Updated: Nov 24, 2020
The freight forwarding industry is ever evolving and more so than ever following the COVID pandemic. There is tremendous pressure on airfreight rates globally and South Africa is no different.
The shortage of international flights operating to and from South Africa has seen a steep hike in airfreight rates. Similarly, entering into the traditional peak season has seen space restrictions on vessels operating into South Africa (particularly from China) and with this, a hike in ocean freight rates. Many importers have until now held off on replenishing stock however we are seeing higher volumes and more demand on “just in time deliveries”.
Against this backdrop, the ability of a country to import/export goods and services remains one of the key global contributors of economic growth amongst both developed and developing countries, It has been said that Importing and Exporting are two sides of the same coin as both supply customers with products manufactured outside their respective countries.
A country’s ability to pay foreign currency for much needed raw materials and other
cost-effective goods is significantly enhanced by the receipt of foreign currency for exported goods and services. Global trade has withstood times of economic turmoil, volatile exchange rates, war, pandemics, transition, political uncertainty, and tragedy, over thousands of years.
Of vital importance in the physical supply chain is the importer/exporter partnerships with a commercial bank and a reputable freight forwarder. These are two of the most critical relationships in the entire financial and physical supply chain process regarding any global trade transaction.
In this blog we will touch on some of the major considerations regarding the movement of goods, globally.
All of us are fortunate that a set of rules exits as to standardise responsibilities as well as the passing of risk. This was created by the International Chamber of Commerce many years ago as far back as 1936. These rules are called Incoterms (International Commercial Terms - Incoterms®). The last revision came into effect on the 1st January 2020, as Incoterms ®2020.
DO YOU KNOW WHAT A FREIGHT FORWARDING AGENT DOES?
A freight forwarder, forwarder, or forwarding agent, is a person or company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer, or final point of distribution.
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A freight forwarder, forwarder, or forwarding agent, is a person or company that organises shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer, or final point of distribution. Freight forwarders contract with a carrier or often multiple carriers to move the goods. A forwarder does not move the goods but acts as an expert in the logistics network. The carriers can use a variety of shipping modes, including ships, airplanes, trucks, and railroads, and often use multiple modes for a single shipment.
For example, the freight forwarder may arrange to have cargo moved from a plant to an airport by truck, flown to the destination city and then moved from the airport to a customer's building by another truck.
International freight forwarders typically handle international shipments and have additional expertise in preparing and processing customs documentation and performing activities pertaining to international shipments. Information typically reviewed by a freight forwarder includes the commercial invoice, shipper's export declaration, bill of lading and other documents required by the carrier or country of export, import, and/or transhipment.
In this context, the term “Physical Supply Chain” is also used to describe the totality of the organisation, systems, people, activities, information, and resources involved in moving a product or service from supplier to a buyer.
This process is extremely important for importers/exporters of goods across country borders and the appointment of a reputable Freight Forwarder will go a long way in smoothing the import/export logistical process and will ultimately protect profit margins and minimise risks.
In addition to the financial risks associated regarding trade and working capital finance, payment, and currency exchange, the following are some additional risks faced by importers/exporters (that can be mitigated by freight forwarding companies) regarding physical movement of goods across country borders:
Goods are not adequately insured
Performance risk of third parties (inspection companies, freight forwarders, customs departments, suppliers of goods, etc.)
Delivery issues (incompetent or inappropriate shipping/transport companies/distance and delays)
Exchange controls in counter party counties
Trade embargoes/blacklists/anti-dumping legislation
Export/import licence requirements
Specific health requirements
Legal requirements for label and packaging
Documentary requirements - ownership of goods (documents of title)
As mentioned earlier in this blog, it would be advantageous to understand the rules used regarding the movement of goods in global trade as set out in the above mentioned Incoterms.
Unless the buyer understands the total cost of the product at his premises, he will not be able to make a sound decision regarding the product.
In essence, Incoterms determine the cost, risk and responsibilities of the parties, enabling importers/exporters to correctly read the price of a product. The cost of a product will increase systematically until it reaches the buyers premises. Unless the buyer understands the total cost of the product at his premises, he will not be able to make a sound decision regarding the product. Incoterms are therefore used to standardise the rules regarding delivery terms of goods in a global trade transaction.
If needed, in addition to your trade payments, foreign exchange and finance requirements, BeztForex is well placed to facilitate your freight forwarding requirements through our reputable partners.
These services will typically include;
International Freight Forwarding (sea freight movements (LCL and FCL)
Airfreight movements and over border road haul; Customs Clearing; Exports services
Exchange Control advice/guidance
Warehousing and local distribution
Author – Herman Bezuidenhout