Essentials of Freight Forwarding P2.pptx

Essentials of Freight Forwarding P2.pptx

1. Essentials of Freight Forwarding P2 Commercial Documentation

2. IMPORTANT DATES ASSSIGNMENT S – May 3 (Fri) MIDTERM – May 10 (Fri) FINAL EXAM: May 17 (Fri)

3. Enabling Learning Objectives (ELO’s) Documentation Requirements: ▶ Identify Regulatory Requirements: Understand and identify the legal and regulatory documentation requirements for international trade in a given country or region. ▶ Explain Documentation Timelines: Explain the importance of adhering to specific documentation timelines and deadlines in international trade transactions. ▶ List Key Information: Compile a comprehensive list of essential information and data needed for international trade documentation. ▶ Distinguish Between Types: Differentiate between various types of documents required for international trade, including commercial invoices, certificates of origin, and bills of lading. Invoices: ▶ Create Accurate Invoices: Learn how to create accurate and compliant commercial invoices for international transactions, including details such as pricing, currency, and Incoterms. ▶ Calculate Duties and Taxes: Understand how to calculate and include relevant duties, taxes, and fees in international invoices. ▶ Invoice Language and Formatting: Learn the importance of presenting invoices in the appropriate language and format for the destination country. Export Documents: ▶ Prepare Export Declarations: Understand how to prepare and submit export declarations to customs authorities, as required by the exporting country. ▶ Master Bill of Lading: Learn how to complete a master bill of lading and understand its role in international shipping. ▶ Certificate of Origin: Describe the purpose of a certificate of origin and how to obtain one for export documentation.

4. Enabling Learning Objectives (ELO’s) Import Documents: ▶ Understanding Import Regulations: Gain knowledge of import regulations and documentation requirements of the destination country. ▶ Import Licensing: Explain the concept of import licenses and how to obtain them when required. ▶ Customs Documentation: Learn about customs clearance documents, such as import declarations and customs bonds. Transportation Documents: ▶ Bill of Lading Types: Understand the different types of bills of lading, including negotiable and non- negotiable, and when to use each. ▶ Air Waybills: Explain the role and importance of air waybills in air freight shipments. ▶ Packing List: Describe the purpose of a packing list and how to create an accurate and complete packing list for different modes of transportation. Electronic Data Interchange (EDI): ▶ EDI Implementation: Learn the basics of implementing Electronic Data Interchange for efficient and paperless international document exchange. ▶ Data Security in EDI: Understand the importance of data security and confidentiality when using EDI for international trade documents. ▶ EDI Standards: Familiarize with common EDI standards and protocols used in international trade, such as UN/EDIFACT and ANSI X12. Document Preparation as a Marketing Tool: ▶ Branding in Documentation: Explore how the preparation and presentation of international trade documents can be used as a marketing tool to enhance the company's brand image. ▶ Document Accuracy and Reputation: Understand how accurate and well- prepared documents can contribute to a positive business reputation in international markets. ▶ Document Automation: Learn about the benefits of document automation and the use of technology in improving document accuracy and efficiency.

5. The Complex Web of International Trade Documentation ▶ International trade involves numerous documents that must adhere to specific requirements based on goods, destination, transportation, and payment methods. ▶ Accurate documentation is crucial for smooth cross-border trade, compliance with regulations, and proof of transaction details. ▶ Filling out these documents correctly is complex, with varying requirements between countries and industries. ▶ Errors or missing documents can lead to delays, extra costs, and legal complications. ▶ Specialized software solutions have emerged to simplify the document generation process, reducing the risk of mistakes and streamlining the workflow. ▶ Extensive documentation requirements often involve multiple originals and copies, posing logistical challenges for exporters when dealing with various intermediaries and organizations. ▶ Despite digital advancements, many countries still favor paper-based documents, presenting logistical, financial, and environmental challenges. ▶ The role of software in simplifying documentation is crucial, offering efficiency, accuracy, and convenience. Future trends may include increased electronic submissions and international standardization of trade documentation processes.

