A EFFSAA International FRDG 2018

An Introduction to International
Freight Forwarding
FIATA Diploma in international freight forwarding
Sisay Asres
December, 2018
Addis Ababa
Introduction to International Freight
Forwarding
• Learning Objectives:
• The student should understand the legal position
of a freight forwarder, his/her functions and the
general structures and processes in forwarding.
• The interrelations between trade and forwarding
should be clear to him/her.
• He/she should know the different FIATA
documents and the area of their application.
Module title and date

Forwarding
• FIATA Diploma in International Freight Forwarding consists
of 13 Modules, one dissertation and final assessment.
• The Modules are:
➢Introduction to International Freight Forwarding (32
hours)
➢Multimodal Transport (24)
➢Maritime Transport (32)
➢Air Transport (52)
➢Road Transport (52)

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➢Rail Transport (20)
➢Inland Water Ways (16)
➢Introduction to Logistics (32)
➢Transport Insurance (12)
➢Dangerous goods (40)
➢Information and Communication Technology (12)
➢Customs (40)
➢Introduction to Safety and Security (12)

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• Module 1. Content
• International Freight Forwarder and the Freight Business
• International Trade
• International Organizations in Forwarding and Trade
• Organization of the Company
• Financial and Legal Requirements

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• FIATA Document and Forms
• General Knowledge of Transport Related Geography
• Special Transport services
• Packaging Requirements
• Customs Procedures

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1. International Freight Forwarder and the Freight
Business
Learning Objectives:
• The student should be aware of the interrelation
between international trade and forwarding activities.
• The student should understand the position of a
forwarder as an intermediary in international freight
business and should be able to explain the differences
between shipper, carrier, forwarder and forwarder as
principal.

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• The importance of general trading conditions for
forwarders should be realized.
• The student should understand in which areas expertise
is required for freight forwarders.

Supply Vs Demand
• Old Paradigm
➢Traditional focus more on Supply than Demand
➢Basic question –“How much products can we make ?
How fast can my employees make it ?”
➢Economies of Scale drive “push-pull”strategy
➢Manufacturers forced to keep large inventories
➢Consumers reached only indirectly…
➢Increased inefficiency &
➢product or service obsolescence…

Supply Vs Demand
• New Paradigm
➢Focus shifts from supply to demand
➢New business questions –“What does my Customer
need?”& “When do they need it?”
➢Flow of info & flow of goods -all to meet Customers’
demands!
➢Global sourcing expands inbound transportation
➢The need for professionals emerged

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• Definition
• Freight forwarding services means services of any kind
relating to the:
➢carriage,
➢consolidation,
➢storage,
➢handling,
➢packing or distribution of the goods as well as ancillary
and advisory services in connection therewith,
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• including but not limited to customs and fiscal matters,
➢declaring the goods for official purposes,
➢procuring insurance of the goods and
➢collecting or procuring payment or documents relating
to the goods.

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▪ As our economy recovers, opportunities increase for Ethiopian
companies to export their products, but international shipping
remains daunting for many new or relatively inexperienced
exporters, particularly small and medium-sized firms.
▪ To assist these firms, the freight forwarder is the first in a

series of articles about international trade logistics.

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• Who is a “Forwarder” ?
• “Middleman”,
• Freight Forwarders,
• Forwarding Agents,
• Freight Brokers,
• Freight Managers,
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➢Freight forwarder means the person concluding a contract of
freight forwarder services with a customer; or
➢Freight forwarder is an agent who arranges the transportation of
goods for others;
➢A forwarder functions as a travel agent for cargo or a designer of
logistics.

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▪ Forwarding includes:
➢Booking cargo space for
shippers,
➢Providing shipping
documents, and
➢Sometimes arranging other
services as varied as shipment
packing and cargo insurance.
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• Many forwarding companies offer assistance in
transportation logistics, including
➢freight consolidation,
➢customs brokerage,
➢warehousing,
➢distribution, and other value-added services.

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• Freight forwarders are generally non-asset-based providers,
meaning that they do not own planes, ships, and other means of
transport.
• When forwarders book cargo space for customers, they have the
flexibility to choose the best routes and transit schedules.
• Forwarders typically have service contracts with many air and
ocean carriers to facilitate economical shipping around the globe.

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“He is the Architect of Transport !”

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• Forwarding and Integrating
➢Some forwarders are
integrators.
➢Integrators wholly own or
control assets such as planes
and trucks that are used for
their shipping services.
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• Integrators roughly fall into two categories:
➢integrated express carriers,(transport documents
and small packages) and
➢integrated heavyweight forwarders. (transport

heavyweight packages and other types of freight)
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•Third-party Logistics (4th, 5th )
➢3PLs have similar duties as freight forwarders but are not limited to
these.
➢These firms facilitate the movement of parts and materials from
suppliers to manufacturers, and finished products from manufacturers
to distributors and retailers.
➢The main services which they provide are transportation, warehousing,
inventory management, packaging, and freight forwarding.

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• The Top 10 Global 3PL
1) DHL Supply Chain & Global Forwarding,
➢ With a gross revenue of $26.1bn, DHL describes itself as the North American
leader in contract logistics.
➢ It has a recognizable logo and household name, and is present in over 220
countries.
➢ Having been founded in 1969 in San Francisco, its workforce now exceeds
325,000. It is therefore well ahead of target in its aim to be ‘the logistics
company for the world’.

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2) Kuehne + Nagel, The business was founded in Bremen, Germany in 1890 and
is now present in over 100 countries. It had a gross revenue of $20,294bn as
of April 2017
3) Nippon Express, Grossing $16,976bn last year, describes itself as a ‘logistics

consultant’, its head office is in Tokyo
4) DB Schenker
5) C.H. Robinson, Founded in North Dakota in 1905

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6) DSV, Danish company
7) XPO Logistics, US company
8) Sinotrans, state-owned by the Chinese government
9) GEODIS, State-owned French logistics provider
10) UPS, United Parcel Service supply chain solutions

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1.1 Interrelation between international trade and
forwarding activities
• The trade contract is the basis for the forwarding activities,
especially concerning organizational and documentary
matters.
• Note the different functions and terms:
➢ seller,
➢ buyer,
➢ consignor,

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➢consignee,
➢shipper,
➢freight forwarder and
➢carrier.

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• The freight forwarder will arrange for the transport of the
goods by road, rail, air or sea to the port of shipment.
• The freight forwarder is usually instructed to find

warehouse space for the goods while they await the
vessel’s arrival.

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• The necessity that the goods be transported to the port of
shipment to meet the arrival of the nominated vessel for
shipment has led to the use of combined transport
agreements.
• These agreements, normally negotiated and concluded by
freight forwarders, will provide for the carriage of the goods
using various modes of transport.

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Scope of FFs Services
i)On behalf of the Consignor (Exporter)
➢In accordance with exporter shipping instructions the forwarder would:
✓Book space with carrier
✓Choose route
✓Take delivery
✓Arrange warehousing

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✓Note damages/loss
✓Weigh and measure cargo
✓Advise on insurance
✓Monitor cargo movement
✓Study L/C provisions
✓Transport the goods
✓Pay fees and other charges

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• During the initial planning phases of international sale, the freight
forwarder can help decide:
➢Which carriers to use;
➢The best days of the week to ship;
➢The best route;
➢The most economical shipment size;

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• At the beginning of a sale, they can provide the exporter with a quotation
on:
➢Freight costs;
➢ Port charges;
➢Consular fees;
➢ Cost of special documentation;
➢ Insurance costs;
➢ Freight forwarder’s fees;

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ii) On behalf of the Consignee
➢Receive and verify relevant documents;
➢Monitor cargo movement;
➢Take delivery;
➢Arrange customs clearance;
➢Assist in pursuing claims;
➢Warehousing and distribution.

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• International Freight Business involves :
➢The legal relationships between parties who sell and
buy goods from each other;
➢Their relationships with persons willing to carry the
goods from one place to another;

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• The arrangements they have with insurers to protect the
goods in the event of loss or damage and
• Any financing or payment agreements with banks or
financial institutions.

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• International Trade Relations are governed by:
➢ The contractual rights and obligations as agreed between the
parties whether expressly or by implication. Where the
performance of a duty is provided for by contract, unless that
provision contradicts the law or public policy of the hosting
country, that contractual provision shall be binding as
between the parties;

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➢The municipal legal framework entails all local regulations
and legislation;
➢International and European legal sources which,
indicatively, include relevant EU legislation, USA Trade
requirements, ASEAN initiatives, Ethiopian legislation,
INCOTERMS, ICC Rules on Documentary Credits and
Uniform Rules for Demand Guarantees.

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• The structure of International Trade refers to the
mechanisms in place for trading to take place.

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• We can therefore notice :
➢ direct exporting is the transfer of the property in the

goods to the buyer by shipping the goods to him or his
agent and payment being made to the seller either
directly or through a bank payment system, and

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➢counter-trade is an ideal solution when the states
involved face difficulties in obtaining money to pay for
imports.

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Agents in the International Trade Transactions
The Agent is usually employed :
➢As far as export / import practice is concerned,
➢to market a particular product;
➢to penetrate a market known especially to the Agent by
virtue of his skill, experience and personal attributes;

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➢to secure sub-agents to sell the product;
➢to elicit information relevant to the Principal’s business;
➢to represent the Principal;
➢to secure credit on behalf of the Principal;
➢to procure certain goods or services for the Principal;

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➢to procure freight space;
➢to procure finance from banks and lenders;
➢to secure insurance for the goods;
➢to secure legal advice in a foreign country;

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Agents inherent to International Trade include:
• Factors, namely persons in possession of goods belonging
to their Principal to be sold for the benefit of the Principal;
• Brokers, namely persons who conduct negotiations on

behalf of Buyers and Sellers;

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• Commission Agents, namely persons who enter into
contracts with third parties in their own name, although
they do not do so as agents;
• Confirming Houses, namely persons who take on the role
of an agent for an overseas buyer who is interested in
buying goods from a seller in the country;

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• Del credere Agents, namely persons who take on additional
risks;
• Agents in the Carriage of Goods include:
• Loading Brokers, who conduct loading operations;
• Forwarding Agents, whose duties are determined by the
contract. Their role and duties are open to agreement.
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1.2 Forwarding Services and the Legal Position of a Freight
Forwarder
• Freight Forwarding Services are services of any kind
relating to the carriage, consolidation, storage, handling,
packing or distribution of the goods, etc...

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• The legal position of a Freight Forwarder is regulated in
many countries by:
➢Civil code - defines the general liability of
everyone to compensate for damages.
➢ Trade code - defines the general legal position of
a freight forwarder and his duties. And

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➢General trading conditions for freight forwarders (as
contractual law) – are binding only if referred to in
contracts and specify rights and duties of the
contractual parties and limit the liability of a forwarder.

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• There are two different legal positions of a freight forwarder
possible depending on the scope of his activities as including:
➢Acting as an Intermediary
➢Acting as Principal
Are you acting as a “Principal”?

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• The FIATA Model Rules for Freight Forwarding Services:
➢General Trading Conditions for freight Forwarders are
usually developed by National Freight Forwarder
Associations.
➢The FIATA Model Rules for Freight Forwarding Services
form a sound international basis and can be adjusted to
local national conditions.

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• The FIATA Model Rules for Freight Forwarding Services consists
of four parts:
• Part 1 General Provisions:
➢Applicability
• These rules apply when they are incorporated into a
contract by referring to the FIATA Model Rules for
Freight Forwarding Services
➢Definitions (Freight forwarding services; Freight forwarder;
Carrier; Customer; Goods; SDR; Mandatory law; In writing;
Valuable goods; Dangerous goods...)

