To my parents,

with gratitude

2

TABLE OF CONTENTS

Introduction Pag. 3

Dissertation Pag. 5

• EXPORT

� Introduction of the Export commodity Page 5

• Why movement Spain – Hong Kong? Page 7

� DDP Incoterm: why? Page 8

� Thing that is not allowed to forget Page 10

� It’s time to choose the carrier Page 11

• And the winner is… Page 16

� We are freight forwarders, not NGO Page 23

� Let’s ship then! Page 24

� Seem to be easy, but it’s not Page 27

• IMPORT

� Short introduction Page 29

� What can we import? Page 31

� That’s not what I’ve ordered (L/C) Page 33

Conclusion Page 34

Reference and Appendices Page 37

3

INTRODUCTION

I perfectly know that in this thesis the complexity of the issues and problems

faced will be high valuated. By the way, this is not an early confession about the

too simplicity of mine, as I believe that each candidate should write about

matters that they have experienced during their still short career.

“I know one thing: that I know nothing” says Socrates.

For the reason explained above, on this thesis you will find many aspects that

I’ve learned (sometimes thanks to mistakes) during my 6 years working as

International freight forwarder. As you will clearly understand later, I mainly

operate on export business, which in the last years is the real engine of

economic growth for the European countries.

As the FIATA member Association that selected me use to say, “Forwarders

are the cargo architects” , and that’s the key to let understand people that

doesn’t work in our business how interesting is it.

Let me explain it with a short example, where you have to substitute words with

the others “tipped on brackets”:

Architects (freight forwarders) design all kinds of buildings (shipments).

Okay then, but what does the word "design" mean? A design is simply a

plan. Before constructing a building (shipments), an architect (freight

forwarder) needs to draw a plan of the building (shipment). The building

(shipment) is then built (managed) by a construction company (shipping

4

company) which follows the directions of the plans for the building

(shipment). The architect (freight forwarder) will closely supervise the

construction company (shipping company) to make sure that the building

(shipment) is built (scheduled) according to the plans. Architects (freight

forwarder) have to think of many things before they draw up the plans for a

building (shipment).

In this thesis I will try to explain, within the worlds limitation that have been

imposed, what are these “many things” that freight forwarder has to think before

starting with his shipment plan.

5

DISSERTATION

EXPORT

INTRODUCTION OF THE EXPORT COMMODITY

About the export commodity, I’ve decided to choose newsprint paper . In this

work, the final destination of this cargo will be Hong Kong (later I will specify

more about Incoterm used, point of origin, inland destination, etc...).

Before starting with this specific case, I need to make a little introduction about

the commodity itself: I must underline “newsprint”, as paper has a lot of varieties

(more than 500 types)1, as you can see when you just take a look of the

Harmonized System Code2.

Under code number 48, we can find a lot of different kind of paper. In this case,

I will consider HS code 480100, which means “Newsprint, in rolls or sheets”.

Nowadays, the paper industry is dominated by North American, following by

northern European (Finland, Sweden and North-West Russia) and East Asian

1 Source: ASPAPEL, Spanish Association of Pulp and Paper Manufacturers . More info:

http://www.aspapel.es/en/paper/what-it-is 2 The Harmonized Commodity Description and Coding System (HS) of tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization (WCO). HS Code Search Database: http://www.foreign-trade.com/reference/hscode.htm or http://www.hscode.org/

6

countries3. This ranking basically depends on the row material and the

extension of the territories that these countries have.

The paper industry trend is to expand globally to countries like Russia,

Indonesia and China, where obviously there are low wages, no power for the

labour union and where the natural environmental seems that is not yet

appearing on their dictionaries.

The sector has a long background in Spain. Today it is a capital-intensive

industry that uses the most up-to-date technologies and in its plants distributed

across the entire country: Spain holds the fifth position within the European

Union as a producer of pulp and is the sixth largest paper producer4.

3 According to RISI, Inc. (http://www.risiinfo.com), the leading information provider for the global forest products industry. 4 Appendices online: www.fabiogava.com/YIFFYaward2013/1.Paper&Industry.pdf

7

WHY THIS MOVEMENT SPAIN-HONG KONG?

Basic of my personal experience, since few years there is a regular traffic of

newsprint paper of about 30 TEUs per month from our customer/producer to

this special administrative region of the People's Republic of China.

