Part I: Policy and economic issues

Part II: Pharmaceutical management

Selection
Procurement
Distribution
22 Managing distribution
23 Inventory management
24 Importation and port clearing
25 Transport management
26 Kit system management
Use

Part III: Management support systems

chap ter 24

Importation and port clearing

Summary24.2
24.1 Managing importation24.2
24.2 Using a clearing and forwarding agent 24.3
24.3 Organizing an import unit 24.4
24.4 The port-clearing process 24.5
Notify buyer of expected arrival date of shipments
Locate shipments Obtain documents needed for
clearing Deliver to warehouse

24.5 Expediting port clearing 24.5

Use of an activity monitoring system Information and

documentation for expected consignments

24.6 Lodging insurance claims 24.8

References and further readings 24.8
Assessment guide24.9

copyright management sciences for health 2012

illustrations
Figure 24-1 Processing of import documents 24.6
Table 24-1 Flow of importation documents 24.8
b oxes
Box 24-1
Box 24-2

Contracting for port clearing 24.3

Documents used in port clearing 24.7

24.2 di str i but ion

s u mm a r y
The purpose of an effective and efficient importation and
port-clearance process is to ensure that pharmaceuticals
and related health supplies are cleared from a land, sea,
or airport with the least possible delay after their arrival.
Port delays can have costly consequences, such as
Reduced shelf life or, for vaccines and other very
temperature-sensitive items, possibly a complete loss
of potency
Deterioration of product
Damage to product cartons and other packaging or
damage to outer identification
Increased chance of theft
Storage fees (demurrage), which can result in prohibitively high costs
Stockouts, resulting in emergency purchases made at
higher unit cost and with the potential for unassured
quality
Cash flow problems caused by pharmaceutical products being tied up for indefinite periods in port
The port-clearing process consists of
Managing preshipment issues, such as documentation, which are often required for the clearance
process
Identifying and anticipating the arrival of shipments
Locating the shipments and the particular consignments
Obtaining the documents needed for clearing before
the arrival of supplies at a port, and ensuring that the
documents are in accordance with the countrys port
and customs requirements
Making timely payments relating to the clearance
process

24.1 Managing importation

This chapter discusses systems and procedures to improve
the efficiency of port clearing. The port-clearing process is
vital to the efficient operation of a public pharmaceutical
supply program, whether it is performed by public employees or contracted out.
In many countries, clearing pharmaceutical consignments from airports and other ports is an inefficient and
time-consuming activity that leads to financial losses.
Unlike products that are nonperishable or indestructible,
medicines and medical supplies can be damaged by poor
handling and inadequate or poor storage conditions. They
are also highly attractive to thieves. Thus, there is a criti-

Ensuring that appropriate storage space is available

to receive the shipment and that transport is available immediately
Delivering goods to the warehouse or other storage
facility as appropriate
Expediting port clearing is an important function,
requiring either a well-organized, paper-based activitymonitoring system or a computerized information system, as well as suitably trained human resources.
Port clearing may be slowed by government customs and
import regulations, and inefficiencies within agencies
that import goods. Private companies are sometimes
able to achieve more rapid port clearance than government agencies. Two private-sector choices are available:
either the supplier can be made responsible for the portclearing process and delivering goods to a nominated
warehouse, or the task can be contracted out to a clearing
and forwarding agent. Retaining the services of experienced and well-trained staff can significantly improve
the port-clearing process. A cost/benefit analysis should
be carried out to establish the most suitable method for
managing port clearanceeither in-house or outsourced
to the private sector. In addition, any changes to clearance formalities must be monitored continuously to
prevent unnecessary delays when new regulations come
into force.
Losses and damage in transit can be substantial. In
order to recover insured losses, the import unit must
lodge insurance claims systematically and expeditiously,
because insurance companies usually have specific periods within which claims must be made.