6. The Significance of the International Invoice in Trade Transactions ▶ Currency and Exchange Rates: International transactions often involve multiple currencies. Exporters must specify not only the price of goods in the currency of their own country but also the equivalent value in the currency of the importing country. This necessitates an awareness of current exchange rates and a clear display of the chosen currency. ▶ Incoterms: The International Commercial Terms, or Incoterms, dictate the responsibilities and risks associated with the delivery of goods. Exporters must specify the chosen Incoterm on the international invoice, as it determines the point at which ownership and risk are transferred from the seller to the buyer. ▶ Customs and Regulatory Compliance: International invoices must adhere to the customs and regulatory requirements of the importing country. This includes accurately identifying the products, specifying their HS (Harmonized System) codes, and providing any necessary certifications or documentation for compliance with trade regulations and tariffs. ▶ Shipping and Transportation Details : In international transactions, the invoice should include comprehensive shipping and transportation details. This encompasses the mode of transportation, the port of departure, and the destination port, among other specifics. Accurate shipping information is crucial to prevent delays, clear customs, and facilitate the smooth movement of goods. ▶ Language and Cultural Considerations: An international invoice should be presented in a language that the importer understands. This could necessitate translations or the use of standardized, universally recognized terminology. Additionally, an understanding of cultural nuances is important to ensure respectful and effective communication in an international business context. ▶ Taxation and Duties: Taxation and duty- related information, such as VAT (Value Added Tax) or GST (Goods and Services Tax), must be included in an international invoice. Accurate taxation information is essential for compliance with the tax laws of the importing country and for the importer's claims for input tax credits.

7. Commercial Invoice ▶ An international shipment invoice is known as a commercial invoice and can be sent directly to the importer or indirectly through banking channels depending on the payment terms. ▶ The commercial invoice must provide a precise description of the products being billed, including the Harmonized System Number, due to customs clearance requirements. ▶ The terms of trade or Incoterms® rule used should be explicitly stated, following the International Chamber of Commerce guidelines to clarify responsibilities for various ancillary services and fees. ▶ Detailed notes of prepaid items should be included, such as international insurance payments for CIF or CIP shipments, to ensure accurate duty calculations. ▶ The terms of payment, whether it's a letter of credit, bank draft, cash-in- advance, purchasing card, or an open-account sale, should be clearly indicated. ▶ The currency for payment should be specified, with strategies for handling currency fluctuations discussed in our previous lectures. ▶ Essential shipping information, including departure and destination ports, shipping company details, shipment dates, box or container quantities, weights, and sizes, must be provided. ▶ Identifying information for involved parties, including seller- exporter and buyer- importer names, contact persons, addresses, and relevant details, should be included without local telephone access codes.

8. Pro forma Invoice ▶ A pro forma invoice is a commonly used international document, serving as a quote rather than an actual invoice. ▶ Due to the complexity of international transactions and the various cost factors involved, importers may request a pro forma invoice to estimate their final expenses. When an exporter requests payment through a letter of credit, the information from the pro forma invoice is used by the issuing bank to open the letter of credit, and it must match the final transaction documents. ▶ ▶ Careful attention is essential when creating a pro forma invoice, as any variance between the pro forma invoice and the final commercial invoice may lead to discrepancies, requiring costly amendments. The pro forma invoice should mirror the final commercial invoice in terms of information, amount, and quotes from other suppliers involved, such as shipping and insurance. ▶ ▶ Including an expiration date in the pro forma invoice is crucial, as international transactions treat offer expiration differently from domestic ones, particularly under the United Nations Convention on the International Sale of Goods (CISG). ▶ In international transactions under the CISG, the offer in a pro forma invoice cannot be revoked by the seller (or buyer) before the expiration date, making it an irrevocable offer, with different rules than in many domestic transactions.

9. Consular Invoice ▶ A consular invoice is needed for exports to specific Latin American countries. ▶ It is a regular commercial invoice printed on consulate- provided stationery and made official by the consulate through stamping, embossing, or other procedures. ▶ Obtaining a consular invoice can be time- consuming, involving exchanges with the consulate. ▶ Countries that require consular invoices use them to forecast foreign currency needs and generate revenue through stationery and officialization fees. ▶ The requirement for consular invoices is diminishing and is often seen as a non- tariff trade barrier by exporters. ▶ As of June 2017, consular invoices were still required in about six countries, primarily in Latin America.

10. Specialized Commercial Invoices ▶ Commercial invoices are vital in international trade, recording transaction details for goods or services. ▶ Some countries, such as Canada, Mexico, New Zealand, Brazil, and Israel, mandate specialized commercial invoices printed on standardized forms. ▶ These forms meet specific criteria and are compliant with the country's customs regulations and legal requirements. ▶ The requirement is intended to facilitate customs procedures and expedite clearance, not seen as a trade barrier. ▶ Specialized international stationery printers provide these standardized forms. ▶ The use of such invoices simplifies the work of customs employees and enhances trade efficiency.