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SDR (Standard Drawing Right):
• The SDR is an international reserve asset, created by the IMF in 1969
to supplement its member countries’ official reserves.
• As of September 2017, 204.2 billion SDRs (equivalent to about $291
billion) had been created and allocated to members.
• The value of the SDR is based on a basket of five major currencies—
the US dollar, the euro, the Chinese renminbi (RMB), the Japanese
yen, and the British pound sterling.

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• Goods means any property including live animals as well as
containers, pallets or similar articles of transport or packaging not
supplied by the Freight Forwarder.
• In writing includes telegram, telex, telefax, or any recording by

electronic means.

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• Carrier means any person actually performing the carriage of the
Goods with his own means of transport (performing Carrier) and any
person subject to carrier liability as a result of an express or implied
undertaking to assume such liability (contracting Carrier).
• Dangerous Goods means Goods which are officially classified as

hazardous as well as Goods which are or may become of a dangerous,
inflammable, radioactive noxious or damaging nature.

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➢Insurance
• No insurance will be effected by the Freight Forwarder,
except upon express instructions given in writing by the
Customer.
• Unless otherwise agreed in writing the Freight Forwarder
shall not be under any obligation to effect a separate
insurance on each consignment, but may declare it on any
open or general Policy held by the Freight Forwarder.

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➢Hindrances
• If at any time the Freight Forwarder’s performance is to be affected by risk
of any kind (including the conditions of the Goods) not arising from any
fault or neglect of the Freight Forwarder and which cannot be avoided by
the exercise of reasonable endeavor, the Freight Forwarder may abandon
the carriage of the Goods under the respective contract and, make the
Goods available to the Customer at a place which the Freight Forwarder
may deem safe and convenient.

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• In any event, the Freight Forwarder shall be entitled to the
agreed remuneration under the contract and the Customer
shall pay any additional costs resulting from the above-
mentioned circumstances.

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➢Method and Route of Transportation
• The Freight Forwarder shall carry out his services according
to the Customer’s instructions as agreed.
• If the instructions are inaccurate or incomplete, the Freight

Forwarder may at the risk and expense of the Customer act
as he deems fit.
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• the Freight Forwarder may without notice to the Customer
arrange to carry the Goods on or under deck and choose or
substitute the means, route and procedure to be followed
in the handling, storage and transportation of the Goods.

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• Part II. The Freight Forwarder’s Liability
➢The Freight Forwarder’s Liability (except as principal)
The Freight Forwarder’s Duty or Care:
• The Freight Forwarder is liable if he fails to exercise due diligence and
take reasonable measures in the performance of the Freight Forwarding
Services.
• in which case he shall compensate the Customer for loss of or damage
to the Goods as well as for direct financial loss resulting from breach of
his duty of care.

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No Liability for Third Parties:
• The Freight Forwarder is not liable for acts and omissions by third
parties, such as, Carriers, warehousemen, stevedores, port authorities
and other freight forwarders, unless he has failed to exercise due
diligence in selecting, instructing or supervising such third parties.

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➢The Freight Forwarder’s Liability as Principal
The Freight Forwarder’s liability as Carrier:
• The Freight Forwarder is subject to liability as principal not only when
he actually performs the carriage himself by his own means of
transport (performing Carrier), but also if, by issuing his own
transport document by contracting Carrier.
• However, the Freight Forwarder shall not be deemed liable as Carrier
if the Customer has received a transport document issued by a person
other than the Freight Forwarder.

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The Freight Forwarder’s liability as principal for other services:
• With respect to services other than carriage of Goods such as,
storage, handling, packing, or distribution of the Goods,etc, the
Freight Forwarder shall be liable as principal:
1. when such services have been performed by himself using his
own facilities or employees or
2. if he has made an express or implied undertaking to assume
liability as principal.

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The basis of the Freight Forwarder’s liability as principal:
• The Freight Forwarder as principal shall, be responsible for the acts
and omissions of third parties he has engaged for the performance of
the contract of carriage or other services in the same manner as if
such acts and omissions were his own and his rights and duties shall
be subject to the provisions of the law applicable to the mode of
transport or service concerned,

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➢Exclusions, Assessment and Monetary Limits of Liability
Exclusions:
• The Freight Forwarder shall in no event be liable for:
1. Valuables or Dangerous Goods unless declared as such to the
Freight Forwarder at the time of the conclusion of the contract.
2. Loss following from delay unless expressly agreed in writing.
3. Indirect or consequential loss such as, but not limited to, loss of
profit and loss of market.

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Assessment of compensation:
• The value of the Goods shall be determined according to:
• the current commodity exchange price or,
• the current market price or,
• by reference to the normal value of the Goods of the same kind
and quality.

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Monetary limits:
1. Loss of or Damage to the Goods:
• the Freight Forwarder shall not be or become liable for any loss of
or damage to the Goods in an amount exceeding the equivalent of
2 SDR per kilogram of gross weight of the Goods lost or damaged.
• If the Goods have not been delivered within ninety consecutive days
after the date when the Goods ought to have been delivered, the
claimant may, in the absence of evidence to the contrary, treat the
Goods as lost.

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2.Limitations of Liability for Delay
3. Other Type of Loss

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➢Notice
➢Time Bar
➢Liability of Servants and other Persons
These Rules apply whenever any claim is made against a
servant, agent or other person the Freight Forwarder
engaged for the performance of the service

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• Part III. The Customer’s Obligation and Liability
➢Unforeseen Circumstances
In the event that the Freight Forwarder, in case of unforeseen
circumstances, acts in the best interest of the Customer extra costs
and charges have to be borne by the Customer.

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➢No Set-Off
All payments due shall be settled without any reduction or
deferment on account.
➢General Lien
The Freight Forwarder shall have a general lien on the Goods and
any documents relating thereto for any amount due at any time to
the Freight Forwarder from the Customer including storage fees
and the cost of recovering same, and may enforce such lien in any
reasonable manner which he may think fit.
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➢Information
➢Duty of Indemnification
➢The Customer’s Liability
The Customer shall be liable to the Freight Forwarder for all loss or
damage, costs, expenses and official charges resulting from the
Customer’s inaccurate or incomplete information or instructions.

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• Part IV. Disputes and Mandatory Law
➢Jurisdiction and Applicable Law
Unless otherwise agreed, actions against the Freight Forwarder
may be instituted only in the place where the Freight Forwarder
has his principal place of business and shall be decided according
to the law of the country of that place.

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➢Mandatory Law
• These Rules shall only take effect to the extent that they are not
contrary to the mandatory provisions of international conventions
or national law applicable to the Freight Forwarding Services.

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How do you select a freight
forwarder?

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Factors in Selecting IFF
• Being licensed
• Size= ability to provide ‘one stop service’
• Capability in terms of having experience, financial stability, handling variety of
products
• Network in target market
• Ability and willingness to communicate with client
• Having knowledge of the client’s products
• Reference

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1.3 Required Expertise of a Freight Forwarder
• Freight forwarding is all about the smooth flow of
international trade. To accomplish this, expertise is
required in a number of different areas:
➢Transport Modes and Geography
✓Close co-operation is required with transporters in
every mode – road, rail, sea and air.

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✓Freight forwarders are constantly negotiating freight
rates with transport providers, comparing the costs of
moving cargo along different routes via different
modes and then designing logistics infrastructures
which provide the best compromise between cost,
speed and reliability.

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Each mode offers advantages and disadvantages on key
transportation features that include:
➢Product Options- the number of different products that can
realistically be shipped
➢Speed of Delivery- how quickly it takes products
➢Accessibility- whether the use of a mode can allow final delivery
to occur at the buyer’s desired location
➢Cost- the cost per item to cover some distance (e.g Kilometer)
➢Capacity- the amount of product that can be shipped at one time
within one transportation unit (lowers transportation cost per-
item shipped)
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➢Statutory Compliance
✓A vital ingredient to successful trading on world
markets is that every transaction must comply with a
myriad of statutory measures and their related
procedures, especially those associated with Customs.
➢Risk Management
✓International traders require that their forwarders be in a
position to advise and assist them in minimising those
risks which are particularly associated with the
movement of goods – loss, damage and destruction
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➢Finance and Payment
✓this involves advice as to the alternative methods of
financing of the transactions concerned and the
establishment of payment methods that are
mutually beneficial to both parties.

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➢Cross functional integration and logistics
• The ability to ensure the efficient and effective supply
chain management (SCM) of goods from country to
country from the time an order is placed until
finished goods are delivered to the final consumer
places the freight forwarder is in a position to make a
unique contribution to the enhancement of value to
the activities of exporters and importers.

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2. International Trade
Learning Objectives :
• Transport organization and transport documents
depend on the requirements of the trade contract. As a
basis for the forthcoming modules the student should
understand the different possibilities for buyer and
seller to conclude terms of delivery and terms of
payment and their implications for the transport
organization by the forwarder.

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Meaning of international trade:
• The exchange of products, services, and money across national
borders; essentially trade between countries- backbone of foreign
trade.
• Deals with export & import that forms the essence of international
finance.

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Reasons for International Trade:
➢Uneven distribution of resources- cost, quality & price differences;
➢Globalization;
➢E-commerce;
➢Trade agreements;
➢Demand exists in one country for products produced in another country;
➢Cost advantage;
➢The ability of some countries to produce what other countries want is what makes
foreign trade work.

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2.1 International Trade and Trade Contracts
• International trade can be riskier than trade within a

country.
Why? (which lead to risks)

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• Particularities of international trade which lead to risks are:
➢Longer distances;
➢Different currencies;
➢Different cultures and languages;
➢Different legal frameworks;

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What are the risks in

international trade for
the buyer and seller?

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• In general the following risks in foreign trade may occur:
1) Risk of Non-Acceptance
Risk for the seller that the buyer rejects the acceptance
of goods. The reasons can be very different, e.g.
bankruptcy, problems in performance or production,
loss or damage during transport etc.

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2) Risk of Payment
The seller faces the risk that he does not receive his
payment for the goods delivered.
The reasons could be that the buyer is not willing or not
able to pay, for instance if the goods do not meet the
requirements of the buyer or if the market price for the
goods delivered has been falling in the meantime.

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3)Risk of Non-Performance
Risk for the buyer that the seller does not fulfil the
contract in terms of quantity or quality of the goods or
concerning punctual delivery.
4) Transport Risks
Danger of loss or damage of the goods during transport
or delays (relates to seller or buyer depending on the
terms of delivery)

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5) Political Risks
Risks of political interferences, e.g. withholding of
financial transaction or of goods, strikes, war etc.

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• Other classification of risks
➢Commercial risk; (weak partner, operational problems)
➢Currency (financial) risk; (currency exposure, asset valuation, foreign

taxation, inflation)
➢Country risk; (government intervention, corruption, unfavorable legislation to

foreign firms, economic failures and mismanagement, social and political
unrest)
➢Cross-cultural risk. (cultural difference, ethical practice)

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How risks are handled

in international trade?

