TECH TERRAIN COLLEGE

DIPLOMA IN LOGISTIC
MANAGEMENT

ASSIGNMENT (GLOBAL TRANSPORTATION)

PREPARED BY:
NURUL IMAN MARDHIAH BINTI GHAFAR LA8-014-22
FELLYCIA BINTI LORENS LA8-018-22
HAZELDE ASRINA JUMAHIT LA8-017-22
MISYELBIE DAPHNIE PONSIUN LA8-011-22

PREPARED FOR:
MS ANIS SHAFIQAH BINTI MOHD SAIDUN

DATE OF SUBMISSION
23 AUGUST 2022
BIODATA GROUP :
 TABLE OF CONTENT

NO CONTENT PAGE
1 History of Incoterm 1-2
2 Shipping Process 3-9
3 Propose the Necessary Documentation 10-11
4 Key Features to Choosing Freight Forwarder 12
5 Summary 13
6 References 14
 1. History of Incoterms

The FOB Incoterm was the first Incoterm to be created. And even though its
origin traces back over more than two centuries, Incoterms as they are now
weren’t actually created until 1936 by the International Chamber of Commerce
(ICC). Since then, the international transportation community has gone through
many changes. To adapt, there have been new and improved editions of the
Incoterms like the ones introduced in 1953, 1967, and 1976. But over the past
five decades, revisions have been implemented at the turn of every decade
and tend to stay in effect for the entire decade, such as Incoterms 1980, 1990,
2000, and 2010.

The importance of Incoterms and how they facilitate world trade cannot be
denied. When Incoterms were first introduced, they applied only to 13
countries. Eight revisions later, they are now widely used in over 140 countries
and can be found in 31 different languages.
A reflection of the evolution of international trade is the world of international
trade has seen many changes over the past 80 years - some monumental,
others relatively small-scale. These changes include new methods of transport,
modifications in the types of international sales contracts, amendments
to customs clearance of goods, new ways of transmitting information, to name
a few. And as such behaviour changes, so must the terms that govern
them. The ICC’s objectives of revising Incoterms are to guarantee that the set
of transport terms keeps up with the pace of progress and adapts to the
evolving needs of international trade.

We may think of the incoterms as a pretty accurate reflection of how the world
economy and trade have developed and advanced. The 1980 edition of the
incoterms introduced changes motivated by the increasing volume of container
traffic, while the 1990 edition was evidence to the growth of intermodal
transport. In 2010, Incoterms were revised to solve security problems and
improve issues related to the digital exchange of information.
The main changes over the course of the history of Incoterms are highlighted
in this infographic.

1812: The FOB Incoterm was first used in the British Courts in 1812. This was
later known as the forefather of the famous transport clauses - Incoterms.

1895: 83 years later, thanks to the expansion of world trade, a second Incoterm
was born.

1936: The birth of Incoterms as we know them today. In 1936, the ICC published
the first edition with six Incoterms and rules on how to interpret them. For the first
time in history, there was a global effort to standardize international trade practices.

1953: The first Incoterms revision came after WWII. Rail transportation was on the
rise and three new Incoterms were introduced for non-maritime transport: Free on
Rail, Free on Truck, and Delivered Costs Paid. EXW Incoterm was also added.

1976: The FOB Airport Incoterm (Free on Board Airport) was introduced for air
freight to avoid confusion with the FOB Incoterm.

1980: Due to the proliferation of freight traffic in containers, two new Incoterms
were added: FRC and FCI, which are known today as FCA and CIP respectively.
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1990: A complete revamp of Incoterms to adapt to inter-modal transportation.
Changes were made to accommodate the increasing use of Electronic Data
Interchange (EDI).

2000: In 2000, Incoterm formats were simplified for clarity and to better distribute
responsibilities for customs clearance.

2010: Four Incoterms (DAF, DES, DEQ, DDU) were eliminated and two new ones
(DAT and DAP) introduced, bringing the number of Incoterms to 11. Modifications
were also made so that buyer and seller were obliged to cooperate in the exchange
of information as a security measure.

