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Narottam Morarajee Institute of Shipping
LOGISTICS & SHIPPING-20 August 2010
INDEX
Sr Topics Page1 Logistics Meaning & Background 22 The role of Various Logistics Service provider in
shipping Industry
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3 Intermediaries Import cycle
Carrier Terminal operator-CFS operator CHA
Local transporter
3-4
4 Intermediaries -Export cycle
Freight broker-Freight Forwarder -CHA-CFS
operator Terminal operator shipping agents-
carrier Charterer NVOCC /MTO
4-5
5Ocean Freight & Surcharge
6-7
6 Export procedure & Documentation 7-8
7 Import procedure & Documentation 8-9
8 Role of Customs & Indian Customs Act 1962 10
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Transportation & warehousing
Effective component in Logistics Management
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Logistics Meaning & Background
Importance of logistics
Indias logistics sector is in the tremendous growth path. Logistics
activities are expanding due to,
Globalization
Expansion of manufacturing base in India
Geographical location -Logistics hub
Fast growing retail sector
Elements of Logistics
Procurement- Sourcing & purchasing
Warehousing & Storage of finish product
Material Handling at warehouses ports & ICD Transportation goods with various mode
Inventory Control Minimization
Physical Distribution of finish product Information & Communication
Packaging
Objectives of Logistics
3 R in Logistics
1) Right time
2) Right quantity
3) Right place
Definition of logisticsThe management of the storage and flows of goods, services and information throughoutfrom origin of suppler to the end user of finish products
Type of LogisticsInbound Logistics Raw material flows from supplier to production place (factory)
Out bound logistics Flows of finish goods from factory through end user customer
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The role of Various Logistics Service provider in shipping Industry
Import Movement
There is chain of various logistics service provider to handle import cargo.
They helps to importer to carry his cargo from port of loading (foreign port)
to port of discharge (Indian port)-unloading at port/container terminals-container movement from terminal to CFS Customs examination at CFS
and clearing.
Export movement
In case of export of cargo, all movement to be carried out reverses ofimport. CHA helps to file shipping bill-CFS operator providing facility for
customs examination and moving container to terminal-shipping agents
arranging container to load on ship. Carrier taking container/cargo out ofIndia by sea route
Import Cycle
Carrier (shipping company)
Shipping company provides sea service from port of loading to port of dischargeImporter pays freight to shipping company and shipping company issues Bill of Lading
Terminal OperatorA container terminal is a facility where cargo containers are transshippedbetween
different transport vehicles, for onward transportation. The transshipment may be
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between ships and land vehicles, for example trains ortrucks, in which case the terminal
is described as a maritime container terminal
CFS operator
CFS operator brings container from Terminal to his CFS on behalf shipping
line. He provides customs examination service. He collects his dues and
gives physically delivery to CHA/importerThere are 23 CFS attached to JNPTport
CHA
The purpose of a custom house agent is to tackle the problem that management of many
businesses simply does not have the resources to personally deal with import and exportissues.
A Custom House Agent is somebody entitled to act upon a companys behalf on actions
involving the import and export of goods. The phrase is most commonly used in India.
There such agents must be licensed under section 146 of the Customs Act.1962
The Bombay Custom House Agents Association popularly known as BCHAA is an
Association of Custom house Agents, licensed by the Commissioner of Customs,
Mumbai, under the provisions of the Customs Act 1962
Export cycle
Freight broker-Freight brokers use their knowledge of the shipping industry and technological resources
to help shippers and carriers accomplish their goals. Many companies find the services
provided by freight brokers indispensable. In fact, some companies hire brokers tocoordinate all of their shipping needs. He provides booking service to shipper and
collecting its brokerage from shipping line
Freight ForwarderA firm that represents shippers by arranging transport and completing documentation
required for international shipping. Some freight forwarders also act as cargoconsolidators.
CHA-Customs House Agents
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A firm that represents importers in dealings with Customs. Normally responsible for
obtaining and submitting all documents for clearing merchandise through Customs,
arranging inland transport, and paying all charges related to these functions
CFS operatorA type of steamship line service in which cargo is transported between container freight
stations, where containers may be stuffed, stripped, or consolidated. Usually used forless-than-container load shipments. There are 23 CFS attached to JNPT port
Shipping agents-Shipping agents represent charterers, receivers or ship owners. Their main roleis to liaise between their clients and the various entities that service vessels inport including
1) Arrival Departure Formalities with port & customs authorities2) Bunkering-Supply of fuel3) Marketing for cargo4) Collect Freight and remittance to ship owner5) Issue Bill of Lading
ChartererChartering is an activity within the shipping industry. In some cases a charterer may
own cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price,called freight rate. Freight rates may be on a per-ton basis over a certain route (e.g. for
iron ore between Hazira (Gujarat ) and China or alternatively may be expressed in terms
of a total sum - normally in U.S. dollars - per day for the agreed duration of the charter.
