Sample Paper on Freight Forwarding Documentation

Introduction

The world has recorded a significant growth in international trade over the past few decades. According to Dennis and Shepherd(2011, 102), many businesses have expanded their operations internationally and, as a result,there is a high demand for better transportation services of goods from one country to another. When transporting good overseas, there are very high risks involved in addition to the high cost of transportation. To minimize the risks and lower the transportation cost, there is a need to involve service of freight forwarding companies (Korinek, & Sourdin, 2011, 41). Freight forwarding firms are firms that specialize in the shipment of goods from one destination to the other using a single or multiple carriers via air, rail, water or road (Glass, 2013, 13). In addition to the transportation of goods, freight forwarders act as intermediaries between international buyers and sellers. The firms perform a wide range of services such as cargo documentation, transportation and shipping arrangements, warehousing, negotiating freight charges, booking cargo space, insurance arrangements, freight consolidation and filing of insurance claims on behalf of the traders (Korinek, & Sourdin, 2011, 47). This paper will address freight forward documentation as one of the services provided by freight forwarding firms in relation to Australia freight forwarding industry.

Major Stakeholders in Freight Forwarding Industry

Freight forwarding industry in Australia is a significant component in the promotion of its international trade. The freight industry is one of the fastest growing industries in the country, and this is a result of increased demand for import and export services in the country (Burnson, 2010, 49). The industry has attracted numerous stakeholders who depend on their services. Major stakeholders in the industry include exporters, importers, government, insurance firms, logistic firms and banks among others.

Exporters

Exporters are the main participants in the industry (Shang, & Lu, 2012, 64). They ultimately use freight forwarding services to conduct their business. Exporters use freight forwarders to carry out cargo documentation, packaging, warehousing, shipment and insurance of goods before they are exported. The services of freight forwarders help exporters to reduce the cost and save time (Branch, 2006, 61). Freight forwarders usually build a strong relationship with logistic firms’ hence, they can negotiate for cost effective means in the shipment of goods. Moreover, the companies usually consolidate goods for different exporters hence the cost of shipment is shared.

Importers

Freight forward industry has helped importers in tracking their imported goods as they are being shipped. They also help importers to process payment of goods online and ensure safety of their transactions. The companies provide clearing and warehousing services when imported goods reach their destination and arrange for inland transportation on behalf other importers (Shang, & Lu, 2012, 64). Freight forwarders help in reducing cost and time for an importer to receive his or her goods. Importers also rely on them in ensuring the imported goods have the right quality and quantity, and meet all the standards as claimed by the exporter in the other destination.

Government

Government usually relies on freight forwarding companies when collecting data relating to export and import of goods. The companies carry out documentation and clearance of cargos hence they keep records of the imports and exports. Government uses these records to regulate its trade internationally. The companies also help the government to track revenue generated through payment of custom duties (Burke, 2011, 55).

Insurance Firms

It is a requirement by the government to ensure all goods transported by water and air. Freight forwarding companies are responsible for arranging insurance covers on behalf of the importer or exporter (Burke, 2011, 59). As a result, insurance firms have developed a strong work relationship with freight forwarders in order to offer their services to their clients. Insurance firms also rely on freight forwarders in ensuring the insured goods is of the right quality and quantity as claimed by the client.

Banks

Banks work with freight forwarding companies in processing payment of goods. Freight forwarders advise banks on when to release payment for the cargo. For example, freight forwarders inform bank when a cargo reach its destination, and the bank take necessary action depending on the contract between importers and exporters.

Cargo Documentation

Cargo documentation is a significant service offered by freight forwarders. According to Ostroukh, & Krupensky (2014, 33), cargo documentation involves ensuring exporters have acquired all the legal documents required before and after the shipment of goods. A number of legal document are involved in the shipment of goods overseas, and each document plays an important role in supporting international trade. These documents include bill of lading, commercial invoice, consular invoice, inspection certification, certificate of origin, destination control statement, insurance certificate, export license and export packaging list (Johnson, 2010, 19).

Bill of Lading

Bill of lading is the contract between the owner of the goods and the carrier that can either be through air or water (Johnson, 2010, 19). The contract contains terms and condition for the shipment of goods. Bill of lading exists in two forms; straight bill and shipper’s order bill of lading. Shippers order bill of lading is negotiable, and it can be sold or traded when the goods are in transit but, on the other hand, straight bill of lading is not negotiable.

Bill of lading plays a significant role in facilitating international trade. First, it operates as a receipt confirming that the goods to the contract have been shipped. It also confirms that the goods are the hands of the carrier for delivery to the shipment destination (Johnson, 2010, 20). Second, it acts as evidence of the contract that the carrier is responsible for the goods in transits. In the case where the goods are damaged or lost or are not delivered as indicated, the document can be used to raise a claim against the carrier. Third, it operates as a negotiable instrument of transferable document of title. Since goods can only be released at the port after surrendered of the bill of lading, procession of the document gives an inclusive right to procession of goods. Therefore, a party can be able to trade the document when goods are in physical procession of the carrier. This document can also be accepted by the bank and can be used as a security to acquire a loan.

