Customs Clearing and Freight

Forwarding Management
LSCM4094
Busha Temesgen (PhD)
 COURSE DESCRIPTION

• This course is designed to provide basic knowledge related to Ethiopian

Import Bank and Customs procedure.
• Pertinent import formats and documents such as Import permits,
Purchase order, Insurance Policy, Bill of Lading, Airway Bill, Sales invoice,
Consular Invoice, and the like which should be presented along with
Customs Declaration Form (CDF) to clear goods out of Customs station
are discussed in detail.
• Moreover, the description INCOTERMS and the respective responsibilities
of foreign purchaser and seller are spelt out.
• The course considers an overview of transport systems, the role of
transport, types of transport, regulation of carriers, freight classification,
freight forwarding concepts, FOB terms, selection of carriers and routing,
documentation in freight shipments, and management and investment
decisions in the transport sector
 COURSE OBJECTIVES

• At the completion of the course, the student will be able to:

• Discuss the role of freight forwarding
• Differentiate the nature of transit and freight
• Adapt with different freight shipment documentations
• Familiarize with import procedure and its respective documentation in
processing foreign purchase;
• Discuss available modes of payments in effecting payments to seller in
foreign country; and
• Comprehend with the Ethiopian Customs Authority (ECA) Customs
formalities to clear out imported goods from Customs stations of
Ethiopia;
• Successfully consult Customs Tariff Book; and
• Assess the customs duty and taxes on imported commodity
 Contents
• CHAPTER ONE: FREIGHT MANAGEMENT
– Freight classification
– Documentation in freight shipments
 Contents…
• CHAPTER TWO: FREIGHT FORWARDING
– Freight forwarding operations
– Sea forwarding operations
– Air forwarding operations
– Land forwarding operations
– Multimodal forwarding operations
 Contents…
• CHAPTER THREE: IMPORT PROCEDURE
• 3.1 Reasons for Importing Commodity
• 3.2 Parties that Facilitate the Importing of
Commodity
• 3.3 Import Procedure: International Practices
• 3.4 Contract Considerations for Importers
• 3.5 Trade Terms in Foreign Purchasing
• 3.6 Compulsory Documentation in Foreign
Purchasing
 Contents…
• CHAPTER FOUR: MODES OF PAYMENTS IN FOREIGN
PURCHASING
• 4.1 Letter of Credit (L/C)
• 4.2 Other Modes of Payments
• 4.2.1 Documentary Collection: Bill of Exchange (B/Ex) (Draft)
• 4.2.2 Consignment
• 4.2.3 Cash on Delivery (COD)
• 4.2.4 Cash With Order / Telegraphic Transfer / Advance
Payment
• 4.2.5 Open Account
 Contents…
• CHAPTER FIVE: ETHIOPIAN CUSTOMS
CLEARING PROCEDURES AND PRACTICES
• 5.1 Customs Operations In Ethiopia
• 5.2 How To Import And Export Goods In
Ethiopia
• 5.3 Customs Operations In Ethiopia
 Method of assessment

• Continuous Assessment……………………………...
……….. 50 %
• Final Examination………………………….…….50%

