international transport systems-imu1

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INTERNATIONALTRANSPORT SYSTEMS

Prof. S. Ramani

since 1895

Confederation of Indian IndustryCII Institute of Logistics



CII Institute of Logistics

Peace Mantra(From the Kato Upanishad)

OM SAHANA VAVATHU; SAHANAV BHUNAKTHU;SAHA VIRYAM KARAWA VAHAI;TEJASVINA VADITAMASTHU MA VIDVISHA VAHAI;OM SHANTHI SHANTHI SHANTHI:

Together may we be protectedTogether may we be nourishedTogether may we work with great energyMay our journey together be brilliant and effective

May there be no bad feelings between usPeace, peace, peace!

25/11/2010

© Confederation of Indian Industry

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CII Institute of Logistics 25/11/2010


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Unit 1

Transportation Modes Introduction to International Transport System

Basic Terms characteristics & relations

Significance of Transportation Services

Modes

Road Transportation

Rail Transportation

Maritime Transportation Air Transportation

Intermodal Transportation

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Unit 1

Technical Performance Indicators Transport Economic Indicators

Maritime Routing Patterns

Containerization of Commodities

Maersk Shipping Line

Trans Continental Bridges

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Transportation Inevitable?

Economy Business

General Living

Education

Human Mobility Goods Mobility

Machinery Mobility

Money Mobility

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Transportation Defined

Intentional, organized and physical movement of men & materials from one place to another without any change in the form

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A Canadian meets his Indonesian counterpart in aFrench restaurant, located in London, owned by anIndian

One is dressed in an Italian suit, wearing a Brazilianpair of shoes while other wears Hong Kong suit and

Thai shoes Shirts are made of Egyptian Cotton Business is discussed over a cup of coffee fromIvory Coast accompanied by Syrian pastries andends with a Cuban cigar.

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Global Business



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Scenarios

SUPPLIERS MANUFACTURER CUSTOMERS

Local Local Local

Local + Foreign Local Local

Local + Foreign Local Local + Foreign

Local + Foreign Local + Foreign Local + Foreign

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Logistics Defined

Logistics is that part of supply chain process that plans, implements and controls the efficient, effective forward and reverse flowof and storage of goods, services, and relatedinformation between the point of origin andthe point of consumption in order to meet the customers requirements

- Council of Logistics Management

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International Logistics Defined

Logistics is that part of supply chain process that plans, implements and controls the efficient, effective forward and reverse flowof and storage of goods, services, and relatedinformation between the point of origin andthe point of consumption in order to meet the customers requirements

- Across differ ent countri es

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25/11/2010 © Confederation of Indian Industry 13

The world is truly getting virtuallysmaller and the market place is getting bigger. Global logistics canhelp bridge the gap between service

and efficiency, but it is not so easy



EconomicGrowth

Supply ChainPersepective

Regionalization

Technology Deregulation

Why International Logistics?



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Unique Components of IL

International Transportation Multimodal, long distances, different carriers,documentation needs

International Insurance more complicated as it is across countries

Packaging Needs to be different towithstand various handlings andtransportation modes

Contract Laws Rules governinginternational contracts are different fromcountry specific contracts.

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Unique Components of IL ..

Payments Modes are different , currencies are different and currency rates fluctuate.

Terms of Trade Are different from

domestic transactions as greater nodes andlinks increases the alternatives for transfer of ownership and responsibility

Customs Crossing of country borders results in customs check and duty payments and related paper work

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International TransportationDifferentiated

Cultural Differences

Beliefs, Values & Customs

Language differences

Infrastructure differences

Performance

Information Systems

Human Resources

Strategic & Financial Resources

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Important notice: These general conditions of carriage: EXCLUDE the liabilityof the Carrier and its employees or agents for loss, damage and delay incertain circumstances; LIMIT liability to stated amounts where liability is accepted; and REQUIRE NOTICE of claims within strict time limits.SHIPPERS SHOULD READ THESE CONDITIONS CAREF ULLY ANDWHERE NECESSARY OBTAIN INSURANCE COVER IN ORDER TOPROTECT THEIR INTERESTS. Finnair Cargo Oy reserves the right tochange these Terms without prior notice. ARTICLE 1: DEFINITIONS ARTICLE 2: APPLIC ATION ARTICLE 3: ACCEPTABILITY OF GOODS FOR C ARRI AGE ARTICLE 4: DOCUMENTATION ARTICLE 5: RATES AND CHARGES ARTICLE 6: SHIPMENTS IN COURSE OF C ARRI AGE ARTICLE 7: SHIPPERS RIGHT OF DISPOSITION ARTICLE 8: DELI VERY ARTICLE 9: PICK-UP AND DELI VERY SERVICES ARTICLE 10: SUCCESSI VE C ARRIERS ARTICLE 11: C ARRIERS LI ABILITY ARTICLE 12: LIMITATIONS ON CLAIMS AND ACTIONS ARTICLE 13: MODIFIC ATION AND WAI VER

