rahul reddy igtc internship report 2010

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CWCL internship program

BY RAHUL REDDY EPURU [C09022] IGTC Chennai

Submitted on: 5/7/2010

1

Rahul Reddy C09022 IGTC CWCL internship program 2

INDEX

EXECUTIVE SUMMARY……………………………………………………………Page 3

INTRODUCTION……………………………………………………………………..Page 3

ABOUT NDR GROUP………………………………………………………………...Page 4

ABOUT CWCL CFS FACILITY – CHENNAI……………………………………….Page 4

MY DUTIES IN THIS COMPANY…………………………………………………...Page 8

REQUIREMENTS OF A CFS – FACILITY…………………………………………..Page 10

MY FEEDBACK ON CWCL……………………………………………………….…Page 11

Continental Warehousing Corporation (Nhava Seva) Limited – internship report By Rahul Reddy Epuru


EXECUTIVE SUMMARY

Continental Warehousing Corporation (Nhava Seva) Ltd is one of the leading players in the logistics industry. This is a subsidiary of the NDR group. The NDR group has occupied a large amount of space in the warehousing arena. CWCL also provides Container Freight Station (CFS) services at Navi- Mumbai, Tuticorin and Chennai. My internship program with CWCL Chennai CFS had kick started on 5th April 2010 and concluded on a successful note on 25th June 2010. This report contains information about the NDR group, CWCL Chennai CFS and what I have actually done there during my internship program. It was a very fresh experience and a great way to walk the baby steps of my career ahead.

INTRODUCTION

Have you ever imagined that your boots travelled all the way from Australia? Do you know that the laces are hand-made in China? Any idea about the sole and the metal frame designs on the sides of the boot? Each material used in the boot has a story behind its making; every part has a mark of human blood and sweat. All man-made products have a lot of ocean/air/road/rail travel (transportation) to do and they need to be stored (warehousing) at different points in this travel. This ‘travel’ and ‘storage’ forms a major part of the logistics industry.

The following story will explain this ‘travel’ and ‘storage’ in better detail:

Mr.Ravi has a retail outlet - Cinderella Shoppe in Chennai and he sells all imported stuff such as soaps, perfumes, slippers, bracelets, watches, handbags etc. he wants to offer Yardley soaps of London to his esteemed customers in Chennai. Mr. Ravi orders 1 lakh pcs of Yardley soaps from London to be imported to India.

Yardley Ltd. Has to export these 1 lakh pcs to Mr.Ravi. They approach a CHA (Customs House Agent) who will take the total responsibility to export the goods. CHA first approaches a Liner. The liner arranges for a container for shipment. The CHA then approaches a CFS - Container Freight Station where the 1 lakh pcs of Yardley soaps are loaded in the container. Customs Inspection is done by the authorized customs officer in the CFS and the loaded container is transported to the Port of Chennai from the Port of London.

CFS is simply an out-of-port customs clearance point

Container – loading and inspection activity is very important for any export but this is a time taking process and requires huge machinery. If this activity is done inside the port premises it leads to congestion hence the loading and inspection activity is done in a different location i.e.,



CFS - Container Freight Station and not in the port. This is how the Container Freight Station or CFS has come into play.

I have recently interned with Continental Warehousing Corporation (Nhava Seva) Ltd. - CWCL which is quite a large setup with 84 warehouses all over India and 3 CFS. I have successfully completed my internship program at Chennai – Madhavaram CFS.

ABOUT NDR GROUP

The Naidu Dasharatha Raami Reddy (NDR) group was started in 1954 as a modest 400 sq. ft. of storage for agro-products in the District of Nellore in Andhra Pradesh. Under the brand name of CWCL the NDR group is spread out in more than 84 locations – 6.5 mill sft. NDR Group is today one of the biggest warehouse providers in the Indian private sector and a pioneer in bonded warehouse in the private sector. The Group provides end-to-end logistics solutions to its clients from freight forwarding, C&F, transportation and distribution, dry and cold storage, to container freight station and coastal movement of cargo.

ABOUT CWCL CFS FACILITY – CHENNAI

The CFS and bonded warehouse are spread out in 13 acres of land with a total warehouse space of 2,40,000 Sft. and total open storage area of 75,000 Sft.

Reach stackers 2 no.s Forklifts 2 no.s (can hire more according to scale of operation) Escort crane 1 no. (can hire more according to scale of operation) Office space for CHAs Complex with compound wall and 24hrs security 10.8 kms from Chennai port Fully concreted internal roads with yard lighting Efficient trained labour force Easy access by phone, fax, mail, etc.



Departments

Administration Operations – Export, Import & Bond Marketing – Export, Import & Bond Documentation & Billing - Export, Import & Bond Finance and Accounts HR

This CFS mainly undertakes 4 operations:

1) Exports2) Imports3) Bonding4) General Warehousing

1) Exports:

Cargo loaded in a lorry enters the CFS with a shipping bill, invoice and packing list sent by a CHA.

i) Shipping bill: This contains all the details regarding the consignment such as date, line no.(in the ship), IGM no., cargo description, importer, exporter, port of loading, port of discharge and country of origin of the cargo.

ii) Invoice: This contains the total quantity of goods and their price (worth) in USD

iii) Packing list: This contains the no. of pieces per carton, dimensions of the carton and price per piece

The export team in the CFS verifies these documents The cargo is unloaded in the CFS export warehouse



Unloading is done either mechanically using a fork lift/escort or manually using labour An empty container enters the CFS All the unloaded cargo is stuffed into the empty container – Stuffing operation ,this is

again done manually/mechanically This container stuffing may be FCL – Full Container Load where full cargo is owned by

a single exporter or LCL – Less than container load where cargo of various exporters is in the container.

It is the job of the surveyor to see the dimensions of the cargo so that the volume of the total cargo matches the volume capacity of the container

Containers are usually of 3 sizes – 20 feet ,40 feet and 45 feet AO(Appraisal Officer) EO(Examining Officer) and PO(Preventive Officer) inspect the

container and finally load out authorization is given by PO A customs seal is affixed to the container A trailer comes to the CFS to transport the loaded & sealed container to the port of

Chennai Export cargo storage charges and stuffing charges apply to the exporter

2) Imports:

The cargo enters the CFS from the port in a loaded container This container may be FCL – Full Container Load where full cargo is owned by a

single importer or LCL – Less than container load where cargo of various importers is in the container.