11. Specialized Commercial Invoices The utilization of specialized commercial invoices offers several notable advantages: ▶ Simplification of Customs Procedures: Standardized commercial invoices streamline the customs clearance process by presenting information in a structured and consistent format. This simplifies the work of customs officials, who can quickly locate and verify essential data, such as the product description, value, and origin. As a result, goods can move through the customs process more efficiently, reducing delays and enhancing trade facilitation. ▶ Enhanced Accuracy and Compliance: The use of specialized invoices helps ensure that exporters provide accurate and complete information. These forms often include fields for specific details required by customs, such as the HS (Harmonized System) codes for products. This not only aids in maintaining legal compliance but also reduces the potential for errors or discrepancies. Greater Transparency and Accountability: Standardized forms foster transparency and accountability throughout the supply chain. The structured layout of these invoices makes it easier for customs officials, as well as other parties involved, to understand the transaction and confirm that it aligns with international trade regulations. This transparency builds trust and promotes efficient trade relations. Consistency and Predictability: Specialized invoices provide a consistent and predictable framework for conducting international trade. Exporters can readily access and complete these forms, knowing that they meet the legal requirements of the importing country. This consistency aids both small and large businesses, as they do not need to tailor their invoices for different markets. ▶ ▶ ▶ Compliance with Legal Regulations: Using standardized commercial invoices helps exporters meet the specific legal requirements of the destination country. Some countries have unique regulations regarding invoices, and specialized forms ensure that exporters adhere to these rules. Compliance is essential for avoiding legal disputes and potential penalties.

12. Export Documents ▶ Governments may impose document requirements for exports to gather accurate data on outgoing products. ▶ Specific documents like Electronic Export Information (EEI) in the United States and the Single Administrative Document in the European Union serve this purpose. ▶ Export licenses may also be necessary when governments seek to control the export of certain goods or limit trade with specific countries for political reasons. ▶ These licenses are required in cases of controlled merchandise or embargoes.

13. Electronic Export Information ▶ The Electronic Export Information (EEI) is required by the U.S. government for exports over $2,500 per item category, except for exports to Canada. ▶ EEI is collected electronically by U.S. Customs and Border Protection or the Census Bureau. ▶ EEI replaced the paper Shipper's Export Declaration (SED) and helps tabulate exported products and their destinations. ▶ The EEI's definition of "exporter" designates the U.S. principal party in interest (USPPI) as the manufacturer, improving the accuracy of export statistics. ▶ The data collected is available through the National Trade Data Bank on the International Trade Commission's website with a subscription.

14. Single Administrative Document ▶ The Single Administrative Document (SAD) is required by the European Union for all exports. ▶ It can be submitted in paper or electronic form and must be filed where the goods are packed and shipped. ▶ The "owner of the goods" or their representative is responsible for filing the SAD.

15. Export Licenses ▶ Export licenses are government authorizations for specific product exports. ▶ Export licenses are usually required for national treasures, antiques, raw materials, or for political and military control. ▶ Several countries like India, Britain, France, Russia, and Turkey use export licenses to control the export of antiques and cultural artifacts. ▶ Some governments, like China, use export licenses to manage the export of raw materials like rare earths and phosphates. ▶ Export controls can be implemented for political reasons, such as the Ivory Coast banning cocoa exports in 2011. ▶ Export licenses are also employed for political or military objectives, notably by the United States. ▶ Various countries have export restrictions or controls, with over 50 countries identified by the OECD. ▶ The European Union, for instance, prohibits the export of personal data gathered on customers or consumers.

16. Fair trade in cocoa from the Ivory Coast

17. U.S. Export Controls ▶ U.S. export control policy has been shaped by historical milestones such as the CoCom agreement, the Export Administration Act, and the Comprehensive Anti-Apartheid Act. ▶ These milestones led to the creation of the Commerce Control List, which specifies which commodities and products can be shipped to certain countries. ▶ The list is published in the U.S. Export Administration Regulations (EAR) and was revised in 1996 to shift from a policy of "everything not explicitly authorized needs an export license" to "everything is authorized unless specifically prohibited." ▶ In 2002, the Bureau of Export Administration was renamed the Bureau of Industry and Security. ▶ U.S. export control policies focus on three elements: the product being exported, the entity purchasing it, and the ultimate destination of the product. ▶ Dual- use products, which can have both commercial and military applications, are subject to close scrutiny to ensure they are not diverted for military use.

