahe/Athens/London/Toronto or Mahe/Bombay/Los Angeles/Toronto. Transit time is 3-4 days either way. However, you have a consolidation every three days from Hong Kong direct to Toronto. TACT rate Mahe/Bombay/Hong Kong is US $1.00/kg chargeable weight. Your cost from Hong Kong to Toronto is US $2.00/kg of chargeable weight and you can get the shipment in six days. How would you route this shipment? What will you charge CCC? What is your profit?

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1. What ability sets the true international freight forwarder apart from carriers and

customs brokers?

A true international freight forwarder has the ability to think in ALTERNATIVES. Sometimes freight forwarders are considered “architects of transportation.”

2. What is the most important action a forwarder can take in choosing the correct

transportation alternative?

It is important that the international forwarder identifies the true needs of the customer. This is achieved by asking the customer questions about their freight, past, present and future requirements and business demands.

3. How do you keep informed about occurrences in foreign countries, which may

require that you look for an alternative?

Through your foreign agent, the news media, Internet news agency or CIFFA eBulletins.

4. What client needs must you identify, and take into account before deciding on

transportation alternatives?

a) The safety and security of the cargo. b) Reasonable transportation costs. c) Scheduled delivery of the cargo at destination.

5. Name the basic elements you must take into account when working out a

possible alternative?

Mode of transport; Cost; Time sensitivity; Government restrictions; Packaging; The cargo itself; Urgency of the shipment; Value of goods; Perishability of the goods; Hazardous or non-hazardous cargo.


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6. Prior to offering an alternative to your client, and after assessing the information that your client has provided, what other important element must you take into account?

You must always take into consideration what the client is willing to pay.

7. What occurrences may force you to look for an alternative?

Labour disputes (strikes, lockouts, work slowdowns); Port congestion; Overbooked carriers; Hostile situations (war, revolution, political instability); Natural disasters; Climate.

8. Your 40-ft container shipment from Toronto is booked with an ocean carrier that

has a rail interchange agreement with Canadian National Railway. The planned routing is to rail the container to the port of Montreal, then by ocean to Antwerp.

One day prior to the planned loading of the container, at the seller’s warehouse, C.N.R. workers declare a strike, and walk out, thereby halting all C.N.R. rail traffic, coast to coast.

What alternative could you offer your customer?

Due to the close proximity of Toronto to Montreal, your best alternative would be to truck the container from Toronto to Montreal. This is generally done at an additional charge. You would first check with the ocean carrier to determine that they are willing to do this. Should they refuse to truck the container to Montreal, you may be required to use your own drayage company to perform the trucking. Either way there will be additional charges that you should discuss with your shipper and make them aware of the labour situation and how you would propose to overcome this unexpected event and additional charges. This is an example where, if the professional freight forwarder was aware of domestic events that may affect their performance, they may have opted for a carrier that has an interchange agreement with Canada’s other railway, Canadian Pacific Railway. These types of potential labour situations are quite often printed in local newspapers, as well as broadcast via CIFFA newsletters.

9. The port of Vancouver is closed because of a strike. Name two suitable ports which are able to accommodate container vessels and should be considered as an alternative.

Prince Rupert, Tacoma/Seattle or San Francisco/Oakland.


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10. You have regular ocean shipments to Frankfurt, Germany, which you usually

route through Bremerhaven, and then inland to Frankfurt. Suddenly, the shipping lines have suspended service to Bremerhaven due to severe congestion. What other ports are available as alternatives.

Antwerp, Rotterdam, Hamburg.

11. List advantages air freight has over ocean freight, other than speed.

Can move goods with less costly packaging; Perishable goods move quickly; High-value goods can have security, if arranged; Sensitive cargo can be moved with extra care; Lower insurance premium; Less chance of damage; A low inventory is possible, in some cases, depending on the

location, it may be cheaper than other modes of transportation.

12. A customer has called and has indicated that they have a shipment to Madrid, Spain. Madrid is an inland destination. What are two ports that you can use as a gateway to Madrid?

Spain has two coasts. The Atlantic to the north, the Mediterranean to the south. For example, ports that you might use might be Bilbao to the north, Valencia to the south.

13. What possible disadvantages are there when traffic intended for a Canadian

destination is routed through an American port?

There is always the risk of a U.S. Customs inspection as well as delays in transferring the cargo to the correct on-carrier.

14. When looking for an alternative for your client who thinks ocean freight movements are too slow and air freight is too fast, what alternatives could you offer your client? Why?

a) Sea – road. b) Sea – air. c) Air – road. Any combination should offer a quicker transit time than exclusively sea, however the costs will be more than sea alone and conversely, any combination will be less costly than airfreight alone.


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Exercises 8.2 (Answer) 1. Is it more common to move containers from Eastern to Western Canada and

vice versa by rail than by truck? Give at least two reasons why?

It is more common to move containers from Eastern Canada to the West Coast, and from the West Coast to Eastern Canada by rail because it is less expensive, and the transit time is generally faster.

2. You have to move 120 cartons by air from point A to point B. Gross weight is

600 kg, volume 4.5 m3. Which of the two following alternatives would you choose? a) You can move it under the general cargo rate at CAN $4.00/kg chargeable

weight. b) You can load the cartons, at your own expense, into a ULD type LD3, for

which the cargo is CAN $2,000.00 lump sum up to 600 kg (pivot weight) and CAN $2.50/kg for each kg chargeable weight over 600 kg.

