COURSE NAME: CUSTOMS CLEARING AND

FREIGHT FORWARDING

E-mail: [email protected]
 Questions

1. Explain the sequential steps how to import

goods to Ethiopia;
2. Explain how to export goods from Ethiopia
3. Define the term freight forwarding in your own
words ?
4. Distinguish the difference between freight
forwarding service and customs clearing agency
services?
5. Distinguish the difference between supply chain
and logistics concepts?
6. List legal bases for customs clearing agents and
Freight Forwarders?
 Introduction
¾Maritime trade logistics
Globalization and the rapid increase in world trade
Ø has brought about new developments on global
maritime industry and increased competition.
Øchanges in the mode of world trade and cargo
transportation, characterized by the prevalence of
business-to-business and integrated supply chains.
ØT h e s e c h a n g e s h ave b e e n e m b o d i e d i n t h e
increasing demand for value-added logistics services
and the integration of various transportation modes
 Introduction…
ØAs a consequence, high-quality logistics services
and the effective and efficient integration of
transport and logistics systems offered by a
maritime operator (i.e. a shipping company or
port/terminal operator) has become an
important issue;
ØMaritime logistics has been traditionally
regarded as the primary means of transporting
parts and finished goods on a global scale;
 Introduction…

¾Maritime transport (i.e. shipping and ports) is

the transportation of goods and/or passengers
between two or more seaports by sea;
¾logistics is the function responsible for the flow
of materials from suppliers into an organization,
through operations within the organization and
then out to customers.
 Introduction…
Logistics is ‘part of the supply chain, process that plans,
implements, and controls an efficient, effective forward
and reverse flow, and storage of goods, services, and
related information between the point of origin and the
point of consumption in order to meet customers’
requirements’
Reverse Logistics vs Logistics

(Council of Logistics Management (1991) ), Rodrigue (2012) and …

 Introduction…

The implied purpose of logistics is to make

available goods, and raw materials, fulfilling
four major requirements related to order,
delivery, quality and cost fulfillment.
 Introduction…
¾A supply chain is composed of a series of
activities and organizations that materials (i.e.
raw materials and information) move through
on their journey from initial suppliers to final
customers.
¾Supply chain management involves the
integration of all key business operations
across the supply chain.
• Supply chain
• Logistics
• Transport
Introduction…
At the center of maritime logistics is, therefore,
the concept of integration,
Pbe it physical (intermodal or multimodal),
Peconomic/strategic (vertical integration,
governance structure) or
Porganizational (relational, people and process
integration across organizations) as an
ongoing attempt to create greater value for
shareholders.
Introduction…

Actors /stakeholders
¾ Behind the movement of goods across
international borders lies a sale involving

¾From the point of sale to the ultimate

destination of the goods there are
different actors who play a distinct role.
 Introduction…

¾The seller/supplier and buyer/ customer

are the principal actors in the transaction.
¾ In between the principal actors there
comes intermediary.
¾ International maritime trade logistics is
characterized by many stakeholders at the
national, regional or international level,
Introduction…

¾Shipping and transport companies:-

organize and take care of the physical
m o ve m e n t o f g o o d s , o r a r r a n g e
commercial transportation in the case
of freight forwarders and logistics
companies .
 Introduction…

¾ Tr a d e a n d i n d u s t r y a s s o c i a t i o n s a r e
stakeholders that represent multiple members.
¾Associations may be organized for:
P specific business sectors (such as the shippers '
councils ) or;
Pprivate sectors (such as chamber of commerce,
association of employers ), and;
PAn international or regional dimension.
 Introduction…

¾IATA and FIATA are examples of international

transport organizations, and
¾The ICC is the international association of
chambers of commerce.
¾Trade and industry associations are essential in
consultation process as it is usually impossible
for individual companies/entities to follow and
participate in all consultative processes for
reasons of lack of time and information.
 Regulatory Agencies
¾There are distinct International and
National Agencies that entail stake in the
undertaking of maritime trade logistics.
¾The prominent national agencies entailing
stake in freight forwarding and maritime
law along objectives and powers and duties
vested them by law and which correspond
to the training topic are:
 International Regulatory Agencies
16

