Meeting International Customer

Sales and Service Demands

Servicing global customers is as much an art as it is a science. While it can be said

that “Customer service is
“customer service is customer
customer service
service in
in any business,” in international cus-
tomer sales and service there is a completely different set of skill sets required for
managing this area successfully.
Cultural, language, legal, and foreign infrastructure issues all come into play
with great consequences if not handled properly.
This chapter addresses all the customer service concerns with the best options
for avoiding costly errors.

International Customer Service

In the new millennium, customer service has taken on a new meaning. The com-
petitive pressures of an increasingly growing and varied world market places the
subject of “customer service” at a new height of importance. With a greater em-
phasis on technology utilization, the basic “eyeball to eyeball,” “person to person”
interface is still very viable in the international arena.
The need to provide information in different languages, 24/7/365, in different
time zones any day of the week is now “status quo.” The need to resolve customer
problems in a “flash,” whether it is Beijing, Sao Paolo, or Sydney, is here now.
The ability to service a customer in Asia, their time 0800, your time 2300, is nec-
essary and what differentiates one company from another. And you may have to
do it in three different dialects!
The time is now that customers expect all three basics of a business relationship:
good price, good service, and now! Years ago, some would say that only two of the
three could be achieved, “pick any two.” But today the “modus operandi” of high-
end international customer service is all three or I go elsewhere.
The importance of this book, and more specifically this this chapter,
CD-Romisfile,
thatistothat to
meet
meet the competitive
the competitive demandsdemands of customer
of customer service service in today’s
in today’s market,market, the vendor
the vendor must
must
raise raise theof
the bar barcapability,
of capability,
andand therefore,
therefore, mustmust raisetheir
raise theirinternational
internationalskill
skill set
and competence.
competence. ThatThat is what
is what this book
this book will will
teach.teach.

Skills Needed to Succeed in International Trade

In the new millennium, 2000 and beyond, we have seen a dramatic expansion in
the number of U.S. corporations engaged in world trade. It appears that if you are
not “global,” your tenure is limited. With this growth has come the problems of
entering a new world, one that has language barriers, political risks, terrorism,
difficult transit hazards, credit and payment dilemmas, and insurance
headaches.
However, with these barriers comes opportunity. The American business that
can master the skills of world trade will gain new markets, high profit potentials,

15
 and the advantages of successfully doing business in the international market
place.
Success in transacting business internationally means acknowledging that most
of the work has to be done up front, before the shipment is expedited because most
control is lost at point of shipment. From that time forward, the fate of your cargo,
ability to get paid, and ultimate delivery is in the hands of others.

A mistake in documentation, labeling, or packaging could be fatal.

An error
errorin
inthe
thecommercial
commercialpaperwork,
paperwork, such
likeas theletter
the letterofofcredit,
credit,will
willhold
hold up
up pay-
ment. Not knowing local customs and laws can hold up the shipment and add hid-
den costs. Those personnel involved in world trade must master a number of ba-
sic trading skills to be successful. Each skill interfaces with others, which
necessitates a basic understanding of all the skills to mitigate the risks of world
trade and increase profits. The following guidelines should be considered for ex-
port transactions.
The exporter must be focused on a specific marketing strategy, more so than in
a domestic sale, primarily because the opportunity for something to go wrong is
great and the margin for error is even greater. And when something goes wrong,
the consequences could be very harsh.
Specific markets and a well thought-out marketing strategy are keys to success.
An array
array of
of factors
factorsmust
mustbebeconsidered,
consideredsuchlikeas
politics
politicsand
andculture,
culture,legal
legal ramifica-
ramifica-
tions, distribution complications, collection problems, communication difficul-
ties, insurance concerns, and the additional “hidden” costs involved in world
trade.
The international
internationaltrader
tradershould
shouldalign
alignwith
withquality
qualityprofessionals
professionals in three keykey
in three ar-
eas:
areas:BANKING, TRANSPORTATION/FORWARDING,
banking, transportation/forwarding, and insurance. andThe
INSURANCE. The
quality of these
quality of these
individuals willindividuals
have a directwillinfluence
have a direct
on theinfluence
viabilityonand theprofitability
viability andofprof-
the
itability of thesale.
international international
They willsale. Theyexposures
identify will identify exposures
to you and offerto you and offer
workable op-
workable options forthem
tions for resolving resolving
before them
theybefore
become they become insurmountable
insurmountable obstaclesobstacles
that are
that
costlyareand
costly
time and time consuming.
consuming.
Maximize resources from friendly competitors, trade associations, government
entities, foreign trade associations, consultants, and the media. The world is chang-
ing swiftly and dramatically. A continual flow of up-to-date information is critical.
Spending at least 5 to 10 percent of one’s time in maximizing resources and net-
working will “pay off in spades.”
Paying attention to detail is absolutely vital. The international sale requires an
inordinate amount of detail work. There is no room to cut corners. The i’s must be
dotted and the t’s crossed. Understanding the terms of sale, currency implications,
political environment, legal ramifications, etc. is tantamount to failure or success.
Every detail must be reviewed, checked, and rechecked. Nothing can be left to
chance.
Understanding the documentation requirements for foreign trade in itself can
be a full-time, frustrating job. International transactions are burdened with paper.
Not only is it complicated, but it is continually changing. No one person or source
can provide all the answers. The answers are typically gray, not black and white.
This causes confusion and discomfort leading to arbitrary arbitrary decision making, with
decision-making,

