RFS Document Defined

The Received for Shipment (RFS) document in ocean shipping indicates that a carrier has received the cargo at the port but still needs to load it onto a vessel. It’s a pre-printed bill of lading, formalizing other packages’ receipts before loading, and is crucial in transactions involving Letters of Credit. 

The RFS document confirms receipt but doesn’t guarantee shipment loading, making it different from an onboard bill of lading. This distinction is vital for freight logistics and payment processes in international trade​​​​.

How An RFS Shipment Works

In an RFS shipment, in this shipment status, the shipping line issues a bill of lading indicating cargo receipt at the port, yet to load onto a vessel. This facilitates tracking and confirms receipt for buyers and banks, especially in LC transactions. However, it doesn’t guarantee subsequent loading onto the ship​​​​.

RFS and Bill Of Lading Status

When cargo is confirmed as loaded and shipped, the RFS notification changes to an onboard bill of lading, typically showing a shipped-on-board date. This transition is crucial for banks and financial institutions involved in Letter of Credit transactions, as it provides the necessary assurance about the shipment of goods.

Details On A Received For Shipment

The document issued includes the carrier’s acknowledgment of cargo receipt, detailed cargo description and quantity, terms and conditions of the bill of lading, and relevant information for customs and tracking. 

It often accompanies a packing list commercial invoice and the certificate of origin, which are essential for customs clearance and shipment management​​​​​​.

RFS Bill Of Lading Vs. On Board Bill Of Lading

In international shipping, the dynamic between the Received for Shipment (RFS) Bill of Lading and the On Board (SOB) Bill of Lading is vital for efficient cargo management and adherence to trade finance protocols.

RFS Bill of Lading

This document is issued initially when the carrier receives the cargo at the port. It serves as a preliminary acknowledgment of cargo receipt without confirming its loading onto the vessel. The RFS Bill of Lading is crucial in the initial documentation, facilitating planning and logistical arrangements for the upcoming shipping process.

SOB Bill of Lading

Following the RFS Bill, the SOB Bill of Lading comes into play once the cargo is loaded onto the named vessel. This document confirms the loading of the shipment, thereby advancing the cargo’s status in the shipping cycle.

Entities Involved

The interplay between these two bills of lading ensures a transparent and systematic progression of the cargo shipment. It involves multiple stakeholders, including shipping carriers, shippers, consignees, and financial institutions like banks. 

Each entity relies on the accurate and timely issuance of these documents to track the shipment’s journey and fulfill various contractual and financial obligations.

Trade Finance Compliance

The transition from RFS to SOB Bill of Lading is a procedural and compliance step. It aligns with international trade finance requirements, providing necessary assurances to involved parties, particularly in transactions involving Letters of Credit.

Importance for Stakeholders

These documents provide crucial information about the cargo’s status and location for shippers and consignees, aiding in logistics planning and management. Banks and financial institutions offer assurance about the cargo’s journey, mitigating risks associated with international trade financing.

Global Shipping Operations

RFS and SOB Bills of Lading are standard practices in global shipping operations, ensuring that cargo movements are documented and managed effectively from the point of receipt at the port to the final loading onto the vessel.

Moreover, the RFS and SOB Bills of Lading work in unison to ensure a smooth cargo transition through various stages of international shipping, maintaining transparency, compliance, and assurance for all involved parties.

FAQs

Here are some common FAQs about the received for shipment.

What Does Received For Shipment Mean?

Received for shipment is a notation on a bill of lading that indicates the carrier has received the cargo at the port for loading onto a specific vessel or voyage.

What Is Received For Shipment Bill Of Lading?

A shipment bill of lading receipt acknowledges the cargo receipt by the carrier at the port facility for loading onto a specific vessel or voyage. It indicates the cargo has been accepted but has yet to be loaded on the vessel.

What Is The Difference Between SOB And RFS?

The difference between them is RFS indicates that the cargo has been accepted by the carrier at the port for loading, but it doesn’t guarantee that the shipment has been loaded on the vessel. Conversely, SOB confirms that the shipment has been loaded and shipped on a vessel.

Summary Of Received For Shipment

In conclusion, understanding the concept of ‘Received for Shipment’ is important in the shipping industry. This notation indicates that the carrier has received the cargo at the port facility for loading onto a specific vessel or voyage.

It’s important to note that “Received for Shipment” doesn’t mean the cargo has been shipped on board yet. This notation and other notations like “Shipped on Board” and “Clean on Board” help satisfy the buyer or banks that the cargo has been received or delivered. 

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This allows people to ship and receive items worldwide while still meeting local and federal shipment requirements. Buyers and sellers should be aware of the different processes, so they can choose the one that works best for their shipment and delivery needs. There are many ways to handle international shipping, with delivery duty paid (DDP) being one of the most common.

Understanding DDP can help you prepare for international shipments as a seller or buyer.

What Does Delivered Duty Paid Mean?

DDP is an agreement in which a seller assumes the responsibilities and risks of transporting goods internationally. This means the seller assumes all costs for the delivery, including customs, taxes, and fees. DDP is just one method available to sellers when delivering goods.

While DDP shipping comes with some risks for the seller, it is one of the most common methods of transporting goods internationally. Many customers have come to expect the seller to cover all customs clearance formalities and international trade terms in their delivery agreement.

Why is DDP Shipping Important?

DDP is important to international trade. DDP, and other incoterms used in international shipping, provide buyers and sellers all over the world a universal language. For the seller, DDP rules are important to avoid expensive mistakes. A DDP agreement means the seller holds the majority of responsibility for the goods.

DDP shipping is also important because it encourages trust and minimizes risk for buyers. Many customers expect sellers to cover all shipping and delivery costs. DDP protects the buyer and ensures safe delivery by holding the seller responsible for all customs and fees and providing a generic method of shipping goods.

A DDP agreement requires the seller to hold the responsibility for goods until they reach the buyer. This limits the buyer’s risk despite buying goods internationally. DDP protects buyers from surprise fees and damaged goods. Once the DDP shipment reaches the buyer’s country and destination port, the risk transfers to them.