The container is stacked in the yard by the reach stacker Customs inspection is done where the cargo is thoroughly checked The cargo next undergoes – De-stuff (or) Direct out De-stuff – this means the cargo is unloaded from the container and is stacked onto a

lorry manually/mechanically, the loaded lorry goes to the importer’s location for final delivery

Direct out – this means the loaded container coming from the port (after inspection) goes to the importer’s location

Handling charges and storage charges are levied for any import container



3) Bonding:

In case the importer pays only part amount of the import duty, he takes home cargo worth the paid amount, the remaining cargo goes to the custody of the customs officer which goes to bonding.

Bond is a warehouse for all the cargo in the customs officer’s custody (for which import duty is not paid)

For example, the import duty for 1000 aluminum rods is $10000 but the importer who is a manufacturer does not want to block his working capital. He also wants to avoid the huge handling costs that come with these 1000 aluminum rods. He pays the duty in parts and gets his cargo released periodically i.e. he pays $1000 and takes 100 rods this month. Next month his requirement increases now he needs 500 rods, he pays $5000, the consecutive month he needs 400 rods so he pays $4000 thus releasing his full import order from the bond

This bonded warehouse is owned by the CFS, importer pays the rent for the goods which are in customs officer’s custody in the bonded warehouse

The customs officer sits in the office of the CFS and receives his fees for import or export inspection from importer/exporter/CHA. This apart he also receives salary from the government. Huge responsibility lies in the customs officer’s hand as he is liable for any illegal entry or exit of cargo.

4) General Warehousing

Any cargo is allowed for general storage or warehousing. CWCL also offers custom made dedicated warehouses. Phillips has a dedicated warehouse built and given by CWCL

Storage charges are levied accordingly or the warehouse may be leased out



MY DUTIES IN THIS COMPANY

I was initially issuing gate in-pass for trailer/lorry and job order for the reach stacker then gradually I was put in loading/unloading operations subsequently I was in the export department. This took me almost two months time.

Duties discharged till date:

Cargo Customer (CHA) Operation

Husk J.M.Baxi U/L and Stuffing

Cotton bale Global shipping U/L

Yarn PL shipping U/L

Sod. Silicate Kiran Global U/L and Stuffing

Chilly Exim shipping U/L and numbering

Potash Feldspar powder Exim shipping Stuffing

Granite Fairmacs shipping Stuffing

For 1 month I was in port operations monitoring the procedure for receiving an import container. CWCL CFS has an additional office near the port premises from where all port operations both import and export are carried out.



Key Terms:

1) IGM/PNR list – Import General Manifest/Public Notification Receipt list is a list containing all the containers allotted to CWCL CFS

2) CCTL – Chennai Container Terminal Limited (owned by Dubai Port World - 2000 )CITPL – Chennai International Terminal Pvt. Ltd. (owned by Port of Singapore Authority - PSA and South India Corporation Agencies Limited – SICAL – 2009)CCTL and CITPL control the total shipment of imports and exports in the port of Chennai

3) Form 13 – is a copy given to the trailer driver which allows him to receive an EIR copy (equipment interchange receipt) from the port authority – CCTL or CITPL

4) EIR copy – authorizes the trailer driver to go and collect the import container from the group of containers stacked on the Warf

5) Container Movement Facilitation Cell (CMFC) – this is a customs division in the port premises monitoring the container movement using standard set of procedures for sending or receiving containers.

Following are the steps for receiving an import container from the port:

Liner mails IGM/PNR list to CCTL or CITPL

CCTL/CITPL mails this list and form13 to Continental CFS port office

Port operations team takes a printout of the IGM/PNR list and form 13

Submits the IGM/PNR list to CMFC

CMFC allots TSA nos. on the IGM/PNR list

A Photocopy of this list is given to CCTL or CITPL for grouping

Vessel berthing, container placing and Vessel departure operation takes place within 26 hrs

All trailers must go through In-gate before cut off

At In-gate transport trailer driver must show form-13



He receives EIR copy – now he may collect the container from a terminal

P.O. inspects the outgoing container

If the container is Open Top or Flat Rack a special escort permission is mandatory, this escorting is done by the PO(Preventive Officer)

My next stint was in the billing section where I monitored all the bills related to imports and exports for about a week. Again I came back to exports department also put in 4 to 5 days in imports department with this I concluded my internship program.

REQUIREMENTS OF A CFS – FACILITY

CFS license

10 acre land with concrete ground

1 acre – empty container, 5 acre – Import, 0.5 acre – Export, 3.5 acre – Bonded warehouse

2-Reach stackers 2- FLT 2-Escort 1- Empty Container Handler

Labour (Ideally from Bihar or Nepal) & Security (at the gates and warehouse)

Operations, Marketing, Documentation & Billing

Liner network , CHA network and Importer/Exporter network

Independent authority (Decentralized) per CFS in case of multiple CFSs

Air-conditioned canteen with good ambience (as lunch is the only recharge point for any worker)

Customer waiting room with basic facilities like A/c, chairs, T.V., drinking water, snacks canteen

CCTV to monitor Bonded warehouse ,export warehouse, export yard and import yard

1- office near port and 1- office near CFS premises

Safety officer for labourers and operations staff

Separate room for operation staff (in yard) and a security room must be provided



Surveyor

MY FEEDBACK ON CWCL

This is a great place to work at Work culture is very harmonious Top management is very easily accessible, responsive and keeps a close watch on what is

done and what is to be done on a day to day basis. This is the most significant aspect in this organization.

This being the smallest CFS in Chennai has actually put it in an advantageous position. Customers say that they get their deliveries much faster on a relative scale

HR has put the right people at the right place Marketing & Operations coordination is very good Needless to say about the flawless Financial team It is amazing to note that the employees are multi-task masters each person knows

beyond his boundary of work

OTHER IMPORTANT INFORMATION



The actual procedures in the customs house for various activities are given below in detail:

PUBLIC NOTICE NO. 111 / 2002 - Dated: 27/04/2002.

Sub: (i) Formation of Container Movement Facilitation Cell (CMFC)

(ii) Transhipment of cargo from gateway ports to other ports/ ICDs/ CFSs

issuance of transhipment permit – regarding

In pursuance of the directions vide Board’s circular No. 79/2001 Cus. Dated 07.12.2001, the following new procedures regarding the permission for transhipment of cargo from the Gateway port to other ports/ICDs/CFSs would be followed with effect from 01-04-2002.

