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Handout on Certificate course

In
International Logistics

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A general overview of India economy
India is the seventh-largest country in the world, with over a 1.2 billion people. It is bound by the Indian Ocean
in south, Arabian Sea in west, and by the Bay of Bengal in the east. India shares its borders with Pakistan to the
west, China, Nepal, and Bhutan to the northeast, and Myanmar and Bangladesh to the east. In the Indian
Ocean, Sri Lanka and the Maldives are in the vicinity of India. India's Andaman and Nicobar Islands share a
maritime border with Thailand and Indonesia.

It has an area of 3287263 square kilometre (1269346square miles), extending from the snow-covered
Himalayan heights to the tropical rain forests of the south. It measures 3,214 km from north to south between
and about 2,933 km from east to west. It has a land frontier of about 15,200 km. The total length of the
coastline is 7,516 kilometres.

A country’s economy is measured by gross domestic product (GDP). GDP means the total value of all the
services and goods that are produced within the territory of the nation during the specified period of time.
Per-capita means per-person of the country’s population.

Per capita GDP - Is the value of all final goods and services produced within a nation in a given year, converted
to U.S. dollars and then divided by the country’s’ population This is often considered an indicator of a country's
standard of living, but is not a measure of personal income.

India's diverse economy encompasses traditional village farming &modern agriculture, handicrafts, a wide
range of modern industries, and a multitude of services. Slightly less than half of the workforce is in
agriculture, but services are the major source of economic growth, accounting for nearly two-thirds of India's
output but employing less than one-third of its Labour force. India has become a major exporter of information
technology services, business outsourcing services, and software workers. So, let’s discuss the three major
sectors of the Indian economy i.e. 1. Agriculture, 2. Industrial sectors and Services Sector

Agriculture Sector
Agriculture and allied sectors like forestry, logging and fishing accounted for 18 % of the GDP in 2016,
employed 60% of the total workforce and despite a decline of its share in the GDP, is still the largest economic
sector and plays a significant role in the overall socio-economic development of India. India is the largest
producer of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper. It also has the world's largest
cattle population (193 million). It is the second largest producer of wheat, rice, sugar, groundnut and inland
fish. It is the third largest producer of tobacco. India accounts for 10% of the world fruit production with first
rank in the production of banana and sapota, also known as chiku or sapodilla.

Industrial Sector

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India’s manufacturing sector saw major growth with diverse companies including those engaged in
manufacturing of machinery and equipment, electrical and metal products, cement, building and construction
material, rubber and plastic products and automation technology products. India is tenth in the world in
factory output. Manufacturing sector, in addition to mining, quarrying, electricity and gas accounts for 29 % of
the GDP and employs 17% of the total workforce. Petroleum, Chemicals Pharmaceuticals, Engineering items,
Automobile& Tyres, Gems & jewellery, Textile, Mining, Iron and steel, Paper products, Fruit pulp are few major
products that are domestically produced for local and international markets.
Mining & quarrying is yet another sector that gives the nation a major thrust in growth. Coal, iron ore, bauxite
manganese, mica, titanium, chromites, natural gas, magnetite, limestone, dolomite, barytes, kaolin, gypsum,
apatite, phosphorite, steatite, and fluorite are few the mining products available in India.

Services Sector
The areas of Service sector are Shipping, Logistics, Aviation, Banking and Financial service, Insurance, Retail,
Electricity sector, Infrastructure, Retail, Tourism, Construction, Education, Entertainment industry, Healthcare,
Printing, Telecommunications, Information Technology and Business-process-outsourcing
India is fifteenth in services output in the world. In the last 2 decades, service industry has seen good growth in
demand from foreign consumers, for service exports and for business-process-outsourcing operations.
Asia and the world got linked by the undersea fibre optic cable which was huge investment brought by the
internet bubble of 2000.This development resulted in widely available low-cost communications
infrastructure.

The availability of young employable talent resulted in India becoming the centre for outsourcing of Business
process. Within this sector the ITES-BPO sector has become a big employment generator especially amongst
young college graduates. The number of professionals employed by IT and ITES sectors was estimated at
around 1.3 million as of March 2006. Also, Indian IT-ITES is estimated to have helped create an additional 3
million job opportunities through indirect, induced and in helpful manner have created employment.

Information technology in India is an industry consisting of two major components: IT services and business
process outsourcing (BPO). The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.5%
in 2012. According to NASSCOM, the sector aggregated revenues of US$160 billion in 2017, with export
revenue standing at US$99 billion and domestic revenue at US$48 billion, growing by over 13%. USA accounts
for more than 60 per cent of Indian IT exports

More growth being paved by Logistics sector

The Global Ranking of the World Bank ‘s 2016 Logistics Performance Index shows that India jumped to 35th
rank in 2016 from 54th rank in 2014 in terms of overall logistics performance. Logistics sector provides
employment to more than 22 million people.

Logistics market in India is expected to be worth US$ 307 billion by 2020.India spends around 14.4% of its GDP
on logistics and transportation as compared to less than 8% spent by the other developing countries. CHAM).
The Cargo and Logistics Industry in India can expect to grow at CAGR of 16% in the coming years with inflow of
new investments that in turn will create new opportunities for the logistics sector. The growth of the Cargo
and Logistics industry will not only contribute to the GDP, but will also generate employment opportunities.

Transportation by sea
Is considered the most economical means to move large quantities of merchandise between various countries.
Ninety percent of cargo of the Global trade is moved by Ships. Various export-oriented countries have shown
more than 5 to 6 percent growth in their economy due the support of the shipping industry that made them
reach wider markets of the World. It will not be an exaggeration to say that the World will come to a
“standstill” with the Shipping Industry.

