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Chapter 18

Managing international supply chains. Chapter 18. Managing international supply chains. This chapter covers the following aspects: Distribution channels International goods transport International trade Customs departments Security issues Free-trade agreements and free-trade zones

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Chapter 18

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  1. Managing international supply chains Chapter 18

  2. Managing international supply chains • This chapter covers the following aspects: • Distribution channels • International goods transport • International trade • Customs departments • Security issues • Free-trade agreements and free-trade zones • International trade information requirements • International trade documents • Data to be submitted for international movement • Incoterms

  3. Distribution channels • Choice of a distribution channel • Complexity of technical requirements • Lifespan of the product • Price of the product • Service requirements • Turnover • Distributors* • Trading houses • * See Table 18.1

  4. Distribution channels (continued) • Government departments • Industrial buyers • Wholesalers • Retailers • Export agents* • * See Table 18.1

  5. Differences between distributors and export agents

  6. International goods transport • Sea transport • Overview of basic commercial ocean transport practice • Liner ship operations • Container • Break-bulk (including ro-ro) • Bulk • Tramp ship operations • Voyage • Time period

  7. International goods transport (continued) • Sea transport (continued) • Private ship operations • Lighter-aboard ship operations (lash) • Air transport • Background • Air parcel postal services • Express or courier services

  8. International goods transport (continued) • Air transport (continued) • Passenger services • Combi aircraft • Conventional cargo hold below passenger deck(s) • Freight carriers • Non-operating service providers • Airfreight forwarders • Overview • Freight handling • Guaranteed shipment time

  9. International goods transport (continued) • Non-operating service providers (continued) • International ship freight forwarders • Non-vessel operating common carriers (NVOCC) • Shipbrokers • Ship agents

  10. WTO is the only international organisation dealing with global rules of trade. Its aim is to ensure trade flows smoothly. Administers trade agreements Creates forum for trade negotiations Settles trade disputes Reviews national trade policies World Trade Organization (WTO)

  11. Series of trading agreements Consensus-based – not majority Flow into national agreements Multilateral Trading System

  12. Global trade has grown 6 per cent annually in last 50 years. Growth in global trade

  13. Helps keep trade flowing (removes trade disputes – a potential cause of wars) Disputes handled constructively Rules make trading simpler Free trade reduces costs Greater choice of products Trade raises incomes Stimulates economic growth More efficient Governments not lobbied as consensus Encourages good government WTO advantages

  14. Levy fees for imports (customs duties) Duties based on a Harmonised Tariff Code for each group of products Value of low or no import duties for growing trade (viz. Singapore) Statistical information captured to promote trade Security function: new addition Customs departments

  15. Theft and piracy – historical problems Terrorism new challenge – attacks since late 1990s around the world Balance now being sought between need to search everything and cost-effective trade No longer a domestic issue, but a global one Security

  16. First comprehensive programme – SOLAS (safety of life at sea) of IMO Added ISPS (international ship and port facility security) Mandatory – Government sets security levels for vessels flying its flag; master of vessel must maintain the level of security on vessel. Must have a security communications method to shore. Port facilities must be secure and assessed. Security programmes

  17. First was C-TPAT (customs-trade partnership against terrorism; USA 2001). WCO instituted SAFE Framework to identify reputable, responsible trading partners to allow safe and secure trade. From this came AEO (authorised economic operator; EU 2008): Company information Compliance to customs record Accounting and logistics systems Financial solvency Safety and security requirements Security programmes (continued)

  18. Australia – Frontline Singapore – Secure Trade Partnership Sweden – StairSec Jordan – Golden List Programme Other security programmes

  19. EU – 38 countries and growing in one union NAFTA - North American Free Trade Agreement SACU – Southern African Customs Union Free-trade agreements

  20. Lower tariffs between members Foster trade between local countries Often grow into an entity that promotes efficiency within the larger grouping of countries Free-trade agreements (continued)

  21. Allow goods to move into a zone with no customs duties and leave with no customs restrictions. Data is still kept by customs and movement monitored. In some cases incentives offered to create businesses or manufacturing facilities within such zones. Free-trade zones

  22. Common data and correct documentation are required in order to facilitate trade. International movements of goods involve: Exporter Importer Shipping company Freight forwarder Land transport Banks Exporting country’s regulatory agencies Importing country’s regulatory agencies Regulatory agencies of intermediate countries that goods pass through Trade information

  23. Duties to enter a country are based on: Harmonised Tariff Code, which attracts a certain percentage of the value of the goods The country where goods originate within an FTA, or with special anti-dumping tariffs Value of the goods Country of origin and country from which goods are shipped are not necessarily the same. Customs duties

  24. HS number is assigned in same way worldwide. Mug example: Highest level – liquid receptacle Next level – drinking purposes Next level – personal use Next level – mug HS number is made up of digits for each level to build up a nine-digit HS or HTS number to group goods. Harmonised Schedule or Tariff Code number

  25. ECCN: Export Control Classification Number – five-digit alpha-numeric code Identifies technology level and licensing requirements Licences: various goods require licences in various countries – Hazardous materials Electronic goods ECCN and licences

  26. Country in which the goods are made, or where the dominant value or value add is imparted to the goods May require local country certification Affects customs tariffs Country of origin

  27. International trade documents • Transaction documents • Export documents • Inspection documents • Insurance documents • Financial documents • Import documents • Transport documents

  28. Common documents in international trade • Customs declaration or commercial invoice • Packing list • Shipper’s letter of instruction • Bill of lading (or loading) (see next slide) • Dangerous goods certificate • Dock and master receipt

  29. Bills of loading (BOLs) • The following six BOLs are used: • Non-negotiable bill of lading • Negotiable bill of lading • Air waybill • Ocean bill of lading • Clean bill of lading • Claused bill of lading

  30. Exporter details Importer details For each HS Code: Material descriptions Quantity Value of each goods item and total Weight Licensing requirements Data for transactions base

  31. Extended information – more details for importer, exporter, buyer and seller, as follows: Who receives the goods when first entering a country (ship to partner) Location and who stuffed the container/created the load Consolidator of the load (forwarder?) Plus shipping details for: Vessel stow plan Container details and highest level of hazard for goods in the container Future requirements for data

  32. Incoterms • Introduction • Use of Incoterms • Organisation of Incoterms 2000 • The E term (see Figure 18.2) • The F terms (see Figure 18.3) • The C terms (see Figure 18.4) • The D terms (see Figure 18.5) • Description of Incoterms 2000 – Table 18.3

  33. The E term

  34. F terms

  35. C terms

  36. D terms

  37. Categories of Incoterms (1)

  38. Categories of Incoterms (2)

  39. Categories of Incoterms (3)

  40. Notes on Incoterms 2000 • Added wording • Appropriate contract • Customs of the port or trade • EDI • Export and import customs clearance • EXW and FCA

  41. Notes on Incoterms 2000 (continued) • Inspection • Insurable interest • Packaging • Passing of risks and costs • Precise point of delivery

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