1. As on date permission to move import containers out of Chennai port is given by different units depending on the destined station. The movements of the containers are permitted under P.N. 19/98, P.N. 5/2002 and P.N. 10/2002, of this Custom House. Henceforth, as per the new procedure (“Single Window System”) permission for the movement of containers sought to be transhipped from Chennai port to other ports, ICD, CFSs and re-export of empty containers will be dealt in a single counter/place. Hence, the relevant portions of the above said PN 19/98, PN 5/2002 dealing with transhipment of containers from ports, ICDs, CFS, stand modified to that extent by this PN, further PN 10/2002 is rescinded.

2. The request for permission of transhipment of cargo from Chennai port to other ports /ICDs/CFSs will be processed and issued by one common cell called the Container Movement Facilitation Cell (CMFC). The entire system will be computerised in due course and the transhipment permission would be on-line. Till such time, personal computers will be utilised and the following procedures will be followed.



3. All steamer Agents/Custom House Agents/Container Freight Stations/Importers/Main Line Operators (MLO) dealing with the transhipment of cargo from Chennai port to other ports/ICDs/CFS shall execute a running bond and bank guarantee covering double the value of the cargo likely to be handled at any given point of time and this will be executed for a period of 12 months with the Dy. Commissioner/Asst Commissioner (CMFC). If it is not possible to furnish a running bond and bank guarantee, the parties may produce individual bond and bank guarantee for each transhipment of cargo. On receipt of landing certificate from the concerned port/ICD/CFS, the running bond and bank guarantee will be re-credited and individual bank guarantee will be released. The formats of Running Bond and Bank Guarantee are appended as Annexure A & B to this P.N.

4. The request for permission of transhipment shall be scrutinised, processed and issued by an officer in the rank of Superintendent of Customs (CMFC)

5. The Steamer Agents are advised to file the IGM in floppies of the Containerised/Import cargo in three parts with EDI as well as CMFC. The first part of the IGM will have the details of the cargo to be discharged at Chennai port. The Second part will consist of the details of the cargo for transhipment to different ports/ICDs/CFSs.The third part will consist of details of all the containers. Such part presenting of IGM will facilitate quick processing of the transhipment applications in the CMFC and also avoid enclosing voluminous IGM with each and every request. In addition to the details being mentioned in the IGM, the steamer Agents are required to indicate the type of containers such as (P for Plain, R for Reefer, T for Tank and FT for Flexi Tank) and also code no of the Container Agent (MLO) against each and every Line No in the IGM itself so that the exact value of the containers can be debited or credited in the Steamer Agent / Container Agent (MLO) Running Bond. Any amendments to the IGM permitted by Dy. Commissioner (Import) in respect of transhipment of cargo should be made available to the Superintendent (CMFC) who in turn will transmit those details to the destined Customs Station.

6. The Shipping agents should submit 5 copies of Transhipment application(s) in prescribed form (Annexure – C) to the Supdt. (CMFC) along with copies of relevant portion of the IGM by mentioning details as per part/page ….. of IGM No…..as enclosed instead of writing complete details of cargo in the TSAs



7. The Shipping agents should also submit an authorisation from the carriers appointed for tranportation of goods from Chennai to other ports/ICDs/CFSs. In the case of TSA being filed by the CHAs/CFSs an authorisation from the importer has to be submitted along with the application. The present practice of filing of sub-manifest, which is mere duplication of IGM, is dispensed with.

8. On receipt of TSA from the Steamer Agents/CHAs/CFSs/Importers/MLOs (transhippers) , the Superintendent (CMFC) will check whether the name of the Transhippers appearing in the negative list. Transhipment Permit will be denied in cases where the name of the Steamer Agents / CHA / CFS/Importers/MLOs figures in the negative list.

9. After ensuring that the Transhippers are not figuring in the negative list, the details furnished by the Transhippers in the application will be scrutinised, and if found to be in order, the Bond and Bank Guarantee of the concerned Transhipper carriers shall be debited on the basis of invoice/notional value of the goods. Once the above process is over, the Superintendent will sign all the copies of transhipment permit and affix a seal. Necessary entries are to be made simultaneously in the register kept for the purpose in CMFC.

10. TRANSHIPMENT FROM CHENNAI PORT TO OTHER PORTS AND ICD’S:

In respect of containers to be transhipped from Chennai port to other ports/ICDs, the first copy of the transhipment application will be retained in CMFC itself for office record. The other four copies will be returned to the party, out of which theTranshippers will hand over the second copy of the TSA to CCTL/ChPT for processing Equipment Interchange Receipt (EIR) / Vehicle Ticket (VT) as the case may be. The remaining three copies of transhipment application shall be produced to the Preventive Officer(Container cell). The Preventive Officer (Container Cell) shall verify the load port seal, affix a Customs one time seal on the container and endorse all the three TSA Copies with the details of the number and condition of the load port seal and also enter/record the serial number of the Chennai Customs One time seal. The sealed containers should be moved from the Container Yard to the location decided by the transhipper. The Railway receipt (R.R) or Lorry receipt (L.R) received from CONCOR/Transhipper should be handed over to the preventive officer (container cell). Thereafter, the preventive officer (container cell) will endorse the fact of loading of the containers/cargo in all the copies of TSA.The third copy of the transhipment application along with two copies of the relevant



portions of the manifest and the L.R. or R.R. shall be placed in a sealed cover and handed over to the carriers under acknowledgement. The fourth copy of the transhipment application would be handed over to the Transhipper and fifth copy is retained for record in Container Cell. The Carriers are responsible for the safe custody of sealed cover and will hand over the same to the Customs authorities at the ICDs/other ports for necessary further action. In respect of the containers moved by road by private carriers, the Transhippers at the time of sealing of the container, shall produce the Lorry Receipt along with the transhipment application to the preventive officer (container cell). The procedure adopted for movement by Rail/Road by CONCOR is to be followed in such cases also.

11. In case of containers transhipped to other ports/ICDs, the details of the cargo shall be verified by the customs at the destination ICD & other ports, with the help of the IGM copy.If any discrepancy is noticed, the same may be recorded in the landing certificate.The transhipper should bring the landing certificate duly certified by destination customs within 30 days from the date of permission of transhipment application and submit the same to the Superintendent CMFC for giving credit in the bond/bank guarantee and for reconciliation of record. A copy of closure Report will be sent to Manifest Clearance Department (MCD) for closure of manifest.

12. If landing certificates are not produced within the stipulated time, the Running Bond / Bank Guarantee shall be immediately enforced by the Supdt CMFC. On the basis of the remarks on the landing certificates from the I.C.D./other ports action should be taken to enforce the bond, as the case may be.

