Clearing and forwarding notes

Prepared for the students studying Diploma in Clearing and forwarding

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CLEARING AND FORWARDING
DIPLOMA COURSE ( JP -UK)

Course outline
1. Glossary of Industry Terms
2. The Role of Freight Forwarders
3. Early Days of Freight Forwarding
4. Routes and Transport Modes
5. Capitalization and Assets
6. Forwarders Business Structure
7. The Container Export Transaction
8. The Container Import Transaction
9. Relationship between Forwarders and Client
10. Export Documents
11. Import Documents
12. International Payments
13. Goods Classification
14. Handling and Carriage of Dangerous goods
15. FIATA Model Rules for Freight Forwarding Services
INTRODUCTION TO FREIGHT CLEARING AND FREIGHT FORWARDING
1. GLOSSARY OF INDUSTRY TERMS
Meaning of clearing and freight forwarding Freight, it is a term used to refer to cargo.
Generally, they are goods or products to be transported, mostly for commercial gain, by ship or
aircraft, although the term is now extended to intermodal train, van or truck.

Freight also refers to the sum paid for carriage of goods or payable for hire of space to move the
goods. In this context however, the term freight will be used to mean cargo. It is a global
requirement under World Trade Organization that governments take responsibility to control
cargo moving in and out of their countries. Individual countries have therefore put in place
procedures through which all cargoes crossing their border must adhere to. These procedures
entail cargo declarations, documentations, verifications and approvals prior to movement.

Freight clearance; This is hence a process of seeking authority to move cargo in or out of a
country by complying with set procedures and requirements. In Kenya, The Kenya Revenue
Authority is overall mandated body overseeing freight clearance and it is a requirement under the
EAC Acts that all unaccompanied baggage entering or leaving the country must be manifested
and cleared with customs.

Freight forwarding; Freight forwarding is the coordination and shipment of goods from one
place to another via a single or multiple carriers via air, marine, rail or highway. It involves
coordination of movement of cargo by a freight forwarder on behalf of a shipper or consignee.

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A freight forwarder is an agent who acts on behalf of importers, exporters or other companies or
persons to organize the safe, efficient and cost-effective transportation of goods. Freight
forwarding comes due to the need to comply with export documentation and shipping
requirements and hence many exporters appoint freight forwarders to act as their shipping agent.
Freight forwarding entails a freight forwarder advising and assisting clients on how to move
goods most efficiently from one destination to another.

A Forwarders extensive knowledge of documentation requirements, regulations, transportation
costs, and banking practices can ease the exporting process for many companies. Freight
forwarding practices vary from one country to the other. The International Freight Forwarders
Association (FIATA) is the international body representing freight forwarders. The most
reputable freight forwarders are members of FIATA doing freight forwarding as per the terms
and conditions provided by the association.

Customs agent Customs; Agent means any person who is licensed by the Commissioner of
customs for transacting business relating to the declaration or clearance of goods or baggage
subject to customs control of a person travelling by Air, Land, or Sea on behalf of the owner.

Customs agents need to be licenced by the respective revenue authorities. Trade relies on the
services of a large number of agencies and service providers, who are all participants in the trade
logistics chain. Hence, in order for all stakeholders to have effective operations, they have to join
forces with professional customs agents for fast and accurate clearance of goods under customs
control. This mean there has to be a link organization that helps the organizations involved
succeeds.

Consignee: A person or company to whom commodities are shipped. This can be the importer.

Consignment: A stock of merchandise advanced to a dealer and located at his place of business,
but with title remaining in the source of supply.

Consignor: A person or company shown on the bill of lading as the shipper. Also referred to the
exporter.

Customs: Government agency charged with enforcing the rules passed to protect the country’s
import and export revenues.

Customs Bonded Warehouse: A warehouse authorized by Customs to receive duty–free
merchandise.

Customs Entry: All countries require that the importer make a declaration on incoming foreign
goods. The importer then normally pays a duty on the imported merchandise. The importer’s
statement is compared against the carrier’s vessel manifest to ensure that all foreign goods are
properly declared.

Customs Invoice: A form requiring all data in a commercial invoice along with a certificate of
value and/or a certificate of origin. Required in a few countries (usually former British
territories) and usually serves as a seller’s commercial invoice.

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Demurrage: A penalty charge against shippers or consignees for delaying the carrier’s
equipment or vessel beyond the allowed free time. The free time and demurrage charges are set
forth in the charter party or freight tariff.

Dispatch: An incentive payment paid by the vessel to the charterer for loading and unloading the
cargo faster than agreed.

INCOTERMS 2010
The INCOTERMS (International Commercial Terms) define the role between seller and buyer
at an international transaction. Who has to do what en at what time? In the contract between the
seller and the buyer, the following is determined:



Who decides what
INCOTERMS mean?

The International Chamber of Commerce has set up strict definitions for each
incoterm. Choosing a suitable incoterm allows the buyer and seller to negotiate a
price best suited to their needs and to be confident that there will be no confusion
over who pays the costs. To ensure that the latest version is being used shipping
contracts should refer to "INCOTERMS 2000".




What are INCOTERMS?
INCOTERMS are a set of simple three letter codes which represent the different ways
international shipments may be organized. They allow sellers and buyers from different cultures
and legal systems to decide at what point the ownership and paying for freight, insurance and
customs costs transfer from one to the other.

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When should
INCOTERMS be used?

It is not compulsory to use incoterms. However when things go wrong and
disputes arise it is much easier to sort out who is responsible for what if
INCOTERMS have been written into the shipping contract. To be safe, incoterms
should be decided upon in the negotiation phase of any international purchasing
contract.




E - Group: Used where
the seller does not want to
arrange transport.

1. EXW or "Ex-Works"means the seller's only responsibility is to make the
goods available at the seller's premises, i.e., the works or factory. The seller is not
responsible for loading the goods on the vehicle provided by the buyer unless
otherwise agreed. The buyer bears the full costs and risk involved in bringing the
goods from there to the desired destination. Ex - Works represents the minimum
obligation of the seller.

F - Group: Used where
the seller can arrange
some transport within
his/her own country.

2. FCA or "Free Carrier "This term has been designed to meet the
requirements of multi-modal transport, such as container or roll-on, roll-off
traffic by trailers and ferries. The seller fulfils his/her obligations when the goods
are delivered to the custody of the carrier at a named point. If no precise point
can be named at the time of the contract of sale, the parties should refer to the
place where the carrier should take the goods into its charge. The risk of loss or
damage to the goods is transferred from seller to buyer at that time.

3. FAS or "Free Alongside Ship" requires the seller to deliver the goods
alongside the ship on the quay. From that point on, the buyer bears all costs and
risks of loss and damage to the goods. F.A.S. requires the buyer to clear the
goods for export and pay the cost of loading the goods.

4. FOB or "Free On Board," the goods are placed on board the ship by the
seller at a port of shipment named in the sales agreement. The risk of loss of or
damage to the goods is transferred to the buyer when the goods pass the ship's
rail (i.e., off the dock and placed on the ship). The seller pays the cost of loading
the goods. It can be agreed as 'FOB stowed' or 'FOB trimmed'

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C - Group: Used where
the seller can arrange and
pay for most of the
freight charges up to the
foreign country.

5. CFR (or C & F) "Cost and Freight" requires the seller to pay the costs and
freight necessary to bring the goods to the named destination, but the risk of loss
or damage to the goods, as well as any cost increases, are transferred from the
seller to the buyer when the goods pass the ship's rail in the port of shipment.
Insurance is the buyer's responsibility.

6. CIF "Cost, Insurance, and Freight" this is CFR with the additional
requirement that the seller procure transport insurance against the risk of loss or
damage to goods. The seller must contract with the insurer and pay the insurance
premium. Insurance is generally important in international shipping because
transport companies have restricted liability for loss or damage.

7. CPT "Freight/Carriage Paid To" or DPC. This term means the seller pays
the freight for the carriage of the goods to the named destination. The risk of loss
or damage to the goods and any cost increases transfers from the seller to the
buyer when the goods have been delivered to the custody of the final carrier, and
not at the ship's rail. Accordingly, "freight/carriage paid to" can be used for all
modes of transportation, including container or roll-on roll-off traffic by trailers
and ferries. When the seller is required to furnish a bill of lading, way bill, or
carrier receipt, the seller duly fulfils its obligation by presenting such a document
issued by the person contracted with for carriage to the main destination.

8. CIP "Freight/Carriage And Insurance Paid To" . This term (also
abbreviated CIP) is the same as "freight/carriage paid to" but with the additional
requirement that the seller has to procure transport insurance against the risk of
loss or damage to the goods during the carriage. The seller contracts with the
insurer and pays the insurance premium.


D - Group: Used where
the seller can pay for
most of the delivery
charges to the destination
country.

9. DAF. "Delivered At Frontier" means that the seller's obligations are fulfilled
when the goods have arrived at the frontier but before the customs border of the
country named in the sales contract. The term is primarily used when goods are
carried by rail or truck. The seller bears the full cost and risk in delivering the
goods up to this point, but the buyer must arrange and pay for the goods to clear

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customs.

10. DES "Delivered Ex-Ship" means the seller makes the goods available to the
buyer on board the ship at the destination named in the sales contract. The seller
bears the full cost and risk involved in bringing the goods there. The cost of
unloading the goods and any customs duties must be paid by the buyer.

11. DEQ "Delivered Ex-Quay" means the seller has agreed to make the goods
available to the buyer on the quay or the wharf at the destination named in the
sales contract. The seller bears the full cost and risks in delivering the goods to
that point including unloading. There are two variations of ex quay contracts: "ex
quay duty paid" and "ex quay duty on buyer's account." In the first, the duty is
paid by the seller. In the second, the duty also is paid by the seller, but the buyer
must reimburse the seller.

12. DDU "Delivery Duty Unpaid" Delivered duty paid or Under these terms,
the seller fulfils his obligation to deliver when the goods have been available to
the buyer uncleared for import at the point or place of the named destination. The
seller bears all costs and risks involved in bringing the goods to the point or place
of named destination. There is no obligation for import clearance.

13. DDP "Delivery/Duty Paid" represents the seller's maximum obligation. The
term "DDP." is generally followed by words indicating the buyer's premises. It
notes that the seller bears all risks and all costs until the goods are delivered. This
term can be used irrespective of the mode of transport. If the parties wish to make
clear that the seller is not responsible for certain costs, additional word should be
added (for example, "delivered duty paid exclusive of VAT and/or taxes").
2. The purpose and role of clearing and freight forwarding

The government: Freight clearing is done for several purposes to different parties. First, it is the
government which through its various bodies ensures cargo crossing its borders is monitored to
ensure:
 Collections of import duties and taxes- freight clearing is an opportunity for the
government to collect taxes and also ensure taxes have been paid correctly as per the
respected tariffs.
 Quality control- The government has a mandate to control entrance of counterfeit and
substandard goods in the country. Quality control bodies participate in the freight 5
clearance processes ensuring goods crossing the borders conform with set quality
standards.
 Protection of local industries and business- The government through freight clearance
controls the type and quantity of goods moving in and out of the country. The regulation
is usually meant to ensure local industries do not lose market for their products.
 Monitoring of illegal trade- restricted and prohibited goods – Through freight clearance,
the government is able to ensure that restricted and prohibited goods are not traded freely.

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Merchant (importer /exporter)
The purpose of freight clearance to a merchant (importer /exporter) can be explained in several
ways. First of all, it is a requirement which he has to comply with. Cargo has to be cleared prior
to entry into a country or exit to foreign state.

The role of freight forwarding
Unless the consignor, the person who sending goods, the person who receiving goods, wants to
attend to any of the procedural and documentary formalities himself, it is usually the freight
forwarder who undertakes on his behalf to process the movement of goods through the various
stages involved. The freight forwarder may provide these services directly or through sub-
contractors or other agencies employed by him. He is also expected to utilize, in this connection,
the services of his overseas agents. Briefly, these services are:

On Behalf of the Consignor (Exporter)
The forwarders, on behalf of the consignor (exporter), would:
 Choose the route, mode of transport and a suitable carrier.
 Book space with the selected carrier.
 Take delivery of the goods and issue relevant documents such as the Forwarders’
Certificate of Receipt, the Forwarders’ Certificate of Transport, etc.
 Study the provisions of the letter of credit and all Government regulations applicable to
the shipment of goods in the country of export, the country of import, as well as any
transit country; he would also prepare all the necessary documents.
 Pack the goods, taking into account the route, the mode of transport, the nature of the
goods and applicable regulations, if any, in the country of export, transit countries and
country of destination.
 Arrange warehousing of the goods, if necessary.
 Weigh and measure the goods.
 Draw the consignor’s attention to the need for insurance and arrange for the insurance of
goods, if required by the consignor.
 Transport the goods to the port, arrange for customs clearance, related documentation
formalities and deliver the goods to the carrier.
 Attend to foreign exchange transaction, if any.
 Pay fees and other charges including freight.
 Obtain the signed bills of lading from the carrier and arrange delivery to the consignor.
 Arrange for transshipment en route if necessary.
 Monitor the movement of goods all the way to the consignee through contacts with the
carrier and the forwarders’ agents abroad.
 Note damages or losses, if any, to the goods.
 Assist the consignor in pursuing claims, if any, against the carrier for loss of the goods or
for damage to them.

