Cross border goods transportation has always been the bedrock of international trade. With the exponential growth of e-commerce, huge numbers of business outlets have developed international transportation as their lifeline. In order to carry out a successful shipment, several landmarks have to be achieved. In addition, the services of certain industry players have to be engaged too. Key among these players are shippers, shipping lines, booking agents, freight forwarders, consignee, customs house brokers etc.
Container Shipment Types
The dynamics of the choice of the shipment mode and method are determined by quite a number of factors. Principal among these are the cargo type, cargo size, profit consideration, acceptable window of time for delivery etc. In ocean freight business, the adoption of modular shipping container is considered as industry standard. For the shippers, two major options available. These are LCL and FCL.
LCL means Less than Container Load or groupage while FCL stands for Full Container Load. LCL transport is facilitated by a Non-Vessel Operating Common Carrier (NVOCC). NVOCCs reserve full containers from shipping companies based on traffic demand. They then proceed to offer space in the containers for small LCL shipments at a reduced rate compared to FCL shipping. For FCL, the shipper has an entire container at his disposal for loading cargo. Under this type of container shipment, goods and merchandise in a container are loaded and unloaded for a single consignee.
LCL option of shipment is adopted when the cargo is not large enough to fill the total internal space of the container. The shipper pays for the amount of space his cargo occupies. With this method, different cargoes from different shippers are consolidated into one shipping container to maximize the use of space and cost.
The shipping line is the company carrying you cargo at sea. They usually operate the cargo ships either on charter or full ownership. As a shipper, you are less likely going to have interactions with, receive documents from or have any correspondence with them. Freight forwarders, however, are the logistics provider you will likely be dealing with. They arrange the transportation of cargoes from shippers to consignees.
The shipper is the party that initiates the shipment of cargo at the point of origin. This could be the owner of the cargo, the factory of manufacture or the merchant that sold the product. The consignee is the receiver of the cargo; this again could be the buyer of the item from source or a buyer.
Five physical processes and two documentation steps in International Shipping
The seven steps of international shipping include: Export Haulage, Origin Handling, Export Customs Clearance, Ocean Freight, Import Customs Clearance, Destination Handling and Import Haulage.
This is the first part in the transportation process. It involves the transfer of the cargo from the shipper to the freight forwarder’s location (likely a warehouse). For LCL shipment, the forwarder’s location would be an export consolidation center. The goods could possibly be transported by road (truck), rail or water.
Export Customs Clearance
Customs formalities must be carried out for every cargo leaving a country. This is done in order to certify that the cargo has met statutory regulatory requirements. The business of interacting with customs, usually called customs declaration is carried out by companies that have valid customs licenses. These are called customs house brokers. The process involves the development and submission of declaration documents to the authorities.
The 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 done by a customs house broker appointed directly by the shipper.
Origin handling covers all physical handling and inspection of the cargo from its reception at the originating warehouse till it is loaded on a ship. There are many steps carried out under origin handling by different parties. All these are coordinated by 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.
While it is the freight forwarder that performs all cargo handling at the point of origin, the cost of the service can either be paid for by the shipper or the consignee. For example, if a consignee has decided to use Forwarder A for his 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.
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 shipment. The freight forwarder and the shipping line has a contract of carriage for the cargo, 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 on to the shipper or the consignee.
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 also means before the cargo leaves the destination warehouse of the forwarder or the forwarders agent.
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 preparation of the cargo collection by the consignee.
The final leg of the goods transportation process 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.