13. TRANSHIPMENT OF CONTAINERS FROM CHENNAI PORT TO CFS’s

In respect of containers transhipped from Chennai port to any of the CFSs falling within the jurisdiction of the Chennai Customs Commissionerate, the first copy of the transhipment application will be retained in CMFC itself for office record. The other four copies will be returned to the party, out of which the Transhippers will hand over the second copy of the TSA to CCTL/CHPT for processing EIR/VT as the case may be. The remaining three copies of the transhipment application shall be produced to the Preventive Officer (ContainerYard). The Preventive Officer (Container Yard) shall verify the load port seal, affix a Customs one time seal on the container, and endorse all the three TSA copies with the details of the



number and intactness of the load port seal and also enter/record the serial number of the Customs One time seal.

14. The Preventive Officer posted at the Exit gate of Harbour (Gate 1 out) should maintain separate register which should contain all the particulars of the containers such as the Container No., Seal No, TSA No., CFS Name, Gate Pass or EIR No., Destination, from/to outward date and time etc. Considering the distance between the CFS's and harbour gate (1 out) and the average time taken for the movement of containers, the location of CFS's are divided into 3 zones and accordingly the time limit for movement of containers from Harbour to CFS and vice-versa is fixed as detailed below.

ZONE

NAME OF THE CFS

PERMISSIBLE TIME LIMIT FOR THE MOVEMENT OF CONTAINERS FROM HARBOUR TO VARIOUS CFSs

ZONE – I CWC (ROYAPURAM) 1 HOUR

ZONE - II

SANCO, CONCOR, VIKING, INDEV, BALMERLAWRIE, CWC (MADHAVARAM) & SATTVA

2 HOURS AND 30 MINUTES

ZONE-III

CWC (VIRUGAMBAKKAM), NUMBAL, CONTINENTAL & SICAL-CWT

3 HOURS



15. The preventive officers posted at the entry gate of the Harbour (Gate I) should maintain two separate registers, one for incoming and the other for outgoing containers.The Registers should contain all the particulars of the containers such as container No, seal No, TSA NO/CFS, Gate pass No, destination from / to inward / outward time and date etc. The Officer at the entry gate of the harbour shall indicate the exact time of departure / arrival of the containers and date in the Customs documents. If the containers could not be moved from CFSs to Harbour within the prescribed time limit as above, the transhippers should bring the same to the notice of Asst Commissioner /Dy.Commissioner (Docks) without loss of time. Similarly, if the containers from harbour to CFS do not reach within the prescribed time limit, the Preventive Officer on duty at the CFSs shall bring the same to the notice of Asst Commissioner/ Dy. Commissioner (Docks) without loss of time.

16. For the cargo stuffed at Exporter’s Premises, the Appraisers shall indicate the date and time of sealing of the containers. Similarly, the cargo stuffed at 100% EOU under supervision of Bond Officer, the Bond officer shall indicate the time and the date of sealing of the export containers.

17.The Preventive Officer posted at the CFS concerned, at the time of receiving the container shall verify the seals on the containers with reference to the endorsement made by the Preventive Officer (Container Yard) and Preventive Officer (Gate 1 out) and record the particulars of the seals and the time of the receipt of the container in the CFS in all the copies. If any of the seals on the container is not intact or found to be tampered, or the container reaches the concerned CFS beyond the stipulated time the Preventive Officer (CFS) should not allow the unloading of the container and bring the discrepancy to the notice of the Superintendent / AC/DC (Docks) and Supdt /AC/DC CMFC. The Steamer Agents / CHAs / CFSs / Importers / MLOs shall be directed to be present there, for necessary further course of action. The Preventive Officer at the CFS will also maintain a register indicating the total number of the containers received with reference to the permission granted by the CMFC and submit a daily report to the Supdt. / DC CMFC. The third copy of the transhipment application will be retained by the concerned CFS as office record and the concerned Transhippers should produce the remaining two copies to the Supdt. (CMFC) for reconciliation. The time limit for submitting the endorsed copies of the TSA to CMFC for reconciliation is two working days from the date of receipt of the container at the CFS. After reconciliation and giving credit in the Running Bond and Bank Guarantee, the CMFC will retain the fourth copy and hand over the fifth copy with due endorsement to the respective of Transhippers. The above procedure will also serve as the landing certificate in respect of the local CFSs. The present procedure of obtaining permission from Preventive Department for



taking the containers from Harbour/ CFS to the consignee’s warehouse or factory premises for destuffing the cargo after payment of necessary Customs duty is also dispensed with as the Steamer Agent / MLO is executing Running Bond for empty containers and the Importer is paying Customs duty for the cargo.

18. Steamer Agent / MLO’s Vessel – Wise Application :

The Steamer Agent / MLO shall execute a Vessel-Wise Application in CMFC instead of Vessel-Wise Bonds now being filed in Preventive (General ) Dept for movement of Empty Containers to their plots for storage purpose and FCL / LCL cargo containers to other ports / ICDs / CFSs. In case, other port containers are exported through Chennai port, the Steamer Agent / MLO shall submit a copy of the Bond along with the TSA filed at the other end to CMFC for entering details in the system for onward transhipment to the respective ports.

19. Re-Export of Containers :

The running bond executed by the Steamer Agents / MLOs should also cover the value of the no. of containers proposed to be landed on his account for a period of 12 months. The Superintendent CMFC will debit the container’s value from the respective Steamer Agent / MLO’s account, as soon as the IGM is filed. Any amendment permitted by the Dy.Commissioner (Import) regarding short landing or excess landing of containers should be forwarded by the OS (Imports) to the Supdt CMFC) for making necessary credit or debit in the respective Steamer Agent’s account.

In case the Empty Containers exported through Chennai port the Export TSA (EGM-Wise) duly signed by the Preventive Officer (Container Cell) and the Ship’s officer should be produced to the Superintendent CMFC for reconciliation.

In case, the Empty Containers exported through other ports, the loading/export certificate from the concerned port has to be submitted to the CMFC. For movement of empty



containers (including cargo de-stuffed empty containers) from Chennai to other ports for stuffing export cargo/ re-export, transfer application has to be filed in CMFC. On production of export/loading certificate of the destination customs, by the steamer agent/ MLO transfer application will be closed.

In respect of containers sought for domestication, the person/agent duly authorised by the owners of the containers should produce the original survey reports stating the condition of the containers and obtain permission for domestication from the Supdt / DC CMFC and after completion of all the formalities, the domesticated file should be submitted to CMFC for entering the duty paid details in the computer for record.

20. The existing procedure of sealing of containers and supervision of loading of containers by customs will continue. The collection of overtime for supervision of transhipment will be governed by the Customs (Fees for Rendering Services by the Customs Officers) regulations, 1998 and instructions issued by the Board from time to time.

