EXCLUSIVE WHITE PAPER: International Freight and Trade Compliance Key Management Considerations for 2021
Manufacturers, Dealers and Distributors that are engaged in global trade… Importing, Exporting, Buying, Selling and distributing various products worldwide.
The ability to move goods in the international arena will make or break sales or even maintain a client relationship.
The ability to deliver products on a timely and loss-free basis is a critical component to the companies operating with a global footprint.
This “white paper” created for the readers of Global Trade Magazine addresses “Six Steps” to follow to help reduce risk and cost in the area of international shipping, freight and logistics.
Supply Chain Spend in 2021
We should all keep in mind that the Covid-19 Pandemic of 2020, brought significant increases in logistics costs and supply chain spend, along with limitations on service both domestically and internationally.
This is likely to continue heavily into the 2Q, second quarter of 2021 with a residual impact lasting till December 2021.
Those engaged in budgeting supply chain costs should plan for increases in excess of 25%, as much as 50% and continued delays to midyear 2021.
Demand, capacity, pandemic disruptions fears along with greed will continue to be driving factors.
Warehousing, distribution and all related costs have and will continue to escalate, with limitations on space and capacity.
The Six Steps
The following six steps originate from the authors 35 – year experience in moving freight all around the world and in assisting corporations with global logistics that are cost-effective and reduce risk to themselves and their clients’.
1. Chose the Best INCO Term
2. Insure the Shipment
3. Chose the Right Freight Forwarder and Carrier
4. Track all Shipments Proactively
5. Understand the Total “Landed Costs”
6. Be Trade Compliant!
Choose the Best INCO Term
The INCO Term, established by the International Commerce Commission is followed by all countries belonging to the United Nations for goods that pass through international borders.
INCO Terms typically get updated every ten years as was demonstrated this January 2020.
There are 11 Options in the 2020 Edition.
The seven Incoterms® 2020 rules for any mode(s) of transport are:
EXW – Ex Works (insert place of delivery)
FCA – Free Carrier (Insert named place of delivery)
CPT – Carriage Paid to (insert place of destination)
CIP – Carriage and Insurance Paid To (insert place of destination)
DAP – Delivered at Place (insert named place of destination)
DPU – Delivered at Place Unloaded (insert of place of destination)
DDP – Delivered Duty Paid (Insert place of destination).
Note: the DPU Incoterms replaces the old DAT, with additional requirement for the seller to unload the goods from the arriving means of transport.
The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:
FAS – Free Alongside Ship (insert name of port of loading)
FOB – Free on Board (insert named port of loading)
CFR – Cost and Freight (insert named port of destination)
CIF – Cost Insurance and Freight (insert named port of destination)
The INCO Term is a term of sale between a seller and a buyer that picks a point in time in the transaction where risk and cost is transferred from one party to the other.
It does not address other contractual concerns, such as payment method, title and details of marine insurance.
What it really does is advise an exporter till what time and place in a transaction is it responsible for cost and risk to …. And conversely where the importer picks up on.
Depending upon the INCO Term utilized … the risks and costs could be dramatically impactful for either the seller or the buyer.
We recommend that all operations, purchasing and sales personnel for the readers of Global Trade Magazie learn at a very detailed level all they can about INCO Terms and more specifically how to best leverage the term to reduce risk and cost in their transaction.
The author is available to the readers of Global Trade Magazine with any questions. (firstname.lastname@example.org)
Insure the Shipment
The typical importer and exporter never worry about loss or damage until it occurs.
And at that point, everyone from the forwarder to the carrier is blamed for the occurrence.
Freight will always get lost or damaged at some point in time, when you ship frequently and all over the world.
It is very important to make sure that you first identify through the purchase or sales contract who has risk of loss or damage. What INCO Term is being utilized? How payment is being made?
Once the risk is understood … then marine cargo insurance should be acquired … on an “All Risk”, Warehouse to Warehouse” basis with a reputable international cargo insurance underwriting company.
