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International Logistics

Learning Objectives
To discuss macro-environmental influences on
international logistics
To explain documentation as well as terms of
sale and methods of payment for international
shipments

To distinguish among the unique activities of


international trade specialists
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International Logistics Key Terms

Balance of payments
Cargo preference
Certificate of origin
Commercial invoice
Embargoes
Export management
company

Export packers
Gross world product
Import quota
Incoterms
International freight
forwarders
International logistics

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International Logistics Key Terms


Letter of credit
Load centers
Logistics performance
index (LPI)
Macroenvironmental
influences
Methods of payment

Nontariff barriers
Nonvessel-operating
common carrier
(NVOCC)
Ocean carrier
alliances
Open account

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International Logistics Key Terms


Open skies agreement Shipping conferences
Shippers export
Short-sea shipping
declaration (SED)
Tariffs
Shippers letter of
instruction (SLI)

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International Logistics
International logistics
logistics activities associated with goods that are
sold across national boundaries.

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International Logistics
International logistics occurs when:
A firm exports a portion of a product made or
grown
A firm imports raw materials
Goods are partially assembled in one country and
then shipped to another, where they are further
assembled or processed

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International Logistics
International logistics occurs when:
The firm is global in outlook and sees almost all
nations as being markets, sources of supply, or
sites for markets or for assembly operations
Because of geography, a nations domestic
commerce crosses foreign borders, often in bond

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Macroenvironmental Influences on
International Logistics
Macroenvironmental influences
refer to the uncontrollable forces and conditions
facing an organization and include cultural,
demographic, economic, natural, political, and
technological factors.

Source: http://www.marketingpower.com/_layouts/Dictionary.aspx?dLetter=M.

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Macroenvironmental Influences on
International Logistics
Factors for macroenvironmental influences
Cultural
Demographic
Economic
Natural
Political
Technological
Source: http://www.marketingpower.com/_layouts/Dictionary.aspx?dLetter=M.
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Macroenvironmental Influences on
International Logistics

Political factors

Political restrictions on international trade can


take a variety of forms
Tariffs
Nontariff barriers
Import quota
Limits the amount or product (either in units or by
value) that may be imported from any one country
during a period of time

Embargoes
the prohibition of trade between particular
countries
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Macroenvironmental Influences on
International Logistics
Political factors
Degree of federal government in cross-border
trade
Balance of payments
system of accounts that records a countrys international
financial transactions1

Subsidies
Cargo preference rules

1Ibid

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Macroenvironmental Influences on
International Logistics
Economic factors
Currency fluctuations
Market size
Income
Infrastructure
Economic integration

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Macroenvironmental Influences on
International Logistics
Cultural factors
Religion
Values
Rituals
Beliefs
Languages

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Macroenvironmental Influences on
International Logistics

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Macroenvironmental Influences on
International Logistics

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Macroenvironmental Influences on
International Logistics

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International Documentation1
Flow of documentation is as much a part of the
main logistical flow as the flow of product
Domestic shipments typically only require several
pieces of documentation
Export shipments typically require approximately
10 pieces of documentation
Cross-border trades can require more than 100
separate documents
1This

material in this section is drawn from Donald F. Wood, Anthony Barone, Paul R. Murphy, and Daniel L.
Wardlow, International Logistics, 2nd ed. (New York: Amacom, 2002), Chapter 12.
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International Documentation
Necessary documents are required at the point of
importation
Commonly used documents include:
Certificate of origin
Commercial invoice
Shippers export declaration (SED)
Shippers letter of instruction (SLI)

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International Documentation
Terms of sale involves:
Parties working within the negotiations channel
Looking at the possible logistics channels
Determining when and where to transfer the
following between buyer and seller:
Physical goods
Payment for the goods, freight charges, and insurance
for the in-transit goods
Legal title to the goods
Required documentation
Responsibility for controlling or caring for the goods in
transit, i.e. livestock
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International Documentation
Terms of sale for international shipments are
commonly referred to as Incoterms.
Developed in the 1930s and is periodically revised
Current version Incoterms 2010 reflects rapid
expansion of global trade with focus on improved
cargo security and new trends in cross-border
transportation1

1Export.govIncoterms

2010.