21. The above said simplified procedure for issuance of transhipment permit will be applicable only for the containers/cargo manifested for transhipment to other ports/ICDs / CFSs.

(JOSEPH DOMINIC)

COMMISSIONER OF CUSTOMS ( SEA )

// Attested //

(R.SEKAR)

DY. COMMISSIONER OF CUSTOMS (CMFC)



………………………………………………………………………………………………………

Liner Shipping Operations

Liner service: a fleet of containerships sailing between specified ports on aregular schedule.

Containers move along a network of nodes and links. Thenodes are physical locations where container movement is interrupted and/orcontainers are handled. Many of these concern multimodal transfer points wherecontainers are transferred from one mode to another. The links between nodesare characterized both by a mode of transport (road, rail, inland waterway) and asupporting infrastructure (roadway, canal/river, railroad track, rail marshalling yard,etc.). As containers move along this network they can either be empty, loadedwith a single consignment (Full Container Load, FCL, i.e. CY) or loaded withmultiple consignments (Less-than Container Load, LCL, i.e. CFS).CY/CFS

CY and CFS are the abbreviations for container yard and container freightstation, respectively. CY is the place where container carriers store containersand chassis, accept or deliver loaded containers and lend out empty containers orreceive returned empty containers. CFS is the designated facility at which ashipping company accepts and stores small-lot cargoes, assorts and consolidatescargo into containers by destination, and also devans small-lot consolidated cargoout of the containers for sorting and delivery to consignees. When receiving or

delivering small-lot consolidated cargo at a CFS, the shipping company imposes aCFS charge, separate from the freight rate, to cover various costs incurred inhandling cargo at the CFS.

FCL/LCL

These are the abbreviations for full container load and less than containerload. FCL cargo is large enough to completely fill a container's volume, while LCLcargo is usually smaller-lot cargo not sufficient enough to load a full container.Normally, FCL export cargoes are brought to a carrier's container yard (CY) afterbeing put in a container at the shipper's factory or warehouse. At the destinationport, FCL cargoes remain in the container when being handed over to aconsignee at a CY. On the other hand, LCL cargoes are brought to a carrier'scontainer freight station (CFS) where they are consolidated by the carrier togetherwith other LCL cargoes bound for the same destination. At the port of landing, thecargoes are removed from the container by the carrier at a CFS, sorted out and



then handed over to each consignee. The Containerized cargo moves from inland point to inland point via a multi-modal network linking vessels, port terminals, trucks and trains. At the heart of this service network is the planning, tracking and delivery of cargo and state-of-the-art information systems needed to provide certainty and reliability to shippers.

Transshipment

A distribution method whereby containers or cargo are transferred from onevessel to another to reach their final destination, compared to a direct service fromthe load port of origin to the discharge port of destination. This method is oftenused to gain better vessel utilization and thereby economies of scale byconsolidating cargo onto larger vessels while transiting in the direction of maintrade routes.

Feeder service

Transport service whereby loaded or empty containers in a regional area aretransferred to a “mother ship” for a long-haul ocean voyage.

Intermodal

Movement of cargo containers interchangeably between transport modeswhere the equipment is compatible within the multiple systems.

Service Routes

Currently, shipping lines operate three general types of deep-sea itineraries:end to end, pendulum and round the world service routes, which are shown inFigure 4. End to end services schedule vessels back and forth between twocontinents. Pendulum services schedule vessels back and forth between threecontinents with one of these continents as a fulcrum, with the points at either endof the pendulum swing linked only through the fulcrum. This type of service offersa way to fill container slots four times on the same voyage and to eliminate certainoverlapping port calls in the fulcrum area. The merging of separate end-to-endservices into a pendulum or round the world service serves the two mainpurposes of broadening the range of through services and reducing the number ofships required to provide the same coverage. This gives a major cost saving bymerging the previously duplicated port calls in the central region of the pendulum.Also round the world services can overcome the problems of end-to-endoperations, by accommodating the needs of global corporations. The world’sthree principal trade corridors are tied together into one and this type of servicecan move in either direction, moving westward or eastward or in both directions.

Intense competition in container markets not only makes it necessary for shipowners to offer high quality services between major trading regions but also



makes it imperative for them to optimize fleet utilization. Such pressures have ledto the development of multi-route operating patterns, notably ‘Round-the-World’and ‘Pendulum’ services, enabling carriers to maximize vessel employment andslot utilization. North America-Europe-Asia, with vessels continually circling the globe in an eastbound or westbound direction. ‘Pendulum’ services, operated by a large number of carriers including Hanjin and Yang Ming, typically operate over all or some portion of the route linking the East Coast of North America, via Europe and Asia to the West Coast of North America, returning via the same route. Since vessels employed on ‘Pendulum’ services, unlike those employed in RTW services, are not required to transit the Panama Canal, post-Panamax vessels may be used.

Agents

The duties of the Agent, which are either those customarily performed by thegeneral agents or to be performed as the result of specific instructions fromshipping line, shall include the following items:

1.1 Obtain all licenses, permits and approvals, which are necessary or advisablefor the provision of the services in the agent’s territory and for theperformance of its duties hereunder;

1.2 Provide office premises equipped with suitable office and telecommunicationfacilities and install necessary computer system of both software andhardware as well as maintain all systems of shipping line within the territory atthe Agent’s expenses for business running and electronic data exchange withshipping line, its agents, and third parties relating to shipping industry. Anyspecial programs (which are not routine and pre-defined tasks) required andauthorized by shipping line to be for Owner’s account;

1.3 Provide enough qualified staff for carrying out all shipping line services andbusiness activities;

1.4 Exercise shipping line marketing policy and activities, such as makingmarketing research, providing periodical market analysis and report inaccordance with requirement of shipping line, soliciting cargo, placingadvertisement in the local media generally used by major shipping lines andoffering necessary selling materials to promote shipping line service and orothers as may be requested by shipping line;

1.5 Arrange container traffic and provide good customer service, such asreceiving cargo booking, issuing Bill of Lading, keeping shipping linecustomers advised of vessel schedule, cargo status, coordinating deliveringof inward shipments and receiving of outward shipments and cargo, renderingenough information and assistance for customers request;1.6 Receive, process and settle claims in accordance with shipping line’sinstruction;



1.7 Keep operation smooth and schedule punctual, including preparing allnecessary shipping documents correctly in time for meeting the operation and customs/authorities formalities needs, arranging quick dispatch of the vessel,coordinating and supervising the terminal, port and other service vendors andcooperating with shipping line partners in accordance with the joint serviceworking procedures to ensure efficient operation, keeping close contact withshipping line, other colleague agents, feeder carriers, truck, railroads or othertransport operators to ensure smooth receiving, delivering, shipping andtransshipping of cargoes;