2020: Definitive changes yet to be announced. But we can expect to see the
introduction of a new Incoterm, Cost and Insurance (CNI), and the removal of EXW
and FAS. Also expect a more simplified version to aid comprehension and
application of each Incoterm.

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 2. Shipping Process
STEP 1 : Importer Request Quotes and Orders Goods

The first step in the shipping process is when an importer (also known as
the consignee) orders goods from a supplier (also known as the consignor).

In a usual import, buyers will generally ask suppliers for a quote when looking at
goods to purchase. The quote can often be accompanied by, or be in the form of,
a proforma invoice . A proforma invoice is effectively an invoice that is used to
provide an estimate and can be subject to change. This differs from a commercial
invoice which is a final and official invoice used for customs clearance
declarations.

Picture 2.1 : Pro Forma Invoice Sample

Once the quote has been approved, the consignee will often create a purchase
order. A purchase order is simply a contract outlining the details of the order and
the cost of the goods. Depending on the business, a comprehensive purchase
order will also contain a projected shipping date, origin and destination addresses
as well as the freight dimensions.

1.1 Agreeing on shipping incoterms

When a buyer issues a purchase order to a supplier, the contract should be
governed by one of the many incoterms. Prior to reading on, you should
familiarise yourself with incoterms.

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Incoterms are essentially the terms that allocate the costs and the risks between
the buyer and seller when shipping. Essentially, they determine who is responsible
for what whilst the goods are moving from Point A to Point B.

It is critical to select the set of Incoterms that are most appropriate for the
transaction. Failure to allocate the correct incoterm could cost a buyer much more
money than originally anticipated.

The incoterms will also determine which party needs to engage a freight forwarder
for the individual stages of the shipping process. For the purpose of this process
overview, we assume our importer has purchased the goods on EXW terms and
will be responsible for all stages of the shipping journey.

1.2 Engaging a freight forwarder

Once the purchase has been agreed and the incoterms selected (in this case
EXW), the importer can then arrange for a freight forwarder to manage the
transportation of the goods from Point A to Point B.

1.3 Obtaining a Letter of Credit

When an order is made, a common way to pay the supplier is to obtain a letter of
credit. Many buyers use this because it’s one of the most secure payment methods
in international shipping. It’s essentially a binding legal agreement issued by a
financial institution (such as a bank) guaranteeing payment for the goods.

A buyer will typically apply for a letter of credit with a bank, outlining everything in
their order. When the bank finalises the letter, they will submit it to the supplier’s
bank, who will then check it off to ensure the supplier agrees with the terms and
conditions before the manufacturing of the goods commences.

1.4 Issuing of Commercial Invoice

Following this, the supplier will provide the importer with an order confirmation and
a commercial invoice. This invoice is a key document, detailing the price and
quantity of the sold goods. It will also contain the incoterm used.

It is vital for an importer to keep the commercial invoice in a safe place, as it

provides evidence of proof of sale and is required for customs clearance purposes.

STEP 2: Freight Forwarder arranges export

If you are working with an independent forwarder, the agent you have been dealing
with will then contact their overseas partner to arrange the collection of the goods.

The overseas representative will in turn contact the relevant supplier and arrange
for the export of the buyer’s goods. This will involve the preparation of several key
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documents used in the international shipping process which are required for
customs purposes.

2.1 Documents that need to be prepared by the supplier

• A Packing List: a supplier will prepare a packing list which will be used by
a freight forwarder to highlight all the information regarding the freight being
transported. It will include information such as the contact details of the
exporter and the buyer and how the goods are packed.
• A Certificate of Origin: a supplier will also prepare this certificate if they
are exporting to a free-trade country. This will be used to certify the location
in which the goods were produced so that the buyer may benefit from local
free trade agreements and avoid duty payments

