Chapter 3 transport operation

Group 2 – Rules for Sea and Inland Waterway Transport OnlyFAS :Free Alongside Ship named loading port FOB: Free On Board named loading port CFR: Cost and Freight named destination port

Chapter 3:

Transport operation

PRESENTED BY: BICH HOAI, MSc

HO CHI MINH CITY UNIVERSITY OF TRANSPORT

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Contents

• International trade

• Outsourcing and self-operation

• Cost and pricing issue

• Transportation of OOG

Aspects of International Trade

Parties and Tasks

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Agent

Aspects of International Trade

Parties and Tasks

Types of Agents on the Trading of Goods:

• Factors, persons in possession of goods belonging to their Principal to

be sold for the benefit of the Principal;

• Brokers, namely persons who conduct negotiations on behalf of Buyers and Sellers;

• Commission Agents, namely persons who enter into contracts with third parties in their own name, although they do not do so as agents;

• Confirming Houses, namely persons who take on the role of an agent for an overseas buyer who is interested in buying goods from a seller in the country;

• Del Credere Agents, namely persons who take on additional risks

Aspects of International Trade

Parties and Tasks

Roles of an Agent on the Trading of Goods

• to market a particular product;

• to penetrate a market known especially to the Agent;

• to secure sub-agents to sell the product;

• to elicit information relevant to the Principal’s business;

• to represent the Principal;

• to secure credit on behalf of the Principal;

• to procure certain goods or services for the Principal;

• to procure freight space;

• to procure finance from banks and lenders;

• to secure insurance for the goods;

• to secure legal advice in a foreign country

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Aspects of International Trade

Parties and Tasks

Types of Agents on the Carriage of Cargo:

• Loading Brokers, who conduct loading operations;

• Forwarding Agents, whose duties are determined by the contract Their role and duties are open to agreement

Legal position of the Freight Forwarder

Two different legal positions of a freight forwarder

are possible:

services and choosing the carriers and service providers in its own

name for and on account of the customer (= traditional freight

forwarder) or

account to secure the movement of goods from A to B for a

customer but then entering into a series of contracts with

performing carriers to fulfil the head contract

INTERRELATION BETWEEN INTERNATIONAL TRADE AND FORWARDING ACTIVITIES

Classic Transport: Multimodal Transport:

Trucker Airline

Ship-owner

Railway

Forwarder acts as intermediate

Trucker Airline

Shipowner

Railway

MTO acts as carrier

INTERRELATION BETWEEN INTERNATIONAL TRADE AND FORWARDING ACTIVITIES

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 INCOTERMS 2000: There are thirteen (13) terms of delivery.

 The latest edition of these terms is the INCOTERMS 2010,

11 Rules.

 Coming up INCOTERMS 2020

WHAT ARE INCOTERMS?

WHY ARE INCOTERMS SO IMPORTANT?

Avoiding misunderstanding of different cultures and languages

INCOTERMS tell us what to do in respect to:

• Carriage of goods from seller to buyer.

• Export and import clearance.

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WHAT ARE INCOTERM

INCOTERMS also explains the division

of costs and risks between the seller and buyer.

The importer is possible to calculate the true landed cost of a product

WHY ARE INCOTERMS SO IMPORTANT?

Group 1 - Rules for any Mode and Modes of Transport

EXW: Ex Works (named place)

FCA: Free Carrier (named place)

CPT : Carriage Paid To (named destination)

CIP: Carriage and Insurance Paid to (named destination)

DAT: Delivered At Terminal (named port or place) / (DPU:

Delivery at place Unloaded, Incoterms 2020)

DAP: Delivered at Place (named place)

DDP: Delivered Duty Paid (named destination place)

THE TWO GROUPS OF INCOTERMS

Group 2 – Rules for Sea and Inland Waterway Transport Only

FAS :Free Alongside Ship (named loading port)

FOB: Free On Board (named loading port)

CFR: Cost and Freight (named destination port)

CIF: Cost, Insurance and Freight (named destination port)

THE TWO GROUPS OF INCOTERMS

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Principles

Delivery conditions, not payment conditions!

Seller and buyer agree on the delivery of goods

Usually, they refer to standardized terms

This speeds up the process and increases the transparency and mutual understanding

Incoterms (= International Commercial Terms), are

prepared by the International Chamber of Commerce

They do not apply unless they are expressly incorporated into the contract They have

no binding force of law

Relationship: between seller and buyer,

not between seller / buyer and carrier!

Forwarders, shipbrokers, stevedores and carriers

are intermediaries, who instructed by the seller or the

Critical Point =

The moment in the route of the goods

at which the responsibilities are transfered

from the seller to the buyer.

