International Trade

Taking the Helm - It’s Your Freight!

Whether you use an intermediary or navigate the often confusing sea of logistic choices one fact remains, it’s your merchandise and you need to understand how it moves. Freight costs on your terms: You can try to remove yourself from the process, “I’ll just have my supplier ship it” but remember caveat emptor. Whether you take possession of the goods at origin or landed in the U.S., you have to know what you’re paying for. When is a dock not a dock? A 3PL colleague once told me about a client who bought merchandise FOB Dock. He thought the dock was where the ship came in. Boy was he surprised when he was billed for local transport charges from the seller’s warehouse to the ocean terminal. You can’t make this stuff up! Be sure if you mean FOB Vessel you state that in your terms of sale. The D.O.T. defines FOB (Free on Board) Named Point of Exportation as the point at which the buyer becomes responsible for all freight charges. Some European buyers and sellers actually use “FOB Named Point” and “FOB Vessel” interchangeably, as long as it’s spelled out, you’re in the clear. In January 2011 the International Chamber of Commerce published the 8th revision of its “International Commercial Terms” also known as INCOTERMS. INCOTERMS 2010 revises the original 1936 publication and attempts to update a number of designations taking into account the roles of cargo security and electronic data interchange. Several terms have been eliminated and two new ones DAT (Delivery at Terminal) and DAP (Delivery at Place) have been added. Many international forwarders publish INCOTERM Charts, which provide an easy reference for importers and exporters. Knowing when to take the helm Buyers shouldn’t expect to take control of all their shipments. Many experts suggest that at best most achieve it on about 60 to 70% of their moves. Indeed there are cases where you want the seller to handle the shipment. For example, if the supplier can consolidate your goods with other orders or find cheaper freight rates because of his greater buying power. Test the market. Compare the cost of goods FOB Port of Exit with CFR (Cost and Freight) Named Port of Destination. Be advised however if the shipper desires control, perhaps to continue receiving favorable rates from his service providers, he may mark up the actual cost to reflect that loss. Freight intermediaries and their place on deck Remember you are the Captain and your forwarder is the helmsman. Be vigilant when your freight is in transit and monitor your shipments periodically. Choosing to use a Third Party Logistics Provider or 3-PL can be an asset in situations where the buyer is new to international shipping or the volume of freight doesn’t warrant a direct carrier contract. Forwarders as I used to call them (actually still do) also have the flexibility of providing different modes for different needs. Most maintain agreements with several ocean and air carriers giving the cargo owner more control over his mode of shipment. Enter into a working partnership and learn as much as you can about your forwarder’s method of operation. The National Customs Brokers and Forwarders Association of America (NCBFAA) provides ongoing education and information to its members and the shipping public on everything from Shipper’s Letter of Instruction to U.S Export Regulations, as well as links to websites for other transport groups, government agencies and International Trade Relations. They are a resource you shouldn’t pass up! Charting your course toward logistic independence Once you’ve made the decision to control some of your cargo, be sure you consult with your supplier so that his staff and yours are monitoring your choice of carriers. The value of good logistics professionals cannot be understated. Hire or train your supply chain staff and be sure that you both understand the associated challenges and rewards. Are you ready to take the helm?
Matt Guasco
Matt Guasco


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