Chargeable weight = 750 kg. Option a) 750 kg x CAN $4.00 = CAN $3,000.00 Option b) CAN $2,000.00 + (150 kg x CAN $2.50/kg) = CAN $2,375.00 We would choose option (b) as it is the least expensive.

3. What are the prime guideline when assessing any alternative for a client?

How the cargo is packaged; Is the cargo time sensitive or not; and What the client is willing to pay.

4. When looking only at alternative routes and modes of transportation, what must be your foremost concerns.

The transit time of the cargo.

5. a) MLB Taipei-Toronto = US $3,100.00 = CAN $4,030.00

Ocean to Vancouver, unloading in Vancouver, then trucked to Toronto. O/F US $1,750.00 CAN $2,275.00


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Transfer CAN $338.00 Trucking CAN $2,010.58

Total CAN $4,623.58

b) Based on cost alone, one would choose the MLB routing.

One might choose another route if the MLB is through a U.S. port. This route could be an all water route to Montreal and then railed or trucked to Toronto.


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1. What should you consider when deciding transportation alternatives? Name

3.

Safety of the cargo; Reasonable transportation costs; and Scheduled delivery.

2. You are moving 80 cartons from Montreal to London by air. Total weight is 500 kg and total volume 5.5 m3. Which alternative would you choose to move this freight?

a) Move at the rate of CAN $3.50/kg chargeable weight.

b) ULD with pivot weight of 600 kg for CAN $2,200.00 and CAN $2.00/kg

for chargeable weight over 600 kg.

Volume weight = 5.5 m3 x 1,000,000 = 916.7 kg = 917 kg 6,000 Volume weight is greater than the actual weight, thus charges are based on volume weight Alternative a) 917 kg x CAN $3.50 = CAN $3,209.50 Alternative b) ULD charges for first 600 kg = flat rate .................... CAN $2,200.00 Charges on next 317 kg = 317 kg x CAN $2.00 ........ CAN $634.00 Total charges ............................................................. CAN $2,834.00 All other factors being equal, you would move this cargo using the ULD alternative.


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1. As Switzerland is landlocked, any of the major Northern European ports

would provide a suitable alternative to service this country. Antwerp, Hamburg, Bremerhaven, Rotterdam, Le Havre, and possibly even some Mediterranean ports, such as Fos, Marseille, and Genoa.

2. First, determine what the customer is presently actually shipping. Each shipment is 3 identical skids. Let’s examine one skid. They have 60 cartons loaded onto a plastic pallet. How are these 60 cartons loaded onto the plastic pallet? There are 5 layers of 12 cartons. Each carton has a height of 12 in so the height of the cargo is 60 in (which should fit into a lower deck pallet) but we must include the height of the skid, which is 6 in, thus the unitized skid dimensions become 48 in x 42 in x 66 in. The present manner, in which the customer is unitizing their freight, can only be handled with upper deck pallets. The astute forwarder might recommend that they eliminate the top layer of each unitized skid, create an extra skid, such that their cargo can load into a lower deck pallet, which has daily capacity.


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1. Actual weight = 120 x 9 kg = 1,080 kg.

Volume weight = 46 x 30 x 30 x 120 cartons = 828 kg. 6000 Charges based on actual weight Alternative a) 1,080 kg x CAN $2.95 = CAN $3,186.00 Alternative b) CAN $2,000.00 + (480 kg x CAN $2.50/kg) = CAN $3,200.00 We would offer alternative a) as it is the least expensive.


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Exercises 8.6 (Answers)

1. a) Calculate the freight charges for alternative 1.

Trucking charges Montreal – JFK = 1,825 lb x CAN $14.50 = CAN$264.63 100 lb Air freight JFK – LBV = 828 kg x US $10.08 = US $8,346.24 (CAN $8,513.17) Total charges alternative 1 = CAN $264.63 + CAN $8,513.17 = CAN $8,777.80

b) Calculate the freight charges for alternative 2. Air freight YUL – CDG = 828 kg x CAN $3.26 = CAN $2,699.28 Air freight CDG – LBV = 828 kg x EUR 6.83 = EUR 5,655.24

(CAN $7,860.78) Total charges alternative 2 = CAN $2,699.28 + CAN $7,860.78

= CAN $10,560.06

c) Based solely on freight charges, which alternative would you offer your customer?

Based solely on freight charges Option #1 is clearly the least expensive.

d) You have concluded that the Montreal - New York – Libreville alternative is actually 1 day faster in scheduled transit time, however both alternatives meet the customer’s requirements for delivery dates. What would you consider a “safer”/more “secure” routing?

Even though alternative 1 is the least expensive, it offers the forwarder little or no control at the cargo transfer point in New York. Alternative 2 offers the forwarder control at the point of origin and the transfer point in Paris. By utilizing their Paris agent, the forwarder can monitor and can easier communicate with their partner in regards to the smooth and continuous movement of their cargo.


