Saturday, 24 March 2012

The Air Cargo Industry & its specialty – a personal experience II Archie D’Souza

The Air Cargo Industry & its specialty – a personal experience II Archie D’Souza [This is a second article as part of a series of articles on the same subject] I have already mentioned that the cargo industry offers various types of services that are diverse and unique. One such service is offered by integrators, viz. carriers offering door-to-door services. Examples of integrators are TNT, UPS, Fedex, DHL, Blue Dart, etc. Integrators and courier or express cargo companies compete with each other for the same market. In fact, the former are courier companies with a fleet of aircraft. The non-integrators use the services of scheduled passenger and cargo airlines to carry their loads. A company representative, could be a direct employee or one working for a franchisee/agent, will pick up package/s from the origin customers’ (shipper/exporter) premises (home/office/factory/warehouse, etc.). These packages then are moved through one or more hubs to an airport at the origin country. They are then carried in aircraft to destination airports. Once there, exactly the reverse of what happened at the origin takes place. The package/s is/are delivered to the destination customers’ (consignee/importer) premises. Users of this service needn’t drive to and from an airport or appoint customs brokers. This service is very popular for documents, samples and other very small consignments. The core business of courier companies, whether integrators or not, is handling small consignments (a consignment is a lot of packages moving under a single consignment note for one shipper and consignee). For larger consignments they are not cost-effective for the users. In such cases, depending on the type of service required and the contract between buyer and seller, other types of services may be used. The exporters and importers would use the services of passenger or cargo airlines who offer an airport to airport service. The carrier (airline) will only accept cargo after it is ready for carriage. This means that the following must be done: 1. Cargo should be properly packed, marked and labelled 2. Documentation needed by the airline, like the air waybill, completed 3. Cargo customs cleared These formalities have to be completed by the exporter or his agent prior to acceptance by the carrier. The exporter may do so himself or use the services of a customs broker. At times the buyer may decide to perform the services and ask the seller to hand over the cargo and documents to their nominated forwarder. The terms of trade or INCOTERMS (short for International Commercial Terms) decide who will be responsible for performing these services. Standard INCOTERMS are published periodically by the International Chamber of Commerce. The INCOTERM used for an individual consignment decides the following: • Which tasks will be performed by the exporter • Which tasks will be performed by the importer • Which activities will be paid for by the exporter • Which activities will be paid for by the importer The tasks/activities mentioned here are the following: • Packing for export • Pick-up and local transport at the origin • Customs clearance for export • International carriage • Insurance • Customs clearance for imports • Payment of customs import duties • Delivery and local transport at destination It’s very clear that some of these tasks are undertaken at the origin and some at the destination. Purchase of insurance can take place at either place. We shall be taking a detailed look at INCOTERMS and their usage in another article. Right now let us look at what is involved in making cargo ready for carriage. These functions are generally carried out by a freight forwarder or a cargo agent. They are intermediaries between shippers and consignees on the one hand and carriers on the other. Legally they act on behalf of both the shipper and carrier. An IATA cargo agent is a freight forwarder registered by IATA to act on behalf of IATA member airlines. The task of customs clearance is completed by a customs broker (CHA in India) – an individual or organisation licensed by customs to customs clear goods for imports or exports on behalf of consignees or shippers. In most instances freight forwarders also have a customs broking license, so the exporters/importers are dealing with the same party. We shall be looking here at when cargo becomes ready for carriage and the role of the freight forwarder/customs broker in doing so. From now on we shall only be using the term forwarder. Some of the services provided by forwarders to exporters are: • Providing facilities for acceptance or collection of export shipments • Arranging pick-up from exporters’ premises • Preparing documents pertaining to customs clearance and transportation • Arranging insurance • Booking space with carriers and liaising with them in connection with the movement of goods • Customs clearance and delivery at destination • Delivery status to the shipper Exports involve procedures which, more often than not, an exporter may not be conversant with or due to logistical problems may not be able to complete the formalities himself. The main role of the freight forwarder is to ensure that these are completed in a way that