Picture 2.1 : Certificate of Origin Sample

• A Shipper’s Letter of Instruction (SLI) : a supplier may be required to

prepare an SLI, to provide the local shipping agent with a written record of
the shipping information.
• An Australian Packing Declartion (if shipping to Australia): this is only
required for freight shipped by sea and will be prepared by a supplier and
sent to the buyer. It will be used by customs to identify the packing material
of the goods. Packing declarations can either be one-off (for one shipment)
or annual, lasting for 12 months. If a buyer imports regularly to Australia
from the same supplier, obtaining an Annual Packing Declaration will mean
less paperwork throughout the year.
• A Manufacturer’s Declaration: This is typically a declaration created by
a manufacturer for customs purposes. It declares information such as
whether or not the goods are toxic or hazardous and also declares what
materials the goods contain; and
• Dangerous Goods Forms: If a supplier is shipping dangerous goods as
classified by the International Air Transport Association (IATA) or the
International Maritime Organisation (IMO), they will be required to fill out
and include relevant dangerous goods forms.

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2.2 Documents that need to be prepared by the buyer
Each country has different requirements for export customs clearance. However,
in order to prepare a shipment for export from Australia, generally, the following
documents are required:

• An Export Declaration: When exporting from Australia, a supplier will

typically be required to make an export declaration if the goods exported
are over AUD$2,000 in value or if an export permit is required. Some goods
are exempt from this requirement such as pets, mail, domestic cargo,
military goods and personal effects; and
• A permit to export/import prohibited goods: If a supplier or a buyer is
importing or exporting prohibited goods, they may require a special type of
licence depending on what goods they decide to import or export.

The buyer in Australia may also be required to obtain certain declarations and
permits, such as:

• An Import Declaration: Importers may be required to fill out an import

declaration. There are few types of declarations that can be requested
depending on the circumstances, including:
• An N10 Declaration: This will need to be completed if the goods have a
value of over $AUD1,000. Importers will also need to pay the relevant
taxes, charges and duties;
• A Self-Assessed Clearance (SAC) Declaration: If a buyer’s goods arrive
by sea or air and have a value of equal to or less than AUD $1,000, they’ll
be required to fill out a SAC declaration. There are several types of SAC
declarations, and which one a buyer needs to fill out depends on the
circumstances (such if the goods they are importing require an import
permit);
• An N20 Warehouse Declaration: If a buyer intends to place their
imported goods in a warehouse before clearing them from customs (and
their value exceeds AUD$1,000), they’ll require a Warehouse Declaration.
• An Import Permit/ Permission: Importers may also be required to obtain
an import permit depending on the type of goods they are importing into
Australia. A Biosecurity Import Conditions (BICON) permit may be required
if the goods present a threat of diseases or pests. Permission is also
required from the Australian Border Force to import goods such as
prohibited weapons.

STEP 3: Booking of Freight

Once the required documentation is in order, the supplier must make a booking for
the export shipment.

It is critical for freight to be booked early to avoid disappointment, especially if the

goods are going to be transported in peak shipping season.

Once the goods are packed and ready, they will be transported to a depot or port
for export. Depending on the shipping incoterms, this will either be arranged by the
supplier or by the consignee through their freight forwarder. Export clearance can
then commence.

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STEP 4. Goods to travel to international depot/pot

4.1 The Bill of Lading

When a carrier arrives to pick up the goods, a bill of lading is issued. A bill of lading
confirms that the goods were received by the carrier in an acceptable condition.

This is an extremely valuable document, as it acts as proof of legal title over goods.

Several bills of lading may be involved in a shipment. For instance, a supplier may
require an ‘inland’ bill of lading if goods are being moved from a warehouse to a
seaport (for the goods to travel via international transit). A separate bill of lading
may then be issued by an ocean carrier to a supplier if the next leg of the journey
is by sea.

The supplier will then need to provide the bill of lading to the consignee (i.e. the
buyer). The buyer will be required to present the bill of lading in order to secure
the release of the shipment and claim ownership over the goods. Again, this can
all be coordinated through a freight forwarding company.

Picture 4.1 Bill of Lading sample

STEP 5 : Goods Processed Through Export Customs Clearance and

Placed in Transit.

