BSP 380-UNIT 2

CLEARING AND FORWARDING

INTRODUCTION
Freight forwarding dates back beyond the16th centaury
First international freight forwarders were actually inn keepers in
London who held and re-forwarded the personal effects of their hotel
guests.
Seizing on a business opportunity, companies such as Thomas
Meadows and Company Limited in London sprung up to serve
merchants and manufacturers
Original function of the forwarder was to arrange for the carriage of his
customers' goods by contracting with various carriers.
His responsibilities included advice on all documentation and customs
requirements in the country of destination.
 His correspondent agent overseas looked after his customers' and kept
him informed about matters that would affect the movement of goods.
The advent of worldwide containerization , arrival of both reliable
trains and steamships created a demand for trade between Europe
and North America almost overnight -­giving birth to the booming
international shipping industry.
Forwarders started to operate their own export and import
groupage services and thus were no longer simply acting as an
agent on behalf of their customers but became Principals to the
transport contract.
In addition to organising transport, the forwarder can also carry
out customs procedures, arrange packing and insurance and even
prepare on behalf of the customer their commercial documentation
Morden Freight Forwarder offers highly sophisticated
supply chain solutions of which pallet and warehousing
logistics operations form an integral part.
These systems are commonly referred to today as either
Third Party (3PL) or Fourth Party (4PL) logistics
solutions dependent upon the percentage of the work the
provider retains in-house or sub contracts.
FREIGHT FORWARDING
Flow of shipment and goods from two destinations
carried out by a freight forwarder.
Process of undertaking export/import cargo
arrangements on clients/shippers behalf at a
seaport, airport etc.
Freight forwarders act as agents responsible for the
movement of goods on behalf of the cargo owner.
This responsibility can start from the time the goods are
picked up from the seller until they are delivered at the
buyer’s specified location.
At seaport it would include collection of freight;
collection and issuing bills of lading; notification of
arrival and loading of goods; customs, import & export
documentation; certificates of shipment; arranging sorting
of cargo, cold storage, warehousing, transport to
destination including near continent; cargo or damage
surveys
ILLUSTRATION OF FREIGHT
FORWARDING
 STAGES OF THE FREIGHT
FORWARDING PROCESS
1. EXPORT HAULAGE
Involves movement of items from a shipper’s location to the freight forwarders
warehouse.
Freight forwarders ensure the cargo receives the clearance for leaving the country of
origin. 
Different transport modes such as road, rail or air are used
2. ITEMS CHECKPOINT
After clearance, goods are unloaded from the warehouse
Cargo is then inspected and validated against their booking documents
Freight forwarders receiving the goods ensure every item is transported without any
incident
3. Export Customs Clearance
Clearance of cargo from country of origin is performed by licensed
customs house brokers.
Details about the cargo and any supporting documents are submitted to
the clearing authority.
The consignee and shipper agree in advance who will be responsible
for this step of the process.
4. Import Customs Clearance
Once the shipment arrives, authorities in the destination country are
required to check import customs documents.
Import customs clearance can be done earlier before the cargo even
arrives.
It is the responsibility of the freight forwarder or nominated customs
broker to perform this clearance by the time the cargo arrives.
5. Destination Arrival Handling
International freight forwarders are responsible for handling the goods
and documentation after it reaches the destination.
During this process, the goods are transferred from the ship to shore and
from the port to the forwarder’s destination warehouse.
It also involves unpacking of the container and preparing the cargo for
the consignee to collect.
6. Import Haulage
Cargo is transported from the warehouse to the final destination of the
intended receiver.
Import haulage can be undertaken by the freight forwarder or the
consignee can also choose to collect the cargo themselves.
 ROLE OF A FREIGHT FORWARDER
Offer expert advice to the exporter on various logistics-related expenses
(such as freight expenses, port expenses, consular fees, documentation costs,
insurance fees, cost of merchandise, custom clearance and charges) incurred
during the process of exports.
Consultancy/advisory services on international trade
Provides strategic solutions of long distance product sourcing and movement
e.g. transit cost, time, nature of goods and safety of the goods to suggest the
best possible route for the shipment to the exporter.
Provides capabilities interfaced across a range of different transport modes
i.e. booking of cargo space on ship, plane, train, or truck.
Coordinate the insurance of the goods and do the necessary follow-up in
case of an accident.
Oversee the cargo handling and distribution management, packing and
loading/unloading into the carrier.
Offers supply chain management solutions
Delivery and customs clearance
IMPORT PROCESS
Involves purchase of goods and services from a foreign country.