Types of Ships
A cargo ship is a vessel that carries cargo, goods, and materials from one port to another. There different types
of like i.e. 1. Bulk, 2. Breakbulk, 3. Tankers vessels 4. Containerships and 5. Roll on/Roll-off vessels. Although

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these segments belong to the same industry, each carries out different tasks and has a very different
character.

1. Bulk Ships: Cargoes like iron ore, coal, steel scrap, bauxite, cement, urea, sulphur and food grain are
carried by the bulk shipping. This cargo cannot be packed and is in bulk or mass form. It is continuous
& homogeneous.
2. Break Bulk Ships: Also called as General Cargo - Break bulk cargo is transported in bags, boxes, crates,
drums, casks; barrels bales paper reels, steel girders and motor vehicles. Unit loads of items secured
to a pallet or skid are also used. Generally, they carry manufactured goods. These typically are
material stacked on pallets and lifted into and out of the hold of a vessel by cranes on the dock or
aboard the ship itself.
3. Tankers: This is a type of ship designed to transport liquids or gases in bulk. Major types of tank ship
include the oil tanker, the chemical tanker, and gas carrier. Examples of such cargoes are, Crude Oil
LPG, LNG, Chlorine, Ammonia, Sulphuric acid, Phosphoric acid, Palm oil, Vegetable oils, Methanol and
Styrene.
4. Container ships: Are common carriers that use 20 Foot and 40 Foot containers that are stuffed with
cargo to transport cargoes from part of the world to another. Since 1960’s Containerization
revolutionized maritime transport industry. Containerized cargo includes everything from general
cargo, textiles, Pharma, tyres, agricultural products, electronic gadgets, furniture, electrical fittings,
glass, plastics goods, luggage’s, steel forgings, paper, granites, auto parts, machinery, manufacturing
components to shoes and toys to frozen meat and seafood and all types liquid cargo too. There are
about 5224 containerships in the world
5. Roll on-Roll off (RORO) ships: are vessels designed to carry wheeled cargo, such as cars, trucks, semi-
trailer trucks, trailers, and railroad cars, which are driven on and off the ship on their own wheels or
using a platform vehicle, such as a self-propelled modular transporter.

Nature of Shipping Services: a. Liner Trade and b. Tramp Services


Cargo ships fall into two major patterns, that reflect the services they offer to industry i.e. a. Liner Trade and b.
Tramp services. Those on a fixed published schedule and route are called Liner Service. Tramp ships do not
have fixed schedules. Generally, the smaller shipping companies and private individuals operate tramp ships.
Each trip a liner takes is called a voyage. Liners mostly carry general cargo.

a. Liner Trade: It is a service that operates within a schedule and has a fixed port rotation with published dates of calls at
the advertised ports. Typically (but not exclusively) container vessels (wherein "general cargo" is carried in 20 or 40-foot
containers), operating as "common carriers", calling a regularly published schedule of ports is called as Liner Service. A
common carrier refers to a regulated service where any member of the public may book cargo for shipment, according to
long-established and internationally agreed rules.

b. Tramp Services or tramper or a Tramp vessel on the other hand is a ship that has no fixed routing or itinerary
or schedule and is available at short notice (or fixture) to load any cargo from any port to any port. It will go
wherever a suitable cargo takes it.

India has 12 Major ports that handle large volume of traffic. These are Chennai Port, Cochin Port, Jawaharlal
Nehru Port, Kamarajar (Ennore) Port, Kandla Port, Kolkata & Haldia Port, Mormugao Port, Mumbai Port, New
Mangalore Port, Paradip Port, V.O Chidambaranar Port and Vishakhapatnam. Port Blair is added in major ports
recently. Krishnapatnam a new private Port in Andhra Pradesh has emerged in the recent past. India has a
coastline spanning 7516.6 kilometres, forming one of the biggest peninsulas in the world.

According to the Ministry of Shipping, around 95 per cent of India's trading by volume and 70 per cent by value
is done through maritime transport. It is serviced by 12 major ports mentioned here

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There are 200 notified minor and intermediate ports in the following States:- Maharashtra (48); Gujarat (42);
Tamil Nadu (15); Karnataka
(10); Kerala (17); Andhra
Pradesh (12); Odisha (13); Goa
(5); West Bengal (1); Daman
and Diu (2); Lakshadweep (10);
Pondicherry (2); and Andaman
& Nicobar (23).

Government of India plans to


modernise these ports and has
approved a project called
Sagarmala which is a strategic
and customer-oriented
initiative of the Government of
India to modernize India's
Ports. The Ports and shipping
industry in India play a vital role in sustaining growth in the country’s trade and commerce. The Indian
Government has allowed Foreign Direct Investment (FDI) of up to 100 per cent under the automatic route for
port and harbour construction and maintenance projects. The government has also initiated National Maritime
Development Programme (NMDP), an initiative to develop the maritime sector with a planned outlay of US$
11.8 billion.

Chennai port is second largest and third oldest port in India. It is considered as a big hub for cargo traffic, for
cars & containerized shipment on east coast of India. Chennai port is known for its Coastal breakwater,
artificial, large seaport type of harbour. Jawaharlal Nehru port is the largest container port in India and is also
known by Nhava Sheva. It is situated in Maharashtra (Mumbai). It accounts for more than half of total
container volumes handled at India’s 12 public ports and around 40 percent of the nation’s overall
containerized ocean trade.

