Transportation Strategy – SCMN 4780
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Shipper’s Perspective Global Trade. International Trade for US Companies. Shipper’s Perspective. 2. Reasons for Increased Global Trade. Grow the business through trade in new markets Diversify financial performance over various economies

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Shipper’s Perspective Global Trade

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Shipper s perspective global trade

Transportation Strategy – SCMN 4780

Shipper’s Perspective Global Trade


Shipper s perspective global trade

International Trade for US Companies

Shipper’s Perspective

2


Reasons for increased global trade

Reasons for Increased Global Trade

  • Grow the business through trade in new markets

  • Diversify financial performance over various economies

  • Establish brand identity and viability in foreign markets

  • Improve profitability by reducing supply cost (outsourcing)

  • Superior quality of products in foreign market

  • Access to unique materials and/or new technologies

  • React to buying / selling patterns of competitors

  • Improve plight of downtrodden nations / people

Shipper’s Perspective

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Shipper s perspective global trade

US Global Trade ($B)

Shipper’s Perspective

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Shipper s perspective global trade

US Global Trade ($B)

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Shipper s perspective global trade

2000 – 2010 US Global Trade $B

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Key barriers to successful global trade

Key Barriers to Successful Global Trade

  • Lack understanding of import procedures / documentation

  • Lack knowledge of foreign business practices

  • Logistical, political and financial risks

  • Language and cultural differences

  • US domestic market nationalism

  • Complex contract negotiations

  • Difficulty in making engineering changes

  • Longer supply chain lead-times (vs. LEAN)


Shipper s perspective global trade

US Top Trading Partners – 2010

2010 Top 15 US Trading Countries ($B)

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Shipper s perspective global trade

2010 US Top Trading Partners

2010 Top 15 US Trading Countries ($B)


Domestic transportation network

Domestic Transportation Network

Outbound Transportation

Inbound Transportation

PRODUCER (Shipper)

SUPPLIER

CUSTOMER

Interstate Border Crossing

Interstate Border Crossing

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Shipper s perspective global trade

Border Crossing Comparison

Phoenix

San Antonio

Monterrey

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Global transportation network

Global Transportation Network

Outbound Transportation EXPORT

Inbound Transportation

IMPORT

PRODUCER (Shipper)

SUPPLIER

CUSTOMER

US Border Crossing

US Border Crossing

Typical modes of transport between Mexico and US?

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Shipper s perspective global trade

U. S. Points of Entry

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Globalizing the supply chain

Globalizing the Supply Chain

What management changes are required by the shipper when logistics linkages cross the border of a sovereign country?

extraction

conversion

manufacture

US Assembly Operation

?

distribution

retail

consumption

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Shipper s perspective global trade

US Customs & Border Protection (CBP)

Responding to the need for revenue following the American Revolutionary Way, the First United States Congress passed and President George Washington signed the Tariff Act of July 4, 1789, which authorized the collection of duties on imported goods. Four weeks later, on July 31st, the fifth act of Congress established the United States Customs Service and its ports of entry.

In 2003, the United States Customs Service was re-commissioned to a subsidiary of the US Department of Homeland Security as the Bureau of Customs and Border Protection, Immigration and Customs Enforcement. US Customs Service has three major missions: (1.) collecting tariff revenue, (2.) protecting the U.S. economy from smuggling and illegal goods, and (3.) processing people and goods at ports of entry.

Shipper’s Perspective

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Shipper s perspective global trade

US Customs & Border Protection (CBP)

  • CBP has a workforce of over 58,000 employees including officers and agents, agriculture specialists, aircraft pilots, trade specialists, mission support staff and canine enforcement officers and agents

  • 1,000 Air and Marine Interdiction Agents prevent people, weapons, narcotics, and conveyances from illegal entry by air and water

  • 2,500 employees in revenue positions collecting >$30 billion annually in entry duties and taxes through the enforcement of trade and tariff laws; CBP collections are 2nd largest revenue source to US gov’t

  • Currently, US has 320+ officially designated ports of entry (POE) and an additional 14 pre-clearance locations in foreign countries

  • Responsible for container security through identifying and inspecting foreign cargo in its mother country before it is imported into US

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Shipper s perspective global trade

US Customs & Border Protection

  • CBP is authorized to search inbound and outbound shipments. It uses targeting to carry out its mission. CBP is required to seize all merchandise that is stolen, smuggled or clandestinely imported into the United States.

  • Merchandise may be seized and forfeited if:

    • Import is prohibited or restricted by law

    • Importer does not have proper license or documentation

    • Imported goods are not properly packaged or labeled

    • Merchandise does not have proper country of origin markings

    • Merchandise is subject to quarantine

  • The Tariff Act is used for civil and criminal penalties for non-compliance in the importation of goods. It prescribes penalties against any person who imports, attempts to import, or procures merchandise by unlawful means. Penalty provisions include FRAUD, GROSS NEGLIGENCE and NEGLIGENCE.

