Archive for the ‘Logistics’ Category


 

Perishables Shipping | 12 Questions Every Shipper Must Ask

Perishables Shipping | 12 Questions Every Shipper Must Ask

Seldom do shippers or product owners know or understand the terminologies or intricacies of perishables shipping to ensure safe, and seamless passage of their goods. Without industry expertise, critical shipment details may be overlooked resulting in product damage or contract loss. Here are tips and tools to be a successful perishables exporter.

When we are contacted to move perishables shipments, the conversation may include the commodity trade name and that it must be kept at a specific temperature. It is packed in boxes, on skids, and is delivering to a foreign city, ready for pickup tomorrow. We then ask them the following questions:

  • What are the Incoterms® (terms of sale)?
  • Is there a letter of credit (L/C) involved?
  • How many commodities (SKU) make up the shipment?
  • What are the weights and dimensions of each shipping piece?
  • Are any pallets used certified and does the product contain the required markings?
  • Have the pallets been shrink-wrapped and were corners used?
  • Are there temperature recorders on the freight?
  • *What export documentation has been prepared to accompany the shipment?
  • Will your company file the B13A export document for Statistics Canada?
  • ** Does your product require phytosanitary certificates and has the Canadian Food Inspection Agency (CFIA) completed the
  • inspection?
  • What mode of transport is optimal: air, ocean, or highway?
  • Has this shipment been pre-quoted – what is the quote reference?

TIP: Be ready to share your knowledge of the shipment to ensure proper handling and transportation to destination.

This list of condensed questions will start a conversation about a perishables shipment. It is important to note that although the client is familiar with their products and may not understand the need for these questions, we are not and therefore are required to ask in order to meet your specific shipping requirements. This ever-changing field is a constant learning process for freight forwarders and carriers. The freight forwarder, the person in charge of the shipment, must have a clear understanding of the shipment to be able to react to any situation following pickup from origin door. This would include after hours and weekends when the shipper is not available.

TIP: Be proactive and start the discussion early.

From this list of questions the conversation continues until we have a complete picture of the shipment and knowledge of where, when and how it must move. From door to door any number of issues, security measures or documentation questions can arise that would cause a delay and/or negative result.

Conversely the carriers – truckers, steamship lines and airlines – have a similar list of questions when the freight forwarder is booking the shipment. If we are not able to provide a complete understanding of the shipment, those carriers may have doubts about a successful delivery, which could affect them supplying a booking confirmation and final freight rates as a matter of liability. All parties involved in a freight movement want to deliver the shipment in its best possible condition, on time and as quoted. Carriers are bound by the information contained in the bill of lading and/or in the booking confirmation. Therefore, all questions must be asked, answered and understood, and itemized on the export documentation and on-hand with the freight forwarder.

TIP: Exporters must be as detailed as possible when organizing their shipments. Be ready and prepared to share all information with your freight forwarder so they can ensure the documentation is correct and in order, as well as being your conduit to the carriers. If your freight forwarder does not ask all these questions or is not available 24/7, you will require a freight forwarder that better meets your needs.

Finally, do not hesitate to ask any and all questions of your freight forwarder. They may not have all the answers exactly when you ask them but they gain the knowledge and reply as promptly as possible, as to put your mind at ease that you are receiving the best possible service.

We hope you will drop in again as this series on perishables shipping continues. If you have any questions or suggestions regarding the movement of perishable commodities, please do not hesitate to call us at 888.538.1566.

Cost Insurance Freight CIF Incoterm ® 2010 | Use Case Scenario

Risk, Responsibility and Rewards – How The CIF Incoterms ® rule delivers and what it covers in greater detail:

cif-incoterms

 

In order to better reflect modern commercial reality, the ICC created a new classification system for Incoterms and abolished the previous classification system which was based on the first letter of the Incoterm rule. Under Incoterms 2010, the ICC has divided the Incoterms in accordance with the means of transportation as follows:

Rules for any Mode or Modes of Transport: EXW, FCA, CPT, CIP, DAT, DAP, DDP

Rules for Sea and Inland Waterway Transport: FAS, FOB, CFR and CIF

 

CIF Incoterms ® (Cost Insurance Freight)

 

In our series on the importance of understanding and leveraging Incoterms® 2010, we take a deeper and more detailed look into the CIF Incoterm and the impacts negotiated, as well as often overlooked during the establishment of project viability or business case development for capital projects that are going to be requiring international sales contracts to fulfill their mandates.

