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What’s Really in Your Imported Shipment?

By: Simon Kaye, CEO, Jaguar Freight
Posted: April 14, 2009

Most cosmetics producers that source globally view the quality of the physical elements in a world class shipping chain as a given. The same is true of shipping and tracking processes involving ocean carriers themselves. Allowing for improved transportation management, leveraging tools such as GPS technology to track vessels en route, tools that better forecast supply and demand in given markets, and ways to tie up all the loose ends of a transaction to its cost finalization process are just some of the features that companies shipping globally increasingly expect. A transportation management system is expected to coordinate every phase of the process—from contractual activity to delivery and cost finalizations. Even so, fine print can cause big problems unless the agent used has the shipping expertise and technology to handle them.

Bills of Lading

For example, no globally sourced material can be shipped via ocean without a bill of lading, which shows where and from whom the goods were received, describes the shipment and defines the liability of the carrier. It is not unusual for carrier bill of lading agreements to be voluminous, containing a myriad of terms and conditions. Exoneration clauses, benefit of insurance clauses and limitation of liability clauses (which, in effect, mean that the bill of lading does not cover insurance) are typically buried in these agreements. That’s particularly true if the goods are shipped using CIF (cost-insurance-freight) International Commercial Terms (Incoterms), where the seller arranges and pays for carriage without assuming its risk.

Here is an example of how insurance coverage is limited. For U.S. importers, the Carriage of Goods by Sea Act (COGSA) governs the rights and responsibilities between shippers of cargo and ship operators regarding ocean shipments to and from the United States. COGSA sets the amount that ship owners must pay cargo owners for damage in transit at $500 per package or, for goods not shipped in packages, per customary freight unit. This “package limitation” has spawned much cargo damage litigation, because when COGSA was enacted, most cargo was shipped in boxes, crates and bags. Today, most shipments use an ocean shipping container up to 45 feet long, supplied by the carrier. Such containers can hold huge amounts of components or goods valued at many hundreds of thousands or even several million dollars—yet carriers often contend that one container is a “package” with a $500 insurance limitation.

To get adequate insurance coverage, importers should provide appropriate instructions to their freight forwarder. This is possible by using Free On Board (FOB) Incoterms in which the importer takes control of the goods as they go onboard at the overseas port of shipment—control that includes shipping terms and insurance coverage.

Allowing a freight forwarder to handle the importing details makes FOB easy. Global forwarders have the IT systems, standardized operations and relationships with key international shippers to smooth the logistics process. Their services can be customized for use by both the smallest and largest businesses and corporations. Competent freight forwarders can often find creative solutions where traditional supply chain handlers see obstacles. When it comes to challenges such as refrigeration, throughput, theft, hazardous material, customs as well as other regulations, and product tracking, freight forwarders consistently solve problems in a non-traditional way that adds value.

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