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Shipper s perspective global trade

US Harmonized Tariff Schedule (HTS)

The HTS lists tariffs charged for all products imported into the US. HTS classifies goods according to the international harmonized commodity coding and classification system established / maintained by the World Customs Organization.

Virtually all countries base their tariff schedules on this system, making it easier to conduct international trade.

The HTS generally classifies goods based on their level of processing, with raw materials appearing first and highly processed goods last.

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Shipper s perspective global trade

US Harmonized Tariff Schedule (HTS)

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Shipper s perspective global trade

Tariff Application

00

Tariff Rates in Developed Markets for Timber Products

Source: International Tropical Timber Organization

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In ternational co mmercial terms

INternationalCOmmercial TERMS

What are INCOTERMS? A series of pre-defined commercial terms published by the International Chamber of Commerce widely used in international commercial transactions. A series of three-letter trade terms related to common sales practices. The rules are intended to clearly communicate the tasks, costs and risks associated with the transportation and delivery of goods. Incoterm rules are accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce / remove uncertainties arising from different interpretation of the rules in different countries.

Incoterms Handout

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International terms of trade

International Terms of Trade

  • Determine the seller’s and buyer’s obligations concerning responsibilities and charges for international transportation of goods from the seller’s premises to the buyer’s place

  • Objective is to avoid confusion and misunderstanding addressing the following questions:

    • Who is responsible for what?

    • Who is going to pay for what?

    • Where do responsibilities begin / end?

    • Who assumes the risk?

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Shipper s perspective global trade

Buyer seeks to purchase container of 24” LCD monitors from a Taiwan supplier. The seller quotes a price of $225 US per monitor, FAS, Port of Kaoshiung, Incoterms 2010. What is seller responsible for?

Packing the goods for export and loading the container

All transportation costs of getting the monitors to the port

Dropping the container at the port

Clearing the goods for export

Loading the container on the ship

Paying for the ocean transport

Paying for the insurance on the international voyage

All costs related to unloading the container from the ship

Clearing the goods through U.S. Customs

All transportation costs of getting monitors from the port to the destination 

Application of Incoterms


Shipper s perspective global trade

Another supplier in India offers a similar quality monitors. Seller quotes buyer a price of $240 US per monitor, CIF, Port of Savannah, Incoterms 2010. What is the seller responsible for?

Packing the goods for export and loading the container

All transportation costs of getting the monitors to the port

Dropping the container at the port

Clearing the goods for export

Loading the container on the ship

Paying for the ocean transport

Paying for the insurance on the international voyage

All costs related to unloading the container from the ship

Clearing the goods through U.S. Customs

All transportation costs of getting monitors from the port to the destination

Application of Incoterms


Customs documentation

Customs Documentation

Why is customs documentation (or paperwork) important?

  • Customs Forms: invoice, bill of lading, certificate of origin, certificate of insurance, letter of credit

  • Documentation drives the entire export process

  • Documentation results in transfer of information in a timely fashion to ensure uninterrupted freight flow

  • Keys to success:

    • use the correct form

    • available in advance of shipment

    • accuracy is essential

      • impacts application of tariffs

      • errors create delays and costs

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Customs documentation1

Customs Documentation

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Documentation and security

Documentation and Security

  • US Customs & Border Protection has established smart borders that increase security while facilitating the movement of legitimate trade

  • Regulation – 19 CFR Part 4 or “24 Hour Rule”

    • Ocean Vessel – present 24 hours prior to lading at a foreign port

    • Air / Courier – present 4 hours prior to arrival in US or at "wheels up" for the aircraft

    • Rail – present 2 hours prior to arrival at US entry port

    • Truck – present 1 hour prior to arrival in US or ½ hour for Free And Secure Trade or FAST participants

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Ocean freight challenges

Ocean Freight Challenges

Why is ocean freight protection an issue?

There are numerous perils are created by longer distance travel, extensive product handling and different conditions.

roll, pitch, yaw, surge, sway, heave

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Handling stowage problems

Handling / Stowage Problems

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Pirates thieves on high seas

Pirates / Thieves on High Seas

Areas of concern include the South China Seas, West Africa, South America (particularly Brazil), the coasts of the Arabian Peninsula, The Philippines, Indonesia, Somalia and, with the chaos in Albania, even parts of the Mediterranean. Over 200 crew have been assaulted, taken hostage or injured in attacks this year, and eight killed. The figures also show that pirates are more likely to be armed with guns than in previous years.

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Fortuitous losses at sea

Fortuitous Losses at Sea

Ship’s master (captain) has the absolute right to jettison cargo when he reasonably believes it to be necessary, and the owners of the ship incur no liability.

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Shipper s perspective global trade

Fortuitous Losses on Land

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Shipper s perspective global trade

Import / Export Management Challenges

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