First we review what CIF Incoterm is as defined by the International Chamber of Commerce (ICC): CIF is recommended for use with non-containerized sea freight.

CIF Definition: CIF, or “cost, insurance and freight”, is a term used in international contracts for the sale of goods being shipped by sea to a port of destination where the seller pays the cost of the insurance and transport of the goods to the destination, and provides the buyer with the documents necessary to obtain the goods from the carrier. Legal delivery occurs when the goods cross the ship’s rail in the port of shipment (where they are being shipped FROM).

 

Insurance Charges:

Under CIF, the seller is required to obtain insurance only for minimum coverage. If the buyer wants more comprehensive insurance, they must ensure that the seller is contractually obliged to do so within their contract.

Insurance coverage for goods during shipment:

Freight insurance can be purchased directly from a shipper or from a third-party insurer. also called cargo insurance.

 

Cargo insurance Types:

Insurers offer two basic types of ocean cargo insurance policies. A voyage policy is used when insuring a single voyage, sometimes referred to as a “stray risk” or “trip risk.” Voyage policies are used primarily to cover shipments made by infrequent shippers. The other basic type of policy is the open cargo policy.

 

Motor Truck Cargo insurance (Cargo) provides insurance on the freight or commodity hauled by a For-hire trucker. It covers your liability for cargo that is lost or damaged due to causes such as fire, collision, or striking of a load.

 

Marine insurance:

Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.

 

Cargo Management Charges:

 

Stevedoring charges:

Stevedoring is the process of loading and unloading ships. The main sectors of stevedoring are container terminal operations – the loading and discharge of container vessels at terminal ports, largely using advanced mechanical technology. Stevedoring charges are the charges incurred for unloading the goods from ship hold to wharf. These charges are treated as forming part of the freight and are to be added to the value for the purpose of charging duty on imported goods. This contingency arises only when the carrier does not include these charges in the Freight Bill.

 

Wharfage charges?:

A charge assessed by a shipping terminal or port when goods are moved through the location. Wharfage is one of the costs of transport goods within the distribution system used by a business to bring its goods to market.

 

Terminal Handling Charges:

Terminal handling charges or Container Service Charges (CSC or THC) are essentially charges on top of the sea freight, collected by shipping lines to recover from the shippers the cost of paying the container terminals or mid stream operators for the loading or unloading of the containers, and other related costs borne by the shipping lines at the port of shipment or destination terminal before being loaded onboard a vessel.

 

Container Freight Station (CFS) charges:

CFS is the term used at the loading port and means the location designated by carriers for the receiving of cargo to be loaded into containers by the carrier. At discharge or destination ports, the term CFS means the bonded location designated by carriers for devanning of containerized cargo.

 

Entry of Goods Valuation and Charges:

 

Entry costs and their determination are also a part of negotiating the international sales contract under CIF. You may wonder how Incoterms selection impact the landed entry costs, it is often overlooked that the Incoterms define where the responsibility for costs rests within the contract covering all of the aspects mentioned above and in certain circumstances there may also be packaging requirements for containers where inspection is required for example.

It is often overlooked that inspection for customs or quality control / delivery inspections incur a cost of service that needs to be considered in the overall costing process.

 

What is included in CIF value?

For the purpose of customs valuation, the CIF value is the price paid for the goods plus the cost of transportation, loading, unloading, handling, insurance, and associated costs incidental to delivery of the goods from the port or place of export in the country of export to the port or place of import in the country.

Assessable value:

Assessable value is a very broad term and complicated, it means the total end assessed value upon which various duties and taxes are levied . The Assessable value is calculated based on various factors/valuation rules mentioned in the Excise Act/Rules as per the Import or Export country.

 

Use Case Scenario:

 

For our case study purpose, below is an example of an international sales contract announced by Northern Minerals Ltd. where CIF was selected from the 2010 Incoterms to guide the pricing, risk and responsibility for this agreement where they are leveraging CIF to determine clarity on costs for their sales agreement:

Northern Minerals Ltd. (ASX:NTU) announced that it has entered into a sales agreement with Lianyugang Zeyu New Materials Sales Co. Ltd. (JFMAG). The agreement covers all planned production from the company’s Browns Range pilot plant.

JFMAG is a subsidiary of Guangdong Rare Earths Group, and Guangdong Rare Earths Group is a subsidiary of Guangdong Raising Asset Management. Guangdong Rare Earths Group is one of China’s five major vertically integrated heavy rare earths companies.