The Role of the Seller

The seller assumes primary responsibility for the shipment of goods during international trade. The seller typically has more local knowledge of shipping rules and regulations, which can ensure goods reach their intended destination. Efficient, speedy arriving means a better customer experience.

The seller is responsible for all tasks included in a DDP agreement, which include:

• Providing goods
• Creating a sales contract
• Meeting all custom requirements
• Scheduling and paying for transportation
• Covering licensing fees
• Covering shipping costs
• Managing all export and import duty fees
• Paying for shipping insurance
• Arranging for proof of delivery
• Notifying buyer of order status

The Role of the Buyer

The role of the buyer in DDP is minimal. The buyer is responsible for unloading the goods, and the risk transfers to them once they receive them. The buyer’s risks are limited with DDP incoterms since the seller assumes all the costs. The roles of the buyer in a DDP include:

• Payment of goods
• Assisting sellers with any document needed to clear customs
• Requesting a refund or return promptly 

DDP Delivery Process

The seller manages most of the import formalities from the initial shipment of goods to the final delivery to the buyer’s address. This is what you can expect from the DDP process:

1. The seller packages and prepares the goods for shipment. This includes preparing invoices and customs documentation requirements.
2. The seller chooses an international delivery carrier. They provide them with import and export licenses and review all international commercial terms.
3. The seller delivers the package to a delivery partner, where it’s shipped by sea or air freight.
4. The goods arrive at their destination. Import and export clearances vary depending on the country. Some goods may experience delays, which could lead to additional shipping or customs fees.
5. Customs may add value added taxes (VAT) to inbound shipments. The seller incurs any VAT fees.
6. A local delivery partner delivers the package to the buyer’s place. The buyer now assumes all risk.

Import Clearance DDP

All international goods must clear customs before reaching their intended destination. DDP includes customs import clearance, which means the seller is responsible for all import and customs fees with a DDP agreement.

All products that arrive from another country must clear customs, which means they receive permission from a government agency. The seller includes customs documentation in the export packaging. Some packages may undergo extensive reviews or even inspections.

DDP Fees and Costs

The seller assumes the maximum obligation of paid costs in a DDP agreement, which includes:

• Shipping costs: Shipping costs vary depending on the carrier and distance. Sellers may also need to account for extra fees and fluctuating transportation costs.
• Import and export duties: Import clearance and export duties and requirements vary based on the country.
• Shipping insurance: Shipping insurance covers the cost of damaged goods during shipment.
• Damages of goods: Sellers may have to replace some goods. Sellers may also be responsible for any costs related to late shipments.
• Value-added taxes (VAT): Some goods may be subject to value-added taxes, which are the seller’s responsibility. Some sellers may qualify for a VAT refund, which can help with these costs.
• Storage: Storage fees are related to customs clearance and may be charged if there are shipment delays.

FAQ

Here are some of the most frequently asked questions related to delivery duty paid shipments and international import formalities:

What is an Incoterm?

An incoterm is a set of rules that guide sellers and buyers when importing or exporting goods. Incoterms rules include 11 stipulations regulated by the International Chamber of Commerce (ICC).

What’s the Difference between DDP and DDU?

Whereas DDP refers to a seller’s responsibilities when shipping goods internationally, delivery duty unpaid (DDU) refers to an agreement in which the seller is only responsible for delivering goods to the buyer’s home country. With DDU shipping, once the goods reach the intended country, the buyer is responsible for all import fees. The buyer is also responsible for pulling licenses and paying taxes and duty fees.

What’s the Difference between DDP and DAP?

Delivered at place and delivered duty unpaid are both acronyms that describe an international trade agreement in which the buyer is responsible for duty costs, taxes, and clearance fees. DDP and DAP both mean that the buyer is responsible for paying all import fees once the shipment arrives at its destination country.

United States export controls are primarily governed and enforced by the Bureau of Industry and Security (BIS), the Directorate of Defense Trade Controls (DDTC), and the United States Treasury Department’s Office of Foreign Assets Control (OFAC). These governing bodies have the authority to enforce export regulations through fines and penalties, including prison time.

These rules protect U.S. security, stop funding for terrorism and money laundering, cut down on trade barriers, and encourage fair trade.

Since export compliance regulations are mandated by law, businesses and even educational institutions must be aware of them. We will talk about the basic requirements of export compliance, how it affects businesses, and how to ensure compliance.

What is Export Compliance?

Export compliance is the specialized, cross-disciplinary framework that includes all export-related activities that are in some way controlled by export control laws. These transactions occur between two separate states, jurisdictions, or countries.

Activities that are subject to export controls may include but are not limited to

• Transfers of controlled information
• Shipment of controlled physical items
• Disclosure of technical data to a foreign person in the United States
• Transfer of services and payments to restricted parties

Export compliance helps to ensure that the export of a product or service does not violate U.S. law and does not harm the security interests of the United States.

U.S. export control regulations and rules safeguard national security interests, foreign policy, and economic interests without stifling lawful international trade. Dual-use, proliferation, and sanctions are control issues directly affecting U.S. security.

Dual-Use Controls

Export control regulations are placed on importing commodities such as weapons, munitions, and dual-use products.

A product or service is called “dual-use” if it can be used for both civilian and military purposes. For example, missiles, nuclear reactors, and technology that could be used to make ballistic missiles all fit this description.

The export of items with more than one use is regulated because they can pose a significant risk to U.S. security interests by hurting the economic growth of other countries and giving them resources to threaten U.S. foreign policy and defense interests.

Proliferation

The United States takes part in many export controls to curb terrorist activities, the expansion of weapons of mass destruction (WMD), and the amassing of instability-inducing stockpiles of weapons systems and their components.

Proliferation controls seek to prevent the transfer of WMD and their delivery systems, as well as other technologies that terrorists or hostile countries could use to develop WMD.

Sanctions

Sanctions are the most severe form of export regulations, and the U.S. government can impose them for several reasons. Sanctions may be used to penalize foreign governments or other entities deemed to have violated international law or U.S. foreign policy interests. They’re also used as a tool in diplomatic negotiations with these entities; for example, sanctions may be lifted if certain conditions are met.