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1. First determine shipment total volumes and weights:

Total volume = 0.425 m3 Total weight = 60 kg Ocean Freight Pre-carriage = 0.425 m3 x US $85.00 = US $36.13 BUT THE MINIMUM CHARGE IS FOR 2 m3. Pre-carriage = US $85.00 x 2 = US $170.00 Ocean freight = 0.425 m3 x US $165.00 = US $70.13 BUT THE MINIMUM CHARGE IS US $275.00 Total ocean freight charges = US $170.00 + US $275.00

= US $445.00 (CAN $453.90) Air Freight Actual weight = 60 kg, volume weight = 0.425 m3 x 1,000,000 = 71 kg 6,000 Air freight = 71 kg x CAN $8.08 = CAN $573.68 At this point, you could offer to your client that for about an extra CAN $120.00 they can get their freight to the destination in 4 business days as opposed to 21 days. This will no doubt be attractive to your client, however, by declaring a higher chargeable weight of 100 kg to the airline you are able to offer your client an air freight rate that will be less than the ocean freight rate. Air freight = 100 kg x CAN $4.00 = CAN $400.00 This is an example of a minimum ocean shipment where it may be less expensive to move the cargo by air freight. The client originally asked for ocean freight, yet the forwarder was able to offer an alternative with a faster transit time at a lower rate.


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1. Determine the charges of moving the Grader as 1 break bulk piece.

The total volume of the Grader = 26 ft x 8.5 ft x 7 ft = 1,547 ft3 = 43.806 m3 Trucking charges Sturgeon Falls – Port NY/NJ = CAN $6,000.00 Terminal charges NY/NJ = US $6.00 x 36,000 lb 2,000 lb

= US $108.00 (CAN $110.16) Ocean freight NY/NJ – San Antonio = US $115.00 x 43.806 m3

= US $5,037.69 (CAN $5,138.44) Total ocean charges break bulk = CAN $6,000.00 + 110.16 + 5,138.44

= CAN $11,248.60 As you are an astute forwarder, you have reviewed the drawings provided, and realize that by removing the front bucket, the Frobenius 165XL Grader can be loaded into a 40-ft standard container. You should now determine an alternative to offer your customer, and the associated cost. Container placement Sturgeon Falls = CAN $1,400.00 Ocean freight CY Toronto – CY San Antonio = US $3,500.00

(CAN $3,570.00) Total 40 ft container freight Door Sturgeon Falls – CY San Antonio = CAN $4,970.00/40 ft Now we have monetary ALTERNATIVES to offer our client. We can offer our client that by removing the front bucket, the Grader can load into a 1 x 40-ft container, and they could save approximately CAN $6,278.00 in shipping charges. This is an example where one must examine the additional costs of dismantling and re-assembling a machine against the freight savings. These costs may well be greater than the freight savings offered. The astute forwarder will offer these alternatives to their client, and let the client, who ultimately pays the freight, decide.


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1. First determine totals for each mode of transport:

Ocean freight: Total volume = 1.211 m3 x 5 skids = 6.055 m3 Total weight = 195 kg x 5 skids = 975 kg Air freight: Total weight = 975 kg Volume weight = 6.055 x 1,000,000 = 1,009.5 kg 6,000 All air freight charges will be based on the volume weight. Determine the freight charges for each alternative determined.

a) Ocean freight: CFS Tokyo – CFS Berlin Ocean Freight = US $115.00 x 6.055 m3 = US $696.33 (CAN

$710.26)

b) Ocean freight: CFS Tokyo – CFS Vancouver Ocean Freight = US $85.00 x 6.055 m3 = US $514.68

(CAN $524.97)

c) Air freight: NRT - TXL Air freight = YEN 1,472.00 x 1,009.5 kg = YEN 1,485,984.00

(CAN $18,129.00)

d) Air freight: YVR - TXL Air freight = CAN $4,54 x 1,009.5 kg = CAN $4,583.13

There are now 3 ALTERNATIVES we can offer the client. 1. All ocean: CAN $710.26, transit time approx. 29 days. 2. All air: CAN $18,129.00, transit time approx. 3 days. 3. Sea-air combination:

(ocean freight Tokyo – Vancouver) + (air freight YVR – TXL) = CAN $524.97 + CAN $4,583.13 = CAN $5,108.10, Transit time approx. 16 days.


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As the client was concerned about price and transit time we are able to present to the client a SEA-AIR combination, where the transit time is half of a sea-only transit, at a price that is about 3 times less than an air-only transit. It is always best to present all these alternatives to the client and let them decide as to how they wish to proceed. Recall, we must always be aware of what the client is willing to pay.


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1. First determine the anticipated time lines for our 3 ALTERNATIVES based

on the cargo being ready for pick-up on April 2, using the calendar provided. LCL Cargo Delivered to CFS Toronto by Wednesday, April 7. (Closing date). Cargo sails Port of Halifax Monday, April 12. Cargo arrives CFS Helsinki Friday, April 30. Cargo transfers CFS Helsinki, and arrives Door Murmansk May 12. FCL Cargo Delivered to CY Toronto by Tuesday, April 6 (closing date). Cargo sails Port of Montreal Thursday, April 8. Cargo arrives Port of Bremerhaven Friday, April 16. Cargo sails Port of Bremerhaven Friday, April 23. Cargo arrives CY Kotka Wednesday, April 28. Cargo transfer CY Kotka, and arrives door Murmansk Thursday, May 6. Air Cargo Cargo tendered to airline Friday, April 2. Cargo departs YYZ Sunday, April 4. Cargo arrives SVO Monday, April 5. Cargo transfers Tuesday April 6. SVO – MMK: Only 1 – LD7 pallet allocated for cargo or mail, per daily flight. Due to our pallet dimensions of 42 in x 48 in x 54 in., only 4 of our pallets per day will fly to Murmansk. SVO - MMK - 4 pallets April 7. SVO - MMK - 4 pallets April 8. SVO - MMK – 2 pallets April 9. Final delivery of cargo to door Murmansk Monday, April 12. All 3 of our ALTERNATIVES meet the customers delivery requirement of May 22, and both ocean freight options do allow for up to a week delay en-route.


