logistics & shipping ( basics )

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Narottam Morarajee Institute of Shipping

LOGISTICS & SHIPPING-20 August 2010

INDEX

Sr Topics Page1 Logistics Meaning & Background 22 The role of Various Logistics Service provider in

shipping Industry

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3 Intermediaries Import cycle

Carrier Terminal operator-CFS operator CHA

Local transporter

3-4

4 Intermediaries -Export cycle

Freight broker-Freight Forwarder -CHA-CFS

operator Terminal operator shipping agents-

carrier Charterer NVOCC /MTO

4-5

5Ocean Freight & Surcharge

6-7

6 Export procedure & Documentation 7-8

7 Import procedure & Documentation 8-9

8 Role of Customs & Indian Customs Act 1962 10

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Transportation & warehousing

Effective component in Logistics Management

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1

Logistics Meaning & Background

Importance of logistics

Indias logistics sector is in the tremendous growth path. Logistics

activities are expanding due to,

Globalization

Expansion of manufacturing base in India

Geographical location -Logistics hub

Fast growing retail sector

Elements of Logistics

Procurement- Sourcing & purchasing

Warehousing & Storage of finish product

Material Handling at warehouses ports & ICD Transportation goods with various mode

Inventory Control Minimization

Physical Distribution of finish product Information & Communication

Packaging

Objectives of Logistics

3 R in Logistics

1) Right time

2) Right quantity

3) Right place

Definition of logisticsThe management of the storage and flows of goods, services and information throughoutfrom origin of suppler to the end user of finish products

Type of LogisticsInbound Logistics Raw material flows from supplier to production place (factory)

Out bound logistics Flows of finish goods from factory through end user customer

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The role of Various Logistics Service provider in shipping Industry

Import Movement

There is chain of various logistics service provider to handle import cargo.

They helps to importer to carry his cargo from port of loading (foreign port)

to port of discharge (Indian port)-unloading at port/container terminals-container movement from terminal to CFS Customs examination at CFS

and clearing.

Export movement

In case of export of cargo, all movement to be carried out reverses ofimport. CHA helps to file shipping bill-CFS operator providing facility for

customs examination and moving container to terminal-shipping agents

arranging container to load on ship. Carrier taking container/cargo out ofIndia by sea route

Import Cycle

Carrier (shipping company)

Shipping company provides sea service from port of loading to port of dischargeImporter pays freight to shipping company and shipping company issues Bill of Lading

Terminal OperatorA container terminal is a facility where cargo containers are transshippedbetween

different transport vehicles, for onward transportation. The transshipment may be

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between ships and land vehicles, for example trains ortrucks, in which case the terminal

is described as a maritime container terminal

CFS operator

CFS operator brings container from Terminal to his CFS on behalf shipping

line. He provides customs examination service. He collects his dues and

gives physically delivery to CHA/importerThere are 23 CFS attached to JNPTport

CHA

The purpose of a custom house agent is to tackle the problem that management of many

businesses simply does not have the resources to personally deal with import and exportissues.

A Custom House Agent is somebody entitled to act upon a companys behalf on actions

involving the import and export of goods. The phrase is most commonly used in India.

There such agents must be licensed under section 146 of the Customs Act.1962

The Bombay Custom House Agents Association popularly known as BCHAA is an

Association of Custom house Agents, licensed by the Commissioner of Customs,

Mumbai, under the provisions of the Customs Act 1962

Export cycle

Freight broker-Freight brokers use their knowledge of the shipping industry and technological resources

to help shippers and carriers accomplish their goals. Many companies find the services

provided by freight brokers indispensable. In fact, some companies hire brokers tocoordinate all of their shipping needs. He provides booking service to shipper and

collecting its brokerage from shipping line

Freight ForwarderA firm that represents shippers by arranging transport and completing documentation

required for international shipping. Some freight forwarders also act as cargoconsolidators.

CHA-Customs House Agents

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A firm that represents importers in dealings with Customs. Normally responsible for

obtaining and submitting all documents for clearing merchandise through Customs,

arranging inland transport, and paying all charges related to these functions

CFS operatorA type of steamship line service in which cargo is transported between container freight

stations, where containers may be stuffed, stripped, or consolidated. Usually used forless-than-container load shipments. There are 23 CFS attached to JNPT port

Shipping agents-Shipping agents represent charterers, receivers or ship owners. Their main roleis to liaise between their clients and the various entities that service vessels inport including

1) Arrival Departure Formalities with port & customs authorities2) Bunkering-Supply of fuel3) Marketing for cargo4) Collect Freight and remittance to ship owner5) Issue Bill of Lading

ChartererChartering is an activity within the shipping industry. In some cases a charterer may

own cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price,called freight rate. Freight rates may be on a per-ton basis over a certain route (e.g. for

iron ore between Hazira (Gujarat ) and China or alternatively may be expressed in terms

of a total sum - normally in U.S. dollars - per day for the agreed duration of the charter.