Commercial Invoice

This is a form of a bill of goods being shipped from the buyer to the seller. Commercial invoice contains information relating to cargo transaction. The information includes physical description of goods, address of the shipper and the exporter payment terms and delivery terms (Branch, 2006, 168).

Commercial invoice are used by the buyer to prove ownership of the goods and arrange for their payment. Commercial invoices are also used by the government to ascertain custom duties since they indicate the correct value of goods being shipped (Johnson, 2010, 21). Insurance companies also use a commercial invoice to ascertain the value of goods being insured.

Consular Invoice

Consular document is a shipment document requirement of some states that provide information relating to the consignor, consignee and the value of goods in transit. Consular invoice is used by consular officials to verify the value of goods quantity and the nature of the shipment.

Certificate of Origin

Certificate of origin is a signed deed that indicates the origin of the shipment. The certificate is obtained through official organizations such as the chamber of commerce in the origin country. The document helps the customs officials to determine the country of origin of any given shipment (Dennis, & Shepherd, 2011, 107).

Inspection Certificate

Inspection certificate is a certificate issued after the goods have been inspected by various testing and standard organizations. Inspection certificate helps in attesting the specifications of cargo being transported. Inspection certificate is issued after the goods have been inspected by various officials to ascertain their quality and quantity (Dennis, & Shepherd, 2011, 109).

Dock Receipt and Warehousing Receipt

Dock receipt and warehousing receipt are documents that transfer accountability when export goods move from the hands of exporter to the hands of the freight company. according to Dennis and Shepherd (2011, 109), the document helps in ensuring that the freight forwarding company is responsible for the storage of goods before they are shipped.

Export License

Export license is a document obtained from government agencies that authorize the export of particular goods and in specific quantities to a specific destination (Dennis, & Shepherd, 2011, 109). The document is a requirement for all countries in ensuring the licensed goods are exported.

Insurance Certificate

The document is an assurance to the consignee that the insurance company will cover damages or loss of cargo during transits. Insurance certificate helps in mitigating the risk in an occurrence where goods are lost in transit, and are damaged.

Key issues to Consider When Preparing Freight Documents

There are a number of factors that freight forwarders must consider when carrying out cargo documentation. These factors include the mode of transport to be used, the cost of shipment, rules and regulation of the destination country and the nature of the cargo to be transported.

a)      The mode of Transport to be Used

The documents to be prepared depend on the mode of transport to be use. For example, cargo can be transported by air, water rail or roads. Each mode of transported requires a certain type of documents to be available before cargo transportation. For example, the bill of landing is a necessity when carrying out transportation through sea. On the other hand, when transportation of goods is through air airway bill is a necessity (Gagova, & Pencheva, 2011, 49).

b)     Rules and Regulation of the Destination Country

Different countries have different rules and regulation that govern its international trade (Gagova, & Pencheva, 2011, 52). These rules at times require importer and exporters to have certain documents before shipment of their cargo. Therefore, freight forwarders must consider these rules and regulation prior to preparation of cargo document.

c)      The Nature of Cargo

Certain cargo requires special care and, therefore, they will require special documents. Cargo such as foods and beverages requires extra documents such as standardization documents and medical prove before transportation. Therefore, freight forwarders must consider the nature of the goods before documentation (Shang, & Lu, 2012, 66).

d)     The Cost of the Cargo

It is necessary for freight forwarders to consider the cost of shipment before documentation. The higher the cost of the cargo the higher the cost of documentation since it requires extra documents such as insurance.

Importance of High-Quality Documentation and Fraud

It is necessary for freight forwarders to carry out quality documentation prior to the shipment of goods. Some of the benefits of proper documentation include

1)      Avoidance of Delays during Shipment and Clearance of Cargo

When proper documentation is done, goods are shipped easily without delays. On the other hand, when the cargo reaches its country of destination clearance is easy since the goods will have met all the requirements (Shang, & Lu, 2012, 66).

2)      Reduce Fraud

Many frauds are experienced when exporting or importing goods. Proper documentation helps in reducing these frauds since it allows room for inspection of goods before and after shipment. These ensure that the exported goods are of the correct quality and quantity as specified in the document (Shang, & Lu, 2012, 69).

3)      Facilitate Collection of Custom Duties

Government use cargo documents in the collection of custom duties. Quality documentation will help the government to collect the duties since the value and nature of goods are well documented.

4)      Helps the Government in Regulating International Trade

Proper documentation allows the government to measure number of imports and exports in the country. Therefore, the government can be able to regulate its international trade by enacting laws and regulation to govern imports and exports (Shang, & Lu, 2012, 71).