Prior to departure, the goods will be processed through export customs clearance.
This is where all documentation is reviewed and checked by government agencies.

As mentioned above, suppliers will typically be required to complete an Export

Declaration.

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If the export is cleared, those goods will then be placed in international transit
(where, as mentioned, a separate bill of lading may be issued).

There are several modes of transport a buyer can select to transport their freight
when shipping by sea, including:

• Full Container Load (FCL) : this is where the shipment of one buyer takes
up a full container;
• Lesser Container Load (LCL): where a buyer’s goods don’t take up the
whole container (instead, the goods take up less of the container) and are
stored with other buyers’ goods;
• Refeer : A reefer is essentially a large fridge used to refrigerate goods while
in transit – reefers are normally used to transport goods like fruits, meat,
vegetables, dairy and fish;
• Out of Gauge (OOG) : also known as break bulk, these are loads that are
basically too big to fit into a container (and usually come with an extra
surcharge);
• Flat Racks: As opposed to using standard shipping containers, buyers can
instead choose flat racks – these are great for goods that do not fit in normal
shipping containers (like break and OOG loads).

STEP 6: Goods arrive in buyer’s country for import clearance

Once a buyer’s goods arrive in the country of destination, the goods undergo an
import clearance.

In Australia, all imported goods must be cleared through the border by the
Australian Border Force. There are several regulations you must follow depending
on the goods you are importing whether they are motor vehicles, animals, human
remains or even intellectual property.

Imported goods may be subject to certain taxes, tariffs and/or charges.

Depending on the commodity the goods may also be subject to quarantine

inspection on arrival. For example, if you are importing plants, animals, certain
minerals or human products such as human remains, the Australian Department
of Agriculture and Water Resources will inspect and/or treat your goods for
diseases and/or pests.

STEP 7: Goods are transported from the port to the buyer

Once the goods pass through customs and are good to go, they will then be
delivered to the buyer or agreed delivery point. Once, again, the incoterms on the
shipment will determine who arranges this.

Depending on the shipment type (air or sea freight, FCL or LCL) a range of
transport options will be available. This can include delivering loose on a truck,
delivering a container with a sideloader and dropping the goods on the ground, or
delivering to a roller door for live unload.

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The receiver should discuss with the transport company or forwarder beforehand
how they would like to receive the cargo for ease of delivery.

7.1 In A Nutshell, Your Shipping Timeline

Understanding your shipping timeline and key factord the influence arrival and
departure times will help you manage your shipping effectively.

Always be mindful of things that can affect the delivery of your cargo, such as cut
off times at the wharf, quarantine, border inspections and rural tailgates when
importing into remote Australia.

If you still have questions regarding any part of the shipping process, or if you’d
like to know about the import or export of a particular product, please feel free to
get in touch with our friendly ICE team or leave a comment below.

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 3. Proposed necessary Documentation

Process documentation provides a detailed description of how to carry out a

business process.

It includes all types of documents that support a process, like

• policies
• checklists
• tutorials
• forms
• screenshots
• links to other applications
• process maps

It is used as a guide to help employees at all levels, including decision makers

and stakeholders, quickly understand company processes.

3.1 Documenting a process will help you achieve 5 key things:

3.1.1 Helps improve processes. Identify bottlenecks and inefficiencies by

documenting the exact processes. You’ll quickly see what processes that you
need to improve or get rid of.

3.1.2 Helps train employees. You can use process documents to help new
employees understand their job roles and familiarize themselves with the
processes they’ll be involved in. Even experienced employees can still refer to
these documents whenever they want to make sure that they are executing the
process right.

3.1.3 Helps preserve company knowledge. Keep a record of processes

known only to a few people specialized in doing them. That way even when they
leave, the newcomers can resume the work easily.

3.1.4 Helps mitigate risks and maintain operational consistency.

3.1.5 Detailed process documentation is also a vital part of patents and

trade secrets.

3.2 Using a step-by-step method to document a process will help you

get it done quickly.

