Erin C. Butler Senior International Account Executive March 23, 2010 INTERNATIONAL LOGISTICS Erin C. Butler Senior International Account Executive March 23, 2010

INTERNATIONAL LOGISTICS Today’s Topics Importance of a Logistics Solutions Provider The Contract of Carriage – Bills of Lading; Airway Bills Commodity Classification Export Documentation INCOTERMS Regulatory and Compliance Requirements Proper Labeling & Packing Freight Insurance International Logics Export University 101

The Importance of a Logistics Solutions Provider A Logistics Solutions Provider can simplify your export program by allowing you to concentrate on your business. A few options…… Do it Yourself Freight Forwarder Integrator (FedEx, UPS, DHL, etc.) Each has advantages based on your logistics strategy Do It Yourself - (Time consuming- Knowledge & Experience required) Not recommended unless you have experience Freight Forwarder - (Also known as “Ocean Transport Intermediary” ‘OTI’ Federal Maritime Commission Licensed, Bonded as a license requirement. Background checked by FMC. Coordinates movement of cargo, complete documentation including Letters of Credit, Export regulations assistance. Provides complete transport cost analysis in advance. Also does Air Freight. NVOCC (Non Vessel Operating Common Carrier) – “The Shipless Shipline” – FMC licensed and bonded (may also be an OTI)– Acts as a Common Carrier (issues own Bill of Lading) – BL has same standing as vessel operator (most cases)– Contracts for space on vessels and guarantees volume to carrier in return for discount (buys wholesale) – Re-sells space to customers at a charge somewhat more than cost but usually less than if customer went directly to carrier Integrator (FedEx, UPS, DHL, etc.) Usually a larger company with significant capital investment - Multiple offices and terminals -– Depends upon large volumes of freight to support network - Acts as Common carrier, Forwarder, Trucker, Airline, Customs Broker, and Delivery Agent International Logics Export University 101

Transportation Mode The good news is that there are choices. Choose one or more to fit your specific needs. Ocean Railway Trucking Air A combination of the above International Logics Export University 101

The Contract of Carriage All modes of transportation require documentation. Form of documentation differs between modes of transportation The Ocean Bill of Lading Contract between the Shipper (You) and the Carrier Carriage of Goods by Sea (COGSA) Limitation of Liability Air Waybill – Samples provided Trucking – Bill of Lading Rail – Bill of Lading The Ocean Bill of Lading – Contract - Read the back- (Most are very similar) – Ignorance is not an excuse or defense – Read the front ... Especially the “Declared Value” portion • If you fill this in, you will be charged an additional fee • It is cheaper to buy cargo insurance COGSA – Limitation of Liability - $500 per piece, package or customary freight unit…. If you tender a full container, sealed at origin, the entire container may be a single freight unit Airway bill - Read the back, Ignorance is not an excuse or defense, Read the front…… “Declared Value”, Total Liability…..USD$20.00 per Kg. (Approximate), May be lower cost to Insure…… International Logics Export University 101

Commodity Classification Classification of goods will have direct impact to your duty and tax rates and documentation requirements. Avoid Vague Descriptions - a good description should answer these questions – What is it? What is it made of? What will it be used for or with? How many are there? Harmonized System (HS) numbers Worldwide coding system for classifying all commodities Used no matter where the shipment originates First six digits are the same Some countries utilize an additional four digits (ex: Schedule B) International Logics Export University 101

Export Documentation A typical export shipment from the U.S. could require any or all of these documents Most common documents Commercial Invoice Certificate of Origin Export Declaration Insurance Certificate Bill of Lading or Airwaybill Packing List In addition: If a Letter of Credit is involved, there could be any number of additional documentary requirements that add to the “package” Export licenses may be required for certain items International Logics Export University 101

International Commercial Terms - INCOTERMS International traders use a widely agreed-upon shorthand type of terminology called INCOTERMS to define the basis for the sale. (INternational COmmercial TERMS) Once the buyer and seller agree on one of these terms, it will clarify: (1) where in the journey the seller releases the goods to the buyer; (2) what charges and documentation are the seller’s responsibility prior to that point; and (3) what charges and documentation are the buyer’s responsibility after that point. An INCOTERM is always paired with a location and is meaningless without it. For instance, FCA Memphis is quite a different price from DAF Laredo, but the same goods may pass through both points en route to a customer in Mexico. While the terms of sale in international business often sound similar to those commonly used in domestic contracts, they often have different meanings. Confusion over these terms can result in a lost sale or a financial loss on a sale. Thus, it is essential that you understand what terms you are agreeing to before you finalize a contract. By the 1920’s international traders had developed a set of trade terms to describe their rights and liabilities with regards to the sale and transport of goods. These trade terms consisted of short abbreviations for lengthy contract provisions. Unfortunately, there was no uniform interpretation of them in all countries and therefore misunderstandings often arose in cross-border transactions. To impove this aspect of international trade, the International Chamber of Commerce (ICC) in Paris developed ‘INCOTERMS’ (INternational COmmercial TERMS), a set of uniform rules for the interpretation of international commercial terms defining the costs, risks, and obligations of buyers and sellers in international transactions. First published in 1936, these rules have been periodically revised to account for changing modes of transportation and document delivery. The current version is Incoterms 2000. Copyright 1999 by ICC Publishing S.A. The actual text of INCOTERMS 2000 is contained in IC publication NO. 560. Contaqct: ICC Publishing, Inc. Source: Dictionary of International Trade, 7th Edition, 2006, World Trade Press. International Logics Export University 101