18. Internet Encryption ▶ Businesses are increasingly interested in conducting international transactions over the internet, requiring data security for confidential information like credit card details. ▶ Encryption software is a means to secure data by scrambling it, making it readable only to those with the corresponding software. ▶ The United States government has historically classified encryption technology as sensitive due to potential military applications, placing it on the Commerce Control List. Initially, the U.S. government restricted the use of encryption software on the internet as it was considered an export, but certain entities like banks, health facilities, and online merchants were granted access. ▶ ▶ The Bureau of Industry and Security (BIS) now permits low- level "mass-market encryption" for export, but software with such encryption is still subject to BIS review. Software products containing low- level encryption remain listed in the Commerce Control List. ▶

19. The Product Exported The Bureau of Industry and Security (BIS) publishes the Commerce Control List (CCL), which lists products that concern the United States and may require export licenses. Each product on the CCL is assigned an Export Control Classification Number (ECCN), different from the Harmonized System Number, to determine the need for an export license. Products not on the CCL are classified as "EAR99" by the BIS, although some may still require licenses if under the jurisdiction of another government entity. The BIS provides the reason for each product's inclusion on the CCL, such as national security, anti- terrorism, or encryption. ECCN commodities may or may not require licenses based on the reason for listing and the destination country, with the BIS offering a Product/Country License Determination Matrix to assist exporters.

20. The Purchaser of the Product ▶ The Entity List. This list identifies people, companies, and organizations engaged in weapon proliferation, drug smuggling, or terrorism, and to which the U.S. government wants to control exports. Sales to persons or organizations on the Entity List require an export license. The Entity List is maintained by the BIS. ▶ The Unverified List. This list identifies individuals, companies, and organizations that are suspected of engaging in activities that. the BIS considers illegal. Before making a sale to a person on the Unverified List, the exporter must check with the BIS about possible issues. The Unverified List is also maintained by the BIS. In addition, the exporter must report a suspect transaction when. the transaction has elements that the BIS considers “red flags,”such as when a cash sale is made for a product that is generally. Purchased on credit, or when a product is sold to a company that. does not appear to be in the exporter’s main line of business. ▶ The Specially Designated Nationals List. The Specially Designated Nationals List contains the names of persons located. abroad with whom exporters are expressly warned not to do. business. These persons have been deemed to represent countries. to which the United States does not want to export, or they? represent companies or organizations engaged in terrorism or trafficking. Some of these companies are located in the United. States. The Specially Designated Nationals List also identifies. U.S. persons, companies, or organizations “whose export privileges have been revoked.” The list is maintained by the Department of the Treasury. ▶ The Debarred List . An exporter is expressly prohibited to sell to a person on the Debarred List, and a company that is contacted. (even for a domestic sale) by one of these companies must notify. the BIS. The Debarred List is maintained by the United States Department of State.

21. The Country of Import ▶ The Commerce Control List (CCL) determines whether a product with an Export Control Classification Number (ECCN) can be exported to a specific country. ▶ The U.S. has different export regulations for friendly and unfriendly countries, with embargoes imposed on certain products for select countries. ▶ Total embargoes prohibit any product exports to Cuba, Iran, North Korea, and Syria. ▶ Limited embargoes apply to other countries, including Belarus, Iraq, Libya, and Venezuela. ▶ When an export license is required, exporters need an Individual Validated Export License with specific terms and conditions, including a Destination Control Statement on related documents.

22. Deemed Export ▶ The U.S. Bureau of Industry and Security (BIS) regulates exports of products with potential risks to national security. ▶ BIS also includes "deemed exports," covering products sold to foreign nationals within the United States. ▶ Companies should monitor and control access to sensitive technology by foreign employees. ▶ Export licenses may be required to grant foreign employees access to controlled technology. ▶ Permanent U.S. residents are exempt from these regulations.

23. Fines ▶ Schlumberger Oilfield Holdings, a wholly-owned subsidiary of Schlumberger, a Curaçao-based company with headquarters in Sugarland, Texas, agreed to pay over $232 million for trading with Iran and Sudan. ▶ Hetran, located in Pennsylvania, manufactured a large horizontal lathe, which it sold for $800,000 to a company in the United Arab Emirates. Since Hetran’s president knew that the shipment was ultimately being sent to an Iranian company named Falcon Instrumentation and Machinery, he pleaded guilty and was sentenced to a fine of $837,500. ▶ Gary Tsai pleaded guilty to illegally export high- precision milling machines to his father, Alex Tsai, in Taiwan. These milling machines needed a Validated Export License that was not obtained. Alex Tsai was sentenced to two years in prison. ▶ Weatherford International conducted business in Cuba, Iran, Sudan and Syria through Weatherford’s subsidiary in the United Kingdom. Combined, Weatherford generated approximately $110 million in revenue from sales to these countries. The company was fined $100 million. ▶ EgyptAir Airlines Company, the flag carrier airline of Egypt, leased two Boeing 737 aircraft to Sudan. EgyptAir agreed to pay a fine of $140,000 for having re- exported the aircraft without a Validated Export License.