On behalf of the Consignee (Importer)
The forwarders, on behalf of the consignee (importer), would:
 Monitor the movement of good on behalf of the consignee when the consignee controls
freight, that is, the cargo.

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 Receive and check all relevant documents relating to the movement of the goods.
 Take delivery of the goods from the carrier and, if necessary, pay the freight cost.
 Arrange customs clearance and pay duties, fees and other charges to the customs and
other public authorities.
 Arrange transit warehousing, if necessary.
 Deliver the cleared goods to the consignee.
 Assist the consignee, if necessary, in pursuing claims, if any, against the carrier for the
loss of the goods or any damage to them.
 Assist the consignee, if necessary, in warehousing and distribution.

The scope of clearing and freight forwarding
Port clearance; Port clearance is a process of seeking authorization and complying with set
procedures so as to enable:
 A vessel to access a berth and commence cargo operations. Before a vessel is allowed to
come in contact with the shore or shore based activities, it is a requirement that the vessel
should have been cleared. The port authority is one among the authorities mandated with
the task.

 Vessel to sail from a port- Before a vessel departs from a port; she should seek clearance
from the port authority. Such port clearance is undertaken by the shipping or port agent
who has a responsibility of paying all relevant charges relating to the vessel call and
cargo handling to the port authority. In the past, vessel would not be allowed to sail out of
a port before all dues have been collected. In the recent times however, the commitment
by the port or shipping agent to pay the charges is enough to allow the vessel to sail. It is
therefore important for the ship agent to ensure an outstanding relationship with the port
authority and the ship owner to avoid vessel delays.

 Clearing agent move cargo in or out of the port.

The process of port clearance involves a number of procedures which includes but not limited to:

 Declaration of cargo / vessel with port authorities. This includes submission of all details
relating to vessel and cargo with the port authorities in advance. In Kenya and other East
Africa countries for example, the process involves making a declaration in form of
manifest to the port authority. In the recent times, manifest filing has been harmonized
with all authorities now using a common system.

 Process of billing and recovery of stevedoring charges from shipping lines, charterers or
cargo owners. This is to ensure allocation of stevedoring personnel and resources for
purpose of offloading the ship.

 Stevedoring. This is the loading or offloading of cargo to or from the ship. The process is
coordinated by the shipping agent and terminal operator. Offloading takes place either
using shipboard cranes or shore based facilities such as dock cranes, ship shore gantry
cranes and harbor cranes.

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 Transfer of cargo to the yards or sheds. Upon offloading, cargo is transferred to the yards
or sheds for clearance. The movement to the yard is done using: straddle carriers, front
loaders, truck and trailers, forklifts etc.

 Issuance of verification memos. The port authority receives verification approvals from
customs and subsequently issues verification memos to the clearing agent. The
verification memo is an authority by the port authority office to ground officers and
machine operators to lift containers and place them in verification areas.

 Receiving of pre-advise and pick up orders. The port authority receives cargo pre-advises
and pick up orders from clearing agents. Approval of pick up orders and pre-advises is
granted upon confirmation customs release. Upon approval, billing takes place
automatically and the next step is securing of payment.

 Preparation and issuance of loading slips. Once port charges have been secured, the
clearing agent presents the truck details and a loading slip is processed. Loading slips are
an authorization for the port authority yard staff to lift the cargo and load on the indicated
truck.

 Preparation and issuance of gate pass. Gate pass are processing takes place when the
truck arrives at the gate. It is used for purpose of exiting the port.

Shipping line clearance;

Shipping lines are the local representatives and offices of ship owners. They are tasked with a
responsibility of coordinating cargo handling operations and delivery to consignees. They work
in liaison with port authorities and terminal operators on matters of documentation, cargo
handling, and temporary storage and delivery modalities to consignee’s agent.

Most shipping lines have their established clearance procedures and which they usually require
the consignee through his agent to comply with for release of delivery orders. In the recent days,
procedures have been harmonized and there exist a lot of similarities in shipping line clearance
procedure. This has been aided by regulation bodies and shipping lines’ associations.

The scope of shipping line clearance basically entails submission of original bill of lading to
shipping agent by the consignee’s agent. The bill of lading as a document of title is surrendered
fully endorsed for a delivery order to be issued.



Customs clearance;
Customs clearance work involves preparation and submission of documentations required to
facilitate export or imports into the country, representing client during customs examination,
assessment, payment of duty and co taking delivery of cargo from customs after clearance along
with documents.
The scope of customs clearance entails:

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 Receiving appointment from the importer to undertake customs clearance of his behalf.
An appointment for customs clearance could be by express agreement or by word of
mouth depending on relationship and level of trust between the parties. The current trend
has seen most importers and customs agent preferring to perform the scope of customs
clearance under express contracts. This helps to ensure each party perform in their part
and can be held liable for losses and damages arising from failure to exercise due care or
non performance.

 Handing over clearance documents to clearing agent. Upon appointment, the
clearingagent should advise the importer on documents requirements. The agent should
make arrangements to receive documents as required. Customs clearance documents
range from shipment to shipment but below are a list of most common clearance
documents: Bill of lading, Commercial invoice, packing list, Certificate of conformity,
Certificate of origin, Certificate of analysis, Material safety data sheet.

Other Government Agencies
The scope of customs clearance with other government agencies varies from one shipment to the
other and also depending on the government directions, A good example would be in a case of an
arriving consignment of maize shipped in bulk. Under the circumstance, the government is
concerned with the public health and safety issues. For such cargo, they will station their
agencies consisting of KEBS, port health and KEPHIS to coordinate the various tests and
inspection. The cargo will have to be tested for afro toxins and also for genetically modified
organisms. For it to be accepted, it must be certified as GMO free and afro toxin free. If the
cargo is not compliant, the vessel is not allowed to discharges and such goods will have to be
reshipped back to the source. The government agencies are also much involved when comes to
clearance of individual shipments. They are positioned at the various clearance stations and work
adjacent to customs officials. Each of the government agencies has its focus with most of the
common ones as follows:
 Conformity to quality of standards (Kenya Bureau of standard- KEBS)
 Radio Activity (Radiation Protection Board)
 Microorganisms, plants and animals- Kenya Plant Health Inspectorate (KEPHIS)
 Public health and safety- Port health
 Chemicals, food and poison – Food and poisons board

Port dues and charges
Port dues and charges are the costs paid by ship owners, importers, charters or shipping agents to
the port authority or terminal operator in relation to cargo or vessel operations. The amount or
charges to be levied are dependent upon:
 Type of ship- container ships, break bulk ships, RORO vessels, tankers, lighter aboard
ship, bulk carriers, reefer vessels etc
 Type of cargo handled: break bulk, containerized, less than container load, liquid cargo,
grains etc
 Volume of cargo handle- no of containers or tonnage on metric tons
 Size of the ship- in tons, net registered tonnage, gross registered tonnage, twenty foot
equivalent units etc

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 Nature of operation: shifting from the berth, cargo handling, pilot age, mooring etc
 Time spent at a berth or at the port- storage, delay etc
There are so many charges payable to the port authority in relation to the vessel or cargo
handling. These charges are applied as per the port tariff which is a public document. A port 27
tariff is a well detailed documents listing on services provided by the port and charges payable
for each. It also shows the basis through which charges may be calculated or arrived at. Port
tariffs are arrived are made through consultation with all stakeholder. In this unit, we will briefly
analyze the most common port changes to equip the student with a basic understanding and to
enable him know what port charges are likely to be levied for certain services. Students should
however, Endeavour to obtain copies of local port tariff to analyze the charges and be able to
compute the costs applicable for a given ship or volume of cargo.

Some of the common port charges include:

Marine
 Berth Hire; A berth is a designated area at the port next to a shore where vessels sit to
load or discharge cargo. One port may have several berths. The number of berths in a port
depends on the type of vessels and cargo operation at the port. Berth in most ports are
located on basis of first come first served. The port authority charges for use of a berth
depending on length of time take. The charges levied for hiring a berth are known as
berth hire charges. The charges are based on time spent at the berth so as to push shipping
agents to ensure minimal time is spent at the berth. Berth hire charges help the terminal
operator to get proceed for maintaining the berth and the port in general.
 Light Dues; Light dues are charges levied on most commercial vessels calling at ports
around the world for lighting services offered at the ports. Lighting dues are used to
finance lighthouse services. The light dues concept was borrowed from United Kingdom
and has main principles as below: The port authority traffic department sets the level of
light dues, which is reviewed annually, taking advice from the General Lighthouse
Authorities and representatives of the shipping industry. In most cases, the rate charged
is based on the net registered tonnage of the vessel. There is a cap on the charge which
limits the cost incurred by vessels regularly docking across different ports. There is a
minimum charge. Tugs and fishing vessels make an annual payment based on the
registered length of the vessel. Increasing automation of aids to navigation in ports across
the world has seen the rate of Light Dues fall in real terms over recent years.
 Mooring / Unmooring charges Mooring is the process of securing a vessel fast to any
variety of shore fixtures such bollard or piers on shore for the purpose of achieving
effective operations Mooring is often accomplished using thick ropes called mooring
lines or hawsers. The lines are fixed to deck fittings on the vessel at one end, and fittings
on the shore, such as bollards, rings, or cleats, on the other end. Mooring requires
cooperation between people on the pier and on a vessel. For larger vessels, heavy
mooring lines are often passed to the people on the shore by use of smaller, weighted
heaving lines. Once the mooring line is attached to the bollard, it is pulled tight. On large
ships, this tightening can be accomplished with the help of heavy machinery called
mooring winches or capstans.
Unmooring is the opposite of mooring i.e. the process of untying or releasing the ship
from the bollards and mooring structures ashore. The levies charged by port authorities or
other terminal operators for offering mooring services as described above to a ship is

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what is referred to as mooring charges Mooring charges are based on vessel size or
tonnages.
 Pilotage charges; Pilotage service refers to act safely guiding a vessel through a transit
by a pilot. The word also refers to charges or compensation to a pilot for his Pilotage
roles. It is an international requirement for vessel arriving or departing from ports in other
countries to utilize services of a local pilot for the purpose of ensuring safe navigation.
The levies charged by port authorities or Pilotage companies for offering the pilotage
services is what is referred to as Pilotage charges. The charges are levied based on the
size of the ship, net registered tonnage (NRT) or gross registered tonnage (GRT).
 Towage In/Out Towage charges; are charges levied by terminal operators or towage
companies associated with services of helping to maneuver the ship by pulling or pushing
the ship to a berth, from a berth, in or out of a port. The charges are levied on the basis of
the size of the ship or number of tug boats employed.

Stevedoring
 Stevedoring charges; Stevedoring is another word for cargo loading or discharge
operations. Stevedoring charges are the fees levied by a terminal operator for loading or
discharging cargoes to and from the ship. The amount is based on the volume of cargo
handles e.g. per ton or per twenty foot equivalent unit. A customs agent upon receiving
an appointment to clear good on behalf of a consignee should endeavor to find out the
carriage terms and cargo handling operation so as to find out who has the responsibility
to pay the stevedoring cost. There are some contracts fixed on terms which put the
stevedoring costs for the account of the cargo owners. For example, most bulk
consignments are fixed on free in out basis. Under such contract, the burden of loading
and offloading the vessel lies on the shoulder of the cargo owner. It is important for a
customs agent to find out the terms and advise the importer to allow for proper planning
and allocation of funds accordingly.
 Shore handling Shore handling charges are the fees levied by a port authority or terminal
operator for moving the cargo between the quay and the yards. This movement is done to
facilitate loading onto the vessel or creating space for offloading more cargo.
 Wharfage charges;the cargo handling facility is known as a wharf. Terminal operators
or the port authority levies wharfage fees to port users for usage of the port facility. The
fee is charged to all users for cargo handled through a port facility.
 Port Dues; The words ‘port dues’ are a common way of referring to various charges
payable to the port authority. Any payables to the port authority in respect for the ship,
cargo or services to both may be wholly termed as port dues.
 Tallying charges; Tallying is the process of cargo verification done to cargo prior to
loading or on offloading of ships meant to provide assurance that the number or quantity
of goods to be shipped or received is as described in shipping documents such as the bill
of lading, letter of credit, mate’s receipt, or other documents. It is also aimed at ensuring
material is packed, marked and labeled accurately to avoid damages or pilferage. Cargo
tallying roles are performed by inspectors or tally clerk who perform a number of
activities, based on client instructions. This would include:
 Conduct cargo tallies during loading and unloading to assure all parties that the
quantity specifications and features are as outlined in the documentation.
 Check packing, marking and labeling.