¾World customs organization (WCO)

¾The mission of the WCO -enhance the effectiveness
and efficiency of Customs administrations -trade
facilitation, revenue collection, community protection
and supply chain security, thereby contributing to the
development of international trade
¾In order to fulfill its mission, the WCO develops and
maintains instruments and recommendations for the
standardization and simplification of Customs
systems and procedures governing the cross-border
movement of goods.
 International Regulatory Agencies…
17

¾ International maritime organization (IMO)

]As a specialized agency of the United Nations,

IMO is the global standard-setting authority for the
of
international shipping.
]Its main role is to create a regulatory framework for
the shipping industry that is fair and effective,
universally adopted and implemented.
 International Regulatory Agencies…
18

¾International chamber of commerce (ICC)

PICC aims to promote international trade and
investment as vehicles for inclusive growth and
prosperity.
PSupport the resolution of commercial disputes,
through policy advocacy, in the development of
rules and guidelines, in training courses, and in the
delivery of other practical tools and services, help
the business to adapt to the challenges of trading
in today’s fast-paced global economy.
 National Regulatory Agencies

Promote the expansion of transport services,

¾ Ensure the provision of transport services are integrated and
are in line with the country's development strategies,
¾ Ensure the establishment and implantation of regulatory
frameworks to guarantee the provision of reliable and safe
transport services, and transport policy.
¾ Regulate maritime and transit service,
¾ Ensure that transport infrastructure are constructed, upgraded
and maintained,
¾ Follow up the activities to the Ethio-Djibouti Railways in
accordance with the agrements concluded between the two
countries.
 National Regulatory Agencies …

¾Ensure that the transport operations and

movement of goods in import and export
of the country are economical;
¾ Plan, coordinate and enforce such operation;
¾Reduce the transit time of import export of
goods, and coordinate the concerned
Government bodies to care for goods at port.
 National Regulatory Agencies …

¾Seek ways and means for the promotion

and development of multimodal transport,
marine transport, in-land water transport and
¾e n s u re t h e av a i l a b i l i t y o f u n i n t e rr u p t e d
resource of skilled man power in the maritime
sector for the Country to implement obligations
and rights of Ethiopia under international
maritime conventions.
 National Regulatory Agencies …

3. Customs
¾Examine goods and means of transport entering into or
departing from Ethiopia through customs ports, frontier
posts and other customs stations, and ensure that
customs formalities are complied
¾ Decide the place where import and export goods are
to be deposited;
¾Establish Warehouses, issue Warehouse licenses;
 National Regulatory Agencies …
3. Customs
¾Supervise duty-free shops; control the handling and care
of deposited goods suspend or revoke warehouse
licenses; collect license and service charges;
¾Enter into contracts and international agreements
regarding customs administration;
¾Maritime law proclamations\proclamation-no-859-2014-
customs-proclamation.pdf
¾Maritime law proclamations\Reg No. 108-2004 Customs
Clearing Agents Council of Minister.pdf
Key Concepts and Terms

Bill of Lading (B/L): is A document that

establishes the terms of a contract between a
shipper and a transportation company.
Carrier means any person actually performing
the carriage of the Goods with his own means
of transport (performing Carrier) and any
person subject to carrier liability as a result of an
express or implied undertaking to assume such
liability (contracting Carrier).
 Key Concepts and Terms…

Consignee: is the party shown on the bill

of lading or air waybill to whom the
shipment is consigned. Need not always be
the buyer, and in some countries will be
the buyer's bank.
Consignor: A person or company shown
on the bill of lading as the shipper
 Key Concepts and Terms…