Depending on the type of ship and the type of charter, normally a standard contract form

called a charter party is used to record the exact rate, duration and terms agreed betweenthe ship owner and the charterer

Charterparty

A Charterparty is a contract signed between a ship owner and a charter who hires thevessel for a period of time (Time Charter) or for a particular voyage (Voyage Charter).

There are many types of Charterparties, most codified by various shipping associations

NVOCC /MTONon-vessel operating common carrier. A firm that offers the same services as an ocean

carrier, but which does not own or operate a vessel. NVOCCs usually act asconsolidators, accepting small shipments (LCL) and consolidating them into full

container loads. They then act as a shipper, tendering the containers to ocean common

carriers. In India MTO has to register with Director General of Shipping under Multimodal Transportation of Goods Act 1993

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OCEAN FREIGHT & SURCHARGES

Freight

The freight is the remuneration payable for the carriage of goods in a ship

from port of loading to port of discharge (JNPT to Colombo)

Basic Sea Freight (or Ocean Freight) or BAS - It is the cost of thesea freight from port to port.Ocean Freight in ContainerizationSea Freight (or Ocean Freight) is the part of total Freight Cost of aninternational shipment by sea that covers containers move betweenContainer Yards (CY) at origin and CY at destination.

SEA FREIGHT (or Ocean Freight) DOES NOT INCLUDECOST OF INLAND TRUCKING (Containers pre-carriage and drayage

at origin and destination).

It also does not include any other charges related to shipments by seasuch as containers stuffing, ground rent charges payable to CFS or

Port, container detention charges, customs formalities, duty, insuranceetc.

Freight Pre paidFreight paid by the shipper to the carrier when merchandise is tendered for shipment. Not

refundable if the merchandise does not arrive at the intended destination

Freight Payable at Destination

When the ocean freight of a shipment is paid at the time of delivery at the foreign port.

Types of Freight in bulk cargo1) Lump Sump freight2) Advance freight

3) Pro Rata Freight

4) Dead Freight

Types of Freight in containerization

1) Commodity Box Rate

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2) FAK Freight All kinds

3) Tariff Rate

Surcharges in Sea Freight (or Ocean Freight)

Total Sea Freight (or Ocean Freight) offered in a price quoteshould excluding SURCHARGES added to Basic Sea Freight (orOcean Freight).

THC

The terminal handling charges is in nature a component of

international container transport freight. It is a practice in the maintrading countries (regions) that the liner companies collect terminalhandling charges at the port of loading from the consignors andcollect terminal handling charges at the port of discharge from theconsignees. This covers loading unloading charges of container

BAF or Bunker Adjustment Factor - Fuel surcharge. Itreflects changes of price of oil on the world market. In sea

freight contracts typically changes quarterly.

CAF-Currency adjustment Factor This is related to exchange rate fluctuation with domestic

currency USD V/s INR Covering risk

Port Congestion surcharges (if any)

Shipping line imposing this surcharge when there is delay to shipin particular port