FINNAIR CARGO OY - GENERAL CONDITIONSOF CARRIAGE




Basic Terms in International Transport Systems

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Movement from Factory to FF

Storage at USA

Movement to Airport

Customs Formalities F light into India

Storage at Indian Airport

Customs Clearance

Transport to Warehouse

Storage in India Distribution within India

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What are the activities?

Who will pay for transport?Who will pay for Storage?Who will insure the goods?Where does the responsibility

transfer?What are the payment terms?In what currency is thepayment made?What is the mode of transport?What documentations are

needed? Any special packingrequirements?What laws do applyin case of a dispute?Who will do customs clearance?

Activities Challenges



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Terms of Trade

Movement from exporters factory orwarehouse to FF s warehouse

Movement to airport/seaport. Export clearance

Movement by sea/air

Import clearance at the country of import Delivery to the customers warehouse

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Incoterms 2000

Incoterms: a contraction of INternational COmmercial TERMS

Incoterms define the reciprocal obligations of seller and buyerunder an international sales/purchase contract

Incoterms specify the respective responsibilities of the parties,but do not specify the point at which title is transferred

Incoterms set out how the associated costs and risks are

apportioned

4 groups

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Incoterms

Developed in 1936 by International Chamber of Commerce

13 different terms of trade were evolved , calledinternational commerce terms

These were revised about 6 times and the latest version was in the year 2000

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Incoterms define

Which tasks will be performed by the exporter

Which tasks will be performed by the importer

Which activities will be paid for by the importer Which activities will be paid for by the exporter

When the transfer of responsibility will take place.

Incoterms deal only with the relation between the sellers and buyers under the contract of sale

Limited to matters relating to the obligations of the parties with respect to the delivery of the goods sold

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Transfer of Responsibility

Transfer of responsibility vs. Transfer of Title

The transfer of responsibility or transfer of

risk is dictated by the choice of the incoterms Transfer of title is based on payment terms

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Incoterms deal with a number of identified obligations

imposed on the parties such as Sellers obligation to place the goods at the disposal of

the buyer, or Hand them over for carriage, or Deliver them at a destination, and

The distribution of risk between the parties Obligations to clear the goods for export and import Packing of the goods Buyers obligation to take delivery

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Scope and Purpose




` Incoterms are international norms accepted bygovernments, legal authorities and practitionersworldwide

`Reduces or removes uncertainties arising from differinginterpretations of shipping terms in different countries.

` Reference to a proper Incoterm in a contract clearlydefines each party¶s obligations, costs and risks in theinternational transaction and reduces the risk of legal complications.

` They can assist in defining what costs the purchaseprice includes (e.g. prepaid international freight,prepaid duties, insurance, etc.), and clarify the risks &liabilities.

` Eliminate barriers caused by distance, language, andlocal business practices

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Why Incoterms?




Eliminate barriers caused by distance, language, and localbusiness practices

Eliminate uncertainties and different interpretations of trade terms on a world-wide scale

Provide universally accepted vocabulary

Reduce risk of misunderstanding, disputes, and litigation

Facilitate international commercial exchanges

Define the importer¶s and exporter¶s costs, risk andobligations regarding delivery of the goods

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Main Functions




How or when title to the goods transfers Protect a party from his/her own risk of loss for all

segments of the shipment

Cover the goods before or after delivery Define the remedies for breach of contract Terms of payment that dictate when you get paid Specify details of the transfer, transport, and delivery

of goods

Intangible goods like computer software Incoterms applies to the contract of sale and not the

contract of carriage (transportation)

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What Incoterms Does Not Cover