Customs Clearing Agent: a person authorized to deal

with the customs, for and on behalf of another person, to
carry out customs formalities related with the importation,
exportation and in general with the movement and storage of
such goods within the customs territory.
Customs Formalities: means any customs operations
carried out in connection with the importation, exportation
or transit of goods from the time of arrival at the customs
port until released from the customs control for free
circulation
 Key Concepts and Terms…
¾ Freight: Refers to either the cargo carried or the charges
assessed for carriage of the cargo
¾ Freight Forwarding: According to the FIATA Model Rules:-
FFSs are “services of any kind relating to the carriage,
consolidation, storage, handling, packing or distribution of
the goods; as well as ancillary and advisory services in
connection therewith, including but not limited to:
P customs and fiscal matters,
P declaring the goods for official purposes,
P procuring insurance of the goods and
P collecting or obtaining payment or documents relating to the
Goods.”
 Key Concepts and Terms…

¾I t i s c o m m o n ly k n ow n t h a t f re i g h t
forwarders often provide clients with a
combination of customs clearing and
freight forwarding services.
¾However, in some countries, freight
forwarders do not always provide
customs clearing services.
 Key Concepts and Terms…

¾F r e i g h t F o r w a r d e r : i s a p e r s o n o r
corporation who arranges transport of goods
on behalf of either the seller or buyer.
• S/he will also consolidate several small shipments
into one larger one to take advantage of better
freight rates.
• Issues bill of lading and will assume the legal
liabilities of acting as a carrier
¾"Marine Transport Service" mean the
carriage by sea of passengers, goods, or mail.
 Key Concepts and Terms…

¾ Multimodal Transport: means the carriage of goods by at least

two different modes of transport, on the basis of a multimodal
transport contract, from a place at which the goods are taken in
charge by the multimodal transport operator to another place
designated for delivery, situated in a different country
¾ Notify party: is the person or company to be advised by the
carrier upon arrival of the goods at the destination port.
¾ Shipper: is the person or company who is usually the supplier
or owner of commodities shipped in international trade. Also
called Consignor.
Scope of Freight Forwarding Services

Introduction
¾G l o b a l L o g i s t i c s S c e n e i s
dominated by a handful of ten to
twelve multinational Companies
followed by smaller companies
altogether numbering below fifty.
¾Entire global trade is facilitated by
these service providers.
Scope of Freight Forwarding
Services…
¾Most of the logistics players have been traditionally freight
forwarders dealing with cargo bookings coupled with
origin and destination services.
¾As the global business practices changed, and supply chain
managements started gaining ground, these companies
realized the potential of being able to offer multiple
services including ground transportation, warehousing,
and contract logistics under one umbrella.
¾quickly turned themselves to acquire the required
capabilities and have managed to become single window
service providers on global scale.
Scope of Freight Forwarding
Services…
Freight Forwarding Service: is a Services of any
kind relating to the carriage, consolidation,
storage, handling, packing or distribution of
the goods as well as ancillary and advisory
services in connection therewith, including but not
limited to customs and fiscal matters, declaring
the goods for official pur poses , pro curing
insurance of the goods and collecting or procuring
payment or documents relating to the goods.
Cargo consolidation
Cargo consolidation

FCL-> Full continer load LCL-> Less continer load

 FCL Vs. LCL
36

¾FCL and LCL are shipping terms used to describe how cargo
is transported in containers:
¾ FCL: Stands for Full Container Load, and refers to a
shipping method where a single sender's cargo fills an entire
container. The container is sealed and transported to its
destination. FCL is often used for high-volume shipments.
¾LCL: Stands for Less than Container Load, and refers to a
shipping method where multiple senders' cargo is packed
into a single container. LCL is also known as "Consolidation"
or "Groupage". LCL is often used for smaller volumes of
goods.
Basic Concept of Public Financial Management
 Consolidation & Deconsolidation
38

