10/21/2013

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Presenter:

Marilyn Gettinger, C.P.M., CPSM

The Total Landed Costs of

Offshoring in 2013

Marilyn Gettinger, C.P.M., CPSM

• Credentials – C.P.M., CPSM, MBA

• Customized training and consulting in supply

chain management since 1994

• Course developer and instructor for SCM

certificate programs at Bergen, Union County,

and Middlesex County Colleges as well as at

William Paterson University

• International Trade and Importing at Baruch

University

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Presentation Objectives

• Review of the importing process

• Identification of information resources

• Import cost factors

• Total landed cost model

• Impact of regulations

• Total landed cost reduction opportunities

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What Will We Talk About?

• Worth the work

• Definitions

• Challenges

• Resources

• Import regulations

• TLC model framework

• Keeping up with events

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Worth the Work

• Poor return on investment

• Net losses

• Quality Issues

• Disruptions

• Incorrect pricing models

• Return to onshoring or insourcing

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Definitions

• International sourcing

• Global sourcing

• Offshoring

• Near shoring – Canada and Mexico

• Total landed cost or total delivered cost

• Total cost of ownership

• Trade and other U.S. agreements

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Challenges

• Data difficult to gather

• Time constraints preclude adequate analysis

• Lack of resources to maintain cost inputs

• Silo mentality

• Focus on low wages rather TLC’s

• Push from senior management

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Resources

• Code of federal regulations – www.ecfr.gov

• Harmonized tariff schedule of the United

States – www.usitc.gov

• Customs Border and Protection Agency –

www.cbp.gov

• International Commercial Terms 2010

– http://www.iccwbo.org/

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Import Regulations

• Labeling and marking requirements

• Import licensing, registrations, permits

• 24-hour rule

• Import security filing – 10+2

• Container screening initiative

• Certifications

– Lacey Act

– Wood fumigation

– Seals

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Getting Started

Questions

Prohibited Items Fish, Wildlife

Meats, Livestock, Poultry

Restricted Items Fish, Wildlife

Food

Plants and Seeds

License or Registration Agency Identification 40 Possible Agencies

FDA, USDA, EPA

Markings and Labeling

Made in America

Code of Federal

Registration

Title 19

Federal Trade Commission

Embargoed Country OFAC – The Office of

Foreign Assets Control

Cuba, Iran, Sudan

Quotas Absolute

Tariff Rate

Country of Origin Code of Federal

Registration 10

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Import Flow

IMPORTER/SHIPPER Purchase Order

CONSOLIDATOR / NVOCC Freight Receipt

Master & House Bills of Lading

Local/Ocean Transportation* Ship Manifest*

CUSTOMS BROKER Import Entry

Duty Payment Cargo Clearance

Local Transportation*

FACTORY Production In-country

Transportation*

FOREIGN PORTS/ TERMINAL OPERATORS

Longshore Labor

U.S. PORTS/ TERMINAL OPERATORS

Longshore Labor

FREIGHT FORWARDER

Document Packet Original Bill of Lading (OBL)

In-country/Ocean Transportation*

OCEAN CARRIER Vessel Availability

Port Landside Operations Ship Manifest

TRUCKING COMPANIES/RAIL LINES

Local Distribution

FINAL DESTINATION

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Getting Started - Pre-Transaction Costs

• Manpower

• Research

• Country study

• Onsite visit

• Overhead placement

• Cost analysis evaluation

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Payment Terms

• Prepayment

• Deposit

• Letter of credit – 2-3% of the value of the LOC

• Confirming bank

• Local bank

• Draft

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Currency Fluctuations

• Agreement in Euros = €1,000,000

• €1.5 = $1.00 = $ 666,666.66

• €1 = $1.00 = $1,000,00.00

• €2 = $1.00 = $ 500,000.00

• Agreement in Dollars = $666,666.66

• €1.5 = $1.00 = €1,000,000.00

• €1 = $1.00 = € 666,666.00

• €2 = $1.00 = €1,333.332.00

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Service

EXWEx-Works

FCAFree

Carrier

FASFree

Alongside Ship

(ocean only)

FOBFree

Onboard (ocean only)

CFRCost of

Goods & Freight (ocean only)

CIFCost

Insurance & Freight

(ocean only)

CPTCarriage Paid To

CIPCarriage

Insurance Paid To

DAPDelivered At Place

DATDelivered

At Terminal

DDPDelivered Duty Paid

Warehouse Services

Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Export Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Loading at Point of Origin

Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Inland Freight Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Port Receiving Charges

Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Forwarder Fees Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller

Ocean/Air Freight

Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller

Charges in Foreign Port;

Foreign AirportBuyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller

Custom Clearance

Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller

Customs Duties Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller

Delivery Charges to Final

DestinationBuyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller

OBLIGATIONS AND CHARGES

Incoterms 2010Responsibility Matrix - Obligations of Importer (Buyer) and Exporter (Seller)

"E"Departure

"F"Main Carriage Unpaid

"C"Main Carriage Paid

"D"Arrival

INCOterms

• Ask the right questions:

• What does that include?