• Total……………........................................100%
CHAPTER ONE: FREIGHT MANAGEMENT

– Freight classification
– Documentation in freight shipments
 Learning outcomes
• Up on completing learning this chapter,
students will be able to:
 What is Freight Management?
• Freight management is the process of overseeing and
managing the delivery of goods. Any company, large
or small, that deals with cargo movement has to
decide how they’re going to deliver freight on time to
the right destination, and at the lowest cost possible.
• In the transportation process, such companies are
called shippers, even if they employ third parties to
ship their goods.
 Cont…
• Freight management is a part of the logistics
process, which covers the whole supply chain
operation from warehousing to supplier
relationships and inventory control.
• As a shipper, you can handle all of these processes
or outsource some of them, for example, freight
management. On the image on next slide, you can
see the whole list of tasks in logistics, but what
operations make up freight management?
 Cont…
• Carrier selection. If you’re using a third-party carrier, you
need to pick the right one, establishing rates, terms, and
expectations.
• Route optimization. Find the most efficient route and
choose the transport mode(s), assigning vehicles, drivers,
and balancing the load. This is important for the owned
fleet as your carrier will choose the best routes for you.
• Documentation and regulations management. This
includes preparing the appropriate paperwork, insurance
management, and ensuring the government compliance
of goods and transportation.
 Cont…
• Tracking and tracing shipments. This involves
ensuring freight visibility and transparency. A
carrier usually provides vehicle tracking but
you can also track each package and container
individually.
• Data collection and analytics. Gain insights
from collected data and optimize the shipping
process.
 Selecting and managing vendors and
carriers
• Depending on once goals and capabilities, one can manage freight
operations in different ways.
• Having a private carriage. Some companies decide that the cheapest or
most reliable way to transport their goods is to purchase their own fleet and
manage drivers on their own. This is particularly relevant for brands with
high product volumes or those with less common final destinations. This
model mostly concerns road transport, although large companies may own
their own aircraft or ships.
• Using third-party carriers. Many businesses use 3PLs to fulfill their transport
operations. These can be common or contract carriers. Common carriers like
FedEx, DHL, or UPS provide transport services to the general public. In turn,
contact carriers work only with specific shippers based on the contract. Also
known as Dedicated Contract Carriage (DCC), where you pay a flat fee per
day and per truck and can dispatch goods at any time or on a regular basis.
 Cont…
• You can also employ middlemen to connect with carriers and help
arrange the transportation: freight brokers and freight forwarders.
• Freight brokers don’t actually work with cargo – they help shippers
connect to carriers and find the best deals for them.
• Freight forwarders, however, take a more active role – they can do
packaging, warehousing, and paperwork preparation. Sometimes they
own a fleet or containers, and ship under their own bills of lading.
Unlike most freight brokers, they often operate international freight.
• Relationships with carriers, brokers, and forwarders are usually
managed using a transportation management system (TMS) – a
software tool for planning and executing transportation operations,
linked with an ERP from the inside and connected to a carrier’s or 3PL’s
system from the outside. Here’s a common scenario on how it works:
 Cont…
• When you have an order that needs to be delivered, the system creates a pickup
request. Some requests are scheduled up front, some work on a one-off basis.
• The system then pulls out the list of suitable and available carriers depending on
chosen parameters. You then choose the carrier manually or allow the system to
auto-pick the cheapest or best performing option. If you’re using a freight broker,
they will do this for you using the same method.
• A broker, a TMS, or a shipper can then check if the carrier is available and schedule
the load and pickup time.
• A shipper/broker receives information about the load distribution, assigned driver
and vehicle, confirms it, and the driver signs the (digital) bill of lading, if the
platform exists
• A shipper can track and trace the package en route and provide this information to
the customer as well.
• After the consignee accepts the shipment, the carrier is invoiced for their services
Route, load, and transport optimization
• Whether a shipper operates via a broker, 3PL, or uses a
private fleet, it’s costing them money to run half-empty
containers or spend hours in traffic. There are three
main problems carriers and shippers solve to operate
more effectively.
• Route and schedule optimization
• There are a few Vehicle Routing Problems that
businesses solve all the time. Depending on your specific
constraints, types of destinations, vehicle limitations,
and even traffic, you can apply algorithms to build
routes for faster delivery.
 Load planning
• The goal of load planning is to transport as
much cargo as possible with the lowest
number of vehicles/trailers/containers. It goes
hand in hand with route optimization because
you want to design the right hierarchy of
goods to unload faster. Besides the route, the
ideal truckload should be calculated based on
size, weight, class, warehouse, etc.
 Cont…
• Multimodal and intermodal optimization
• Multimodal shipping or using a combination of two or more
modes of transportation is often faster and cheaper, even within
the same country. For shippers who use third-party carriers, it’s
also no different from single-mode transportation since the
movements remain centralized under the control of the same
vendor.
• Another option is intermodal transportation, where shippers
choose different carriers for each part of the route preferring the
choice of the lowest rates, transit schedules, or even
sustainability. Of course, this puts more responsibility on shippers
themselves, who would also need to coordinate delays and
manage several contracts.
 Documentation and regulations
management
• The transportation industry is heavily
regulated and involves tons of paperwork.
Consequently, paperwork comprises a lion’s
share of all freight management work.
 Claim management
• Freight claims ensure that the carrier, freight forwarder, or
any 3PL has monetary responsibility for the loss or damage
of your shipment. Each carrier has different rules for filing
freight claims; they can also be different depending on
whether it’s a domestic or international shipment. Either
way, you want to establish a standardized digital process for
claim management so you can react to damage within the
standard 3-days timeframe and receive reimbursements
quickly. This means filing a claim digitally, preferably via a
system connected to the carrier, and having supporting
documents like bills of lading on hand.
 Cont…
• Tariffs and regulations management
• Most of the transportation documents concern international, air,
and sea shipping. Included are such papers as
– waybills,
– bills of lading,
– packing lists (also called customs invoices),
– certificates of origin,
– dangerous goods notes, and so on.
• To help shippers ensure that the transported goods are compliant
with government regulations, Incoterms, and 3PL agreements,
TMSs provide interfaces for data capture and document sharing.
Digital bill of lading capabilities and e-AWB integrations are also
possible,
 Accounting
• Logistics and freight accounting are a daily part of any business involved in
transportation. Freight costs are not very different from any other costs. Six
components of freight accounting:
• Receiving freight quote and freight cost – the rate of shipping provided by the carrier.
• Receiving a freight invoice – the bill rendered by a carrier that contains all basic
information about the shipment. It should match the bill of lading but it’s similar to
any other invoice.
• Auditing freight and transportation invoices – the process of verifying invoice validity
after they’re entered into your accounting system. After auditing, the bills are paid.
• Freight payment – accounts payable service for transportation invoices.
• Consolidating freight invoices – when invoices are consolidated to make payments
once a week instead of every day. Often done by freight brokers and forwarders.
• Freight in and freight out – the shipping costs of bringing goods into the company
and delivering them to customers.
 Tracking and tracing shipments
• Track and trace is a term describing processes of determining the physical location of
transported goods. Depending on the breadth of detail you want to get, there are
different methods.
• Vehicle tracking via GPS
• A vehicle with a GPS receiver onboard sends data about its current position to the