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Risks can be handled through :
• Risk Prevention
e.g. market information before concluding the
contract
• Risk Bearing
through calculation a surcharge for bearing the risk
• Risk Shifting
through off-loading the risk to the contractual party, a
third party or to an insurance agent
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• Risk Division
between buyer and seller within the trade contract

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Trade contract
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• Main items of a trade contract
✓Name and address of buyer and seller;
✓Description of goods;
✓Quantity of goods;
✓Price;
✓Terms of delivery;
✓Terms of payment;
✓Applicable Law;

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• Main items of a trade contract and their relevance to the FF:
➢Name and address of buyer and seller
✓Who is consignor and who is consignee?
✓Which countries are involved?
✓The country determines the export/import rules and
documentation.
➢Description of goods
✓Determines cargo handling and transport mode,
✓customs tariff
e.g. bulky goods or general cargo

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➢Quantity of goods
✓Determines transport technology
✓How to weigh or to count the goods?
e.g. full load or parcel load; heavy lift
e.g. rail scale, crane scale, or ships draught expertise
➢Price
✓Customs tariff

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➢Terms of delivery
✓Determines who is responsible for the carriage as shipper
and which transport document proves the delivery.
e.g. ICC INCOTERMS
➢Terms of payment
✓Determines which transport document proves delivery
and is decisive for payment.
e.g. documentary credit, cash against documents etc.
➢Applicable Law
✓Duties of the parties involved, Liabilities

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2.2 Terms of Delivery
• The DELIVERY of goods is agreed upon between seller
and buyer. These so called trade terms are simply standard
terms accepted in international trade as meaning a
particular type of contract.
• The most commonly used trade terms are the INCOTERMS
(International Commercial Terms), which are a set of
standard conditions for delivery which can be incorporated
into the contract by the parties.
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• The INCOTERMS have been prepared by the International
Chamber of Commerce but do not apply unless they are
expressly incorporated into the contract. They have no
binding force of law.

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Why are the INCOTERMS so important?
• The fact that the buyer and seller are in different countries
means that both will be subject to different legal systems.
• The law which applies to the contract will be one of the
two, or the law of a third country if both parties agree.
• Which legal system applies depends to a large degree on
the relative negotiating strengths of the parties.
• In any event, an applicable law must be included in the
contract; failure to do so will create legal uncertainty in the
interpretation and application of the contract.
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• As the goods transported from one country to another,
additional expenses will be incurred than would otherwise
be the case if the contract was purely domestic.
• As a general rule, in an international trade transaction the
difference in the price quoted for the goods in a domestic
sale and that in the international sale will be due to these
additional costs.

Forwarding
• In terms of transport costs, it will be necessary to pay for
inland transport for delivery of the goods to the port of
shipment, dock dues, freight forwarding charges and the
cost of ocean transport.
• In addition to pure transport costs, there will also be
charges for customs duties (import and export) like in the
case of Ethiopia, the costs for obtaining import or export
licences, and charges for customs procedures.

Forwarding
• Due to the risks involved in sea ocean transportation,
insurance cover may be required to cover the risk of
destruction or damage during the voyage.
• Once the goods arrive at the port of destination, costs will
be incurred to carry the goods from the vessel to the
buyer’s warehouse or place of business.
• Therefore, it is essential that both parties are aware of
their respective responsibilities and liabilities for these
charges when the sales contract is entered into.
Forwarding
• Where the seller undertakes to pay for some or all of these
expenses, the amount which will eventually be charged on
the invoice will be higher than if the goods were simply
picked up at the seller’s warehouse.
• The liabilities of the parties for these expenses must be
determined at the onset of the contract so that
responsibility for breach of one of these duties can be
apportioned.

Forwarding
• For example, if under the contract it is the seller’s
responsibility to insure the goods in transit, then failure to do
so will render the seller liable in the event that the goods are
not delivered in accordance with the contractual description.
• Responsibility for delivery of the goods is only one side of the
sales contract; the other side is the obligation to make
payment.
• payment in advance is only made in the situation where
the level of trust between the parties is extremely high.

Forwarding
• open account trade are normally only used in three
situations:
➢where the buyer and seller have developed a
relationship of absolute trust;
➢where the buyer and seller are located in geographically
proximate countries and
➢where the buyer and seller are members of the same
international organization.

Forwarding
• As we can see from the above, it is the element of distance
that causes much of the inconvenience in international
sales transactions.
• Therefore the use of INCOTERMS, creates a certain degree
of flexibility built into many of these mechanisms to cater
to the interests of both the buyer and the seller.

Forwarding
• The ICC has introduced thirteen (13) terms of delivery
which reflect upon the degree of liability of both the seller
and the buyer and also accommodate the various means
available for the carriage of cargo to be effected.
• The edition of these terms is the INCOTERMS 2000,
which basically include the following:
➢ EXW (ExWorks)
➢ FCA (Free Carrier)
➢ FAS (Free Alongside Ship)
Forwarding
➢ FOB (Free on BOARD)
➢ CFR (Cost and Freight)
➢ CIF (Cost Insurance and Freight)
➢CPT (Carriage Paid To)
➢CIP (Carriage and Insurance Paid To)
➢DAF
➢DES DAP (Delivered At Place)
➢DDU
➢DEQ DAT (Delivered At Terminal)
➢DDP (Delivered Duty Paid)

Forwarding
• Note : INCOTERMS 2000 has recently been replaced by the
INCOTERMS 2010 with effect from 1st January 2011 with
several modifications to reflect the current times and
changes in trade practices.

Forwarding
Contracts of sale and terms of trade
• terms of trade will generally include agreements
relating to:
➢Which party will pay the cost of transport for each
stage of the journey
➢Who is responsible for loading and unloading of
goods
Forwarding
➢who is responsible for insuring the goods during
transport and storage
➢who is responsible for paying Customs duties and
other taxes
➢who bears the risk of potential loss at any given
point of transportation, etc.

Forwarding
• All relevant parties should know precisely:-
✓ who pays for what, and
✓who assumes the risk of loss or damage to the
consignment while it is in transit.

Forwarding
• INCOTERMS 2010
➢First published in 1936,
➢Incoterms have been periodically updated
➢Eighth version : Incoterms 2010 effective on
January 1, 2011.

Forwarding
• INCOTERMS are intended primarily to clearly communicate
the:
➢Tasks,
➢Costs
➢risks
that are associated with the transportation and delivery of
goods.

Forwarding
• Provide uniform rules for the interpretation of trade
terms
• Provide clear definition of ‘buyers’ and ‘sellers’ rights

and obligations in international transactions

Forwarding
• INCOTERMS don’t determine
• when payment for the goods has to be made
• at which point ownership in the goods passes from
seller to buyer
• Where are these spelt out?

• In the Sales Contract !!
Forwarding
INCOTERMS = INternational COmmercial TERMS
1. CARRIAGE
2. EXPORT/IMPORTCLEARANCE
3. COSTS & RISKS

Forwarding
INCOTERMS = INternational
COmmercial TERMS

Forwarding
1) EX WORKS (...named place) (EXW)
• “Ex works” means that the seller delivers when he places

the goods at the disposal of the buyer at the seller’s premises or
another named place (i.e. works, factory, warehouse, etc.)
• The goods are not cleared for export and not loaded on any
collecting vehicle.
• EX WORKS represents the minimum obligation for the seller, and
the buyer has to bear all costs and risks involved in taking the
goods from the seller’s premises.

Forwarding
• if the parties wish the seller to be responsible for the loading of the
goods on departure and to bear the risks and all the costs of such
loading, this should be made clear in the contract of sale.
• EX WORKS should not be used when the buyer cannot carry out the
export formalities directly or indirectly.
• In such circumstances, the FCA term should be used, provided the

seller agrees that he will load at his cost and risk.

Forwarding
2) FREE CARRIER (...named place) (FCA)
• “Free Carrier” means that the seller delivers the goods,

cleared for export, to the carrier nominated by the buyer at the
named place.
• It should be noted that the chosen place of delivery has an impact on
the obligations of loading and unloading the goods at that place.
• If delivery occurs at the seller’s premises, the seller is responsible for
loading.
• If delivery occurs at any other place, the seller is not responsible for
unloading.

Forwarding
• FCA may be used irrespective of the mode of transport, including
multimodal transport.
• “Carrier” means any person who, in a contract of carriage,
undertakes to perform or to procure the performance of transport by
rail, road, air, sea, inland waterway or by a combination of such
modes.
• If the buyer nominates a person other than a carrier to receive the
goods, the seller is deemed to have fulfilled his obligation to deliver
the goods when they are delivered to that person.

Forwarding
3) FREE ALONGSIDE SHIP (FAS) (...named port of shipment):
• “Free Alongside Ship” means that the seller delivers when the
goods are placed alongside the vessel at the named port of shipment.
• This means that the buyer has to bear all costs and risks of loss of or
damage to the goods from that moment.
• The FAS term requires the seller to clear the goods for export.

Forwarding
• if the parties wish the buyer to clear the goods for export, this
should be made clear by adding explicit wording to this effect in the
contract of sale.
• FREE ALONGSIDE SHIP can be used only for sea or inland waterway
transport.

Forwarding
4) FREE ON BOARD (FOB) (...named port of shipment)
• “Free on Board means that the seller delivers when the

goods pass the ship’s rail at the named port of shipment.
• This means that the buyer has to bear all costs and risks of loss of or
damage to the goods from that point.
• The FOB term requires the seller to clear the goods for export. This
term can be used only for sea or inland waterway transport.
• If the parties do not intend to deliver the goods across the ship’s rail,
the FCA term should be used.

Forwarding
5) COST AND FREIGHT (FCR) (...named port of destination):
• “Cost and Freight” means that the seller delivers when the goods pass
the ship’s rail in the port of shipment.
• The seller must pay the costs and freight necessary to bring the goods to
the named port of destination.
• BUT the risk of loss of or damage to the goods, as well as any additional
costs due to events occurring after the time of delivery, are transferred
from the seller to the buyer.
Forwarding
• The CFR term requires the seller to clear the goods for export.
• The CFR can be used only for sea and inland waterway transport.
the CPT term should be used.

Forwarding
6) COST INSURANCE AND FREIGHT (CIF) (…named port of
destination):
• “Cost, Insurance and Freight” means that the seller delivers when
the goods pass the ship’s rail in the port of shipment.
• The seller must pay the costs and freight necessary to bring the
goods to the named port of destination.
• BUT the risk of loss of or damage to the goods, as well as any
additional costs due to events occurring after the time of delivery, are
transferred from the seller to the buyer.

Forwarding
• However, in CIF the seller also has to procure marine insurance
against the buyer’s risk of loss of or damage to the goods during the
carriage.
• Consequently, the seller contracts for insurance and pays the

insurance premium.
• The buyer should note that under the CIF term the seller is required
to obtain insurance only on minimum cover.

Forwarding
• Should the buyer wish to have the protection of greater cover, he
would either need to agree as much expressly with the seller or to
make his own extra insurance arrangements.
• The CIF term requires the seller to clear the goods for export.
• The CIF can be used only for sea and inland waterway transport.
the CIP term should be used.

Forwarding
7) CARRIAGE PAID TO (CPT) (…named place of destination):
• "Carriage paid to…" means that the seller delivers the goods to
the carrier nominated by him but the seller must in addition pay
the cost of carriage necessary to bring the goods to the named
destination.
• This means that the buyer bears all risks and any other costs
occurring after the goods have been so delivered.

Forwarding
• If subsequent carriers are used for the carriage to the agreed
destination, the risk passes when the goods have been delivered to
the first carrier.
• The CPT term requires the seller to clear the goods for export.
• The CPT may be used irrespective of the mode of transport including


Forwarding
8) CARRIAGE AND INSURANCE PAID TO (CIP) (…named place of destination):
• "Carriage and Insurance paid to…" means that the seller delivers the
goods to the carrier nominated by him, but the seller must in addition pay
the cost of carriage necessary to bring the goods to the named
destination.
• This means that the buyer bears all risks and any additional costs occurring
after the goods have been so delivered.

