Things You Never

Knew About Logistics:

A Detailed Guide on How to Ship by Air and
Sea from China
1. Moving Goods: The Basics of Shipment
2. Freight Forwarders
3. Shipping Documentations
4. Quality Control and Inspections
5. Covering Against Lost: The Traders Guide to Insurance
6. Resolving Payment Problems with Buyers
1. Moving Goods: The Basics of Shipment CIF - COST, INSURANCE AND FREIGHT This
means the sellers responsibility ends when the
Types of international transportation goods pass the ships rail in the port of ship-
ment. The seller must pay the costs and freight
There are a number of shipping options open to you. necessary to bring the goods to the named port
Obviously, they are determined by the quantity and size of destination; although, any additional costs
of your shipment, where it is going to or where it has due to events occurring after the time of deliv-
come from. ery are transferred from the seller to the buyer.
However, in CIF the seller must also procure
Exporters may find it useful to consult a freight forwarder marine insurance against the buyers risk of
in determining the method of international shipping. Since loss of or damage to the goods during carriage.
carriers are often used for large and bulky shipments, the
exporter should reserve space on the carrier well before
the actual shipment date. This reservation is called the 2. Freight Forwarders
booking contract.
Freight Forwarders are professionals who take care of
International shipments are increasingly made through
the more important steps regarding the shipment of your
bills of lading under a multimodal contract. The multi-
goods. You can get all of the transport information you
modal transit operator (frequently one of the transporters)
require from a freight forwarder. For example, they can
takes charge of and responsibility for the entire move-
inform you of shipping rates and routes, and they can
ment from factory to final destination.
also book cargo space for you. They can also prepare the
First steps documents you need and serve as an import agent. Their
roles may vary according to the shipping responsibilities
Order confirmation: Once an order has been confirmed, a outlined in the Incoterms agreed upon between the seller
document called a commercial invoice, or sales confirma- and the buyer/importer.
tion, will be completed by the seller. Upon confirmation of Finding a Freight Forwarder
the order, you should be aware of:
The following resources can help you locate suitable
The quantity of the products being shipped freight forwarders:
The entire cost of the shipment
How and when they will be shipped For the US, go to the USDAs Freight For-
Who is responsible for the shipment warders Online Directory at http://www.ams.
usda.gov/tmd/freight/ffdb/index.asp or visit the
Responsibility: Who is responsible for the shipment is National Customs Brokers and Forwarders
dependent on the Incoterms parties agree to during nego- Association of America website at http://www.
tiations. These terms are fundamental to international ncbfaa.org/
trade as they clarify when responsibility for the shipment Check your Local Yellow Pages under Freight
passes from seller to buyer. Caution must be exercised Forwarders.
when selecting Incoterms because they usually relate to Ask an experienced importer/exporter who
particular modes of transportation. For example, some In- deals in similar products as yours to refer you
coterms deal solely with transport by sea. Terms such as to a good forwarder.
FOB and CIF can be used only for ocean-bound freight: Choosing a Freight Forwarder

Using the right freight forwarder can save time, money

FOB - FREE ON BOARD: This means the
and establish a more competitive base for your product.
shipper (seller) has upheld his/her part of the
Using the wrong one can send you in the opposite direc-
agreement when the goods pass the ships
tion. If you have decided you need the assistance of a
rails at the port of exit. The receiving party
freight forwarder, you must find one that suits your needs.
(buyer) assumes risk and costs associated with
This section covers the criteria for determining if the
the goods once they pass the ships rail in the
freight forwarders you select are appropriate to your type
sellers home port.
of product and the shipping destination.

Some forwarders are more familiar with certain aspects of

trade than others. Therefore, it is a wise business deci-
sion to interview each forwarder. In considering a for-
warder, ask these questions.

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Does the freight forwarder: Proof of receipt of the goods for shipment
An invoice for the freight
Have an office near your shipping port? A certificate of insurance
Have experience handling your type of product A guide to airline staff for the handling, dispatch
and shipment to your market? and delivery of the consignment.
Have experience with the type of carriers you
require? Usually, the document consists of three originals and
Have a good credit rating? nine copies. The first original is intended for the carrier
Have favorable shipping rates and delivery and is signed by an export agent; the second original,
schedules? the consignee's copy, is signed by an export agent and
Receive good recommendations from carriers? accompanies the goods; the third original is signed by the
Belong to any professional associations or carrier and is handed to the export agent as a receipt for
organizations? the goods after they have been accepted for carriage.
Have a reputation for friendliness, competence,
efficiency, reliability, cost-effectiveness, trust- B. Bill of Lading (B/L)
worthiness and using fair business practices?
A bill of lading (B/L) is used for sea shipment and is a
Many customs brokers and freight forwarders use these certificate of ownership of goods. It must be produced
web-based applications to ensure accurate submission at the port of final destination by the importer in order to
of import documentation to customs agencies for security claim goods.
tracking of various shipments. Third party logistics provid-
ers can also provide clients with up-to-date cost analysis, As a document of title, the bill of lading is also a nego-
logistics and import compliance information. The following tiable document and you may sell the goods by endorsing
fee-based online websites can prove useful if you want to or handing it over to another authorized party, even while
import yourself: the goods are still at sea.