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Next we determine the charges associated with each ALTERNATIVE. LCL Cargo Total shipment volume = 630 ft3 (17.840 m3) Total shipment weight = 3,940 kg (8,687 lb) Cartage charges will be based on the actual weight of the shipment. Cartage charges = CAN $219.78 Ocean freight = 17.840 m3 x US $85.00/m3 = US $1,516.40 (CAN $1,546.73) Trucking to Murmansk = US $4,000.00 (CAN $4,080.00) Total charges LCL cargo = CAN $5,846.51 FCL Cargo Container drayage = CAN $325.00 Ocean freight = US $1,800.00/20 ft container (CAN $1,836.00) Drayage to Murmansk = US $5,285.00 (CAN $5,390.70) Total charges FCL cargo = CAN $7,551.70 Air Cargo Actual cargo weight = 3,940 kg Volume weight = 2,974.43 kg Air cargo charges will be rated on the actual cargo weight of 3,940 kg. Local cartage charges = CAN $219.78 Air freight charges YYZ – SVO = CAN $31,520.00 Air freight charges SVO – MMK = EUR 23,640.00 (CAN $32,859.60) Total air freight charges = CAN $64,599.38 Summarizing all charges we have the following: LCL Cargo = CAN $5,846.51 FCL Cargo = CAN $7,551.70 AIR Cargo = CAN $64,599.38 Based on reasonable transportation costs, moving the cargo as LCL cargo would appear to be the better alternative, however, we must also consider the safety and security of the cargo.


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Moving the cargo as LCL freight, the cargo is handled many times en-route. The cargo is: loaded onto a truck in Toronto, off loaded at the CFS in Toronto, loaded into a container to Gothenburg, off-loaded from the container in Gothenburg, loaded into a container to Helsinki, off-loaded from the container in Helsinki, loaded onto a truck for Murmansk, off-loaded at door Murmansk. Each pallet is handled at least 8 times during the voyage. A shipment of this size, 17.840 m3, and of this importance, potential monetary penalties, there exists the possibility of damage to the cargo, possibly a split shipment and maybe even pilferage. It would be prudent of the forwarder to make the customer aware of these possibilities, and recommend that in the best interest of safety and security of the cargo, the customer ships this cargo loaded into 1 x 20-ft container. The cargo is only handled twice, once at the shipper’s door to load, and then again at the consignee’s door. Furthermore, the container will also be sealed and any evidence of tampering with the cargo will become quickly evident. Ultimately it will be the customer’s decision as to which alternative they choose and at what price. Your role as a forwarder would be to make your customer aware of the advantages and disadvantages of each alternative.


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Exercises 8.11 – Calculations (Answer)

1. Stowage Plan

You should decide that Generator A) must be loaded in 40-ft O/T container by itself for balancing of weight and bracing, the stowage plan for the rest is as follows: A) Generator First Container 1 x 40 ft

B) Tables Second Container 1 x 20 ft

No. of Boxes Dimensions used

W 84 in x 1 = 84 in H 6 in x 12 = 72 in space left on top for 18 in L 216 in x 1 = 216 in space left in length 16 in

= 12 tables W = 1,200 kg

Add fabric rolls both on top of tables in space left and in length in space follows: On top of tables rolls dimensions used W 12 in x 7 = 84 in

H 12 in x 1 = 12 in now in total with table 84 in L 45 in x 4 = 180 in 28 rolls W = 420 kg

Add in length at end of tables (rolls upright)

rolls dimensions used W 12 in x 7 = 84 in H 45 in x 2 = 90 in L 12 in x 1 = 12 in now in total with table 19 ft (226 in) 14 rolls W = 210 kg

Total rolls in this second container = 42 rolls.

We will load the remaining balance of 78 rolls into the container with the sewing machines.


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2nd container - 20 ft length taken 19 ft

Plan for third container = 1 x 40 ft C) 684 cartons of sewing machines

cartons dimensions used W 12 in x 7 = 84 in } H 14 in x 6 = 84 in } 672 cartons L 15 in x 16 = 240 in }

Now add into remaining length another 12 cartons using further 15 in in L (W 12 in x 6 + H 14 in x 6 + L 15 in x 1)

i.e. total 684 cartons – weight = 13,680 kg

so far length taken 255 in = 21 ft 3 in D) 1 crate personal effects into length 9 ft 0 in W = 1,000 kg

So far length taken = 30 ft 3 in

E) Balance of 78 rolls into remaining length Rolls dimensions used W 12 in x 7 = 84 in H 12 in x 6 = 72 in this calculation shows you have space for up to

84 rolls but you use only 78 rolls left.