parent company via telecommunications technology, usually GPRS. It allows
observing the vehicle movement live and if combined with electronic logging devices
(ELDs) and telematics, provides information about
– fuel consumptions,
– driving style,
– temperature inside trailers,
– toll records,
– open door sensors, etc.
• Although vehicle tracking doesn’t have data about each individual package, it’s
useful for scheduling purposes and general visibility: to prevent delays and share
information with clients without contacting drivers.
 Cont…
• Package tracking using barcodes and RFID
• Here, each parcel, pallet, or container receives a code-
carrying technology: barcodes or RFID chips, the latter
allowing scanning of objects even when the code is out
of the line of sight. Cargo is scanned during various
points of shipping and its status is sent to the carrier,
shipper, and client.
• The two predominant technologies used in package data
exchange are EDI and API. Their function is exchanging
information between different systems quickly and
eliminating phone calls and emails.
 Cont…
• Package tracking is useful not only because of
detailed visibility but also as a source of
valuable data, which can be analyzed,
transformed into insights, and then applied as
operational improvements.
 Data collection and analytics
• The current connectivity network between shippers, carriers,
and other logistics providers allows us to access information that
will help us plan better and optimize costs. For example,
shippers can
– track their carriers’ and partners’ KPIs and choose the better
performing ones,
– understand consumer patterns and adjust schedules according to
them,
– allocate warehouse bays based on GPS data from arriving trucks,
– compare the costs of different transport modes and select the right
ones.
• However, such complex analytics capabilities are possible only
with end-to-end BI infrastructure consisting of four elements.
 Cont…
• Data sources. They include both internal and external sources of data: from
TMSs, ERPs, warehouse management systems, ELDs in trucks, parcel
tracking data, and so on. All of it flows into the system raw, ready to be
filtered, organized, and transformed.
• Data integration. Here, disorganized data is formatted in accordance with
the company’s internal rules and goals. At this stage, you should already
know how you want this data to be used so it can be prepared for future
processing.
• Data warehouse. This is a different kind of warehouse but with the same
purpose: Here data can be easily found and accessed by data engineers and
analysts, who will prepare data models and interfaces.
• Data representation. Finally, here end users can receive reports and
dashboards and use them to make informed business decisions. They can
even go as far as predicting customer demand, carrier and driver
performance, road and port congestion, and so on.
The power of automation and outsourcing
• In 2019, Walmart made headlines by expanding from its private
fleet to dedicated contract carriers, driving a whole new trend in
the industry. Traditionally, delivering your goods in owned trucks
and by couriers in branded t-shirts was considered the epitome of
customer service. Now, when customers are demanding cheap
two-day delivery, businesses compromise and delegate this task to
other parties, staying focused on their vital operations.
• However, the second trend – visibility and transparency – followed
suit. While outsourcing, you observe where your package is, how
soon it will be delivered, and if there are any disruptions, you know
to be on the lookout for them next time or control the process by
changing any step of it. This is how the industry sees efficiency
today – before we take another big leap with self-driving trucks.
 Freight Classification
• Freight is classified by its dimensions, description, and other factors in
order to make for a smooth shipping and billing process for customers.
Industry standards prevent the process of shipping freight from becoming
cumbersome and ambiguous.
• A product’s physical nature substantially affects almost every aspect of
logistics and distribution systems, including packaging, material handling,
storage, and transportation.
• In fact, both the structure and the cost of a distribution system for a given
product are directly affected by the product’s particular characteristics.
These characteristics can be classified into four main categories, based on:
– Volume-to-weight ratio
– Value-to-weight ratio
– Substitutability
– Special characteristics
 Cont…
• Volume-to-Weight Ratio
• Both the volume and weight characteristics of a product
significantly affect distribution costs. Products with low volume-to-
weight ratios tend to fully utilize the weight-constrained capacities
of road freight vehicles, handling equipment, and storage space.
• Therefore, distribution systems deal with these kinds of products,
including dense products such as sheet steel and books, more
efficiently.
• In contrast, high-ratio products, such as many food items, paper
tissues, and feathers, use up a lot of space, which results in
underutilized distribution components, raising both transportation
and storage costs.
 Cont…
• In general, storage rates are volume based and value based,
but transportation rates are more dependent on the type of
transportation mode. For example, water carriers normally
charge the same price for 1 ton as for 1 cubic meter, but 1 ton
costs the same as 6 cubic meters for airfreight.
• Hence, the transportation of heavy products by air is relatively
more expensive. However, in most cases, overall distribution
costs (including transportation and storage costs) tend to
decrease as the volume-to-weight ratio decreases.
• To avoid abnormally low rates, carriers and warehouses often
stipulate a minimum charge for the transportation and storage
of very light or very heavy products, respectively
 Cont…
• Value-to-Weight Ratio
• This ratio shows the value per unit weight of a given product. High-
value, low-weight products, such as electronic equipment and jewelry,
have greater potential for absorbing the distribution costs because the
relative transport cost of these products to their overall value is not
significant. Therefore, criteria other than price play a significant role in
determining the proper distribution system for high-value products.
• In contrast, only inexpensive transport alternatives can be viable
shipping options for products with low value-to-weight ratios, including
ore, coal, and food. However, the storage and inventory holding costs
for products with high value-to-weight ratios tend to be high in
comparison with low ratio products because the capital tied up in the
stock is higher, and more expensive and secure warehousing is
required
 Cont…
• Substitutability
• The degree to which a given product can be substituted by an alternative from
another source is referred to as its substitutability. Highly substitutable
products, such as soft drinks and junk food, are those that customers would
readily substitute with another brand or type of products if the initially
desired products are not available.
• The distribution system should ensure the availability of these products at all
times, otherwise the sale would be lost. This could be achieved through
maintaining high inventory levels to decrease the stock-out probability or by
using efficient and reliable transportation modes for on-time replenishments.
Both of the preceding options are high cost because they would raise the
average inventory level and enforce a transport system with higher costs,
respectively. However, for products with low substitutability degrees, less-
expensive distribution systems with lower average inventory levels and slower
transportation modes can be used.
 Cont…
• Special Characteristics
• Certain other characteristics of products imply a degree of risk in their distribution.
These characteristics, including fragility, perishability, hazard and contamination
potential, time constraints, and extreme value, pose some requirements and restrictions
on a distribution system. Therefore, a special transport, storage, and handling system is
required to minimize this risk or even satisfy the legal obligations, which means the
company will incur extra charges, as it is the case with any form of specialization.
• Examples of these specifications could be packaging requirements of fragile products,
necessary inventory controls, and refrigerated storage and transportation facilities for
perishable products, as well as special packaging and stringent regulations (such as
controlled temperature, restricted stacking height, and isolation from other products) for
contaminant and hazardous products. Moreover, time-constrained products, such as
foods, newspapers, and seasonal and fashion goods, have significant implications for
distribution systems and often require fast and expensive transportation modes to meet
their time deadlines. Finally, extremely valuable products, or small items that are
vulnerable to theft, require special stock control and distribution systems with high
security.
 Cont…