Smart Border - www.smartborder.com Although negotiable bills of lading are in common use,
Open Harbor - www.openharbor.com some countries do not allow them or make it difficult for
Nextlinx - www.nextlinx.com them to be used. You have to be sure that a negotiable
B/L is accepted in your country; otherwise, a non-negotia-
3. Shipping Documentation ble B/L is issued.

The B/L is a formal, signed receipt for a specified num-

Numerous documents are required for shipping. The
ber of packs, which is given to the export agent by the
primary documents are listed below with links to samples.
shipping line when the shipping line receives the consign-
Exporters should seriously consider having a freight for-
ment. If the cargo appears to be in good order and is
warder handle the formidable amount of documentation
properly packed when received by the shipping line, the
that exporting requires, as forwarders are specialists in
bill of lading is deemed as "clean". The ship owner thus
this process.
accepts full liability for the cargo described in the bill.
Documentation must be precise because slight discrep-
ancies or omissions may prevent merchandise from being
exported, result in nonpayment, or even result in the sei-
zure of the shipment by customs. Collection documents
are subject to precise time limits and may not be honored
by a bank if time has expired.

Most documentation is routine for freight forwarders and

customs brokers, but the exporter is ultimately respon-
sible for the accuracy of its contents.

The following documents are commonly used in the ship-

ping process:

A. Airway Bills

An air waybill is used for air transport and is documentary

evidence of the conclusion of a contract for carriage. It
serves as:

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C. Commercial Invoices

A commercial invoice is a bill for the goods from the seller

to the buyer. These invoices are often used by govern-
ments to determine the true value of goods when assess-
ing customs duties. Governments that use the commer-
cial invoices to control imports will often specify its form,
content, number of copies, and language to be used, as
well as other important details.

4. Quality Control and Inspections

Quality Control and Compliance

When purchasing volume goods internationally, there are

many areas in the process where you should conduct
checks on your prospective suppliers.

The first one is during the discovery and nego-

tiation process when you are deciding which
supplier to go with. More often than not, the
prospective supplier will indicate whether he
or she has achieved ISO accreditation for their
products (see below for details).
The other very important stage in quality
checking is prior to shipment. You need to en-
gage the services of an inspection officer to go
through the shipment to check and see if what
you are about to receive is what you paid for.

D. Insurance Certificates International Organization for Standardization (ISO)

An insurance certificate is a representation of the insur- ISO (International Organization for Standardization) is the
ance policy taken out by the buyer or the seller (depend- world's largest developer of standards. ISO has built a
ing on the Incoterms) for a shipment. strategic partnership with the WTO (World Trade Organi-
zation) having the common goal of promoting a free and
Blank insurance certificates are supplied by the fair global trading system. Between 1947 and the present
insurer pre-signed and bearing the open policy day, ISO has published more than 15,000 International
number of the exporter. For an air shipment, an Standards.
air waybill serves as an insurance certificate.
For a sea shipment, an insurance certificate Although ISO's principal activity is the development of
is issued as evidence of the existence of the technical standards, ISO standards also have important
marine insurance policy. economic and social repercussions. ISO standards make
The marine insurance policy is a contract a positive difference, not just to engineers and manufac-
between the insured and the insurer which de- turers for whom they solve basic problems in production
fines the terms of the agreement between the and distribution, but to society as a whole.
insured and the insurer.
ISO: 9000 is concerned with quality manage-
E. Packing Lists ment. This means what an organization does
to enhance customer satisfaction by meeting
The packing list indicates the number of items in the customer and applicable regulatory require-
contents of each pack, along with individual weights and ments and continually to improve its perfor-
dimensions. This list enables you to check that the cor- mance in this regard.
rect number of units has been received. Customs authori-
ties can also easily identify a specific pack if they wish to
inspect it.

