Transport and distribution for international trade

Transport and distribution for international trade. Find out about international trade distribution by road, rail, air and sea: imports, exports, customs, regulations and freight management. Introduction. Transport and distribution are key considerations when planning for international trade. Choosing the right mode of transport is essential to ensure your import or export operation is efficient and cost-effective. There are four ways of importing and exporting - road, rail, air and sea - although you may need to use more than one type of transport. When making your choices, you will also need to decide whether to handle logistics by yourself, or outsource the work to a freight forwarder. This guide examines each mode of transport and provides an overview of the issues you must address. It covers how to deal with customs, identifies which regulations must be complied with and explains how to manage a freight forwarder. This guide explains the basics of international trade and distribution. For more detailed information see the guide on moving your goods. Assessing your transport needs for international trade. Your choices for international transport and distribution include road, rail, air and sea. Various factors will influence your decision on which type of transport to use - including your business’ requirements, the destination country, and the type of goods you are importing or exporting. Ask yourself the following questions: What do you want to distribute? Size and weight will affect the cost. How quickly does the product need to reach its destination? This will affect which type of delivery service you use and the cost - sending goods by air is quicker but significantly more expensive than by sea. How would transport costs impact on your overheads? Where do the goods need to go? For example, Europe has a large rail and inland waterway network, but you may encounter problems if the destination is especially remote. How valuable are the goods? Get quotes from insurance brokers before deciding on the appropriate insurance level. Do your customers have any special requirements? Consider all the methods of transport available. You should aim to balance service quality, cost, organisation and time. You will often use more than one mode of transport. How your type of goods may influence your decision. Match the transport mode with the goods you’re moving. For example, if you import fresh fruit or other perishable items, speed is important. Transport by ship or road may not be quick enough. Another issue is whether or not your goods need to be kept refrigerated during transport. Other regulations or special requirements may also influence your transport choice. For instance, if the goods you are transporting are classified as dangerous, you must comply with special rules. Find guidance on transporting dangerous goods on the Health & Safety Executive (HSE ) website. Also see the guide on moving dangerous goods. You could use a freight forwarder to manage logistical issues for you. See the guide on choosing and managing a freight forwarder and see the guide on using brokers and forwarders. Using road transport for international trade. Road transport can be the most flexible option for your international business, especially within the EU . The motorway network is good and crossing national borders is usually quick and efficient. relatively low cost extensive road networks - scheduled delivery days and next day delivery services are a viable option you can schedule transport to suit you and you can track the location of goods consignments can be secure and private. But there are also risks for road transport: long distances overland can take more time there can be traffic delays and breakdowns there is the risk of goods being damaged, especially over long distances toll charges are high in some countries some countries have different road and traffic regulations. You can either use your own vehicles, or a carrier. If you operate your own vehicles, you will need to consider licences, fuel costs, regulations, driver training and tax. Different types of carrier, include: Couriers - specialise in the speedy and secure delivery of small goods and packages. Find a courier service in your area on the Locateacourier website. Hauliers - will collect goods from your premises and deliver them by road. Freight forwarders - consolidate shipments and have a detailed knowledge of the rules and regulations that your business must comply with. See the guide on choosing and managing a freight forwarder and see the guide on using brokers and forwarders. Consider your requirements carefully before making your choice. For more information, see the guide on moving goods by road. Goods-in-transit insurance can protect you if goods are lost or damaged when transported. Road haulage falls under the Convention des Marchandises Routiers (CMR) which sets out conditions for transporting goods by road. This gives basic cover, but it’s advisable to take out extra insurance. See the guides on insurance for international trade and transport insurance. The following classes of goods are defined as dangerous: corrosive substances explosive substances and articles flammable liquids and solids gases oxidizing substances radioactive substances toxic substances. Using sea transport for international trade. If your business needs to transport large quantities but there is no pressure to deliver quickly, shipping by sea may be suitable. Other advantages include: you can ship large volumes at low costs - a freight forwarder can consolidate consignments to reduce costs shipping containers can also be used for further transportation by road or rail. However, there are also risks for sea transport: shipping by sea can be slower than other transport