 An import is any good e.g. a commodity or service brought in from one
country to another country in a legitimate fashion, typically for use in trade
or consumption.
The buyer of such goods and services is referred to an importer and is based
in the country of import.
Import goods or services are provided to domestic consumers by foreign
producers.
 An import in the receiving country is an export to the sending country.
The procedure for import trade differs from country to country
depending upon the import policy, statutory requirements and
customs policies of different countries.
In almost all countries of the world import trade is controlled by
the government.
The objectives of these controls are proper use of foreign
exchange restrictions, protection of indigenous industries etc.
The imports of goods have to follow a procedure that involves a
detailed process.
STEP 1- TRADE ENQUIRY
 A trade enquiry is a written request from the intending buyer or
his agent for information regarding the price, quality, quantity
and the terms on which the exporter will be able to supply goods.
Clear details such as the goods required, their description,
catalogue number or grade, size, weight and the quantity
required should be mentioned in the enquiry.
Time and method of delivery, method of packing, terms and
conditions in regard to payment should also be indicated.
A quotation is then raised by the exporter to the importer
Details on the quotation include type of goods, quality, price
terms and conditions of the sale.
STEP 2. Procurement of Import Licence and Quota
Varies from country to country
For the purpose of issuing licence, the importers are divided into three
categories:
• Established importer
• Actual users
• Registered exporters
An intending importer should make an application in the prescribed form
to the licensing authority to obtain an import licence.
STEP 3. Obtaining Foreign Exchange
Obtain foreign exchange to be used in import payments
STEP 4. Despatching a Letter of Credit
A letter of credit, popularly known as ‘L/C or ‘L.C is an undertaking by
its issuer (usually importer’s bank) that the bills of exchange drawn by the
foreign dealer, on the importer will be honoured on presentation up to a
specified amount.
STEP 5. Obtaining Necessary Documents
After despatching a letter of credit, the exporter arranges for the shipment
of goods and sends Advice Note to the importer immediately after the
shipment of goods.
An Advice Note is a document sent to a purchaser of goods to inform him
that goods have been despatched.
It may also indicate the probable date on which the ship is expected to
reach the port of destination.
The exporter then draws a bill of exchange on the importer for
the invoice value of goods.
The shipping documents such as the bill of lading, invoice,
insurance policy, certificate of origin, consumer invoice etc., are
also attached to the bill of exchange. Such bill of exchange with
all these attached documents is called Documentary Bill.
Documentary bill of exchange is forwarded to the importer
through a foreign exchange bank which has a branch or an agent
in the importer’s country for collecting the payment of the bill. 
STEP 6. Customs Formalities and Clearing of Goods
• After receiving the documents of title of the goods, the importer’s only concern
is to take delivery of the goods, when the ship arrives at the port and to bring
them to his own place of business.
STEP 7. Making the Payment
• The mode and time of making payment is determined according to the terms
and conditions as agreed to earlier between the importer and the exporter.
STEP 8. Closing the Transactions
• The last step in the import trade procedure is closing the transaction. If the
goods are to the satisfaction of the importer, the transaction is closed. But if he
is not satisfied with the quality of goods or if there is any shortage, he will
write to the exporter and settle the matter. In case the goods have been
damaged in transit, he will claim compensation from the insurance company.
The insurance company will pay him the compensation under an advice to the
exporter.
EXPORT PROCESS
STEP 1. Having an Export Order
Processing of an export order starts with the receipt of an export order.
An export order is an agreement in the form of a document, between the exporter
and importer before the exporter actually starts producing or procuring goods for
shipment.
It takes the form of proforma invoice or purchase order or letter of credit.
STEP 2. Examination and Confirmation of Order
The export order is examined with reference to the terms and conditions of the
contract.
In fact, this is the most crucial stage as all subsequent actions and reactions
depend on the terms and conditions of the export order.
STEP 3. Manufacturing or Procuring Goods
Having received credit, the exporter starts to manufacture / procure and pack the
goods for shipment overseas.
STEP 4. Clearance from Central Excise
As soon as goods have been manufactured/ procured, the process for obtaining
clearance from central excise duty starts.
STEP 5. Pre-Shipment Inspection
STEP 6. Appointment of Clearing and Forwarding Agents
On completion of the process of obtaining the Inspection Certificate from the
custom agencies, the exporter appoints clearing and forwarding agents who
perform a number of functions on behalf of the exporter.
STEP 7. Goods to Port of Shipment
After the excise clearance and pre-shipment inspection formalities are completed,
the goods to be exported are packed, marked and labelled.
DOCUMENTS FOR CUSTOMS CLEARANCE