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What’s Really in Your Imported Shipment?

Simon Kaye, CEO, Jaguar Freight

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.

Lacey Act Compliance

Such systems and technologies can be an advantage even in the most complex regulatory issues that require detailed bill of lading listings. For example, cosmetic products frequently incorporate organic plant materials, some of them rare and exotic, others standard and widely used. Of course, when these products are imported for cosmetic production they must be detailed on the bill of lading and meet all applicable customs regulations, labeling requirements and the U.S. Food and Drug Administration standards. But now a new regulatory regime involves a law that is primarily intended to prohibit the importation of exotic animal species—but that has been extended to plant materials with potential application to cosmetic and personal care products.

The law in question is the Lacey Act, as amended in 2008. It has been on the books for years to help the United States support the efforts of other countries to combat illegal poaching and logging. Under the amendments passed in 2008, the Lacey Act now makes it unlawful to import, sell, receive or purchase any plant, with some limited exceptions, taken or traded in violation of the laws of a U.S. state or most foreign laws. The Lacey Act also makes it unlawful to make or submit false labeling or records of any plant. It is unlawful under the act to import any covered plant or plant product without an accurate supporting declaration.

This declaration must be made at the time of importation, to state the scientific name of the plant (including genus and species), the value and quantity of the plant material imported, and the name of the country in which the plant was harvested. If packaging made with recycled content is imported, the declaration must state the average percent of recycled content without regard for species or country of harvest.

Lacey Act terms are not precise. It defines “plant” to mean “any wild member of the plant kingdom, including roots, seeds, parts or product thereof, and trees from either natural or planted forest stands.” Obviously, materials from many such “plants” could be blended together, or harvested in more than one country. In such instances, the act requires importers to declare the name of each species that may have been used to produce the product, and to declare the name of each country from which the plant may have been harvested.

Common food crops and scientific research specimens are among the plants excluded from Lacey Act coverage. Most of the provisions relate to such products as lumber, wood pulp, furniture and paper. However, pharmaceuticals are specifically included for coverage, as well as products manufactured from plant-based resins. These provisions likely require a declaration for chemicals or pharmaceuticals using any tree cellulose, fiber or extract, as well as for lipstick or other cosmetics using any wood resin, gum or tar.

The Lacey Act imposes civil and criminal penalties for failure to comply, and unlawful plants or products are subject to seizure and forfeiture. The U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) has the lead in compliance enforcement, working with Customs and Border Protection (CBP), the Department of Justice, and many other agencies. Because declarations are filed electronically rather than as paper forms, it would be wise for any cosmetics producer to consult a freight forwarding expert as well as legal counsel to determine, when, how and how soon compliance is required.

The Forwarder’s Edge

It should be apparent from this discussion that, whether the issue is bills of lading or customs and regulatory compliance, a freight forwarder should be intimately familiar with the technical requirements. Equally important is the forwarder’s knowledge of Incoterms, with a demonstrated ability to define the exporting seller’s and importing buyer’s obligations regarding carriage, risks and costs, and to establish advantageous terms of transport and delivery. The forwarders who use sophisticated on-line tracking technology offer a distinct advantage in compiling bills of lading and documenting compliance with the Lacey Act and other regulations. Simply by entering a purchase order number it is generally possible to see the whole picture in as much depth as required. From shipment details to data as "granular" as pallet numbers and quantities and identities of individual pieces, shippers and customs agents get detailed information virtually at any stage of shipment.

The electronic tracking and documentation systems used by sophisticated freight forwarders are the comprehensive solution that enables companies to produce verified information on shipment status to meet all customs and security requirements. The resulting visibility and transparency in essence creates a computerized trace back system that provide an integrated information exchange platform that can be used across the supply chain, enabling information to be retrieved at any stage once a product has been shipped. Cosmetics producers are well advised to rely on freight forwarding guides who know how to improve throughput, navigate problems and deal with security and customs regulators.

Simon Kaye is Founder and CEO of Jaguar Freight Services, which operates offices in London, New York, Philadelphia, Paris Brussels and Hong Kong and an operations network in Europe, North America, South America, Australasia, Asia, Middle East and Africa. He can be reached at 1-516-239-1900 or