We distinguish 3 critical points:

Management

Planning Executive Control

Raw material Semi-products

Efficient transport

Owner asset

Logistics and Outsourcing

Relationship between main and support activities

Acquisition Customer service

• Transfer part of the functions and

tasks of the enterprise to outsource

• Principles:

• Keep your self the jobs that you

know you will perform better than

others

• Transfer to third parties what they do

better than yourself and others

• Outsource activities what you are

able to manage

Manage all stakeholders in a supply chain by electronic data Supply chain management

Manage a complex service chain

Traditional warehouse and Transport management Self-logistics

Logistics and competitive advantage

• Competitive advantage:

From a cost or value

advantage in product or

service or both

• Efficiency: Produce at the

lowest price or provide the

product with the highest

Lợi thế về dịch vụ và

chi phí Cost and value advantage

Logistics and competitive advantage

• Cost advantage:

• Shorter product cycles, common technology => technological advantages

reduced

• Customers are interested in the cost when the product to their hands =>

logistics costs are the key point to create competitive advantage

Effective Logistics

Low cost

High quality

Improve competitiveability

Selection

For- hire carrier:

(outsource transportation )

- Cost and service trade off

- Modes of transport comparison

- Carrier choosing

Privately controlled transportation :

- Cheaper operation cost

- Faster

- Better control of loss and damage

Which one is chosen?

Outsourcing service vs Self- operation

For- hire carrier:

Cost calculation

Total cost Fixed cost/ investment

Variable cost/ operation

- Salary and salary based items

• Freight basis

• Rail/ Road Freight issue

• Sea freight issue

• Air freight issue

31Cost and pricing issue

Freight basis

• Service cost (minimum freight)

• Service value (max freight)

• Distance

• Weight/ volume

• Value (in some cases)

The basis to calculate transport cost?

• Distance:

• Freight increases with distance

• Area charges: do not depend on distance

• Non-proportional increases

• Shipping weight

• Rates are quoted: USD / ton

• The larger the shipment, the lower the tariff (discount)

• Discounted volume: CL, LCL (rail), TL, LTL (road)

• Volume of shipment: with light goods => freight conversion

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Freight basis

Rail/ Road freight charging

• The reasonable charging method:

• $ / Ton?

• $-Ton-km?

• Eg In the US: 33,000 major delivery points

=> rate permutation =>millions of rates

=> Impossible

How to make it possible?

1.class rate: 2 main steps to simplify (US)

Step 1: Rate base points-charged on base points:

• Gather 33,000 points into a group

• Divided into areas (by square area)

=> Minimize the number of charge points

• National rate basic tariff (based on the major point distances)

• The distance between basic points is based on railways

• Tariffs form the basis fora simple product classification system

Step 2: Product Classification:

• Group of products with similar transport characteristics => apply same freight rate

• Based on: first class rate

• Eg

• Goods with high transport requirement-> class 100-100% freight rates

• Low value, e.g coal, class 20 -> 20% freight charged

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Rail/ Road freight charging

2 Surcharge:

•Classification and tariff system is the basis for freight system

•However: 10% (CL & TL) shipped at basic rates; only 90%has

surcharge

3 Commodity rates

•Quoted by specific category or goods group between 2 points

•This freight applies to large and regular shipments

Rail/Road freight charging

• Determine the freight for the transportation of 1 car engine lot.

Suppose the shipment consist of 4,000 pounds “rust preventive

pipeline coating in metal cans” from Reading, Pensyvania to

Washington, D.C

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4,000

• 2,000 pounds => $2.52/ cwt (hundred weight)

4 Other charges :

• FAK: freight all kind

• Value rates: freight base on value of goods/ liability of the carrier

• Actual value rate: calculated according to actual value

• Release value rate: according to carrier's responsibility

• Late arrival: Feddex pays 46% for a 2-pound parcel within 1-2 days

• Multimodal freight.

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Freight charging

International transport Rate structure

ORIGIN CHARGES (CMA-CGM in VN June, 2019)

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1 Terminal Handling Charge (THC) cont 10 3 VND 2,475 3,900 Types of cont

2 Barging Fee: VNSGN - VNVUT Cont 10 3 VND 700 1,400 Type of cargo

market (USA/ Canada; Intra Asia, Others

3.1 B/L Fee for eSI transmitted via

THC structure

Influences of Available Cargo on Tariffs

• Imbalance in transport

• Special price agreement

• Stowage factor (light/ heavy cargo)

• Below cost level

LCL Cargo Charge

 Less-than-container-load (LCL) charge

+ The same as charge for conventional shipment

+ Basis on “per ton” or “per m3” (weight/volume)

BASIC IN CALCULATION OF OCEAN FREIGHT

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To compensate shipping lines for additional costs or reduced revenues due to unforeseen causes

Currency Surcharge

Bunker Surcharge

Port congestion surcharge (PCS)

OTHER COSTS AND SURCHARGES

Peak Season Surcharge(PSS):

