Introduction to Global Supply Chain ManagementModule Six:

International Shipping, Customs Clearance & Trade Compliance

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Class Agenda

• International shipping, Customs clearance and trade compliance: Who does what and how does it work?

• The role of the 3PL (Third Party Logistics company) in global shipping and Customs clearance

• Fundamentals of air & ocean shipping• Incoterms 2010 Rules• Export compliance• The Customs clearance process

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International Shipping, Customs Clearance & Trade Compliance:

Who Does What & How Does It Work?

Origin: Somewhere Overseas

Destination: Somewhere in the U.S.A.

Supplier Origin Trucker Origin Forwarder International Transportation

CHB U.S. transport W&D Order Fulfillment Last Mile Client

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International Shipping & Customs Clearance:Who Are The Players?

• Buyers & Sellers• Banks• Insurance firms• Freight forwarders

– Indirect Air Carriers– Non-Vessel Operating Common

Carriers

• Customs entities• Customs brokers• Other Government Agencies (OGA’s)

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International Shipping & Customs Clearance:Who Are The Players?

• Truckers• Airlines• Steamship lines• Rail companies• Warehouse companies• National mail systems • Small parcel (UPS & FedEx)• Fulfillment houses• Test & Repair shops

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The Role of the 3PL (Freight Forwarder) InInternational Transportation

• Think of a freight forwarder as a “travel agent” for cargo

• Just as a travel agent doesn’t own planes, cruise ships or hotels, a freight forwarder doesn’t own any ships or aircraft (usually)

• A freight forwarder contracts for low(er) rates from carriers based on guaranteed volumes of cargo over a specified period of time– Tons of air freight– TEU’s for ocean freight

• Upon contracting with carriers, the forwarder then goes out to the “market” to find importers and exporters to re-sell the space to

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The Role of the Freight Forwarder inInternational Transportation

• In addition to contracting for space with airline and ocean carriers, a freight forwarder will also:– Coordinate “spotting” of containers

or pick up for air freight– Receive cargo from multiple vendors

to be sent under a single shipment– Prepare export documentation

(airway bill or ocean b/l)– Submit Automated Export System

filing (AES)• Restricted Party Screening

– Arrange for Customs clearance at destination

– Organize delivery of goods at destination

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The Role of the Customs Broker inCustoms Clearance

• A Customs Broker is licensed by a country’s federal government to act as an agent for importers when clearing goods through Customs

• As an agent for the importer, the broker engages in the “Classification & Valuation” of merchandise– What a product is and how much it is

worth?– What Customs duties are owed to the

government?

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The Role of the Customs Broker inCustoms Clearance

• The Customs clearance process is based on a shipment’s corresponding documentation

• In order to act on behalf of an importer the broker must have a Power of Attorney

• All Customs entries are now filed electronically by the broker– Automated Broker Interface in U.S.

• Often times, forwarders and brokers offer an integrated service package– International shipping and Customs

clearance

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International Shipping:Fundamentals of Air & Ocean Cargo

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Top 10 International Cargo Airports 2013 (Metric tons)

• Hong Kong• Memphis, TN• Shanghai• Incheon• Dubai• Anchorage, AK• Louisville, KY• Frankfurt• Paris • Tokyo

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Source: Airports Council International

Top 10 International Cargo Airlines 2013 (Metric tons)

• Emirates Airlines• FedEx• UPS Airlines• Korean Air• Cathay Pacific Group• China Airlines• Singapore Airlines• Qatar Airways• Lufthansa• Asiana Airlines

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Source: Air Cargo World

Major Steamship Lines (Partial Listing)

• APL• China Shipping• CMA-CGM (3)• Cosco (5)• Evergreen (4)• Hapag-Lloyd• Hamburg Sud

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• Hanjin• Hyundai• Maersk (1)• MSC (2)• NYK• OOCL• Yang Ming

Top Container Ports Worldwide

• Shanghai• Singapore• Hong Kong• Shenzhen• Busan• Ningbo• Guangzhou (Harbor)• Qingdao• Jabel Ali• Tianjin• Rotterdam• Hamburg• Los Angeles & Long Beach (16 & 23)

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• Mumbai• Nhava Sheva• Santos• Manzanillo (MX)• Manzanillo (Panama)• Veracruz• U.S. ports