Forwarding
• However, in CIP the seller also has to procure insurance against the
buyer’s risk of loss of or damage to the goods during the carriage.
• Consequently, the seller contracts for insurance and pays the
insurance premium.
• The buyer should note that under the CIP term the seller is required
to obtain insurance only on minimum cover.
• Should the buyer wish to have the protection of greater cover, he
would either need to agree as much expressly with the seller or to
make his own extra insurance arrangements.

Forwarding
• If subsequent carriers are used for the carriage to the agreed
destination, the risk passes when the goods have been delivered to
the first carrier.
• The CIP term requires the seller to clear the goods for export.
• CIP may be used irrespective of the mode of transport including


Forwarding
9) DELIVERED AT PLACE (DAP) (named place of destination)
• Delivered at place means…that the Seller delivers, when the goods
are placed at the disposal of the Buyer on the arriving means of
transport, ready for unloading by the Buyer at the Named Place of
Destination.
• Seller has to bear all the costs & risks involved in bringing the goods
to the named place.
• Intended to be used for both domestic & int’l sales

Forwarding
10) DELIVERED AT TERMINAL (DAT) (named place of destination)
• Delivered at terminal….means that the Seller delivers the goods,
once they are unloaded from the arriving means of transport &
placed at the disposal of the buyer at a named terminal located at the
named port or place of destination.
• Seller must contract for the carriage and pay the cost of the carriage
of the goods to the named terminal at the agreed port or place of
destination.

Forwarding
• The Seller bears the risks & cost of unloading at the destination
terminal together with any costs incurred for export or security
clearance in country of export.
• Seller will provide the buyer with documents to enable the buyer to
take delivery of the goods at the named place of destination.
• “Terminal” includes any place, whether covered or not, such as a
quay, warehouse, container yard or road, rail or air cargo terminal.

Forwarding
11) DELIVERED DUTY PAID (DDP):
• "Delivered duty paid" means that the seller delivers the goods to
the buyer, cleared for import, and not unloaded from any arriving
means of transport at the named place of destination.
• The seller has to bear all the costs and risks involved in bringing the
goods thereto including, where applicable, any "duty“ for import in
the country of destination.
• DDP is used for all types of shipment.

Forwarding
• Whilst the EXW term represents the minimum obligation for the
seller, DDP represents the maximum obligation.
• This term should not be used if the seller is unable directly or
indirectly to obtain the import licence.

International Trade
Two Categories of INCOTERMS
EXW Ex Works
FOB Free On Board
Any Mode of Transport FCA Free Carrier
CPT Carriage Paid To
CIP Carriage, and Insurance Paid To
DAP Delivered At Place
DAT Delivered At Terminal
DDP Delivered Duty Paid
FAS Free Alongside Ship

CFR Cost and Freight
Sea Transport CIF Cost, Insurance and Freight
149
International Trade
Group E EXW Ex Works
Departure
Group F FCA Free Carrier

Main carriage Paid by buyer FAS Free Alongside Ship
FOB Free On Board
Group C CFR Cost and Freight

Main carriage Paid by Seller CIF Cost, Insurance and Freight
CPT Carriage Paid To
CIP Carriage, and Insurance Paid To
Group D DAP Delivered At Place

Arrival DAT Delivered At Terminal
DDP Delivered Duty Paid
150
International Trade
151
International Trade
152
International Trade
153
International Trade
154
International Trade
155
International Trade
156
International Trade
157
International Trade
158
International Trade
159
International Trade
160
International Trade
161
Forwarding
The Structure of INCOTERMS 2000 grouped into 4
categories:
1)Departure; Seller makes goods available to buyer at
sellers own premises (EXW)
2)Main Carriage Unpaid; Seller delivers goods to carrier
appointed by buyer (Paid by Buyer) (FCA :FAS :FOB )

Forwarding
3) Main Carriage Paid; Seller has to contract for carriage
without assuming risks of loss of or damage to the goods
or costs after shipment or dispatch (Paid by Seller) (CFR
:CIF CPT :CIP)
4) Arrival; Seller has to bear all costs & risks needed to
bring goods to place of destination (DAP: DAT: DDP)

Forwarding
INCOTERMS 2010 only has 2 Categories:
1) Rules for Any Modes of Transport
(CIP: CPT: DAP: DAT: DDP: EXW: FCA)
2) Rules for Sea and Inland Waterway Transport Only
(CFR: CIF: FAS: FOB)

Forwarding
• For air transport, a specific Incoterm ‘FOB Airport’ was introduced by
the ICC in 1976.
• The expression ‘Free On Board’ was not appropriate though, because

goods are handed over in terminal, instead of on board the airplane.
(and the Air Way Bill is often already delivered)

Forwarding
Choice of Terms:
• A business decision taken by Seller & Buyer depending on
several factors;
➢bargaining strength of each party,
➢Seller’s export strategy,
➢nature of the trade,
➢nature of the goods
➢the availability of transport,
➢national import or export regulations and
➢the political situation in the 2 countries;

Forwarding
• with Conventional Transport, trade terms frequently used
are :
➢FOB
➢CIF
• (both use the ship’s rail as “cut-off” point !)

Forwarding
• 10 Tips on Using Incoterms
1) Remember –Incoterms are NOT your Prime Contract of
Sale
2) Consider Terms Appropriate to the Goods
3) Consider Terms Appropriate to the Transport
4) Decide who will organize the Transport
5) Decide who will organize Insurance(if req)

Forwarding
6) Consider Local Customs or Practices at Port or Place
7) Consult the ‘Guidance Notes’ in the ICC Incoterms
Publications
8) Choose the appropriate Rules
9) Specify the Place as precisely as possible
10) Incorporate Incoterms into your Contract

Forwarding
• Basically, INCOTERMS IS ABOUT…
• WHOIS PREPARED TO UNDERTAKE THE RISKS, COSTS,

LIABILITIES & RESPONSIBILITIES ?
BUYER or SELLER?
Forwarding
Terms of Payment

Forwarding
3. Terms of Payment
Payment for goods traded internationally can be arranged in a number of
ways. Terms and methods of payment should be stipulated in the
contract. The most widely used are:
1) Open Account terms (Clean Payment)
➢The seller dispatches the goods to the buyer and sends an invoice at the same
time. Any documents of title are also sent to the buyer.
➢The Importer is trusted to pay the Exporter after receipt of the goods.
172
Forwarding
➢The seller loses control of the goods when he dispatches them and
trusts the buyer to pay.
➢For the buyer is it the most advantageous mode of payment,
because he has a possibility to receive and inspect the goods before
making any payments.
173
Open Account terms

Forwarding
2) Payment in Advance (Clean Payment)
➢An arrangement whereby the Exporter is trusted to ship the goods
after receiving payment from the Importer.
➢The Importer sends payment directly to the Exporter and waits for
the Exporter to send the goods and documents.

Payment in Advance

Forwarding
3) Documentary Collections
➢The seller dispatches goods directly. Documents of title are given to
the seller's bank which sends them to the buyer's bank through the
banking system.
➢According to the accompanying instructions the buyer's bank will
only hand over the documents of title to the buyer against payment
or acceptance of a bill of exchange.
➢The seller retains control of the goods until payment is made or a
legally binding undertaking to pay is given (acceptance of bill of
exchange) .

Forwarding
• Documentary Collections may be carried out in two different ways:
➢Documents Against Payment. Documents are released to the
Importer only against payment. Also known as a Sight Collection or
Cash Against Documents (CAD).
➢Documents Against Acceptance. Documents are released to the
Importer only against acceptance of a draft. Also known as a Term
Collection.
178
Forwarding
• The mechanics of a documentary Collection are easily understood
when separated into the following three steps:
➢Flow of Goods
➢Flow of Documents
➢Flow of Payment

Documentary Collections
• Flow of Goods and Flow of Documents

Documentary Collections
• Flow of Payment

Forwarding
4) Documentary credit (letter of credit)
➢A (conditional) guarantee of payment from the buyer's bank. The buyer
authorizes his bank to issue a documentary credit (letter of credit).
➢The buyer's bank passes on details to a bank in the seller's country which
advises the seller of the existence of a credit.
➢A key principle underlying Letters of Credit is that banks deal only in
documents and not in goods.
182
Forwarding
➢The seller ships the goods, obtains the documents required under the
credit.
➢The seller presents the documents through the banking system and is
paid.
➢The International Chamber of Commerce (ICC) publishes
internationally agreed-upon rules, definitions and practices governing
Letters of Credit, called “Uniform Customs and Practice for
Documentary Credits” (UCP).

Forwarding
• Letters of Credit are either Revocable or Irrevocable:
➢A Revocable Letter of Credit can be revoked without the consent
of the Exporter, meaning that it may be canceled or changed up
to the time the documents are presented.
➢An Irrevocable Letter of Credit cannot be canceled or amended
without the consent of all parties including the Exporter.

Forwarding
• Letters of Credit may be settled either by sight or by acceptance:
➢If payment is to be made at the time that documents are
presented, this is referred to as a sight Letter of Credit.
➢If payment is to be made at a future fixed time from the
presentation of documents, this is referred to as a term Letter of
Credit

Forwarding
• The mechanics of a Letter of Credit are easily understood when
separated into the following three steps:
➢Issuance
➢Flow of Goods
➢Flow of Documents & Payment

Letters of Credit
• L/C Issuance

Letters of Credit
• Flow of Goods

Letters of Credit
• Flow of Documents & Payment

International Organizations in Forwarding and
Trade
• The student should have an overview of the main
international organizations related to international trade
and transport.
• He/she should know their main purposes and should be
able to give examples of their work results.
190
Trade
• These are:
✓UNCTAD
✓ICC
✓WCO
✓WTO
✓ISO
✓FIATA
✓WB

Trade
These are:
• UNCTAD (United Nations Conference on Trade and Development)
The goal of UNCTAD´s programmes on International Trade is to
promote the development of developing countries through
international trade;
➢provide support for their participation in international
trade negotiations;
➢strengthen service-sector capacities in developing
countries;
192
Trade
➢promote the integration of trade, environment and
development;
➢analyse issues related to competition law, policy and
development; and
➢seek to enhance the contribution of the commodity
sector to development through diversification and risk
management
193
Trade
• ICC (International Chamber of Commerce)
➢ICC activities cover a broad spectrum, from arbitration and
dispute resolution to making the case for:
✓open trade and the market economy system,
✓business self-regulation,
✓fighting corruption or combating commercial crime.

Trade
➢ICC has direct access to national governments all over the
world through its national committees.
➢The organization's Paris-based international secretariat feeds
business views on issues that directly affect business
operations, such as:
-Arbitration under the rules of the ICC International Court of
Arbitration
195
Trade
➢ICC INCOTERMS are standard international trade definitions
used every day in countless thousands of contracts.
➢ICC is a pioneer in business self-regulation of e-commerce.
➢ICC codes in advertising and marketing are frequently
reflected in national legislation and the codes of professional
associations.
196
Trade
• WCO (World Customs Organization)
➢The WCO is an independent intergovernmental body
whose mission is to enhance the effectiveness and
efficiency of Customs Administrations.
➢It introduces the Harmonized Commodity Description for
uniform application.
➢It is the competent global intergovernmental organization
in Customs’ matters.

Trade
• WTO (World Trade Organization)
➢The World Trade Organization is the only global international
organization dealing with the rules of trade between nations.
➢The goal is to help producers of goods and services,
exporters, and importers conduct their business.
➢Discussions currently focus Freedom of Transit, Fees
and Formalities, and Publication and Administration of
Trade Regulations.
198
Trade
• World Bank
➢ The World Bank is a vital source of financial and technical assistance
to developing countries around the world.
➢It is made up of two unique development institutions
owned by 184 member countries—
✓the International Bank for Reconstruction and
Development (IBRD) and
✓ the International Development Association (IDA).