Our export customer is a Swedish company that, due to commercial and cost

strategy, in 2.000 acquired a paper mill in Madrid (they have another 2 mills in

Sweden).

For the Madrid mill, the most demanding markets for selling newsprint paper are

Mediterranean, IPBC (India, Pakistan, Bangladesh and Ceylon) and Middle

East.

So, considering what I wrote until now, why a Hong Kong based company (that,

for example, could buy newsprint paper from closer mills in mainland China)

should buy newsprint paper that has been produced in the “far” Spain? Well, the

question is simpler than it appears, and it’s not only about so called

“globalization”5 : apart of quality reasons, both companies (seller and buyer) are

Swedish and the first ones have 20% of capital share of the second one.

5BBC News. “Key fact of the Global Economy”. http://news.bbc.co.uk/2/shared/spl/hi/guides/457000/457022/html/

8

DDP INCOTERM: WHY?

In this case, I will consider an operation based on Incoterm DDP Aberdeen

(Delivery Duty Paid): I’ve helped the exporter to choose this “door delivery”

Incoterms because, as we have our own office in Hong Kong, we can basically

offer better inland haulage rates at destination and have under our control the

whole operation.

Image 1: Distance between Madrid and the principal ports in Iberian Peninsula

9

Image 2: Hong Kong port and Aberdeen (final delivery)

10

THING THAT IS NOT ALLOWED TO FORGET

Not linked to the choice of the carrier (for reason of reliability I will always advice

to work with the biggest ones) is the decision of the insurance. How can I write

a thesis for an award that is sponsored by TT Club, without even mention

the insurance?

Exporters always should have their commodities covered by their own

insurance company. By the way, in some cases they have been required to ship

in CIF conditions (this Incoterms means Cost, Insurance and freight) or simply

have a further insurance.

The fastest and easiest way to get insurance is to be an approved user of TT

Club. In this way, and considering this special case in which we are shipping

newsprint paper reels6, we could generate our insurance certificate

immediately, after an instant online quote. As mentioned on TT Club website,

the insurance cover in accordance with the latest version of the Institute Cargo

Clauses.

Today, there are basically three internationally recognized types of covers

available worldwide and all are offered by local insurance companies. They are

known as the London market “Institute Cargo Clauses” (A), (B) and (C).

The A is the widest possible cover which protects against ‘all risks’ of loss or

damage to the cargo, while the B and C types are more restricted and basically

insure against named perils only. The risks covered by both of them are: 6 For example, if I require a quote of Laptop Computers, Cell & Mobile Telephones, Boats, Classic Cars, Bulk Goods or Temperature Controlled Goods, I must contact with my insurance broker or TT Club directly.

11

• Fire or explosion

• Vessel being stranded, grounded, sunk or capsized• Overturning or derailment

of land conveyance

• Collision or contact of vessel or conveyance with any external object other

than water

• Discharge of cargo at port of distress

• General Average sacrifice

• Jettison

• Salvage Charges

• Liability under the “Both to Blame” Collision Clause.

Apart of this kind of insurance, I always suggest to my customer to be covered

with a so called “Export Credit Insurance ”, that is an insurance policy and a

risk management product offered by private insurance companies and

governmental export credit agencies (in my case, Spain has CESCE7) wishing

to protect their accounts receivable from loss due to credit risks such as

protracted default, insolvency or bankruptcy.

7 CESCE Credit Insurance was born in 1970 and the owner of 51% of capital is the Spanish Government. Rest is owned by banks (Santander and BBVA above others) and insurance companies: http://www.cesce.es/web/sp/

12

IT’S TIME TO CHOOSE THE CARRIER

Just looking at the above map, we can see that the Madrid nearest port is

Valencia , that it’s also one of the busiest ports in Europe. Valencia is the transit

of the 85% of the import and 60% of the Spanish export by sea; only in 2012,

Valencia port reach 4,47 millions TEUs.8

By number of TEUs, in 2011 Valencia was the number 31th in the “Top 50 world

container ports”.9

At the time of choose the ocean carrier, the freight amount is just one of all the

elements that I must consider. The other, and not less important, are:

- Service and transit time from Valencia to Hong Kong Port (I prefer

weekly and direct service in order to avoid transhipments that may delay

the scheduled transit time);

- Availability of requested equipment in Madrid area , where the

shipping lines that I will contract should have various “Containers

Depots”10 .