24. The Significance of End- Use Certificates in International Trade ▶ Legitimacy and Accountability: EUCs serve as a legal commitment by the importing entity, typically a government or authorized agency, to use the goods for the intended, legitimate purpose. This commitment holds the importer accountable and legally responsible for any deviations from the stated purpose. ▶ Preventing Diversion: The primary purpose of End- Use Certificates is to prevent the diversion of controlled goods for unauthorized or unacceptable uses. These certificates act as a safeguard, providing a formal mechanism for exporters to confirm the intended end use of their products. ▶ Government Oversight: In most cases, End-Use Certificates are issued by the importing country's government or relevant authorities. This adds an additional layer of oversight, as government officials evaluate and approve the intended use of sensitive items, thereby reducing the risk of misuse. ▶ International Agreements and Treaties: End-Use Certificates often align with international agreements and treaties that regulate the export and use of certain goods. Compliance with these agreements is vital for maintaining diplomatic relations and international trust. ▶ Security and Transparency: EUCs contribute to security and transparency in international trade. By ensuring the intended use of controlled items, they bolster the integrity of export controls and promote international peace and security. ▶ Preventing Human Rights Abuses: In the case of military equipment, End-Use Certificates are instrumental in preventing potential human rights abuses or misuse of such equipment, such as the use of weapons against civilian populations.

25. Assignment Review

26. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination. A bill of lading is important because whoever has it owns the cargo. It acts as the legal document of title which allows the person holding it to claim ownership of the cargo. This means that filling out your bill of lading accurately and completely is very important. The bill of lading also acts as a contract of carriage — it details the responsibilities of the carrier with the parties involved in the transportation of the cargo. Bill of Lading

27. A forwarder does not move the goods but acts as an expert in the logistics network. A freight forwarder is a firm specializing in the arrangement of cargo on behalf of shippers. In most cases, freight forwarders provide a variety of supply chain services, including: Ocean or air freight transportation. Inland transportation from origin and/or to destination. Preparation of documentation. Forwarder

28. Different types of containers include General-purpose containers, tank containers, and flat rack containers. The most important and popular way to move different types and sizes of goods around the globe. Goods are often moved intermodal by using several transport nodes in a single shipping container during the journey. Containers

29. Canada’s largest trading partner is the United States Canada and the U.S. share one of the largest trading relationships in the world, with more than $3.4 billion worth of goods and services crossing the border each day in 2022 That year, Canada-U.S. trade in goods and services was over $1.2 trillion and represented about two thirds of Canada's total global trade. Trading Partners

30. In Canada, the commercial invoice should be in English or in French. Your CCI is one of four key documents CBSA needs to release your goods: Canada Customers Invoice, or a Commercial Invoice, Bill of Lading, Manifest or Cargo Control Document, and Shipper’s Export Declaration. Canada Customs Invoice

31. Incoterms 2020 are divided into four groups (C, D, E, F). The rules are classified according to the fees, risk, responsibility for formalities, as well as issues related to import and export. Currently, there are 11 different incoterms. These categories are determined by the delivery location and who is responsible for covering the cost of each part of the journey. The groups are then split into sub-categories which refer to various scenarios. Incoterms

32. ICD stands for Inland Container Depot. An Inland Container Depot (ICD) is a container storage facility situated in the hinterlands, away from any major port. Shipping companies use ICDs to store and move containers before and after transporting them to the seaport. Inland Container Depot

33. Break bulk cargo are goods that must be loaded individually and separately, rather than being shipped in a container. Break-bulk/general cargo consists of goods transported, stowed and handled piecemeal to some degree, typically bundled somehow in unit loads for hoisting, either with cargo nets, slings, or crates, or stacked on trays, pallets or skids Ideally, break-bulk cargo is lifted directly into and out of a vessel's holds, and this is mostly the case today. Break bulk cargo

34. Placards are used to warn others of hazardous materials, and this signs are put on the outside of a vehicle and packages that identify the hazard class of the cargo A placard is required if the chemical is in a quantity or concentration for which an ERAP is required. If 500 kg or more of a quantity is being transported of one hazard class a placard is required. Placards

35. Managing the costs of doing international trade in 2023