modes and bad weather can add further delays routes and timetables are usually inflexible tracking your goods’ progress is difficult you have to pay port duties and taxes further transportation overland will be needed to reach the final destination basic freight rates are subject to fuel and currency surcharges. Protect your consignments with insurance. Under the maritime transport conventions you automatically have limited insurance cover under the Hague-Visby and Hamburg rules. However, it’s advisable to get additional insurance, such as general cargo insurance. See the guides on transport insurance and insurance for international trade. All your consignments must be accompanied by either a Bill of Lading or Sea Waybill. These documents clearly set out who the consignment owner is and the terms of the contract of carriage. When exporting to a new customer, use a Bill of Lading. This allows you to retain ownership of the goods until you release them to your customer. It is risky to release the goods before full payment is made unless you know your customer’s creditworthiness. Bills of Lading give you documentary security and more control over your consignments. Sea Waybills are less costly but do not offer the same security of payment. You should only use them when you know the creditworthiness of the business you’re shipping to, or when you have built up a good relationship with them. See the guide on getting paid when selling overseas. For more information on shipping, see the guide on moving goods by sea. If you ship dangerous goods, you must complete a dangerous goods declaration which includes the Dangerous Goods Note. In most cases this will be in addition to the maritime transport document that should accompany your shipments. Read about the International Maritime Dangerous Goods Code on the International Maritime Organization website. Also see the guide on moving dangerous goods. Using rail transport for international trade. Rail transport is a cost-effective and efficient way to move your goods. It offers you the following advantages: fast rail links throughout Europe it is environmentally friendly compared with other transport modes. However, there are also risks for rail transport: routes and timetables available can be inflexible, especially in remote regions rail transport can be more expensive than road transport mechanical failure or industrial action can disrupt services further transportation may be needed from a rail depot to the final destination, adding to costs and affecting delivery schedules. See the guide on moving goods by rail. Insurance and documentation. You should also be aware of the CIM consignment note that sets the conditions for transporting non-dangerous goods by rail. CIM rules mean that your carrier only takes responsibility for insuring your consignments against loss or damage from the time they take possession of them until they are delivered. If you transport dangerous goods that have a UN dangerous goods code, or that your carrier considers to be dangerous, you must complete a dangerous goods declaration. Part of this declaration is the Dangerous Goods Note. classification of dangerous goods dangerous goods lists and any special provisions or exemptions testing and use of packaging, intermediate bulk containers, large packaging and tanks procedures relating to the consignment conditions concerning the conditions of carriage, loading, unloading and handling. Specialised advice can be obtained from your legal adviser or freight forwarder. See the guides on transport insurance, insurance for international trade and international trade paperwork. Using air transport for international trade. Air transport offers numerous advantages for international trade, depending on your requirements. It can: deliver items quickly over long distances give you high levels of security for sensitive items be used for a range of goods. However, you should consider the following issues: air transport can involve higher costs than other options, and is not suitable for all goods flights are subject to delay or cancellation you will need to pay taxes at each airport you use fuel and currency surcharges will usually be added to freight costs further transportation may be needed from the destination airport to the final destination. Make sure that the routes and timetables available for air transport suit your requirements. General cargo insurance is available in three levels - clauses A, B or C. Air transport can also use the Institute Cargo Clauses (Air). The level of insurance is reflected in the premiums that must be paid. You should try and match the level of your insurance to the potential risk that your consignment is put under. Consult a broker or freight forwarder for advice. See the guide on insurance for international trade. Documents and regulations. The Air Waybill sets out the contract between your business and the carrier you’re using. The e-freight project aims to remove all paperwork from air cargo transportation. Find out about the e-freight scheme on the International Air Transport Association (IATA ) website. Warehousing and international trade. When moving your goods in and out of the UK, you may need some form of customs warehousing. This can give your business the following advantages: There are two types of customs warehouse. Private warehouses - known as types C, D and E - are for the storage of goods by an individual trader. A public warehouse (type A) is authorised for use by a warehousekeeper who will accept your goods but takes no responsibility for them. You should check that the warehousekeeper is authorised by HM Revenue & Customs (HMRC ) and that their excise premises are approved. For the detail, see Notice 196 on the HMRC website. You can also read the guide on customs warehousing. You can store most types of