In my case, equipment must be 40’ High Cube, as the paper reels are

126 cm width and they are packaged one above other. For this reason,

40’ dry container do not suit our shipment.

8 InterTransport, March 4, 2013, 23. “Meeting of Valencia port Board of Directors” 9 World Shipping Council. http://www.worldshipping.org/about-the-industry/global-trade/top-50-world-container-ports 10 Container Depots in Spain are better kneed as “Puerto seco”, that means Dry Port. Example: Madrid dry port: http://www.noatum.com/en/noatum-ports/madrid

13

1. Container Dimensions / Weight11

Equipment Interior

Dimensions Door

Opening Tare

Weight Cubc

Capacity Payload

40' High cube Container

L:12.056m 39' 6 ½

W:2.347m 7' 8 ¼

H:2.684m 8' 5½

W:2.340m7'8

H:2.585m 8' 5 ¾

2,900 kg 6,393 lbs

76.0 cbm. 2,684 cu. ft.

29,600 kg 62,256 lbs.

40' Dry Container

L:12.051m 39' 6 ½"

W:2.340m 7' 8"

H:2.380m 7' 9½"

W:2.286m7' 6"

H:2.278m 7' 5 ½"

3,084 kg 6,799 lbs.

67.3 cbm. 2,377 cu. ft.

27,397 kg 60,401 lbs.

My customer obviously prefer to stuff the container directly at their mill,

not only for economical reason, but also to avoid third party manipulation

of their commodity (paper reels required specifically machineries to stuff

them into containers without any pallets).

At the time of quote all shipments of projects, I always suggest to under

mark the sentence “subject to availability of space and equipment”, as

well as the word V.A.T.O.S, that means that all stated Additional Costs &

Charges are “Valid at Time of Shipment”.

- Inland haulage cost and possibility to combine truc k-train : That’s not

only because my customer is “environmentally friendly”, but also

because in this way we can cut cost on about 30% respect truck

transport only.

The calculation of energy consumption and emission data of a worldwide

transport chain can be done rather quickly with the help of EcoTransIT

11 Freightrate.com. “Container dimensions / Weight”. http://www.freightgate.com/resources/container.tet

14

World12. In my case, just see the CO2 equivalents, which show clearly

the positive influence for the climate changes of train transport respect of

truck transport.

More factors, like Primary Energy Consumption, Carbon dioxide,

Nitrogen Oxides, Nonmethane Hydrocarbon, Sulfur dioxide and

Particular matter (combustion related) have been also analyzed and

show a positive influence as well for the train transport compared with

truck transport.

By the way, my personal point of view is that Customers are not

interested in how much CO2 is emitted by the shipowners' ships. Yes,

of course exporter producers could take a look and compare the different

environmental impacts of the “trip” of their commodity, but the principal

reason of selecting one or another carrier (and also one or another way

of inland transportation) is and will be in the next future the money

requested for that. Additionally, it is still not possible to compare the

12 http://www.ecotransit.org/index.en.html - EcoTransIT World calculates environmental impacts of different carriers across the world: this is possible due to an intelligent input methodology, large amounts of GIS-data and an elaborate basis of computation. Data and methodology are scientifically funded and transparent for all users. You can find the full results of our case on the Appendices and also here: http://www.fabiogava.com/YIFFYaward2013/2.truckVStrain-MAD-VLC.pdf

15

CO2 emissions of the major container carriers , says new analysis by

SeaIntel.13

- Reliability of the shipping line: it is a crucial parameter for me-the

forwarder, for my customer but also for the shipping line itself and for all

the supply chain. Customers expect their containers to reach the

destination on time and unharmed14.

13 BBC News, William Kremer. How much bigger can container ships get? http://www.bbc.co.uk/news/magazine-21432226 14 Drewry Maritime Research. “Carrier Performance Insight”. http://www.drewry.co.uk/publications/view_publication.php?id=313 According to Drewry British analysts, Hanjin surpassed Maersk Line last quarter of 2012.

16

AND “THE WINNER” IS…

Considering all above, I will choose Maersk Line as carrier for this shipment

and ask them to register the freight rate that they previously sent to me.