We will discuss in
detail about the
cargoes that
moves by
containers and
the basic
operations and
work process
involved in the
logistics of
containerized
cargo

General cargo moving by Containers


The major commodities exported from India are - Garments, Textiles, Home furnishings, Tyres, Footwear,
Granites, Tobacco, Automobile, Rice, Spices, Chillies, Tractors, Casting, Steel forgings, Paper products, Float
glass, Coffee, Tea, Mango pulp, Plastics goods, Handicrafts, Artware, Brassware, Jute, Cotton yarn, Buffalo
meat and seafood.

The major commodities imported into India from other countries are- Machinery, Electronic gadgets,
Automobile spare parts, Soda Ash, Steel, ,Garment, Accessories, Newsprint, Timbers, Soft luggage, School
Bags, Chemicals, Paints, Dyestuff, Fruits, Resins, Electrical items, Rubber, Carbon black, Sports goods, Polyester
fabrics, Wet blue hides, Wattle extract.

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Dangerous Cargo moving by containers
The International Maritime Organization (IMO) has created two Convention, 1. SOLAS -International
Convention for the Safety of the Life at Sea and 2. MARPOL - International Convention for the Prevention of
pollution from Ships, for governing the Carriage of dangerous goods and marine pollutants in sea-going ships.
To supplement the principles laid down in the SOLAS and MARPOL Conventions, the IMO developed the
International Maritime Dangerous Goods (IMDG) Code. The IMDG code contains detailed technical
specifications to enable dangerous goods to be transported safely by sea.
For all modes of transport (sea, air, rail, road and inland waterways) the classification (grouping) of dangerous
goods, by type of risk involved, has been drawn up by the UNITED NATIONS Committee of Experts on the
Transport of Dangerous Goods (UN), which are as follows.
1. Explosives, 2. Gases, 3. Flammable liquids, 4. Flammable solids, 5. Oxidizing Substances& organic peroxide,
6. Toxic and infectious substances, 7. Radioactive material, 8. Corrosive substances, 9. Miscellaneous
dangerous substances and articles

When an exporter wants to make a booking with a shipping line, he must provide the proper classification
which is the IMDG Number, UN Number, Proper shipping name (PSN)
Company Cargo Declaration should be given, with full details of cargo, the contact-person details for
emergency (from exporter & importer side). Finally, the exporter should also submit a Material safety data
sheet, known as MSDS certificate. The nature of packing with proper mark, label or placard dangerous goods
should also be submitted by an exporter. Unless all these required details are submitted by an exporter you
should not accept to carry their cargo.

Reefer Container Cargoes


Perishable cargoes which require temperature-controlled transportation such as fruit, meat, fish, prawns,
lobster, squids, vegetables, dairy products and few chemicals are known as Reefer cargoes. Refrigerated
containers are capable of controlling temperature ranging from -65C up to 40C.Each cargo require different
temperature for maintaining its freshness, so all shipping lines have individual policy with regard to this and an
exporter has to abide by that, in his own interest for safe carriage and delivery of his value-able cargo to his
buyer. While a reefer is equipped with an integral refrigeration unit, they rely on external power, from
electrical power points (“reefer points”) at a land-based site, a container ship or on the quay. When being
transported over the road on a trailer they can be powered from diesel powered generators ("gen sets") which
attach to the container while on the road journey. While on the ship, the reefer goes through air-cooling and
water cooling or usually combined. Air cooling removes the heat generated by the reefers while water cooling
helps to minimise the heat produced by the reefers.

Out of Gauge Shipment - Special containers


Any cargo which exceeds the internal dimensions of a container by length, width or height is called as OOG
cargo. Such cargoes cannot be stuffed inside a standard size of containers Depending on its dimensions, O.O.G.
cargo is loaded on an open top or flat rack containers. The weight of cargo should not exceed 45 tons. All
shipping Line charges an OOG surcharge for lost slots or killed slots. After all, wherever goods protrude, no
other containers can be loaded. The cargo should be properly lashed and lashing certificate for same must be
insisted for accepting the booking. Depending upon the type, size, and nature of the cargo, a shipping line may
require loading and on deck stowage. Proper planning and survey should be done in handling the cargo. A
detailed load plan should be done for an optimal handling before loading, during the voyage and after
discharge.

Types of Containers
1. General Purpose Dry container: 20 Feet and 40 Feet, 40 High-cube and 45 Feet
2. Open Top Containers: 20 Feet Open top, 40 Feet Open tops: for out of gauge shipment
3. Flat Racks: 20 Feet and 40 Feet: for out-of-gauge cargo like vehicles, machinery or industrial equipment
4. Open sides in 20 Feet or 40 feet may be used for vegetables such as onions and potatoes.
5. Tank containers transport many types of liquids such as chemicals, wine and vegetable oil.
6. Reefers in 20 & 40 refrigerated containers for meat, seafood chemicals, dairy products and Pharma products

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All container moving by sea have certain dimension in it and they have to understood to have a better
information about how to use them in international logistics.

