An Overview of Ocean Transportation

1. Guam Chamber of CommerceSmall Business Focus & Development Committee presents: Shipping A-ZOctober 30, 2009Phillip Santos – Matson NavigationPaje Butler – DGX Ocean/Air Freight Lynwood Baker – JL Baker & Sons

2. An Overview of Ocean Transportation Section 1 • Profile of a Shipment • Financial Instruments • Selling Terms • Bill of Lading • Equipment Types

3. Section 2 • Equipment – Packing and Stowing • Calculating shipment size • Cargo Flow • US Trucking • Regulatory Agencies Section 3 • Air Cargo • Q & A

4. Profile of a Shipment – Export Profile • Shipper • Book shipments • Marks cargo plainly • Prepares B/L for movement of cargo to terminal • Make arrangements with Trucker • Motor Carrier or Trucker • Accepts cargo for transit to Port • Forwarder (if applicable) • Provides Dock Receipt and special permits, if any to delivering motor carrier

5. Profile of a Shipment • Terminal operator • Ingates container against booking number • Steamship company • Issues Ocean Bill of Lading to shipper or agent

6. Profile of a Shipment – Import Process • Steamship Company • Notifies consignee prior to ship’s arrival • Consignee or Broker • Obtains customs release, freight release, Dept. of Agriculture clearances before contacting trucker • Motor Carrier or Trucker • Obtains container(s) • Terminal Operator • Verifies cleared documents and issues container

7. Financial Instruments • Terms of SaleBuyer’s and Seller’s division of cost and risk • Responsibilities • Who will arrange and pay for carriage of the goods from one point to another? • Who will bear the risk if these operations cannot be carried out? • Who will bear the risk of loss of or damage to the goods in transit? • Frequently used Terms of Sale • Free on Board (FOB) • Cost and Freight (C&F) • Cost, Insurance and Freight (CIF)

8. INCOTERMS • A series of International sales terms published by the International Chamber of Commerce (ICC). • They are used to divide transaction costs and responsibilities between buyer and seller and reflect transportation practices • EXW (Ex-Works): Goods are made available for pick-up at the shipper/seller’s factory or warehouse and “delivery” is accomplished when the merchandise is released to the consignee’s carrier. • FCA or FOB (Free Carrier): Seller is responsible for arranging transportation, but is acting at the risk and the expense of the buyer. Seller chooses and works with the freight forwarder. “Delivery” is accomplished at a predetermined port or destination point and buyer is responsible for insurance. Selling Terms (Seller/Buyer Responsibility)

9. CFR (Cost and Freight): It is the shippers/seller’s responsibility to get the goods from their door to the port Of destination. “Delivery” is accomplished at this time. It is buyers responsibility to cover insurance from port of origin to buyers door. Given that the shipper is responsible for transportation, the shipper also chooses the carrier. CIF (Cost, Insurance and Freight): The shipper/ seller will insure the merchandise. The seller usually chooses the carrier. “Delivery” as with CFR, is accomplished at port of destination. DDP (Delivered Duty Paid): The shippers/seller is responsible for dealing with all the tasks involved in moving goods from the manufacturer, warehouse, or shippers door to buyer/consignee’s door. It is the shippers responsibility to insure the goods and absorb all costs and risks including the payment of duties, fees and taxes. DDU (Delivered Duty Unpaid): This arrangement is basically the same as DDP, except for the fact that the buyer is responsible for the duties, fees and taxes.

10. Financial Instruments • Terms of PaymentHow will the seller get paid? • Cash in Advance • Letter of Credit • Documentary payments • Open Account

11. Financial Instruments • Letter of CreditIssued by a bank at the buyer’s request in favor of the seller. It provides the issuing bank’s promise to pay a specified amount of money upon receipt by the bank of certain documents within a specified time.

