Triangular shipment

What Is a Triangular Shipment?

A foreign-to-foreign shipment also known as F2F shipment, triangular shipment or triangular trading is a transaction involving three parties in three different countries. One of the parties, usually a wholesaler, takes an order from a buyer in a particular country and procures the goods from a supplier located in a different country and arranges to ship the goods directly from the supplier to the buyer without the consignment passing through the country where the wholesaler is situated.

What are the Advantages of F2F Shipments?

Though it may sound risky, the advantages of foreign-to-foreign shipments are many:

Shorter Transportation Time
Customs clearance is a cumbersome process. Triangular shipping helps to avoid this delay. This is especially important for those companies dealing with perishables and other price volatile commodities.

Lower Supply Chain Cost
Foreign-to-foreign shipping reduces supply chain cost by saving on the freight rates and eliminating clearance charges

Supply Chain Efficiency
In triangle shipping, the complete logistics from the port of loading to the final port of discharge is handled by a single point of contact, i.e., your freight forwarder, hence optimizing the supply chain efficiency.

Difference between Demurrage and Detention in import with example

Define Demurrage & Detention in a simple language with Example.

Demurrage and detention both refer to fees incurred by importers and exporters alike when containers are either not picked up or dropped off within the appropriate amount of time. It does not matter if those containers are empty or full, nor does it matter if the containers are being stored in a port, outside of a port, terminal, or depot. 

For imports and exports alike there are time frames associated with containers. Regardless of the method used or the location where the container ends up, there is a length of time allotted for pickup and removal of the containers from the given locations. Free time is a given amount of time allotted for such pick up. If containers imported or exported are not properly picked up and removed from a port, a terminal, or anywhere else, they start to accumulate charges much like a car parked in a public location accumulating hourly charges.

Example of Container Demurrage 

A container is discharged off a ship on the 1st of June and the consignee only approaches to retrieve the container for delivery on the 11th of June. Assuming we consider the standard free days offered by the shipping line (different from port free days) is 7 days from the date of discharge, the free days should expire on the 7th of June. Therefore, the box would have been stored in the port/terminal for a total of 11 days when you collect it on the 11th of June.

 11 days – 7 days = 4 days of overstaying

 So, the shipping line will charge the consignee demurrage for 4 days (7th to 11th June) at a pre-fixed rate. 

Example of Container Detention 

Referring to the above example, the customer took the container out of the port/terminal on the 6th of June which is within the free period, but the empty container is only being returned to the nominated depot on the 18th of June. 

So, the shipping line can charge the consignee detention for 11 days from 7th (expiry is 8th of June) to the 18th of June at a pre-fixed rate.

Its Effect on Exports

These effects on exports can be rampant. Not only can It add to the cost for shippers trying to export goods but it can cause scheduling delays. If it happens regularly this can add up in terms of time wasted, delays, business lost, and fees accrued. It can also cause other delays when there is insufficient space available for incoming containers or outgoing containers because of things that are currently in storage or delays because additional containers have to be moved onto vessels for which they were not originally scheduled.

Let’s assume that one company is trying to export 5 containers at once all five of which contain items that have to reach their next port by the end of the month. With a single issue affecting one of those containers, that container might be charged with a detention fee because it wasn’t returned on time with the necessary goods for its shipment. Not only does the company face charges but that single container will not make the deadline now because it has to be rolled over onto the next available vessel which doesn’t leave for three days. Three days beyond the allotted time a cruise 3 days worth of detention charges. Subsequently, business is lost because the people relying upon that shipment arriving on time were let down by their company.

What are the differences between certificate of origin and GSP Certificate of Origin Form A?

What are the differences between certificate of origin and GSP Certificate of Origin Form A?

Certificate of origin is a generic name of an international shipping document, which is used to identify the origin of goods that is subject to foreign trade business. 

There are various types of certificates of origin in circulation. The most frequently used one is known as ordinary certificate of origin or simply "certificate of origin".

GSP Certificate of Origin Form A is a special type of certificate of origin, that can be grouped under "preferential certificates of origin".

