v INTRODUCTION
v ROLE OF CLEARING AND FORWARDING AGENTS
v ESSENTIAL SERVICES
_ WAREHOUSING BEFORE TRANSPORTATION _ LOCAL TRANSPORTATION
_ CONTAINER ARRANGEMENT
_ RESERVATION OF SHIPPING SPACE _ SELECTION OF MODE OF TRANSPORT _ PACKING, MARKING AND LABELLING
_ COMPLETING CUSTOMS AND PORT FORMALITIES _ CARGO INSURANCE
_ ADVISING EXPORTERS ON TRADE LAWS _ EDUCATING EXPORTERS
_ COORDINATION WITH OTHER AGENCIES _ PROCURING DOCUMENTS
v OPTIONAL SERVICES
_ WAREHOUSING FACILITIES ABROAD _ BRINGING BACK GOODS
_ LOCATING STRANDED GOODS _ ASSESSMENT OF DAMAGE v FIXATION OF FEES
v CHECK YOUR UNDERSTANDING
v REVIEW QUESTIONS
INTRODUCTION
Distribution logistics is an important area of planning in exports. Distribution logistics refer to the process of physical flow of goods from the place of exporter to the location of importer, at right time, with minimal cost. In this significant area, Clearing and Forwarding Agents are a link between the owners of goods and owners of means of transport. They help cargo owners in efficient movement of goods to the buyers by completing a number of procedural and documentary formalities. They are experts and knowledgeable in laws and regulations governing shipment of goods through the customs authorities.
ROLE OF CLEARING AND FORWARDING AGENTS
Their basic function is to provide different range of services to exporters to ensure smooth and timely shipment of goods. Clearing and Forwarding Agents play a pivotal role in the selection of mode and route of transport. They are the specialised people to guide in the selection of the shipping line/air line. Every exporter is concerned with distribution logistics to ensure that the goods reach the final buyer, in specified time and at minimal cost, in the condition they are sent. The essence of distribution logistics is the decision in respect of mode of transport to be used. Clearing agent advises exporter about the availability of alternative modes of transport and guides exporter in decision-making about the final choice of transport to achieve optimal cost in transporting the goods, well within the delivery schedule. In addition to these activities, he undertakes most of the functions connected with exports such as marking, labelling, packing of goods, advising on trade laws, arranging local transportation as well as apprising developments on transportation and claiming duty- drawback claims on behalf of the exporter. An efficient clearing and forwarding agent, indeed, goes a long way to the exporter in the journey of exports to make the matters easier, comfortable and may be cheaper too. Above all, the agents act trouble-shooters for the exports, in case of movement problems. It is well said a real clearing agent can perform all the functions except selling the goods!
Where goods are transported by rail, export consignments are to be given either B or C priority of the Railway Priority Schedule as formulated by the Railway Board. There are five priorities in the schedule from the highest A to lowest E. Thus, B and C are fairly high priorities.
Clearing and forwarding agents are also known as Customs House Agents or Freight Forwarders or Shipping Agents.
Classification of services
ESSENTIAL SERVICES
The following are some of the services provided by all Clearing and Forwarding Agents.
1. Warehousing before Transportation
Soon after the goods are manufactured and are ready for shipping, warehousing facility for goods is made available before they are transported to the docks/port.
2. Local Transportation
When clearance is received from Port, goods are transported to the docks and warehoused in the port.
3. Container Arrangement
Movement through containers has been gaining popularity to facilitate export goods reach in the original condition, they are sent. In case of need, this service is provided.
4. Reservation of Shipping Space
Unless shipping space is finalised, there is no guarantee about the shipment of goods. C & F agent books the shipping space contacting the agents of the shipping company, alternatively, making arrangements for air- freighting.
5. Selection of Mode of Transport
Mode of transport is a matter of negotiation between the exporter and importer, invariably, incorporated in the contract. Either exporter or importer arranges transportation, depending on price terms. C & F agent provides information about different shipping lines/ air lines and guides on the selection of route, optimal from the standpoint of delivery date and distribution costs. Delivery of goods as agreed upon is one of the conditions on which success in exports depends. As transportation cost occupies a significant place in total cost structure, services of clearing agents are highly valuable in managing timely delivery, containing costs to achieve sales and profit goals for exporter.