L 45 in x 2 = 90 in Length 7 ft 6 in – 1,170 kg 40 ft total length taken 37 ft 9 in W = 15,850 kg


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RE-STOWAGE IN ROTTERDAM/HONG KONG A) Generator

Due to its length of 21 ft when only 20-ft containers are available, generator must travel break-bulk.

B) Tables Due to length of 18 ft = 1 x 20 ft boxes i.e. W 7 ft x 1 = 84 in L 18 ft x 1 = 216 in H 6 in x 12 = 72 in = 12 tables with L = 18 ft Add rolls on top and at end. 42 rolls = 1 ft First 1 x 20 ft Total length taken = 19 ft

C) Sewing machines

cartons W 12 in x 7 = 84 in H 14 in x 6 = 84 in L 15 in x 15 = 225 in = 18 ft 9 in -------------------------------------------------- = 630 cartons only, balance of 54

cartons (see (D) below).

Second 1 x 20 ft total length taken 18 ft 9 in

D) Personal effects length = 72 in floor length used = 9 ft 0 in

E) Add on top 54 cartons of (C) by turning cartons

cartons W 14 in x 6 = 84 in H 15 in x 1 = 15 in on top of existing (P/E) 72 in = total 87 in H L 12 in x 9 = 108 in = 9 ft = covers 54 cartons ex (C)


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Add for (E) remaining rolls of fabric into the remaining length of 10 ft (78 rolls)

rolls W 12 in x 7 = 84 in could hold 98 rolls but you only need 78 rolls H 12 in x 7 = 84 in L 45 in x 2 = 90 in

Third 1 x 20 ft length taken 19 ft

SUMMARY CONTAINER TYPE/QUANTITIES FROM ROTTERDAM/HONG KONG – MAHE 3 x 20 ft LISTING OF ft3 & TOTAL WEIGHT PER ITEM EXPORT Value CAN $

A) Generator 882 ft3 10,000 kg 50,000.00 B) Tables

12 boxes 63 ft3 each 756 ft3 1,200 kg 2,000.00 C) Sewing machines

684 each 1.458 ft3 998 ft3 13,680 kg 342,000.00 D) Personal effects 378 ft3 1,000 kg 25,000.00 E) Fabric

120 rolls each 3.75 ft3 450 ft3 1,800 kg 30,000.00

3464 ft3 27,680 kg 449,000.00

98.09 m3 27,680 kg E X P O R T S H I P P I N G S C H E D U L E Required Arrival Mahe July 1, 2017 VIA ROTTERDAM Closing Toronto 14/5 Monday slg Toronto 15/5 Tuesday ETA Rotterdam + 14 days 29/5 Tuesday Transit in Rotterdam + 1 day 30/5 Wednesday ETS Rotterdam following Thursday 31/5 Thursday ETA Make + 21 days 21/6 Thursday Transit time 38 days


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Cargo available Mahe 24/6 Sunday A) If shipped 1 week later from Toronto, arrival to Mahe would be 28/6/17

availability at plant July 1st. B) If delayed in Rotterdam for 2nd, sailing on 7/6/17, ETA Mahe would be 28/6/17

and availability at plant. Choosing slg Toronto 15/5 offers therefore a little safety margin

VIA HONG KONG Closing Toronto 10/5 Thursday slg Toronto 13/5 Sunday ETA Hong Kong + 21 days 3/6 Sunday Transit in Hong Kong 1 day 4/6 Monday ETS Mondays 10/6 Sunday ETA Make + 14 days 24/6 Sunday Transit time 45 days Cargo available in Mahe 25/6 Monday Date of availability/readiness not specified. Assume delivery per 11/5 possible to benefit from lower cost.


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C O S T I N G C O M P A R I S O N (for freight charges only) 2 x 40 ft plus 1 x 20 ft (Generator separately)

Via Rotterdam

Via Hong Kong

Tor-Rot 2 x 40 ft @ CAN $2,500.00 CAN $5,000.00 1 x 20 ft @ CAN $1,500.00 CAN $1,500.00 Transhipment Rotterdam 98.09 m3 @ US $20.00 US $1,961.80 @ US $1.40 US $2,746.52 Reshipping (non-unitized) a) 3 x 20 ft @ US $800.00 US $2,400.00 @ US $1.40 US $3,360.00 b) B/B 24.976 m3 @ US $40.00 US $999.00 @ US $1.40 US $1,398.60 Totals CAN $14,005.12

Tor-Hong Kong 2 x 40 ft @ US $3,000.00 = US $6,000.00 @US $1.40 US $8,400.00 1 x 20 ft US $2,000.00 @ US $1.40 US $2,800.00 Transhipment Hong Kong 98.09 m3 @ US $20.00 US $1,961.80 @ US $1.40 US $2,746.52 Reshipping (non-unitized) a) 3 x 20 ft @ US $1,200.00 US $3,600.00 @ US $1.40 US $5,040.00 b) B/B 24.976 m3 @ US $80.00 US $1,998.00 @ US $1.40 US $2,797.20 Totals CAN $21,783.72

Insurance premium is in addition for both routes. Amount of insurance premium does not affect comparison because the amount of premium is the same for both routes simply because CCC supplied you with one price CIF Mahe.