Receipt Delivery Charge Locations Basis Cur D40HD

Madrid, ES

Hong Kong,

HK BAS Container USD 900

IHE* Container EUR 450

DDF A BoL HKD 350

ODF B BoL EUR 45

SER A Container USD 12

PAE* Valencia Container EUR 50

PSE* Valencia Container EUR 5

2. Example of Maersk offer Madrid-Hong Kong – Full details are available on Appendices

This rate, valid for 2 months (generally it’s hard to get an offer for more with

validity of more that this period) are composed of:15

- Basic Ocean Freight

In this offer, the USD 900 x 40’ HC container showed include also:

1. CAF: Currency Adjustment Factor

2. DHC: Handling Charge Destination 15 Full excel file with Maersk offer can be found on Appendices and here: www.fabiogava.com/YIFFYaward2013/example-freight-Vlc-HK.xlsx

17

3. ERS: Emergency Risk Surcharge

4. FFC: Forwarder Commission - Origin

5. OHC: Terminal Handling Service - Origin

6. SBF: Standard BAF (Bunker Adjustment Surcharge)

7. STT: Suez Transit Fee

8. ULF: Agency/Logistics Fee

I’ve decided to choose the Danish shipping line because they better respond to

all the elements that I’ve commented in the previous pages. I must underline

two reasons above all:

- Weekly and direct service from Valencia, with a transit time of about 39

days.

You could think that almost one month and a half to arrive to Hong Kong

from Mediterranean is quite long time. There are part of true in this

affirmation, because after the great world recession started in 2009,

vessel slow down their speed, in a so called “slow steaming ”, that is

nothing else that the simpler way to reduce costs.

But there are also two more reasons that justify and explain slow

steaming and even “extra slow steaming”: the delivery of new incredibly

enormous vessel of more than 14.000 TEUs/400 meter long16 that

16 Maersk Line have called these next generation vessel “Triple-E”, that means: Efficiency, Economy of scale, Environment. More info on http://www.worldslargestship.com On Twitter and Maersk Line's Facebook page the first picture of the Triple-E being built at the Daewoo Shipbuilding & Marine Engineering ship yard in South Korea has been published. The ship will be approximately 400 meters long, 59 meters wide and have an overall capacity of 18,000 teu. If all these containers were placed on a train, the train would stretch for 110 kilometres. According to Maersk Line, the Triple-E will become the most fuel efficient container ship ever built.

consequently create more offer than demand

bunker cost .

18

consequently create more offer than demand and the

and the increment of

- Generally, Maersk Line do not

cube containers in Madrid Area

- I think Maersk Line is truly commitment with the

just wrote that because of various facts (these are j

that I believe are the

1. Maersk Line has reached its 2020 target of

emissions by 25% from its benchmark 2007 levels

2. Maersk Line wants Hong Kong to ban dirty fuel to fight smog: the

company and 17 oth

sulphur oil for the past two years to help curb Hon g Kong’s

pollution , the worst among global financial

17 We must be careful with the “seasonal business”, like the export of alfalfa hay to Middle East Region, that use huge quantities of 40’ containers (both dry van and high cube). 18 Maersk Line. “Maersk Line http://www.maerskline.com/link/?page=news&path=/news/news20130125

19

Maersk Line do not have any problem with stock of 40’ high

cube containers in Madrid Area 17.

Line is truly commitment with the environment

just wrote that because of various facts (these are just three examples

that I believe are the most significant ones):

Maersk Line has reached its 2020 target of reducing CO

emissions by 25% from its benchmark 2007 levels

Maersk Line wants Hong Kong to ban dirty fuel to fight smog: the

company and 17 other operators have voluntarily

sulphur oil for the past two years to help curb Hon g Kong’s

, the worst among global financial centres

We must be careful with the “seasonal business”, like the export of alfalfa hay to Middle East antities of 40’ containers (both dry van and high cube).

reaches 2020 CO2 target”. http://www.maerskline.com/link/?page=news&path=/news/news20130125

stock of 40’ high

environment and I

ust three examples

reducing CO 2

emissions by 25% from its benchmark 2007 levels 18;

Maersk Line wants Hong Kong to ban dirty fuel to fight smog: the

er operators have voluntarily used low-

sulphur oil for the past two years to help curb Hon g Kong’s

centres. By the way,

We must be careful with the “seasonal business”, like the export of alfalfa hay to Middle East antities of 40’ containers (both dry van and high cube).