Step 1: Identify and Name the Process

Figure out which process you are going to document first. Determine its purpose
(why and how the process will benefit the organization) and provide a brief
description of the process.

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Step 2: Define the Process Scope
Provide a brief description of what is included in the process and what is out of
the process scope, or what is not included in it.

Step 3: Explain the Process Boundaries

Where does the process begin and end? What causes it to start? And how do
you know when it’s done? Get these boundaries well defined.

Step 4: Identify the Process Outputs

Establish what will be produced by the process or what result the process will
achieve once it is completed.

Step 5: Identify the Process Inputs

List down what resources are necessary to carry out each of the process steps.

Step 6: Brainstorm the Process Steps

Gather all information on process steps from start to finish. Either start with what
triggers the process or start at the end of the process and track back the steps to
the starting point.

The brainstorming session should involve those who are directly responsible for
the process tasks or someone with extensive knowledge of it, as they can
provide precise data.

Step 7: Organize the Steps Sequentially

Take the list of steps you’ve come up with and put them in a sequential order to
create a process flow.

Keep the number of steps to a minimum and if a step includes more than one
task, list them under the main step.

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 4. Things to Look for In a Freight Forwarder

To ensure that you are getting the right solution for your business, look for a
freight forwarder with the following qualities:

4.1. Experience and a Good Reputation

Building a trusted reputation can take years. If a freight forwarder has numerous
positive reviews and a generally positive reputation, they are likely doing
something right. In addition to their reputation, be sure to consider their level of
experience. For example, if your shipment will involve import and export
customs, you will need a freight forwarder that knows how to navigate the laws
and regulations in both the country of origin and the destination. This
combination of a good reputation and applicable experience will help to ensure a
smooth and hassle-free experience.

4.2. An Established Network and Strong Connections

Industry relationships and networks are crucial for freight forwarders as they can
be the difference between success and failure. A well-established network can
result in lower rates and global reach, allowing you to get your products where
they need to be while reducing costs. Be sure to ask a freight forwarder for
references or a list of providers they work with.

4.3. A Variety of Services

If your business requires multi-modal shipments or you need to ship hazardous

materials, you need to work with a forwarder who can provide the appropriate
services. Discuss all aspects of your supply chain with possible forwarders to
ensure they provide all the services you will require. If they are only local or only
offer a few services, they might not have the flexibility, expertise, or reach that
you need.

4.4. Transparency and Open Communication

Communication is key for any industry. When choosing a freight forwarder, look
for a provider with a transparent pricing structure, effective tracking services, and
the ability to provide regular updates. This provider should also be easy to reach
in the event of a problem or emergency.

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 5. Summary

Logistics has tended to mean the management and holding and movement of
material through the supply chain. Transport logistics are similar to logistics
transportation. In many ways, logistics tends to be synonyms with transportation,
even though it was not originally defined.

In a way, the term supply chain management took over for what the term logistics
used to mean, and then the term logistics had its definition shrunk to dealing with
transport and sometimes warehousing. At many companies, the “Logistics
Department” actually transports management.

The term transport logistics, freight logistics, logistics transportation combine the
term “transport” or “freight” waith logistics, emphasizing the transportation or truck
transport side of logistics.

Truck transport because, as we will see, the services that fall under the umbrella
of these terms of primarily related to truck transport.

These terms are somewhat useful because they effectively differentiate

transportation management and various transportation services from the simple
activity of transportation or truck transport. Therefore when one finds a company
that uses any of these terms in their marketing literature or on their websites, they
clearly distinguish basic transportation and more enchanced offering.

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6. References.

1) How to Best Understand Transport Logistics or Logistics Transportation -

Brightwork Research & Analysis ( Shaun Snapp, 27 March 2021 )

2) How the Shipping Process Works, Step-By-Step (+ Flow Chart)

(icecargo.com.au) ( INCE ,2 December 2019)

3) The History Behind the Incoterms | iContainers ( Icontainer, 16

Ocktober 2018 )

4) Process Documentation Guide: Learn How to Document Processes

(creately.com) ( Creatly, 16 August 2022 )

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