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 ISO: 14000 is primarily concerned with envi- Safety: Are the products compliant with appli-
ronmental management. This means what an cable safety regulations?
organization does to minimize harmful effects Performance: Does the product function prop-
on the environment caused by its activities erly and as intended?
and to continually improve its environmental Appearance: What is the condition of the finish,
performance. printing and marking?
Packaging: Is the condition of packing, marking
Shipment inspections and accessories appropriate?
Governments or buyers demand inspection reports for a
number of reasons: 5. Covering Against Loss: The Trader's
Guide to Insurance
To ensure shipments do not contain illegal or
low-quality merchandise Generally speaking, all international shipments should be
To make sure importers are properly declaring insured against loss or damage.
their goods
To ensure they have received what they have Obtaining insurance:
paid for or are about to pay for (usually by inde-
pendent inspection) Many SME importers and exporters can ap-
proach their freight forwarders for coverage or
buy insurance directly.
The process typically starts with the buyer. Once a con-
Most SME shippers organize an all-risk cover-
tract between a buyer and seller has been established,
age that covers all reasonable risks to a given
the importer or buyer will arrange a pre-shipment inspec-
shipment.
tion with their favorite inspection company. Although
Proof-of-insurance coverage is outlined and
some countries require a specific company to perform
verified in a document known as a policy or
the inspection, others have opened it up to a variety of
insurance certificate. Insurance policy formats
competitors.
vary from insurer to insurer.
Upon requesting an inspection, the following information
needs to be given to the inspecting company: company Remember, it is the Incoterms which decide who is re-
name, contact name of the exporter, and the type and sponsible for organizing insurance coverage. It is advis-
location of the goods to be inspected. able when shipping to use a Group F Incoterm and import
with a Group C Incoterm, and then move beyond use of
Note: Regarding the time of the inspection, inspec- these as your experience builds.
tors have busy schedules and need a five to seven day
window to schedule a visit. Once you have a tentative Some common Incoterms and their insurance obligations
date for inspection you need to have the goods ready for are:
inspection. This may mean opening the shipping unit or
CIF
having the container staged and ready to load.
The exporter is responsible to insure on behalf
of the buyer until goods arrive and are unload-
Some other advice:
ed at the port of destination.
Many Less than Container Load (LCL) ship-
FOB or CFR (Cost & Freight)
ments can be inspected at the port of export.
The importer is responsible to insure goods
It is recommended that the inspection take
from the time the goods are loaded on the
place where you can supervise and answer
seagoing vessel.
questions the inspector might have.
You may also need to close up a crate or box
If the other party is responsible for the insur-
following the inspection so it is best that you or
ance and you have doubts about the cover-
your forwarder is available to assist during the
age, you may want to consider buying back-up
examination.
insurance, called contingent insurance. This
Following the inspection, a Clean Report of
provides supplementary coverage that is
Findings (or something similar) will be issued.
activated if the primary insurer does not pay a
This is usually required at the time of import.
legitimate claim.
Most reports are issued following proof of ex-
port and usually can be completed by fax.

The importer usually pays the costs for such examina-

tions; however, delays can be invoiced directly to the
exporter. The inspector will look at the following aspects
of the products in the shipment:
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6. Resolving Payment Problems with Buyers

If a payment problem occurs, you will want to resolve the

issue as quickly as possible with the buyer. You first need
to get a good understanding of the entire situation before
seeking dispute resolution assistance. Ask:

Were the goods supplied per the contract /

invoice?
Are all your shipping and customs documents
in order?
Was there damage or theft?
Have you attempted to negotiate a solution
to the problem, along with a payment plan or
future concessions to the buyer?
Have you discussed your problem with your
bank and your lawyer?
Do you have copies of all correspondence and
records related to the dispute?

Help with payment disputes

If you have come to the point where negotiations with the

buyer are not leading to a resolution and you are deter-
mined to collect, you will have to turn to the advice of
your bank, legal adviser and perhaps other advisory bod-
ies involved in mediation, arbitration or even litigation.

The International Chamber of Commerce handles the

majority of international arbitration and is usually accept-
able to foreign companies because it is not affiliated with
any single country. For additional information, go to

Councils of the International Chamber of Com-

merce at http://www.iccwbo.org/ or
ICC Dispute Resolution Services at http://
www.iccwbo.org/home/bdrs/bdrs.asp

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Contents of this white paper are contributions from members of Alibaba.com

Copyright 2007 by Alibaba.com Hong Kong Ltd. All rights reserved