– New York/New Jersey– Savannah– Charleston– Norfolk– Miami– Houston– Philadelphia– Baltimore– Tacoma & Seattle

Air Freight

• Consolidated– Composed of cargo from many

shippers with freight that has same origin and destination

– Freight forwarder purchases allotments on aircraft and sells space to individual shippers

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Air Freight

• Consolidated– Per kilo rates are determined by

market conditions– Individual shippers are assigned a

unique House Air Waybill– Master Air Waybill identifies

consolidation; freight forwarder is shown as the shipper, and destination office as consignee

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Actual vs. Volume Weight

• All aircraft have space and weight restrictions. In order to maximize payload and revenue potential, freight is subject to charges based on the actual or volume weight of a given shipment.

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Document Example:Airway Bill

Types of Maritime Transport

• Bulk • Tankers• Tramper vessels • Charters• Roll On/Roll Off• Passenger ships• Barge• Ferries• Container ships

Standard 20’ & 40’ Containers

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20’ & 40’ Reefer Containers

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Images of Slider Chassis

 

Terminology Specific to the Maritime Industry

• Beneficial Cargo Owners (BCO’s)

• Steamship lines• Ocean Transport Intermediary

• Licensed by the Federal Maritime Commission

• Ocean freight forwarder

• Non-Vessel Operating Common Carriers (NVOCC)

• Carrier Alliances

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Full & Less than Container Load

• Full Container Load (FCL)– Single shipper, typically loaded at a

factory, warehouse or works– Container can be “spotted” or a “live-

loaded”– FCL rates are offered “all-in” or with

additional charges

• Less Than Container Load (LCL)– A consolidator (forwarder) offers

shared space in a container on a weight/measure basis

– Multiple shippers in the same container, same origin/destination

– Rates sold on a weight/measure basis (1,000 kilos or 1 cubic meter)

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Document Example:Ocean Bill of Lading

Incoterms® 2010 Rules:International Shipping Terms

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Incoterms® Defined

• By focusing on the seller’s delivery obligations within an international sales contract Incoterms® govern three critically important considerations:

– At what physical point in a supply chain the risk of loss or damage to the goods shifts from seller to buyer

– At what physical point in a supply chain the responsibility for all transportation, customs clearance, duties and related charges shift from the seller to the buyer

– Responsibility between seller and buyer for execution of certain functional activities

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The 11 Official ICC 2010 Incoterms® As of 1/1/2011

• EXW Ex Works (named place of delivery)• FCA Free Carrier (named place of delivery)• FAS Free Alongside Ship (named port of shipment)• FOB Free On Board (named port of shipment)• CFR Cost & Freight (named port of destination)• CIF Cost, Insurance & Freight (named port of destination)• CPT Carriage Paid To (named place of destination)

• CIP Carriage & Insurance Paid To (named place of destination)• DAT Delivered At Terminal (named terminal at port or place of destination)• DAP Delivered At Place (named place of destination)• DDP Delivered Duty Paid (named place of destination)

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FCA Free Carrier (named place of delivery)

• There can be more than one delivery point at origin (seller’s facility, forwarder’s facility, port or airport)

• Delivery occurs when goods are presented to the carrier nominated by the buyer at the named place or port, cleared for export, from there all transport/customs related costs are for the buyer

• If delivery is at seller’s facility, the seller must load the collecting vehicle• Can be used with any mode of transport

Destination plant or warehouse

Origin

The seller’s delivery responsibility can end at his works, at a forwarder’s facility or at a port/airport. Under each scenariogoods must be cleared for export.

Destination

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CIP Carriage & Insurance Paid To (named place of destination)

• Risk shifts with the first carrier at origin (normally the collecting vehicle at the seller’s facility), but seller pays transport costs to named place and secures minimum cover insurance for buyer

• Can be used for any mode of transportation or combination thereof

Origin

Any mode of Seller Inland carrier transport

Destination

Destination port or airport Buyer

Delivery is completed at origin Transportation extends to a named port or with first carrier (trucker) place at destination and seller must secure minimum cover insurance for buyer

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DDP Delivered Duty Paid (named place of destination)

• Seller delivers when goods are made available to the buyer at the named placed at destination, cleared for import but not unloaded from the delivering vehicle

• Seller is responsible for all transportation, customs & related costs up to named place at destination