• Documentation?

• Insurance?

• Carriage?

• Port fees?

• Licensing?

• Value added taxes?

• Province taxes?

• Packaging?

• Material costs?

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Documentation

Customs bond

Insurance document

Bill of lading

Commercial invoice

Customs invoice

Entry Summary (7501)

Immediate Entry Summary (3461)

Proforma invoice

Letter of credit

Country of origin

Entry Manifest 7533

Packing list

Certificates

Permits

Customs bond

Insurance document17

Total Landed Cost Factors – Unit Price

Country of Origin

• Letter of credit

• Fumigation

• Seal closure

• Province taxes

• VAT – Value added

tax

• Inland transportation

• Certifications

• Export documents

• Importer security

filing (10+2)

• Container screening

• QC inspection

• Shipping loading

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Total Landed Cost – In Transit

Country of Destination• Ocean freight

• Packaging

• Maritime insurance

• Ship unloading

• Port fees

• Import

documentation

• Customs review

– $0.21% of value of

goods with $25 min

and $450 max

• Harbor maintenance

fee

– 0.125% of the

entered value of

goods

• Customs duties

Total Landed Cost -

• Freight forwarder

• Customs broker fees

• Drayage to location

• Customs bond

– $45/$1000 with

– $45 minimum

• Container screening

– $450.00

• Pipeline inventory

– Unit Price x

.0075/week carrying

cost x lead time in

weeks

– Ex. $100 x .0075 x 6

weeks = $100 + $4.50

= $104.50

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Customs Broker Fees

• Customs Entry Form (7501) $125.00

• In-bond entry $ 70.00

• Routine messenger $ 20.00

• Additional classifications $ 7.50

• Additional invoices or BOL $ 20.00 each

• FDA, USDA, other agency $ 20.00 each

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Cost Considerations

• Offshoring – up to 25% overall savings

Offshoring – Actual savings realized 4-6%

Total cost of ownership supply chain costs

3-5% locally to increase to 35% globally

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Electronic Transfer

• U.S. Custom’s Automated Commercial System

(ACS)

• Automated Commercial Environment (ACE)

• FAST – Free and Secure Trade

• Automated Broker Interface (ABI)

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Importer Security Filing (ISF) (10+2)

• January, 2010

• Electronic filing 24 hours prior to loading

container

• Up to $85 per transaction

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Importer Security Filing – 10 Elements

• Importer of record

• Consignee number

• Ship to party

• Manufacturer/

• Supplier

name/address

• Country of origin

• Commodity HTS-6

• Container stuffing

location

• Consolidator

(Stuffer) name and

address

Importer Security Filing - +2

• ASAP, but NLT 24

hours to arrival

• Foreign port of

lading

• Place of delivery

• +2

• Vessel stow plan

• Container status

message data

• NLT 48 hours after

departure

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Customs-Trade Partnership Against

Terrorism (C-TPAT)• A voluntary certification program

• Secure international import processes

• CPB approval

• Average implementation costs

– $38,471

• Average maintenance costs

– Security personnel $40,441

– Salaries and Expenses of personnel $28,454

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Keeping Up With Events

• Customs brokers

• Smart containers

• Sustainability and green initiatives

• Emerging seaports

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Keeping Up With Events

• Intermodal growth

• Bunker fuel

• Harbor maintenance tax

• Prince Rupert Seaport

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Keeping Up With Events

• The big ships

• Natural gas

• The Panama Canal

• Inland ports

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Keeping Up With Events

• Food & Drug Administration

• Chassis

• Transloading

• Global trade management

Keeping Up With Events

• Drayage trucking

• Foreign trade zones

• Duty drawback

• Bonded warehouses

• Future regulations

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Thank you For Learning With Me Today

• For additional questions, please contact me

Marilyn Gettinger at:

• mgettinger@aol.com

• 908-709-0656

Survey

www.tinyurl.com/lc3s3fm