20

Government incentives for switching to cleaner fuels for shipping

lines calling on the world’s third-busiest container port, a key

contributor to the island’s pollution, don’t cover additional costs

and the payments are often delayed because of processes. For

this reason, Maersk Line threatened to stop using cleaner fuel at

Hong Kong port from next year if the government doesn’t mandate

higher quality oil for carriers berthing in the city.19

3. Last February 3rd 2013, through his CEO Peter K. Nymand,

Maersk Container Industry declare that “We urge the European

Commission to ensure enforcement of existing EU legislation

regarding insulation foam in reefer containers. This would benefit

the environment, and it would help European innovation and

environmental investments pay off.”

Mr. Nymand was talking about the reefer container, but this “way

of thinking” must be applied also to standard container

transportation.

Current EU legislation bans the "import" or "placing on the market"

of reefer containers with significant potential to damage the

climate and ozone layer. But thousands of such containers

nevertheless circulate in Europe's internal market on virtually the

same market conditions as more environmentally friendly reefers.

19

Bloomberg. “Maersk Wants Hong Kong to Ban Dirty Fuel to Fight Smog”. http://www.bloomberg.com/news/2013-01-06/maersk-wants-hong-kong-to-ban-dirty-fuel-to-fight-smog.html

21

Supotec, which was developed and patented by Maersk Container

Industry in 2002, does not damage the Earth's ozone layer, nor

does it cause significant climate change. As a result, customers

and the World Wildlife Fund WWF laud Supotec for being an

environmental step forward

"This is environmental precaution. It is positive when enterprises,

in this case Maersk Container Industry, move ahead of the

legislation by developing products and production methods, which

in turn make it possible for legislators to demand more from the

rest of the industry," says John Nordbo, head of the Conservation

Department at WWF, Denmark.20

4. Maersk Line act in the Ulysses project21 Advisory Committee: the

objective is “to demonstrate, through a combination of ultra slow

speeds and complementary technologies, that the efficiency of the

world fleet can be increased to a point where the targets of

reducing greenhouse gas emissions by 30% compared to 1990

levels and by 80% compared to 1990 levels are met”

- About reliability , according to British analysts Drewry22, Maersk Line has

handed over the number one spot to its Korean competitor, Hanjin, in the

20 Maersk Line. Press Releases, 04th February 2013. “Maersk Urges EU Climate and Ozone Action: http://www.maerskpress.com/LATEST-PRESS-RELEASES/maersk-urges-eu-climate-and-ozone-action/s/810caf9c-0d94-4537-bb23-76f94e5bfbd6 21 For more info, see Ulysses Project official webpage: http://www.ultraslowships.com/ 22 Drewry is the specialist research and advisory organization for the maritime sector. The publications “Carrier Performance Insight” can be found here http://www.drewry.co.uk/publications/

22

second quarter of 2012. Always according to Drewry, ”containership

reliability reached a record high in the fourth quarter of 2012, with the

percentage of on-time ship arrivals across all trades jumping 79.9

percent, a rise of 6.4 percentage points compared with the third quarter’s

performance” 23.

23 Shippingwatch. “Competitors go after Maersk where it hurts”. http://shippingwatch.dk/English_Version/article5196893.ece

23

WE ARE FREIGHT FORWARDERS, NOT NGO

Now, as I’m a young freight forwarder (and hopefully one of the finalists of

Young International Freight Forwarder of the Year Award) and not a Non-

Governmental Organization, I will increase a bit the above rate.

The best thing is always to increase the rate of ocean freight. Other concepts

(like BAF, CAF, THC, ISPS, etc...) should not be increased or just softly

increased, as should be similar in all offers that an exporter could receive from

other freight forwarders or logistics operators. Even if customer has told you

that they are not asking the same destination to other competitors, be sure that

they will do it.

At this point, the offer has been made and customer should have accepted it (all

right, you can call me optimistic).

The day of the stuffing at mill, I will encourage the exporter to take pictures

of any equipment (while empty, while stuffing and once container is full of

commodity) that arrive at mill: it will avoid any claims that could come later.