INCOTERMS – Examples Any Mode of Transport, including Multimodal EXW - Ex Works (+ named place) FCA - Free Carrier (+ named place) CPT - Carriage Paid To (+ named place of delivery) CIP - Carriage and Insurance Paid to (+ named delivery place) DAF - Delivered at Frontier (+ named place along border) DDU - Delivered Duty Unpaid (+ named place of delivery) DDP - Delivered Duty Paid (+ named place of delivery) Sea and Inland Waterway Transport Only FAS - Free Along Side (+ named port of shipment) FOB - Free on Board (+ named port of shipment) CFR - Cost and Freight (+ named destination port) CIF - Cost, Insurance and Freight (+ named destination port) DES - Delivered Ex Ship (+ named destination port) DEQ - Delivered Ex Quay (+ named destination port) The International Chamber of Commerce released the first version of INCOTERMS in 1936. Here are a few thumbnail examples from the U.S. exporter’s perspective: EXW New Orleans means, "Here are the goods; come and get them." Any export permits are the buyer’s concern; seller does not even have to load the truck. FCA New Orleans shows where goods properly cleared for export will be turned over to the main carrier for shipment abroad. Whatever means of conveyance picks up the goods from seller’s place of business, exporter pays any cost of loading it aboard. If main carrier does not provide cargo pickup services free to the exporter, he pays cost of inland delivery to that carrier’s terminal in New Orleans. Overseas buyer is liable for transportation and insurance expenses once main carrier receives the cargo. (If railroad in New Orleans issues a Maersk bill of lading, accepting cargo destined for shipment by Maersk Lines out of a California port, exporter has documented FCA compliance.) CPT Istanbul means the vendor’s price includes freight all the way there, but insurance is up to the buyer. Seller has no stake in insuring anything past the point where he turns the cargo over to the export carrier. CIP Lisbon means vendor’s price includes freight and insurance all the way to Lisbon. Once it comes over the ship’s side or down the plane’s ramp at the other end, the buyer takes full possession. FOB vessel Houston means the vendor undertakes to get the cargo that is properly cleared for export loaded onto the outbound vessel. (Documentary evidence of FOB compliance is a clean on-board bill of lading.) International Logics Export University 101

Regulatory and Compliance Requirements Knowledge of the regulatory requirements for your goods will ensure a smooth transit with minimal delays and that your company remains compliant. Customs regulations - considering the product type Compliance - important to company survival Keep accurate records Fines can be very expensive Resources and training are available Expectations for carrier’s performance? What can shipper and recipient expect from carrier during the cycle.. Online tools are available Knowledgeable resource to manage your program Certain products and merchandise are subject to export controls and additional documentation. Examples – Drugs, Medicines, Pharmaceuticals…… Radiation Emitting Appliances Labeling Country of Origin Marking Electrical Foods Packing Materials Language Phytosanitary Fumigation Military products, munitions, “precursor items” Crime Control, * things that hurt people, help an enemy 􀂃 Your Responsibility as an Exporter to Know your Product 􀂃 Forwarder can help 􀂃 Penalties can be mind-boggling !!!!!! International Logics Export University 101

Proper Labeling & Packing Recommendations for small packages Always ship in sturdy, non-descript boxes and seal with high-quality packing tape Use boxes larger than 7" x 4" x 2" Pack boxes with care Include contact information inside the inner box Address your packages carefully If shipping multiple packages, do not tape boxes together Never ship valuables in any type of envelope or folder. Use packaging material to properly cushion your items and avoid shifting or rattling of box contents Place a copy of your company’s packing slip inside the inner shipping box. Include contact information for both the sender and the recipient International Logics Export University 101

Proper Labeling & Packing – cont’d Recommendations for Skid Loading Follow all carton orientation symbols or verbiage when able Distribute weight evenly on the skid/pallet to avoid excess weight being placed on carton contents Stack cartons squarely on the skid/pallet to the edge (do not overhang) and corner-to-corner to maximize compression strength Top of skid/pallet must be flat to minimize chances of lost or damaged cartons (pyramid stacking is unacceptable) Shipments must be securely banded, bolted and/or stretch/shrink-wrapped to the forkliftable base Individual cartons should include the origin, destination address whenever possible Remove or mark through all old labels Use a 70-gauge minimum stretchwrap or shrinkwrap and ensure it is secure to the base of the skid. Banding material can include steel, rayon, polypropylene,nylon or polyester strapping. Use a minimum of two bands (tightly secured) through the skid/pallet voids and around all cartons.. If applicable when bolting, consider using shockabsorber connections or cushioned skids. International Logics Export University 101

Freight Insurance VS Declared Value Obtaining Insurance is a choice that warrants careful consideration. Why Insure? Carrier’s limit of liability (COGSA & Warsaw Convention) File claims timely with complete information Insurance pays the claim and then files with the Carrier Use “declared value” to increase carrier liability when needed Based upon replacement value of the goods Insurance or declared value may be a requirement when using Letters of Credit Insurance Cost - usually less than 2% of shipment value (1.25% is avg.) Insurance VS Declared Value – Choose your best option International Logics Export University 101

FedEx Resources Web Sites Global Trade Manager - http://www.fedex.com EEI Filing Options Guide - http://www.fedex.com/us/software/support.html FedEx Export AgentFile Tool – http://www.fedex.com/eei FedEx Global Regulatory Services Toll Free 1.800.851.3336 Email rcg@mail.fedex.com FedEx International Customer Service Toll Free 1.800.GoFedEx 1.800.463.3339 (say “International Services") International Logics Export University 101

INTERNATIONAL LOGISTICS Questions? Thank you! Erin Butler Sr. International Account Executive, FedEx Erin.butler@fedex.com 504-214-8747 What questions do you have? International Logics Export University 101