Export Control Regulations and Laws

Three export control laws regulate the export of technology that affects production, trade, and distribution. The goal of these laws is to regulate access to types of technologies and the information they generate. These laws are meant to stop sensitive information from being given or shared with a foreign national.

Each law regulates different things and has different governing agencies.

International Traffic in Arms Regulations (ITAR)

ITAR controls the export compliance of all weapons and technology used for defense. DDTC is responsible for enforcing these regulations. The United States Munitions List (USML) contains items regulated under ITAR.

Export Administration Regulations (EAR)

EAR controls the export compliance of all dual-use items and other information and technology that is not covered by ITAR. BIS enforces these regulations. The Commerce Control List (CCL) is a list of items that fall under the jurisdiction of the EAR.

Foreign Assets Control Regulations (FACR)

The Foreign Assets Control Regulations, or FACR, are responsible for U.S. economic trade sanctions against countries and regimes that pose a threat to national security, enforcing embargoes on terrorists or international narcotics traffickers. OFAC is responsible for enforcing these regulations.

When Do You Need an Export License?

U.S. law imposes trade restrictions, including embargoes and sanctions, on several organizations and individuals. These limitations affect both domestic and international business.

An export license certifies that the bearer has been given permission to export a specific number of products from their nation. It is not the same as an import permit, which lets you bring the same goods into your own country.

Export licenses are critical because they inform governments about the movement of goods across borders. They help in managing international trade by keeping track of who is sending what and where

Businesses that are considering whether an export license is required for the shipment, transfer, or transmission of technical data to a foreign country should consider four things:

• What goods are you sending?
• Where are they being sent?
• Who will receive your goods?
• What will the shipment be used for?

The need for a BIS license varies according to the item’s technological specifications, final destination, final user, and intended purpose. As the exporter, you are responsible for determining if a license is necessary.

1. What Goods Are You Sending?

Licenses from the U.S. Department of Commerce’s Bureau of Industry and Security are only needed for a small fraction of all U.S. exports and reexports. Check the item’s Export Control Classification Number (ECCN) to see if you need a license to export it.

Export Control Classification Number

To learn about licensing requirements from the Department of Commerce, you need to look up its ECCN.

The ECCN includes the item category, the product category, and the main reason for control as an alphanumeric code (for example, 3A001). In the ECCN record, you can find information about the item and any necessary licenses. The CCL contains all ECCNs.

In the CCL, there are ten main classifications:

• Nuclear Materials, Facilities, and Equipment on the Commerce Control List (and Miscellaneous Items)
• Hazardous Substances, including Dangerous Chemicals, Microorganisms, and other Toxins, as well as Special Materials and Related Equipment
• Material Handling
• Computing Devices
• Security and Communications
• Lasers and Detection Devices
• Avionics and Navigation
• Marine
• Propulsion and Aerospace

To get the ECCN for an item, you can self-classify, talk to the supplier, or send a classification inquiry to BIS.

If your product is subject to U.S. Department of Commerce regulations but is not on the CCL, it will be labeled as EAR99. Items designated as EAR99 are less-sensitive consumer goods that often do not need a license.

However, a license may be necessary if the destination of an EAR99 export is an embargoed country, if the end user is someone of concern, or if the recipient will use the item to facilitate an end user that is not allowed.

2. Where Are The Goods Being Sent?

The next step in determining if your item needs an export license is to see if the EAR has the relevant export regulations for your goods.

The Export Administration Regulations spell out the specific licenses that are needed for the export, reexport, and transfer (inside the nation) of certain products to foreign countries. This list includes

• businesses
• research institutions
• government and private organizations
• individuals
• other types of legal persons.

You can check if the United States has signed an international agreement at BIS.

Destination Country

Country restrictions may be more or less stringent than others. Due to international embargoes, Cuba, Iran, North Korea, and Syria are the most prohibited places. The embargoed countries and other Treasury Department regulations are detailed in section 746 of the EAR. 

3. Who Will Receive Your Goods?

Even if an item is not listed as needing a license on the ECCN and Commerce Country Chart or in the Export Administration Regulations for EAR99, some people and organizations are nonetheless restricted from acquiring U.S. products.

A list of blocked, unverified, and denied persons is on a list of banned entities kept by the U.S. Departments of State, Treasury, and Commerce.

The Consolidated Screening List (CSL) is available on the U.S. International Trade Administration website and may be used by exporters to check potential partners.

4. What Will The Shipment Be Used For?

Specific applications are not permitted, and others may need a license. For instance, without permission, you cannot sell anything to organizations that promote the spread of nuclear, chemical, or biological weapons or the missiles used to transport them. Additional information on limited applications may be found in Part 744 of the EAR.

What Types of Products are Subject to Export Controls Regulations

The United States has export controls over the following five types of goods:

• All items in the U.S., regardless of origin
• All items of U.S. origin
• Items incorporating more than 25% of U.S.-controlled content
• Foreign-made items utilizing U.S. technology
• Other exceptions

As a general rule, export restrictions apply to controlled products, including goods and services, to foreign nationals with potential military uses or such items that might significantly impact our national interests.

What Are the Penalties for Export Violations?

Individuals, businesses, and organizations can face repercussions if they violate export control sanctions and regulations. Non-compliance can be punished criminally or civilly, depending on the offender’s purpose when sending exports. Prison terms are only applicable for criminal offenses.

Administrative Penalties

An administrative body imposes penalties for laws, rules, or regulations violations. They aren’t considered criminal penalties because they aren’t intended to punish the offender. Instead, they’re meant to deter future violations and promote export compliance with the law.

Administrative cases reviewing export non-compliance can take away export privileges to get a business to comply. Violations can be double the value of the transaction or $300,000 per infraction, whichever is larger. Typically, the maximum amount of an administrative fine is increased each year to account for inflation.

Monetary Fines

A court imposes monetary fines as punishment in criminal cases. They’re considered fines, not penalties, because they’re assessed in addition to other criminal penalties like prison time or probation.