A survey by the Hong Kong Shippers’ Council (HKSC), exclusively revealed to

IFW, found that the size and frequency of fees charged for box damage had

been increasing, and shippers were being charged for damage they were not

liable for. One Hong Kong-based shipper reported: “Shipping lines are asking

for cleaning or chemical wash fees for almost all empty containers returned to

24

their depots, even though our cargo is clean, packed in paper cartons and

moved only by hand at our own warehouse.”24

In this case, prove with pictures that at the time of loading the equipment were

in good conditions may help. By the way, this will not exclude at all that

importers will be asked to pay for container damage.

Shippers claim lines and depots are making them pay for container damage,

even when they are able to prove non-liability with an equipment interchange

report (EIR - document executed by a truck carrier and a terminal transferring

possession of a container from one to the other, and showing equipment

condition at time of transfer).

“Even though damage is clearly marked on the EIR upon gate-out at the

terminal, some shipping lines insist on collection of repair costs on return of the

empty at its depot,” said one shipper. “Otherwise, acceptance will be denied, or

the tractor will have to wait for hours, causing delay and extra costs. This is

simply blackmail”.25

24 Maritime Sun. “Shipping lines accused of stealth charges for “container damage””. http://www.maritimesun.com/news/220 25 About this matter, Mr. Balakrishnan Muthukaruppan (Director at PKT Logistics Group in Selangor, Malaysia), has opened an interesting debate on LinkedIn, a social networking website for people in professional occupations that you surely know. Link: http://goo.gl/HGV9f

25

LET’S SHIP THEN!

The paper reels has been stuffed at mill and the cargo is now on his way to

Valencia port, where will be loaded in the first available vessel to Hong Kong

port.

About documentation, for this shipment we will use a so called “House

Seawaybill ” (HSWB) because two mainly reason:

1) The consignee of the goods on the HSWB is our agent in Hong Kong ,

that will take care of the goods and delivery the cargo until the “door” of

the buyer;

2) A sea way bill performs is non negotiable (the ownership of the goods

cannot be transferred by endorsing the sea way bill and cannot be

issued “to the order” ). The cargo consigned under it can only be

released to the named consignee on the Seawaybill. As such, the

original document is not required and the receiver only needs to identify

themselves correctly.

3) SWB is more relevant for non commercial transactions, inter company

stock transfers or where the bank L/Cs are not involved.

4) The receiver of newsprint paper reels have already paid them;

I’m not going to explain what is the standard bill of lading, but just let me say

that, as my boss used to say “If you read all the conditions that appears on

26

page one of any BL – because the first one is the page with all terms &

conditions – you will never ship anything !”

In some countries (like, for example, Spain), any freight forwarder can act as

NVOCC (Non Vessel Operating Common Carrier) and issue House Bill of

Lading for their ocean shipments. It’s interesting to know that in other countries

(e.g. the USA), only companies registered specifically as NVOCC are licensed

to issue HBL.

So, as soon as the containers have been sailed and the shipping line confirms

us that they are “on board”, we can release the HSWB: it will be an exact replica

of the Master Bill of Lading (issued by the Shipping line – Maersk in my case) in

respect of cargo details. The only difference will be that the shipper, consignee

and notify party details will be different in the HSBL and MBL.

On the appendices26 you can see an example of both Master Seawaybill and

House Seawaybill. The Master Seawaybill shows our agent as consignee: in

fact, as soon as the vessel arrives at Hong Kong port and the container/s will be

discharged, he will identify himself as consignee even without the

seawaybill (remember that seawaybill has no original) and, at this point, he

could gate the cargo out of the port for final delivery, that in our case will be

done by truck. Give the final inland transportation to our agent in Hong Kong

assure that we’ve got better price than the prices that shipping line would have

gave us for the same inland service.

26 Appendices is available online, here: MBL: www.fabiogava.com/YIFFYaward2013/mbl.pdf HWBL: www.fabiogava.com/YIFFYaward2013/H-SEAWAYBILL-1169.pdf

27

So, at this point cargo has been released and if there isn’t any problem with

container damage (as mentioned above), in a few days paper reels will be used

to print the most famous newsprint in Hong Kong.

28

SEEMS TO BE EASY, BUT IT’S NOT!

If you are reading my thesis and you have the feeling that the work of freight

forwarder is too easy, of course you’re having a wrong impression.

Our job is full of variables, that most of the times are unpredictable: bad

weather, political crisis, wars, pirates, trade interdictions, etc…

A great way to discover almost all of them was the BBC News project called

“The Box”27: in 2008, the world famous British TV channel followed a 40’

shipping container for a year to tell stories of globalization and the world

economy.