Trade
➢Each institution plays a different but supportive role in the
mission of global poverty reduction and the improvement
of living standards,
➢The IBRD focuses on middle income and creditworthy
poor countries, while IDA focuses on the poorest countries
in the world.
➢Together they provide low-interest loans, interest-free
credit and grants to developing countries for education,
health, infrastructure, communications and many other
purposes.

Trade
• ISO (International Organisation for Standardisation)
➢ISO is a network of the national standards institutes of 156
countries
➢It is a non-governmental organization: its members are not, as is
the case in the United Nations system, delegations of national
governments.
➢Nevertheless, ISO occupies a special position between the public
and private sectors.
➢ISO is able to act as a bridging organization that meet both the
requirements of business and the broader needs of society, such
as the needs of stakeholder groups like consumers and users.
201
Trade
• FIATA (International Federation of Freight Forwarders
Associations)
➢ It is a non-governmental organisation and represents
today an industry covering approximately 40,000 forwarding
and logistics firms, also known as the "Architects of
Transport",
202
Trade
➢FIATA has consultative status with:
✓the Economic and Social Council (ECOSOC) of the
United Nations (inter alia ECE, ESCAP, ESCWA),
✓the United Nations Conference on Trade and
Development (UNCTAD), and
✓the UN Commission on International Trade Law
(UNCITRAL).

Trade
➢It is recognised as representing the freight forwarding
industry by many other governmental organisations,
governmental authorities, private international organisations
in the fields of transport such as:
✓ the International Chamber of Commerce (ICC),
✓ the International Air Transport Association (IATA),
✓ the International Road Transport Union (IRU),
✓ the World Customs Organization (WCO),
✓ the World Trade Organization (WTO) etc.
204
Trade
➢ FIATA has created several documents and forms to
establish a uniform standard for use by freight forwarders
worldwide.
➢The documents are easily distinguishable as each has a
distinctive colour and carries the FIATA logo.
✓ FCR (Forwarders Certificate of Receipt)
✓ FIATA FCT (Forwarders Certificate of Transport)
✓ FWR (FIATA Warehouse Receipt)

Trade
✓ FBL (negotiable FIATA Multimodal Transport Bill of Lading)
✓ FWB (non-negotiable FIATA Multimodal Transport
Waybill)
✓ FIATA SDT (Shippers Declaration for the Transport of
Dangerous Goods)
✓ FIATA SIC (Shippers Intermodal Weight Certificate)
✓ FFI (FIATA Forwarding Instructions)
206
Trade
➢These documents have an excellent reputation and are
recognised as documents of tradition and trust.
➢They have greatly contributed in the past to the facilitation of
international exchanges and will continue in the future to be
valuable instruments in the service of the world.
207
Organization of the Forwarding Company
• The student should be able to explain the general types of
forwarders and the principle structure of a forwarding
company.
• He/she should be able to explain the main components of
a forwarding process and should understand the criterions
for choosing a mode of transport.

1. Organisation of a forwarding company
• There are different types of forwarding companies ranging
from universal forwarders to highly specialized companies.
• There is also the tendency to integrate more value adding
activities alongside the supply chain and to develop from
traditional forwarding to logistics service providers.

Types of companies are for example (European Operators):
• System provider
• International Universal Forwarder
• Specialised Forwarder
• Customs Agent
• Warehousing
• Logistics Services

Type of company Detail Example
System provider Network provider for courier, parcel DHL, UPS, FedEx
and express services
International Universal Forwarder Comprehensive Service in: Militzer&Münch

Airfreight Kühne&Nagel
Sea freight Schenker
Railway Sojuzvneshtrans
International Road Haulage
Specialised Forwarder Specialised on Modes or Goods: Sheldorgexpedicia (Rail)

e.g. Railway, Tank, Road etc. Harms (Cars)
Hoyer (Tank)
Customs Agent Customs Clearance

Warehousing General Cargo Warehouse, Refrigerated Unistore
Warehouses etc.
Logistics Services Specialisation on Customers / supply Schnellecke (Volkswagen)

chains Hermes (Catalogue Shops)
211
• Because of the wide variety of forwarding companies
there is no uniform structure of forwarding companies.
Related to a universal forwarding company a typical
company structure could be:
• Managing Director…. . ..(safety advisor)
➢Sales Department
➢Operations Department
➢Financial Department
➢Personnel Department

2. General Procedure
• The legal statute of the freight forwarders permits them to
have the choice of both the “way" and the "means”.
• They control the organisation of the transport operation
for which they have been solicited by their customer or
contractor. Thus, they are confronted with a multitude of
choices and decisions for which they have the complete
responsibility.

• freight forwarder has two principal choices:
➢That of choosing the means of transport to be used in
the transport operation which they are to organize,
➢That of choosing competent and reliable transport
providers so as to fulfil the contract which has been
awarded them in the best manner possible and to
defend the best interests of their customers.

• Therefore, they must have full command of:

➢The cargo handling techniques associated with each
method of transport to be used,
➢The legal framework of each method,
➢The legal significance of the transport documents
used.

• What is the procedure of order-processing within a

freight forwarding company?

• The typical procedure of order-processing within a freight
forwarding company can be described as in the following
flow:
1.Enquiry/Offer
2.FF contract
3.Selection of route and modes
4.Contracting of carriers
5.Issuing documents
6.Monitoring of goods and documents
7.Invoicing

• What are the factors to be considered concerning the

means of transportation?

• The Factors To Be Considered Concerning The Means Of
Transportation:
➢ Factors linked to the efficiency of the method of
transport: the nature of the goods transported and the
capacity of the means of transport, the size of the
shipments, transhipment with or without intermediate
handling etc.;

➢Factors linked to cost: cost of the packing to be used,
cost of transhipment, handling costs, transportation
costs, insurance costs etc.;
➢Factors linked to the quality of service:
✓delivery times,
✓speed,
✓regularity,
✓security,
✓reliability,
✓flexibility etc.

3. Quality Management System ISO 9001
• Quality Management is a part of business management that
fixes the quality policy and the quality-relevant functions,
responsibilities and competences in the company and realizes
them by :
➢quality planning (punctuality, availability etc.)
➢quality control (managing the forwarding process)
➢quality inspection (checking the quality)
➢quality improvement (systematic analysis of failures
and development of improvement measures)
• Forwarders implement more and more quality

management systems in order:
➢to improve the service quality,
➢to meet customer needs and
➢to reduce the costs for failures and double work.

4. Environmental Management System ISO 14000
• The Environmental Management System is the
management of human-kind's interaction with and
impact upon the environment.
• Environmental management involves the management of
all components of the bio-physical environment, both
living (biotic) and non-living (abiotic).

• The environment also involves the relationships of the
human environment, such as the social, cultural and
economic environment with the bio-physical
environment.
• The ISO 14000 standard is the most widely used
standard for environmental risk management

Financial Requirements
The student should have first insight into the book-keeping

and cost-accounting.
He/she should understand their differences, their
objectives and selected methods in the forwarding
company.

• Formal Sources of income
• Informal sources of income
• Formal costs
• Informal costs

1. Accounting and Cost Accounting
• Accounting is the measurement, disclosure or provision of
assurance of information that helps forwarders and other decision
makers make resource allocation decisions.
• There are three types of accounting depending on the recipient of
information:
➢ Financial accounting
➢ Controlling
➢ Tax

• Financial Accounting
➢Financial statements:
✓Income statement - economical result for the year
✓Balance sheet - situation (assets, equities and liabilities)
✓Cash flow statement: - makes transparency in forms of cash per diem
• Controlling
➢Contribution margin accounting: summaries net sales, variable and fixed
costs ordered by products or services.
➢Cost Centre Accounting: summarises different costs ordered by cost
centres in details.
• Tax
➢Tax income statement gives information about your income tax liabilities
for the tax authority.

• Invoicing,
➢All types of accounting use an invoice and a bank
statement as primary documents for activities.
➢ A bank statement that you get from your bank
indicates all account movements.
➢ An invoice is what you get when you purchase some
products or services or what you have to give to the
buyer when you sell some products or services.

• You have to provide the following information on an
invoice:
➢complete name and address of seller and of buyer;
➢date of invoice;
➢date (if necessary time) of delivery and of payment;
➢consecutive number of the invoice;
➢breakdown of invoice total;
➢Usually tax number and V.A.T. number of seller and of
buyer;
• Financial Accounting
➢In the financial accounting, the source documents are
recorded in a journal, or a book of first entry. The journal
records both sides of the transaction recorded by the
source document. These write-ups are known as journal
entries.
➢These journal entries are then transferred to a ledger, or
a book of accounts. This process of transferring the
values is known as posting.

➢Once the entries have all been posted, the ledger
accounts are added up in a process called balancing. A
particular working document called an unadjusted trial
balance is created.
➢At this point accounting happens.
➢The accountant produces a number of adjustments
which make sure that the values comply with accounting
principles.

➢These values are then passed through the accounting

system resulting in an adjusted trial balance. This process
continues until the accountant is satisfied.

• Cost Accounting
➢Based on the information from the financial
accounting the cost accounting provides the
opportunity to track, record and analyse costs
associated with the activity of an organization.
➢The costs are usually categorised into fixed or variable.
➢Fixed costs are associated with the business
administration, and do not change during quiet or busy
times.
➢Variable costs are associated with productive work,
and naturally rise and fall with business activity.
➢You have to consider that you have to cover variable
and fixed cost with net sales.
➢Costs are produced in different positions. It is
important to know which and how many costs are
produced in “non-productive” areas.

Risk Management
• Risk Management
➢It is the process of measuring and then developing
strategies to manage the risk.
➢In general, the strategies employed include transferring
the risk to another party, avoiding the risk, reducing the
negative effect of the risk, and accepting some or all of
the consequences of a particular risk.
➢Traditional risk management focuses on risks stemming
from physical or legal causes (e.g. natural disasters or
fires, accidents, death, and lawsuits).

➢Financial risk management, on the other hand, focuses
on risks that can be managed using traded financial
instruments.
➢Intangible risk management focuses on the risks
associated with human capital, such as knowledge risk,
relationship risk, and engagement-process risk.
➢Risks can be eliminated or minimised, if organisations
install a risk management system. In that risk
management system risk can be identified, measured
and prevented.

Risk Management
Processes in Risk Management:
• Strategic Risk Management
• Systematic Risk Identification
• Risk Measure and Aggregation
• Risk Management and Control

Risk Management
• Strategic Risk Management
➢Risk Policy
➢Organization Rules
• Strategic risk management defines main policy steps and

the organisation of a system which have to manage risks.

Risk Management

Risk Management
• Systematic Risk Identification
➢Identification of risks systematically collects important
information about different risks.
• Risk Measure and Aggregation

➢The identified risks can be measured by how
dangerous they are for the organisation.
Risk Management
• Risk Management and Control

➢ After the evaluation of risks, risks will then be positively
managed and controlled. Minimisation of risk will be
achieved through the reduction of occurrence
probability or of possible losses.
➢ Other risk control methods implemented
Risk Management

Intercontinental Transport and General Knowledge of
Transport Related Geography
• Learning Objectives :
The student should have a general knowledge about main

routes in international transport.