A criminal offense may result in a fine of up to $1 million per export compliance violation. Criminal violators may additionally receive a jail sentence of up to 20 years.

Brand and Reputation Damage

When small to medium-sized businesses experience export violations, the repercussions can be devastating. A company’s reputation may suffer irreparable harm, and it could lose business. A company’s brand value is closely tied to its reputation, which can be damaged when the company is caught violating export compliance regulations. This damage extends beyond those directly impacted by the violation or anyone who has suffered financial loss.

Adverse Media Coverage

Adverse media coverage can also damage a business’s reputation. When the media reports on an export violation, it can be challenging to repair the damage to the company. The company may need help attracting new customers, and existing ones could choose to take their business elsewhere. In addition, competitors could use this information as leverage against them.

Supply Chain Disruption

When an export violation occurs, the entire supply chain can suffer. If suppliers or companies violate export regulations, it can be difficult for them to continue doing business with their partners. Supply chain disruption could lead to a loss of revenue for both parties involved.

In Review

Despite the time and resources it takes to learn about export compliance, small to medium-sized businesses should know their legal obligations regarding exporting controlled items, technology, and services. The United States government has several trade sanctions programs that prevent certain exports to certain countries. If you are still determining whether or not an export license is required, check with your local export compliance agency.

The report, which assesses the global business impact of the crisis, focuses on the businesses and countries that work with Russian and Ukrainian suppliers. Data compiled by the business intelligence provider shows that 25 countries heavily depend on Russia and Ukraine for a variety of commodities. In particular, at least 374,000 businesses worldwide rely on Russian suppliers—90% based in the United States—and at least 241,000 businesses rely on Ukrainian suppliers—93% based in the United States.

The most prominent commodities affected by the conflict include wheat and meslin, coal, and petroleum gases and other hydrocarbons. Of particular concern, the crisis threatens “to widely exacerbate Europe’s energy crisis,” according to the report, which notes that European gas storage levels are at a critically low 33% of capacity. Another concern is Germany placing a hold on the Nord Stream 2 gas pipeline as part of European Union sanctions on Russia.

The impact of the Russia-Ukraine crisis on the supply chain includes not only the disruption of trade routes but also increased freight costs and inaccessibility of critical raw materials. The sanctions on Russian companies issued by the United States, the UK, and the EU impact thousands of entities and “further cripple an already weakened global supply chain,” the report says.

TapRm: Expanding to New States? Hold my Beer

Despite these challenges, some import/export professionals have not only survived, but thrived. Their strategies include working hard and smart, and being open to experimenting. The recent trials presented “an opportunity to evolve,” says Bruce Lancaster, CEO of Wilson Electronics, a manufacturer of cellular signal booster technology.

Other traits that have proved critical include a willingness to go above and beyond, and to build productive collaborations. “Having strong, trusting relationships with customers and suppliers” has been critical for North American Meats & More, says owner Justin Marx. His company supplies restaurants and food service operators with premium meat, seafood, and other products.

The ingenuity, grit, and hard work of the supply chain leaders profiled here continue to help them succeed.

Wilson Electronics: Plugged Into Domestic Suppliers

From its base in Utah, Wilson Electronics has prospered over the past few years by making greater use of domestic suppliers and beefing up its forecasting function, among other steps.

Many of its products come from a factory in southern Utah, where they’re assembled, programmed, and tested. At the same time, Wilson’s extended supply chains reach across the globe. Like many companies, Wilson has had to navigate freight costs that quadrupled—or more—even as delivery timelines fluctuated. Given the company’s location, the Port of Los Angeles has been the best option for receiving goods, despite recent congestion.

To address these challenges, Wilson moved some business to local suppliers, including a packaging supplier that’s a three-hour drive away and a large supplier of assemblies that’s about six hours away. “It helped to eliminate the variability,” Lancaster says.

Every two weeks, Lancaster and his team analyzed demand and customer input to adjust the forecast for every stockkeeping unit (SKU) Wilson offers. They also extended their forecast timeframe by an additional six months, going out to between 12 and 18 months.

“This helped to ensure the company’s place in line with key suppliers,” he notes.

Wilson’s sophisticated API connections with key suppliers enabled the company to readily communicate any demand adjustments, helping to mitigate problems.

For instance, if demand fell for parts that were in short supply, Lancaster would let the supplier know so they could supply what Wilson actually needed. This also helped to manage inventory levels from a capital allocation stance.

The team at Wilson Electronics also worked with its suppliers’ suppliers to resolve component and material issues. “We went down as far as we could to book materials and give visibility to our orders to ensure our suppliers could meet demands,” Lancaster says.

Lancaster began booking shipping containers further in advance, reserving capacity even before Wilson had material to fill them. “This ensured availability when parts were available,” he says.

There was a risk: If Wilson couldn’t fill the containers, it still would have to pay for them. As far as Lancaster recalled, that didn’t happen, likely in part because Wilson is large enough that it can consolidate orders from suppliers to fill the containers.

CarParts.com: Driving Strong partnerships

Over the past 20 years, CarParts.com, a leader in the e-commerce automotive aftermarket, has delivered more than 50 million parts. Several moves made prior to the pandemic bore fruit over the past few years, says Sherry Liu, vice president of international supply chain.

A largely new leadership team came on board several years ago, when the company was struggling. Team members recognized Carparts.com wouldn’t be successful entirely on its own. So, they worked to develop strategic relationships with a range of partners, including the company’s ocean carriers.

As congestion intensified at the Los Angeles and Long Beach ports, Liu’s team asked CarParts.com’s ocean carrier to instead send products to the Port of Houston, which is near one of their warehouses. The carrier did.

“The main takeaway is to maintain good relationships with external vendors,” Liu says, noting that when CarParts.com asked for additional support, their partners were willing to work with them.

Historically, many agreements between shippers and carriers are non-binding. In another move that proved fortuitous, CarParts.com agreed to a binding contract. It reserved a set amount of space with its ocean carrier, at a locked rate, and then placed funds in escrow to hold it. “Looking back, it was one of the best investments we made,” Liu says, as it went into effect about the time the pandemic hit, offering CarParts.com secured space while other companies struggled to find capacity.