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 Monitor product marking and packing details to confirm that the material is
shipped in suitable packaging.
 Confirm manufacture dates, batch numbers, expiry dates, shipping marks and
packing lists, supplier certificates and labels.
The levies charged by a port authority for tally services are referred to as survey charges. The
charges vary depending on the volume of cargo with the basis being per ton, weight
measurement, cubic meter of consignments.
 Terminal handling charges (THC). Terminal handling charges refers to the costs levied
by the port authority or terminal operator to the ship agent for the roles of lifting
containers from the quay to the ship or vice versa. THC is charged on the basis of a 40ft
or 20ft container.
Miscellaneous
Miscellaneous charges are minor and extra charges served by port or terminal operators as
additional charges:
 Remarshalling fees; Upon vessel offloading, cargo is moved to the yards where the
importer is expected to clear the cargo and take delivery within a given timeframe. If the
importer does not clear the goods within the indicated timeframe, there is an assumption
that cargo 30 is moved (remarshalled) to a storage area to clear the yard and allow storage
of more cargo. Remarshalling fees is that taken as the cost of moving cargo from the
temporary storage area to the main storage area.
 Storage fees; Storage charges are the cost levied by a yard or terminal operator to a cargo
received for failing to clear goods within the provided days. Storage charges are usually
levied on a daily basis and are usually higher than the normal storage charges. They are
intended to punish cargo receivers and discourage him from using the facility as a
warehouse.
 Extra storage charges; Extra storage charges are charges levied above the normal
storage charges in the event a consignee delays clearance of goods beyond a given
period. For instance, the yard operator may charge thirty dollars for storage per day for
the first five days and thereafter decide to charge 50 dollars per day. The additional
charges are referred to as extra storage charges.
3. EARLY DAYS OF FREIGHT FORWARDING
Originally, a freight forwarder was a commission agent performing on behalf of the
exporter/importer routine tasks such as loading/unloading of goods, storage of goods, arranging
local transport, obtaining payment for his customer, etc.

However, the expansion of international trade and the development of different modes of
transport over the years that followed enlarged the scope of his service. Today, a freight
forwarder plays an important role in international trade and transport. The services that a freight
forwarder renders may often range from routine and basic tasks such as the booking of space or
customs clearance to a comprehensive package of service covering the total transportation and
distribution process.

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4. ROUTES AND TRANSPORT MODES
Trade Routes
The sea borne trade routes: A trade route is a logistical network identified as a series of pathways
and stoppages used for the commercial transport of cargo. a single trade route contains long
distance arteries, which may further be connected to smaller networks of commercial and
noncommercial transportation routes The trade routes enable goods to reach distant markets
across the globe. Below is a map showing some of the major trade routes.

Trans-Atlantic trade route: Links major industrial centers of the world namely East coast
North America and Western Europe. The route covers major ports like Gothenburg, Hamburg,
Bremerhaven, Antwerp, Le Havre, Felixtowe, Valencia, Rotterdam in Europe and Montreal,
Toronto, Newyork, Philadelphia, Charleston, Hampton Roads, Boston, Halifax. Major shipping
line operating in this route are , Maersk Sealand, Evergreen, COSCOS, OOCL, Hapag Lloyds,
MSC, Mitsui OSK, NYK and Hyundai Merchant.

Trans- pacific trade route: Links North American west coast ports to the industrialized canters
of Japan and the Far East with some services extending to the Middle East. Major Ports covered
in North America include Tacoma, Los Angeles, long Beach, Oregon, San Francisco, 14
Vancouver in the west, New York, Hampton Roads, Charleston etc. on the East Coast and
Tokyo, Singapore, Hong Kong, Busan and shanghai.

Asia-Europe: The route covers the trade of Europe stretching from Sweden down to France to
the Far East comprising of China, Malaysia, Singapore, Thailand, Hong Kong, Philippines,
Taiwan, South Korea and Japan. Major shipping lines involved in this route include Maesk
Sealand, COSCO, Mitsui OSK, PIL, MSC, Evergreen, NYK, Hapag Lloyds, and CMA-CGM
among others. Main ports served include; Le Havre, Rotterdam, Southampton, Hamburg,
Antwerp in Europe and Singapore, Hong Kong, Busan, Osaka, Tokyo, Shanghai, Salala and
Kaohsiung.

Transport Modes
The modes of transport Modes of transport are an essential component of transport systems since
they are the means by which mobility is supported. Geographers consider a wide range of modes
that may be grouped into three broad categories based on the medium they exploit: land, water
and air. Each mode has its own requirements and features, and is adapted to serve the specific
demands of freight and passenger traffic. This gives rise to marked differences in the ways the
modes are deployed and utilized in different parts of the world. More recently, there is a trend
towards integrating the modes through intermodality and linking the modes ever more closely
into production and distribution activities. At the same time, however, passenger and freight
activity is becoming increasingly separated across most modes.

The features of a good transport mode are:
• Cost friendly
• Safe and more secure
• Speed
• Convenient to users i.e. cheap and quick loading and unloading
• Flexible i.e. capability of carrying different kinds of materials
• Reliable i.e. delivery timely and without shortages or defects

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• Easy to control materials while in transit
• Extensive of added value

Before making a choice on mode of transport to be used in distribution of materials, the
following factors must be thoroughly assessed:
• The quantity of materials to be transported
• The type of packages used for the materials
• The cost of transporting the materials
• The urgency of the materials to be transported
• The nature of the goods i.e. size, shape, weight
• The security and safety of the mode
• The distance the materials are to be moved
• The timely delivery reliability of the mode
• The rates offered by other modes
• The effectiveness of tracing systems while goods are in transport.

The modes of transport used in distribution of materials include:

Air Transport:
Air transport has increased very surprisingly but still commanding less than 3% of the transport
needs. Crafts with high capacity jet freighters have made air transport mode more popular than
before. Air transport still stands the best method for perishables, fragile, emergencies and other
related deliveries. Due to high handling efficiency, packaging costs, damages and losses are
minimized.
The advantages of using air freight are:
• It is faster thus suitable for emergencies and perishable
• Increased cargo safety and security hence suitable for fragile and other valuables
• Reduced insurance costs as deliveries are only in transit for shorter period of time
• It serves the whole world hence increased availability
• Customers carry very small inventories hence reduced risks associated with transit
inventory carrying.
• Reduced packaging costs due to high skilled handling officers
• No traffic congestions
• The way is free i.e. no payment for using air space
• Easier shipment planning as flight is timetabled

The disadvantages of using air freight are: High freight cost
• Limited carrying capacity
• Only serves urban zones
• Possible disruptions due to bad weather
• Possible craft hijacking and crushing
• Requires much capital to buy crafts and construct airports
• Cannot transport all types of cargo
Water transport:
Materials are moved on water using ships, ferries, boats etc. The advantages of using water
freight are:
• The way is free i.e. no payment for using water

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• Can carry bulk materials unlike other transport modes
• Can carry heavy and irregular shaped materials
• Can serve a variety of destinations
• Little time is required for traffic control
• Offers alternative way of using water resources
The disadvantages of using water freight are:
• Very slow means of transport thus unsuitable for perishable and emergencies
• Not all countries have access to water i.e. land locked
• Very expensive to construct harbours where there are no natural ones
• Delays due to port congestion and corruption leading to operational disruptions
• Deterioration of quality of materials due to poor landing and shipping delays

Land Transport
a) Rail Transport
Rail freight operates as full carload (FCL) and less than carload (LCL). Materials are moved
from source to required destinations through train cars.
The advantages of using rail freight are:
• Very economic over long distances
• Very economical for bulky transportation
• Have definite schedules hence easy planning
• Can carry almost every type of materials hence reduced limitations
• Have convenient delivery/collections points thus flexible
• It is cheaper to run once set up
• Not affected by weather conditions
• Has no competitor hence increased market share
• No congestions
The disadvantages of using rail freight are: Very slow hence unsuitable for perishables and
emergencies
• Poor safety and security to materials thus increased damage and losses
• Only serve customers along railway lines
• Very uneconomical for shorter distances
• Very costly to buy trains and construct railway lines
• Set timetables may cause inconveniences and delays where there are irregularities
b) Road transport:
Materials are moved by means of motor vehicles on land surfaces.
The advantages of using road freight are: Very flexible i.e. can serve many destinations
• Very economical over shorter distances
• Can accommodate every size of delivery
• Easily available
• Enhances on route sales
• Does not require large capital to set up as compared to other modes
The disadvantages of using road freight are:
• Very costly over long distances
• Very poor road network leading to delays and high maintenance cost
• Not suitable for bulk deliveries
• Increased traffic congestion especially in urban zones and weighbridges
• Easily disrupted by bad weather

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• More expensive compared to railway and water freight
• Lack of timetables resulting to vehicles moving one way empty
c) Pipeline transport:
Pipeline is mainly used to freight liquefied cargo such as oil, water, chemicals from source to
destination. All cargo that is solid state must be liquefied first before freighting using pipeline.
The advantages of using pipeline freighting are:
• Increased environmental friendliness due to underground construction
• Safer and cost effective to use
• Not affected by weather conditions as they are closed underground
• Cheaper to operate
The disadvantages of using pipeline freighting are: High construction cost
• Land disturbance during construction
• Unsuitable for smaller units
• Requires highly sophisticated monitoring systems
• Any slight leakage in the system may result in heavy losses
• Unsuitable for solid goods
• Serves only limited geographical zones
5. EXPORT DOCUMENTS

Export cargo documentation is the process or procedure or practice of export cargo declaration,
obtaining clearance, logistics, reserving space onboard a vessel, general facilitation of cargo with
necessary institutions for purposes of export and payments.
The types of export cargo documents
a) Booking documents
Booking documents are documents that are used to reserve space for loading of export cargo
onboard a ship for a specific voyage. These documents are requested by the Forwarder on behalf
of the Shipper and/or in some cases are requested by the Shipper and are issued by the local Ship
Agent or a Shipping company.

Booking documents primarily serve as export cargo shipping instructions and confirms
information of goods intended for shipment which may have earlier been provided on the
telephone by the shipper to the shipping line or agent. These documents are eventually used to
confirm shipment and to generate outward Bill of Lading for shipped export cargo. Examples of
booking documents include, but are not limited to:

Export Cargo Shipping Instructions (ECSI)
The Export Cargo Shipping Instruction (ECSI) is the instruction from the exporter to the
forwarder or carrier. It contains information on the goods and the route to their destination, any
transport requirements, customs information, which is to receive what documents and an
allocation of the costs. It is extremely important that the information provided in the ECSI is
accurate.

The ECSI is designed to be a multipurpose form fulfilling several functions and giving specific
instructions about export services required and responsibility for those charges. The form can be
used for one or more purposes relating to a consignment:

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• Movement and handling of goods (shipping, forwarding and transport)
• Customs (including Customs clearance and payment of any duties and taxes)
• Distribution of related commercial and transport documents
• Allocation of charges (freight and other operational charges)
• Special instructions (e.g. insurance, dangerous goods, additional documents required)

The use of the ECSI is good exporting practice as it can serve as a checklist at the planning
stage. The ECSI provides the authoritative record of the exporter's instructions for the way the
consignment should be handled and processed along the international supply chain.

In cases of disagreement over cargo handling procedures, proper export documentation or
responsibility for export charges the properly completed ECSI can be the source document for
the resolution of any dispute. In summary, the ECSI can save exporters time and money and give
clear instructions to those involved in the transport chain.


Shipping Order/Standard Shipping Note
A shipping Order is also referred to as a Standard Shipping Note. It is a document that gives
information about particular export consignment. It is used when delivering cargo to a seaport or
freight terminal.

The Shipping Order must accompany the export goods to the receiving berth (in case of direct
loading) or be lodged at the receiving authority‘s designated office before arrival of the export
goods for shipment according to local port practice.

It provides, among other information, the Consignor‘s name and address, the Consignee‘s name
and address, the Forwarders name, country of origin, vessel name, voyage number, expected
arrival date of the loading ship, port of loading, port of discharge, cargo description, cargo marks
e.t.c.

Container Booking Forecast
Container Booking Forecast is a list of all cargo bookings for a particular sailing/voyage. It is a
list compiled by a shipping line/agent and sent to the respective load port giving figures of export
cargo expected to be loaded on a specific ship for purposes of export cargo space reservation and
planning by the port for the ship/voyage.

NOTE: Booking document is NOT a document of title to the goods. For Booking Document to
be valid, it must be signed by the shipping line or agent as a necessary authorization to load the
indicated cargo onboard the booked ship and voyage.


b) Clearing documents Cargo
Clearance also refers to Customs Clearance which is the formality needed to obtain authorization
from Customs to allow or permit cargo to leave a port. Clearing is the act of clearing
merchandise from a Customs restricted area or jurisdiction.

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Clearing documents are therefore documents which are used for purposes of making cargo
declaration and facilitating Customs cargo clearance procedures for the release and subsequent
shipment of export cargo from a port.
Examples of these clearing documents include, but are not limited to:

Customs Entry
A Customs Entry is a Customs document where declaration of information on imported or
exported goods, prepared by a Customs Broker/Forwarder on a prescribed form called an Entry
Form and submitted to the Customs. It states the customs classification number, country of
origin, description, quantity, and value of the goods, and the estimated amount of duty to be paid.
If upon examination by a customs officer the entry is verified as a correct, the goods in question
are released (on payment of duty and other charges, if any) to the importer, or are allowed to be
exported.

Shipping Order
Apart from being a Booking Document, the Shipping Order also serves as a clearing document.
This is mainly so due to the design of the document which is divided into several sections.

A section of the Shipping Order is dedicated to declaration of shipping and cargo information.
Shipping information includes the respective Ship’s Name and Voyage number, the Port of
Loading, Port of Discharge, Final Destination etc. whilst cargo information includes Marks and
Numbers, cargo/commodity description, weight of cargo, container size e.t.c.