Today on this article I would like to mention the differences between ordinary certificates of origin and GSP certificate of origin Form A.

Certificates of Origin: Ordinary certificates of origin could be used in any kind of international trade transaction. It simply states the origin of the goods, but does not give any benefits to the importers in terms of import custom duties.

Once an ordinary certificate of origin presented to the customs, importers will pay tariff rates as applicable to Normal Trade Relations (NTR) or Most Favoured Nation (MFN).

Ordinary certificates of origin should be completed by the exporter and certified by one of the local chambers of commerce.

In some cases certificates of origins should be legalized by the importing country's embassy/consulate in accordance with the letter of credit terms and conditions or import requirements.

GSP Certificate of Origin Form A: Form A is a special type of certificate of origin. It does not only states the origin of goods, but also allows importers to be benefited from reduced tariff rates during importation.

Once a Form A certificate of origin presented to the customs, importers will pay preferential tariff rates as applicable to under the Generalized System of Preferences.

As Form A is a special type of certificate of origin, it should be issued in limited situations, where Generalized System of Preferences applies. 

Form A certificates of origin should be completed by the exporter and certified by one of the local chambers of commerce or another authorized institution.

In very rare situations Form A certificates of origins should be legalized by the importing country's embassy/consulate in accordance with the letter of credit terms and conditions or import requirements.

What are risks of making air shipments when using documents against payment method?

What are risks of making air shipments when using documents against payment method?

Documents Against Payment (D/P) is apayment method used in international trade transactions.

This payment method has couple of alternative names such as documentary collections, cash against documents, CAD and documents against acceptance.

There are various advantages of using this payment method in export and import operations.

Some of the advantages of documentary collection payment method can be mentioned as follows:

·      Documentary collection payment method is easy. 

·      Documentary collection is relatively a cheap payment option comparing to letters of credit. 

·       Documentary collection is a fast international payment type comparing to letters of credit.

Despite all of these advantages stated above, documentary collection payment has couple of disadvantages, which have to be burdened by the exporters.

Documentary collection payment method inherits greater risks comparing to letters of credit, bank payment obligation and bank guarantees. 

Banks have very limited obligations against exporters.

What are risks of documentary collections for exporters when the shipment effected via air transportation?

The main risk of the documentary collection for the exporters is that under the air shipments the goods could be delivered to the final buyer without the need of the original documents.

If the importer is a fraudulent company, then they would never apply to presenting bank in order to collect the original documents. Instead importer could apply to the transport company and gets the goods by simply proving his identity.

Alternatively fraudulent importers leave goods at the import customs. During this period they do not reply to exporter's calls. They simply cut all their communications with the exporting companies. 

They act in a such way because untouched goods, which have been waiting at the import customs, will be sold out in auctions after a reasonable time. The waiting period will vary from one country to another but it would be logical to expect a 3-6 month period.

Example : Real life situation

We are a small exporting company located in Morocco. We have made a shipment to a new customer in France against a mixed payment. According to sales contract conditions payment should have been made 50% in advance and 50% documents against payment.

We have received the advance payment and make the shipment via air. Although we have sent all the shipping documents via bank under documents against payment, we have never received the remaining 50% payment.

We have waited 15days after we have presented documents. Then we asked to our customer the remaining balance payment. They claimed that the payment has been made. But our bank confirmed us that no further payment has been received. 

One week later once again we asked our customer state of the payment. Additionally our bank sent a swift message to the importer's bank in France. Both of them have not responded our questions.

At the same time we have confirmed through our freight forwarder that the importer has released the good, even if the air waybill has been consigned to the importer's bank. 

Now we are searching possible ways to get our money by legal means.

Conclusion :

Documentary collection payment method is a risky option for the exporters, especially if the shipment will be effected via air. 

Even if you consigned the air waybill to the name of the importer's bank, it is possible that the importer company could receive the goods without having the original shipping documents.

Receiving some amount of the order total may not be changing the situation.

As a result exporters should be very careful when working with documentary collection payment, if shipment will not be sea freight but air or road transportation.

What are the differences between bills of lading vs. non-negotiable bills of lading?