War Risk Surcharge (WRS)

Canal surcharge

Low Sulphur surcharge (LSS) applied for:

North Europe… then China…

1.2 FORWARDING SERVICES AND THE LEGAL POSITION OF A FREIGHT FORWARDER

OTHER COSTS AND SURCHARGES

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$100

Asia-Americas

Asia-Latin

Min Margin Guideline per TEU Trade-lanes

$100

Asia-Americas

Asia-Latin

Min Margin Guideline per TEU Trade-lanes

MARK UP GUIDELINE

DESTINATION CHARGES (CMA-CGM in VN June, 2019

1 Terminal Handling Charge (THC) cont 10 3 VND 2,475 3,900 Types of cont

2 Container Maintenance Surcharge (CMS) Cont 10 3 VND 700 1,400 Types of cont/

dest./ cargoes

3.1 discharged @ HoChiMinh/VungTau Port Teu 10 3 VND 1,125

3.2 discharged @ HaiPhong Port Area Teu 10 3 VND 2,150

3.3 discharged @ DaNang Port Area Teu 10 3 VND 600

5… Import documentation fee & others B/L 10 3 VND

6 Container deposit (South/ North) 10 3 VND 600/2,000 2,000/3,000

• A consignment includes 2 parcels A and B which are transported

from M to N with the same unit price.

• Parcel A: 30.4kg; 90x 50x60cm

• Parcel B: 30.0kg; 60x50x40cm

? Calculate the freight of above consignment

? Calculate the freight of 2 parcels if they are transported separately ?

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FLIGHT SCHEDULE AND FREIGHT

DXB

PER EK $3.16 $2.96 Daily Direct 08 hours

PER TG $2.90 $2.70 Daily BKK 1 day

AIR FREIGHT – LOCAL CHARGES

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MARK UP GUIDELINE

Kgs Min -45 +45 +100 +300 +500 +1000USD/Kg 60 6.0 4.0 3.8 3.6 3.2 3.0Mark up

(USD/Kg) 120 8.0 5.5 4.4 3.9 3.4 3.2

OOG (OUT OF GAUGE) TRANSPORTATION

1 Definition of oversize and overweight cargos in sea and land

transportation

2 Two key factors in logistics solution for handling oversize and

overweight cargos in project logistics

3 Remarks and recommendation.

OOG TRANSPORTATION, OBJECTIVES

DEFINITION OF OVERSIZE AND OVERWEIGHT CARGO

IN SEA AND LAND TRANSPORTATION

• Normal standard containerized cargoes: ISO 668:1995(E)

DIM Container 20′ (20’DC) Container (40’DC) Container (40’HC)

Inch Metric Inch Metric Inch Metric Outside

L 19′ 10,5″ 6,058 m 40′ 12,192 m 40′ 12,192 m

W 8′ 2,438 m 8′ 2,438 m 8′ 2,438 m

H 8’6″ 2,591 m 8’6″ 2,591 m 9’6″ 2,896 m Inner

VGM 52,900 lb 24,000 kg 67,200 lb 30,480 kg 67,200 lb 30,480 kg

DEFINITION OF OVERSIZE AND OVERWEIGHT CARGOS

IN SEA AND LAND TRANSPORTATION

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• Over size cargo?

• Over weight cargo?

• Over size and Over weight in sea and land transportation?

• Road transport:

• Non- removable cargo (except Container: 4.35m)

• Over sized: Outer Dim- 20m* 2.5m * 4.2m (actual cargo dim: 12m* 2.5m

*2,7m)

• Over weight: Gross mass 32t (Actual: 20 tons)

(Article 12 of Circular 07/2010 / TT-BGTVT of Feb 11, 2010 of the Ministry of Transport)

OVER SIZE CARGOS

OVER SIZED AND OVER WEIGHT CARGOS

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

+ The duration to be taken;

-> The most effective technical solution to be advised

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

Example: Inquiry 1:

• Pick up address: SPCT, ETA 20 May 2019

• Delivery address: Bosch Long Thanh

• Cargo: machinery

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

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Proposal:

• Pick up address: SPCT, ETA May 2019

• Delivery address: Bosch Long Thanh

• Cargo: machinery

• SOW: Trucking

- Road survey: ready

- Trailers: low bed trailers

- Number: 2

- Road permit: yes

- Safety rules: OHSAS 18001-2007

- Insurance: third party provided by transporter

02 KEY FACTORS TO HANDLE THE OVER SIZE/OVER WEIGHT CARGOS IN PROJECT LOGISTICS

REMARKS AND SPECIAL RECOMMENDATION

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CHECK LIST:

1 Input data;

2 Survey data;

3 Solution on technical side;

4 Reasonable commercial package;

10 Schedule of the projects;

11 IT application for supervision;

12 Maintain and repair;

13 Record data;

THANK YOU