Forwarding
• Continents and Most Important Countries

Forwarding

Forwarding
• Main Flows of Traffic World Wide (Main World Sea Traffic Ways)

Forwarding
• (Main World Air Traffic Ways)

Forwarding
• Main Transport Corridors Europe – Asia and Ethiopia

Forwarding

Forwarding

Forwarding
• River-Shipping
• This technique consists of loading containers in an
inland river port (Lyons, for example) and then
unloading them in the port of destination (Tunis, for
example).

Forwarding
• The Sea-Air technique
• The forwarding company forwarding goods from Asia to
Africa inland (like Ethiopia) or Asia to Europe can choose
the Air-Sea technique.
• This involves helping customers to take advantage of the
best compromise between the factors of speed and cost:
➢Time is saved during the air leg,
➢Money is saved during the maritime leg.
• This technique is situated therefore halfway between
expensive all-air transport and slow all-maritime transport.
Forwarding
• Geopolitical Aspect

Forwarding
• Time Zones

Forwarding

Forwarding
• Time Zones
➢Airline Geography & World Time
➢Basic Air Cargo Rating –IATA Areas 1, 2, 3

✓IATA Area 1-North America, South America, Central America and Greenland
✓IATA Area 2-Europe, Middle East, Africa, Pacific Islands
✓IATA Area 3-Asia, Australia, New Zealand

FIATA Documents and Forms
• The student should know the different FIATA documents,
their benefits and how to use them.
• He/she should be aware of the responsibility a freight
forwarder takes over, when issuing bankable documents
like the FBL and FCR.

FIATA Documents
• These documents usually adopted by National Freight
Forwarders’ Association for use by its Members.

• FBL (FIATA Bill of Lading)
➢The FIATA Multimodal Transport Bill of Lading (FBL) is a
carrier's document which was developed by the FIATA
for the use of forwarding agents who are active as a
Multimodal Transport Operator (MTO).
➢The FBL can also be issued as an ocean bill of lading.
➢The FBL is negotiable.

➢The document is negotiable (transferable), provided
that it is not stamped with the print "non-negotiable".
➢It shall constitute title to the goods and the holder,
by endorsement of this FBL, shall be entitled to
receive or to transfer the goods herein mentioned.
➢It was accepted by the international chamber of
commerce (ICC) as according to the UNCTAD/ICC Rules
for Multimodal Transport Documents, which the ICC has
published in their brochure No. 481.

➢Therefore, the FBL also carries the symbol of the ICC
together with the emblem of the national forwarding
agent's federation.
➢A forwarding agent who issues an FBL as a Multimodal
Transport Operator (MTO) or sea carrier is responsible
for the realisation of the transport.

➢He takes over not only the responsibility for the delivery
of the goods at the destination, but also the realisation
of the entire transport even if it is subcontracted to
other transportation companies and third involved
parties by him.
➢With issuing the FBL the forwarding agent takes over a
basic liability.

➢The responsibility of the Freight Forwarder for the
goods under these conditions covers the period from
the time the Freight Forwarder has taken the goods in
his charge to the time of their delivery.
➢The Freight Forwarder shall be liable for loss of or
damage to the goods as well as for delay in delivery if
the occurrence which caused the loss, damage or delay
in delivery took place while the goods were in his
charge.

• Arrival times are not guaranteed by the Freight
Forwarder. However, delay in delivery occurs when the
goods have not been delivered within the time expressly
agreed upon.
• As summarized functions of the Bill of Lading include:
➢Evidence of a Contract of Carriage;
➢Evidence of Receipt of the Cargo;
➢Document of Title;
➢Negotiable Instrument;
➢Freight Agreement.
• With the issue of an FBL the forwarding agent must make sure,
that:
1)he/she has taken over the consignment as described and
that he is entitled to the sole right of disposal over the
consignment;
2) the consignment is in an externally good state;
3) the data on the document with the given order
correspond,
4) the question of the transport insurance with the sender
was cleared;
5) Expressly declared whether one or several originals were
issued.

• Therefore, the forwarding agents who issue FBL's must
ensure their liability originating from it according to the
regulations of the FBL.

• FCR (Forwarders Certificate of Receipt)
➢The FIATA FCR document enables the freight forwarder
to provide the consignor with a special document as an
official acknowledgement that he/she has assumed
responsibility of the goods.
➢The FIATA FCR can be handed to the consignor
immediately after the consignment has been received
by the freight forwarder.

➢By completing the FIATA FCR the freight forwarder
certifies that he/she is in possession of a specific
consignment with irrevocable instructions for despatch
to the consignee shown in the document or to keep it at
his disposal.
➢The FIATA FCR will primarily be used when the supplier
sells the goods EX WORKS and needs to prove that
he/she has complied with his/her obligations to the
buyer by presenting a FIATA FCR.

➢In the case of a Letter of Credit the seller will under such
conditions be able to present a FIATA FCR issued by a
forwarder in order to obtain payment of the sales price.
➢The FIATA FCR is non-negotiable.
➢As the delivery of the consignment to the consignee does
not depend on the handing over of this document, only one
original is issued.
➢ Should further copies be required, then forms specially
overprinted with the words ''Copy non-negotiable'' should
be used.
• When issuing a FIATA FCR, the freight forwarder should ensure:
a) that he/she or his/her agent (branch, intermediate freight
forwarder) has taken over the consignment specified therein and that
the right of disposal of the goods is vested solely in him/her;
b) that the goods appear to be in apparent good order and
condition;
c) that the details on the document clearly correspond with the
instructions he/she has received;
d) that the conditions of freight documents (B/L etc.) are not
contrary to the obligations he/she has assumed according to the
FIATA FCR document.

• The FIATA FCR bears the general national freight forwarding
conditions of the issuing country on the reverse side.
• The document may only be used by freight forwarders who
adhere to these general conditions in their forwarding
activities.
• It is recommended that the freight forwarder covers
his/her liability by insurance in accordance with the FIATA
FCR requirements.

• FIATA FCT (Forwarders Certificate of Transport)
➢By issuing a FIATA FCT document to the consignor, the
freight forwarder assumes the obligation to deliver the
goods at the destination through the medium of an
agent appointed by him/her.
➢The FIATA FCT can be handed over to the consignor
immediately after the consignment has been handed
over to the freight forwarder for shipment.

➢By issuing the FIATA FCT the freight forwarder
certifies that he/she has assumed responsibility for
dispatch and delivery of a specific consignment
according to instructions he/she has received from
the consignor as indicated in the document.
➢The freight forwarder is responsible for the delivery
of the consignment at the destination through a
delivery agent appointed by him/her to the holder of
the document.

➢The freight forwarder is only responsible for the
forwarding and delivery of the goods.
➢The FIATA FCT as distinguished from the FBL, is not a
document subjecting the freight forwarder to a liability
as carrier but his/her liability is governed by the
applicable freight forwarding conditions.

• When issuing the FIATA FCT document the freight
forwarder or his/her agent (branch, intermediate freight
forwarder) has taken over the consignment specified
therein and that the right of disposal of the goods is vested
solely in him/her.
• There fore he/she, should ensure that :
a) that the goods appear to be in apparent good order
and condition;

b)that the details on the document clearly correspond
with the instructions he/she has received;
c) that conditions of freight documents (B/L etc.) are not
contrary to the obligations he/she has assumed according
to the FIATA FCT document;
d) that responsibility for the insurance of the consignment
has been agreed;
e) that it is clearly specified whether one or more originals
have been issued.
• It is recommended to dispatch the FIATA FCT documents by
registered post only.
• The FIATA FCT bears the general national forwarding
conditions of the issuing country on the reverse side.
• The document may only be used by freight forwarders who
adhere to these general conditions.

• FWR (FIATA Warehouse Receipt)
➢The freight forwarder often provides warehousing
services. When doing so he/she has to issue a receipt for
the merchandise.
➢The FWR is a Warehouse Receipt for use in freight
forwarders' warehousing operations. It is a standard
document mainly used at national level.
➢The FWR is not negotiable, unless it is marked
"negotiable".

➢It must be decided individually in each country which
standard trading conditions are to be applied to the
FIATA warehouse receipt.
➢In countries where forwarders use standard trading
conditions which include also provisions regarding the
activity of warehouse keepers, such standard conditions
are to be applied.

• FWB (non-negotiable FIATA Multimodal Transport
Waybill)
• The non-negotiable FIATA Multimodal Transport Waybill is a non-
negotiable sea waybill. The FWB should not be produced for delivery
of goods.

• FIATA SDT (Shippers Declaration for the Transport of
Dangerous Goods)
➢If a Freight Forwarder deals with the transport of
dangerous goods he/she needs detailed information with
regard to the classification of the goods.
➢The classification is shown on the reverse side of the
form.

➢The Shippers Declaration of the Transport of Dangerous
goods, FIATA SDT, allows the freight forwarder to identify
the goods and to clarify the question of responsibility in
case of an accident or damage.
➢it is important that the FIATA SDT is not filled-in by the
freight forwarder.
➢In each case the FIATA SDT must be completed and
signed by the shipper and then handed over to the
freight forwarder.

FIATA SIC (Shippers Intermodal Weight Certificate)
➢The Shippers Intermodal Weight Certificate is an
acknowledgment of the weight of the goods.
➢It is very often used in the intermodal freight
forwarding in the USA. The FIATA SIC is up to the
standards of the Intermodal Safe Container Act from the
USA.

• FFI (FIATA Forwarding Instructions/Shippers’
Instructions )
➢Freight Forwarders mostly design and print their own
forwarding instruction forms which have to be filled in
by their clients. However, the instruction forms of the
various freight forwarders are non-uniform.
➢FIATA therefore thought that it would be advisable for
Freight Forwarders to agree on a common layout and
drafted the FIATA Model for Uniform Forwarding
Instructions.

➢The form is aligned to the UN layout key for trade
documents, which aims at providing an international basis
for the standardisation of documents used in international
trade.
➢The form is designed to be used in the aligned series and to
combine functions in sets of forms, of which integral parts
serve various purposes in the procedures for cargo handling.
➢The member organisations of FIATA may adapt this
instruction form to their national requirements; however, it
is fundamental that such changes are made within the
margin of the UN layout key.

• It establishes the forwarder-customer relationship for
arranging transport from point ‘A’ to point ‘B’
• The form to be filled by the customer on all relevant
particulars regarding the goods to be dispatched and to
enclosed all documents as may be required
• Therefore, FIATA recommends its national member
organisations to adopt and to introduce this instruction
form.

• Documents received from Customer:-

➢FFI(FIATA Forwarding Instructions);
➢FIATA SDT(Shippers Declaration for the Transport of
DGs).

• Documents issued to Customer:-
➢FIATA FCR(Forwarders Certificate of Receipt)
➢FIATA FCT(Forwarders Certificate of Transport)
➢FBL(Negotiable FIATA Multimodal Transport Bill of Lading)
➢FWR(FIATA Warehouse Receipt)
➢FWB(Non-negotiable FIATA Multimodal Transport Waybill)
➢FIATA SIC(Shippers Intermodal Weight Certification)
➢House Bill of Lading / House Air Waybill

Special Transport Services

Learning Objective :
• The student should understand the specifics of the
consolidated deliveries, transport of heavy cargo,
dangerous goods and foodstuffs.

• Consolidated delivery
➢Delivery of cargos from different customers of one
region with a short-time intermediate storage for
consolidation and transportation in same direction
within one uniform consolidated transport.
➢This is more economical both for customer and for
freight forwarder. Very often the forwarder can charge a
minimum freight for each consignment on the one hand.
On the other hand he books a full truck or wagon load
for a lower freight.
• Transport of heavy weight and out of gauge cargo
➢Heavy Lifts and out of gauge cargos are cargos of which
the weight or dimensions exceed the usual capacities of
transport equipment and infrastructure.
➢They need a special planning, preparation, permission
and special equipment and experience.