• Many different product characteristics significantly

affect almost every logistics function; some of
them have been explained in this section. Because
these logistics functions are interrelated, the
requirements and restrictions imposed by these
characteristics often lead to complicated
alternatives. These alternatives vary in cost and
service attributes and should be thoroughly
evaluated by logistics executives for determining an
appropriate distribution system.
 Documentation in freight shipments
• Quotation
• Purchase Order
• Commercial Invoice
• Packing List
• Certificate of Origin
• Shipping Instruction
• A shipping instruction is a document advising detail of
cargo and exporter’s requirements and physical
movement freight forwarder to issue the bill of lading.
 Cont…
• Shipping Bill and Bill of Lading
• Cargo Manifest
• A cargo manifest is a consolidated list of all the
cargo that is onboard a cargo vessel.
CHAPTER TWO: FREIGHT FORWARDING

– Freight forwarding operations

– Sea forwarding operations
– Air forwarding operations
– Land forwarding operations
– Multimodal forwarding operations
 Freight Forwarding
• The freight forwarding process refers to the flow of goods between
destinations. The process is conducted by freight forwarders. Businesses
seeking to expand and grow by trading at an international level better turn
to the freight forwarder to streamline the process and ensure accuracy.
• Shipping items provides an opportunity for an organization to expand its
customer base. However, the logistics process involved in international
trade is complicated and requires the skills of a freight forwarder.
• Freight forwarders are the people in the middle responsible for the
facilitation of the shipping. Although they do not do the shipping
themselves, freight forwarding services are much more specialized to the
process. It’s important that they understand international trade, the
regulations of trade and how to ship on behalf of a company that
requires shipment throughout the world.
 Cont…
• The freight forwarding process is the flow of shipment and goods
from two destinations carried out by a freight forwarder.
Businesses that want to grow and expand should consider trading
on an international level. Shipping items in and out might present
an opportunity to expand customer-base but can become very
complex very fast. Logistics for international trade can become
complicated, thus requiring the need for freight forwarders to help.
• These freight forwarding firms employ agents that can handle
paperwork and documentation for shipping and receiving logistics.
Their objectives are to ensure a company’s goods are properly
shipped and arrive by the specified date. They will handle
everything from cargo manifests to insurance claims and even ship
items on internal bills of lading.
 Cont…
• The services provided by freight forwarders include the negotiation of
freight charges with the ocean carrier on behalf of the shipper, booking of
cargo space onboard ocean vessels, arranging cargo insurance, arranging
transport and labor, inland haulage of goods from the customer’s
warehouse to the port, temporary storage if necessary, cargo
consolidation, preparation of shipping and customs documentation, and
export papers.
• They may also be required to liaise with different government agencies
depending on the type of cargo that is to be exported, examples being
restricted items, certain types of food products, etc.
• Freight forwarders should keep themselves abreast of laws, rules, and
regulations in the importing country as well. For this, they need to have a
good communication network with the government and other related
agencies of both the exporting and the importing countries.
 The Freight Forwarding Process
• A freight forwarder facilitates all aspects of shipping. They do
not actually conduct shipping. Instead, freight forwarding
services focus on the intricacies of the process. Freight
forwarders know the changing requirements of international
trade and regulations to effectively ship items around the world.
• Freight forwarding firms provide specialized teams of agents to
oversee all documentation and paperwork for the shipping and
receiving of goods. The main objective is to ensure that the
goods arrive by the required date. The freight forwarders will
handle every step of the cargo process which may include
insurance claims or internal bills of lading
 Cont…
• Export Haulage
• The term ‘export haulage’ refers to the movement of goods from
the shipper’s location to the warehouse of the freight forwarder
or the importer. Usually, a truck, ship, air or train transports the
goods. The time it takes can vary depending on the distance of
the transport, geographic location, and size/amount of goods.
The initial first stage can take from a few hours to several weeks.
• Checking of Items
• After export haulage, a freight forwarder will always check to
make sure that all items were transported without any
problems. Freight forwarders receiving the goods will check to
see and ensure everything was transported without incidents.
 Cont…
• Clearing Export Customs
• Prior to shipping, items must have clearance from the
country of origin. Customs clearing agents perform
the process by submitting details concerning the
cargo along with any required documents. The
agreement developed between the shipper and
consignee is singular and not managed by the freight
forwarding company. If a freight forwarding company
does not offer this service, it is required to find a
third-party customs clearing agents.
 Cont…
• Customs Clearance for Importation
• Once the shipment arrives, authorities in the destination
country are required to check import customs documents. The
secret to this stage is that it can begin before the cargo even
arrives. It is the responsibility of the freight forwarder or
nominated customs broker to perform this clearance by the
time the cargo arrives. Destination Arrival and Handling
• Many processes take place during this stage when the cargo
arrives. The freight forwarders receive all documents for the
goods such as the carrier bills and outstanding documentation.
This process is always managed by the freight forwarder in
some countries
 Cont…
• IMPORT HAULAGE
• Almost identical to export haulage, this
process transports the cargo from the
warehouse to the final destination of the
intended receiver. This process can be
facilitated by freight forwarders or the
consignee can choose to collect the cargo
themselves.
 Export Documentation
• Several documents are required for the export of cargo and the
requirements may vary between countries. Though the format and name
of these documents may differ, the information that is required to be