Another section of the Shipping Order is designed for clearance of the export cargo by both
Customs and Port Authority/Stevedoring Company, respectively. Further, the Shipping Order
must be obtained first before the Forwarder makes an export declaration on Customs Entry since
cargo must have already been booked on a specific vessel/voyage with specific shipping
information and cargo marks/container number(s) for same to be entered on the export customs
entry so as to be able to make any applicable payments and obtain clearance for shipment from
Customs.

Additionally, the Shipping Order must also be lodged with the Port Authority/Stevedoring
Company so as to enable the payment of applicable port charges for handling of the export cargo
and for the cargo to be allowed for shipment by the Port Authority/Stevedoring Company. This
therefore makes the Shipping Order to also be a clearing document.


Certificates of export
Certificates of export from pertinent institutions vary according to the type of export cargo.
Because there are commodities that are either controlled or restricted or prohibited from export,
the Government has established pertinent institutions which are charged with the responsibility
of overseeing the controlled or restricted exports of such commodities or the prohibition of such
goods as may be defined in respective Acts.

Certificate of Origin
Certificate of Origin is a critical clearance document for export cargo and is issued by the Kenya
National Chamber of Commerce and Industry under the Directorate of Commerce in the

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Ministry of Trade. The Certificate of Origin confirms where export goods were made and their
trade value. The origins of goods influence taxation depending on bilateral trade agreements
between trading states.

c) Interchange documents
Interchange is the transfer of cargo and/or container between different means of transport or
modes of transport.
An Interchange document is a standard container document signed by two parties concerned in
the shipment of cargo container in relation to the outside condition or survey of the containers
especially at the point where the responsibility of handling the cargo container is changing from
one relevant party to another.
A container interchange is a document that gives a detailed description of the outward
condition of a container e.g. whether it is dented, cracked, bulge outwards or in good order and
condition etc. when the container transfers from one responsible holder to another. By preparing
an interchange report for each transfer, it can be established when damage to a container has
occurred and the party, who during that period, had the container in their possession can be held
responsible.
In other words, it is a document which contains information regarding the condition (physical
and functional) of a freight container.
d) Payment documents
Payment documents are documents which are used to process payments so as to facilitate
transportation, clearance, handling and shipment of export cargo.
They include the date, amount, name of the payer, name of the payee, respective account
number, etc. Examples of payment documents include, but are not limited to:

Banker’s Cheque: A banker’s cheque is a cheque drawn by a bank on itself, which is bought by
a person to pay a supplier unwilling to accept a normal Cheque. Banker's cheques are used as
they are a guaranteed form of payment. A Banker’s Cheque is the same as cash and so, the
cheque cannot be returned unpaid. This cheque is a bill of exchange to be paid on demand and
drawn by one bank on another. Sometimes it is a cheque drawn by a bank on itself. Also called
banker's draft or bank draft.
Commercial Invoice: A commercial invoice is a document used in international maritime trade.
It is provided by the person or corporation that is exporting goods to another country or other
countries. It is a document required by customs to determine true value of the imported goods,
for assessment of duties and taxes.
A commercial invoice (in addition to other information), must identify the buyer and seller, and
clearly indicate the;
(1) date and terms of sale,
(2) quantity, weight and/or volume of the shipment,
(3) type of packaging,
(4) complete description of goods,
(5) unit value and total value, and
(6) insurance, shipping and other charges (as applicable).

Receipts

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A receipt is an accounting document issued after payments for a particular chargeable service
have been received. It is a confirmation that due payments have been duly and properly settled
by the respective client.

e) Inspection documents
Inspection of export cargo before shipment is known as Pre-shipment Inspection commonly
abbreviated as PSI. This inspection ascertains the value and quality of export cargo prior to
shipment and is used by the importing country or buyer/Consignee for different reasons.

Many importing countries require pre-shipment inspections (PSI) of export cargo prior to their
shipment. This process is designed to protect the interests of the importer/consignee in the
international purchasing process. A pre-shipment inspection includes:
• Physical identification of the goods in the exporting country to ensure that the goods are
in accordance with the description declared by the exporter
• Verification of the contract price. This is to ensure that the price is reasonably in line with
current export prices from the country of supply or world market prices. Verification of
price provides Customs with accurate data for the collection of import taxes and levies
hence allows Customs to apply the correct tariff rates.

The purpose of export cargo documents
Booking documents:
• Booking documents plays a very critical role in as far as reserving of space onboard a
ship, provision of equipment (empty containers) for export cargo, delivering export cargo
to a port/terminal and confirmation of shipment is concerned.
• They also form a basis for export declaration with Customs and processing with the port
or stevedoring company. For example, when making an export declaration, the shipper or
Forwarder will indicate the voyage number and name of ship intended for loading of the
export cargo et al, while to the port the Shipper or Forwarder will indicate the same
information for purposes of planning and export receiving.
• Booking documents are principally used for the shipping transaction purposes like
Export- Import.

Shipping Order
Shipping Order is used to provide cargo information to a ship agent for purposes of booking
space onboard a ship. It is also used to provide shipping information such as the Port of
Discharge and/or Final Destination of the export cargo for planning purposes by both the
Shipping Line/Agent and the Port/Stevedoring Company. It is also used:
• As a basis for making declaration of export cargo for purposes of obtaining a release for
export by Customs.
• As a basis of lodging export details with a Port/Stevedoring Company for purposes of
paying applicable port charges and port planning purposes.
• To confirm shipment/loading on board of the export cargo for purposes of generating an
outward Bill of Lading.

The Shipping Order serves the receiving authority as a delivery or receipt note for a particular
consignment. It is for use with all export consignments delivered to container reception points as
well as to conventional berths receiving areas.

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It enables the shipper to complete one standard document for all consignments irrespective of
port or inland depot. By doing so, it provides the receiving authority with complete, accurate and
timely information as well as providing all those with an interest in the consignment with
adequate information at each movement stage, until final loading on board the vessel.

The Shipping Order plays the role of facilitating export cargo receipt at the departure port/load
port but is not acceptable to banks for financial settlement purposes.

Export Cargo Shipping Instructions
Export Cargo Shipping Instructions serves as a confirmation of the information regarding the
goods to be shipped provided earlier on the telephone by the shipper to the shipping line/ship
agent.
This document is intended to facilitate accurate completion of the Outward Bill of Lading. It can
only be used for general cargo shipment and not for dangerous goods, obnoxious cargo or
merchandise requiring controlled temperature (refrigerated cargo).
It is used in the many trades worldwide but the layout may differ from one shipping company to
another. It has no mandatory requirement.

Container Booking Forecast
A Container Booking Forecast is a document sent by the Shipping Line/Agent to the respective
Load Port giving information (including Commodity, Port of Discharge, Weight) of export
containers booked and expected to be loaded on a specific Vessel/Voyage.

The Container Booking Forecast is used by the Port for purposes of planning and
creation/reservation of space for the number of export containers expected to be received in the
port as booked for the specific vessel/voyage.
It is a critical document for efficient export cargo receiving and ship loading operation at a port.



Clearing documents
The purpose of the Clearing documents is to facilitate the issuance of a formal release for
shipment of declared export cargo by the relevant institutions or authorities.
These documents also provide evidence of the duly issued release and can be produced at
whichever point of the logistical chain, as and when requested.

Interchange documents
The interchange document is used to record the outward physical condition of a freight container
when it is being passed from one handling entity to another, either from one mode of transport to
another or through the gates or when export cargo is being offloaded from a truck or wagon and
is being received at the Terminal/Port. This document will be printed out, acknowledged and
handed to the party that is taking up the responsibility of handling the container.

In case of a physical damage to a container, an Interchange document is also to determine the
point at which it was damaged while being exchanged/handed-over from one party to another

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and can therefore be used as a basis to raise claim for compensation of the damage from the party
responsible.

Payment documents
The purpose of payment document is to facilitate payment processes for the service of export
cargo handling and as proof of payment for the service rendered or expected to be rendered.

Inspection documents
The purpose of Inspection documents such as the Pre-shipment Inspection certificate/report is:
• It is used by Customs authorities as a basis to determine applicable tax and is used to
maximize duty collections. By undertaking duty assessment in the country of export,
importers have no opportunity to pressurize customs to assign lower rates.
• It is used to deter capital flight in countries where exchange controls exist by preventing
deliberately inflated invoicing. This can deplete foreign exchange reserves, which can
also reduce the taxable income declared especially by multinational companies.
• It is used by countries of import to significantly reduce the incidence of illegal imports,
such as radioactive waste, by inspecting shipments in the country of export before
dispatch.
• The issuance of PSI gradually creates a vast database of vital trade information is created,
which can be supplied to the Client Government in a variety of formats, as an aid to
economic decision making and to induce confidence in donors.
• Pre-shipment inspection document is used to ensure that the price charged by the exporter
reflects the true value of the goods.



6. IMPORT CARGO DOCUMENTATION
Clearance documents
Cargo Clearance also refers to Customs Clearance which is the formality needed to obtain
authorization from Customs to allow or permit cargo to leave a customs restricted area or a port.

This is because Customs Departments are the government designated authority to implement the
policies related to import and export, collect customs duties and facilitate movement of people,
goods and cargo into and out of the country.

Any exit or entry point out of or into a country is a Customs restricted area. Customs
departments therefore have offices at all sea ports, air ports and border gateways which are
essentially the exit and entry points for people and cargo movements into and out of the country.

Clearing therefore is the act of clearing merchandise from a Customs restricted area or
jurisdiction by a licensed Customs Agent.

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Customs clearance agents are also called Clearing and Forwarding agents/Forwarders. They are
registered and licensed by Customs to operate. Their role is limited to acting on behalf of and
representing clients as third-party agencies engaged in customs clearance.

Clearing documents are therefore documents which are used for purposes of making cargo
declaration and facilitating Customs cargo clearance procedures for the release and subsequent
delivery of import cargo from a port for both domestic and/or transit destinations.
Examples of these clearing documents include, but are not limited to:


Import Cargo Manifest:
An import cargo manifest is a document which lists all the goods onboard a vessel i.e. a
description of the contents, weight, volume and marks of all packages, shippers and consignees,
destination, and freight. It is drawn up by Ship Agents at ports of loading from Bills of Lading
issued.

It is also a critical document that is used by Customs as a basis of authorizing the respective ship
to access the port and is also used by the Port Authority as a basis to plan for ship ‘s reception
and import cargo discharge operations. See example below;

No import cargo clearance process at the port can be successful unless with the existence of a
cargo manifest.
The cargo manifest is generated by the local ship agent and is used by different government
agencies, at the port, as a principal document of reference and as a basis for processing release of
import cargo.

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Import Declaration Form
Commonly referred to as IDF, the Import Declaration Form is a commercial form that is
obtained from Revenue Authority and which is applied for and filled by the importer/consignee
in consultation with appointed Forwarder who will engage the port system.

The IDF is the primary document that starts of the Customs clearance procedure for domestic
import cargo.
The IDF form contains the following information
o Value of the cargo (to enable Tax calculation)
o Quantity of the cargo
o Quality of the cargo (backed up by the Pre-shipment Inspection report)
o Cargo Classification (HS Code).

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Bill of Lading
A Bill of lading specifies the name of the master, the port and destination of the ship, the goods,
the consignee, and the rate of applicable freight.
It is a document of title and is essential in cargo declaration and clearance as it serves as a proof
of shipment, especially where pre-arrival clearance is being done.
It contains amongst other information:
o Name of the vessel
o Voyage number of the vessel
o ETA of the vessel
o Cargo description
o Cargo marks and numbers
o Actual number of packages
o Name & Full address of actual Sender
o Name & Full address of actual receiver

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o Place of delivery
o IMDG code (if cargo is dangerous)
o CFS (where cargo is not for port clearance)

It is document that establishes the terms of a contract between a shipper and a transportation
company.
 It serves as a document of title.
 A contract of carriage.
 A receipt for goods.



The basic functions of the Bill of Lading
The Bill of Lading has three basic functions:
Evidence of the contract of carriage: an evidence of the contract of carriage (i.e. contract
between the carrier and the shipper for the transportation of the goods),
Receipt: a receipt issued by the carrier to a shipper for goods received for transportation,
(i.e. a proof of delivery of the goods on board the vessel) and most importantly,
Evidence of title: evidence of title to the goods (the bill of lading, representing the
physical cargo, proves ownership of the goods in case of dispute and when transferring
rights to the goods in transit by the transfer of the paper document to another party)

Delivery Order
The Delivery Order is a document issued by a liner company's agent authorizing the party named
in it to take delivery of specific cargo from a ship. It is normally issued in exchange for an
original bill of lading.
The Delivery Order commonly abbreviated as DO is also issued electronically by the respective
Ship Agent to the Port Authority, confirming that no amounts are owed by the importer and
authorizing for the indicated cargo to be delivered to the named consignee.
Without the Delivery Order, the Port Authority will not deliver the pertinent cargo.

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Customs Entry
A Customs Entry also known as the Single Administrative Document (SAD – under the East
Africa Community Customs Management Act and Customs administration) is a Customs
document where declaration of information on imported or exported goods, prepared by a
Customs Broker/Forwarder on a prescribed form called an Entry Form and submitted to the
Customs.
It states the customs classification number, country of origin, description, quantity, and value of
the goods, and the estimated amount of duty to be paid. If upon examination by a customs officer
the entry is verified as a correct, the goods in question are released (on payment of duty and
other charges, if any) to the importer, or are allowed to be exported.