Depending on the type of ship and the type of charter, normally a standard contract form
called a charter party is used to record the exact rate, duration and terms agreed betweenthe ship owner and the charterer
Charterparty
A Charterparty is a contract signed between a ship owner and a charter who hires thevessel for a period of time (Time Charter) or for a particular voyage (Voyage Charter).
There are many types of Charterparties, most codified by various shipping associations
NVOCC /MTONon-vessel operating common carrier. A firm that offers the same services as an ocean
carrier, but which does not own or operate a vessel. NVOCCs usually act asconsolidators, accepting small shipments (LCL) and consolidating them into full
container loads. They then act as a shipper, tendering the containers to ocean common
carriers. In India MTO has to register with Director General of Shipping under Multimodal Transportation of Goods Act 1993
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OCEAN FREIGHT & SURCHARGES
Freight
The freight is the remuneration payable for the carriage of goods in a ship
from port of loading to port of discharge (JNPT to Colombo)
Basic Sea Freight (or Ocean Freight) or BAS - It is the cost of thesea freight from port to port.Ocean Freight in ContainerizationSea Freight (or Ocean Freight) is the part of total Freight Cost of aninternational shipment by sea that covers containers move betweenContainer Yards (CY) at origin and CY at destination.
SEA FREIGHT (or Ocean Freight) DOES NOT INCLUDECOST OF INLAND TRUCKING (Containers pre-carriage and drayage
at origin and destination).
It also does not include any other charges related to shipments by seasuch as containers stuffing, ground rent charges payable to CFS or
Port, container detention charges, customs formalities, duty, insuranceetc.
Freight Pre paidFreight paid by the shipper to the carrier when merchandise is tendered for shipment. Not
refundable if the merchandise does not arrive at the intended destination
Freight Payable at Destination
When the ocean freight of a shipment is paid at the time of delivery at the foreign port.
Types of Freight in bulk cargo1) Lump Sump freight2) Advance freight
3) Pro Rata Freight
4) Dead Freight
Types of Freight in containerization
1) Commodity Box Rate
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2) FAK Freight All kinds
3) Tariff Rate
Surcharges in Sea Freight (or Ocean Freight)
Total Sea Freight (or Ocean Freight) offered in a price quoteshould excluding SURCHARGES added to Basic Sea Freight (orOcean Freight).
THC
The terminal handling charges is in nature a component of
international container transport freight. It is a practice in the maintrading countries (regions) that the liner companies collect terminalhandling charges at the port of loading from the consignors andcollect terminal handling charges at the port of discharge from theconsignees. This covers loading unloading charges of container
BAF or Bunker Adjustment Factor - Fuel surcharge. Itreflects changes of price of oil on the world market. In sea
freight contracts typically changes quarterly.
CAF-Currency adjustment Factor This is related to exchange rate fluctuation with domestic
currency USD V/s INR Covering risk
Port Congestion surcharges (if any)
Shipping line imposing this surcharge when there is delay to shipin particular port
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Container terminal in port
EXPORT PROCEDURE & DOCUMENTATION
Main Pre Shipment procedure & Documentation
Procedure Documents
1 Passing of shipping bill in Customs Invoice packing list SDFOr GR GATT declaration
2 Cargo removing from factory Invoice packing listARE-Application of removable of
excisable goods
3 Cargo arrival at port or CFS Carting note or form 13
4 Examination of cargo
After examination Customs will allowto export good physically LEO
Packing list invoice -shipping bill
5 Stuffing cargo into container Mate receipt
6 Container movement to Terminal FCL by shipper shipper transporter
LCL by CFS operator
7 Sailing of ship
8 After sailing of ship Shipping company files EGM
Main Post Shipment procedure & Documentation
Procedure Documents
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Preparation of documents
Invoice packing list
Bill of lading from Shipping company
Insurance policy from insurance CoCertificate of origin from trade Association
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or export inspection agency
2 For bank Invoice packing list Shipping bill
3 For D G F. T
Director General of foreign Trade
proof of export
E.P copy of shipping bill
Documents of proof of export
Invoice packing list-Bill of ladingBRC bank Realization Certificate etc
4 Excise Authority
Prof of export
Invoice
Packing listBill of Lading
ARE-1
BRC
IMPORT PROCEDURE & DOCUMENTATION
Main Import procedure & Documentation
Procedure Documents
1 Arrival of vessel in port with import cargo Filing of Import General Manifest
By shipping agents
2 Berthing of ship & unloading of cargo