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International Documentation
Incoterms 2010 involve two key changes
Organizing the terms by modes of transport
Characterized as Group 1
Applies to any mode of transport

Using the terms in both international and


domestic transportation
Characterized as Group 2
Applies to sea and inland waterway transport only

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International Documentation
Incoterms 2010
Group 1 Terms

EXW (ExWorks)
FCA (Free Carrier)
CPT (Carriage Paid To)
CIP (Carriage and Insurance Paid To)
DAT (Delivered at Terminal)
DAP (Delivered at Place)
DDP (Delivered Duty Paid)

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International Documentation
Incoterms 2010
Group 2 Terms

FAS (Free Alongside Ship)


FOB (Free on Board)
CFR (Cost and Freight)
CIF (Cost, Insurance, and Freight)

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Methods of Payment1
Methods of payment refer to the manner by
which a seller will be paid by a buyer.
Much more challenging in international logistics
vs. domestic logistics
Four methods of payment include:

Cash in advance
Letters of credit
Bills of exchange
Open account

1The

material in this section is largely drawn from Jim Sherlock and Jonathan Reuvid, eds., The Handbook of
International Trade (Edinburgh, UK: GMB Publishing, 2005), Part 8.
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Methods of Payment1

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Methods of Payment
Payment method
Should be established at the time that a shipment
price is decided upon
Can be influenced by key factors such as
the country the product is to be sold in
the sellers assessment of buyer risk

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International Trade Specialists


International Freight Forwarders
Specialize in handling either vessel shipments or
air shipments

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International Trade Specialists


Principle functions of International Freight
Forwarders include:

Advising on acceptance of letters of credit


Booking space on carriers
Preparing an export declaration
Preparing an air waybill or bill of lading
Obtaining consular documents
Arranging for Insurance
Preparing and sending shipping notices and
documents
Serving as general consultant on export matters
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International Trade Specialists

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International Trade Specialists

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International Trade and Supply Chain


Specialists
Nonvessel-operating common carrier
(NVOCC)
Export management company (EMC)
Export packers

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Transportation Considerations in
International Logistics
Ocean shipping
International airfreight
Surface transportation

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Transportation Considerations in
International Logistics

Ocean Shipping

Approximately 60% of cross-border shipments move by


water transportation
Variety of ship types include:
Dry-bulk
Dry cargo
Liquid bulk
Parcel tanker
Containerships
Shipping conferences and alliances pool resources and
extend market coverage
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Transportation Considerations in
International Logistics

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Transportation Considerations in
International Logistics

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Transportation Considerations in
International Logistics
International Airfreight
Three types of international airfreight operations
include:
Charted aircraft
Integrated air carriers
Scheduled air carriers

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Transportation Considerations in
International Logistics
Surface Transport Considerations
Transit times can be significantly impacted by a
countrys infrastructure and modal operating
characteristics.
Short-sea shipping (SSS) is an alternative to
surface transporting

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Transportation Considerations in
International Logistics

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International Trade Inventories


Safety stocks must be large due to greater
uncertainties, misunderstandings and or
delays.
Inventory valuation is difficult due to
continually changing exchange rates.
Product return (reverse logistics) policies must
be understood.
Insufficient warehousing practices can lead to
higher inventory carrying costs.
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Logistics Performance Index (LPI)


Relatively new international logistics
concept (2007)
Updated in 2010
Created in recognition of the importance of
logistics in global trade
Incorporates data for approximately 155
countries

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Logistics Performance Index (LPI)1


Measures a countrys performance across six
logistical dimensions
Efficiency of the clearance process by border control
agencies, including customs
Quality of trade- and transport-related infrastructure
Ease of arranging competitively priced shipments
Competence and quality of logistics services
Ability to track and trace consignments
Timeliness of shipments in reaching the destination
within the scheduled or expected delivery time
1The

material in this section is based on Logistics Performance Index, http://lpisurvey.worldbank.org/

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