¾ Consolidation is combining less than full load (LTL/LCL) shipments of

cargo into one shipment at a centrally located point of origin by a freight
consolidator and transporting them as a single shipment to a destination
point. Deconsolidation is the opposite of consolidation, referring to the
process of breaking down a large shipment into smaller units.
¾ Deconsolidation is the process of breaking down a large shipment into
smaller units for delivery to their destinations. It's the opposite of
consolidation.
¾ Deconsolidation usually takes place at a warehouse or distribution center.
The process involves: Unpacking the shipment, Sorting the contents into
individual shipments, and Preparing the shipments for final delivery.
¾ Deconsolidation is a popular operation because companies group loads
together to reduce the cost of distributing goods. However, the opposite
process must be performed when the shipment is received
Basic Concept of Public Financial Management
Scope of Freight Forwarding
Services…
¾FF is all about the smooth flow of international
trade.
¾The freight forwarder is the party who
ensures that internationally traded goods
move from point of origin to point of
destination and arrive at the right place, at
the right time, in good order and condition,
at the most economic cost.
Scope of Freight Forwarding
Services…
¾Once a forwarder’s recommendations with
regard to cargo routing have been accepted it
becomes the responsibility of the forwarder to
ensure that the goods concerned are transported
and delivered as planned.
¾Forwarder is ideally placed to act as the catalyst
to maximise the benefits from advances in
information technology which are revolutionising
these processes.
Scope of Freight Forwarding
Services…
Evolution of the Freight Forwarder
Traditionally the freight forwarder is the
link between the owner of the goods and
the carrier, and provides forwarding or
clearing service as an agent.
w i t h a d ve n t o f c o n t a i n e r i z a t i o n t h e
forwarder undertook activities such as
packing and cargo consolidation as a
principal on his account.
 Evolution of FF
Customs
broker
Provide customs broker services

Architecture of transport; Book space on all modes of

transport; May own some warehousing assets, truck for
Freight distribution; becomes the custodians of cargo;
forwarder
collaborates with customers and carriers; etc

Book space on all modes of transport; provide a

Freight range of value added logistics services;
logistics
provider/3 collaborates with multiple supply chain players;
PL use IT to manage information and to keep
customers informed about
Scope of Freight Forwarding
Services…
The Scope of Freight Forwarding Service on behalf
of the Consignor
§ responsible for the transportation of goods
between one destination and another.
§ with exporter’s shipping instructions the
forwarder would provide:
ü Book space with carrier on any mode of transport
including sea;
üChoose route of transportation the named
destination;
üTake delivery of goods;
Scope of Freight Forwarding
Services…

üTransport the goods;

üPay fees and other charges;
ü Attend to foreign exchange transactions;
ü Arrange for transshipment
Scope of Freight Forwarding
Services…
On behalf of the Consignee
üReceives and verifies relevant documents
from concerned bodies;
üMonitors cargo movement;
üTake delivery of cargo;
üUnderstand and act as per National
Customs Procedures and techniques;
Scope of Freight Forwarding
Services…
üArranges customs clearance;
üAssists the importer in pursuing claims in case
loss/damage happens;
üWarehousing and distribution services
Scope of Freight Forwarding Services

2.6. Trade and Transport documents prepared by Freight

Forwarders
Shipping Documents can be classified into two
categories as under:
§ Commercial Documents,
§ Regulatory Documents,
1. Com. Docs.
About 16 Com. Docs. classified into principal and
auxiliary export documents;
The principal documents are the ones that are
required to be sent by the exporter to the importer;
Scope of Freight Forwarding
Services…
These principal documentsare:
Commercial invoice
Packing list
Certificate of inspection/quality control(where
required)
Bill of lading
Shipping advice
Certificate of origin
Insurance certificate (in case of CIF)
Bill of exchange.
Scope of Freight Forwarding
Services…
The Auxiliary shipping documents are:
Proforma invoice
Intimation for inspection
Shipping instruction
Insurance declaration
Shipping orders
Mate’s receipt
Application for COO
Letter to the bank for collection/negotiation of
documents
Scope of Freight Forwarding
Services…
2. Regulatory Docs.
Prescribed by different government
departments and bodies in the context of
export/import trade.
are meant to comply with the various rules
and regulations under relevant laws governing
export/import trade such as:
v export inspection,
vforeign exchange regulations,
vtrade control and customs etc.
Scope of Freight Forwarding
Services…
Sample
Scope of Freight Forwarding
Services…
Types and Functions of Bill of Lading
A bill of lading is one of the most important
types of shipping document.
signed by a carrier (eg, a ship owner, master
or charterer)
states that certain goods have been
transported from one place to another on
board a particular ship; and delivered to a
particular party named in the bill of lading.
Scope of Freight Forwarding
Services…