“The BBC Box project was intended to tell the story of the global economy and

international trade over the course of a year, and as global trade reached near

standstill at the height of the turmoil, “The Box” followed it.

From April until July 2009 it sat forlornly in the Japanese port of Yokohama.

It was just one tiny illustration of the statistic that the container business made a

collective profit of £3bn in 2008, but is estimated to have lost a cool £20bn in

2009.

Way back, in what seems like a different economic world, our container

delivered its first cargo of Scotch whisky from Greenock to Shanghai, in China.

27 BBC News. “The box”: http://news.bbc.co.uk/2/hi/in_depth/business/2008/the_box/default.stm

29

BBC News showed the growing strength of China's consumer class whose

buying habits seem only to have been momentarily slowed by the global

recession.

But even that blip badly hurt in Brazil as we found out when the Box arrived at

the busy port of Santos earlier this year.

For them the dip in China's iron imports was painful - a dip made worse by

falling demand across the world for goods made in China.

From Singapore to New York, Los Angeles and Bangkok we learned vividly just

how inter-dependent countries have become, and what globalization really

means close up.

Along the way, literally, we were able to cover developments in international

piracy28, including its impact on insurance and the profitability of the Suez Canal

through which the Box passed early in its journey”. 29

28 BBC News. Christian Fraser, BBC Middle East correspondent. “Suez: the supertanker super highway. http://news.bbc.co.uk/2/hi/business/7666877.stm 29 BBC News. Jeremy Hillman, Editor, BBC business and economics unit. “Lesson learned as the Box returns” http://news.bbc.co.uk/2/hi/business/8314116.stm

30

IMPORT

SHORT INTRODUCTION

Maybe I’ve analyzed too much30 the above export operation but I think that I’ve

used the same trend that are manifesting right now in my countries (Italy were I

was born and Spain that is where I live now).

Let me explain: exports are growing even with recession, and that is also

“thanks to” the deceleration of domestic demand. Seems that Italians and

Spanish producers understand that to survive they need to have larger

ambitions, of course not limited to their boundaries.

In my thesis I would like to make a correspondence with the reality of my

countries: give more prominence (means words) to the export than the import.

For the import operation I will do not enter in the same problems and decisions

that I’ve focused for the export operation above. That means that I will do not

repeat again any matters like:

- the reason of buying/selling commodity at the other side of the world

(well-known like “globalization”);

- the choice of carrier, their service/transit time, availability of requested

equipment/space, their reliability; 30 “Too much” in reference of the limitation of 6000 words to be used in the whole thesis

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- the opportunity of multi-modal transportation;

- the freight costs with;

- the way to make the offer;

- the documentation (Bill of lading).

With this import operation I would like to explain and analyze something that

I’ve never mentioned till now: the way of payment international transaction of

goods. In this case, I will consider the most used and the most viewed for me

since I’ve started to work as international freight forwarder: the letter of credit.

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WHAT WE CAN IMPORT?

I really love seafood: I remember when I was in Karachi, Pakistan, sitting in the

terrace of Hook Line & Sinker seafood restaurant, where I tried the best lobster

of my life. I was there with my girlfriend: she really likes to soak up the sun and I

remember that she was spread on her a sun tan lotion that she previously

bought in Shanghai, China (yes, that was an amazing trip of almost two

months).

When we were back in Europe, we commented to our friends how amazing was

the whole trip and, like every group of friends, men finished talking about food

and girls finished talking about beauty.

They want to try Pakistan’s seafood and this Chinese sun tan lotion, so they

were searching for Importers in Europe of those products.

The results of their searching were that they must go to out of any countries of

European Union to try Pakistani seafood and the Chinese sun tan lotion.

