Chapt10 Logm 617

Front 1

why is global transportation such an important issue?

Back 1

1.Global economy in a volatile period

2.Much downward pressure on transport rates

3.In an economy focused on cost control, both carriers and their customers must plan effectively

Front 2

what are the different Global Trade Agreements?

Back 2

1.Agreements between nations.

2.Bi-lateral agreements.

3.Regional trade agreements.it involves 3+ nations

Front 3

what are the trades that U.S. currently involved in ?

Back 3

1.Free Trade Area of Americas.

2.Middle East Free Trade and Enterprise for ASEAN Initiatives.

3.North American Free Trade Agreement (NAFTA).

Front 4

describe NAFTA principles?

Back 4

includes U.S., Mexico, and Canada.

1.Unimpeded flow of goods.

2.Enhanced cross-border movement of goods/services.

3. enable transport carriers to move more easily between countries.

4. carriers have same rights.

5.May transport domestic traffic .

6.Same accessibility is not currently available between U.S. and Mexico

Front 5

what are Logistics Channel Issues?

Back 5

1.Transaction channel activities

2.A 2nd key transaction channel activity.

3.Communication channel

4.Distribution channel

Front 6

identify Transaction channel activities, and what are they responsibile for?

Back 6

A key activity is specifying when and where legal title to goods transfers.

Defines responsibility for:

1.Mode and carrier selection and shipment routing.

2.Obtaining insurance coverage.

3.Payment for transport services, insurance, and import duties.

4.Compliance with regulations, management of goods while in-transit, and financial liability while in-transit

Front 7

describe A 2nd key transaction channel activity?

Back 7

it is arranging payment for the goods.

1.Obtaining payment is riskier in global trade compared to domestic trade

2.Advance payment would be ideal for exporter

3.Importer would be concerned about paying in advance of seeing/inspecting the goods

4.There are many terms of payment options used to balance these risks

Front 8

describe Communication channel?

Back 8

1.Documentation requirements are much higher for global than for domestic transactions.

2.Organizations requiring documentation include:
a.Countries of export and import.
b.Transportation companies, banks, and the importer.

3.Many documents not in electronic form

Front 9

describe Distribution channel?

Back 9

1.Greater distance and complexity of global shipments means higher risk.

2.Requires more diligence in transport mode, carrier and route selection decisions

Front 10

what areGlobal Transportation Challenges macro level ?

Back 10

1.General business/economic trends, including fuel prices

2.Changes in governmental regulations and interventions

3.Consumer demand trends

Front 11

what areGlobal Transportation Challenges Monitoring specific issues ?

Back 11

1.Trade level fluctuations

2.Carrier consolidation activity

3.Security risks

4.Shifts in regional sourcing

Front 12

what are Key export preparation activities ?

Back 12

1.Choosing terms of trade

2.Securing freight insurance

3.Agreeing upon terms of payment

4.Completing required freight documentation

Front 13

what does Completion Key export preparation of activities helps ?

Back 13

1.Clarify importer and exporter responsibilities

2.Protect each party’s financial interest

3.Improve freight control and visibility

4.Facilitate problem-free transport

Front 14

what are Terms of Trade of Export Preparation Activities?

Back 14

1. responsibilities transfer from exporter to importer

2.Govern decision making authority for movement of the product

3.Establish when and where ownership and title of goods pass from exporter to importer

4.Clarifies which organization incurs delivery-related costs

5.each country could have its own set of trade terms

Front 15

what would happend if country have its own set of trade terms?

Back 15

1. uncertainties in the meaning of terms and raise transaction costs

2. a worldwide standardized set of terms and definitions was established
Known as the International Commercial Terms.

Front 16

describe Incoterms?

Back 16

13 different Incoterms, divided into 4 primary groups, are available
All 13 apply to ocean transport
Just 7 Incoterms are appropriate for air, truck, rail and intermodal transport
Typically expressed as three letter acronyms with a named location
Examples: DEQ, Long Beach, CA, U.S.A., Incoterms 2000

Front 17

what are 4 primary groups of Incoterms?

Back 17

E term

F terms

C terms

D terms

Front 18

define E term?

Back 18

E term: Importer takes full responsibility
Consists of just one Incoterm: Example Works (EXW)

Front 19

define F term?

Back 19

F terms: Exporter has responsibility for getting shipment from origin to port of embarkation
3 F terms
Free Carrier (FCA): may be used with any mode
Free Alongside Ship (FAS): water transport only
Free On Board (FOB): water only and exporter assumes responsibility for cargo loading

Front 20

define C term?

Back 20

C terms: Exporter obtains and pays for main transport leg and/or cargo insurance. 4 C terms:

Cost and Freight (CFR): water shipments only
Carriage Paid To (CPT): any mode of transport
Cost, Insurance, Freight (CIF) and Carriage and Insurance Paid To (CIP): Exporter pays for main carriage and insurance

Front 21

define D term?

Back 21

D terms: Exporter responsible for delivery of shipment to foreign destination. 5 D terms:
Delivered at Frontier (DAF): all modes.
Delivered Ex Ship ((DES) and Delivered Ex Quay (DEQ) : water shipments only
Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP): all modes. Highest levels of exporter responsibility

Front 22

what are Managing risks of Export Preparation Activities Cargo Insurance?

Back 22

1.Decision between retaining or transferring risks.

2.Retaining risk is essentially self insurance. Makes most sense when:

a.Goods shipped are low value or not susceptible to damage

b.Carriers used rarely deliver damaged or lost freight

c.A damaged shipment would have relatively minor financial impact on the freight owner

3.Risk transfer via insurance is appropriate when above conditions are not met

Front 23

what are financial risks for International shipments ?