12. Bill of Lading • B/L Functions:Roles and Uses • Legal Tool • Transportation document

13. Bill of Lading – Legal Tool Smith Inc LegalOwner Cruz Company

14. Bill of Lading – Financial Proviso Smith Inc Order of a Party Order of Shipper Order of Bank Cruz Company

15. Bill of Lading – Transportation Document • Contract of Carriage • Agreements between shipper and ocean carrier

16. Inside Dimensions Length x width x height Cubic Capacity CarryingCapacity Dry Containers 20’ Standard Reefer 18’ x 7’6” x 7’5” 1,002 ft. 30,563 lbs. 40’ Standard Reefer 38’ x 7’6” x 7’2” 2,069 ft. 57,590 lbs. 40’ High-Cube Reefer 38’ x 7’9” x 8’3” 2,340 ft. 56,800 lbs. Equipment Types 20’ Dry Standard 19’4” x 7’6” x 7’8” 1,172 ft. 62,330 lbs. 40’ Dry Standard 39’6” x 7’6” x 7’10” 2,387 ft. 59,460 lbs. 40’ Dry High-Cube 39’6” x 7’9” x 8’10” 2,686 ft. 59,040 lbs. 45’ Dry High-Cube 44’5” x 7’9” x 8’10” 3,030 ft. 57,200 lbs. Refrigerated Containers Open Equipment 40’ Flatrack 23’6” x 7’9” x 7’10” 1,972 ft. 56,950 lbs.

17. Section 2 • Equipment – Packing and Stowing • Calculating shipment size • Cargo Flow • US Trucking • Regulatory Agencies

18. Equipment – Packing and Stowing • Packing of goods

19. Equipment – Packing and Stowing • Stowing loads

20. Equipment – Stowing Loads

21. Equipment – Packing and Stowing • Reefer packaging requirements

22. Equipment – Packing and Stowing • Reefer stowage requirements

23. Equipment – Packing and Stowing • Securing load

24. How to compute the size of your shipment • In order to compute actual cubic feet, you will need to measure the length, width and height (in inches) of each piece to be shipped. • One cubic foot is equal to a single piece with the dimensions of 12" x 12" x 12". • To compute cubic feet, first multiply together all the dimensions for the piece being measured. • Then divide the total by 1728. • This calculation will give you your total amount of cubic feet for the piece. • Total the individual pieces "cubed" to determine your total shipment cube. • 12" X 12" X 12" = 1728 • 1728 / 1728 = 1 cubic foot or 12" X 12" X 12" = 1 cubic foot

25. Helpful hints in computing cubic feet • When taking your dimensions, round up to the next highest inch. Example: 11 ½" = 12". • Total cubic feet should always be rounded up. Example: 10.45 cubic feet = 11 cubic feet. • With multiple pieces of the same dimensions, multiply the total number of pieces along with the dimension. For example, 10 pieces at 12 x 12 x12 would be computed as follows: • 10 PCs X 12" X 12" X 12" = 17280 / 1728 = 10 cubic feet

26. To compute density cubic feet, divide the weight of shipment by 45 to ensure that the 45 lb. density rule cube does not exceed the actual cube. If it exceeds the actual cubic feet, you will be charged based on density. • The formulas used to convert weight and cube into metric for international shipment pricing are as follows: • International "less than container-load" (LCL) rates are quoted on a weight/measurements (w/m) -- revenue ton basis. • A revenue ton is defined as 1 cbm (m3) and/or 1000 kg. The basis for the calculation is whatever yields the greater revenue.

27. To calculate the cubic meters: • Follow steps to get cubic feet, divide cubic feet by 35.314 to determine cubic meters. • To determine weight in kilos divide gross weight by 2.2046. Every 1000 kilos is considered a one CBM. The higher of actual measurement of the cargo or 1 CBM for each thousand kilos is used to determine the CBM for billing purposes. • Shipments are always measured as tendered by the shipper, with the outer most dimensions inclusive of pallet, crating, banding or bundling to calculate volume.

28. U.S. Trucking • Trucking rates in the United Sates (also known as inland service) are based on Class Code, origin and destination. • Class codes are determined by the NMFC. Commodities are grouped into one of 18 classes—from a low of class 50 to a high of class 500—based on an evaluation of four transportation characteristics: density, stowability, handling and liability. Together, these characteristics establish a commodity’s “transportability.” • Trucking rates are given at a per 100 lb rate (cwt) basis. • Class 50 items are lower in cost to transport, then class 500 items.