Liu also worked with some of CarParts.com’s smaller vendors who were having trouble getting shipments from Asia. Instead of “pounding on them,” Liu says, she worked directly with these suppliers’ Asian operations, and then used its carrier partnerships to move items to the United States more quickly than many other companies could.

To further connect with vendors in Asia, Liu traveled to Taiwan for several months. After quarantining for two weeks, she was able to visit vendors and engage with them face-to-face. “It was key to keeping strong relationships,” she says.

BioCareSD: Multiple Suppliers and Employee Expertise are Lifesavers

Even when a company can access raw materials and components, it can be hamstrung by a shortage in packaging. Just ask BioCareSD, a specialty distributor of life-saving medications that often require refrigeration.

Before any products are shipped, the packaging and liners in which they will be transported must complete an extensive validation process, says Andrew Kirk, chief revenue officer.

In spring 2021, a supplier of lining material was unable to source material, which delayed its shipment of liners to BioCare. The reason? The Ever Given ship blocking the Suez Canal.

BioCare’s warehouse manager went to work, contacting multiple vendors until locating a suitable replacement made from the same materials. Instead of insisting on its full order right away, BioCare communicated its exact shipping needs. The supplier was able to send one-third of the original order, which was enough to last until the remainder arrived.

“The important takeaway was to share honest, realistic needs so we could manage through the problem,” Kirk says.

BioCare also leased an inexpensive shipping container to store supplies, such as packaging materials, on its premises without eating into valuable warehouse space.

As they met these challenges, Kirk and his team learned several lessons. When validating packaging, it’s critical to consider the availability of related supplies, including inexpensive materials such as liners. They also worked even more diligently to maintain strong relationships and communicate with suppliers on all items.

At the same time, BioCare focused on sourcing from multiple suppliers. When the cost of a material or supply is negligible, sourcing from only one supplier to capture volume discounts can leave an organization vulnerable to shortages and delays, Kirk notes.

Also key was leveraging the experience of BioCare’s entire team, some of whom came from other industries and brought new contacts and insight to solve these challenges. “Don’t take supply chain people for granted,” Kirk advises.

North American Meats & More: An Appetite For Partnerships

One decision that proved fortuitous for North American Meats & More, particularly over the past few years, was to truly partner with Silver Fern Farms, a producer and exporter of grass-fed meat based in New Zealand. Together, the two companies improved the butchery and distribution processes, boosting yields of various cuts of meat by between about one-quarter and one-third. That’s key, given the price pressures bearing down on many restaurants.

North American Meats also regularly travels to New Zealand and has worked with Silver Fern to help them provide ready-to-portion cuts. These produce less waste and require less labor in the kitchen.

This has been significant, particularly recently, as many restaurants struggle to attract workers, often paying higher salaries for individuals with little experience. “Working with them on fabrication and butchery has been powerful,” says owner Justin Marx.

And as shipping delays intensified, Silver Fern, possibly working with other companies, began chartering ships from New Zealand to the United States. That helps ensure North American Meats can fill its clients’ orders on time.

“Logistics involves physical constraints—trucks, containers, warehouses, time and space,” Marx says. “Often overlooked are the communication and relationships that take time to build and that you can lean on in difficult times.”

TapRm: Expanding to New States? Hold my Beer

In the early days of the pandemic, orders at TapRm.com, a platform for everything beer, jumped from about 10 to 800 per day, says Jason Sherman, founder and chief executive officer. A positive development, but not without challenges. Alcohol distribution in the United States is both highly regulated and inordinately complicated, a lingering consequence of prohibition. TapRm operates within a three-tier distribution system that separates producers, distributors, and retailers.

In 2018, Sherman decided to build a platform that would enable beer brands to work within the system to sell online, and with a degree of accuracy that would rival Amazon. More than 98% of TapRm’s orders are delivered on time, intact, and accurately, Sherman says. Some competitors’ accuracy rates are in the 50-60% range, he adds.

Initially, TapRm shipped only within New York state. As it considered expanding to other states, freight rates were exploding. “That led us toward a micro-fulfillment center model,” Sherman says, which would offer faster delivery, lower freight costs and greater regional variety.

TapRm began partnering with beer retailers around the country, essentially creating dozens of smaller fulfillment centers, keeping freight costs down and speeding delivery times. The company’s partners receive fulfillment software, information on best practices, exclusive brands, and a network of couriers, among other solutions, that can “turn them into one of the largest alcohol e-commerce delivery centers in a given city,” says Sherman. TapRm currently covers about 40 cities in 34 states.

Along with multiple locations, the ability to take a deep dive into sales and inventory data helps ensure TapRm has the right products in the right places, and can dispatch items to customers at the right time.

Also important? “The number one thing that saved us has been hard work,” Sherman says. Especially when expanding to a new city, he and his team are comfortable showing up, packing boxes, and handling other functions, working into the night when needed. “You get great operations when people at the top see the challenges in real life,” he adds.

Understand the macro view of the global economy. As a young professional in logistics, I remember being educated on the timing of when I needed product to land in the United States. I almost launched a promotion right after the Chinese New Year, but thankfully I worked with great partners who helped me understand that the product would never arrive by the date I needed. Understanding the global economy, tariffs, etc., could truly save you significant time and money.

—Aaron Galer
SVP, Strategic Partners, Arrive Logistics

Have a plan to export your product:

• People. Can someone from your team drive this program?
• Capacity. Do you have enough capacity to meet the market’s demands?
• Packaging. Is there a legal requirement for labeling, or does the label need to be translated?
• Knowledge. Know your customer and market.

—Bryan Blalock
Chief Operating Officer
Container Maintenance Corporation

When establishing a compliance program, it’s easy to get overwhelmed with what you have left to do. Take a moment to remember where you have been and how much you have accomplished. Progress takes time; every step forward is a step in the right direction.

—Michelle Frennier
Director, Solution Consulting
BluJay Solutions

The best advice I received around exporting and importing is sometimes it’s best to stick with the tried-and-true technologies, such as barcoding.

