The larger the operation, the more challenges it presents to a company’s logistics needs.
Determining who should handle logistics depends on both the buyer and seller’s relative and absolute sizes. The larger shipper should be able to offer lower rates; however, there is a bottom limit below which rates do not lower much with size.
If the smaller party is still a large shipper, the rates could be the same. Many large companies who are major exporters also prefer to be responsible for the inbound shipment of purchased goods; it increases its leverage with shippers.
In addition, some major suppliers operate their shipping department as a profit center so that money can be saved by handling the inbound logistics internally. Be sure to check your supplier’s proposed shipping costs against rates you obtain on your own. There is also a distinction between shipping and customs clearance operations.
Note: While it is sometimes better to let the supplier handle shipping, the buying company should handle customs clearance operations.
Freight Flow, Export Customs and Clearances
Understanding and mapping your freight flow is an essential prerequisite to making decisions on logistics operations handling.
The export customs process is routine and superficial in most countries. Essentially, it is a data collection effort. It is also an opportunity to check if militarily restricted articles are properly licensed.
However, there are a few countries where export customs can be difficult. Usually, these countries with high-income taxes lead companies to undervalue exports to move profit out of the exporting country.
Recently, more countries are charging “export duties.” They do this to replenish raw materials, such as wood, or raise the cost of exports due to criticism for exporting at too low a price. China is one example.
After clearing export customs, the goods are placed on a plane, ship, truck, or train. The carrier brings the goods to the port of entry controlled by the importing country’s customs operations. Customs clears the goods, and a local carrier delivers them to the buyer’s location.
Procedures for moving goods may vary. It may be held “in bond” across the importing country. It may later clear customs near (or even inside) the buyer’s factory or warehouse. Fortunately, reasonably priced services from various organizations may offer help in coordination through these many steps.
A freight forwarder, forwarder, or forwarding agent, is a person or company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution. In logistics, they provide various services, from arranging sea or air transport to generating shipping documentation. They also pick up goods at the supplier’s factory and deliver them to the port of export. Additionally, they send freight and shipping details to the receiver (e.g., freight numbers, arrival date & times or ship names.
Once goods have cleared customs in the buyer’s country, they notify the buyer to pick up the goods. Some forwarders can also deliver the goods from the port of import to the buyer.
Freight forwarders earn by negotiating shipping rates based on their total volume and selling space at a slightly higher price. Because one of the key functions of a freight forwarder is to pick up goods at the supplier and deliver them to a port, buyers normally choose a freight forwarder who is a major operator in the seller’s country.
These are usually local companies. Some names you will likely hear are Kintetsu World Express, Danzas-AEI, and Kuehne and Nagel. DHL, Fed Ex, and UPS have also entered the industrial freight forwarding business
The Customs Broker
A customs broker is a logistics expert responsible for ensuring that a shipment meets all standards and regulations for the import or export of goods. They can assist with all necessary documentation, duties, taxes, and payments.
The customs broker is another valuable link in the chain. Customs brokers provide advice on customs classification, fill out the forms necessary to clear goods through customs, pay duties for the importer and notify the importer that the goods are available.
Customs brokers are used extensively in North America and Asia, but not as much in Europe. The broker may be integrated with the freight forwarder or an independent company.
In the United States, large freight forwarders own major independent customs brokers. Because of this, customs brokerage is disappearing as an independent industry.
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