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INSURANCE FOR ALL RISK (clause A) Value CIP Mahe CAN $449,000.00 + 10% CAN $44,900.00 Insured value CAN $493,900.00 x 0.25% (premium) = CAN $1,234.75 Recommendation Route Rotterdam due to lower overall cost, with at least 2 sailings with reshipping opportunities. Handling Generator must be shipped in a separate open top container with weight evenly distributed and generator braced. It is important that any of your recommendations are consistent with the details of your proposal to CCC. I M P O R T Stowage 20 ft 750 doz: 5 = 150 cartons

each 24 in L x 18 in W x 24 in H 900 ft3 - 25.485 m3 – 3,000 kg

Container inside 232 in L x 90 in W x 90 in H (at door) The secret here is not to fit cartons by using the same width of cartons into the width of the container but a mix of the sizes of 18 in and 24 in to best utilize the given width of container of 90 in. The following samples will demonstrate this. First using a uniform pattern:

cartons dimensions used W = 18 in x 4 = 72 in H = 24 in x 3 = 72 in = 108 cartons only - NO GOOD L = 24 in x 9 = 216 in You could add a fourth layer by reversing cartons meaning you now use 24 in as

width, 18 in as height, length remains 24 in.


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cartons dimensions used W = 24 in x 3 = 72 in } 27 additional H = 18 in x 1 = 18 in plus previous height of 72 in } cartons in

now new total height 90 in } fourth layer L = 24 in x 9 = 216 in Total: 108 + 27 cartons = 135 cartons or 22.936 m3 - STILL NO GOOD Because now you still have a balance of 15 cartons “left 'over”, it does not make sense to consider shipping such a small quantity separately as break-bulk. You should also realize that 15 cartons only have a volume of 90 ft (2.548 m3) and looking at the used space so far of 22.936 m3 it is fair to assume that there must be another solution to stow the complete quantity of 150 cartons. Now try using a mixed pattern of cartons, i.e. use some cartons with a width of 1 in and then add to that width of 18 in other cartons using 24 in as width. It would look like this:

cartons cartons dimensions used W 2 x 18 in + W 2 x 24 in = 84 in (W) H 3 x 24 in + H 3 x 24 in = 72 in (H) L 9 x 24 in + L 12 x 18 in = 216 in + (L)

cartons used: 2 x 3 x 9 = 54 + 2 x 3 x 18 = 108 = 162 cartons possible You only need 150 cartons. So when mixing different width it is possible to improve the total quantity of cartons to be stowed. QUOTATION/PRESENTATION TO CCC BASIC IDEA OR OUTLINE By making a rough outline with all main points you wish to cover, you would find it much easier to develop or draft from this outline a full letter text by simply following your points in the right order.

Export 1) Explain choice of routing (timing-price) pointing to Rotterdam.


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2) Why to ship the generator in separate open top container. 3) Decline liability for any set delivery time at a destination or for any delay

beyond your control as a freight forwarder. 4) Offer net cost in lump sum form as requested. Add a separate handling fee

of US $150.00 per container and all risk insurance premium. Import 1) Explain choice of routing (timing-price) pointing to Montreal/Toronto via

Rotterdam and to Vancouver/Edmonton via Hong Kong. 2) Decline liability for any fixed delivery time at a destination or for any delay

beyond your control as a freight forwarder. 3) Offer net cost in lump sum form as requested. Add a separate handling fee

of US $150.00 per container and all risk insurance premium. Add standard trading clause, present tariffs, subject to change etc. without notice (a reference to the STCs if printed on your letterhead, then no repetition in the text of the quotation is necessary).

AFTER PROFIT EXPORT Handling fee 3 x US $150.00 = US $450.00 Commission 1 1/4% on ocean freight Tor-Rdm CAN $6,500.00 = CAN $81.25 Total CAN $531.25 PROFIT IMPORT Handling fee per container + week = CAN $150.00 plus possible profit share from your Rotterdam agent

PRESENTATION TO: THE CHEAP 'N CHEERFUL CLOTHING CO. TORONTO


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Re: Project Mahe Seychelles Islands We thank you for your enquiry and submit the following explanation and quotation to you. This presentation is in two parts: 1) For your export to Mahe 2) For your import from Mahe General Vessel Services There are no direct or any transhipment services on a through bill of lading either to or from Mahe. Mahe is only served by a steamship line either from Rotterdam or from Hong Kong offering only 20-ft containers as well as facilities for acceptance of break-bulk shipments. This means all cargoes must be transloaded from container arriving in Rotterdam from Canada into 20-ft containers for Mahe. Your generator must be shipped break-bulk due to its length of 21 ft. The same situation of transloading applies to containers arriving in Rotterdam/Hong Kong from Mahe for outgoing containers from Canada. There are regular weekly sailings available from/to Toronto to/from Rotterdam or Hong Kong and again there are weekly sailings from Rotterdam to Mahe or from Mahe to Hong Kong. Vancouver and Edmonton are best served with transshipment in Hong Kong whereas Montreal/Toronto is better serviced with transshipment via Rotterdam.