1.8 Liaise with parties concerned to arrange adequate supply of containers seals,labels and documents and arrange the matters such as bunkering, repairs,crew changes, ship’s stores, spare parts, technical, nautical, medicalassistance and consular requirements;

1.9 Prepare equipment interchange documents, submit same with vouchers toshipping line as per “Agency Accounting Procedure”, arrange for on-hire,off-hire for container and equipment leases authorized by shipping line, andarrange for repair, maintenance and refurbishment of containers andequipment as authorized or instructed by shipping line;

1.10 Report & provide revisions on the Exchange Control Regulation, officialtariff, other local tariff and shipping circulars & practice to shipping line in anaccurate and timely manner;

1.11 Collect freight and effect disbursements on behalf of shipping line, checkvouchers, pay disbursements, and render correct statements to shippingline.

Freight forwarders

Person or company who arranges for the carriage of goods and associatedformalities on behalf of a shipper. The duties of a forwarder include booking spaceon a ship, providing all the necessary documentation, and arranging customsclearance.

Non-vessel operating common carrier (NVOCC)

A cargo consolidator in ocean trades who buys space from a carrier andresells it to smaller shippers. The NVOCC issues bills of lading, publishes tariffs,and otherwise conducts itself as an ocean common carrier, except that it does notprovide the actual ocean or intermodal service.NVOCC was first defined in the U.S. Shipping Act of 1984, according to



which "NVOCC means a common carrier that does not operate the vessels bywhich the ocean transportation is provided, and is a shipper in its relationship with an ocean common carrier." Under the Act, the NVOCC, as a common carrier, issubject to supervision by the U.S. Federal Maritime Commission (FMC). Thismeans that the NVOCC must file its tariffs with the FMC and that it must depositUS$50,000 with the commission as proof of its financial soundness. Today, acommonly used definition for NVOCC is "a cargo consolidator in ocean tradeswho will buy space from a carrier and sub-sell it to smaller shippers." The NVOCCissues bills of lading, publishes tariffs and otherwise conducts itself as an oceancarrier, except that it will not provide the actual ocean or intermodal service.Meanwhile, in trades other than U.S.-related ones, the NVOCC does notnecessarily operate under a strict interpretation of the law. In many cases, itseems regarded as an international intermodal transport service provider whouses the services of common carriers, including shipping companies, and issuesits own combined transport B/Ls (house B/Ls).

Bill of lading (B/L)

A document that establishes the terms of contract between a shipper and atransportation company. It serves as a document of title, a contract of carriage,and a receipt for goods.

Shipping Bill

Customs document used where drawback is claimed, such as on goods exported or on dutiable goods transshipped or re-exported from a bonded warehouse. It serves basically as a statistical record.

EXPORT TRANSPORT LOGISTICS

Ocean and surface transport costs are excessive and create a major barrier to foreign market. Transport infrastructure, such as ports, ICDs, CFSs, etc., plays an essential role in facilitation international trade, constituting as they do the main interface between ocean transport and surface transport. The level of infrastructure development and the quality of services are major factors in the cost of transportation.

The major component of export transport logistics cost are:

i. Labour charges for handling, stowing etc ii. Road transport charges

iii. ICD charges


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iv. CFS charges

v. Port Terminal Handling charges

vi. Clearing charges

vii. Consolidation charges

viii. Liner freight

This article will serve as a guideline to work out export transport logistics costs associated with export of containerized shipment.

An export transport logistics cost estimate do not include the following:

i. On carriage charges payable at destinations port ii. Transport insurance

iii. Duties and taxes

iv. Storage and demurrage charges.

Containerised Shipment

Basically, shipments are classified into two broad categories, bulk shipment and small shipment. Bulk shipment is further divided into two, liquid bulk, e.g. POL, chemicals, edible oil etc. and dry bulk e.g. ore, food grain, fertilizer etc. Small shipment is further divided into two, Containerised shipment and non- Containerised shipment (break-bulk or general cargo).

To cater to the movement of these shipments, shipping companies provide two types of services, tramp shipping and liner shipping. Tramp shipping provides services on demand and carries bulk shipment (liquid and dry bulk), between nominated ports. Transportation charges, i.e. freight is based on supply and demand situation for the ship in the market.

In contrast, liner shipping provides schedule service to advertised ports, on different selected trade routes in the world. Liner shipping carries containerized shipment and non- Containerised shipment (break bulk or general cargo). Liner shipping carries small shipment, received from N-number of exporter in various ports and deliver to N-number of importer located in various ports. Liner shipping receives the shipment, irrespective of characteristics, volume, weight and quantity of cargo. Freight rates are fixed and made known to traders in advance, this enables them to quote prices on CIF basis or as per Incoterm 2000.

Containerised shipment is further divided into less than container load (LCL) and full container load (FCL).

Movement of containerized shipment



Generally, an exporter based in hinterland, irrespective of distance from the servicing gateway port, prefers to move cargo by road to CFS(a transit facility where he stuffs cargo in containers and containers are transported to port for loading on board the ship).Some preferred to move cargo in container under ‘factory stuffed’ facility by road.In both LCL/FCL and factory stuffed, cargo moves through the CFS (Container Freight Station), a transit facility, before entering in port premises for loading on board the ship.

A) Following are the steps involved in the movement of shipment by road and stuffing of shipment in container is done at CFS, port:

1. Transfer of cargo into truck 2. Storage of cargo in truck

3. Road (truck) journey

4. Breaking out of cargo from truck

5. Transfer of cargo from truck to storage point/shed/yard in CFS

6. Unpacking for customs examination

7. Repacking for customs examination

8. Consolidation of cargo according to destination

9. Stuffing of cargo in the container

10. Locking and sealing of container

11. Loading of container on truck

12. Transportation of loaded container to container yard in port

13. Unloading of container in container yard in port

14. Stacking of container tin container yard in port

15. Loading of container on truck to move container alongside ship

16. Truck journey from container yard to alongside ship, i.e., Quay

17. Loading of container from truck to cellular hold of ship

18. Sea voyage

B) Following are the steps involved in the movement of factory stuffed FCL shipment container:

1. Central excise clearance 2. Transfer of cargo into container in presence of Central Excise Inspector



3. Stowage of cargo in container

4. Central excise sealing


6. Road journey

7. Unloading of container from truck and storage/stacking of container in buffer yard in CFS.

8. Customs clearance/sealing of container


10. Transportation of loaded container to container yard in port

11. Unloading of container in Container Yard in Port

12. Stacking of container in Container Yard in Port

13. Loading of container on truck to move container alongside ship

14. Truck journey from Container Yard to alongside ship i.e., Quay.


16. Sea voyage

Factory stuffing serves certain advantages over CFS stuffing. It reduces multiple handlings of packages/cases, etc., thus reducing labour cost and material handling equipment hiring cost. Further, it also reduces risk related to loss or damage due to theft, mishandling.