Certificate of Conformity (applicable to certain goods)
The Certificate of Conformity is a primary document used by Kenya Bureau of Standards to
ascertain that the product conforms to the standards of Kenya and to authorize import cargo into
the domestic market. The Certificate of Conformity is required on certain goods such as
 Edible offal of bovine animals, swine, sheep, goats, horses, asses, mules or hinnies, fresh
chilled or frozen,

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 Meat of sheep or goats, fresh, chilled or frozen. - Carcasses and half-carcasses of lamb,
frozen
 Friction materials and articles thereof (e.g. - sheets, rolls, strips, segments, discs, washers,
pads), for brakes, clutches or the like - containing asbestos

Packing List
A Packing List is a list issued by the seller/sender of goods and which provides the description of
goods including the package number, description, weight in metric ton, length in meter, width in
meter, height in meter and cubic measurement of all packages.
The information provided on the packing list must match with the details mentioned on the Bill
of Lading and the Commercial Invoice.
The Packing List is critical in the Customs clearance process.


Commercial Invoice
A Commercial Invoice is issued by the sender/seller of goods to the importer/buyer.
The Commercial Invoice provides details (as per pertaining packing list) and indicates the total
CIF value of the consignment. It will provide the exact details as shown on the packing list such
as Items cost, freight charges and insurance amount which is duly broken down on each
Commercial Invoice.
The Commercial Invoice is also critical in the Customs clearance process for import cargo.

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Exemption letter (if applicable)
An exemption letter is a letter given by the Ministry of Finance to a qualified applicant,
exempting payment of import customs duty and/or VAT.
Charities and governmental organizations, diplomatic missions, returning residents etc. can apply
for exemption of duties and/or VAT. This is done by the receiver writing to the Treasury. If
accepted, the Treasury instructs the customs not to collect the waived portion on the particular
consignment.
Exemption letters are usually granted for specific consignments which have to be exactly
described in the application.
Obtained exemptions are uploaded into the SIMBA system by means of a code which has to be
passed on to the clearing agent when making cargo declaration

Inspection
Cargo inspection is very critical in as far as ascertaining the value of the imported goods is
concerned for purposes of determining applicable duty by Customs and for purposes of
determining conformity to domestic standards by Kenya Bureau of Standards.

The initial inspection of import goods is done at the point of cargo origin where an
internationally reputed and designated inspection company will conduct inspection of the cargo
and issue an inspection report.

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Governments will implement PSI programmes to ensure that imports comply with their
regulations. Non-compliance with these regulations can result in:
• Loss of valuable duty and tax revenue
• Loss of foreign exchange reserves (in countries where exchange controls exist)
• Importation of substandard or prohibited goods

Below is how the PSI process works.
• A physical inspection of goods is carried out pre-shipping, in the country of export,
establishing the exact nature of the goods.
• The invoice and other documents are then scrutinized, and an accurate valuation, and
customs tariff code, are assigned. These are used, in conjunction with the client country's
published duty rates, to calculate the correct duties and taxes payable.
• A PSI certificate is issued to the importer. This is used to substantiate the payment of full
duty, prior to clearing the goods.
• The actual duty collected is compared with the PSI certificates, and any shortages can be
investigated and corrected.
Below are samples of Certificates of Pre-shipment Inspection and Conformity.

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Interchange
Interchange is the transfer of cargo and/or container between different means of transport or
modes of transport.

The interchange document is used to record the outward physical condition of a freight container
when it is being passed from one handling entity to another, either from one mode of transport to
another or through the gates or when export cargo is being offloaded from a truck or wagon and
is being received at the Terminal/Port.

Upon arrival of the import container at the port exit gate, the Forwarder and the Port Authority
gate officer will inspect the outward physical condition of the subject container and will
record/indicate the findings on the Interchange report which shall then be duly signed by both
KPA and the Forwarder as a confirmation of concurrence by both parties as to the physical
condition of the container as at the time of delivering same out of port.

The Forwarder retains a copy while another copy is retained by KPA.
After the Consignee/importer has taken possession of cargo, the empty container is returned to
the Empty Container Depot.

Upon arrival at the depot and prior to receiving the empty container, the Forwarder and the
Empty Container Depot representative will inspect the container and an Interchange report will
be issued indicating the physical condition of the container.

The Interchange will be signed by both the Forwarder and the Empty Container depot.
Below is a sample of an interchange report.

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Airfreight Documentation
The meaning of airfreight documentation:
Definition of airfreight; Airfreight is the carriage of commercial goods by aircraft.

Airfreight documents; Airfreight documents are documents that are used to for the clearance
and carriage of goods by aircraft.

Airfreight documentation; Airfreight documentation is the process of facilitating clearance and
carriage of goods by aircraft.
The types of airfreight documents
Import documents
Import documents used in airfreight include:
 Air Waybill; An Air Waybill is the document that accompanies goods conveyed by the
airline throughout the transit. It is an air consignment note. It is not a document of title or
transferable/negotiable instrument. Generally, it is a receipt for the goods for dispatch
and is a prima facie evidence of the conditions of carriage. Some of the information
contained in an Air Waybill include, but not limited to: Consignee’s name and address o
Shipper’s name and address Consignee’s account number, Shipper’s account number o

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Name of the carrier,Airport of departure o Airport of destination, Agent IATA code o
Handling information o Nature and quantity of goods, Declared value for customs e.t.c.

 (Air) Cargo Arrival Notice; An (Air) Cargo Arrival notice is a letter of advice and
request to the consignee, issued only when the client has failed to contact the airline
regarding the processing of the imported goods. The (Air) cargo Arrival Notice contains
the following information: o Consignment details o Name and address to which the
consignment is to be sent o Air Waybill number o Airline o Flight number e.t.c.

 House Air waybill; A House Air waybill is a certificate of shipment of a specified
consignment for a particular flight(s). The consignment forms part of a groupage or
consolidated international consignment normally undertaken by cargo consolidators.
Some of the information contained in an Air Waybill include, but not limited to: o
Consignee’s name and address o Shipper’s name and address o Consignee’s account
number o Shipper’s account number o Name of the carrier o Airport of departure o
Airport of destination o Agent IATA code o Handling information o Nature and quantity
of goods o Declared value for customs e.t.c.

 Air Cargo Manifest A document which lists all the goods on board an aircraft i.e. a
description of the contents, weight, volume and marks of all packages, shippers and
consignees, destination, and freight.


Export documents
 Air Waybill; An Air Waybill is the document that accompanies goods conveyed by the
airline throughout the transit. It is an air consignment note. It is not a document of title or
transferable/negotiable instrument. It is a receipt for the goods for dispatch and is a prima
facie evidence of the conditions of carriage. Generally, an Air waybill is a document
which covers transport by air. It is issued by the carrier, whether an airline or a freight
forwarder, as a non-negotiable document serving as a receipt to the consignor for the
goods, and containing the conditions of 90 transport. It also shows the details of the
consignee so that they can be contacted on arrival of the goods.
 Instructions for dispatch of goods; Instruction for Dispatch of Goods is a standardized
form prepared by the shipper and submitted to the airline giving clear and complete
forwarding instructions.
Clearance documents

The clearance documents include:
 Import Declaration Form Commonly referred to as IDF, the Import Declaration Form
is a commercial form that is obtained from Kenya Revenue Authority and which is
applied for and filled by the importer/consignee in consultation with appointed Forwarder
who will engage the SIMBA system.

 The IDF is the primary document that starts of the Customs clearance procedure for
domestic import cargo. The IDF form contains the following information; Value of the
cargo (to enable Tax calculation), Quantity of the cargo, Quality of the cargo (backed up

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by the Pre-shipment Inspection report), Cargo Classification (HS Code) and Mode of
transport.
 Customs Entry A Customs Entry also known as the Single Administrative Document
(SAD – under the East Africa Community Customs Management Act and Customs
administration) is a Customs document where declaration of information on imported or
exported goods, prepared by a Customs Broker/Forwarder on a prescribed form called an
Entry Form and submitted to the Customs.

 It states the customs classification number, country of origin, description, quantity, and
value of the goods, and the estimated amount of duty to be paid. If upon examination by a
customs officer the entry is verified as a correct, the goods in question are released (on
payment of duty and other charges, if any) to the importer, or are allowed to be exported.

The purpose of airfreight documents
Import documents
 Air Waybill; The purpose of the Air Waybill is to cover carriage of goods over any
distance by IATA scheduled services by as many airlines as may be required to complete
the transportation. When goods carried by one airline for part of the journey are
transferred to another airline, the original Air Waybill is sent forward with the
consignment from the point of original departure to the final destination under a through
rate. The main functions of the Air Waybill are a contract of carriage and a receipt for
goods; providing a unique reference for handling inventory control and documentation. It
is a primary document that is also used to facilitate Customs cargo clearance.
 Air Cargo Manifest; The Air cargo manifest is used for showing the cargo carried on
the aircraft and their respective Air Waybill. It is also used as a primary document for
cargo clearance at the airport.
 (Air) Cargo Arrival Notice; The purpose of the (Air) Cargo Arrival Notice is to inform
the consignee of the arrival of the goods at the specified airport; and to request the
appropriate documents to enable the consignment to be cleared through Customs.
 House Air waybill; The House Air waybill merely acts as a cargo receipt for the cargo
owner to confirm the goods have been accepted by the airline. It is not recognized by
Banks officially as a document to effect payment of goods.
Export documents
 Instructions for dispatch of goods; when completed by the shipper it is intended to
supply accurate information for the preparation of the Air Waybill by the airline or
IATA agent. It confirms details of the merchandise to be exported by air provided
earlier by telephone, fax or on-line from the shipper to the airline or IATA agent.
 Air Waybill; The purpose of the Air Waybill is to cover carriage of goods over any
distance by IATA scheduled services by as many airlines as may be required to
complete the transportation. When goods carried by one airline for part of the journey
are transferred to another airline, the original Air Waybill is sent forward with the
consignment from the point of original departure to the final destination under a
through rate. The main functions of the Air Waybill are a contract of carriage and a
receipt for goods; providing a unique reference for handling inventory control and
documentation. It is a primary document that is also used to facilitate Customs cargo
clearance.
Clearance documents

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The purpose of import documents in cargo clearance is to facilitate the process of import cargo
clearance from the airport. These documents are requirement by government agencies that have
the mandate to oversee release and/or control of import cargo entering the country. The primary
documents used for import cargo clearance are:
 Import Declaration Form The Import Declaration Form (IDF) is used for declaring
intention to bring into the country cargo originating from a foreign nation and is the basis
of declaration process with Customs which ultimately leads to import cargo release.
 Air Cargo Manifest The Air cargo manifest is an airfreight document issued by the
airline and the purpose is to show the cargo carried on board an aircraft, including its
description. It is primarily used for purposes of facilitation customs clearance.
 Customs Entry Its main purpose is to make customs declaration and facilitate issuance
of cargo release by customs.
The local airfreight documentation practice
 Cargo clearance Once the Forwarder has obtained the original Air Waybill and cargo
manifest, the Forwarder engages the airport customs clearing process. He/she first
prepares and IDF and submits to customs. The document is scrutinized at Document
Processing Center and if found in order it is passed. Applicable duty/excise is paid. Cargo
is duly released.
 Cargo identification Cargo is identified through the marks and numbers mostly
indicated on labels affixed to cargo or otherwise marked with an indelible pen. The cargo
identification details would also include the respective Air Waybill number, consignee’s
name and address and description of cargo.
 Cargo inspection Where customs or other government agencies would want to verify the
declaration made, the respective cargo would be opened for inspection. Once inspection
has been completed, the cargo is repacked and sealed.
 Cargo interchange The condition of the cargo/packages will be indicated on the delivery
note at the time of collection.

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7. GOODS CLASSIFICATION

What commodities are traded by sea?
These commodities can be summarized as follows:
 Energy trades:
Energy dominates bulk shipping. This group of commodities, which accounts for 45 percent of
seaborne trade, comprises crude oil, oil products, liquefied gas and thermal coal for use in
generating electricity. These fuel sources compete with each other and non-traded energy
commodities such as nuclear power.
 Agricultural trades:
A total of twelve commodities, accounting for 13 percent of sea trade, are the products or raw
materials of the agricultural industry. They include cereals such as wheat and barley, animal
feedstuffs, sugar, molasses, refrigerated food, oil and fats and fertilizers. The analysis of these
trades is concerned with the demand for foodstuffs, which depends on income and population. It
is also concerned with the important derived demand for animal feeds
 Metal industry trades:
This major commodity group, which accounts for 25 percent of sea trade, represents the third
building block of modern industrial society. Under this heading we group the raw materials and
products of the steel and non-ferrous metal industries, including iron ore, metallurgical grade
coal, non-ferrous metal ores, steel products and scrap.
 Forest products trades:
Forest products are primarily industrial materials used for the manufacture of paper, paper board
and in the construction industry. This section includes timber (logs and lumber) wood pulp,
plywood, paper and various wood products, totaling about 145 MT. The trade is strongly
influenced by the availability of forestry resources.
 Other industrial materials:
There are a wide range of industrial materials such as cement, salt, gypsum, mineral sands,
asbestos, chemicals and many others. The total trade in these commodities accounted for 9
percent of sea trade. They cover a whole range of industries.
 Other Manufactures:
The final trade group comprises the remaining manufactures such as textiles, machinery, capital
goods, vehicles, etc. The total tonnage involved in this sector accounts for only 3 per cent of sea
trade.