The terms allocate responsibilities and costsbetween the parties for: Licenses and government imposed formalities for

import & export

Packing and marking for international transport

Documentation required for the transport, transferand Customs clearance of goods

Proof of delivery

Taxes, duties, consular fees, terminal charges, arrival & destination charges

Insurance, when elected

Loading and unloading International and inland transport

Risk of loss or damage

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Responsibilities Affected




Pre-carriage: Initial transport of goods from the seller to the maincarrier

Usually by truck, rail, or inland waterway

Main carriage:

Primary transport of goods

Longe st part of the journey & from one country toanother

Usually by sea or air, but may be by truck, or rail

On-carriage:

Transportation from arrival point in the de stination

country to buyer, which can be by any mode Carrier:

Any party who arrange s for the primary transportation bytruck, plane, ship, rail, etc.

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Common Terms



CII Institute of Logistic s

FF- Freight Forwarder- Move s goods from one country to another. Is an agent

for movement of goods.

CHA: Customs House Agent. The company that clears the goods.

Consolidation: Collection of goods from different suppliers for different customers for movement to the same de stination

Break Bulk: Splitting up of consignment s to individual customers uponreaching de stination

Named Place: A pre agreed place where the re sponsibility transfers from sellerto buyer

Bill of Lading/ AWB: Receipt issued by the carrier.

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Common Terms




Delivery:The term delivery is used in two context s in Incoterms:

The seller bringing the goods to the named point Traditional sense of the buyer receiving the goods

Customs clearance:Clearing the goods for export or import means

Paying the dutie s, taxe s and administrative cost s

Performing administrative matters related to: Clearance and Customs formalitie s Import and/or export regulations Typically, the Shipper (exporter) clears the goods for export

the Buyer (importer) clears the goods for import

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Common Terms



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Please note that the

Exporter always almost decides the terms of trade

The importer is always paying

for the transport and other costs of shipping

internationally




For all Incoterms, the Seller packs, verifie s content s and marks the goods for export.

Seller always

has

re spon

sibility to provide the se document s:

Commercial Invoice Packing List Certificate of Origin

The Seller also is obligated to assist the Buyer(at buyer¶s expense) in obtainingdocumentation required for export or import.

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Notes on Responsibilities




The Buyer is re sponsible for the cost s of any formalpre-shipment inspection of goods that may be required by the authoritie s of either the exporting orimporting country.

Each party must provide Proof s of Delivery andtimely notifications to the other when goods are delivered and/or received.

Cost s that are the Seller¶s obligation could be billed

to the Buyer but doe s not change the risks &re sponsibilitie s of Incoterms.

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Notes on Responsibilities & Costs



All modes of transportincluding multi-modal

EXW Ex Works FC A Free Carrier

CPT Carriage Paid To DAF Delivered at Frontier DDU Delivered Duty

Unpaid DDP Delivered Duty Paid CIP Carriage and

Insurance Paid To

Sea and inlandwaterway transportonly

DES Delivered Ex ShipDEQ Delivered Ex Quay

FAS Free Alongside Ship FOB Free Onboard CFR Cost and Freight CIF Cost, Insurance, and

Freight

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The Thirteen Incoterms

http://www.iccwbo.org/incoterms/wallchart/wallchart.pdf



Incoterms are divided into four (4) categorie s:

E term Exit- Seller make s the goods available to the buyer at the seller s premise s or other place named by the seller

F terms Free- Seller is re sponsible to deliver the goods tothe export shipment point and carrier de signated by the buyer,in the country of export

C terms Main Carriage Paid- Seller is re sponsible forcontracting carriage of goods to the place of de stination, but doe s not assume risk of loss or damage to goods, or additionalcost s due to event s occurring after shipment

D terms Delivery- Seller is re sponsible for all cost s andrisks associated with delivering goods to the named place inthe country of de stination

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Organization of Incoterms 2000



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Global Logistics (Terms of Trade )

Incotermdefinitions

FC A

Delivery (D = delivery, at seller s cost)

Main carriage unpaid (F = free; not paid by seller)

Main carriage paid (C = carriage, paid by seller)

Departure (E = Exit, from seller s location)

Delivered at Frontier: seller pays cost s to frontier of delivery country; allmode s

Delivered Ex Ship: seller select s & pays main carriage; transfer onboardDelivered Ex Quay: seller select s, pays main carriage; transfer on wharf