cal need to clear pharmaceuticals and other temperaturesensitive and high-value products, such as HIV test kits, as
quickly as possible after delivery to any port. The speed of
this process is particularly important in landlocked countries, where goods may travel long distances overland,
subject to unexpected delays, in less than desirable storage
conditions.
Financial losses caused by poor port-clearing management, such as the following, can be extensive and are often
proportional to the delay in the port.
Shelf life can be affected when products are kept in the
port under incorrect storage conditions. In the case of
vaccines and other temperature-sensitive products, the

24/Importation and port clearing

product may be rendered unusable or extra costs may
be incurred to test the potency of the items.
The likelihood of theft and product deterioration or
damage is increased, especially when cartons are damaged by poor handling or are handled multiple times.
Storage fees (demurrage) can result from delays in
clearing; such fees are often substantial.
Port-clearing delays result in longer delivery lead
times. Unless funds are invested to increase safety
stocks, stockouts may occur at storage and dispensing
facilities, leading to extra expenditures on emergency
purchases and supply chain disruption.
Capital funds are tied up by port-clearing delays,
which worsen cash flow problems in programs operating a revolving drug fund.
In many countries, the efficiency and economy of port
clearing are hindered by cumbersome, bureaucratic, or
obsolete regulations and by the poor systems and procedures used by customs and port authorities. The resulting
delays for importers are substantial, yet improving performance can be difficult. The common practice adopted by
private companies and individual importers is to obtain the
services of a private clearing agent on a contract basis. An
experienced agent has the best chance of negotiating the
regulatory labyrinth in the shortest possible time.

24.2 Using a clearing and forwarding agent

Importation and customs clearance is a specialized area of
work. Unless the pharmaceutical program already has an
experienced team with clearing and forwarding skills, contracting with a specialized clearing and forwarding agent is
strongly recommended.
If a private-sector agent is used, tenders for these services
should be obtained from several companies, particularly if a
large volume of business is involved. Any tender must clearly
specify the service levels required and request pharmaceutical handling experience and references from current and
previous clients. Tenderers should be asked to specify all
charges and rates and to clearly identify the duties they will
perform (see Box 24-1). Before an agent is appointed, it is
important to obtain satisfactory business references from
other clients and verify documents that have been submitted with the tender offers. The agents offices and warehouses
should also be inspected to ensure that good business and
materials-handling practices are observed. Pharmaceuticals
require special handling, and the agent should show an
understanding of the problems associated with such commodities and demonstrate the ability to deal with these
problems.
The import agency must have a broad understanding
of the regulations and procedures related to customs and

Box 24-1
Contracting for port clearing
The following list includes the main features of a contract
for port-clearing and forwarding services. Professional
advice should be sought to ensure that terms and conditions are locally appropriate, legally enforceable, and
realistic.

Scope of work
Dealing with customs formalities
Arranging clearance from the port or airport
Arranging transport to the agents warehouse or the
consignees premises
Reviewing existing warehousing and identifying any
potential problems in terms of capacity, security,
ease of access, and availability of handling equipment
Providing safe and secure warehousing prior to
delivery, if required
Arranging for delivery to final destinations, if
required, which may include ensuring that lists of
authorized signatories for taking over goods are
available to maintain security
Specifying documentation to be provided by the

supplier and by the consignee (for example, shipping

advisory, bill of lading, air waybill, packing list)

Performance standards
Time periods allowed for each stage in the import
and port-clearing process
Procedures for regular performance monitoring

Service requirements
Reporting
Quoting for individual consignments
Payment arrangements
Penalties for poor performance
Security
Dealing with defective shipments in a timely manner
Restrictions on the sublease of services to other
companies

Payment terms
Port or airport charges itemized in detail
Agents costs itemized in detail

24.3

24.4 di str i but ion

port clearance, whereas the clearing agent must be familiar

with key local officials and understand local rules, practices, and culture to help the recipient through the routines required. For example, differences in standard work
weeks because of cultural or religious customs could make
clearance and delivery procedures unfeasible on particular days of the week (for instance, arrivals should not
be scheduled in Muslim countries on Fridays). The agent
should obtain documentation from the import agency in
advance of the arrival of goods in port to avoid storage
charges, and should also assist in obtaining relevant permits, waivers, or bonds. The agent must also be up-to-date
with current legislation and promptly notify the principals
of any changes.
The agent must take full responsibility for ensuring that
the cargo is cleared and delivered with minimal delay, in
a secure and appropriate way, and at the lowest cost (or
at a cost consistent with the contracted rate). Even if this
system is in place, it is critically important for the recipient

to understand all the stages of the importation and portclearing process.