• Can be used with any mode of transport

Destination

Seller is responsible for risk of loss or damage andtransportation up to named place at destination, includingcustoms clearance, duties and taxes

Origin

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U.S. Import/Export Trade Compliance:Following the Rules…

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U.S. Import/Export Trade Compliance:Regulatory Entities (Partial List)

• Exports:– U.S. Department of Commerce,

Bureau of Industry & Security– U.S. Department of State,

Directorate of Defense Trade Controls

– U.S. Department of Homeland Security, Customs & Border Protection

• Imports:– Department of Homeland

Security, Customs & Border Protection

– Other Government Agencies (OGAs)

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U.S. Import/Export Trade Compliance:Regulations

• BIS: Export Administration Regulations (15 CFR)

• DDTC: International Traffic in Arms Regulations (22 CFR)

• CBP: U.S. Customs & Border Protection (19 CFR) & The Harmonized Tariff Schedule of the United States

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U.S. Export Compliance:Export Administration Regulations (EAR)

• Enforcement of the EAR falls under the auspices of the Bureau of Industry and Security, U.S. Department of Commerce

• Focus is on controls over the export and re-export of “dual-use” items

• CAVEAT: BIS applies a broad definition to the term “export”

• Primary tools for determining export license requirements are the Commerce Control List and Commerce Country Chart

• The vast majority of products/technology do not require an export license, but still remain “Subject to the EAR”

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Complying with the EAR:Five Fundamental Questions

• Is the item(s) on the Commerce Control List and if so, what is its classification?

• What is the country of ultimate destination for an export or re-export?

• Who is the ultimate end-user of the item?

• What is the ultimate end-use of the item?

• Is there any conduct surrounding a transaction such as contracting, financing, and freight forwarding in support of a proliferation?

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Classifying Goods for Export:Schedule B Numbers

• The Schedule B is a 10-digit nomenclature used to classify goods for export from the U.S.

• There is literally a Schedule B number for every type of product

• Schedule B is based on the Harmonized System, which is administered by the World Customs Organization– Globally, “HS” numbers are identicial

up to six digits (4 digit “headings” and 6 digit “subheadings”)

– Import classification in the U.S. is done via the Harmonized Tariff Schedule (HTS)

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Before You Export…The Automated Export System (AES)

• Method through which Electronic Export Information (EEI) and manifest details are filed with the U.S. government

• Intended to support U.S. Export Controls and the compilation of trade statistics

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Before You Export…The Automated Export System (AES)

• AES filing is a multi-agency requirement– Customs & Border Protection– Bureau of Industry & Security– Bureau of the Census– Directorate of Defense Trade Controls

• AES filing is the responsibility of the U.S. Principle Party of Interest (USPPI)

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The Essence of Importing:Classification & Valuation

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Classification & Valuation

• Classification– What is it you are importing and how do you match it with the corresponding

Harmonized Tariff Schedule of the United States (HTSUS) number?

• Valuation– What is the currency of purchase (and $ equivalent exchange rate when entry is made)?– What was the “price paid or payable”?

• Valuation is pursuant to the rules found in the U.S. Customs Regulations & Rulings, Code of Federal Regulations, Title 19

• The quality of the classification & valuation process depends to a great extent on the content of the commercial invoice, packing list and ocean/air bill of lading

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Classification & Valuation

• Classification of goods is governed by the HTSUS• Customs Duties are governed by the U.S. Customs Regulations & Rulings (Code of

Federal Regulations, Title 19)– Packing, stamping & marking– Transportation in bond and merchandise in transit– Customs warehouses & container stations– Rules of origin– Customs brokers– Customs bonds– Country of origin marking– Quotas– Trademarks, trade names and copyrights

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The HTSUS

• The United States uses the Harmonized System to classify both import and export products (Called “Schedule B” for export classifications)

• In both cases, the first 6 digits are consistent with the H.S., while an extra 4 are specific to the U.S.

• The Harmonized System serves as the foundation for the Harmonized Tariff Schedule of the United States

• While tariffs are established by Congress, the HTSUS is put together by the U.S. International Trade Commission (www.usitc.gov)

• Classification & interpretation fall under CBP

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The HTSUS:Special Tariff Treatment Programs

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Classification & Valuation:How to Use the HTSUS

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Classification & Valuation:How to Use the HTSUS

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End of Module Six

Congratulations!!!

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