C) Following are the steps involved in the movement of shipment by road and rail and stuffing done at ICD:

1. Transfer of cargo into truck 2. Stowage of cargo in truck

3. Road journey

4. Breaking out of cargo from truck

5. Transfer of cargo from truck to shed/place of examination in ICD

6. Unpacking for customs examination

7. Repacking after Customs examination

8. Consolidation (in case of LCL)



9. Stuffing of cargo in container

10. Locking and sealing of container

11. Loading of container on flatbed wagon

12. Rail journey

13. Unloading of container from flat bed wagon and storage of container in container yard in port.

14. Loading of container on truck to move container alongside ship.

15. Truck journey from container yard to quay.


17. Sea voyage

The movement of containerized shipment through ICD is more cost effective. Containers are moved by rail from ICD to gateway port, serves the advantages like no traffic congestion, i.e, quick transit, rail freight cheaper than road transport, ICD containers exempted from octroi formalities etc.

Road Transport

In India, ‘Motor Vehicle Act 1988’ deals with transportation of goods by road: registration of vehicle, safety, economic life of vehicle, etc. This act prohibits overloading of cargo.

Road transportation charges are more than rail transportation charges. Cost of fuel accounts for more than 50 percent of the running cost of truck, heavy labour charges engaged for unloading, road traffic congestion because of bad road conditions, toll collection at various points and detention at toll points, i.e., loss of time and money contributes to higher transportation charges. However, road transport continues to be the preferred choice because unlike the Railways, road transport provides door-to-door service.

Road freight (without container): Rate / Tonne

Road freight (with container): Rate / TEU

Rail Transport

Rail transport is a more convenient mode of transport for cargo movement from the hinterland to port. It is not only cheap, but also eliminates traffic congestion and detention at Octroi. Railways, initiated the process of containerized cargo transportation way back in 1966.

To promote and manage effectively the growth of containerized cargo traffic in India, the Container Corporation of India (CONCOR), a sister concern of Indian Railways, was incorporated in 1988. Apart from transportation of containers by rail, CONCOR also operates a



huge network of ICDs and CFSs all over India. By injecting the competition in container rail transport segment, the monopoly status of CONCOR in container rail transport came to a standstill. It is envisaged that competition in container rail transport will reduce the cost of transport.

Rail Freight Rate

For Empty container Rate / TEU

For Loaded container Rate / TEU

Customs clearing charges

Custom House Agent’s (CHA) main job responsibility is to study the laws governing the export and import and interpreting the levies payable and incentives receivable by clients. They also assist their clients in preparation of document according to expectation of customs authorities.

These Custom House Agents are known by different names in different countries such as Customs Clearing Agent, Freight Forwarding Agent, Customs Broker and Shipping and Forwarding Agent. But one aspect of their activities, which is common to all of them, whatever name they use, is that they all sell their services only.

On behalf of the shipper, CHA does all procedural and documentation formalities, involved in the Customs and port clearance. Such as:

i. Processing of documents, shipping bills etc. ii. Carting of goods/cargo to CFS

iii. Arranging of physical examination of goods

iv. Collection of measurement certificate

v. Handover goods/cargo to carrier i.e., shipping line

vi. Personally attending stuffing of cargo in container

vii. Collection of Bill of Lading from shipping line

viii. Collection of documents from Customs such as duplicate copy of shipping bill, attested copy of Invoice & Packing List.

Today, CHA or Freight Forwarding Agent does except everything except manufacturing the goods and they are a real third party logistics providers.

Following are the charges payable to CHA for the service rendered:

1. Agency Expenses



There is no fixed yardstick for charging agency expenses. Some charge 0.75% of invoice amount, if invoice amount is more than Rs. 10 Lakh. And some charges 1% of invoice amount, if invoice amount is less than Rs. 10 Lakh. Some charge fixed rate per TEU for FCL shipment and some fixed minimum charges for LCL shipment.

2. Documentation Charges. Rate / Shipping Bill

Charges varies according to type of Shipping Bill, i.e., free drawback, DEEC, DEPB, etc

3. “N” Form charges Rate / Invoice

4. Measurement charges Rate / Package or Carton

5. Examination Charges Rate/ Shipping bill

6. GSP Charges & expenses Rate / Certificate

7. Postage, courier charges Rate / DOC set

8. Bill of Lading charges Rate / Bill of Lading

9. Consolidation charges Fixed Amount

INLAND CONTAINER DEPOT (ICD) AND CONTAINER FREIGHT STATION (CFS)

Both ICD and CFS is an infrastructure facility, owned and operated by public or private authority, especially designed for offering services of handling, storage and movement of containerized cargo and cargo under Customs supervision.

SERVICES OFFERED BY ICD/CFS

ICD and CFS handle only containerized shipment, thus special kind of facilities are provided like:

1. Sheds for temporary storage of cargo 2. Container yard for temporary storage of container

3. Customs clearance facility

4. Cargo handling equipment

5. Container handling equipment

6. Manpower for stuffing the cargo into container and destuffing the cargo from container

7. Road/rail connectivity to and from serving gateway port.

8. Bonded warehousing facility



9. Maintenance and repair of container unit

10. Packaging, palletisation fumigation

Advantage

Basically, shipping company, CHA and individual exporter and importer are the users of these infrastructure facilities. Every user has some unique advantages:

1. Port authority receives ready-to-load condition container, thus port authority relieved from traditional job of preparing tally sheets etc and enable port to provide faster turnaround time to shipping lines ultimately port’s productivity and profitability increases.

2. Almost all ICDs linked to port by rail thus quick transit at lower transport cost, no traffic congestion, no detention at octroi post.

3. ICD / CFS is a logistic hub for LCL cargo thus consolidation became more easy.

4. ICD / CFS assist exporter / importer is reducing inventory cost.

5. ICD / CFS are owned and operated by public and private authorities thus every user gets quality service at competitive rates.