Delivered Duty Unpaid: seller incurs all cost s except import duty; all mode s

Delivered Duty Paid: seller incurs all cost s including import duty; all mode s

FAS

FOB

CFRCIF

CPT

DES

CIP

DAF

DEQ

DDU

DDP

EXW Ex Works: buyer take s over goods at seller s location; loads vehicle

Free Carrier: seller delivers to main carrier; buyer loads; any mode

Free Alongside Ship: buyer lift s cargo onboard; water only

Free on Board: seller put s goods on main transport ve ssel

Cost and Freight: seller select s, pays for main carriage; all mode sCost, Insurance, Freight: seller pays main carriage and insurance

Carriage Paid To: seller select s & pays for main carriage; any mode

Carriage and Insurance Paid to: seller pays main carriage & insurance

See alsowww.iccwboo.org



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GROUP EDEPARTURE

EX.WORKS

In

dia

The Seller hand over the consignment at his premise s or at a place named by the seller.

He doe s not do export clearance but assist s inthe same.

Doe s not even load the

consignment in the vehicle.



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F TERMSMAIN CARRIAGE UNPAIDFCA-FREE CARRIER (NAMED

PLACE)F AS-FREE ALONGSIDE SHIP(NAME LOADING PORT)FOB-FREE ON BOARD (NAMELOADING PORT)

FCA: The Seller delivers the goods tothe Carrier selected by the buyer

F AS: The goods are handed over Along side the ship

FOB: Goods are loaded onto the ship.

The responsibility shifts when goodscross the rail of the ship



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C TERMSCFR Cost and Freight (named de stination port)

CIF Cost, Insurance andFreight (named de stinationport)

CPT Carriage Paid To(named de stination)

CIP Carriage and Insurance paid to (named de stination)

CFR and CIF Responsibility

changes when goods cross ships rail.

CPT and CIP : When goods are handedover to the carrier and when thecarrier issues receipt

CFRCIFCPTCIP



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D TERMSDAF Delivered at FrontierDES: Delivery ex. Ship(Named Port)DEQ: Delivery ex. Quay(Named PORT)

DDU Delivery Duty UnpaidDDP Delivery Duty Paid

ResponsibilityDAF: When the goods arePlaced at the disposal of the buyer.DES: Once the ship reaches theportDEQ: When the goods are

unloadedDDU: the seller delivers the goodsto the buyer,not cleared for import, and notunloadedat the named place of destinationDDP : when the goods are customs

cleared and deliveredDESDEQDDUDDP



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Global Logistics

Impact of various Incoterms on the commercial invoice

E terms plus sellerarrange s and pays for

export documentation anddelivers goods, ready forexport, to specified point or port in seller s country.

D TermsF Terms C Terms

C terms plus sellerarrange s and pays for

delivery anddocumentation service s inside buyer s country.

F terms plus sellerarrange s and pays for

international transport service s to point orport in buyer s country.

Seller make s goods available for export at

it s facility.

E Terms

CPT Mumbai DDU buyer s namedport Mumbai

Ex Works plant, factoryGlen Burnie, MD

FOB Chicago, IL

Invoice: USD 10,300.00

FOB Baltimore:


CIF Mumbai


DDP buyer s namedfacility, Mumbai

Invoice: USD 12,800.00 Invoice: USD 13,750.00

Invoice: USD 15,500.00Invoice: USD 10,000.00



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Incoterms Strategy depends on

The type of product

The type of shipment.

The ability of the individual partie s to performthe different tasks

The amount of trust and mutualunderstanding between partners

As a busine ss strategy by the exporter As required by Laws of the Land

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EXWFC AFOBFASCPTCIPCFRCIFDAF

DESDEQDDUDDP

EXWFC AFOBFAS

CPTCIPCFRCIFDDP

DATDAP

Incoterms 2000 Incoterms 2010

Any Mode EXW,FCA,CPT,CIP,DAT,DAP,DDP

Sea Mode F AS,FOB,CFR,CIF



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Incoterms-2010 Some more Information

- Extensive guidance note

sand illu

strative graphic

stohelp users efficientlychoose the right rule for each

transaction.-Advice for the use of electronic procedure - New classifications to help choosing the most suitable

rule in relation to the mode of transport - Information on security related clearance s forshipment s.- Advice for the use of Incoterms 2010 in dome stic trade - Documentation stre ss



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GROUP E : Departure

EXW (Ex Works):

The seller make s goods available on his own

premise s The buyer bears loading on vehicle, transport,

insurance

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GROUP F : Main Carriage Unpaid

FC A (Free Carrier) : The seller has fulfilled his obligation to deliver when he has delivered the goods, cleared for export, to the carrier nominated by the buyer at the named place. The buyer choose s the transport method andcarrier. He pays for the main transport. Cost s and risks are transferred at the moment the carrier take s charge of the goods.