input is more or less the same.
• The important documents required for exporting cargo are as follows:
• Commercial invoice
• Packing list
• Export shipping Bill
• Bill of lading
• Certificate of origin
• Letter of credit – if applicable
• Insurance certificate
• Declaration of hazardous cargo – if applicable
 Cont…
• Commercial Invoice
• Issued by the seller, the commercial invoice shows the details of
goods that are to be shipped. It shows the individual quantities
and costs and the total amount that is charged to the customer
by the seller.
• Packing List
• A packing list shows the complete physical details of the goods
that are to be exported. It will have the serial numbers,
dimensions of the cargo, weight, Harmonized Systems code, etc.
The packing list helps in easy identification of the cargo and
each package by all the parties receiving it – the carrier, the
transporter, the consignee, etc.
 Cont…
• Export Shipping Bill
• The Export Shipping Bill is issued by the exporter and endorsed by
the Customs prior to exporting the goods mentioned in it. Ships do
not accept goods onboard unless the export shipping bill is
submitted to them.
• Bill of Lading
• A Bill of Lading is proof that your export cargo has been received
onboard the ship. It is issued by the shipping company and has
details of the consignor, the consignee, the cargo, etc. The shipping
company may also authorize a freight forwarder such as an NVOCC
to issue the bill of lading. In this case, it is called a House Bill of
Lading or HBL. Bill of lading is a title to the goods being
transported.
 Cont…
• Certificate of Origin
• It is the Chamber of Commerce of the exporting
country that usually issues a Certificate of Origin.
Other authorized government bodies may also issue
this certificate to exporters. It certifies the country of
origin of the product that is exported.
• Letter of Credit
• A letter of credit issued by a bank is a guarantee of
payment to the seller from the buyer. Any default
from the buyer’s side is met by the bank.
 Cont…
• Insurance Certificate
• An insurance certificate is a must for exports to protect the
goods against natural calamities and accidents. The buyer may
agree to insure the goods in the case of CFR terms (Cost and
Freight) or the insurance cost may be borne by the seller as in
the case of CIF terms (Cost, Insurance, and Freight).
• Hazardous Cargo Declaration
• If the goods to be exported come under the hazardous cargo
classification of the government, then the freight forwarder
has to ensure that the export documentation includes the
hazardous cargo declaration. Such goods include combustible
solids and liquids, corrosive materials, radioactive materials,
etc.
 Cont…
• The steps above are the general outline for the freight
forwarding process that most companies will undergo
for international trade. The freight forwarder roles
also include charting out proper routes and finding
the best travel options for the consignee.
• This may include routes by air travel, ground travel,
and by sea. Depending on the kinds of goods and
cargo being shipped will determine the freight
forwarding services needed for the success of
businesses.
 Cont…
• THE 7 STEPS PROCESS OF SEA (OCEAN) FREIGHT
FORWARDING
• Shipper: a person/company dealing with shipment
at supplier end.
• Consignee: a person/company dealing with
shipment at receiving end.
• Freight Forwarder: the logistics provider (for road,
ship or air transportation).
• Shipping Line: company carrying product related
cargo.
 Cont…
• Step 1. Export haulage:
• The first step involves the movement of the
products/cargo from shipper’s to forwarder’s
premises. Products usually get transported by
road or railways or a combination of both.
• Step 2. Export customs clearance:
• It is a type of official regulatory formality
involving submission of valid and required
documents to the concerned authorities.
 Cont…
• Step 3. Origin handling:
• This step covers all physical handling, inspection, and
loading of the cargo; at the supplier’s warehouse.
This is coordinated by the freight forwarder.
• Step 4. Ocean freight:
• To meet the required timeline for shipments, freight
forwarder schedules shipping line for transportation.
This step not only covers costs involved in shipping
from port-to-port but also the levied surcharges like
currency adjustment factor, exchange rates, etc.
 Cont…
• Step 5. Import customs clearance:
• This process can begin even before the arrival of cargo.
This clearance is performed by customs clearing agents
appointed by the consignee.
• Step 6. Destination handling:
• This involves transportation and unloading of cargo
from port to destination warehouse.
• Step 7. Import haulage:
• The final step of actual delivery of the product to the
consignee and ultimately to the consumer.
 Air forwarding operations
• STEP ONE
• The concerned department of local and overseas
office contract with the shipper (the person or
company who sends the goods) and consignee
(the person or company to whom goods are
sent) in home and abroad. They make an
agreement with the prospective shipper (cargo
or goods owner) and finally both parties settle a
contract with specific terms and conditions.
 Cont…
• STEP TWO
• The shipper sends by e-mail or physically a hard copy
of the commercial invoice, packing list and delivery
note and a most important written document as
booking format which is the essential for booking
carrier. Those are included the freight term and
status time e.g. cargo delivery date. Whenever found
that the shipper did not send a booking format then,
request to fill up the company’s prescribed booking
format for the company purpose.
 Cont…
• STEP THREE
• Then create a House Air Way Bill number (HAWB)
from the company’s system. The system is Computer
Integrated External Logistics (CIEL). At the time of
creating HAWB number, the following are considered:
– Service Level.
– Shipper’s company code from reference entry system of
CIEL system.
– Consignee company code
– Principal, which is the same of consignee ID number.
 Cont…
• Notify Address
• Destination (the place of discharge of cargo)
• Country code
• Freight term (the term based on which cargo
are carried from one to another destination)
• The freight term consist of two individual terms:
– 1. Collect shipment.
– 2. Prepaid shipment
 Cont…
• Number of package e.g. total cartons
• Description of good or cargo. What kind of goods is
actually into the carton
• Gross weight and chargeable weight
• Forwarder code
• Flight schedule, given by the airlines
• Purchase Order number (PO number)
• After filling the above information then you get the
HAWB number. It is only the identification number of
the specific order of Air Export shipment
 Cont…