24.3 Organizing an import unit

An alternative to contracting with a private-sector clearing
agent is to empower an import unit in the supply system to
handle port-clearance responsibilities. This units responsibility should be specifically defined and include standard
operating procedures, and the responsible officials should
be accountable to the pharmaceutical supply program for
prompt, reliable port clearance. The unit should have one
or more experienced clearing agents on staff. Before the
decision is made to organize an in-house import unit, its
cost-effectiveness should be compared with that of using a
contract with a private clearing agent. Chapter 44 discusses
the responsibilities of an import unit attached to medical
stores.

24.4 The port-clearing process

The most important steps in the port-clearing process are
discussed in this section. Shippers and their forwarding
agents must check conditions at the relevant port at each
end of the journey. This step includes establishing any
limitations on the use, size, and availability of containers
and container-handling equipment; determining storage
conditions in warehouses or storerooms in the port; and
ascertaining the availability and functionality of refrigeration equipment to store vaccines and other temperaturesensitive products.

Notify buyer of expected arrival date of shipments

As soon as a consignment of medicines is shipped (in the
case of air freight, preferably twenty-four hours ahead of dispatch), the seller has the responsibility of telling the buyer
the name of the carrying vessel, aircraft, or vehicle and its
expected time of arrival at the buyers port. This step is often
done by e-mail or fax. The seller then dispatches to the buyer
copies of all the documents mentioned in Figure 24-1 and
Box 24-2. When the buyer receives these documents, the
local agents for the shipper or carrier can be contacted to
obtain exact arrival details.

Locate shipments
The shippers local agent provides final details specifying
the quay, airport, or land destination where the shipment
will arrive. Typically, a land destination will be a customsbonded warehouse that can be publicly or privately owned
(often by the importer) and is often located right at the
port of entry, which minimizes handling and therefore
risk. Subsequently, the agent provides details of the specific port or customs warehouse to which the consignment
will be cleared. During the time that goods are parked in
a bonded warehouse, duties do not have to be paid. Duty
is not due until the product is taken from the bonded
warehouse to sell or consume; if the products are reexported or destroyed, then duties will not have to be paid
at all. Storage in a bonded warehouse also allows time for
pharmaceuticals to be quality-tested before being released
to the market. Such warehouses require adequate security
to prevent theft or diversion of pharmaceutical shipments
and also should have the capacity to store medicines at
the right conditions, including appropriate temperature, to
prevent damage.

Obtain documents needed for clearing

The port authorities require the original copies of the documents described in Box 24-2 to permit clearance by the
buyer or its authorized clearing agent. Having an established

24/Importation and port clearing

list of duly authorized persons able to sign for goods helps
ensure full security and accountability. Along with the original documents described in Box 24-2, the buyer or the clearing agent prepares customs and port authority entries. The
drug regulatory authority may also inspect the shipment to
make sure that the pharmaceuticals are registered, have been
imported by a licensed importer, and any charges have been
fully paid. After these steps are completed, customs duties (if
applicable) as well as port authority and other charges must
be paid before the consignment of medicines is removed
from the custody of the customs and port authorities. When
import agencies do not make advance preparations to have
the required funds ready, clearance is delayed and storage
fees accumulate.

Deliver to warehouse
Except in the case of medicines requiring special storage
conditionsfor example, a cold room or a dark location
the consignment is kept in a general-purpose port or customs warehouse until delivery. Such warehouses should be
checked to ensure that they have appropriate handling and
storage facilities for medicines in addition to straightforward container handling. The loading of the consignment
onto trucks must be supervised by wharf officers from the
import agency or its authorized clearing agent. To avoid
delays at the delivery site, drivers should be told precisely
where the consignment is to be delivered and informed of
any particular timing issues related to warehouse closures or
lack of receiving staff.

