Export ABCs: Forwarder quality

February 8, 2006

8 February 2006

Export ABCs: Forwarder quality

The following article is extracted from Frank Reynold’s column “Export ABCs”, published in the 7 February 2006 edition of “The Journal of Commerce”.

…Let's now look at the qualities that differentiate good forwarders from the pack. In examining this, we mention that some tasks are more important to sellers or to buyers. This is not to say that both parties shouldn't be concerned. After all, everyone wants transactions to proceed legally and for buyers to get their goods and sellers to get paid.

Obviously, the ideal forwarder should have up-to-date knowledge of U.S. government export regulations. At least some apply to all U.S. exports. The Bureau of Industry and Security (BIS) Export Administration Regulations (EAR) are frequently updated. Details are available at www.bis.doc.gov. Same for the Treasury Department Office of Foreign Assets Control Specially Designated Nationals and Blocked Persons "bad guy" list, available at http://www.treas.gov/offices/enforcement/ofac. Other government agencies have jurisdiction over selected product types (defense, regulated drugs, nuclear, etc.) Note: Census' Foreign Trade Statistical Regulations (FTSR) apply to all tangible exports. …

A thorough understanding of Incoterms 2000 is a must. Not only do these speak to carrier and forwarder selection, but explain the various obligations the seller and buyer have to each other in the transaction….

Documentation accuracy is important, particularly for sellers using document-driven terms of payment such as letters of credit and documentary collections. Getting it wrong can cause payment problems. Forwarders should be familiar with the current versions of the Uniform Customs and Practice for Documentary Credits (UCP 500) as well as the ICC Rules for Collections (URC 522). Information on both is available from ICC Publishing….

Knowledge of the destination country's import regulations is also important, and there are several reference sources available. Presumably, buyer-designated forwarders already have this information, as successful import clearance usually is of greater concern to buyers than to sellers.

Obtaining competitive freight costs is another important consideration. Large service providers have the volume needed to get them. Smaller outfits can pool their freight volumes to get reasonable rates for their clients.

It is generally true that sellers are best served when using their forwarders. They and their forwarders already know each other, and are familiar with the way each other operate and with the kind of goods being handled. As repeat customers, sellers should expect their forwarders to devote the necessary time and attention to protect their interests. On the flip side, buyers often have their forwarders handle import clearance, and prefer that they handle transportation well. On top of these considerations, both parties are interested in providing their respective forwarders with enough business to obtain preferential treatment.

In practice, the party contracting for transport has a strong preference for using its forwarder, as it is the one committing for the transport cost. This also fits with the way carriers pay brokerage to the forwarder making the booking.

Regardless of which party's forwarder is used, all parties are best served by competent execution. Here are some ways to access forwarder qualifications. When choosing a forwarder, ask for trade references. Ask also how they keep abreast of ever changing foreign government regulations. How about training? The National Customs Brokers and Freight Forwarders Association offers education programs including "Certified Ocean Forwarder" designation. … Be guided by your own experience. If you have a good forwarder relationship, stick with it. If not, look around for a better fit…. Above all, keep the forwarder informed of any changes that may affect the transaction such as timelines, required documentation, etc. They can't help you if they don't know what's going on.


Topic(s): 
Canadian Economy & Politics
Information Source: 
Canadian News Channel
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