29. Example • A shipment of bricks Class 50 at 1000 lbs which is very heavy, small in size and low value. The rate may be around $4.00 per 100 lbs. You would pay $40.00 • 1000 lbs divided by 100 lbs = 10 10 times $4.00 = $40.00 • A shipment of appliances Class 300 at 1000 lbs which can be very light, large in size and high value. The rate may be around $24.00 per 100 lbs. You would pay $240.00. • 1000 lbs divided by 100 lbs = 10 10 times $24.00 = $240.00

30. Cargo Flow - Discharge

31. Cargo Flow – Port of Guam Terminal

32. Cargo Flow – Container Availability • Port Free Time Demurrage • Carrier Free Time Detention

33. Regulatory Agencies • US Customs and Border Protection • 10 + 2 Program (for export from Guam to US) • US Department of Treasury/Office of Foreign Assets Control • US Coast Guard • Port Authority of Guam • Department of Transportation/DMV • Other • The Adherence Group (TAG) • Long Beach Clean Truck Program

34. Guam Customs & Quarantine What Customs wants from you? • 1) Commercial invoice listing seller, buyer, commodity, quantity and cost of goods, with a total invoice dollar amount in US$. • 2) A current valid Guam Business license. • 3) A BOL or freight bill. • 4) Their fees. Will Customs hold up your shipment? • 1) Shipments will be held if a Use Tax is due when arriving through the port authority of Guam. Air freight shipments will not be held, but the Use Tax must be paid to the Treasurer of Guam with in 14 days. • 2) Shipments will be held for a satellite inspection or physical inspection. • 3) Shipments will be held if specialized documents are requested. WPC, NOA, EPA release and quarantine inspection.

35. Section 3AIR CARGOIntroduction into Shipping by Air

36. Types of products shipped by Air • High Value Products • High-Tech ie. Microsoft, Hp, Dell, IBM etc. • Significant inventory carrying costs • Time Sensitive Shipments • Laptops, cell phones, periodicals, etc. • Medical Supplies • Critical Parts

37. Types of Air Services • Express (2-3 Days) • Deferred (3-7 Days) • Consolidated Services • Direct Service or Direct IATA • Charter Service

38. Types of Air Services - Continued EXPRESS • Serviced by Express Companies ie. UPS, DHL, FEDEX, TNT • Express Companies usually more aggressive when it comes to guarantees • Traditional Freight Forwarders, who use regularly scheduled commercial carriers do not always guarantee • Express is the highest priced air service DEFERRED • Consolidated Services (Consolidation) • Shipments from different shippers are grouped together and tendered to the airline as one shipment • The forwarder gets a much lower price because of the higher volume • Airport to Airport • Door to Airport • Door to Door

39. Types of Air Services – Cont’d DEFERRED • Direct IATA Service • When no consolidation service is available • Sometimes used for DG where contract rates are not available • This method is more expensive than consolidation but offers speedier service CHARTER • Many times a forwarder will help a customer charter an entire aircraft • The aircraft is completely at the customers disposal • All charges are normally paid in advance IATA: International Air Transport Association is an international trade body, created over 60 years ago by a group of airlines. IATA represents some 230 airlines comprising 93% of scheduled international air traffic. The organization also represents, leads and serves the airline industry in general

40. Moving Goods by Air Things to know before shipping your product into Guam AIRFREIGHT RATES • Basic cost of Airfreight • Charged per Kilogram (kg) Weight or Volume, whichever is greater, known as Chargeable Wt (dimensional weight) • Rates apply for movements from the airport of origin to the airport of destination. Pre-departure and post-arrival expenses are additional to the airfreight cost • Other additional expenses

41. AIRFREIGHT DOCUMENTATION • Air Waybills • Provides evidence of a contract of carriage between exporter and forwarder/carrier • Proof of receipt of goods for shipment • Unlike the ocean Bill of Lading, the AWB isn’t, when in your possession, a title to the goods

42. Customs Invoice • Commercial Invoice -Used in International Trade • Used as Customs Declaration provided by the shipper • No specific format BUT must include Shipper, Consignee, Qty, Description, Unit Price and Total Price

43. PACKAGING • Will your product withstand damage if other, heavier packages are stacked on top of your en route • Stabilize your goods within the packaging – use filling material, ie bubble wrap, peanuts • Pallets and wood packaging from foreign countries require treatment for infestation and marked to this effect • Size of package – Narrow body aircraft vs Wide body aircraft

44. Q & A Thank You!