Additionally, some loss control elements need to be considered to mirror the insurance policy that considers:
-That the freight is packed, marked and labeled well
-A responsible forwarder and carrier is utilized
-Freight needs to pass through the system quickly … delays at border pints open the door for loss and damage
-Freight needs to clear customs … thoroughly, legally, following all import regulations and timely … all that will mitigate the potential for loss and damage
Chose the Right Freight Forwarder and Carrier
As an extension of your shipping personnel the Forwarder and Carrier take responsibility to move your freight through the global system.
They need to do this:
Choosing the right company who is qualified, experts in pet products distribution becomes some very important criteria to make sure the shipment, the freight and the logistics moves your package to your customer’s satisfaction.
Blue Tiger International with over 35 years’ experience has developed some very key relationships with an array of freight forwarders and carriers and can assist you in making sure you have all the necessary information to make the best choices.
Other organizations like the NCBFAA, AFA and TIA … all freight trade associations can produce members who specialize in the Global Trade Magazine Industry Vertical.
Track all Shipments Proactively
Making sure the shipments arrive on time and in workable condition is the guarantee of customer satisfaction, long term relationships, less headaches and greater margins.
This can be a service your freight forwarder or carrier provides, but it needs to be clearly identified in that vein and it must be done proactively … through every step of an international shipment.
Depending upon distances involved, countries of export and import, choices of mode and carrier … some freight can travel 12,000 miles, through 4-5 carrier handoffs, via several customs authorities and in several modes of transit.
All these convolutions can create exposure to loss, damage or delay. All three concerns we want to avoid. They lead to loss of revenue, customer dissatisfaction and lots of stress within your organization.
To mitigate this concern you need to structure a proactive system to “track and trace” all your international shipments through all the convolutions, hand-offs and modes of transit.
Many “track and trace” systems can be electronic and advise you through web portals, emails and other electronic means on all your shipping activity.
The benefits of proactively in lieu of a “reactionary” mindset will pay off in spades over the course of time and client relationships.
Understand the Total “Landed Costs”
Landed Costs are the total of all the accumulated expenses attached to a shipment moving internationally.
Many of these costs are outlined as follows:
-Duties, Taxes and Fees
-Clearance and Handling Charges
-Storage and Warehousing
Sometimes the landed costs can exceed the value of the actual shipment.
In order to protect margins and profits … it is critical to make sure “transactional” that you completely understand what the “landed costs” are for your shipment … then you can make sure these costs are covered in the eventual client invoicing that will follow.
Remember no one likes surprises … particularly those that have an additional price tag attached to them.
Be Trade Compliant!
It is imperative that both pet product importers and exporters operate their global supply chains trade compliantly.
This is following procedures and operational practice that accomplishes:
-Supervision and Control
This includes …
-Understanding the regulations
-Building internal SOP’s to comply with the regulations
-Train personnel on how to interpret and practice the SOP’s and in a regulatory manner
-Engaged in government programs that provide evidence of managing secure and compliant global supply chains, such as C-TPAT, Customs-Trade Partnership Against Terrorism
C-TPAT is a voluntary program of security created for importers into the United States managed by CBP, Customs Border and Protection … now open to include exporters from the USA.
Areas also included in trade compliance have to do with … documentation, classification (HTSUS/Schedule B Number(s), Valuation, Record Keeping, Export License Requirements, Denied Party Listing … to name a few of the operational concerns.
The penalties for non-compliance are fines, penalties and potential loss of import or export privileges. More serious areas can include criminal prosecutions.
Importing and exporting products successfully, means paying attention to detail. These six areas outlined above are a good foundation for creating a detailed and comprehensive approach to managing global supply chain responsibilities.
Our 35 years plus of global supply chain experience has demonstrated that those companies that are diligent about how they manage the freight, logistics and distribution of pet products will create the best opportunity to:
-Protect margins and grow profits
-Increase customer satisfaction
-Decrease stress and problem areas in global markets
-Better the reputation, which converts to client retention and expansion
Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.
The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.
Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.
Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.
He can be reach at email@example.com or 516-359-6232
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