Transit-Sailing-Times Export Toronto via Rotterdam-Mahe About 38 days Import Mahe-Rotterdam-Toronto About 36 days

Mahe-Rotterdam-Montreal About 34 days

Mahe-Hong Kong-Vancouver About 37 days Mahe-Hong Kong-Edmonton About 39 days

The transit times are estimated only and are calculated on the basis of current published sailing schedule dates of the steamship lines concerned. The calculation assumes that transit re-handling in Rotterdam/Hong Kong can be done in one/two working days, so that cargo always reaches first available


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scheduled sailing to Mahe or in case of import from Rotterdam/Hong Kong to Canada. At this point we must point out that we have, of course, no control over the sailing time of vessels, delays, weather etc.. Therefore we cannot accept any liability to deliver at destination at a specific date or within a given period of time. We are only responsible for our own negligence and that of our agent (name) in Rotterdam/Hong Kong, but we are not responsible for the action of any other sub-contractor we may choose on your behalf. Generator There is one special area of handling to which we must draw your attention. For your protection and safety of cargo during voyage, we judge it mandatory that the generator is to be loaded by itself in a separate 40-ft O/T container to permit even weight distribution over the total floor length of the container and allow appropriate bracing inside the container to prevent the generator from moving. Our freight calculation has therefore considered this aspect. Freight Charges Export For the five items of cargo you specified we have pleasure in quoting you for one shipment as requested in lump sum form from door Toronto to CPT Mahe with transloading in Rotterdam.

CAN $14,005.00 We have calculated that with a separate 40-ft open top container for the generator, we require in total 2 x 40-ft plus 1 x 20-ft containers to Rotterdam and 3 x 20-ft from Rotterdam to Mahe, whereby the generator would be shipped from Rotterdam as break-bulk. An all risk insurance coverage is available at a rate of 0.25% of insured value.

Insured value is usually CIP value plus 10%. On that basis, your insured value

would be as follows:

CIP Mahe CAN $494,000.00 + 10% CAN $49,400.00

----------------------- Insured value CAN $543,400.00


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Premium @ 0.25% CAN $1,358.50

In addition, we propose an overall export handling and coordination fee of CAN $150.00 per container. Import Your weekly shipments of 750 doz. shirts or 150 cartons can be loaded in 1 x 20 ft. We have pleasure in quoting as requested in lump sum form all charges From door Mahe to CPT Toronto CAN $2,614.00

CPT Montreal CAN $2,914.00 with transloading in Rotterdam.

CPT Vancouver CAN $3,514.00 CPT Edmonton CAN $4,214.00

with transloading in Hong Kong. There is a lower rate of CAN $3,414.00 available for Edmonton via Rotterdam upon request, but transit time would be 3 days longer than offered now. In addition we propose an import handling and coordination fee of CAN $150.00 per container. All risk insurance coverage is available at a rate of 0.25% of insured value. Insured value is usually CIP value plus 10%. On that basis, your import insured value per shipment of 20 ft would be

CIP value CAN $45,000.00 Plus 10% CAN $4,500.00

---------------------- Insured value CAN $49,500.00

Premium @ 0.25% CAN $123.75

Canadian duty & taxes should be declared in addition for insurance purposes, having a special premium of only 0.12%. Above prices are based on today's rates and current conditions of transport with carriers and organizations of our choice, and are subject to change with or without notice.


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We are very interested in handling this traffic for you, and we hope you find our offer attractive and competitive. Always with pleasure at your service, we remain, Yours very truly, Your CIFFA FORWARDER


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COST CALCULATION I M P O R T FIGURES IN CANADIAN DOLLARS

EXCHANGE RATE 1.25 VIA ROTTERDAM VIA HONG KONG

From/in Rotterdam Hong Kong 1) Ocean freight US $500.00 US $1,000.00 from Mahe 2) Transhipment for 25.485 m3 @ US $20 per m3 in. US $509.70 US $509.70 3) Ocean freight from Rotterdam Hong Kong to a) Vancouver CAN $2,500.00 US $1,000.00 b) Edmonton CAN $2,000.00 US $1,500.00 c) Toronto CAN $1,500.00 US $2,000.00 d) Montreal CAN $1,200.00 US $2,000.00

TOTALS

VAN 700 714

EDM 700 714

MON 700 714

TOR 700 714

VAN 1400 714

EDM 1400 714

MON 1400 714

TOR 1400 714

2500 - - - 3914

- 2000 - - 3414

- - 1500 - 2614

- - - 1200 2914

1400 - - - 3514

- 2100 - - 4214

- - - 2800 4914

- - 2800 - 4914


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Import Sailing Schedules Rotterdam ETS Mahe Friday 1/7 Monday

ETA Rotterdam + 21 days 2/7 Tuesday Transit Rotterdam 1 day 3/6 Monday ETS Rotterdam Thursday 6/6 Thursday ETA Montreal + 7 days 13/6 = 34 days Thurs ETA Toronto + 9 days 15/6 = 36 days Sat ETA Edmonton + 14 days 20/6 = 41 days Thurs ETA Vancouver + 17 days 23/6 = 44 days Sun Hong Kong ETS Mahe Monday 13/5 Monday ETA Hong Kong + 21 days 3/6 Monday Transit Hong Kong 4/6 Tuesday ETS Hong Kong Wednesday 5/6 Wednesday ETA Vancouver +14 days 19/6 = 37 days Wed ETA Edmonton +16 days 21/6 = 39 days Fri

ETA Toronto + 21 days 26/6 = 44 days Wed ETA Montreal + 22 days 27/6 = 45 days Thurs

TRANSIT (# of days) 44 41 34 36 37 39 45 44 INSURED VALUE $49,500 @ 0.25% = $123.75 Declare duty and taxes separately and in addition.