• Dangerous goods/Classified goods
➢Dangerous goods are substances which pose risk to
health, safety, property or the environment during
operation and/or transportation.
➢They are divided into classes on the basis of the specific
chemical characteristics producing the risk.
➢Very often it is not allowed to co-load these dangerous
goods with other goods.


• Perishables
➢Perishables are goods which depend on specific
environmental conditions (temperature, humidity).
➢They need special transport equipment (e.g.
temperature controlled container etc.) and therefore
special attention.


• Foodstuffs (liquid and solid)
➢foodstuffs are substances that can be consumed by
humans.
➢By transportation of foodstuffs you need to observe
hygienic standards and foodstuff law.

• Flowers and Plants
➢Are very sensitive goods and need time and
temperature controlled transport (e.g. by plane).
• Livestock
➢It Is a very sensitive cargo and needs special transport
equipment and skilled personnel.




• Therefore, these goods should be transported

by a freight forwarder who is specialised and
experienced in these specific goods !

Packing Requirements
• The student should know the function of packages, and

different markings.

• Packing
➢When shipping, it is vital that the merchandise is
properly packed so it arrives in good condition.
➢The package must be protected against breakage,
moisture, theft, and kept to a minimum in weight and
dimensions.
➢All packages should be properly secured and filled with
moisture-resistant material.
➢The packages help communication with shippers and
receivers.

• Packing Methods
➢As movers, professional
packers need to “think inside
the box” so that all items are
carefully packed and placed in
such a way that would cover
every aspect of safety for the
items being moved.

➢Packing is not only a skill, it also involves the vision of
how goods must be packed while taking into account all
procedures involved so that your goods will remain in
tact up until final delivery
➢It is the responsibility of a well trained packer to help
the destination crew unpack your goods safely, and
➢this is only achieved by adopting skilled techniques that
packers acquire from their training and years of
experience.

• Packing Specialists
➢There are different packing specialists all over the world.
➢The quality services depends on their experience and
economical background.
➢some of the international packing specialists:
✓MPS (Multiple Packaging Solutions) Packing Specialists
oProvide a packing services to ensure that the products
are evaluated, inspected, packed, marked and
documented correctly.
oMostly they give services for the Dangerous goods.
✓REBUL Packing Specialists
oGive additional packing services including measure and
inspection of items.

➢Locally there are also Several Packing Companies such
as:
✓Trade Path International Logistics:
oFound in 2003, have between 32 and 1245
employees.
oThe Company uses trucks to collect flowers from
farms and then put them in a cold truck. Have 70
Ethiopian flower exporters.

✓Packtra Ethiopia PLC:
oEstablished in 1991 Pioneer logistics company in
Ethiopia specializing in professional packing and moving.
oPacking and moving Ethiopian warehousing and heavy
lifting, Ethiopia Air Freight, Sea Freight, land
transportation, clearing and transit.
oPacktra owns 40 truck of 18 wheelers and special trucks
up to 90 ton trailer capacity and extendable trailer up to
27 metre for extra long cargo.
oIt has a wide range of customers including Embassies,
NGOs, UN Agencies, Aid Organizations and Government
Ministries.

• Marking and Labeling
➢Correct marking of packages helps to prevent
✓incorrect handling and delivery,
✓accidents,
✓losses of weight and volume and
✓Customs fines.
➢Marking must be clear. Its colour should stand out
clearly from that of the package. Where possible, black
symbols on a white background should be used.
➢Both when marking is applied directly onto the package
and when adhesive labels are used, care must be taken
to ensure that marking is applied in a legible and
durable manner.
➢All packages should have markings on three sides.

• An example of the marking of a package.


• Three types of information and marks
➢Shipping marks
➢Information mark
➢Handling marks


• All information and marks can be put into three groups:
➢Shipping marks
✓Identification mark (e.g. shipper’s or receiver's
company name)
✓Identification number (e.g. receiver's order number)
✓Total number of items in the complete consignment
✓Number of packages in the consignment
✓Place and port of destination

➢Information mark
✓Country of origin
✓Indication of weight of package
✓Dimensions of packages
➢Handling marks (ISO R/780)
✓This side up
✓Centre of gravity
✓Use no hooks

✓Handle with care (food)

✓Fragile, Handle with care
✓Keep dry
✓Keep away from heat (solar radiation)
✓Photographic Materials
✓Temperature limitations
✓Flammable
✓Acid
✓Sling here
✓Stacking limitation
✓Clamp here

Customs Procedures
Objective of the training
The trainee is able to know the basic customs procedures and

technicalities that allow the trainee to exercise his/her right and
obligation.

Customs Procedures
DEFINITION
A Customs Procedure means a particular course of action

accepted or prescribed by law or regulation, which follows a definite
order of steps (transit, warehouse, and clearance) with a view to
obtaining the required authorization to import or export goods.

Customs Procedures
➢Different customs regimes:
▪ Clearance for home use,
▪ Temporary importation,
▪ Re-importation,
▪ Outright Export,
▪ Temporary exportation,
▪ re-exportation,
▪ Inward processing,
▪ Out ward processing,

Customs Procedures
➢International Customs conventions on particular aspects of

Customs work:-
✓ The Revised Kyoto Convention (RKC) on the Simplification and

Harmonization of Customs Procedures,
✓ The HS Convention, adopted in 1988;
✓ The Istanbul Convention; the WCO Convention on Temporary Admission;
✓ The Johannesburg Convention; Mutual Assistance in Customs.

Customs Procedures
➢Important concepts incorporated in RKC:

• transparency and predictability of Customs actions;
• standardization and simplification of the goods
declaration and supporting documents;
• simplified procedures for authorized persons;
• maximum use of information technology;
Customs Procedures
• minimum necessary Customs control to ensure

compliance with regulations;
• use of risk management and audit based controls;
• coordinated interventions with other border agencies;
and
• partnership with the trade.
Customs Procedures
• The basic customs procedures are the following:

• Customs Transit procedures;
• Customs Warehouse procedures;
• Customs Clearance procedures.

Customs Procedures
Customs Transit Procedure
Definition
Customs Transit means Customs procedures under which goods

are transported under Customs control from one Customs office to
another.

Customs Procedures
Types of Transit:
➢International Customs transit:
• Through transit :From an office of entry to an office of exit
• Inward transit : From an office of entry to an inland Customs office
• Outward transit : From an inland Customs office to an office of exit
➢ National Transit :
• Interior transit : From one inland Customs office to another inland
Customs office .

Customs Procedures
• Customs transit procedures:

• Uni-Modal transit procedure
➢Uni-modal Transport: means the carriage of goods
by a single mode of transport from the place of
loading till the place of unloading.

Customs Procedures
• Multi-Modal transit procedure
➢“ ‘International multimodal transport /MTS/’ means the
carriage of goods by at least two different modes of transport
on the basis of a multimodal transport contract.
➢‘Multimodal transport operator’ means any person who on his
own behalf or through another person acting on his behalf
concludes a multimodal transport contract and who acts as a
principal, who assumes responsibility for the performance of the
contract.

Customs Procedures
The main features of a multimodal transport

➢the carriage of goods by two or more modes of transport,
✓under one contract,
✓one document and
✓ one responsible party (MTO) for the entire carriage,
➢MTO might subcontract the performance of some, or all

modes, of the carriage to other carriers.

Customs Procedures
Advantages of multimodal transport ‘MT’
• Minimizes time loss at trans-shipment points
• Provides faster transit of goods
• Reduces burden of documentation and formalities
• Establishes only one agency to deal with
• Reduces cost of imports and exports

Customs Procedures
➢To terminate a customs transit operation, the goods and the

relevant goods declaration shall be presented to the customs
station of destination:-
✓ within the time limit fixed;
✓ without the goods having undergone any change and without
having been used, and
✓ with customs seals, fastenings or identification marks intact.

Customs Procedures
Customs Warehouse Procedure

Types of Customs Warehouses
▪ Temporary Storage,
▪ Customs (Bonded) Warehouse,
▪ Government Warehouse,

Customs Procedures
Temporary Storage
Temporary Storage is a place where storing of goods
under Customs control in premises and enclosed or
unenclosed spaces specified by the Customs (temporary
stores) pending lodgment of the Goods declaration.

Customs Procedures
Purpose and features of temporary storage

• To provide service for the storage of goods until customs
formalities have been complied.
• Where goods are offloaded from a ship but have not yet been
cleared to move off the wharf(dock), they will be held under
Customs control in temporary storage.

Customs Procedures
• Goods can be worked on while in temporary storage to ensure

their preservation and preparation for further transport ;
• All temporary storage facilities must be approved by Customs,
who reserve the right to request security in an acceptable form.

Customs Procedures

Customs Procedures

Customs Procedures
Customs (Bonded )Warehouse
Customs Warehousing Procedure is a procedure under
which imported goods are stored under Customs
control in a designed place (a Customs warehouse)
without payment of import duties and taxes.

Customs Procedures
Purpose and features of customs (bonded)
warehouse
➢It is a trade facilitation concept.
➢Goods may be entered for warehousing and held
there until they are required for home consumption,
at which time an entry for home consumption is
made and duty paid.
➢Warehousing occurs after the goods declaration has
been lodged and the goods approved for warehousing.

Customs Procedures
Types of Customs (Bonded) Warehouse

➢Public Customs Warehouse:
➢Private Customs Warehouse:

Customs Procedures
Advantage of Customs Warehouse
➢To delay payment of import duty and taxes.
➢To get Customs service at own premises.
➢To minimize the damage arise from market demand fluctuation.
➢ To enjoy discount from bulk purchase.
➢To store temporarily imported goods such as goods temporarily
imported for demonstration or exhibition.

Customs Procedures
Time Limit of Storage in Customs Warehouse (Art.51)
➢ Goods imported and stored in a temporary customs storage shall
undergo customs procedures and be removed:-
✓For goods transported by sea or land transport within 60 days
from the date of storage.
✓For goods transported by air transport within 30 days from the
date of storage.

Customs Procedures
➢Goods stored in custom bonded warehouse shall undergo
customs procedures and be removed :-
✓ For any commercial good other than goods in a duty free

shop stored, within four(4) months from the date of storage
✓For any machinery, equipment and input to be used for
producing goods for domestic consumption, within one year
from the date of storage.

Customs Procedures
➢ Goods owned by a person who is permitted to use bonded warehouse

but mistakenly stored in temporary customs storage shall, within 15
days, be transferred to the bonded warehouse.
➢ Goods stored in temporary customs storage or bonded warehouse may
not be kept for more than 7 working days after the completion of
customs formalities.

Customs Procedures
Warehouse Fee (Art.59)
➢Warehouse fees for goods stored in a temporary customs storage
or bonded customs warehouse, established for rental use, shall be
calculated:-
✓ from the date of deposit until released upon completion of
customs procedures; or
✓from the date of deposit until transfer to another customs
warehouse;
Customs Procedures
Transfer of Ownership of Goods in Customs Warehouse (Art.60)
➢Transfer of ownership of the goods stored in customs warehouse

may permitted.
➢ The person to whom ownership of goods stored in customs
warehouse is transferred shall have the obligation to observe the
obligations and restrictions imposed on the previous owner

Customs Procedures
• Customs Clearance procedure
Clearance means the accomplishment of the customs
formalities necessary to allow goods to enter home
use, to be exported or to be placed under another
customs procedure;

Customs Procedures
Basic Functions of Clearance Procedure
i. Lodgment of Customs Declaration
ii. Application of Risk Management

iii. Checking of Declaration
iv. Examination of Goods
v. Release of goods

Customs Procedures
i. Lodgment of Customs Declaration
Customs Declaration means a statement made in the
manner prescribed by the customs, by which the persons
concerned indicate the customs procedure to be applied to
the goods and furnish the particulars which the customs
require for its application;

Customs Procedures
• The importer and/or exporter/agent are required to

complete the customs declaration. It is the
responsibility of the importer and/or exporter/agent to
ensure that the declaration is fully and accurately
completed and all supporting documents are produced.