Back 23

1.Significant dollar limitations on ocean and air carrier liability

2.If there is damage or delay, burden of proof falls on cargo owner to prove that carrier was at fault

Front 24

what are transport perils for International shipments ?

Back 24

1.Many ocean-related perils, including cargo movement, water damage, overboard losses, and hijacking

2.Perils by other modes are relatively minor

Front 25

what are Payment for Export Preparation Activities?

Back 25

1.Letter of credit (LC).

2.Draft or bills of exchange.

3.Sight draft

4.Time draft

Front 26

describe Letter of credit (LC)?

Back 26

Letter of credit (LC)
Ensures exporter is paid and importer receives goods as expected
Importer’s bank issues LC to the exporter
Bank guarantees payment provided goods delivered per terms of the LC
Bank uses importer’s line of credit to guarantee payment
Bank charges the importer a fee for issuing the LC

Front 27

describe Draft or bills of exchange?

Back 27

Draft or bills of exchange
Similar to a check, except title to the goods does not transfer to importer until draft is paid

Front 28

descibe Sight draft?

Back 28

Sight draft
Used when exporter wishes to retain ownership until goods are delivered and payment received
The original ocean bill of lading (showing title) must be presented to carrier before goods are released to importer

Front 29

describe Time draft?

Back 29

Time draft
Used when exporter extends credit to buyer
Payment due within time period specified on draft

Front 30

explain Export Preparation Activities Freight Documentation?

Back 30

Freight documents control movement of cargo
Mistakes or missing documents inhibit flow of goods
Documentation requirements set by customs regulations of exporting and importing countries
Freight forwarders are documentation experts

Front 31

what are the Four types of documents ?

Back 31

1.Invoices documents

2. transportation documents

3.Export documents

4. import documents

Front 32

describe Invoices documents?

Back 32

Invoice or bill for the goods
International invoices are more complex and there are several types
Commercial invoice is most common. Must contain:
Description of goods, quantities and value – may impact duties
Country of origin, Incoterms, and parties to the transaction
Pro-forma invoice - actually a sales quote
Used by buyers to estimate total landed costs for potential order
Consular invoice - prepared by exporter
Certified in origin country by consul of destination country

Front 33

describe Export documents?

Back 33

Export documents

Used by many countries to:
Develop statistics (types, volume, value) of goods exported
Control exports of strategic materials, national treasures
For exports from U.S.,

Front 34

what are documents required for export documents?

Back 34

1.Shipper’s export declaration (SED)
Required on all exports exceeding a nominal value and all exports requiring an export license

2.Export license
Used to control export of sensitive materials to selected countries

3.Certificate of end use
Purpose: assure exporting country that product put to intended use

Front 35

describe Import documents?

Back 35

Protect citizens from inferior quality products
Properly classify products for collection of duties
Limit imports of products deemed inappropriate
Certificate of origin
Most widely required import document
Indicates shipment origin, but not location of production
Used to determine appropriate import tariff

Other import documents
Phyto-sanitary certificates
Certificate of analysis
Certificate of certification

Front 36

define certificate of origin?

Back 36

Certificate of manufacture
Indicates location of product production
Also used to determine appropriate import tariff
Certificate of inspection
Attests to authenticity and accuracy of description of the goods shown in the commercial invoice

Front 37

describe Export Preparation Activities Transportation Documents?

Back 37

1.Carrier manifest
Lists critical information needed to perform the transport service

2.Bill of lading – primary transport document

3.Transport documents are largely paper-based

Front 38

define Bill of lading?

Back 38

Bill of lading – primary transport document
Contract of carriage between cargo owner and transport company
Serves as receipt for the goods
For international shipments, ocean bill of lading and air waybills are used

Front 39

what are types of bills of lading?

Back 39

1.Through bill of lading

2.Intermodal bill of lading

3.Negotiable vs. non-negotiable bill of lading
If non-negotiable, carrier must deliver only to consignee named on the bill
If negotiable, the person possessing the bill has the right of ownership to the goods

Front 40

Transport documents are largely paper-based what is the effect of shifting to electronic work ?

Back 40

Major challenge: move toward electronic document format
International Air Transport Association e-freight initiative
Intended to replace the 20 most widely used paper documents with electronic messages
Anticipated to reduce costs by $4.9B, improve accuracy, and speed transmission of information

Other U.S. electronic document initiatives
Automated Commercial Environment
Auto. Brokers Interface System, Auto. Export System

Front 41

what is types of bills of lading Transportation Planning?

Back 41

Decision must achieve best fit and balance between:
Modal service capabilities
Accessibility, capacity, transit time, reliability, safety
Product characteristics – size, durability, value
Supply chain requirements for speed, service, cost
Decision must also align with corporate strategy, control risk and provide required level of customer service

Front 42

what affect the decision on Carrier Selection?

Back 42

Decision based on best fit and balance between:

1.Geographic coverage

2.Average transit time and reliability

3.Reliability of on-time pickup and delivery

4.Technical capabilities, ability to share information

5.Equipment availability and capacity

6.Product protection/carrier’s freight damage experience

7.Carrier’s financial stability and freight rates

Front 43

what are the Carrier selection strategies?

Back 43

1.Leverage transportation dollars by using a limited number of carriers

2.Build relationships with service providers

3.Monitor carrier performance, rates, and financial stability

4.Have contingency plan with back-up carriers

Front 44

what Differs from mode selection decision?

Back 44

1.Many more options to choose from

2.Decision made more frequently but not for each move

Front 45

define Route Planning?

Back 45

Carriers primarily responsible for routing
However, shippers should have input to ensure proper consideration given to:
Customer satisfaction and supply chain performance
Efficiency and product safety during transit

Front 46

who should Routing decisions be ?

Back 46

1.Coordinated with mode and carrier selection

2.Aligned with global sourcing, inventory, demand fulfillment strategies