20′ container 40′ container 40′ high-cube 45′ high-cube


SPECIFICATION
Feet Meter Feet Meter Feet Meter Feet Meter
Lengt
20′0″ 6.058 m 40′ 0″ 12.192 m 40′ 0″ 12.192 m 45′ 0″ 13.716 m
h
Externa
Width 8′ 0″ 2.438 m 8′ 0″ 2.438 m 8′ 0″ 2.438 m 8′ 0″ 2.438 m
l
Heigh
8′ 6″ 2.591 m 8′ 6″ 2.591 m 9′ 6″ 2.896 m 9′ 6″ 2.896 m
t
Lengt
19′ 3″ 5.867 m 39′ 5  45⁄64″ 12.032 m 39′ 4″ 12.000 m 44′ 4″ 13.556 m
h
Internal Width 19
7′ 8   ⁄32″ 2.352 m 19
7′ 8   ⁄32″ 2.352 m 7′ 7″ 2.311 m 19
7′ 8   ⁄32″ 2.352 m
Heigh
7′ 9  57⁄64″ 2.385 m 7′ 9  57⁄64″ 2.385 m 8′ 9″ 2.650 m 8′ 9  15⁄16″ 2.698 m
t
Width 7′ 8 ⅛″ 2.343 m 7′ 8 ⅛″ 2.343 m 7′ 6" 2.280 m 7′ 8 ⅛″ 2.343 m
Door Heigh
7′ 5 ¾″ 2.280 m 7′ 5 ¾″ 2.280 m 8′ 5″ 2.560 m 8′ 5  49⁄64″ 2.585 m
t
Internal volume
1,169 ft³ 33.1 m³ 2,385 ft³ 67.5 m³ 2,660 ft³ 75.3 m³ 3,040 ft³ 86.1 m³
CFT/CBM
Empty weight
of Container
4,850 lb 2,200 kg 8,380 lb 3,800 kg 8,598 lb 3,900 kg 10,580 lb 4,800 kg
(Pound/Kilogram
)
Cargo Weight 28,200 k 26,200 k 58,598 l 26,580 k 25,600 k
61,289 lb 57,759 lb 55,559 lb
(Payload) g g b g g
Total Load 30,400 k 30,400 k 68,008 l 30,848 k 30,400 k
66,139 lb 66,139 lb 66,139 lb
Weight g g b g g

Sales and Pricing Strategies in Container Shipments


Customer – Is an exporter, importer or a freight forwarder to a shipping line. When the freight is “prepaid” at
origin port in an export shipment (which normally known as CIF), When the freight rate is on “to collect”
(which here is referred to as FOB), then the decision maker is the importer. When a direct exporter does not
have sufficient volumes, he approaches a freight forwarder who has a contract with the shipping line. The
freight forwarders make a small margin as his “profit” for this service. Besides this a freight forwarder also
offers solution to an exporter/importer on all landside activity requirements, like inland transportation,
customs clearance, warehousing and other value-added activities.

A freight forwarder is also a customer to the shipping line. A forwarder signs a rate-contract with shipping line
(based on the volumes of various exporters/importers) and commits a certain volume of container to be
shipped in a stipulated period. This is called as a service contract.

As a sale-person you have to first determine decision maker, to get your sales. The step prior to this to identify
customers, who has to be taken either from previous sales-records or by checking various trade directories,
There are also various trade bodies and councils, from who list exporters/importers can be obtained.

Pricing structure of shipping lines – At the Country level, all shipping lines have Corporate Pricing & Trade
Management desks, who offer the rates and contracts to their customers. The bridge between corporate desk
and customers are the sales departments in each branch. Every sales-person in the sales-department is
allotted certain set of customers, from whom a definitive target volume has to be achieved by the sales-
person. The sales-manager is responsible for the branch sales performance. This is a basic sales organisation
structure in most of the shipping lines.
The price which the customer is looking for is called as Freight or Rate. Whenever a customer needs a rate for
a particular business, a pricing-request is sent by the sales-person to the corporate desk, which then approves
or gives a counter offer. This offer is then negotiated by the salesperson with the customer and a conclusion is
reached on the business. General rate increases are announced by most of the shipping lines from time to time

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and this is also factored in the pricing strategy, based on the volumes performed by the customer with the
shipping line. Besides above

Full Container Load


FCL is an ISO standard container that is loaded and unloaded under the risk and account of one shipper and
only one consignee. In practice, it means that the whole container is intended for one consignee. FCL container
shipment tends to have lower freight rates than an equivalent weight of cargo in bulk. FCL is intended to
designate a container loaded to its allowable maximum weight or volume, but FCL in practice on ocean freight
does not always mean a full payload or capacity - many companies will prefer to keep a 'mostly' full container
as a single container load to simplify logistics and increase security compared to sharing a container with other
goods.

Less-than Container Load


LCL is a shipment that is not large enough to fill a standard cargo container. In LCL quantities of material from
different shippers or for delivery to different consignees and sometime different destinations carried in a single
container. This container is taken to common transhipment, en-route for sorting & redistributing into different
containers to reach the final destination.
LCL is "a quantity of cargo less than that required for the application of a FCL rate. A quantity of cargo less than
that fills the visible or rated capacity of a container." It can also be defined as "a consignment of cargo which is
inefficient to fill a shipping container. It is grouped with other consignments for the same destination in a
container at a container freight station".

The Birth of "INTERMODALISM"


Intermodalism is a system that is based on the theory that efficiency will be vastly improved when the same
container, with the same cargo, can be transported with minimum interruption via different transport modes
from an initial place of receipt to a final delivery point many kilometres or miles away. That means the
containers would move seamlessly between ships, trucks and trains
To realize intermodal cargo transport, all areas of the transport chain had to been integrated. It was not simply
a question of putting cargo in containers. The ships, port terminals, trucks and trains had to been adapted to
handle the containers.

Although the world economy is highly dependent today on the efficiencies brought about by modern
containerization, this method of transporting goods internationally is just decades
Modern container shipping celebrated its 50th anniversary in 2006. Almost from the first voyage, use of this
method of transport for goods grew steadily and in just five decades, containerships would carry about 60% of
the value of goods shipped via sea.

Container freight station

Container freight station (CFS) is a common user facility with public authority status equipped with fixed
installations and offering services for handling and temporary storage of import/export laden and empty
containers carried under customs control and with Customs and other agencies competent to clear goods for
home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright
export. Trans-shipment of cargo can also take place from such stations’ is a place where containers are stuffed,
de-stuffed and aggregation/ segregation of export/import cargo take place. This is more so when the ports are
facing congestion at their premises.