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1. Details of stowage calculation for item A-E are spelled out in preceding pages of the solution. Details per Container

First 40 ft

A) Generator Vol.: 882 ft floor length 21 ft Total 882 ft 21 ft

Second 40 ft

B) Sewing machines Vol.: 998 ft floor length 21 ft 3 in C) Personal effects Vol.: 378 ft floor length 9 ft D) 78 rolls fabric Vol.: 292.5 ft floor length 7 ft 6 in

Total 1,668.5 ft 37 ft 9 in

Third 1 x 20 ft

E) Tables Vol. 756 ft floor length 18 ft F) 42 rolls of fabric Vol. 157.5 ft floor length 1 ft

Total 913.5 ft 19 ft

Stowage Plan Import 20 ft

AA) Shirts Vol.: 900 ft floor length 18 ft


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3. Rotterdam/Hong Kong freight comparison refers to both exports and import.

Refer to separate working sheets. Export: Rotterdam cheaper. Transit via Rotterdam 38 days

versus Hong Kong's 45 days. Import: A mix. Logical for geography involved

Montreal/Toronto cheaper/faster via Rotterdam Vancouver/Edmonton cheaper/faster via Hong Kong.

4. Quotation: Refer to previous pages.

5. Forwarders should not commit themselves for a final delivery date at destination, neither should they agree to be responsible for any delay while goods are in transit. Any such transit delay is totally out of control of forwarder. This must be clearly spelled out.

6. Omitting to load one carton is clearly negligent handling of your agent, a matter under your control as a forwarder. Your agent should be responsible for cost of airfreight, i.e. 29 vol kg @ US $3.00 per kg = US $87.00. Definitely do not invoice CCC. At worst, if your agent is unwilling or uncooperative you may have to either split the cost or absorb it.

7. a) Your very first duty is to inform your client of this delay, especially when you have declared yourself as an agent. You have an ongoing duty to keep your client advised at all times. Your motto to guide you should be the text based on clause 5 of the Standard Trading Conditions. “Respecting any wishes of your client, keeping your client informed on an ongoing basis of all details of any transaction as it progresses . . . is your best protection”. Therefore if you offered your services as an agent and if you specifically highlighted the fact that you are not liable for a delay, the vessel delay is beyond your control and of no consequence to you, provided you


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informed the client. Without passing on the information you can be found liable even as an agent. If a forwarder does accept to deliver at a specific deadline at destination, forwarders liability under STC, clause 35.D.ii is a maximum of twice the freight. b) If the forwarder offered for Vancouver for 1 x 20 ft freight of CAN $3,514.00, forwarder’s liability could be as much as CAN $7,028.00. One more reason to clearly decline to accept such liability in writing before you accept an order for shipping. In fact, it would be smart to refuse to handle such business if that problem is not resolved in favour of forwarder. You cannot have such an enormous risk (weekly!) hanging over your head for a simple vessel delay.

8. The principle answer is that you are always responsible for the

consequences of your own negligence. However, your financial exposure

is limited by the terms of the STC. The STC contains two possibilities.

Let's figure out both possibilities for 1 x 20 ft shirts to Vancouver.

a) General liability including negligence: 2 SDR per kg. 250 cartons @ 20 kg = 3,000 kg @ 2 SDR = 6,000 SDR @ CAN $2.13 (per May 5, 1995) = CAN $12,780.00 b) For delay : twice your freight charge (clause 35.D.ii) = CAN $3,514.00 x 2 = CAN $7,028.00 Your negligence caused a delay so you are potentially liable for CAN $7,028.00. Comment Remember, you cannot cover yourself against your own mistakes by simply raising fees. This would be silly most of the time. The solution lies with a conscientious and diligent work procedure in your office, preferably routinely controlled by someone else in your office. You can limit your liability in your offer to CCC, but in regard to delay, it can only be any aspect beyond your control. This means to repeat you are on the hook for your negligence and that of your agent overseas.


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9. 100 dozens shirts: 5 = 20 cartons

each 24 in x 18 in x 24 in = 120 ft 3,398 m3, 400 kg or 567 vol kg

TACT Mahe/Athens/London Toronto @ US $4.00

or Bombay/Los Angeles/Toronto US $2,268.00

a) 4 days

VIA HK Mahe/Hong Kong/TACT @ US $1.00 US $567.00

H.Kong-Toronto consolidation @ US $2.00

US $1,134.00

US $1,701.00

b) 6 days

Offer route via Hong Kong consolidation. Better control.

Mark-up rate by US $0.50 kg US $283.50

c) Offer either US $3.50 kg/6,000 cm3 or US $1,984.50

Profit : Mark-up US $283.50

5% on $1,134.00 US $56.70

US $340.20

Share with Hong Kong agent 50/50.

Commission of 5% for Mahe/Hong Kong applicable but probably not

collectible/accessible for you or your Hong Kong agent.

You could use the route via the consolidation service you have from

Hong Kong and charge still full TACT rate US $4.00/kg. That's all right

for the exam only, in reality you always should reduce your rate if a

consolidation is involved compared to full TACT. How much is

discretionary.

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