Customs Procedures
Declaration type
Export
• EX 1 Exportation
• EX 2 Temporary Export
• EX 3 Re-export
• EX 8 Transit to export
IMPORT
• IM 4 Entry for home use
• IM 5 Temporary Importation
• IM 6 Re-importation
• IM 7 Entry for warehousing
• IM 8 Import Transit

Customs Procedures
• Supporting documents attached with customs
Declarations:
➢Transport documents( B\L, Airway bill,…etc)
➢Invoice,
➢Packing list,
➢Certificate of origin and
➢Bank Permits and
➢Other necessary documents

Customs Procedures
ii. Application of Risk Management
• What is Customs ‘RISK’?
Risk is the possibility or likelihood of the evasion of

taxes, or of the evasion of the prohibition on
importation or exportation, taking place.

Customs Procedures
• Customs Import Risk types

➢Green; (automatic release)
➢Yellow and; (documentary check)
➢Red. (documentary check and goods examination)

Customs Procedures
iii. Checking of Declaration
• The presence of necessary documents,
• Checking the correctness of data filed in the declaration
against the supporting document
• Classification & valuation
• The calculation of duties & taxes
Customs Procedures
• Bases for Customs duty & Tax Assessment
➢ Duty & Tax Rate;
➢Duty Paying Value (DPV);
➢Origin of Goods; and
➢Customs Procedure Code (CPC)

Customs Procedures
iv. Examination of Goods
Examination of Goods means the Physical inspection of
goods by the Customs to satisfy themselves that the nature,
origin, condition, quality and value of the goods are in
accordance with the particulars furnished in the Customs
declaration.

Customs Procedures
v. Release of goods
Release of goods means the action by the customs to permit

goods undergoing clearance to be placed at the disposal of
the persons concerned;

Customs Procedures
Activities performed to release of goods from Customs
control:
• registration & assessment of the Goods declaration
• verification of declaration and supporting documents
• examination of the goods, if required
• enforcement of other statutory provisions relating to the
control of the imported

Customs Procedures
• identifying prohibited goods or ensuring that restricted
goods have the appropriate permits or other
government agencies requirements are met (e.g.
veterinary, health, phytosanitary, etc.)
• assessment and collection of import duties and taxes
• release of the consignment
• ensuring the import data on the declaration is recorded
(usually electronically) for trade statistical purposes and
transfer of that data to the Government’s statistics
department.

Customs Procedures
Customs clearance procedures

• three different procedures that may allow to facilitate the trader
according to their policy priority and level of compliance.
➢ Simplified Clearance Procedure;
➢ Pre-arrival Clearance Procedure; and
➢ Normal Clearance Procedure

Customs Procedures
• Customs Techniques
• Harmonized Commodity Description and Coding
System (the ‘HS’)
• Customs Valuation
• Rules of Origin

Harmonized Commodity Description and Coding System (the
‘HS’)

Harmonized Commodity Description and Coding
System (the ‘HS’)

Harmonized Commodity Description and
Coding System (the ‘HS’)
21 Sections of commodity sectors
96 Chapters (97 → Chapter 77)
1,121 Headings (4-digit codes)
5,250 Subheadings (6-digit codes)

5.482 Customs Tariff(8-digit Codes)National Split

Harmonized Commodity Description and
Coding System (the ‘HS’)
• Classification is done on the basis of certain qualities of
the commodity.
➢Description;
➢Composition and other technical specification;
➢Manner of presentation (e.g. packing for retail sale
➢Degree of Manufacture
➢Function or use

Customs Valuation
• Customs valuation is used to determine the value of goods when

they are being entered into the various customs procedures, Like
Import, export, warehousing and processing under customs control.
• Custom valuation is distinguished from commercial valuation in that

it brings the third party the customs (custom officers), who is
concerned with the transaction between the buyers and sellers.

Customs Valuation
• METODS OF CUSTOMS VALUATION
1.Transactional Value method (Art. 90)

2.Transactional Value identical goods method (Art. 91)
3.Transactional Value similar goods method (Art. 92)
4. Deductive method (Art. 93)
5. Computed value method (Art. 94)
6. fallback method (Art. 95)

Rule Rules
Rules of Origin of Origin s of Origin
• “Country of origin of goods” Means the country in
which the goods have been produced or
manufactured, according to the criteria laid down for
the purposes of application of the customs tariff, of
quantitative restrictions or of any other measure
related to trade;
Rules of Origin
• Types of Origin:
➢Non-preferential
➢Non-preferential

Rules of Origin
Criteria To Determine Origin Of Good
• The originating criteria is determined by the good is:
➢Wholly obtained, or
➢substantial transformation or sufficiently worked or
processed

Rules of Origin
• substantial transformation or sufficient working or
processing is defined by:
➢change of tariff classification;
➢the ad valorem percentage criterion; and
➢the criterion of manufacturing or processing
operation

Information and Communication Technologies
(ICT)
• The student will be aware of the importance of IT systems

in Freight Forwarding.

(ICT)
• IT
➢Information technology (IT) has become a vital and
integral part of every business plan.
➢From multi-national corporations who maintain
mainframe systems and databases to small businesses
that own a single computer, IT plays a role.

(ICT)
• Communication
➢For many companies, email is the principal means of
communication between employees, suppliers and customers.
➢Email was one of the early drivers of the Internet, providing a
simple and inexpensive means to communicate.

(ICT)
➢Over the years, a number of other communications tools have
also evolved, allowing staff to communicate using live chat
systems, online meeting tools and video-conferencing systems.
➢Voice over internet protocol (VOIP) telephones and smart-
phones offer even more high-tech ways for employees to
communicate.

(ICT)
• Inventory Management
➢When it comes to managing inventory, organizations
need to maintain enough stock to meet demand without
investing in more than they require.
➢Inventory management systems track the quantity of
each item a company maintains, triggering an order of
additional stock when the quantities fall below a pre-
determined amount.

(ICT)
➢These systems are best used when the inventory
management system is connected to the point-of-sale
(POS) system.
➢The POS system ensures that each time an item is sold,
one of that item is removed from the inventory count,
creating a closed information loop between all
departments.

(ICT)
• Data Management
➢The days of large file rooms, rows of filing cabinets and
the mailing of documents is fading fast.
➢Today, most companies store digital versions of
documents on servers and storage devices.
➢These documents become instantly available to
everyone in the company, regardless of their
geographical location.

(ICT)
➢Companies are able to store and maintain a
tremendous amount of historical data economically,
and employees benefit from immediate access to the
documents they need.

(ICT)
• Management of Information Systems
➢Storing data is only a benefit if that data can be used
effectively.
➢Progressive companies use that data as part of their
strategic planning process as well as the tactical
execution of that strategy.

(ICT)
➢Management Information Systems (MIS) enable companies
to track:
✓sales data,
✓expenses and
✓productivity levels.

(ICT)
➢The information can be also used to track:
✓profitability over time,
✓maximize return on investment and
✓identify areas of improvement.

(ICT)
➢Managers can track sales on a daily basis, allowing them
to immediately react to lower-than-expected numbers
by boosting employee productivity or reducing the cost
of an item.

(ICT)
• Customer Relationship Management
➢Companies are using IT to improve the way they design
and manage customer relationships.
➢Customer Relationship Management (CRM) systems
capture every interaction a company has with a
customer, so that a more enriching experience is
possible.

(ICT)
➢If a customer calls a call center with an issue, the
customer support representative will be able to see
what the customer has purchased, view shipping
information, call up the training manual for that item
and effectively respond to the issue.

(ICT)
➢The entire interaction is stored in the CRM system,
ready to be recalled if the customer calls again.
➢The customer has a better, more focused experience
and the company benefits from improved productivity.

(ICT)
• Mainframe and Personal Networks
➢A network is the hardware and software that enables
computers to share files and resources and exchange
data.
➢Networks play a significant role in much of the world's
transaction processing.
➢A large corporation conducts daily operations over one
or more networks that connect the business--locally or
remotely--to partners, suppliers, and customers around
the world.

(ICT)
➢In the broadest sense of the word, a network is an
interconnected system of people or things.
➢Depending on the size of a business, a network can be
as simple as two personal computers on a locally
connected network or as complex as the Internet, a
worldwide network of millions of computers of various
types.

(ICT)
• Hardware and Soft ware
• Hardware
➢Hardware refers to the physical elements of a computer.
➢This is also sometime called the machinery or the
equipment of the computer.
➢Examples of hardware in a computer are the keyboard,
the monitor, the mouse and the central processing unit.

(ICT)
➢However, most of a computer's hardware cannot be
seen; in other words, it is not an external element of the
computer, but rather an internal one, surrounded by the
computer's casing (tower).
➢A computer's hardware is comprised of many different
parts, but perhaps the most important of these is the
motherboard. The motherboard is made up of even
more parts that power and control the computer.

(ICT)
• Software,
➢Software commonly known as programs or apps,
consists of all the instructions that tell the hardware
how to perform a task.
➢These instructions come from a software developer in
the form that will be accepted by the platform
(operating system + CPU) that they are based on.

(ICT)
• Practical computer systems divide software systems into
two major classes:
➢System software:
✓Helps run the computer hardware and computer
system itself.
✓System software includes operating systems, device
drivers, diagnostic tools and more.
✓System software is almost always pre-installed on
your computer.

(ICT)
➢Application software:
✓Allows users to accomplish one or more tasks.
✓It includes word processing, web browsing and
almost any other task for which you might install
software.
✓Some application software is pre-installed on most
computer systems.

(ICT)
• Applications in the transport Industry
• The freight transportation industry uses IT in several ways:
➢Backroom management and integration.
✓ to manage internal processes and to link them by sharing information internally and with
suppliers and customers
➢Mobile communications and tracking.
✓ To keep track of the locations of trailers, trucks, rail cars, and other mobile assets and
their contents,
➢Internet applications.
✓ The Internet plays a growing role for all freight companies.

THE END
THANK YOU VERY MUCH!
sisayasres2006@gmail.com
FLK Trading PLC
Customs, Tax, Finance and Management Consultancy and Training

A EFFSAA International FRDG 2018

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An Introduction to International

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▪ To assist these firms, the freight forwarder is the first in a

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➢integrated heavyweight forwarders. (transport

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3) Nippon Express, Grossing $16,976bn last year, describes itself as a ‘logistics

5) C.H. Robinson, Founded in North Dakota in 1905

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7) XPO Logistics, US company

8) Sinotrans, state-owned by the Chinese government

9) GEODIS, State-owned French logistics provider

10) UPS, United Parcel Service supply chain solutions

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➢freight forwarder and

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• The freight forwarder is usually instructed to find

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➢In accordance with exporter shipping instructions the forwarder would:

✓Book space with carrier

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✓Weigh and measure cargo

✓Monitor cargo movement

✓Study L/C provisions

✓Transport the goods

✓Pay fees and other charges

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➢Monitor cargo movement;

➢Arrange customs clearance;

➢Assist in pursuing claims;

➢Warehousing and distribution.

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➢ direct exporting is the transfer of the property in the

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• Brokers, namely persons who conduct negotiations on