A CFS is an extended arm of Port/ ICD/Air cargo Complex, where import/ export goods are kept till completion
of their examination and clearance. The imported goods can be immediately shifted from the port to CFS
which also helps in the reduction of port congestion. All the activities related to clearance of goods for home
consumption, warehousing, temporary admissions, re-export, temporary storage for onward transit and
outright export and trans-shipments take place from such stations. Therefore, clearance of goods from CFS is
an important point of consideration for trade in respect of export/ import Cargo as it is the final Customs
contact point.

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Functions of CFS
• Receipt and dispatch/delivery of cargo.
• Stuffing & De-stuffing of containers and Reworking of containers
• Transit operations by rail/road to and from serving ports.
• Customs clearance.
• Consolidation and desegregation of LCL cargo.
• Temporary storage of cargo and containers.
• Maintenance and repair of container units.

Benefits of CFS
• Concentration points for long distance cargoes and its unitization.
• Service as a transit facility.
• Customs clearance facility available near the centres of production and consumption
• Reduced level of demurrage and pilferage.
• No Customs required at gateway ports.
• Issuance of through bill of lading by shipping lines, hereby resuming full liability of shipments.
• Reduced overall level of empty container movement.
• Competitive transport cost and • Reduced inventory cost

ICD & Usage


The other way ICD is called as a Dry Port. So, wherever the Port is not in a close proximity the government of
India has to issue a notification under section 7 of Customs Act 1962 for selecting place as ICD for unloading of
import goods and the loading of export goods or any class of such goods. The importers would get clearance of
imported goods at the nearest point to their factory/premise. Equally, it is helpful for exporters as they can
export the goods from the nearest point of their factory/premises. In order to provide this facility, some
statutory conditions are to be fulfilled and necessary infrastructure provided.

After issue of such notification, the Commissioner of Customs, having jurisdiction over that place issues a
notification under Section 8 of the Customs Act, 1962 approving proper places for loading and unloading of
goods and also specify the limits of Customs area and port of Discharge / Delivery Customs Officers and staff to
attend to work.

The Primary Function of CFS & ICD’s are


• Stuffing or De-stuffing of the Cargo
• Customs Clearance
• Consolidate or De-Segregations of the cargos
• Temporary storage of the cargo & containers
• Re-working of Containers
• Maintenance & Repair of the container units
• Transit operation by Rail Road to and from serving ports, etc.

The Primary Benefits of CFS & ICD’s are


• Service as transit facility
• No customs are required at Gate Way Ports.
• Reduced level of Demurrage and pilferage
• Reduced Inventory cost.
• Competitive Transport Cost.
• Reduced overall empty containers movements, etc.

Bills of Lading issued by a Shipping Line


1. Bill of Lading: A bill of lading (sometimes abbreviated as BL) is a document issued by a Shipping Line to
acknowledge receipt of cargo for shipment. A bill of lading must be negotiable, and serves three main
functions:

 It is a conclusive proof of receipt of cargo by the shipping line or the carrier.


 It is an evidence of the terms of the contract of carriage.

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 It serves as a document of title to the goods.
 It is transferable by endorsement (or by lawful transfer of possession)

Bill of lading is a crucial document used in international trade to ensure that exporters receive payment
and importers receive the merchandise. The principal use of the bill of lading is as a receipt issued by the
carrier once the goods have been loaded onto the vessel. This receipt can be used as proof of shipment for
customs and insurance purposes, and also as commercial proof of completing a contractual obligation,
especially under Incoterms such as CFR (cost and freight) and FOB (free on board).

Air freight
This is ideal for time-sensitive and high value cargo that needs to be delivered in the fastest time. Air freight
forwarders use this mode of transport when an exporter wants to send his goods to his buyer at the earliest
possible time. Though this is the most expensive mode of transport, still freight forwarder uses it when they
are time pressed for delivery schedule to reach the cargo at the destination to a buyer.
A forwarder would suggest to a customer to use air freight, when the cargo is perishable in nature and is
required urgently and which could be high value. The following types of cargo fall in air freight category.

 Live animals, hatching eggs, human organs, human remains, medical supplies
 Express Parcels and commercial cargo requiring urgent delivery, including SAMPLE items
 Perishables (food, flowers, dry-ice shipments)
 Pharmaceuticals and life-saving drugs
 Valuables &Vulnerable goods like (money, gold bars, diamonds, electronics, fashion goods)
 Technical supplies (high tech, oil & gas, aerospace, automotive, ship spares, exhibition cargoes)

Service options in air freight


The main trade routes for air freight are the same as those for sea freight and to a limited extent sea and air
are competing for the same traffic. Air cargo is carried either in the cargo compartments of passenger aircraft
operating scheduled services or in dedicated freighter aircraft. Freighter airplanes are crucial to the overall
health of the air cargo industry. Dedicated freighters provide reliable capacity to shippers of general cargo,
mail and express packages, and cargo that cannot be accommodated in passenger airplane lower holds.