• House Air Way Bill: A House Air Way Bill is a document

of contract between Shipper and Freight Forwarder
• Master Air Way Bill: A master Air Way Bill is a document
of contract between Freight Forwarder and Air Lines.
• House and Master Air Way Bill contains the following
common information:
– 1. Name and address of shipper
– 2. Name and address of consignee
– 3. Name and adders of AWB issue agent
– 4. Name of the carrier agent
 Cont…
• 5. Flight schedule
• 6. Freight term
– a) Collect shipment, when consignee pays the freight charge and
carrier charge
– b) Prepaid shipment, when shipper pays the freight charge and
carrier charge
• 7. Number of carton
• 8. Invoice number, L/C number, EXP number and SB number
• 9. Order and article number.
• 10. Freight rate or charge
• Freight rate are selected by International Air Traffic Association
(IATA). The freight rate depends on destination to destination
basis.
 Cont…
• Freight Certificate
• For the prepaid shipment, air freight forwarder have to
issue a freight certificate to the shipper. The shipper
takes freight certificate for customs purpose.
• This certificate carries the following particulars:
– Shipper name
– House Airway Bill number
– Cartons
– Air Freight charge
– Security charge, & Scanning charge
– Documentation charge
 Cont…
• STEP FOUR
• MAIL FOR APPROVAL: E-mail or hard copy will be sent to local buying
office or ultimate consignee or shipper. These depend on the nature
of shipment or cargo with identifying the following particulars:
• 1. Purchase order number
• 2. Article number
• 3. Number of carton
• 4. Freight term
• 5. Description of cargo.
• 6. Invoice number
• 7. Letter of Credit number (L/C)
• 8. EXP number, given by company or shipper
 Cont…
• After that, the informed company or person
further send message to Airfreight
department informing the conformation that
the sent information are correct or right with
the air freight forwarder. Then the forwarder
forwards the shipment or cargo.
 Cont…
• STEP FIVE
• Finishing the handle of cargo to airport, the FFr book the space of
specific airlines and send an Email to airlines of approximate CBM and
Weight of cargo. After the cargo receives, airport supervisor and
responsible person at the airport provide actual weight, CBM, and
dimension of the cargo. Providing the actual weight, CBM, dimension
and carton the FFr conforms the airlines for air shipment of that
specific cargo.
• Every airline has a specific flight schedule for a week or a month. Then
the FFr tries to match with flight schedule and after matching with the
destination arrival date, the FFr confirms the airlines of that shipment.
• After confirmation with the airlines, the FFr links its House Air Way Bill
number with Flight number by the CIEL system. Then the FFr gets a
Master Air Way Bill (MAWB) number from the CIEL system. Depending
on the CIEL MAWB number, the airlines issue a Master Air Way Bill.
 Cont…
• Then flight uplift towards the destination. The FFr sends the original documents to
the overseas office. At the same time the firm informs the ultimate consignee,
mentioning the following information:
• 1. House B/L number
• 2. Master B/L number
• 3. Number of carton, Order number, L/C number, EXP number and SB number.
• 4. Flight name and schedule Release the Bill of Landing:
• Finally the documentation system added the release of original Bill of Leading to
shipper. They are as follows:
• Collect Shipment: If the shipment would be Collect Shipment, then the shipper pay
only the documentation fee to the FFg firm e.g. forwarder and release the original
Bill of Leading (B/L).
• Regarding the Collect Shipment destination office issue the invoice to concerned
overseas office. The overseas office collects the shipment charge at the time of
release the original B/L.
 Cont…
• Prepaid Shipment: If the shipment would be
Prepaid Shipment, then the shipper have to
pay the total amount of charge which was
contracted with shipper as per kilo Gram of
the cargo. After paying the charge to
forwarder they release the original Bill of
Leading (B/L).
 Land forwarding operations