6. Packing, Marking and labelling
Goods are packed, marked and labelled so that goods are ready for inspection and pre- shipment. These services are also provided by shipping agents, depending upon the requirement.
7. Completing Customs and Port formalities
Clearing agents prepare the shipping documents to the requirements of customs procedures. Necessary port formalities are complied with, in time, to avoid delays in shipment of goods.
8. Cargo Insurance
Necessary marine/cargo insurance is made as per the terms of contract. Risk coverage in insurance policy has to be earlier to the date of shipment of goods.
9. Advising Exporters on Trade Laws
They are experts in the field as they deal continuously. They are abreast of the changes in the regulations and trade practices of foreign countries. Exporters can get benefit of their advice.
10. Educating Exporters
Clearing agents educate exporters in respect of developments in transport and changing options available to them to explore new markets that are earlier remote or inaccessible.
11. Coordination with other Agencies
Clearing agents arrange to procure certificates or endorsements from different agencies, required for shipment of goods. To illustrate, where necessary, certificate of origin is procured by them from the local Chamber of Commerce.
12. Procuring Documents
Finally, clearing agent procures documents like Bill of Lading and makes them available to the exporters for negotiation with the bank.
OPTIONAL SERVICES
The leading clearing and forwarding agents provide the following optional services:
1. Warehousing facilities abroad
When goods reach the destination point and importer refuses to take delivery of goods, exporter faces an embarrassing situation. At some of the major international markets, the leading clearing agents provide warehousing facilities. This facility gives breathing time to plan alternative course of action to gain, at least minimal profit to the exporter.
2. Bringing back Goods
When original importer refuses to take delivery of goods, it is not easy for exporter to find alternative buyer at that place, immediately. If his efforts fail, there is no option to the exporter other than bringing back the goods to his own place or sending goods to another place where sale can be made, with minimum loss. If the clearing agent can perform that service, exporter can avert a major chaos in the business of exports.
3. Locating Stranded Goods
At times, it so happens that the goods may be misplaced and do not reach the intended destination. When the goods are misplaced or stranded at some port, clearing agents provide necessary assistance in locating them.
4. Assessment of Damage
When goods are sent by ship, occasionally, goods may get damaged partly or totally. In such an event, clearing agent coordinates with the ship surveyor for assessment of damage
and obtaining surveyor’s certificate. They may provide the assistance to file claim with the insurance company.
FIXATION OF FEES
There are no standardised rates for the services provided by the clearing and forwarding agents. The exporter negotiates the fees, depending on the range of services provided and competence of the clearing agent. Selection of a competent clearing agent is highly important for the smooth completion of export contract. Fees, naturally, depends on experience of the clearing agent in the product/country exported and on the frequency of exports of the exporter, above all, bargaining capacity of the mutual parties.
CHECK YOUR UNDERSTANDING
State whether the following statements are TRUE or FALSE.
1. Basic function of Clearing and Forwarding Agent is to ensure timely and smooth shipment of goods to the importer.
2. Clearing and Forwarding Agent helps in efficient movement of goods.
3. Clearing and Forwarding Agents are a link between the owners of goods and owners of transport.
4. Exports are to be given either B or C priority in respect of movement of goods as per the priority of Railway Board.
5. Clearing and Forwarding Agents do not advise the exporter on the relative cost of sending consignment on different shipping lines and selection of the route.
6. There are standardised rates for the services provided by the clearing and forwarding agents.
7. All clearing agents provide both essential and optional services. Answers
1. True. 2. True. 3. True.4. True 5.False. 6. False. 7. False
REVIEW QUESTIONS
1. Discuss the role of a Clearing and Forwarding Agent in the successful execution of an export contract?
2. Describe the Essential and optional services provided by Clearing and Forwarding Agents in International Trade? What is the basis for fixation of fee for their services?
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