Major types of cargo
Cargo or Freight refers to all articles, goods, materials, merchandise, or wares carried onboard an
aircraft, ship, train, or truck, and for which an air waybill, or bill of lading, or other receipt is
issued by the carrier. Cargo is generally classified in two major groups namely bulk cargo and
general cargo. Bulk cargo is further divided into liquid and dry cargo.

Dry Bulk - This refers to the unpackaged non-liquid bulk and comprises two types of cargos -
major dry bulks such as iron ore, coal, and grain which together represent 70% of the global dry
bulk trade volume and minor dry bulks such as sugar, steel, and cement.

Liquid Bulk - this refers to free-flowing liquid cargo shipped in bulk. The cargo includes crude
oil and oil products, liquefied natural gas, chemicals, fruit juices and edible oils.

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General Cargo- this cargo consists of goods packed or unpacked that are demanded in small
quantities in a continuous basis. Most of general cargo is carried by scheduled ships that call
specific ports on particular trade routes. Most of the general cargo today moves in containers.

The characteristics of cargo types
The different major cargo types have different shipping characteristics for shipment.
Iron ore & coal
Iron ore and coal are minerals mined and shipped in raw form. The cargo requires allot of space
for storage during the pre-shipment and post-shipment operations. The cargo is dirty and is
therefore handled away from the general port area.

Conveyer belts and grabs are the main equipment used to handle the cargo. Huge bulkers with
deep draft are used to carry the heavy cargo across the international waters.
Grain
Grain is an agricultural produce which comprise of wheat, maize/corn, rice among others.
It is used for human and animal consumption and therefore has to be handled under strict
hygienic conditions. The holds of the ship must be cleaned and inspected before loading a grain
cargo. Loading and offloading is done by elevators and grabs.

Grain is sensitive to moisture and therefore care must be taken to ensure that the cargo makes no
contact with moisture. The cargo has a problem of shifting onboard ship and therefore effective
trimming is required to prevent the ships from listing.
Crude oil
This cargo is extracted from the ground. it is dirty and dangerous cargo that require a lot of
precaution during handling. Crude oil is carried by crude carriers and some of the ships can be as
big as 450,000dwt. The ships are constructed with a double hull as a caution to prevent spillage
of oil into the ocean.

The ships are fitted with heating coils to ensure the cargo remain fluid during shipment. The inert
gas system is used in the ships to prevent explosion of the cargo since it contains explosive
gases. The cargo is pumped in and out of the ships by use of pumps and horse pipes.
Huge storage facilities are found in the ports of export and import.
General cargo
Comprise of different types of cargo that is used in small quantities in a continuous basis.
Examples of general cargo are automobiles, clothing, electronics, and industry boilers and
medicine. Most of the general cargo is containerized. Different types and
sizes of containers have been designed to carry the different types of cargo.

A container can load a maximum of twenty six tons. Some of the general cargo cannot fit in the
ISO standard freight container and have to be carried by multipurpose general cargo ships.
Automobiles are wheeled in and out of Ro - Ro ships. The handling of general cargo is usually
done by cranes apart from the automobiles that are driven through the ship ramps. Some of the
general cargo are classified as dangerous cargo and is therefore handled with great care
as per the IMDG code guidelines.

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8. HANDLINGOF DANGEROUS GOODS .

Dangerous goods or hazardous goods are solids, liquids, or gases that can harm people, other
living organisms, property, or the environment. They are often subject to chemical regulations.

In the United States, United Kingdom and sometimes in Canada, dangerous goods are more
commonly known as hazardous materials (abbreviated as HAZMAT or hazmat). Hazmat teams
are personnel specially trained to handle dangerous goods, which include materials that are
radioactive, flammable, explosive, corrosive, oxidizing, asphyxiating, bio hazardous, toxic,
pathogenic, or allergenic.

Also included are physical conditions such as compressed gases and liquids or hot materials,
including all goods containing such materials or chemicals, or may have other characteristics that
render them hazardous in specific circumstances.

In the United States, dangerous goods are often indicated by diamond-shaped signage on the
item (see NFPA 704), its container, or the building where it is stored. The color of each diamond
indicates its hazard, e.g., flammable is indicated with red, because fire and heat are generally of
red color, and explosive is indicated with orange, because mixing red (flammable) with yellow
(oxidizing agent) creates orange.

A nonflammable or nontoxic gas is indicated with green, because all compressed air vessels are
this color in France after World War II, and France was where the diamond system of hazmat
identification originated.

People who handle dangerous goods will often wear protective equipment, and metropolitan fire
departments often have a response team specifically trained to deal with accidents and spills.
Persons who may come into contact with dangerous goods as part of their work are also often
subject to monitoring or health surveillance to ensure that their exposure does not exceed
occupational exposure limits.

Laws and regulations on the use and handling of hazardous materials may differ depending on
the activity and status of the material. For example, one set of requirements may apply to their
use in the workplace while a different set of requirements may apply to spill response, sale for
consumer use, or transportation. Most countries regulate some aspect of hazardous materials.

The 9 Classes of Dangerous Goods
Dangerous goods are materials or items with hazardous properties which, if not properly
controlled, present a potential hazard to human health and safety, infrastructure and/ or their
means of transport.

The transportation of dangerous goods is controlled and governed by a variety of different
regulatory regimes, operating at both the national and international levels. Prominent regulatory
frameworks for the transportation of dangerous goods include the United Nations

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Recommendations on the Transport of Dangerous Goods, ICAO‘s Technical Instructions,
IATA‘s Dangerous Goods Regulations and the IMO‘s International Maritime Dangerous Goods
Code. Collectively, these regulatory regimes mandate the means by which dangerous goods are
to be handled, packaged, labeled and transported.

Regulatory frameworks incorporate comprehensive classification systems of hazards to provide a
taxonomy of dangerous goods. Classification of dangerous goods is broken down into nine
classes according to the type of danger materials or items present:

Class 1 – explosives
Explosives are materials or items which have the ability to rapidly conflagrate or detonate as a
consequence of chemical reaction.
Reason for Regulation

Explosives are capable by chemical reaction of producing gases at temperatures, pressures and
speeds as to cause catastrophic damage through force and/or of producing otherwise hazardous
amounts of heat, light, sound, gas or smoke.

Commonly Transported Explosives are Ammunition/cartridges Fireworks/pyrotechnics, Flares
Blasting caps / detonators, Fuse and Primers.

Class 2 – gases
Gases are defined by dangerous goods regulations as substances which have a vapour pressure of
300 KPA or greater at 50°c or which are completely gaseous at 20°c at standard atmospheric
pressure, and items containing these substances.

The class encompasses compressed gases, liquefied gases, dissolved gases, refrigerated liquefied
gases, mixtures of one or more gases with one or more vapors of substances of other classes,
articles charged with a gas and aerosols.

Reason for Regulation
Gases are capable of posing serious hazards due to their flammability, potential as asphyxiates,
ability to oxidize and/or their toxicity or corrosiveness to humans.

Class 3 – flammable liquids
Flammable liquids are defined by dangerous goods regulations as liquids, mixtures of liquids or
liquids containing solids in solution or suspension which give off a flammable vapour (have a
flash point) at temperatures of not more than 60-65°C, liquids offered for transport at
temperatures at or above their flash point or substances transported at elevated temperatures in a
liquid state and which give off a flammable vapour at a temperature at or below the maximum
transport temperature.

Reason for Regulation
Flammable liquids are capable of posing serious hazards due to their volatility, combustibility
and potential in causing or propagating severe conflagrations.

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Commonly Transported Flammable Liquids: Acetone / acetone oils, Adhesives, Paints / lacquers
varnishes, Alcohols, Perfumery products, Gasoline / Petrol, Diesel fuel, Aviation fuel, Liquid
bio-fuels, Coal tar / coal tar distillates, Petroleum crude oil, Petroleum distillates.

Class 4 – flammable solids; substances liable to spontaneous combustion; substances which
emit flammable gases when in contact with water
Flammable solids are materials which, under conditions encountered in transport, are readily
combustible or may cause or contribute to fire through friction, self-reactive substances which
are liable to undergo a strongly exothermic reaction or solid desensitized explosives.

Also included are substances which are liable to spontaneous heating under normal transport
conditions, or to heating up in contact with air, and are consequently liable to catch fire and
substances which emit flammable gases or become spontaneously flammable when in contact
with water.

Reason for Regulation
Flammable solids are capable of posing serious hazards due to their volatility, combustibility and
potential in causing or propagating severe conflagrations. Aluminum phosphide, Sodium
batteries, Sodium cells, Firelighters, Matches, Calcium carbide.

Class 5 – oxidizing substances; organic peroxides
Oxidizers are defined by dangerous goods regulations as substances which may cause or
contribute to combustion, generally by yielding oxygen as a result of a redox chemical reaction.

Organic peroxides are substances which may be considered derivatives of hydrogen peroxide
where one or both hydrogen atoms of the chemical structure have been replaced by organic
radicals.

Class 6 – toxic substances; infectious substances
Toxic substances are those which are liable either to cause death or serious injury or to harm
human health if swallowed, inhaled or by skin contact. Infectious substances are those which are
known or can be reasonably expected to contain pathogens.

Dangerous goods regulations define pathogens as microorganisms, such as bacteria, viruses,
rickettsia, parasites and fungi, or other agents which can cause disease in humans or animals.

Reason for Regulation
Toxic and infectious substances can pose significant risks to human and animal health upon
contact.

Commonly Transported Toxic Substances; Infectious Substances, Medical/Biomedical waste,
Clinical waste, Biological cultures / samples / specimens

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Class 7 – radioactive material
Dangerous goods regulations define radioactive material as any material containing
radionuclide's where both the activity concentration and the total activity exceeds certain pre-
defined values.

A radionuclide is an atom with an unstable nucleus and which consequently is subject to
radioactive decay.
Reason for Regulation
Whilst undergoing radioactive decay radionuclides emit ionizing radiation, which presents
potentially severe risks to human health. Examples are Radioactive Material, Radioactive ores.

Class 8 – corrosives
Corrosives are substances which by chemical action degrade or disintegrate other materials upon
contact.

Reason for Regulation
Corrosives cause severe damage when in contact with living tissue or, in the case of leakage,
damage or destroy surrounding materials. Commonly Transported Corrosives are Acids/acid
solutions, Batteries, Battery fluid, Fuel cell cartridges, Hydrofluoric acid, Sulfuric acid, Nitric
acid, Sludge acid and Hydrogen fluoride.

Class 9 – miscellaneous dangerous goods
Miscellaneous dangerous goods are substances and articles which during transport present a
danger or hazard not covered by other classes.

This class encompasses, but is not limited to, environmentally hazardous substances, substances
that are transported at elevated temperatures, miscellaneous articles and substances, genetically
modified organisms and micro-organisms and (depending on the method of transport)
magnetized materials and aviation regulated substances.

Reason for Regulation
Miscellaneous dangerous goods present a wide array of potential hazards to human health and
safety, infrastructure and/ or their means of transport. Commonly Transported Miscellaneous
Dangerous Goods are Dry ice / cardice / solid carbon dioxide and Expandable polymeric beads /
polystyrene beads.

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9. FIATA MODEL RULES FOR FREIGHT FORWARDING SERVICES

PART I GENERAL PROVISIONS

1. Applicability

1.1. These Rules apply when they are incorporated, however this is made, in writing, orally or
otherwise, into a contract by referring to the FIATA Model Rules for Freight Forwarding
Services.

1.2. Whenever such reference is made, the parties agree that these Rules shall supersede any
additional terms of the contract which are in conflict with these Rules, except insofar as they
increase the responsibility or obligations of the Freight Forwarder.


2. Definitions

2.1. Freight Forwarding Services means services of any kind relating to the carriage,
consolidation, storage, handling, packing or distribution of the Goods as well as ancillary and
advisory services in connection therewith, including but not limited to customs and fiscal
matters, declaring the Goods for official purposes, procuring insurance of the Goods and
collecting or procuring payment or documents relating to the Goods.


2.2. Freight Forwarder means the person concluding a contract of Freight Forwarding Services
with a Customer.

2.3. Carrier means any person actually performing the carriage of the Goods with his own means
of transport (performing Carrier) and any person subject to carrier liability as a result of an
express or implied undertaking to assume such liability (contracting Carrier).


2.4. Customer means any person having rights or obligations under the contract of Freight
Forwarding Services concluded with a Freight Forwarder or as a result of his activity in
connection with such services.

2.5. Goods means any property including live animals as well as containers, pallets or similar
articles of transport or packaging not supplied by the Freight Forwarder.

2.6. SDR means a Special Drawing Right as defined by the International Monetary Fund.


2.7. Mandatory Law means any statutory law the provisions of which cannot be departed from
by contractual stipulations to the detriment of the Customer.


2.8. In writing includes telegram, telex, telefax or any recording by electronic means.

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2.9. Valuables means bullion, coins, money, negotiable instruments, precious stones, jewelry,
antiques, pictures, works of art and similar properties.