• Land freight forwarding is basically the

physical movement or processing of cargo
over the land from a point “A” to another
point “B” through trucks, trailers or rail.
• Land freight plays an important part in the
logistics system when it comes to the
distribution of goods.
 Cont…
• There are major types of shipment movement involved in Land freight
forwarding. One is LTL shipments ( Less than Truck Load) that moves cargo
with a weight of between 150 and 15,000 pounds. Efficient for domestic and
international land freight shipments that occupy less than 24 feet of the
space and is not more than 5 pallets.
Then there is FTL (Full Truck Load) where the truck’s trailer carries only one
shipment in bulk. The entire space is reserved for one dedicated shipment.
This type of trucking has several benefits which include:
– Cheaper compared to LTL trucking.
– The shipments get to the destination quickly as there are no other stopovers in
between.
– Less handling which means fewer chances of goods getting damaged
– Container trucking is one more type of shipment mode where the containers
between the loading site and the container port (or yard) are moved.
Heavy-lift cargo trucking is the one which is moved by heavy-duty trailers specially
made to handle cargo of any dimension and weight.
 Cont…
• For the land freight movement to be a good option, the
delivery point has to be accessible by land and both points
have land borders connecting them for international land
freight shipping.
• For Full Truck Loads (FTL), it is good to compare rates with
Sea Freight Full Container Load (FCL) options as it may be
more cost-efficient to move by sea. For small shipments
moved as Less than Truck Load (LTL), one can always
compare with airfreight keeping in mind that airfreight most
probably will be faster to reach the destination. However,
airfreight is only valid domestically in larger countries with
multiple airports.
 Cont…
• Land freight shipments can be moved in more than one type. LTL shipments are
moved as a consolidation (also called Groupage). This is mainly efficient for
domestic and international land freight shipments that are smaller in size: one or
few pallets only.
• FTL (Full Truck Load) is used for more bulkier shipments and also it shows normally
a better transit time than LTL shipments as the driver goes directly from pick up to
delivery points.
• Container trucking movement is moving containers between the loading site and
the container port, this is a very commonly used type of trucking.
• Heavy-lift or project cargo is usually an over-size and over-weight piece that is
moved on special types of trailers that can handle such odd weight or dimensions.
• Industrial-sized projects, such as the construction, expansion and transfer of
equipment for power plants and manufacturing facilities, require extensive
planning and careful implementation. To ensure that these projects are completed
safely and successfully, industrial companies rely on project logistics and project
forwarding companies. Land freight services for over-dimensional cargo is often an
integral part of these operations.
 Cont…
• Consolidation as a concept was created to make the land, sea and air
freight shipping less costly and sometimes with the same transit time.
• In the land freight mode of transportation, shipments are collected
from the shipper’s loading site, delivered to the service provider (co-
loader) warehouse for processing. They will be sorted and put with
other shipments or items going in the same direction then resent
again to its next transit point or to the recipient location.
• This way helps service providers to distribute costs in a way that
allows them to offer better prices to customers. It may be the same
time or slightly more than the dedicated van or FTL movement. Some
call this the “Hub and Spoke” system.
 Cont…
• Land freight services are steady and flexible, safe and practical. Most of
the products that are transported include FMCG, Refrigerated Food
and perishable products, Pharmaceutical and medical products,
Hazardous and non-hazardous solids and liquids, chemicals, dangerous
goods, heavy equipment and machinery, construction materials such as
sand, rocks, asphalt and steel.

• Most of the LTL system works follow this process. The shipment is
collected first from point A. Point A is shipper’s loading site. The
shipment is then delivered to the service provider or third party
warehouse. The shipment is then sorted and put together with other
loads whose destination is the same. The same process goes on till the
shipment is reached the recipient location.
 Cont…
• The bill of lading in land freight is a contract of transportation from shipper to
consignee. This contract states details of the shipment (weight, dimensions,
description or commodity, value, packing … etc.), it also mentions the pick up
location and delivery location, incoterms and other details that are related to
the cargo being shipped.
• On the back of this bill of lading one can see terms and conditions that
explains and determines liability of each party on this document including the
carrier who is liable in some scenarios. Especially, if cargo was received in
perfect condition and delivered damaged or short in pieces.
• In land freight it is either called the “ Bill of Lading” or “Truck Consignment
Note”, where in some parts of the world it is called CMR (in French :
Convention Relative au Contrat de Transport International de Marchandises
par la Route), in English this means: an international agreement that contains
the rights and obligations of parties involved in road transport: the shipper,
carrier and addressee
 Cont…
• Land freight liabilities can be a little tricky. However, it is
always recommended to have insurance coverage to put
everyone at ease in the unfortunate circumstances of loss or
damage.
• Each party; shipper, consignee, and carrier have their part of
the liability of the cargo. When the shipment is and moved
internationally through land freight, it can be even more
complicated as it will involve different countries rules and
regulations.
 Advantages of land freight
• Cost-Effectiveness: Comparatively low packing and fuel costs
• Versatility: Able to handle short or long hauls, local or across
borders of neighboring countries, even in rural areas
• Preparedness: A single customs document process makes
for relatively seamless cross-border transport of goods
• Predictability: Scheduled delivery, easily track and trace
cargo
• Convenience & Discretion: Door-to-door service—need we
say more? Goods can also be kept secure and private
• Flexibility: Extensive road networks make rushed delivery
possible
 Multimodal forwarding operations