The Sales Agreement terms are based off CIF Incoterms 2010 with pricing referenced from a 2-month average of quoted prices on Asian Metals and Beijing Ruidow Information Technology.

Under the Sales Agreement, prior to the first shipment of rare earth carbonates, JFMAG will make a pre-payment to Northern Minerals of A$10 million. The prepayment covers approximately 15% of the expected value of production during the Pilot Plant phase, with the remaining 85% to be paid to Northern Minerals over the course of the agreement based on volumes delivered. JFMAG or its nominated beneficiary will be issued 40 million unlisted options at $0.25 exercise price which can be converted to ordinary shares to offset the pre-payment of A$10 million.

Northern Minerals Enters Sales Agreement for Browns Range Pilot Plant Output

 

 

The Disadvantages of Delivered Duty Paid (DDP)

Outsourcing your Transportation and Customs Control

Have you ever asked yourself why you choose Delivered Duty Paid (DDP Incoterms ®) for your international business? Many companies choose international terms of sale based on their company philosophy, history, costs, seller options or perceived ease of transaction. Without knowing the options beyond Incoterms DDP; a company could be losing control of their shipments and increasing their costs dramatically. The solution is to understand all Incoterms®; the responsibility involved, and to select the most advantageous term for your business strategy.

DDP Incoterms ®

Incoterms® DDP being an example, are terms that are agreed upon during the negotiation of a contract or sale and deal exclusively with;

  • The obligation of buyers and sellers (with regard to each of the 13 stages involved in the transport and clearance of a shipment – see Incoterms® chart), and
  • The stipulations on which party bears the risk of loss during transit.

Additional Information:

  • The purpose of these terms are to provide a set of international rules for the interpretation of the most commonly used trade terms.
  • The parties to the transaction select the Incoterms®, which determines who pays the cost of each transportation segment.
  • Incoterms® influence customs valuation of imported merchandise. Certain costs within the supply chain may or may not be included in the value for Customs, depending on the term selected.

It is important that your buyers understand and select terms of sale that are in the best interest of your company. The best time to determine the chosen one is when the buyer is evaluating whether or not to move forward with the purchase. Decisions made after the fact will inevitably affect the initial price that was being considered.

DDP – Delivered Duty Paid

This commonly used term places the maximum obligations on the seller and minimum obligations on the buyer.

The seller is responsible for delivering the goods to the named place, in the country of the buyer, and pays all costs and risks in bringing the goods to the destination, including, import duties and taxes. Risk transfers from seller to buyer when the goods are made available to the buyer, ready for unloading from the arriving conveyance.

Buyer Advantages

  • Lower risk, as the seller assumes all responsibilities and charges to the destination. However, risk is not gone!
  • Landed cost is known at the time of purchase.
  • No administrative supply chain management, arrangement of vendors or payment of such charges.

Buyer Disadvantages

  • Can not be used if the seller is unable to obtain import licenses, permits or certain payment options with Canada Customs. Some taxes such as GST are only payable by registered business entities, so there may be no mechanism for the seller to make payment.
  • No control over the movement or importation of the goods.
  • No direct contacts to track a shipment other than through your vendor.
  • No ability to interject in the event of an issue.
  • Hidden transport and import costs may lie in the markup calculated by the seller.

An Alternative to DDP: FCA – Free Carrier

This commonly used term places the maximum obligations on the buyer and minimum obligations on the seller.

The buyer is now responsible for delivering the goods to their intended destination, and pays all costs and risks in bringing the goods to the destination, including, import duties and taxes.

The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place. The seller pays for carriage to the named point of delivery, and risk passes when the goods are handed over to the first carrier

Buyer Advantages

  • Control over the movement or importation of the goods.
  • Direct contacts to track a shipment.
  • Ability to interject in the event of an issue.
  • No hidden transport and import costs.

Buyer Disadvantages

  • Administrative resources to liaise with service provider.

Always review and consider terms of sale proposed for use in a new contractual agreement to ensure they are consistent with your business plan. Ask for advice from your customs broker or freight forwarder, as often times they can recommend advantageous terms of sale.

Need assistance in reviewing your terms of sale? Please leave your questions and comments in the section below or email Ask Your Broker.

Freight Forwarders Take Note: eManifest in effect November 7, 2016

Canada Border Services Agency (CBSA) has announced that bonded and non-bonded freight forwarders, who are responsible for consolidated imports are required to transmit advance house bill data electronically for in-bond and in-transit shipments commencing November 7, 2016.