ICD / CFS charges

Following are the charges payable to ICD / CFS authorities for the services rendered:

1. Ground rent charges o Loaded container Rate / TEU / Day

o Empty container Rate / TEU / Day

2. Cargo Storage Charges Rate / Sq. Mtr

a) For LCL Rate / TEU

Unloading of cargo from truck, stacking in storage area, providing labour and CHE for taking out packages for examination, consolidating consignment, shifting of container to stuffing point, stuffing of cargo in the container, locking and sealing.

b) For FCL Rate / TEU

Providing labour, equipment for taking out required number of packages from container, unpacking for Customs examination, repacking, stuffing the packages in container, locking and sealing.



3. Lift on/Lift off charges

o Loaded Container Rate / TEU o Empty Container Rate / TEU

4. Transportation of container from ICD/CFS to JN Port

o Loaded Container Rate / TEU

o Empty Container Rate / TEU

TERMINAL HANDLING CHARGES

Once the cargo is stuffed in container to its fullest capacity and after completion of all due documentation formality, sealed containers are moved from CFS/ICD to gateway servicing port for further loading on containership.

Port authority provides facility to receive container, stacking of container in yard, transportation of container from yard to quayside and loading on board the ship. For providing these facility, port authority recover some charges from shipping line or agent of vessel or cargo agent, commonly known as Terminal Handling Charges (THCs).

Normally, THCs are quoted per TEU separately for loaded and empty container. Rate varies per TEU for the type of container used like reefer container, flatbed container, hazardous cargo carrying container.

Following are the THCs for normal container:

1. From truck to Container Yard Rate / TEU

2. From rail flat wagon to Container Yard Rate / TEU

3. From CFS to Container Yard Rate / TEU

4. From Container Yard to Ship Rate / TEU

Normal practice is that shipping line or vessel agent or cargo agent pays THC to port authority and, subsequently, recover from the concerned party i.e., exporter or importer.

OCEAN FREIGHT

Liner conference is an association of liner shipping company. Liner conference appoints a Rate Committee to prepare liner freight tariff, application of which will be binding to all the member shipping companies associated with the conference.

a) LCL Shipment



For heavy cargo RATE/TONNE

For voluminous cargo RATE/CBM

b) FCL Shipment RATE/TEU

Ocean freight are fixed per TONNE or per CBM or per TEU basis, commonly known as Basic Ocean Freight. During a voyage, shipping line incurs extra expenditure or losses due to impact from external forces, which are beyond control of shipping line. Thus, in order to recover such expenditure or losses, shipping lines imposes surcharges on and above Basic Ocean Freight. These surcharges are:

i) Currency Adjustment Factor (CAF) + or – x% of BOF

Whenever a shipping line incurs certain losses or gain certain profit due to fluctuation in value of currency, they recover the losses by adding some per cent of BOF to BOF or pass on the share of profit by deducting some per cent of BOF from the BOF.

ii) Bunker Adjustment Factor (BAF) + y% of BOF

The cost of fuel is incorporated in the BOF. On certain occasion, shipping lines incur additional expenses on purchase of fuel due to sudden escalation in international fuel prices. These additional expenses are loss to shipping lines. To recover additional cost on fuel, shipping lines impose surcharge called BAF by adding some per cent of BOF to BOF.

iii) Port Congestion Surcharge Fixed Amount/TEU

Port workers’ strike, inadequate harbour and terminal infrastructure facility, sudden change in demand and supply leads to situation like pre-berthing detention, slower turnaround time, slower movement of container from/to hinterland. Such situations are beyond control of shipping lines. This not only hampers the further schedule, but also inflates the standing cost of shipping lines. Disturbance of schedule and additional standing cost is loss to shipping lines. To recover this loss, shipping lines impose surcharge by adding some per-cent of BOF or fixed amount per TEU to BOF.

Term of sale Freight paid by

Freight charged to

Risk transfer point

Ownership in transit

Claims

FOB Origin Freight Collect

Buyer Buyer Port of shipment

Buyer Buyer

FOB Origin Freight Prepaid

Seller Seller Port of shipment

Buyer Buyer

FOB Origin Freight Prepaid & Charged back

Seller Buyer by adding amount to invoice

Port of shipment

Buyer Buyer

FOB Destination Freight Collect

Buyer Buyer Port of Destination

Seller Seller



FOB Destination Freight Prepaid

Seller Seller Port of Destination

Seller Seller

FOB Destination Freight Collect & Allowed

Buyer Seller by deducting amount from invoice

Port of Destination

Seller Seller

iv) War Risk Premium

Fixed Amount/TEU

Whenever a ship passes through war-prone zone, insurance underwriter imposes additional premium to shipping lines. Normal insurance premium paid by shipping line is incorporated in a freight. This additional premium is additional expenditure. To recover additional expenditure, shipping lines impose surcharge by adding some per cent of BOF or fixed amount per TEU to BOF

INCOTERM

FOB (free on board) means that the exporter fulfils his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment. This means that exporter bears entire export logistics costs till the goods shipped on board the ship in port of shipment and completes all formalities of export. And importer has to bear all costs and risk of loss or damage to the goods from that point onwards. Importer pays for freight, insurance and import duty etc.

Sum of inland transport cost (road + rail) + Transit facility charges (CFS / ICD) + CHA charges + Consolidation charges + THC + Cost price of goods; represent FOB cost to the buyer.

Some common terms of sale now a days practiced in international trade are FOB Origin, FOB Destination etc. In FOB Origin a buyer pays freight and risk is transferred from seller to buyer in the port of shipment. Whereas in FOB Destination, seller pays freight and risk is transferred from seller to buyer in the port of destination. The sale term like freight prepaid, freight collect when clubbed with FOB origin or destination, it gives a different ground for negotiation. The table above gives details of each term.

INCOTERM 2000 provides interpretation of obligations and responsibilities to be discharged by exporter and importer in international trade. There are 13 terms including FOB as explained above. All these terms have unique feature. These terms can also be used as negotiating and cost-cutting tool.

The FOB as a concept signify a price which includes entire export transport logistics cost incurred up to the time that the goods are on to ship for exportation. Government authorities keep the difference of 15 per cent between cost price and declared FOB. This difference can be said to include the profit margin and export transport logistics cost incurred up to the time when goods are loaded onto the ship for exportation.



Globalisation and internationalisation of industries have increased the importance of logistics within the firm since its costs, specially transportation, becomes a larger part of the total cost structure.

Apart from transportation cost, exporters are also forced to incur on inventory, inventory carrying cost, warehousing cost etc. with no value addition to the product. The value is added by minimising these costs and by passing the benefits to customers and to the firms’ shareholders.


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