2.10. Dangerous Goods means Goods which are officially classified as hazardous as well as
Goods which are or may become of a dangerous, inflammable, radioactive noxious or damaging
nature.

3. Insurance
No insurance will be effected by the Freight Forwarder, except upon express instructions given
in writing by the Customer. All insurances effected are subject to the usual exceptions and
conditions of the Policies of the Insurance Company or Underwriters taking the risk. Unless
otherwise agreed in writing the Freight Forwarder shall not be under any obligation to effect a
separate insurance on each consignment, but may declare it on any open or general Policy held
by the Freight Forwarder.

4. Hindrances
If at any time the Freight Forwarder's performance is or is likely to be affected by any hindrance
or risk of any kind (including the conditions of the Goods) not arising from any fault or neglect
of the Freight Forwarder and which cannot be avoided by the exercise of reasonable endeavor,
the Freight Forwarder may abandon the carriage of the Goods under the respective contract and,
where reasonably possible, make the Goods or any part of them available to the Customer at a
place which the Freight Forwarder may deem safe and convenient, whereupon delivery shall be
deemed to have been made, and the responsibility of the Freight Forwarder in respect of such
Goods shall cease.

In any event, the Freight Forwarder shall be entitled to the agreed remuneration under the
contract and the Customer shall pay any additional costs resulting from the abovementioned
circumstances.

5. Method and route of transportation

The Freight Forwarder shall carry out his services according to the Customer's instructions as
agreed. If the instructions are inaccurate or incomplete or not according to contract, the Freight
Forwarder may at the risk and expense of the Customer act as he deems fit.

Unless otherwise agreed, the Freight Forwarder may without notice to the Customer arrange to
carry the Goods on or under deck and choose or substitute the means, route and procedure to be
followed in the handling, stowage, storage and transportation of the Goods.


PART II THE FREIGHT FORWARDER'S LIABILITY

6. The Freight Forwarder's liability (except as principal)

6.1. Basis of liability

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6.1.1. The Freight Forwarder's duty of care. The Freight Forwarder is liable if he fails to
exercise due diligence and take reasonable measures in the performance of the Freight
Forwarding Services, in which case he, subject to Art.8, shall compensate the Customer for loss
of or damage to the Goods as well as for direct financial loss resulting from breach of his duty of
care.


6.1.2. No liability for third parties The Freight Forwarder is not liable for acts and omissions by
third parties, such as, but not limited to, Carriers, warehousemen, stevedores, port authorities and
other freight forwarders, unless he has failed to exercise due diligence in selecting, instructing or
supervising such third parties.


7. The Freight Forwarder's liability as principal

7.1. The Freight Forwarder's liability as Carrier The Freight Forwarder is subject to liability as
principal not only when he actually performs the carriage himself by his own means of transport
(performing Carrier), but also if, by issuing his own transport document or otherwise, he has
made an express or implied undertaking to assume Carrier liability (contracting Carrier).

However, the Freight Forwarder shall not be deemed liable as Carrier if the Customer has
received a transport document issued by a person other than the Freight Forwarder and does not
within a reasonable time maintain that the Freight Forwarder is nevertheless liable as Carrier.

7.2. The Freight Forwarder's liability as principal for other services With respect to services
other than carriage of Goods such as, but not limited to, storage, handling, packing or
distribution of the Goods, as well as ancillary services in connection therewith, the Freight
Forwarder shall be liable as principal:

o when such services have been performed by himself using his own facilities or
employees or

o If he has made an express or implied undertaking to assume liability as principal.


7.3. The basis of the Freight Forwarder's liability as principal. The Freight Forwarder as
principal shall, subject to Art. 8, be responsible for the acts and omissions of third parties he has
engaged for the performance of the contract of carriage or other services in the same manner as if
such acts and omissions were his own and his rights and duties shall be subject to the provisions
of the law applicable to the mode of transport or service concerned, as well as the additional
conditions expressly agreed or, failing express agreement, by the usual conditions for such mode
of transport or services.

8. Exclusions, assessment, and monetary limits of liability

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8.1. Exclusions: The Freight Forwarder shall in no event be liable for:

o Valuables or Dangerous Goods unless declared as such to the Freight Forwarder
at the time of the conclusion of the contract,


o Loss following from delay unless expressly agreed in writing,

o Indirect or consequential loss such as, but not limited to, loss of profit and loss of
market.


8.2. Assessment of compensation. The value of the Goods shall be determined according to the
current commodity exchange price or, if there is not such price, according to the current market
price or, if there is no commodity exchange price or current market price, by reference to the
normal value of the Goods of the same kind and quality.

8.3. Monetary limits

8.3.1. Loss of or damage to the Goods. The provisions of Art. 7.3. notwithstanding, the Freight
Forwarder shall not be or become liable for any loss of or damage to the Goods in an amount
exceeding the equivalent of 2 SDR per kilogram of gross weight of the Goods lost or damaged
unless a larger amount is recovered from a person for whom the Freight Forwarder is
responsible. If the Goods have not been delivered within ninety consecutive days after the date
when the Goods ought to have been delivered, the claimant may, in the absence of evidence to
the contrary, treat the Goods as lost.



8.3.2. Limitation of liability for delay. If the Freight Forwarder is liable in respect of loss
following from delay, such liability shall be limited to an amount not exceeding the remuneration
relating to the service giving rise to the delay.

8.3.3. Other type of loss. The provisions of Art. 7.3. notwithstanding, the Freight Forwarder's
liability for any type of loss not mentioned in 8.3.1. and 8.3.2. Shall not exceed the total amount
of SDR (The maximum liability amount is intentionally left open and has to be completed
according to the situation in the country where the Model Rules are applied.) for each incident
unless a larger amount is received from a person for whom the Freight Forwarders is responsible.


9. Notice

9.1. Unless notice of loss of or damage to the Goods, specifying the general nature of such loss
or damage, is given in writing to the Freight Forwarder by the person entitled to receive the
Goods when they are handed over to him, such handing over is prima facie evidence of the
delivery of the Goods in good order and condition. Where such loss or damage is not apparent,

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the same prima facie effect shall apply if notice in writing is not given within 6 consecutive days
after the day when the Goods were handed over to the person entitled to receive them.

9.2. With respect to all other loss or damage, any claim by the Customer against the Freight
Forwarder arising in respect of any service provided for the Customer or which the Freight
Forwarder has undertaken to provide shall be made in writing and notified to the Freight
Forwarder within 14 days of the date upon which the Customer became or should have become
aware of any event or occurrence alleged to give rise to such claim. Any claim not made and
notified as aforesaid shall be deemed to be waived and absolutely barred except where the
Customer can show that it was impossible for him to comply with this time limit and that he has
made the claim as soon as it was reasonably possible for him to do so.


10. Time bar

The Freight Forwarder shall, unless otherwise expressly agreed, be discharged of all liability
under these Rules unless suit is brought within 9 months after the delivery of the Goods, or the
date when the Goods should have been delivered, or the date when failure to deliver the Goods
would give the consignee the right to treat the Goods as lost. With respect to other loss than loss
of or damage to the Goods the 9 months period should be counted from the time when the failure
of the Freight Forwarder giving right to the claim occurred.

11. Applicability to actions in tort

These Rules apply to all claims against the Freight Forwarder whether the claim be founded in
contract or in tort.


12. Liability of servants and other persons


These Rules apply whenever any claim is made against a servant, agent or other person the
Freight Forwarder engaged for the performance of the service (including any independent
contractor) whether such claims are founded in contract or in tort, and the aggregate liability of
the Freight Forwarder and such servants, agents or other persons shall not exceed the limit
applicable to the service concerned as expressly agreed between the Freight Forwarder and the
Customer or following from these Rules.


13. Unforeseen circumstances

In the event that the Freight Forwarder, in case of unforeseen circumstances, acts in the best
interest of the Customer extra costs and charges have to be borne by the Customer.

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14. No set-off

All monies due shall be paid without any reduction or deferment on account of any claim,
counter-claim or set-off.

15. General lien

The Freight Forwarder shall, to the extent permitted by the applicable law, have a general lien on
the Goods and any documents relating thereto for any amount due at any time to the Freight
Forwarder from the Customer including storage fees and the cost of recovering same, and may
enforce such lien in any reasonable manner which he may think fit.

16. Information

The Customer shall be deemed to have guaranteed to the Freight Forwarder the accuracy, at the
time the Goods were taken in charge by the Freight Forwarder, of all particulars relating to the
general nature of the Goods, their marks, number, weight, volume and quantity and, if
applicable, to the dangerous character of the Goods, as furnished by him or on his behalf.

17. Duty of indemnification

17.1. General duty of indemnification Except to the extent that the Freight Forwarder is liable
according to the provisions of Part II, the Customer shall indemnify the Freight Forwarder
for all liability incurred in the performance of the Freight Forwarding Services.

17.2. Duty of indemnification in respect of General Average the Customer shall indemnify the
Freight Forwarder in respect of any claims of a General Average nature which may be made on
him and shall provide such security as may be required by the Freight Forwarder in this
connection.

18. The Customer's liability
The Customer shall be liable to the Freight Forwarder for all loss or damage, costs, expenses and
official charges resulting from the Customer's inaccurate or incomplete information or
instructions or the handing over by the Customer or any person acting on his behalf to the
Freight Forwarder, or to any other person to whom the Freight Forwarder may become liable, of
Goods having caused death or personal injury, damage to property, environmental damage or
any other type of loss.


PART IV DISPUTES AND MANDATORY LAW

19. Jurisdiction and applicable law

Unless otherwise agreed, actions against the Freight Forwarder may be instituted only in the
place where the Freight Forwarder has his principal place of business and shall be decided
according to the law of the country of that place.

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20. Mandatory Law

These Rules shall only take effect to the extent that they are not contrary to the mandatory
provisions of international conventions or national law applicable to.

10. International Payments
International payment and exchange, international exchange also called foreign exchange,
respectively, any payment made by one country to another and the market in which national
currencies are bought and sold by those who require them for such payments.

There are 5 types of payment methods available in international trade. These payment types
are;
• Cash-in-advance
• Open account
• Documentary collections
• Documentary credits (letters of credit)
• Bank payment obligation
Cash in advance is a payment method in international trade in which an order is not processed
until full payment is received by the supplier in advance. Sometimes cash in advance is called
cash with order. Please always keep in mind that under the cash in advance payment, the funds
received by the exporters before the ownership of the goods is transferred to the importers. Cash
in advance posses highest risk to the importer, lowest risk to the exporter.
Open Account: Open account means that buyers pay the cost of the goods after goods have been
shipped by the supplier. In an international trade transaction open account defines as a sale where
the goods are shipped and/or delivered before payment is due, which is usually in 30 or 60 days.
Open account posses highest risk to the exporter, lowest risk to the importer.
Documentary Collections: International trade procedure in which a bank in the importer’s
country acts on behalf of an exporter for collecting and remitting payment for a shipment. The
exporter presents the shipping and collection documents to his or her bank (in own country)
which sends them to its correspondent bank in the importer’s country. The foreign bank (called
the presenting bank) hands over shipping and title documents (required for taking delivery of the
shipment) to the importer in exchange for;
 cash payment (in case of ‘documents against payment‘ instructions) or
 a firm commitment to pay on a fixed date (in case of ‘documents against acceptance‘
instructions).
A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of a
payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank
(importer’s bank), along with instructions for payment. Funds are received from the importer and

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remitted to the exporter through the banks involved in the collection in exchange for those
documents.
Documentary Credits: Documentary credits, also known as letters of credit, are one of the
payment methods in international trade. Letter of credit defined by International Chamber of
Commerce publication of UCP 600 as “any arrangement, however named or described, that is
irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a
complying presentation.”
Bank Payment Obligation: Bank payment obligation is a new payment method in international
trade.Bank payment obligation (BPO) is an irrevocable undertaking given by an Obligor Bank
(typically buyer’s bank) to a Recipient Bank (usually seller’s bank) to pay a specified amount on
a agreed date under the condition of successful electronic matching of data according to an
industry-wide set of rules adopted by ICC.


What are the Key Points of Consideration When Choosing an International Payment
Method?
Financial Needs of the Parties: Open account payment term is a credit granted by the exporter
in favor of the importer. In contrast, cash in advance is a credit granted by the importer in favor
of the exporter.
Letters of credit available by deferred payment and documentary collections payable with time
drafts are also financial credits supplied to the buyers.