Functions of Bill of Lading

As a receipt for goods
A document of title
As carriage contract
Scope of Freight Forwarding
Services…
Types of Bill of Lading
Straight B/L, Direct B/Lading,
To order B/L, Stale B/Lading,
Clean Vs Dirty B/L Shipped On
Inland B/L Board B/L,
Ocean B/L, Received B/L
Through B/L,
Scope of Freight Forwarding
Services…
2.7. Forwarding Services and the Legal
Position of a Freight Forwarder
A. The legal position of a Freight Forwarder:

¾In most countries there is no special

licensing for freight forwarders required.
Scope of Freight Forwarding
Services…
There are two different legal positions of a
freight forwarder possible depending on the
scope of his activities as including:
1. Acting as an Intermediary:-
organizing the transport and ancillar y
services and choosing the carriers and
service providers in its own name for and
on account of the customer (= traditional
freight forwarder);
Scope of Freight Forwarding
Services…
2. Acting as Principal:-
undertake in its own name and on its own
account to secure the movement of goods
from A to B for a customer but then
entering into a series of contracts with
performing carriers to fulfil the head
contract.
When using different modes of transport
he may act as a multimodal transpor t
operator (MTO) with his own means for
transport and bought in transport.
Scope of Freight Forwarding
Services…
A freight forwarder will normally be held to be
a principal if he issues a multimodal transport
bill of lading or a house bill of lading as an
NVOCC;
These terms of bills of lading impose a clear
obligation on the issuing freight forwarder as a
principal carrier and where the transport
document holds the freight forwarder as a
principal it will be unlikely for the freight
forwarder to only have the liability of an agent.
Non-Vessel Operating Common Carrier (NVOCC)
60

¾Non-Vessel Operating Common Carrier

¾Is An ocean carrier who performs all of
the services of a carrier, but who does
not own their own vessel(s).
¾T hey o pe r a t e by l e a s i n g o r b u y i n g
available space in containers and using
their own House Bill of Lading to
contract with customers.

Basic Concept of Public Financial Management

Scope of Freight Forwarding
Services…

Therefore, a freight forwarder is subject to

liability as principal when he/she:-
perform the carriage of goods by his/her own
means of transport;
issues his/her own transport document;
makes express or implied undertaking to
assume carrier liability;
Scope of Freight Forwarding
Services…
2 . 7 . T h e F I ATA M o d e l R u l e s f o r F r e i g h t
Forwarding Services
General Trading Conditions for freight Forwarders
are usually developed by National Freight Forwarder
Associations.
The FIATA Model Rules for Freight Forwarding
Services form a sound international basis and can be
adjusted to local national conditions.
 objective of the FIATA
63

¾What is the main objective of the FIATA?

¾Its mission is to catalyze progress in the
freight transportation sector, defending
the interests of its members and
promoting professionalism through
training, networking, and representation
before international bodies.

Basic Concept of Public Financial Management

 FIATA MODEL RULES FOR FREIGHT
FORWARDING SERVICES
1. Part I. General Provisions
2. Part II.The Freight Forwarder’s Liability

3. PART III. THE CUSTOMER'S OBLIGATIONS

AND LIABILITY

4. PART IV. DISPUTES AND MANDATORY LAW

Note: Each of the above are stated separetely

Scope of Freight Forwarding
Services…
Monetary limits
the Freight Forwarder shall not be or become
liable for any loss of or damage to the Goods in
an amount exceeding the equivalent of 2 SDR
per kilogram of gross weight of the Goods lost
or damaged unless a larger amount is recovered
from a person for whom the Freight Forwarder
is responsible.