24.5 Expediting port clearing

Port facilities in many countries are inefficient. Nevertheless,
the port-clearing department or port-clearing agent can
improve the situation by adopting better systems and procedures. Typical problems experienced by an import unit,
and some methods for expediting work, are discussed in this
section.

Use of an activity monitoring system

One of the greatest problems experienced by the manager
of an import unit or port-clearing department is the supervision of staff engaged in clearing shipments of medicines
at the port. Unlike the staff of other departments, such as
procurement and inventory control, many of the personnel
involved in clearing medicines spend much of their time
outside the office. Hence, supervision, assignment of duties,
and progress monitoring are difficult. Careful selection of
appropriate staff for port-clearing positions and consistent communication via radios or wireless telephones are
important.

24.5

24.6 di str i but ion

Figure 24-1 Processing of import documents

SELLER

SELLERS BANK

SHIPPER

BUYERS BANK

BUYER
Specific medicine
requirements

ffers
Call for o

PI

Prepare PI

Select supplier

Prepare LC
Approval
notification
Begin production
and packing
of order

Advise of LC

Review and
approve LC

Establish LC
LC particulars
Dispatch
confirmation
to seller

Direct confirmation of LC number

Prepare goods
for shipment

BL

Accept
shipment

Collect all
documents

BL,
C
PL, Q,
CO, IN,
IP

Approve
supplier
payment;
forward original
documents

BL, CQ, PL, IN, CO, IP

Payment

Dispatch copies
to buyers

Receive
documents
and authorize
payment

Receive
payment and
release original
documents
al documents
Present origin the bank
ed
authoriz by

Issue delivery
order to buyer
Key
PI pro forma invoice
LC letter of credit
BL bill of lading
IN invoice
CQ certificate of quality
CO certificate of origin
IP insurance policy
PL packing list

Proceed to customs

Notification and
bank bill
Receive
documents
and initiate
payments
Payment
BL, CQ, PL, IN released
Begin portclearing
operations
Pay customs duty
and port authority
charges
Obtain delivery
order from port
warehouse
Transport to
warehouse for
complete
inspection

24/Importation and port clearing

Box 24-2
Documents used in port clearing
Air waybill (AWB). Document prepared by the shipper
that provides details about the contents of the shipment,
the route and carrier, and the shipping charges.

vides information about the nature and extent of coverage provided and the terms and conditions under which
it is valid.

Bank bill (BB). A bill presented by the buyers bank to

the buyer that covers the total cost of goods received and
any bank charges for processing the order (cable charges,
interest on letter of credit, fees).

Invoice (IN). Document provided by the supplier indicating costs, freight, insurance, and any other payment
due on the order.

Bank guarantee (BG). In certain circumstances, the

lack of necessary documents may make it impossible for
the buyer to clear a consignment of medicines that has
arrived at the port. In such instances, a bank guarantee
from the buyers bank can facilitate port clearing.
Bill of lading (BL). A document certifying that the
goods are in the charge of the carrying vessel and dated
on or before the last date for shipment as given in the letter of credit. The document is issued by the shipper and
signed by the master of the vessel.
Certificate of origin (CO). Document stating that
the product under consideration has been produced
by the manufacturer in the country concerned. Such a
certificate should be obtained from a national chamber of commerce or similar institute of the exporters
country.
Certificate of quality (CQ). A buyer usually insists on
certification from the supplier, such as batch certificates
and a WHO-type certificate of a pharmaceutical product
from the exporting countrys drug regulatory authority
(see Chapters 19 and 39).
Insurance policy (IP). Pharmaceutical consignments
are generally insured against damage, pilferage, and complete loss. The insurance policy indicates that a certain
sum of money has been paid as a premium to cover the
consignment of medicines. This document normally pro-

Under such conditions, the import manager may also find

it helpful to maintain an information system that is capable
of monitoring current port-clearing activities, causes of
delays, and assignment of personnel and equipment. This
system should also be able to expedite clearance of urgently
needed consignments. In some instances, an information
system includes the issue of logbooks for all officers, whether
in-house or contracted, who are responsible for customs and
port clearance, to record their activities. Logbooks can be
used to identify possible causes for delays and solutions for
avoiding them.