3 Container movement from Terminal to CFS Filing of bill of Entry by CHA
4 Container at CFS for physical examination5 Shipping line procedure D O for Examination by shipping line
6 Examination of cargo by Customs
7 Customs payment T R 6 challan
8 Out of charge bill of entry
9 Payment of CFS ground rent charges D O from CFS
10 Physical delivery of cargo from CFS
Export Import & Documentation
1- Pro forma InvoiceThe Pro Forma is used primarily to document to the buyer, in advance, the cost and terms
of sale of a proposed export. It is used by the foreign buyer as a quotation from the
exporter and also to assist in applying for a Letter of Credit from his bank. The ProForma Invoice serves as the basis for the subsequent Commercial Invoice
2-Commercial Invoice
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A commercial invoice is the basic statement of the seller to the buyer for payment of the
goods shipped. It must conform to any Letter of Credit requirements, foreign governmentrequirements, It is used as one of the primary documents in the collection process, and is
the main document used by foreign Customs for control, valuation of the goods, pricing,
terms of sale, payment and delivery, credit numbers, import license numbers, shipper andconsignee names, and shipping marks and numbers. Commercial invoices are usually
signed by the exporter
3) Packing List
This important document describes all items in the box, crate, pallet, or container, plus
the type, dimensions, and weight of the container. It is used to determine total shippingweight and volume (cubes) by Customs officials to check cargo, and by the buyer to
inventory merchandise received. Prices and item values are usually omitted from the
Packing List. Shipping marks, reference numbers and carton numbers are also important
additions to the packing list.
Ocean Bill of Lading
Issued by: Steamship line Purpose: Each carrier has its own bill of lading form. Serves as
contract of carriage between carrier and shipper, spelling out legal responsibilities andliability limits for all parties to the shipment. The B/L also can be used to transfer title to
the goods to a party named in the document. Specifics shipment details, such as number
of pieces, weight, destination, etc. Usually three signed originals issued. Licensed
consolidators (NVOCCs) issue their own B/Ls to shippers. (House bill of lading)
Inspection CertificateTo protect those selves, many foreign firms requests a Certificate of Inspection. This maybe an affidavit by the shipper, or by an independent inspection firm hired by the buyer,
certifying the quality, quantity, and conformity of the goods to the purchase order.
Insurance Policy / Certificate
An Insurance Certificate gives evidence of risk coverage for merchandise shipped. It is
sent to the bank with other collection documents, and normally is used only whenrequired by Letter of Credit or Documentary Collection procedures. There are many
types of insurance policies available. Coverage requested is usually 110% of the value of
the cargo shipped.
Customs Act 1962 provision related to import & export
Filing of IGM Section 30 of ICA 1962
Bill of entry Section 46 of ICA 1962
All goods are chargeable Section 12 of ICA 1962
Collection of Import duty Customs tariff Act 1975
Valuation Section 14 of ICA 1962
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Interest on customs duty Section 4 7 of ICA 1962
Clearance of goods
a) 1st Check system Examination first and then applying rate of dutyb) 2nd Check system-Duty to be paid before examination of good
Cause of Delay of clearance of imported good1) Vessel delay2) Congestion in port /terminal
3) Scanning of import container
4) ICD import container due to inadequate container trains
5) 100 % examination of scrap6) Shortage of lorries
7) Shortage of cargo handling equipment at CFS
8) Road condition of JNPT port9) Shortage of customs officer for examination
Transportation & Warehousing
Transport determines place utility
Inventory is moved from one place to another by transport system
Sea Transport is cheapest mode of transport
Various mode of transport
Transport is a backbone of logistics
Transportation cost (40 %) is main factor in Logistics
How Transportation cost can minimize
Various mode of Transport
Sea Coastal-Inland waterways-International shipping
Road State & national Highways expressway
Rail -Indian Railway divided into 10 zones
Air- facilities for cargo
Pipeline Gas pipeline
A warehouse is a commercialbuilding for storage ofgoods.
Warehouses are used by manufacturers,
importers, exporters, wholesalers, transportbusinesses, customs
The warehousing sector is another vital link in the logistics chain, one
which is evolving at a rapid pace
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Types of warehouses
1) Private general warehouses2) Customs Bonded warehouse
3) CFS-cargo distribution centre near port/ICD/Airport
4) Cold chain warehouse for perishable cargo5) Logistics park
Prof: Sham Choughule 19 August 2010
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