The implementation timeline as it applies to eManifest requirements for freight forwarders is as follows:

  • November 7, 2016 to January 10, 2017
    Transition period during which penalties for non-compliance will not be issued. CBSA will work closely with freight forwarders on corrective measures to become compliant.
  • January 11, 2017- July 11, 2017
    Non-compliant freight forwarders may be issued zero-rated (non-monetary) penalties under the CBSA Administrative Monetary Penalty System (AMPS).
  • July 12, 2017
    Freight Forwarders deemed non-compliant may be issued monetary penalties.

CBSA encourages freight forwarders to adopt the eManifest requirements now before they become mandatory. By doing so freight forwarders will have time to adjust to eManifest processes and correct problems effectively reducing the risk of non-compliance.

Start to prepare now:

  1. Ensure you have a valid CBSA-issued 8000-series freight forwarder carrier code and that CBSA has your current company contact information. For detailed information on obtaining a carrier code visit the Commercial Carrier section of the CBSA website.
    Choose a transmission option. Available options included:

    1. Electronic Data Interchange (EDI)
    2. Third party service provider (Borderpro)
    3. CBSA’s eManifest portal
  2. Secure a copy of the technical reference chapter of the Electronic Commerce Client Requirements Document (ECCRD) – Chapter 5 and 8. These chapters provide the business rules and data requirements when transmitting data to CBSA. Contact the CBSA Technical Commercial Client Unit (TCCU) for a copy.
  3. Review the tools, resources and client support available on the CBSA website.

Available eManifest filing options:

  • Full-service filing as primary service provider – For carriers who would prefer Pacific Customs Brokers to file eManifest on their behalf.
  • Full-service filing as secondary service provider – A backup option for carriers that are registered with another third party service provider, or who plan to use the CBSA web portal in the event of system failures, power outages, internet connectivity issues, etc.
  • Self-filing (partial) – For carriers choosing to enter eManifest data themselves.Note: Pacific Customs Brokers offers 24/7 carrier support with all of our service options listed above.

We are a third party service provider and know how to be compliant with filing your ACI eManifest. Contact us at 855-542-6644 or leave us a comment in the comment section below.

Highway eManifest: A Year in Review

 

It has been just over a year since eManifest became mandatory for highway carriers. On July 10, 2015, full compliance of eManifest came into effect and since January 11, 2016, non-compliant carriers may have been issued a Administrative Monetary Penalty System (AMPS) penalties.

The Canada Border Services Agency (CBSA) at the Pacific Highway port of crossing reports that for the most part, carriers have been compliant. However the occasional carrier has arrived without an eManifest filed. Additionally, some carriers do not report multiple pickups on a single Pre-Arrival Reporting System (PARS).

Here is a quick review of how a carrier can be compliant when filing an eManifest with CBSA:

  • Transmission of Electronic Data Interchange (EDI) cargo and conveyance data must be received and validated by CBSA no later than one hour before the arrival at the First Port of Arrival (FPOA).
  • All cargo data must be accepted by CBSA and on file in order to be subsequently linked to a conveyance. If a conveyance is transmitted quoting a cargo control number (CCN) that is either not on file or in reject status, the conveyance will be rejected.
  • The highway cargo submission will include but is not limited to:
    • A CCN that begins with the carrier’s 4-digit alphanumeric, CBSA-assigned carrier code followed by a unique reference number assigned by the carrier or service provider
    • Port of report and port of destination
    • A description of the goods
    • Shipper and consignee name and address
  • The CCN and Conveyance Reference Number (CRN) cannot be the same.
  • A machine readable bar code must be presented to the officer at the FPOA. The bar code must either be the CRN or the CCN or both.
  • Unless subject to an exemption or exception (see ECCRD or D-Memorandum for exemptions and exceptions) the carrier must provide a cargo submission to the CBSA for each shipment destined to Canada not being cleared as CSA.
  • Changes (pre-arrival) or amendments (post-arrival) to cargo data should be made as soon as they are discovered. Electronic changes by clients will be accepted up to the FPOA of the goods.

Failure to submit an eManifest or report all shipments can lead to a penalty of $2000 to $8000 Canadian Dollars per shipment not reported. Additionally, the carrier’s truck and shipments can be refused entry until an eManifest is filed within the prescribed time limits.

Pacific Customs Brokers is a third party service provider and knows how to be compliant with filing your ACI eManifest. Contact us at 855-542-6644 or email us [email protected]