What are the differences between the bills of lading vs. non-negotiable bills of lading?

Bill of lading is a transport document that is used in international port to port sea shipments. 

This transport document has a long history as it can be accepted as a first transport document used in international shipments.

The traditional bill of lading was developed before the industrial revolution had been taken place. 

At those times vessels were slow and information options were very limited comparing our current technology. 

Bill of lading has been evolved over the years in order to respond to the changing business environment. Non-negotiable bill of lading is one of the end results of this evolution.

The traditional bill of lading is a document of the title so you can transfer the ownership of the goods to another party by means of endorsement or delivery. 

For this reason, buyers have to present at least one original bill of lading to the carrier at the port of discharge. Non-negotiable bill of lading is not a document of title. 

As result buyers do not have to present at least one original bill of lading to the carriers at the port of discharge. 

Also, you cannot transfer the ownership of the goods to another party by means of endorsement or delivery under a non-negotiable bill of lading. 

That is why the non-negotiable bill of lading is called non-negotiable sea waybill. It is not a bill of lading in a traditional sense.

Main Differences :

·   Consignee: Bill of lading can be issued in a negotiable form. Non-negotiable sea waybill cannot be issued in a negotiable form. You should indicate your buyer's name on the non-negotiable sea waybill. 

·   Endorsement: The only bill of lading can be endorsed. Non-negotiable sea waybill cannot be endorsed. 

·   Delivery of Goods: Under the traditional bill of lading, buyers have to present at least one original B/L to the carrier’s agent at the port of discharge. Otherwise, they cannot get the goods unless a letter of indemnity is issued. Under non-negotiable sea waybill, buyers can claim the goods by confirming their identity.

Are there any differences between express bills of lading vs. non-negotiable sea waybills?

Are there any differences between express bills of lading vs. non-negotiable sea waybills?

We can see that international logistics sector is no shy assigning new names to the transport documents. 

ICC which is the short form of International Chamber of Commerce have noticed this reality and add phrases to its rules books such as UCP 600, ISBP in an effect that the name of the transport document is not a point of consideration. 

Actually both non negotiable bill of lading and express bill of lading have the same transport document. They are not document of title so you cannot transfer the ownership of the goods to another party by means of endorsement or delivery. 

Buyer at the port of discharge can get the goods without surrendering at least one original bill of lading by simply proving its identity.

May be the only difference would be between express bill of lading vs. non-negotiable bill of lading is that in express bill of lading case forwarder’s do not issue full set of bill of lading. 

They may be issue one non-negotiable form in a soft copy and send it to both the shipper and their agent at the port of discharge via e-mail. 

Of course, I am not talking about the electronic bill of lading. They would be subject to another article.

Letter of Indemnity (LOI)

Letter of Indemnity (LOI)

A document that serves to protect the carrier/owner financially against possible repercussions  in connection with the release of goods without presentation of an original bill of lading. A letter of indemnity is used in cases in which the goods arrive at the port of destination before the original bill of lading. The issuance of the letter of indemnity allows the purchaser to take immediate delivery of the goods, thus saving himself time, additional demurrage, storage expenses, insurance costs, etc.

Letters of Indemnity for Telex Release of goods

If a negotiable bill of lading has been issed in an international trade transaction, then importers have to present to the carrier’s agents at the port of discharge one original copy of bill of lading in order to receive the goods.

If buyers could not present this original bill of lading than the shipper may have to fill a document called letter of indemnity to have the goods released without surrender of the original bill of lading. 

This article explains the issuance process of letter of indemnity and telex release of goods.

Bill of lading is a transport document which is used only port-to-port sea shipments. 

In a traditional way bills of lading are document of title which means that with the help of an original bill of lading you can legally transfer ownership of the goods by delivering or endorsing it over to another party.

Traditional bills of lading should be issued in a negotiable form allowing the delivery or endorsement title of goods to another person. 

Negotiable form bills of lading can be issued as bellows:

·                     consignee : to the order of “XYZ Bank” 

·                     consignee : to the order of “the shipper” 

·                     consignee : to the order

Once the bills of lading are issued in a negotiable form as shown above, they can be endorsed to a third party. The receiver of the goods, which is known as consignee, can be changed to a new person or company by endorsement. 