will benefit the exporter to the fullest extent. The forwarding agency staff must be in a position to understand and explain the complex legal and documentary requirements involved in international carriage. How does all this happen? This is exactly what we are going to see. An exporter will call on the agent telling that a consignment is to be dispatched. The agency staff receiving the call will require the following information: • Mode of transport to be used (as our discussion is on airfreight we assume that air is the mode) • Booking details (will be dealt with when we deal with Booking Procedures) The following steps are involved in the shipment of goods: 1. The agency must receive from the shipper such documents as invoice, packing-list, GR, etc. (Documentation is an altogether separate discussion). Based on the booking details the forwarder will reserve space with the carrier 2. The agency staff prepares the necessary customs documents and clears the cargo 3. The cargo is handed over to the carrier ready for carriage The agency staff should be able to suitably advise the exporter on the choice of carrier. We have seen earlier that the exporter calls the forwarder to give details of the consignment. The shipper needs to provide what is called instructions for carriage. These instructions may be either oral or in writing. In case of oral instructions, the agency staff should preferably ask the shipper’s representative to sign the air waybill. It is, as far as possible, advisable to get the shipper’s instructions in writing. This can be done on the shipper’s letterhead or preferably in a formatted Shipper’s Letter of Instructions (SLI). These forms are available with local or international forwarders’ associations. The main advantages of an SLI are that it is itemised in such a way that all possible aspects are given consideration. Further, legally by signing the SLI, the shipper does the following: • Authorises the forwarder to prepare and sign the air waybill (AWB) on his behalf. • Acknowledges the acceptance of the conditions of carriage • Certifies the correctness of the consignment containing dangerous goods is in proper condition for carriage by air according to the applicable Dangerous Goods Regulations. It is very important from an agent’s point of view to get the shipper into the habit of using this method of conveying instructions. However, in order to fulfil its purpose the SLI must be accurate and complete. Cargo ready for carriage means that the conditions in which a shipment must be delivered by an IATA Cargo Agent to an IATA carrier. The shipment and accompanying documents must be ready for immediate carriage. To do so, the following requirements must be met: 1. The Air Waybill The AWB must be complete and accurate in all respects. It must be issued in accordance to the IATA Air Waybill Handbook, a publication every IATA Agent must have. To be complete and accurate, the person authorised to sign the AWB must ensure correct filling up of all boxes and also ensure checking the weights, measurements and nature of goods The AWB is a contract between the shipper and carrier and hence must be signed twice – once on behalf of the shipper and once on behalf of the issuing carrier. One must remember that the agent is authorised to act on behalf of both the carrier as well as the shipper so may insert his signature twice on the AWB 2. Documentation All documents necessary for each consignment for: • determining the nature of the goods, where required; and • export, import or transit, which the carrier is required to present to customs or any government body must accompany the AWB 3. Marking of packages All packages of each consignment must be marked to help the airline identify them. Either all packages must show the name and address of the consignee as on the AWB, or this information is shown on one or more packages with an appropriate cross-reference on all other packages in the consignment. The exporter/manufacturer’s marks and numbers, as on the AWB, must be clearly visible on the packages in the consignment The International Cargo Handling Coordination Association has made certain recommendations in this regard. I can, on request, provide you with these. Those interested please email me at archiedsouza@samsacademyonline.com. 4. Packing The contents of each consignment must be properly packed to withstand the normal wear and tear of transportation. Goods must be packed in such a way that they will not deteriorate or damage other goods before delivery at destination. Exporters should never compromise on the quality of packing materials to reduce costs. 5. Labelling of packages The forwarder must ensure that adequate stock of airline stickers is available at every branch/location. If a house air waybill (HAWB) is used, then the HAWB sticker must be displayed next to the airline sticker showing the master air waybill (MAWB) number Certain special types of cargo, such as dangerous good, perishables, human remains, etc. have special packing, documentation, marking and labelling requirements. Every IATA agency location must have a copy of the IATA Agents’ Handbook, IATA Live Animal Regulations and IATA Dangerous Goods Regulations (all current editions only) [To be concluded]

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