Air cargo Containers


International Air Transport Association (IATA), air cargo carriers and container manufacturers have
standardized the air freight containers. It should be noted that there are many aircraft types and many more
aircraft cargo configurations. Each aircraft and configuration may require customized containers. Here, we
have given illustrations and specifications of the most common containers in use today. Many of these
containers can be used in multiple aircraft.
ULD (Unit Load Devices) - While in the ocean freight cargo business the word "container" is widely accepted,
in the air freight cargo business the proper term is "unit load device", or more commonly ULD. However, both
terms are used.
ULD Markings - According to IATA all ULDs must carry the following marking information: 1) ULD Type Code, 2)
Maximum Gross Weight (MGW) in kilograms and pounds and 3) The actual Tare Weight (TARE) in kilograms
and pounds.
Air freight Station
Air freight station (AFS) is an extension of the airport or an off-terminal facility where all import & export
formalities can be completed without hassles for the customer.
AFS is a facility that is created to move air import cargo from the aircraft to the AFS directly, where the unit
load device (ULD) can be emptied and customs clearance done, for the buyer to take delivery of the cargo from
the AFS instead of at the cargo terminal at the airport. This helps in decongesting the gateway airports which
has witnessed increased volume of cargo in the past few years. Airlines and Freight forwarders can choose the
AFS as a final destination for cargo delivery.
For exports the process is reverse. The cargo brought by the exporter to the AFS is custom cleared at AFS itself
and can be stuffed in the ULD. The ULD can then be moved to the airport for loading directly on to the aircraft.
The security screening is alone done at airport before loading the ULD cargo on to the aircraft.

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Methods of Payment in Foreign trade
To succeed in today’s global marketplace and win sales against foreign competitors, exporters must offer their
customers attractive sales terms supported by the appropriate payment methods. Because getting paid in full
and on time is the ultimate goal for each export sale.

An appropriate payment method must be chosen carefully to minimize the payment risk while also
accommodating the needs of the buyer. As shown in the table below there are five primary methods of
payment for international transactions. During or before contract negotiations, you should consider which
method in the figure is mutually desirable for you and your customer.

  Least Secure Less Secure More Secure Most Secure


Exporter Consignment Open Account Documentary Letters of Credit Cash-in-Advance
Collections
Importer Cash-in-Advance Letters of Credit Documentary Open Account Consignment
Collections

Key Points

 International trade presents a spectrum of risk, which causes uncertainty over the timing of payments
between the exporter (seller) and importer (foreign buyer).
 For exporters, any sale is a risk until payment is received.
 Therefore, exporters want to receive payment as soon as possible, preferably as soon as an order is
placed or before the goods are sent to the importer.
 For importers, any payment is a donation until the goods are received.
 Therefore, importers want to receive the goods as soon as possible but to delay payment as long as
possible, preferably until after the goods are resold to generate enough income to pay the exporter.

1. Cash-in-Advance
With cash-in-advance payment terms, an exporter can avoid credit risk because payment is received before
the ownership of the goods is transferred. For international sales, wire transfers and credit cards are the most
commonly used cash-in-advance options available to exporters. With the advancement of the Internet, escrow
services are becoming another cash-in-advance option for small export transactions. However, requiring
payment in advance is the least attractive option for the buyer, because it creates unfavourable cash flow.
Foreign buyers are also concerned that the goods may not be sent if payment is made in advance. Thus,
exporters who insist on this payment method as their sole manner of doing business may lose to competitors
who offer more attractive payment terms.

2. Open Account

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An open account transaction is a sale where the goods are shipped and delivered before payment is due,
which in international sales is typically in 30, 60 or 90 days. Obviously, this is one of the most advantageous
options to the importer in terms of cash flow and cost, but it is consequently one of the highest risk options for
an exporter. Because of intense competition in export markets, foreign buyers often press exporters for open
account terms since the extension of credit by the seller to the buyer is more common abroad. Therefore,
exporters who are reluctant to extend credit may lose a sale to their competitors. Exporters can offer
competitive open account terms while substantially mitigating the risk of non-payment by using one or more
of the appropriate trade finance techniques covered later in this Guide. When offering open account terms,
the exporter can seek extra protection using export credit insurance.

3. Consignment basis
Consignment in international trade is a variation of open account in which payment is sent to the exporter only
after the goods have been sold by the foreign distributor to the end customer. An international consignment
transaction is based on a contractual arrangement in which the foreign distributor receives, manages, and sells
the goods for the exporter who retains title to the goods until they are sold. Clearly, exporting on consignment
is very risky as the exporter is not guaranteed any payment and its goods are in a foreign country in the hands
of an independent distributor or agent. Consignment helps exporters become more competitive on the basis
of better availability and faster delivery of goods. Selling on consignment can also help exporters reduce the
direct costs of storing and managing inventory. The key to success in exporting on consignment is to partner
with a reputable and trustworthy foreign distributor or a third-party logistics provider. Appropriate insurance
should be in place to cover consigned goods in transit or in possession of a foreign distributor as well as to
mitigate the risk of non-payment

5. Documentary Collections (D/C)


A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of the payment
for a sale to its bank (remitting bank), which sends the documents that its buyer needs to the importer’s bank
(collecting bank), with instructions to release the documents to the buyer for payment. Funds are received
from the importer and remitted to the exporter through the banks involved in the collection in exchange for
those documents. D/Cs involve using a draft that requires the importer to pay the face amount either at sight
(document against payment) or on a specified date (document against acceptance). The collection letter gives
instructions that specify the documents required for the transfer of title to the goods. Although banks do act as
facilitators for their clients, D/Cs offers no verification process and limited recourse in the event of non-
payment. D/Cs is generally less expensive than LCs.

a. Document against acceptance: The documents attached to the draft (bill) drawn by the exporter
and needed to obtain goods are deliverable to the importer only after he/she has accepted the
draft for payment later.
b. Document against payment: The documents attached to the draft (bill) drawn by the exporter
and needed to obtain goods are deliverable to the importer only after he/she has paid the draft.

5. Letters of Credit
Letters of credit (LCs) are one of the most secure instruments available to international traders. An LC is a
commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the
terms and conditions stated in the LC have been met, as verified through the presentation of all required
documents. The buyer establishes credit and pays his or her bank to render this service. An LC is useful when
reliable credit information about a foreign buyer is difficult to obtain, but the exporter is satisfied with the
creditworthiness of the buyer’s foreign bank. An LC also protects the buyer since no payment obligation arises
until the goods have been shipped as promised.