• Multimodal transportation offers an advanced

platform for more efficient, reliable, flexible,
and sustainable freight transportation.
Planning such a complicated system provides
interesting areas in Operations Research.
 Cont…
• Multimodal transportation is a concept which
places the responsibility for transport
activities under one operator, who then
manages and co-ordinates the total task from
the shipper’s door to the consignee’s door
ensuring the continuous movement of the
goods along the best route, by the most
efficient and, cost-effective means, to meet
the shippers requirements of delivery.
 The Advent of the MTO
• However, the market for the delivery of goods has become
increasingly complex and involved many services, customs,
inspections, local trucking and/or railing, international
carriage (which may involve transshipment/feeder
shipment), knowledge of local and international laws and
customs and security and insurance and health
considerations.
• There is also the need to have early/prompt reporting,
manifesting, declaration and scanning to comply with
terrorism prevention concerns. The freight forwarding
function has undergone a strong sea change to
accommodate all these development
 Cont…
• The freight forwarder has emerged as a multimodal transport
professional and shippers and consignees are only too willing
to use and appreciate the convenience, simplicity, security
and efficiency of multimodal transport services.
• The shippers and/or consignees are willing to pay a premium
for these conveniences and benefit of dealing with one
professional for the whole array of services performed often
via many modes of transport and over several foreign terrains.
• The market potential for integrated transport systems
represented by multimodal services became phenomenal.
• There has also been recognition by shipping lines that they
must provide more than just port to port transport.
 Cont…
• These previously dedicated ship-operators have moved
to achieve strategic alliances with transport
companies, warehouse operators, inland transporters
and packers to provide seamless services.
• Freight forwarders and other traditional
“intermediaries” were thus challenged by these new
vessel-owning multimodal service operators.
• They responded quickly with the development of non-
vessel owning and non-vehicle owning multimodal
service operations and integrated logistics support
services, the NVOCCs.
 Cont…
• The forwarder will then arrange collection, local trucking, container release,
stuffing, delivery to carriers after due booking of space and negotiations of
freight.
• The documentation is arranged and goods cleared with customs and other
authorities. The movement of the goods will be coordinated with the loading
schedule of the vessel and separate cargo lots will be consolidated into
groupage shipments to save freight charges or secure best prices.
• Ancillary services will be covered, such as marine insurance, export packing,
warehousing, consolidation, markings and intermediary storage if required
and delivery documents as required by the letter of credit or as instructed by
the shipper. He may negotiate on behalf of the clients for more favorable
freight rates/structures, free use or enter into freight service agreements.
• The forwarder will arrange with a network of agents in the other countries for
the reception and handling of the cargo and delivery to the final consignees.
Cargo Consolidation
Cont…
Cont…
 Freight Forwarding Services…
• FF is all about the smooth flow of
international trade.
• The freight forwarder is the party who ensures
that internationally traded goods move from
point of origin to point of destination and
arrive at the right place, at the right time, in
good order and condition, at the most
economic cost.
 Cont…
• Once a forwarder’s recommendations with
regard to cargo routing have been accepted it
becomes the responsibility of the forwarder to
ensure that the goods concerned are
transported and delivered as planned.
• Forwarder is ideally placed to act as the
catalyst to maximise the benefits from
advances in information technology which are
revolutionising these processes.
 Cont…
The Scope of Freight Forwarding Service on
behalf of the Consignor
– responsible for the transportation of goods
between one destination and another.
– with exporter’s shipping instructions the
forwarder would provide:
• Book space with carrier on any mode of transport
including sea;
• Choose route of transportation the named destination;
• Take delivery of goods;
 Cont…
– Transport the goods;
– Pay fees and other charges;
– Attend to foreign exchange transactions;
– Arrange for transshipment
 Cont…
• On behalf of the Consignee
– receives and verifies relevant documents from
concerned bodies;
– monitors cargo movement;
– Take delivery of cargo;
– Understand and act as per National Customs
Procedures and techniques;
 Cont…
– Arranges customs clearance;
– Assists the importer in pursuing claims in case
loss/damage happens;
– Warehousing and distribution services
 Cont…
• Trade and Transport documents prepared by
Freight Forwarders
– Shipping Documents can be classified into two
categories as under:
• Commercial Documents,
• Regulatory Documents,
• 1. Com. Docs.
– About 16 Com. Docs. classified into principal and
auxiliary export documents;
– The principal documents are the ones that are required
to be sent by the exporter to the importer;
 Cont…
• These are:
– Commercial invoice
– Packing list
– Certificate of inspection/quality control(where
required)
– Bill of lading
– Shipping advice
– Certificate of origin
– Insurance certificate (in case of CIF)
– Bill of exchange.
 Cont…
• The Auxiliary shipping documents are:
– Proforma invoice
– Intimation for inspection
– Shipping instruction
– Insurance declaration
– Shipping orders
– Mate’s receipt
– Application for COO
– Letter to the bank for collection/negotiation of
documents
 Cont…
• There are two different legal positions of a
freight forwarder possible depending on the
scope of his activities as including:
• 1. Acting as an Intermediary:-
– organizing the transport and ancillary services and
choosing the carriers and service providers in its
own name for and on account of the customer (=
traditional freight forwarder);
 Cont…
• 2. Acting as Principal:-
– undertake in its own name and on its own account
to secure the movement of goods from A to B for
a customer but then entering into a series of
contracts with performing carriers to fulfil the
head contract.
– When using different modes of transport he may
act as a multimodal transport operator (MTO)
with his own means for transport and bought in
transport.
 Cont…
• A freight forwarder will normally be held to be a
principal if he issues a multimodal transport bill
of lading or a house bill of lading as an NVOCC;
• These terms of bills of lading impose a clear
obligation on the issuing freight forwarder as a
principal carrier and where the transport
document holds the freight forwarder as a
principal it will be unlikely for the freight
forwarder to only have the liability of an agent.
 Cont…
• Therefore, a freight forwarder is subject to
liability as principal when he/she:-
– perform the carriage of goods by his/her own
means of transport;
– issues his/her own transport document;
– makes express or implied undertaking to assume
carrier liability;
CHAPTER THREE: IMPORT PROCEDURE

• 3.1 Reasons for Importing Commodity

• 3.2 Parties that Facilitate the Importing of
Commodity
• 3.3 Import Procedure: International Practices
• 3.4 Contract Considerations for Importers
• 3.5 Trade Terms in Foreign Purchasing
• 3.6 Compulsory Documentation in Foreign
Purchasing