goods in a customs warehouse, except meat, meat products and any goods requiring a veterinary check. If you store pre-financed agricultural goods - goods that are intended for export in an unaltered state - there may be a time limit on storing your goods. For more information on Common Agricultural Policy (CAP ) goods see Importing CAP goods and Exporting CAP goods. You must keep accurate records, including: receipts showing that the goods have come into the warehouse an inventory of the warehouse, showing exactly what is stored there documentary evidence showing the handling and removal of goods. Stock records must be kept at type A, C and D warehouses. Records for type E should be kept at your head office. If using computerised records, contact HMRC to ensure your systems are compatible. Your stock records must be kept for four years after the removal of the goods they relate to. Choosing and managing a freight forwarder. If you are planning import or export operations, and would prefer not to manage the logistics by yourself, you can engage a freight forwarder. Freight forwarders offer a wide range of expertise and services including: consolidating smaller shipments to save you time and money detailed knowledge of the rules and regulations that your business must comply with acting as an intermediary when transporting to a new territory arranging for and operating several different transport methods for a shipment as required. Selecting and managing a freight forwarder. You need to make sure you choose a freight forwarder who suits your needs. Questions to consider include: For a successful partnership, you need to make sure your respective responsibilities are clearly understood and set down. The use of Incoterms, an internationally accepted system of trading terms for the delivery of goods, is recommended to avoid any ambiguity. See the guide on international trade paperwork. Labelling and documents for international transport. Whatever international transportation you use, there are common documents that you may need to complete: If using a freight forwarder or carrier, you should complete an Export Cargo Shipping Instruction (ECSI). Shipping to EU and non-EU countries. You will need to use correct labelling and shipping marks to ensure smooth processing of your goods. The consignment itself must be labelled with its destination. If your goods are being consolidated, ensure that your own consignment is individually labelled, as it will be shipped along with other business’ goods. Download a guide to shipping container labelling from the Book Industry Study Group website (PDF, 2.05MB). Tax and VAT. Local taxes and tariffs may have to be paid when transporting your goods internationally. Authorised Economic Operator (AEO ) status. Case study: Evans Vanodine. Evans Vanodine exports cleaning, janitorial and hygiene products to over 60 countries and overseas trade accounts for 25 per cent of the company’s turnover. Export manager Peter Thompson’s top tips: Employ logistics personnel. “There are lots of people out there with the experience - and the quality of the experience has greatly improved over the past 10 years, as more UK businesses are trading overseas.” Commit to exporting - do it properly. “Look at your export opportunity and examine every part of the business from an exporting standpoint, from marketing and packaging right the way through to dispatch.” Use the help and advice from UK Trade & Investment. “People don’t realise how easy it is to get this help and how incredibly valuable it is.” Choose freight forwarders carefully. “It’s a buyers’ market for us when we are looking for freight forwarders - there are lots out there. We tend to use around a dozen freight forwarders each year. For each shipment, we get three quotes. And it’s not just the price we look for. “We always look for the best possible documentation management, advice and service levels. Of course, you won’t know all of this until you try one, but you can minimise the risks by checking things, such as drivers being fully certified to carry hazardous chemicals, before you appoint the forwarder. As we export chemicals, we work with freight forwarders who know Customs’ tariff codes and hazard classifications for our consignments.” Keep on top of the paperwork. “We employ a team of people with logistics experience to keep on top of the paperwork. They negotiate with customers on consignment sizes to make sure that we’re all getting the best possible freight deal. “Documentation is always our biggest issue. Our team always makes sure we’ve got copies to hand. For example, if a Dangerous Goods Notice goes missing, the goods can’t leave the port, incurring costs for us and the freight forwarder. So, we always keep duplicate copies of all the paperwork, while sending one to the forwarder and one to the customer. That way we can easily and quickly send it over when problems arise.” Handle insurance for consignments to protect our customers. “We routinely insure consignments on our customers’ behalf. Generally insurance only accounts for 1-to-2 per cent of the consignment’s value. “Handling damage is sadly quite common and it’s very difficult to track down liability for any damage. Occasionally a customer asks us not to bother with insurance, but we do strongly recommend it to them simply as part of the service. Otherwise, they could conceivably end up with empty consignments and no recourse. We use three of the larger insurance companies and add the most suitable insurance to the customer’s invoice.” Set distributor targets more tightly. “We have distributors in around 60 countries and, looking back, we should have initially been more forceful in managing their targets. If a distributor runs to their targets rather than ours, it can handicap growth and the efficiency of the operation.”