Letter of credit (LC). An interbank document issued by

the buyers bank. It states that a certain sum of money is
available for the seller to claim from the bank as soon as a
consignment is shipped and the required documents are
presented, as specified in the letter of credit. It becomes
irrevocable when appropriated and numbered by the
bank.
Packing list (PL). Prepared by the seller, this document
describes in detail the contents of each package in a consignment of medicines, including strength, pack size,
number of packs per carton, and number of cartons per
package. This information helps the buyer check whether
medicines actually shipped are in accord with the packing list and the purchase contract.
Pro forma invoice (PI). Provided to the buyer by the
supplier. It includes information such as the price of the
product, shipping and insurance charges (if applicable),
total value, a detailed description of the product offered,
and terms of payment. In some cases, the PI must be
authorized by the countrys drug regulatory authority
before clearing can be completed. The PI can also form
the basis of assessing the fee payable to the drug regulatory authority by the importer.
Registration documents (RD). In some countries, the
customs department or the drug regulatory authority
requires registration documentation before pharmaceuticals can enter the system.

Information and documentation for expected

consignments
Another major problem is lack of information on expected
shipments. Commonly, the import unit spends a great deal
of time checking with shipping agents to ascertain whether
goods have arrived. In many instances, the import unit
learns of the arrival of consignments only after the goods
have actually landed. In some cases, high port-storage
charges have already been incurred and goods requiring
special storage may have been delayed or damaged by the

24.7

24.8 di str i but ion

Table 24-1

Flow of importation documents

Document

Who generates?

By when?

How transmitted?

Who receives?

Purchase order

NGO distributor

Within 2 weeks of contract

approval

Scanned copy sent by

e-mail or regular mail

Supplier

Pro forma invoice

Supplier

1 week from receipt of

purchase order

E-mail or fax

NGO distributor

Import permit

Ministry of health

3 days after receipt of pro

forma invoice

Collection by NGO
distributor

NGO distributor

Import declaration
form

National revenue
authority at ministry
of finance

3 days after receipt of import

permit

Collection by NGO
distributor

NGO distributor, through

clearing/forwarding agent

Invoice

Supplier

Within 3 days of receipt of

import declaration form

Scanned copy sent by

e-mail

NGO distributor and then to

clearing/forwarding agent

Packing slip

Supplier

Within 3 days of receipt of

import declaration form

Scanned copy sent by

e-mail

NGO distributor and then to

clearing/forwarding agent

Ocean bill of lading

Suppliers agent

Within 1 week of shipment

Scanned copy sent by

e-mail

NGO distributor and then to

clearing/forwarding agent

Air waybill

Suppliers agent

Within 1 day of shipment

Scanned copy sent by

e-mail

NGO distributor and then to

clearing/forwarding agent

time notification is received. Table 24-1 shows an example of

a nonprofit distributors importation document flow.
Excessive delays in port clearing and high port-storage
charges are usually caused by a breakdown of communication between the supplier and the purchasing department. As described in Chapter 39, the procurement
contract should clearly specify the number of copies of
invoices, shipping documents, and any other supporting documentation needed, such as product registration
papers or import licenses. One copy of the shipping document must be sent to the purchasing office by fax or other
expeditious means when the shipment leaves the suppliers
warehouse.
Often, the documents needed for clearing are not received
on time from the supplier or too few copies are sent, resulting in additional delay and expense. Overcoming this problem requires the maintenance of good communication
among the supplier, the freight forwarder, the consignee,
and all other parties; a good practice is to use established,
detailed document requirements that are agreed on by all
parties involved in the process. In addition, reports of supplier inefficiency should be incorporated into the general
merit-rating system for suppliers (see Chapter 21).
Country Study 39-2 describes how Papua New Guinea has
addressed delays in port clearance by awarding contracts
that require suppliers or their agents in the buyers country
to be responsible for customs, port clearance, and delivery of
goods to warehouses designated by the buyer. In such cases,
the seller is motivated to clear consignments and make the
delivery immediately, because payment is not made to suppliers until receipt of the shipment.