FAS (Free Alongside Ship) : The seller has fulfilled his obligation to deliverwhen the goods have been placed alongside a ship at the named port of shipment. The buyer bears all the cost s and risks of loss of or damage tothe goods. The FAS term require s the seller to clear the goods for export.

FOB (Free On Board) : The seller has fulfilled his obligation to deliver whenthe goods pass the ship s rail at the named port of shipment. The seller

clears the goods for export. The buyer choose s the ship and pays the maritime shipping cost s. Cost s and risks are transferred when the goods pass the ship s rail at the named port of shipment.

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GROUP C : Main Carriage Paid CFR (Cost and Freight) : The seller must choose the ship and pay the

costs and freight necessary to bring the goods to the named port ofdestination. The export formalities are the responsibility of the seller.Risks are transferred at the same point as for FOB.

CIF (Cost, Insurance and Freight) : The seller is bound by the sameobligations as for CFR, but must also procure marine insuranceagainst the risk of loss of or damage to the goods during the carriage.The export formalities are the responsibility of the seller. The goods

are carried by sea or inland waterway transport at the risk and perilsof the buyer, at the moment when the goods pass the ships rail at theport of shipment.

CPT (Carriage Paid To) : The seller chooses the transport method andpays the cost of carriage for the goods to the named destination. Healso clears the goods for export. The risks transfer from the seller tothe buyer at the point where the goods are delivered to the first

carrier.

CIP (Carriage and Insurance Paid to) : The seller is bound by the sameobligations as for CPT, but must also procure insurance against therisk of loss of or damage to the goods during carriage. The sellerclears the goods for export.

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GROUP D: Arrival 1/2

DAF (Delivered At Frontier) : The seller has fulfilled his obligation todeliver when the goods have been delivered, cleared for export and onthe arriving means of transport not unloaded, at the named point andplace on the frontier, but before the customs border of the adjacentcountry. Costs and risks are transferred on crossing the frontier. The

buyer is responsible for import customs formalities and the paymentof import customs duties and taxes. Specifically designed for landtransportation.

DES (Delivered Ex Ship) : The seller has fulfilled his obligation todeliver when the goods are placed at the disposal of the buyer onboard the ship not cleared for import at the named port of destination.The seller must bear all the costs and risks involved in bringing thegoods to the named port of destination.

DEQ (Delivered Ex Quay) : The seller has fulfilled his obligation todeliver when the goods are placed at the disposal of the buyer notcleared for import on the quay at the named port of destination. Thebuyer clears the goods for importation. Costs and risks are transferredat the moment when the goods are discharged onto the quay at thenamed port

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GROUP D: Arrival 2/2

` DDU (Delivered Duty Unpaid) : The seller delivers the goods to the buyer not cleared for import and not unloaded from any arriving means of transport at the named place of de stination. The buyer bears the risks andcost s of carrying out the import customs formalitie s and

pays all import dutie s and taxe s.

` DDP (Delivered Duty Paid): Whilst the EXW termrepre sent s the minimum obligation for the seller, DDPrepre sent s the maximum. The seller is re sponsible foreverything, including import customs clearance and the payment of all applicable dutie s and taxe s. Cost s and risks are transferred at the moment of delivery to the buyer.The cost s and risks of unloading are borne by the buyer.

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Characteristics & Relations

25/11/2010© Confederation of Indian Industry

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Inventor Or er Pr ocess ing

Tr nspor tation

War ehous ing

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Indian Logistics

Warehousing26%

Transportation40%

Inventory24%

OrderProcessing

10%



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Indian Logistics - Road

Y 3.3 Million Kms

Y Carry 65% of the goods traffic and 80% of passengertraffic

Y Motorable Road is 2 Lakh Kms, less than 6%

Y NH is only 2% but carry 40% of the load

Y Only 2-3% of NH/SH are 4 lane ,15% single Lane

Y Less than 8000 KMs is 4/6 laned

Y Commercial Vehicles ply 300 KMs per day, compared to

600-700 KMs per day

Y Outdated MV Act and State Levies



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Y Target is 20 km per day

Y Golden Quadrilateral Delhi-Mumbai-Chennai-Kolkata 5846 K ms

YNorth South & East West Corridor

Kashmir to Kanyakumari, Silchar to Porbandar 7300KMs



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Y Out of 66,000 KMs of NH, 25,000 are

under severe strain due to excessive traffic.