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Container terminal in port

EXPORT PROCEDURE & DOCUMENTATION

Main Pre Shipment procedure & Documentation

Procedure Documents

1 Passing of shipping bill in Customs Invoice packing list SDFOr GR GATT declaration

2 Cargo removing from factory Invoice packing listARE-Application of removable of

excisable goods

3 Cargo arrival at port or CFS Carting note or form 13

4 Examination of cargo

After examination Customs will allowto export good physically LEO

Packing list invoice -shipping bill

5 Stuffing cargo into container Mate receipt

6 Container movement to Terminal FCL by shipper shipper transporter

LCL by CFS operator

7 Sailing of ship

8 After sailing of ship Shipping company files EGM

Main Post Shipment procedure & Documentation

Procedure Documents

1

Preparation of documents

Invoice packing list

Bill of lading from Shipping company

Insurance policy from insurance CoCertificate of origin from trade Association

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or export inspection agency

2 For bank Invoice packing list Shipping bill

3 For D G F. T

Director General of foreign Trade

proof of export

E.P copy of shipping bill

Documents of proof of export

Invoice packing list-Bill of ladingBRC bank Realization Certificate etc

4 Excise Authority

Prof of export

Invoice

Packing listBill of Lading

ARE-1

BRC

IMPORT PROCEDURE & DOCUMENTATION

Main Import procedure & Documentation

Procedure Documents

1 Arrival of vessel in port with import cargo Filing of Import General Manifest

By shipping agents

2 Berthing of ship & unloading of cargo

3 Container movement from Terminal to CFS Filing of bill of Entry by CHA

4 Container at CFS for physical examination5 Shipping line procedure D O for Examination by shipping line

6 Examination of cargo by Customs

7 Customs payment T R 6 challan

8 Out of charge bill of entry

9 Payment of CFS ground rent charges D O from CFS

10 Physical delivery of cargo from CFS

Export Import & Documentation

1- Pro forma InvoiceThe Pro Forma is used primarily to document to the buyer, in advance, the cost and terms

of sale of a proposed export. It is used by the foreign buyer as a quotation from the

exporter and also to assist in applying for a Letter of Credit from his bank. The ProForma Invoice serves as the basis for the subsequent Commercial Invoice

2-Commercial Invoice

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A commercial invoice is the basic statement of the seller to the buyer for payment of the

goods shipped. It must conform to any Letter of Credit requirements, foreign governmentrequirements, It is used as one of the primary documents in the collection process, and is

the main document used by foreign Customs for control, valuation of the goods, pricing,

terms of sale, payment and delivery, credit numbers, import license numbers, shipper andconsignee names, and shipping marks and numbers. Commercial invoices are usually

signed by the exporter

3) Packing List

This important document describes all items in the box, crate, pallet, or container, plus

the type, dimensions, and weight of the container. It is used to determine total shippingweight and volume (cubes) by Customs officials to check cargo, and by the buyer to

inventory merchandise received. Prices and item values are usually omitted from the

Packing List. Shipping marks, reference numbers and carton numbers are also important

additions to the packing list.

Ocean Bill of Lading

Issued by: Steamship line Purpose: Each carrier has its own bill of lading form. Serves as

contract of carriage between carrier and shipper, spelling out legal responsibilities andliability limits for all parties to the shipment. The B/L also can be used to transfer title to

the goods to a party named in the document. Specifics shipment details, such as number

of pieces, weight, destination, etc. Usually three signed originals issued. Licensed

consolidators (NVOCCs) issue their own B/Ls to shippers. (House bill of lading)

Inspection CertificateTo protect those selves, many foreign firms requests a Certificate of Inspection. This maybe an affidavit by the shipper, or by an independent inspection firm hired by the buyer,

certifying the quality, quantity, and conformity of the goods to the purchase order.

Insurance Policy / Certificate

An Insurance Certificate gives evidence of risk coverage for merchandise shipped. It is

sent to the bank with other collection documents, and normally is used only whenrequired by Letter of Credit or Documentary Collection procedures. There are many

types of insurance policies available. Coverage requested is usually 110% of the value of

the cargo shipped.

Customs Act 1962 provision related to import & export

Filing of IGM Section 30 of ICA 1962

Bill of entry Section 46 of ICA 1962

All goods are chargeable Section 12 of ICA 1962

Collection of Import duty Customs tariff Act 1975

Valuation Section 14 of ICA 1962

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Interest on customs duty Section 4 7 of ICA 1962

Clearance of goods

a) 1st Check system Examination first and then applying rate of dutyb) 2nd Check system-Duty to be paid before examination of good

Cause of Delay of clearance of imported good1) Vessel delay2) Congestion in port /terminal

3) Scanning of import container

4) ICD import container due to inadequate container trains

5) 100 % examination of scrap6) Shortage of lorries

7) Shortage of cargo handling equipment at CFS

8) Road condition of JNPT port9) Shortage of customs officer for examination

Transportation & Warehousing

Transport determines place utility

Inventory is moved from one place to another by transport system

Sea Transport is cheapest mode of transport

Various mode of transport

Transport is a backbone of logistics

Transportation cost (40 %) is main factor in Logistics

How Transportation cost can minimize

Various mode of Transport

Sea Coastal-Inland waterways-International shipping

Road State & national Highways expressway

Rail -Indian Railway divided into 10 zones

Air- facilities for cargo

Pipeline Gas pipeline

A warehouse is a commercialbuilding for storage ofgoods.

Warehouses are used by manufacturers,

importers, exporters, wholesalers, transportbusinesses, customs

The warehousing sector is another vital link in the logistics chain, one

which is evolving at a rapid pace

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Types of warehouses

1) Private general warehouses2) Customs Bonded warehouse

3) CFS-cargo distribution centre near port/ICD/Airport

4) Cold chain warehouse for perishable cargo5) Logistics park

Prof: Sham Choughule 19 August 2010

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