Barcode technology is 69 years old, but it’s capable of creating a single digital environment to generate more efficiencies when it’s integrated with ERP, and it provides improved inventory visibility and accuracy while reducing costs.

This is not an argument against new, emerging technologies; it is a reminder for organizations to investigate all available options to make their operations more efficient. Barcoding is a great example of "old-fashioned" tech that remains a reliable, staple tool in warehouse and inventory management.

—Scott Deakins
COO, Deacom

Only promise the customer what you know you can do well. This advice not only ensures the quality of service you can offer, but is also a gold standard to safeguarding your customer base during uncertain times.

—Eduardo Rey
Managing Director, Air & Sea Logistics
Dachser Peru

The best advice I’ve ever received is the simplest: Always adhere to and comply with import and export trade regulations. Some shippers have historically won business by using non-compliant, "creative" ways to import or export goods. Ultimately, these shippers have lost the business and their reputation in those markets.

—Ronald Kleijwegt
VP Global Sales & Managing Director, EMEA, Blume Global

As a management trainee at APL (now a CMA CGM subsidiary), I was told to anticipate and plan for things going wrong because they always will. Pay attention to cargo loading and delivery; they are critical and complicated parts of the journey.

Focus on the three most important elements for successful shipping execution: 1) planning, 2) planning, 3) planning.

—Greg Tuthill
CCO, SeaCube Containers

Compliance that operates at a granular level pays dividends. To be able to focus on raw productivity, compliance should be automated with technology. Digital workplace platforms that create training, communication, and task audit trails help enterprises manage compliance efficiently, boosting productivity.

—Steven Kramer
CEO, WorkJam

Identify and leverage strong partners who know the daily challenges of this business. From origin pickup to customs and duties to drayage, the import logistics process is extremely complicated. Identifying the correct partners and freight forwarders can turn a very complicated process into a task that feels almost effortless.

—Sean Mueller
VP of Business Development
Symbia Logistics

As we face 2021 after an especially turbulent year, my best advice is to plan in advance and plan for delays. The variables we regularly face for international in-transit shipments are many, not only on the sea but also once it arrives on land. Work with someone who is experienced and proactive in all modes to execute your shipments even when things don’t go as planned.

—Liberty Baugher
Manager, International Department
Sunset Transportation

My best advice: Get insurance. Crazy things happen that are outside of your control and you want to be protected.

—Sarah Scudder
President & Chief Revenue Officer
Real Sourcing Network

There’s no barcode on a barrel of crude. It’s going to take a combination of systems and data to really cover all cargoes that are imported and exported globally; containers are pretty mature but bulk cargoes are still a vast source of opportunity in logistics.

—William Fox
Chief Product Officer
Data Gumbo

Always be proactive. Operate like you’re playing chess: Think and act multiple steps ahead in the supply chain, coordinating all related parties to the transaction to ensure minimal disruption and focus on customer requirements and committed service.

—Mollie Bailey
Vice President, International
Transplace

If you are importing products from overseas and relying on the manufacturer to pick the freight provider you lose control. You pay high import costs at destination but, more importantly, if the freight charges are included in the cost of the products and not broken out on the commercial invoice, you are paying taxes and duties on freight.

So always make sure the freight costs are a separate line item on the invoice from the company you are buying your products or raw materials from.

—Sarah Barnes-Humphrey
Host, Let’s Talk Supply Chain

Have a good contact that has direct contact with the customs office and can give you real updates to what is happening at the ports. Then my next advice would be: Make sure you always know the latest anti-dumping lawsuits.

—Rachel Liaw
Co-founder & CEO
Fuse Inventory

Pay attention to terms of sale. While working as a young manager of transportation for an industrial shipper, we found our sales team offering delivered costs to clients, while we were only paying CIF (cost, insurance, and freight) port of destination. A mentor-suggested deep dive unveiled the significance of training your sales team on Incoterms.

—Russ Romine
VP of Transportation,
LEGACY Supply Chain Services

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Understanding the Role of Incoterms 2020
Ins and Outs of Exchange Rates and Insurance

“It’s the responsibility of the importer of record, or the exporter’s U.S. Principal Party in Interest, to be knowledgeable about the process, as well as about the compliance regulations,” says Kevin Doucette, director of North American trade policy and compliance at logistics services provider C.H. Robinson in Eden Prairie, Minnesota.

Luckily, Doucette and other experts have valuable insights to share on all aspects of importing and exporting—from meeting tariff obligations to complying with regulations to reducing costs. Here’s some advice you can put to work in your own operation.

1. Use incoterms to your advantage

Incoterms define the roles of buyer and seller (see sidebar). Importers should choose terms that give them ownership right at the door of the overseas factory, recommends Jason Totah, president of Odyssey International Services, Kent, Washington.

When the vendor is responsible for moving product from factory to port of origin, it bundles the cost of transportation into the sale price. So the invoice might show, for example, that the product costs $1.10 per unit rather than $1. That practice increases the tab when the shipment clears U.S. Customs.

“You technically pay duty on those 10 cents embedded in the cost,” Totah says. But when the buyer hires transportation from the factory to the port, U.S. Customs bases duty calculations on just the $1 per-unit price.

2. Leverage programs that reduce tariffs

Sourcing from countries that have special trade agreements with the United States could save money—if you understand the product’s origins, so you know which rules apply.

“Just because you buy a product from Germany doesn’t mean it’s not made in China,” says Elvis Morales, manager of trade compliance at Henry Schein, a medical and dental supplies distributor.

Even when a product is made in a country with good tariff opportunities, it might not qualify if the manufacturer imported some of its components. Also, a product that meets the bar for tariff advantages today might not qualify tomorrow—for instance, if your supplier starts to buy materials in another country.

“Gaining a tariff advantage requires not only the initial vetting, but also having appropriate controls in place with the foreign supplier,” says Doucette.

Some programs reduce taxes in specific situations. For example, the Craft Beverage Modernization and Tax Reform Act (CBMA) lets eligible companies that import small quantities of wine, spirits, or beer pay a lower tax rate than they would on higher-volume shipments.