 A letter of credit, often abbreviated as L/C, and also referred to as a documentary credit, is a document
issued by a financial institution which essentially acts as an irrevocable guarantee of payment to a
beneficiary
 A commercial letter of credit is a contractual agreement between a Commercial Bank, known as the
issuing
When a bank, on behalf of one of its customers, authorizing another bank, known as the advising or
confirming bank, to make payment to the beneficiary. The issuing bank, on the request of its customer,

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opens the letter of credit. The issuing bank makes a commitment to honor drawings made under the
credit. The beneficiary is normally the provider of goods and/or services.

 Elements of Letter of Credit


 Applicant (importer)
 Beneficiary (exporter)
 Issuing Bank (importer’s bank)
 Advising Bank
 Confirming Bank
 Negotiating Bank (usually exporter’s bank)
 A payment undertaking given by a bank (issuing bank)
 On behalf of a buyer (applicant)
 To pay a seller (beneficiary) for a given amount of money
 On presentation of specified documents representing the supply of goods
 Within specified time limits
 Documents must confirm to terms and conditions set out in the letter of credit
 Documents to be presented at a specified place

 Characteristics of LC
 Negotiability
 Revocability
 Transferability
 At Sight & Usance

 Types of LC
1. Irrevocable / Revocable
2. Confirmed / Unconfirmed
3. Revolving
4. Red Clause
5. Green Clause
6. Back to Back

Process
Typically, after a sales contract has been negotiated and letter of credit has been agreed upon as the method
of payment, the Applicant will contact a bank to ask for a letter of credit to be issued, and once the issuing
bank has ascertained that the Applicant will be able to pay for the goods, it will issue the letter of credit.

Once the Beneficiary receives the letter of credit, it will check the terms to ensure that it matches with the
contract and will either arrange for shipment of the goods or ask for an amendment to the letter of credit so
that it meets with the terms of the contract. The letter of credit is limited in terms of time, the validity of
credit, the last date of shipment, and in terms of how much late after shipment the documents may be
presented to the Nominated Bank.

Once the goods have been shipped, the Beneficiary will present the set of requested documents to the
Nominated Bank. This bank will check the documents, and if they comply with the terms of the Letter of Credit,
the issuing Bank is bound to honour the terms of the letter of credit by paying the Beneficiary.

International Bodies governing Global trade

The ICC was founded in 1919 to serve world business by promoting trade and investment, open markets for
goods and services, and the free flow of capital. Letters of credit used in international
transactions are governed by the publications of International Chamber of Commerce
(ICC) Uniform Customs and Practice for Documentary Credits
(UCPDC) Publication 600.ICC’s activities include mediation,

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dispute resolution, advocating open trade, advocating market economy systems, combating commercial crime
etc., INCOTERMS are also instituted by ICC

INTERNATIONAL MONETORY FUND (IMF)


The International Monetary Fund is an organization of 189 member countries. It stabilizes the global economy
in three ways. First, it monitors global conditions and identifies risks. Second, it advises its members on how to
improve their economies. Third, it provides technical assistance and short-term loans to prevent
financial crises. The IMF's goal is to prevent these disasters by guiding its members.

World Bank is a global organization, working to provide loans to


developing nations and to eliminate poverty. It was formed at the
Breton Woods Conference held in Washington, D.C., USA, in 1944.
It is an international financial institution which started as a single
organization, but now it is a group of five organizations namely:

 IBRD – International Bank for Reconstruction and Development


 IDA – International Development Association
 IFC – International Finance Corporation
 MIGA – Multilateral Investment Guarantee Agency
 ICSID – International Centre for Settlement of Investment Disputes

All these institutions are collectively known as the World Bank Group however, IBRD and IDA are the two arms
which constitute the World Bank. World Bank is a part of the World Bank Group and a member organization of
the United Nation Development Group as well. At present, there are 188 member countries of IBRD and 172
member countries of IDA. It was initially established, to help the economies suffering due to World War-II in
development, but later on, it aimed to help the underdeveloped member countries in becoming developed.

The World Trade Organization (WTO) is the only global international


organization dealing with the rules of trade between nations. At its heart
are the WTO agreements, negotiated and signed by the bulk of the world’s
trading nations and ratified in their parliaments. The goal is to help
producers of goods and services, exporters, and importers conduct their business.

The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade.


The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on
15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.It, is
the largest international economic organization in the world.

The WTO deals with regulation of trade in goods, services and intellectual property between participating
countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed
at enforcing participants' adherence to WTO agreements, which are signed by representatives of member
governments and ratified by their parliaments.

According to the World Customs Organization (WCO), an authorized economic


operator (AEO) is a party involved in the international movement of goods in
whatever function that has been approved by or on behalf of a national Customs
administration as complying with WCO or equivalent supply chain security
standards. Authorized Economic Operators include inter alia manufacturers,
importers, exporters, brokers, carriers, consolidators, intermediaries, ports,
airports, terminal operators, integrated operators, warehouses and distributors.
The growth of global trade and increasing security threats to the international movement of goods have forced
customs administrations to shift their focus more and more to securing the international trade flow and away
from the traditional task of collecting customs duties. Recognizing these developments, the WCO, drafted the
WCO Framework of Standards to Secure and Facilitate global trade (SAFE). In the framework, several standards

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are included that can assist Customs administrations in meeting these new challenges. Developing an
Authorized Economic Operator programme is a core part of SAFE.
Freight Forwarding
what is Freight forwarding? Freight forwarding is the coordination & arrangement for movement of goods
from one place to another on behalf of a seller or a buyer using a single or multiple mode of transport like,
airline, shipping line, rail or road operators. It includes storage and warehousing in the entire movement.