Transport Modes and Selection of Routes

Movement of goods from one destination to another characterizes international trade. When transporting goods, there are a number of transport modes and routes that are available to the consignee (Branch, 2006, 198). Freight forwarding companies are responsible to select the best mode of transport and routes on behalf of their clients. Selecting the mode of transport depend on a number of factors.These factors include cargo destination, cost of transportation, cargo capacity, the nature of the cargo, speed of the shipment and the availability of the mode of transport. The following are mode of transports that can be used:

Road Transport

According to Gagova & Pencheva (2011, 24), road transport is the most common mode of transport available to trades. Road transport is usually used to transport goods within the country and to the neighboring countries. It is considered when the destination of the cargo has a good road network, and the cargo capacity is not too large (Gagova & Pencheva, 2011, 33). It is considered more cost effective compared to other modes of transport.

Rail Transport

Freight forward company may choose to use rail transport if the destination of the cargo is within the reach of the railway network. It mainly serves transportation within the country and the neighboring countries. Rail transport can handle a large amount of cargo, and hence several freight companies use it for inland shipment. The mode of transport is also cost effective and fast as compared to road transport.

Air Transport

Air transportation is considered the fastest mode and can be used to transport goods to any destination. Freight forward companies choose air transport-to-transport urgent goods such as horticulture products and lightweight commodities. However, the mode of transport is expensive, and bulk goods cannot be transported through it. Thus, many companies do not recommend this mode of transport.

Water/Sea Transport

Sea transport is the most common mode when transporting goods to overseas countries. It is recommended since it can carry huge amounts of cargo and is very cost effective. Freight forwarding companies consolidate a large volume of cargos from their clients and ship them together, which helps in lowering the cost of shipment (Alderton, 2011, 143). Nevertheless, the mode of transport is very slow and therefore it cannot be used for urgent shipment. Another drawback if the mode of transport is that it only serves countries bordering an ocean.

Multimodal Transportation

Multimodal transportation involves transportation of goods from point of origin to their destination using more than one mode of transport (Leinbach, 2007, 102). In multimodal transport, the freight forwarding company is supposed to arrange to ensure cargo reaches their designated destinations. Thus, a contract is signed with a single carrier who becomes liable for the goods even though transportation is done by different modes of transport (Saeed, 2013, 77).

A good example of a multimodal transportation is shipment of customer order to an oversea country. First, the customer order is loaded into a truck from the warehouse. The loaded truck travels by road to a designated railway station where the cargo is loaded into a train and transported by railway to the designated port. The cargo is them loaded onto a ship and transported via water to the port designated country. From the port, the goods are then loaded to the delivery truck that use the road system to deliver the good to their destination.

Conclusion

Freight forwarding industry is a key player in the promotion of international trade. Freight forwarders pay a significant role to facilitate import and export of goods (Burnson, 2010, 49). The companies are responsible for the preparation of shipping documents, facilitating inland transportation, negotiating freight charges, warehousing, cargo space booking, cargo insurance goods, freight consolidation and filing of insurance claims. Through their services, they reduce the time for the shipment of goods and reduce the cost of exporting or importing goods (Llanto, & Navarro, 2012, 63).

References

Alderton, PM., 2011. Reeds sea transport: operation and economics, 6th ed, A&C Black, London.

Branch, AE., 2006. Export practice and management, 5th ed, Thomson Learning, London.

Burke, R. J., 2011. International Logistics and Freight Forwarding Manual: A Street-Smart Guide to International Trade and Transportation, 4th ed, Victoria, Australia.

Burnson, P., 2010. Freight forwarding: traversing the red tape. Logistics Management, 49(8).

Dennis, A., & Shepherd, B., 2011. Trade facilitation and export diversification. The World Economy, 34(1), 101-122.

Gagova, P., & Pencheva, V., 2011. Strategic risks of the road freight forwarding companies working with international cargo. In III International Scientific Conference “Transport Problems.

Glass, D., 2013. Freight Forwarding and Multi-Modal Transport Contracts. Taylor & Francis.

Johnson, T. E. 2010. Export/import procedures and documentation. AMACOM Div American Mgmt Assn.

Korinek, J., & Sourdin, P., 2011. To what extent are high-quality logistics services trade facilitating?.

Leinbach, T. R., 2007. Globalized freight transport: intermodality, e-commerce, logistics, and sustainability. Edward Elgar Publishing.

Llanto, G. M., & Navarro, A. M., 2012. The impact of trade liberalization and economic integration on the logistics industry: Maritime transport and freight forwarders. Philippine Institute for Development Studies, Discussion Paper Series, (2012-19).

Ostroukh, A., Ivakhnenko, A., & Krupensky, N., 2014. Development of Process-Oriented System For Operational Control of Freight Forwarding Activity. Journal of Applied Sciences, 14, 2601-2607.