Y Slow speed, traffic congestion and high wear and tear ofthe vehicles are some major challenges

Y Estimated Loss due inefficient system is Rs.20,000 croresper annum

YUpon completion, Golden quadrilateral will save Rs.8000

crores per annum ( World Bank Report)



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Indian Logistics-Air

Ó 4 Major Port s carry 80% of cargo traffic

Ó Major portion of Cargo move s bypassenger flight

Ó Vast scope for freighter service

Ó Not enough airport s

Ó Public Private Partnerships inDevelopment of Airport s

ÓCon

cept

slike M

IHAN (Multi-modelInternational Cargo Hub and Airport at

Nagpur )

di i i



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Indian Logistics - Water

7 Huge Coastline- 7517 KMs

7 12 Major Ports handle 76% of thetraffic

7 184 small ports

7 High Concentration at JNPT Mumbai

7 95% of foreign trade by

volume and 75% by value

7 High turaround time of 3.6 days vis avis at Hong Kong

7 Hinterland Connectivity is poor

7 Container traffic volume needs toimprove

7 Smaller ports need to be developed

l d




Limited Usage

Low speeds

Ill equipped material handling systems

Dangerous during monsoons.

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Inland Waterways

I di L i i R il



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Indian Logistics - Rail

W Se cond Large st network in the world-63,000

Kms.W 8% is containerized traffic.

W 68% of the revenue by Freight

W 89% through coal,cement,petroleumproduct s, food grains, steel et c

W Mumbai-Chennai-Kolkata-Delhi carrie s 65%

of freight and 55% of passenger traffic

W Container movement throughConcor. Re cently privatized

I di R il Ch ll




Cargo needs to be delivered and brought back.

Additional material handling equipment s are needed.

Slow speed.

Wagon shunting.

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Indian Railways-Challenges

El t f L i ti C t



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Elements of Logistics Cost

Transportation - 35% to 40%

Inventory - 25%

Losse s - 15%

Packaging - 11%

Handling and Warehousing 10%

St t f L i ti i I di



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Status of Logistics in India

Sporadic, unplanned and piecemeal outsourcing

Supply Chain Integration is low Use of I T for decision making needs to improve Unorganized players Government policy needs to change F

aster infrastructure growth. Telecom isgrowing but what about roads, airports,seaports and railway services?

Too many small logistics players and highlyunorganized

Lack of time sensitiveness Asset Utilization is poor

St t f L i ti i I di



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Status of Logistics in India

Warehousing

Too many small players -C & F Agent s No proper I T systems

No proper material handling systems

Small warehouse s

Concentration on day to day functioning

Transportation

Small players No use of te chnology

Poor accountability Outdated MV Act Poor road conditions




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z Increase in trend for outsourcing of Logistics Function.

z International Logistics players now expanding their base in India

z Service providers are investing heavily in creating infrastructure

to bring efficiency in operations

z Service Providers efficient infrastructure has direct co-relation in

reducing the customer·s cost

Current Logistics Industry Scenario

Sig ifi f T t ti S i




Significance of Transportation Services


67

Diife ent Modes of T anspo tation




Diiferent Modes of Transportation


68

Road Transportation




Road Transportation


69

Rail Transportation




Rail Transportation


70

Maritime Transportation




Maritime Transportation


71

Air Transportation




Air Transportation


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73

Multimodal Transportation




Multimodal Transportation


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Logistics Metrics




Logistics Metrics


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Technical Performance Indicators




Technical Performance Indicators


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Transport Economic Indicators




Transport Economic Indicators


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Maritime Routing Pastterns




Maritime Routing Pastterns


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79

Mearsk Shipping Line




Mearsk Shipping Line


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Transcontinental Bridges




Transcontinental Bridges


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End of Unit



End of Unit


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Thank You All

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