14.4 International Logistics

International transport plays a pivotal role in global trade, marked by its intricate processes and involvement of numerous entities. This complexity is largely rooted in the differing priorities and concerns of the involved parties. From the buyer’s side, a primary concern is quality assurance, ensuring that the goods received meet specified standards and expectations. This entails rigorous scrutiny of product quality, adherence to agreed-upon specifications, and compliance with regulatory standards. Conversely, sellers are primarily concerned with payment security. They need assurance that once the goods are shipped, they will receive timely and complete payment as per the agreed terms. Addressing these dual concerns necessitates a comprehensive understanding of the various roles played by different entities in international transport and the key documents that govern and facilitate these complex processes. This section aims to demystify these aspects, providing insights into the intricate workings of international transport.

14.4.1 International Trade Entities

1. Shipping Companies/Airlines (Carriers): These entities provide the actual service of moving consignments from one country to another. They are responsible for the physical transportation of goods.
2. Non-Vessel Owner Common Carriers (NVOCCs): NVOCCs purchase space in bulk from shipping companies and resell it to exporters. They function as intermediaries, providing shipping services without owning the vessels.
3. Ship Agents: These agents represent the shipping companies at ports, handling documentation and other formalities on behalf of the carriers. Each agent typically represents a single shipping company.
4. Freight Forwarders: Often referred to as ‘travel agents for cargo,’ freight forwarders advise exporters on the best transportation methods for their goods. They are responsible for planning and overseeing the journey of the cargo.
5. Custom House Agents (CHAs): CHAs assist importers with the necessary paperwork and customs duties to clear imported shipments at the destination port.

14.4.2 International Trade Documents

Several key documents are integral to international shipping:

1. Proforma Invoice: Used during the buying/negotiation process, this document outlines the price and quality descriptions of the consignment. It’s similar to the commercial invoice and can be used for securing credit or planning customs duties.
2. Commercial Invoice: This document provides the final value and description of the goods and is used by customs to assess the value for duty purposes.
3. Packing List: This document details the contents of the shipping package.
4. Letter of Credit: A payment guarantee from the importer’s bank, promising to pay the exporter upon meeting certain conditions.
5. Bill of Lading (B/L): Issued by the ship captain, it serves as proof of loading and an ownership document for the goods in transit. Airlines issue an airway bill, which is not an ownership document.
6. Certificate of Origin: Issued by authorized bodies like local chambers of commerce, it certifies the location where the majority of the product’s value was added.

14.4.3 Incoterms

The International Chamber of Commerce has established predefined commercial terms, known as Incoterms, to streamline international trade across different countries with varying regulations. These terms detail the ownership and risk responsibilities for goods in transit. Three key Incoterms include:

1. Ex Works (EXW): The exporter makes the goods available at their premises. The importer is responsible for all transportation and risks from the exporter’s warehouse to the final destination.
2. Free on Board (FOB): The exporter is responsible for loading the goods onto the ship at the port of origin. Beyond this point, all risks and responsibilities transfer to the importer.
3. Delivered Duty Paid (DDP): The exporter assumes full responsibility for delivering the goods to the customer’s location, including all transportation risks and costs.

This overview of entities, documents, and terms in international logistics underscores the complexity and interconnectivity of global trade, emphasizing the need for careful planning and coordination across various stages of the international shipping process.