Who does freight forwarding? The company who is in business of freight forwarding is called a Freight
forwarder. A Freight Forwarder is an agent who works on behalf of a customer (seller-exporters and buyer-
importers) for moving their goods between two points. They assist in moving goods from a producer to a
customer. Their duty is to arrange cost efficient way of transportation. He is an expert in logistics network and
all documentation work related to it. He offers an end-to-end logistics solution to a customer. A forwarder uses
various modes of transport for arranging to move a single shipment. For example, the freight forwarder may
arrange to move an exporter’s cargo from an origin-airport by truck, and then fly it to a destination city, later
move it from the destination-airport to an importers warehouse by another truck. In other words, a freight
forwarder is a “travel agent" for the cargo industry, who would have excellent contacts in all the transport
modes and with a good understanding of the procedure &regulations relating to the carriage of goods in all
the countries. The role of freight forwarding is a challenging one. He must be aware of the entire logistics
scenario to sustain and succeed in the freight forwarding industry. An international freight forwarder should
be a consultant to his customers besides being, just a service provider. The broad range of services a freight
forwarding company provides is given below.
a. Negotiating freight Rate: Because freight forwarders ship a high volume of goods, they can typically
negotiate better prices from shipping lines, airlines and road operators
b. Booking cargo space: Knowing who to call when you need to ship to a certain location, and which
carriers are best at serving which destination, is something he must know completely when it comes
to shipping international cargo. The right choice of carrier will make the shipment go smoothly.
c. Monitoring and Tracking shipments: Freight forwarders arrange and keep track of shipments by
which they move around the world, in various modes transport to keep their customers informed.
d. Preparing shipping and export documents: This is an area where freight forwarding firms really shine.
Because they ship a high volume of goods between various countries, they have specialized
knowledge of the documentation, which is crucial and most significant work in freight forwarding.
e. Warehousing: Freight forwarders either run their own warehouses in several locations or they lease
space in locations they don’t service themselves.
f. Freight consolidation: Turning several small shipments containing goods from several customers into
one large shipment which helps in cost-reduction while negotiating rates with carriers.
g. Arranging cargo insurance and filing insurance claims: Again, because of the high volume of
shipments that freight forwarding firms handle, they have extensive knowledge of obtaining coverage
for shipments and dealing with insurance.

Special Economic Zones


A special economic zone (SEZ) is a geographical region that has economic laws that are more liberal than a
country's domestic economic laws. India has specific laws for its SEZs. The goal SEZ is to increase foreign direct
investment by foreign investors. It includes 1. Free Trade Zones (FTZ), 2. Export processing zones (EPZ), 3. Free
Zones (FZ). This comes under Ministry of commerce. The SEZ Act was passed in parliament in May 2005 and
came into effect on 10th February 2006.

 FTZ is a geographic area where goods may be landed, stored, handled, manufactured, or
reconfigured, and re-exported under specific customs regulation and generally not subject to customs
duty. Free trade zones are generally organized around major seaports, international airports, and
national frontiers—areas with many geographic advantages for international trade. E.g. - DHL

 EPZ is a Customs area where one is allowed to import plant, machinery, equipment and material for
the manufacture of export goods under security, without payment of duty. The imported goods are
subject to customs control at importation, through the manufacturing process, to the time of
sale/export, or duty payment for home consumption – E.g. - MEPZ

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 FZ –The term is used to designate areas in which companies are taxed very lightly or not at all to
encourage economic activity. The taxation rules are determined by each country. The World Trade
Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM) has content on the
conditions and benefits of free zones. – E.g. Sri City

Incoterms 2010
The Functions performed by a Freight Forwarder depends on what the Exporter (or) Importer requires the
Freight Forwarder to do. This in turn depends on the Contract of Sale between the Seller and the Buyer. The
INCOTERMS (International Commercial Terms) are published by the ICC (International Chamber of Commerce).
This is used since 1936 in International Trade transactions. The INCOTERMS are reviewed every 10 years to
ensure that they are kept up to date with current trade practices.

Customs
Customs broker or Exporter files shipping bill through customs online software system electronically through
ICEGATE electronically. Once filed through online the customs system will generate the shipping bill number
automatically. Once the Shipping Bill number is obtained, the customs system will forward the documents to
Appraising office & Dy. Commissioner for assessment. For imports Bill of entry is filed for customs clearance

E-Commerce in Logistics
Inttra the world’s largest, multi-carrier neutral e-commerce platform, software & information network for the
ocean shipping industry. INTTRA's has combined all the shipping lines network into their innovative
ecommerce product, that allows customers to trade with multiple parties and leverage shipping line
information to improve their business
Cargo Smart: Cargo-Smart Limited provides global shipment management software solutions that enable
shippers, consignee’s logistics service providers, NVOCCs, and ocean carriers to improve planning and on-time
deliveries. Connected to over 30 ocean carriers, Cargo-Smart leverages big data sources and a cloud-based
platform to offer award-winning sailing schedules, visibility, documentation, contract management,
compliance, and benchmarking solutions
GT Nexus is a privately-owned cloud supply chain platform, founded in 1998 in Oakland, Ca USA. It runs an on-
demand global supply chain management platform that is used by organizations to manage global logistics and
trade processes.
Global distribution system (GDS) is a network operated by a company that enables automated transactions
between travel service providers (mainly airlines, hotels and car rental companies) and travel agencies. Travel
agencies traditionally relied on GDS for services, products & rates in order to provision travel-related services
to the end consumers.

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