Elenteny Imports, which provides door-to-door services for U.S.-based alcoholic beverage importers, has helped clients save money by filing for rebates on past shipments of this type, or applying the reduced rate to new shipments.

You have to be proactive to gain this benefit. “A customs broker will not automatically do that for you unless you ask,” says Alexi Cashen, CEO at New York-based Elenteny.

3. Get smart about routing

A change in logistics strategy can sometimes yield tariff savings. Donald Hoffman, president of Harmony Logistics Group in Oakdale, New York, and chairman of the Long Island Import Export Association (LIIEA), tells of a company that used to move product from Morocco to France for repackaging, and then ship it to the United States.

“We advised the company to direct-ship their product from Morocco and take advantage of the Morocco Free Trade Agreement to come in duty-free,” he says. “It saved quite a bit of money.”

Conversely, if you add a new country to your route, keep an eye on possible compliance implications. Nowadays, that’s an issue for some importers trying to avoid congestion at the Ports of Los Angeles and Long Beach.

“Some organizations are rerouting goods to Canada,” says Gary Barraco, senior director of product marketing at E2open, which operates a digital platform for supply trade management and global trade.

Although the shipment will merely pass through Canada en route to the United States, the importer must prepare documentation for entry into Canada. “Whenever there are changes, always look to see if there’s a trade compliance implication,” Barraco advises.

4. Pay attention to design

Just as a product’s origin can influence tariff obligations, so can its design. Modifications could put a product in a different category in the Harmonized Tariff Schedule (HTS), which U.S. Customs uses to determine what duties you owe.

“Whether a jacket is lined or not lined, or has zippers or stitches, could impact the tariff,” says Totah. In some cases, it might cost less in tariffs to import components and assemble them in the United States than to import the finished product.

Odyssey International Services works with some of its clients to design products with HTS classifications in mind, making decisions that yield lower tariffs.

5. Create a formal operation, run by an expert

Whether you import, export, or both, one of the most crucial things to do is develop a formal program to manage those functions, with written policies and processes, says Morales.

Ideally, a company that imports or exports significant volumes will put a staff member in charge of meeting all applicable tax and regulatory obligations, even when the company also uses a customs broker or other provider.

“A service provider is facilitating transactions for you, but ultimately the U.S. government would look at you if there are mistakes,” says Doucette.

Mistakes can be costly, whether you misclassify a product for tariff purposes, fail to file a declaration for a regulatory agency, or export a product to a person on the U.S. government’s denied parties list.

Still, service providers can offer invaluable assistance. “They have subject matter experts you can call upon for mentoring and advice,” Doucette says.

6. Educate yourself and do your homework

Companies working to build internal expertise can find a wealth of free information on sites operated by U.S. agencies such as Customs and Border Protection (CBP) and the Department of Commerce.

Importers need to learn not only about tariff compliance, but also about requirements imposed on certain products by partner government agencies such as the Department of Agriculture and the Food and Drug Administration. Exporters must comply with regulations from the Department of Commerce, the State Department, and the Treasury Department.

“Your due diligence process is key on exports, because certain reviews of products, people, and locations need to be conducted per transaction,” says Morales. The U.S. government prohibits exports of certain products to certain recipients, or to any recipients in certain countries.

Besides finding resources online, you can boost your knowledge by joining a local trade organization, says Morales, who serves as regulatory compliance director at LIIEA.

“LIIEA, for example, offers industry knowledge from people who are in the thick of it,” he says. “You get access to officials who are knowledgeable about government policies and the issues impacting the industry.”

7. Understand requirements on both sides of the border

U.S. regulations aren’t the only ones that U.S.-based importers and exporters have to understand. When you arrange transportation from one country to another, you must know the rules on both sides.

“There are different regulations in terms of time frames, hours of service, and ways that you can load freight into certain types of equipment,” says Antonio Echevarria, director of sales at Nuvocargo, a New York-based company that operates a digital platform for managing cross-border trade between Mexico, the United States and Canada.

For example, a U.S. company that exports to Mexico needs a government-authorized trading partner south of the border. “Not every company in Mexico can legally import cargo,” Echevarria says.

U.S. exporters also must be careful about where in Mexico they plan to ship. “Big cities with awesome industrial parks have all the infrastructure ready to receive any kind of cargo,” Echevarria says. But in some less-developed areas, tractor-trailers need special permits.

“A 53-footer won’t be able to go through certain kinds of roads in Mexico without those permits,” he adds.

8. Monitor Rule, tariff, and status changes

Just as you need to keep an eye on overseas suppliers in case they make changes that affect your tariff obligations, you also have to watch for changes in tariffs themselves, in government regulations, and in the status of customers. For example, consider what happened when the U.K. officially left the European Union (EU) at the end of 2020.

“For Brexit, we had about 6 million updates,” says Barraco at E2open, whose platform includes a global database of tariffs and trade regulations. “We had to take the U.K. out of the EU, reestablish all the new EU relationships, and then create all the new U.K. regulations.”

Exporters that screen customers to make sure they’re not denied parties under U.S. law must watch for any changes in a customer’s status. Since it might not be feasible to screen every customer each time it sends a new purchase order, it pays to take a risk-based approach.

“For example, if you sell machinery and accessories, you obviously want tighter controls and to screen with greater frequency,” Morales says. But if you sell gauze pads and toothbrushes to a hospital, then you probably don’t need to screen that customer with every sale.

9. Collaborate, integrate, automate

Import and export operations run best when they collaborate with sales, marketing, transportation, and other parts of the company that touch on international trade.

“If you have a sales or procurement system that hasn’t been reviewed by the regulatory team or trade compliance professional, then you don’t know where the gaps are in your organization,” Morales says. Those gaps can produce gaffes—inbound product that reaches Customs without required documentation, for example, or an overseas sale that runs afoul of U.S.-imposed sanctions.

To stay compliant, a company should integrate the rules from its import/export manual into its enterprise resource planning (ERP) or other operational systems. “The policies and procedures alone don’t mean much if you can’t back that into the workflow of everyone else within the organization,” Morales says.