As a result the carrier’s agent at the port of discharge cannot determine without the presentation of original bill of lading by himself who the actual receiver would be in a situation where a traditional bill of lading used as a transport document.

In order to prevent any mistake, shipping sector created regulations for delivery of goods at the port of discharge for shipments made under traditional bill of lading. 

According to these rules at least one original bill of lading must be surrendered to the shipping line’s agent at the port of discharge for delivery of the goods. 

The carrier have to release the goods to the original bill of lading holder at the port of discharge.

In some occasions buyers at the port of discharge could not present at least one original bill of lading to the carrier’s agent. 

Bellow you can find some possible reasons why buyers at the port of discharge could not present at least one original bill of lading:

·        Buyers may have lost the original bill of lading 

·        Bills of lading may have been lost during the courier service 

·        Vessel may have been arrived to the port of discharge before exporter could   dispatch the shipment documents to the importer. 

·        Goods may have been sold couple of times during the transportation between port of shipment to port of discharge. As a result documents may not be ready when the vessel arrived to port of discharge.

If the buyer could not provide the original bill of lading to the carrier at the port of discharge, than the shipper should fill a letter of indemnity to be given in return for delivering cargo without surrendering of the original bill of lading.

What is the required information should be included in a letter of indemnity

There is no formal sample format exist for a letter of indemnity. As a result each shipping line produces its own format. But we can summarize the main parts that need to be included in a letter of indemnity as bellows:

·                     Vessel Name / Voyage Number 

·                     Port of Loading 

·                     Port of Discharge 

·                     Bill of Lading Number 

·                     Number of Packages 

·                     Goods Description 

·                     Indemnify the carrier and their agents and hold all of them harmless in respect of any liability, loss, damage or expense of whatsoever nature which they may sustain by reason of delivering the cargo in accordance with the request to do so provide sufficient funds to defend any claim brought in connection with the delivery of cargo without bills of lading.

Samples:

As I have explained above there is no standard format letter of indemnity exist but ı can give couple of samples to provide general information as bellows:

To : Golden Fortune Shipping Co., Ltd. Hong Kong

(Agents for Shanghai Hai Hua Shipping Co., Ltd.) if appropriate

Dear Sir/Madam,

Vessel/Voy : ___________________________________

Port of Loading :____________________________________

Port of Discharge : ___________________________________

B/L No. : ___________________________________

No. of Packages : ___________________________________

Goods Description : ___________________________________

The above goods were shipped on the above vessel by us and we hereby request you to deliver such goods at the above port of discharge to _____________________________ without production of the bills of lading.

In consideration of your complying with our above request, we hereby agree as follows:

1. The full set of original bills of lading properly endorsed is surrendered at the above port of loading.

2. To indemnify you, your servants and agents and to hold all of you harmless in respect of any liability loss expenses or damage of whatsoever nature which you may sustain by reason of delivering the goods  to_______________________________________ in accordance with our request.

3. In the event of any proceedings being commenced against you or any of your servants or agents inconnection with the delivery of the goods as aforesaid to provide you or them from time to time on demandwith sufficient funds to defend the same.

4. If the vessel or any other vessel or property belonging to you should be arrested or detained or if the arrest or detention thereof should be threatened, to provide such bail or other security as may be required toprevent such arrest or detention or to secure the release of such vessel or property and to indemnify you inrespect of any loss, damage, liability or expenses caused by such arrest or detention or threatened arrest ordetention whether or not such arrest or detention or threatened arrest or detention may be justified.

5. The liability of each and every person under this indemnity shall be joint and several and shall not be conditional upon your proceeding first against any person, whether or not such person is party to or liable under this indemnity.

6. This indemnity shall be governed by and construed in accordance with Hong Kong law and every person liable under this indemnity shall at your request submit to the jurisdiction of the Hong Kong court.

Yours faithfully,

____________________________________

(Cargo Owner/For and on behalf of Shipper)

(Place and date)