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For these reasons financial needs of the parties is a key element determining the payment terms
in international trade transactions.
Negotiation Power of the Parties: Sometimes exporters are in pressure to sell their products.
On the other hand, importers are desperate to find a particular good in a short period of time.
If balance of the trade power diminishes in favor of one party, then the stronger party may want
to benefited from the situation and dictates most favorable payments terms.
Country Risk of the Exporter and the Importer: As an example if the importer residents in a
developed country whereas the exporter sits in a risky country, then the importer may do not
want to take risks and choose the most secure payment method for himself.
Sector of the Transaction Parties: Occupying sector of the exporter and the importer is one of
the most influencing element that effects the determination of the payment method. For example,
food and textile sector practicing open account payments or documentary collections, on
contrary oil sector uses letters of credit.
Willingness to Take Risks of the Parties: Willingness to take risks is one of the key factor
determining the payment method in international trade.
Occasionally exporters want to take extra risk, while importers tend to trust their suppliers.
A risk taking exporter may ship the goods against open account terms whereas a risk taking
importer may decide to pay in advance.
If both parties want to limit their risks, then they should either choose documentary collections or
documentary credits.
Legal Legislation: If you want to export to Algeria, you have to choose either documentary
collections or letters of credit as a payment method. This is an Algerian legislation and every
exporter that makes business with Algeria has to obey this rule.
Country Practices: Middle East countries tend to use letters of credit intensely, when importing
goods. Chinese exporters also use letters of credit in great volumes. USA importers using
documentary collections for small value purchases. German importers would like to pay 30 days
after bill of lading date under open account payment terms.
11. Capitalization and Assets

The term ‘capital’ refers to any financial resources or assets owned by a business that are useful
in furthering development and generating income.

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 Capital can refer to funds raised to support a particular business or project.
 Capital can also represent the accumulated wealth of a business, represented by its
assets less liabilities.
 Capital can also mean stock or ownership in a company.

Capitalization is an accounting method in which a cost is included in the value of an asset and
expensed over the useful life of that asset, rather than being expensed in the period the cost was
originally incurred.
12. Freight Forwarder Business Structure
A business structure is a category of organization that is legally recognized in a given
jurisdiction and characterized by the legal definition of that particular category.
Freight forwarder, forwarder, or forwarding agent(Freight forwarder is not exactly equal to
NVOCC) Non Vessel Owning Common Carrier, is a person or company that organizes
shipments for individuals or corporations to get goods from the manufacturer or producer to a
market, customer or final point of distribution. Forwarders contract with a carrier or often
multiple carriers to move the goods. A forwarder does not move the goods but acts as an expert
in the logistics network.
The carriers can use a variety of shipping modes, including ships, airplanes, trucks, and railroads,
and often use multiple modes for a single shipment. For example, the freight forwarder may
arrange to have cargo moved from a plant to an airport by truck, flown to the destination city and
then moved from the airport to a customer's building by another truck.
International freight forwarders typically handle international shipments and have additional
expertise in preparing and processing customs documentation and performing activities
pertaining to international shipments.
Information typically reviewed by a freight forwarder includes the commercial invoice, shipper's
export declaration, bill of lading and other documents required by the carrier or country
of export, import, and/or transshipment.
The FIATA shorthand description of the freight forwarder as the "Architect of Transport"
illustrates the commercial position of the forwarder relative to its client. In Europe, some
forwarders specialize in "niche" areas such as rail-freight, and collection and deliveries around a
large port.
One of the earliest freight forwarders was Thomas Meadows and Company Limited of London,
England, established in 1836. According to "Understanding the Freight Business," written and
published by the executive staff of Thomas Meadows and Company in 1972, the advent of
reliable rail transport and steamships created demand for the fledgling freight forwarding
industry.
Trade developed between Europe and North America, creating additional demand. The first
international freight forwarders were innkeepers in London who held and re-forwarded the
personal effects of their hotel guests.
The original function of the forwarder was to arrange for carriage by contracting with various
carriers. Forwarder responsibilities included advice on documentation and customs requirements

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in the country of destination. His correspondent agent overseas looked after his customers' goods
and kept him informed about matters that would affect the movement of goods.
In modern times, the forwarder accepts the same responsibilities. It operates either as a domestic
carrier or otherwise with a corresponding agent overseas or with his own branch-office. In a
single transaction, the forwarder may be acting as a carrier (principal) or as an agent for his
customer or both.
Example of a modern business structure of a freight forwarders, although they differ from every
company.

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12. The Container Export / Import Transaction
International Export process of a Container
Export haulage
The first part of the transportation is export haulage. This relates to the movement of the
cargo from the shipper’s to the forwarder’s premises.

The forwarder’s premises in the case of less than container load shipments is always an
export consolidation centre (an origin warehouse) where the forwarder either has their
own people or nominated agents in their control.

The goods would typically move on road (by truck), rail or a combination. If it were
agreed that the shipper is responsible for this part of the transportation, it would typically
be arranged through a local transportation company.

If, however, the consignee is responsible, it often makes most sense to use a freight
forwarder who can offer export haulage as part of the international transportation.

Handling of the cargo (loading onto a truck) at the shipper’s premises is not considered
part of export haulage, as off loading of the truck at the forwarder’s premises is normally
not part of export haulage.

ii. Export customs clearance
For every shipment leaving a country, customs formalities must take place to meet
regulatory requirements.

Customs clearance is a transaction whereby a declaration is developed and required
documents are submitted to authorities, and can only be performed by companies holding
valid customs licenses, so-called customs house brokers.

Export customs clearance can either be performed by a freight forwarder with a valid
license or an agent appointed by the freight forwarder. Alternatively, it can be performed
by a customs house broker appointed directly by the shipper, who does not necessarily
take any other part in the shipping process.

The export customs clearance step must be completed before the cargo can leave the
country of origin, and if not performed by the freight forwarder, often required to be
completed before the cargo enters the forwarders origin warehouse.

iii. Origin handling

Origin handling covers all physical handling and inspection of the cargo from receiving it
at the origin warehouse till it is loaded on a ship in a container. There are many steps
carried out under origin handling by many different parties, but all that is coordinated and
the responsibility of the freight forwarder, or an agent appointed by the freight forwarder.
In short, when the cargo is received, it is inspected (tallied), planned for loading,
consolidated with other cargo, stuffed into a container and moved to the port where it is
loaded onto a ship.

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While it is always ultimately the freight forwarder performing origin handling, it can be
paid by either shipper or consignee, regardless of who actually buy the freight
forwarding. For example, if a consignee has decided to user Forwarder A for their import
shipments, and agreed with the shipper that the shipper must pay for origin charges,
automatically the shipper will buy origin charges from Forwarder A too.

This situation can create some friction in case a shipper believes the price for origin
handling is not at market levels, as they are forced to user Forwarder A in this case.


iv. Ocean freight
The freight forwarder decides on a shipping line to perform the ocean freight from origin
to destination in order to meet the required timeline for the shipments. The freight
forwarder and the shipping line has a contract of carriage for the container, and the
shipper or consignee in this case is not subject to any direct interaction with the shipping
line.

The cost of the ocean freight will ultimately be charged to the shipper or the consignee.
Ocean freight, however, is never the entire costs of shipping from port to port. There are
multiple surcharges levied in the industry, such as bunker adjustment factor and currency
adjustment factor, which will all be passed to the shipper or the consignee.

v. Import customs clearance
Import customs clearance can typically begin before the cargo arrives at its destination
country. As for export customs clearance, it is a formality where a declaration is
developed and submitted together with relevant documents enabling authorities to
register and levy any customs duty on the shipment. Import customs clearance is
performed by the freight forwarder or an agent of the freight forwarder, or by a customs
house broker appointed by the consignee.

The import customs clearance process must be completed prior to the cargo leaving a
customs bonded area in the country of destination. Typically, that means before the cargo
leaves the destination warehouse of the forwarder or the forwarders agent

vi. Destination handling
As for the origin, cargo handling is also required in the destination before it can be
released to a consignee. In short, destination handling includes transfer of the container
from the ship to shore and from the port to the forwarder’s destination warehouse. It also
includes un-stuffing of the container and preparing the cargo for the consignee to collect.

vii. Truck for haulage of LCL consignments
Destination handling is covered by multiple destination charges and always performed by
the freight forwarder or an agent appointed by the freight forwarder. It can be charged to
the shipper or consignee, but will always need to be paid in full before the cargo can be
surrendered to the consignee.

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Again, if the agreement is that the shipper pay for ocean freight and the consignee pay
for destination charges, it is in fact the shipper deciding on who the consignee must buy
destination handling from.

As discussed for origin charges, that can create some friction or surprises for the
consignee who has not planned for it.

viii. Import haulage
The last leg of the transportation is the actual delivery of the cargo to the consignee. It
can either be performed by the freight forwarder or a local transportation company
appointed by the consignee.

If this part of the transportation is being arranged by the shipper, it would normally make
sense to use a freight forwarder which can also arrange for import haulage. The import
haulage typically covers transportation to a specific address, but not unloading from the
truck, which is the responsibility of the consignee.
Below is a summary of the entire process.
5. Relationship between Forwarders and Client
Shippers who are in most cases the client are those who needs the goods to be shipped or
transported. Usually Exporters, manufacturer of goods, traders, etc.. who needs to ship the goods.
Freight Forwarders are those who liase with Shippers and the actual carriers / transporters and
help in carrying the goods from one place to another. They act as an agent between Shipper and
actual carrier of goods and facilitate the process.

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The moment a freight forwarder signs/accepts a contract (although discouraged, remember that a
contract may also be verbal) with the customer, they are exposed to several unique risks and
liabilities..
The risks and liabilities of a freight forwarder undertaking a contract for the transportation of
cargo from point to point may include but not limited to:
 Total loss of cargo – may happen either due to physical cargo damage or theft while in
the custody of the freight forwarder
 Loss of monies – may happen if the customer does not pay them after the performance of
part or all of the activities
 Damage of cargo – may happen either due to incorrect or improper packaging of the
cargo, incorrect or improper handling of the cargo while in the custody of the freight
forwarder
 Rerouting of cargo – may happen if the documentation submitted to the carrier by the
freight forwarder was incorrect and cargo ended up in another continent
 Abandonment of cargo – may happen if the consignee who was supposed to receive the
cargo suddenly abandons it due to lack of funds, cancellation of the order etc
 Non-collection of documents – may happen when there is BL involved and the freight
forwarder releases cargo to the consignee while the shipper is still holding the original
HBL because he has not yet been paid by the consignee.
 Incorrect release of cargo – may happen if the cargo was released by the freight
forwarder to the incorrect party based on the type of bill of lading issued.. For example, if
the cargo was released to the consignee on a negotiable bill without proper endorsements
on the bill of lading.
 Delays due to improper documentation – receipt of cargo at the destination was
delayed due to incorrect documentation submitted by the freight forwarder to the carrier
or incorrect cargo declarations were filed with customs or any other types of cargo
documentation done by the freight forwarder which caused this delay
 Risk of carrier’s liability – A freight forwarder may be liable as a contractual carrier if :
 They have negotiated the rates for the entire carriage of the goods with their client
(say, shipper or consignee)
 They have issued their Bill of lading for the carriage

Apart from undertaking the above-mentioned risks, in ALL of the above cases, there is a chance
that the freight forwarder may be liable, BUT only if it is proven to be due to negligent behavior
on their part..

Depending on the jurisdiction, it may be possible that the freight forwarder shall be exempted
from all liability if it could be proved that the freight forwarder took all possible steps and
exercised due diligence/care in respect of :
 receiving and storing the goods
 selecting the most suitable carrier for the carriage
 delivering the goods to the receiver

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 and all other matters en-route
For example, let’s say a consignee abandoned the cargo because the costs for delivery of the
cargo was more than the value of the goods.

If the cargo delivery costs increased due to negligence on the part of the freight forwarder, say
for example the freight forwarder did not notify the customer of the arrival of the cargo or they
did not do the clearance of the cargo in time and cargo incurred demurrage,
detention and storage, then the freight forwarder would be liable..

On the other hand if the delivery costs increased because the freight forwarder did not receive the
proper documentation from the consignee or shipper for the timely clearance of the cargo, then
there should be no liability for the freight forwarder (although if the freight forwarder booked the
cargo with the shipping line, they may still hold the freight forwarder responsible for the cargo
abandonment)..
Customers rely on the freight forwarders for their experience and expertise in picking up the
cargo from the seller, arranging for proper packaging of the goods, handling all the
documentation, clearances en-route and delivering it to the buyer at the required place, at the
right price and in the same condition that it is picked up from origin using the most suitable
resources and routing possible..

This is the essence of freight forwarding.. But while the freight forwarder takes care of all
above on behalf of the client, considering the risks involved and their vulnerability, a freight
forwarder must also ensure that they are properly protected and covered for the risks that they
have taken on..

Even if unintentional, a freight forwarder could still be held liable for any of the above items,
especially when the customer could claim that the freight forwarder was negligent.. The onus
then falls on the freight forwarder to prove that they were not negligent..
Therefore, all freight forwarders need to have or be sufficiently covered for
 Marine liability cover for overseas trades
 Full liability protection to cover all forwarding operations
 Third party liabilities
 Regulatory breaches
 Errors & Omissions and Legal Liability – all freight forwarders may be exposed to
contractual liability for a loss, irrespective of who is responsible
 Survey and mitigation costs
 General Average and Salvage Charges including cargo disposal as in some General
Average situations freight forwarders also could be roped in
 A comprehensive Liability Cover and Risk management

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If you are a freight forwarder, there are many insurance cover packages available in the market
to cover the above mentioned liabilities.. The policy underwriters need to be briefed on the terms
and conditions that you are trading under so that they can customize your policy and premiums..
It is normal for your policy underwriters to limit the amounts that they will pay out for one claim
or all claims in a year.. As a freight forwarder, you need to ensure that based on your business
volume and the probability of damages, your cover is adequate to cater for potential claims..
Therefore, a freight forwarder needs to be diligent about which insurer to choose and what type
of cover to take to ensure business continuity..