24.6 Lodging insurance claims

When damaged goods or short shipments are identified, completing the insurance claim quickly is important.
Recovery of insured losses depends on the existence of a
thorough, systematic routine for inspecting all shipments
when they are accepted at the port or at the central warehouse (see Chapter 44), and submission of claims within
the time stipulated by the insurance company. Consistent
recovery of insured losses also depends on the assignment of
qualified staff members to carry out claims processing. An
effective monitoring system reduces the chance that claims
will be forgotten or unduly delayed. This function should
be part of the system used for monitoring the port-clearing
process. n

References and further readings

H = Key readings.
H Durgavich, J. 2009. Customs Clearance Issues Related to the Import

of Goods for Public Health Programs. Task Order 1. Arlington, Va.:

USAID /DELIVER Project, Task Order 1. <http://pdf.usaid.gov/
pdf_docs/PNADP583.pdf>
H International Chamber of Commerce. 2010. Incoterms 2010: ICC
Official Rules for the Interpretation of Trade Terms. [In 31 languages.]
Paris: ICC Publishing.
Nelson, C. A. 2009. Import/Export: How to Take Your Business Across
Borders. New York: McGraw-Hill.
Rushton, A., J. Oxley, and P. Croucher. 2010. Handbook of Logistics and
Distribution Management. 4th ed. London: Kogan Page.
Weiss, K. D. 2007. Building an Import/Export Business. 4th ed. New
York: John Wiley & Sons.

24/Importation and port clearing 24.9

a s s e s s m e n t g u id e
Existing arrangements
Which air, sea, and land ports are used? What proportion of total supplies comes through each port?
What is the average time to clear goods from each
port?
Do any particular problems exist at each site, and
how do they affect the clearance process?

Port conditions and clearance procedures

Are cold rooms, freezers, and locked warehouses
available? Do they have appropriate temperature
controls? Are security personnel on duty at all
times? Does security include fenced areas, alarms, or
other controls? Are medicines damaged by climatic
conditions?
What are the causes of recent port losses?
Physical damage
Theft
Poor storage conditions
Lost shipments caused by crowding or disorganized port management
Delayed port clearance
Lack of human resources
Lack of appropriate handling equipment
Who is responsible for port clearing?
Central medical stores staff
Ministry of health or government import unit
Private import agents
Do port-clearing staff members know in advance
when and where a shipment is due? Is this information used to speed port clearance? Do the same
problems recur regularly, and if so, are remedial procedures being implemented?
Are port-clearing staff members trained in import
documentation and port-clearing procedures?
Does the import unit workload vary significantly
throughout the year? If so, when? Does this variation
cause any difficulties?
Do port authorities assign priority to pharmaceutical and other sensitive shipments?

Do customs and import control regulations affect

port-clearing efficiency? Do other agencies assist or
impede port clearing? If the latter, can this situation
be rectified?
Are storage fees regularly incurred, and are they
justified? Can they be avoided through remedial
action?
Are adequate and secure procedures in place for
receiving and checking pharmaceuticals?
Is adequate and suitable transport for distribution
available?

Private clearing agents

Are private clearing agents available? Are they competent to handle pharmaceutical shipments?
How do charges for contracting with a private agent
compare with the cost of existing arrangements?

Communications
Does the import unit or agency have direct access to
a reliable overseas telephone line and e-mail access?
Does it have a fax machine and a computer?

Monitoring and evaluation

What is the average time needed to clear shipments
from the port or airport?
Are effective systems in place for monitoring and
evaluating import procedures? If not, which elements are missing?
What is the annual cost of port losses as a percentage
of the value of pharmaceuticals received? Do significant variations exist between ports? Why?
If delays in port clearance are chronic, what are the
causes?
Poor procedures by the buyer
Bureaucratic delays at the port
Inadequate communications
Lack of human resources
Missing or incomplete documentation
Lack of funds to clear goods