- Pakistani fish products are subject to a ban in European Union since

2007. The voluntary ban imposed by the fisheries department was the

result of the EU Food and Veterinary Office identifying serious

deficiencies in the official control system for seafood, like traceability and

also hygiene at various stages of the industrial process.31

31 Update: at the time of redacting this thesis (28th February, 2013), The European Union has decided to resume imports of Pakistani seafood to i ts markets. The decision puts an end to a six year long voluntary ban of exports of seafood products to the EU by the Marine Fisheries Department of Pakistan. The Express Tribune: http://tribune.com.pk/story/513679/six-year-hiatus-pakistani-seafood-set-to-enter-eu-markets-again/

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- Since just more than one month (11th March, 2013) The European Union

regulators announced a ban on the import and sale of cosmetics

containing ingredients tested on animals and to pledge more efforts to

push other parts of the world, like China, to accept alternatives.32

32 New York Times. James Kanter, Published March 11th, 2013. “E.U. Bans Cosmetics With Animal-Tested Ingredients”. http://www.nytimes.com/2013/03/11/business/global/eu-to-ban-cosmetics-with-animal-tested-ingredients.html?_r=0

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THAT’S NOT WHAT I’VE ORDERED (L/C)

Everyone that are reading this thesis know perfectly how letter of credit works,

so now I’m explaining only the case when the commodity received is different

from the one bought.

Yes, it happens, and more that what we could imagine.

The buyer pays the total amount of money (agreed with the seller) to his bank,

and consequently the bank gives the documents to the buyer. Now, and only

with these docs, the buyer is able to pick up the commodity from the port (of

course after giving to the shipping company the original bill of lading). At this

point the buyer will do the customs clearance and formalities (with presentation

of commercial invoice and other documents required by Customs Authorities).

Once stocked the commodity, the buyer opens the container and checks if

quality, quantity and other details are exactly the same of his order. If not, the

buyer wants that his bank do not pay the bank of seller. The problem is that the

bank of buyer must pay the total amount to the other bank (excepting if the

existence of regulated reserves made on time).

In this case (unless it’s only a mistake of the seller and he solve it friendly), the

buyer has no defense against the trick of the seller. The only way is to move

rapidly, that’s means before that his bank send the total amount of money to the

bank of seller.

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This possibility consists to take legal action and ask to the judge that the bank

of buyer do not transfer any money to the other bank. Only in this way, the bank

of buyer does not accept responsibility before the bank of buyer.

With the money holds, the buyer could take legal action before the same judge

and against the seller. If the judge will prove that the commodity shipped was

different from the agree/contract, the seller finally could have his money back.

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CONCLUSION

After all the exposed and always in my opinion, standardization is and will be

the “key word”: we have to try to keep working on this concept, like Malcom

McLean did in 1955, when he worked with engineer Keith Tantlinger to develop

the modern intermodal container. The challenge was to design a shipping

container that could efficiently be loaded onto ships and held securely on long

sea voyages: the result was a 8 feet tall by 8 ft wide box in 10 ft-long units

constructed from 2.5 mm thick corrugated steel. The design incorporated a

twistlock mechanism atop each of the four corners, allowing the container to be

easily secured and lifted using cranes: this began international standardization

of shipping containers33.

I firmly believe the shipping industry in general is years behind in terms of use

of technology to streamline communication, reduce costs, improve timings, add

visibility, etc. While paper airline tickets have virtually disappeared in most of

the world, we still see paper bills of lading in most of the shipments. It’s not only

the shipping industry though, customs procedures are particularly prone to

paper and slow processes.

Therefore, the trends that I would like to see in containerized e-commerce all

relate to making the whole process easier, faster and cheaper. Some ideas

could be: standardized quotes from carriers in computer-readable formats, as

well as standardized, computer-readable, comprehensive and reliable

33 McGough, Roger (Narrator), McAulay, Graeme (Director & Producer), Crossley-Holland, Dominic (Executive Producer) (2010). The Box that Changed Britain (documentary). BBC.

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schedules. Really important should be also a better integration with IT solutions

by carriers (for example with an improvement of INTTRA system34), without

forget electronic invoicing and better tracking, as some areas or carriers don’t

provide accurate information.

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INTTRA is the world’s largest, multi-carrier network for the ocean shipping industry. In their website (www.inttra.com) we could read that “Our solution enables customers to efficiently and easily plan, book, manage, settle and analyze ocean freight shipments with the 40 leading carriers and NVOCCs. We’ve made it our mission to streamline and standardize ocean shipping processes and to provide unmatched analysis capabilities across the network to support better business decisions, improve customer experience and drive growth”.

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REFERENCE AND APPENDICES

For my dissertation I’ve used Chicago Referencing System.

All documents of appendices can be found online under the domain

www.fabiogava.com/YIFFYaward2013/ as linked at the bottom of each page

that contains documents.