Along with integrating internal systems, companies can find many other opportunities to automate import and export processes, removing manual labor and the chance of human error. One example is E2open’s new easy classification functionality.

E2open offers courses through its Global Trade Academy where shippers can learn to assign tariff classifications manually, looking up product categories in a huge book and working their way through decision trees to choose the correct code. But with artificial intelligence-driven automation tools, users can classify products based on natural language input, speeding the process and reducing errors.

“The user says, ‘I have shoes,’ and the system asks, “Men’s, women’s or children’s?'” Barraco says. “Then it starts a decision tree to help you find the harmonized system classification to accurately classify the product.”

With the right HS code, E2open’s trade content database can be used to provide the requirements for exporting the product from Country A to Country B.

While importing and exporting are rarely simple, when you build strong internal processes, work with expert service providers, and take advantage of automation, you vastly increase the chance of getting product across borders cost-effectively and trouble-free.

Understanding the Role of Incoterms 2020

Incoterms® were first published in 1936 and are intended to reduce or remove uncertainties that may arise from different interpretations of the rules in different countries. They show where risk passes between buyer and seller, allocate transport costs, and clearly define the responsibilities for export and customs clearance.

Since inception, they’ve been updated multiple times—including the recent update, Incoterms 2020.

While helpful, many companies are unfamiliar with or don’t understand Incoterms. For example, a small retailer in Oregon utilized Incoterms when purchasing product from a mid-sized manufacturer in Paris. No one in the U.S. company spoke French while their Paris business partners knew only a bit of broken English. What could have been a large problem was quickly rectified by using Incoterms 2020 since it’s available in 29 languages, including French.

“FCA Incoterms 2020 Paris, France” was added to the contract, and the deal was made, with responsibilities of both the seller and buyer clearly defined in their native language.

Per the rule, the French manufacturer (seller) assumed the costs and risks through export clearance and onto the pre-carriage collecting vehicle. Then the U.S. retailer (buyer) took on the risk and responsibility for the freight through destination, including customs clearance in the United States. Through Incoterms, both buyer and seller understood their obligations in the transaction, which led to a favorable outcome.

Playing By The Rules

It’s important to note that using an Incoterm rule in a sales contract without a complete understanding of what is expected from both parties can delay the transaction or cause worse problems.

To paint the picture, let’s say a U.S. manufacturer wants to get into the Brazilian market. The sales department agrees to “DDP Incoterm 2020 São Paulo, Brazil” with its new business partner in São Paulo. Under this Incoterm rule, the U.S. manufacturer is the importer of record into Brazil, responsible for exporting from the United States and importing into Brazil, and paying all duty, taxes, and customs charges.

Unfortunately, both parties agreed to an Incoterm that cannot be successfully executed. According to customs regulations in Brazil, this small U.S. manufacturer cannot be the importer of record. When the product arrives at the Port of São Paulo, Brazilian customs seizes the goods for inaccurate documentation.

This is just one example of the many violations that occur when companies don’t understand how to consistently and correctly use Incoterms in trade. While the rules can facilitate good trading practices, lack of knowledge in the meanings and responsibilities behind the rules is a concern.

When companies incorporate Incoterms 2020, it’s vital their logistics, procurement, tax, finance, and sales teams understand the rationale behind the rules and what steps to take to ensure a successful product journey from seller to buyer.

Education and training can be successful methods for helping employees understand the intricacies of global trade. If your company uses Incoterms or plans to start with Incoterms 2020, make sure your employees understand the requirements of both buyer and seller in each of the 11 rules. When used correctly, these rules can help your business achieve optimum success in international trade.

—Jeff Simpson, Manager of Trade Policy, C.H. Robinson

Ins and Outs of Exchange Rates and Insurance

Although many import/export best practices involve tariffs and trade regulation, other aspects of global trade also call for special attention.

Take foreign exchange. When you buy product overseas, how can you get the best value for your U.S. dollars? Sometimes a partner can help.

For example, Elenteny Imports, which provides freight forwarding and customs brokerage for U.S.-based importers of alcoholic beverages, also buys and sells wine itself.

“The quantity of foreign supplier payments we make has consolidated to the point where Elenteny Imports gets highly competitive rates on currency exchange,” says CEO Alexi Cashen.

When Elenteny manages freight for an importer, it can also handle payments to the customer’s overseas suppliers, providing the same advantageous exchange rates.

Insurance is another important concern, since legal liability for product damage varies from country to country.

“In the United States, the Department of Transportation requires carriers to have insurance for their customers, and the minimum is US$100,000,” says Antonio Echevarria, director of sales at Nuvocargo, which operates a digital platform for managing cross-border trade in North America. But in Mexico, a carrier transporting a 34,000-lb. shipment is liable for only about US$1,500.

“To have peace of mind,” he says, “insure your cargo for both sides of the border.”

Overall, St. Lawrence Seaway tonnage for the season (March 22 to September 30) reached 24.8 million metric tons, down 6% from 2018. The figures reflect a combination of factors including the decrease in U.S. corn and soybean exports from earlier in the spring and delays in the Canadian Prairie harvest due to wet field conditions.

September 2019 was a busy month for the Port of Duluth-Superior, with overall tonnage pacing slightly ahead of last season and the five-season average. Grain made a strong move in September, posting its second-highest monthly tonnage total of the season and narrowly outpacing 2018. General cargo movement continued steady, with wind energy cargo arrivals from overseas via the Seaway tracking toward a record total. In addition, iron ore tonnage outpaced the September 2018 total by 3%, putting it almost 16% ahead of the five-year average.

Shipments of limestone and petroleum products continued to lead the way at the Port of Green Bay in September, bringing its year-to-date shipping total to more than 1.6 million tons through September—17% ahead of 2018.

Overall tonnage through Port Milwaukee was up 25% as the port’s handling of salt, cement, steel, and other specialty cargoes led the way this year.

The Toledo-Lucas County Port Authority reported a slight decrease in tonnage compared to the 2018 season. While coal, iron ore, and grain were down, general cargo, dry bulk, and petroleum numbers were up with robust aluminum shipments driving growth. The port also handled bulk sugar for the first time since 2015.