16
experience as the leading factor. This is where networking and resources with ex-
perienced freight forwarders, various bankers, accountants, service providers, etc.,
can pay off tenfold.
Risk transfer can be a necessary evil and a necessary tool in avoiding disaster
and profit potentials. The import/export business should find a specialized in-
surance broker and underwriting company that can assist them through the in-
ternational maze of insurance, claims handling, and local insurance requirements
in the country where the export transactions are occurring. Most insurance in for-
eign countries is treated differently than in the United States. For example, health
and medical benefits, along with workers’ compensation policies, would not typ-
ically extend to employees traveling overseas unless the policies are specially en-
dorsed. Product liability coverage is increasingly becoming an issue as more and
more countries become litigious in the handling of their claims. Proper insurance
plays a major role in transferring risk and increasing opportunity for protection of
assets.
Marine insurance provides protection of goods during transit, where the great-
est probability of loss and damage occurs. The policy should be tailor-made to con-
form to the terms of sale and the terms of payment for each shipment where expo-
sure exists. Typical policies in today’s market are “ALL RISKS” and cover the
goods from point of origin to final destination.
Another major risk facing the exporter is the ability to get paid. Political and ex-
port credit exposures face all exporters who sell on terms where a receivable is cre-
ated. The following risks present a physical and financial hazard: protracted de-
fault, currency inconvertibility, contract frustration, confiscation, nationalization,
war, strikes, riots, and civil unrest to name a few. All these risks can be insured
through various government and private sources.
Freight forwarders can assist in this area by affording access to their “house”
marine insurance policies and their international shippers, with broad insuring
terms and competitive pricing.
Intermodalism is playing a greater role in international transits where combi-
nations of more than one mode occur in the overall shipment. While ocean transit
enjoys the largest market share of international transportation, airfreight is grow-
ing. It is becoming a viable option in just in time (JIT) inventory management and
with certain product lines and trade routes.
Transit times, packaging needs, warehousing and inventory management, and
insurance concerns are just a few of the variables involved in the overall decision-
making process. The freight forwarder is usually an excellent source for trans-
portation consultation and advice. Most forwarders work within close proximity
to major airports and seaports and there is an array of forwarders and custom-
house brokers to choose from.
Packaging needs to be designed to handle the rigors of international transit.
Shock, vibration, condensation, excess water, extremes in temperature, storage
heights, and multiple and rough handling are but a few of the hazards facing the
design and packaging engineers.
Consideration must also be given to ultimate destination, the availability of ma-
terials handling equipment, logistics, and other factors to develop successful pack-
aging. If one notes that 30 percent of all transit losses in international trade are due
to a controllable
controllablecause,
cause,the
theimportance
importance of of
packaging in providing
packaging a sound
in providing product
a sound productand
satisfying the customer,
and satisfying thus protecting
the customer to protect future
futureorders
ordersand
andreducing competition,isisclear.
reduce competition clear

17
 Labeling and proper marking are also important packaging considerations. The
movement of hazardous and labeled cargoes present serious regulated and legal
issues that have strict penalties and consequences when not followed correctly.
There are many sources to assist the international trader in these matters, suchfor-
matters like as
forwarders,
warders, consultants,
consultants, andand
thethe Department
Department of Transportation.
of Transportation.
The last step is an acknowledgment that one must master all of these interna-
tional trading skills to be successful in importing and exporting. A decision on
packaging will affect storage, shipping, and insurance cost factors. A decision on
terms of sale will affect competitiveness, modes of transit, and insuring responsi-
bility. A decision on documentation could affect packaging needs, insurance via-
bility, and carrier acceptance for transit.
These examples are but a few of the scenarios that show the interdependency of
the various considerations in international shipping that must be well thought out
before practice and execution. Any decision could have great and devastating con-
sequences. The individual and company that can “can“put
put it all together,” and address
“address all
all the
the issues,
issues,” will
will begin
begin the
the process
process ofof mitigating
mitigating risk
risk and
and maximizing
maximizing profit.
profit.

Excellence in Customer Service in Global Trade

Many U.S. companies have begun to master the skills of customer service as the
backbone of profitability and continued growth and most certainly competitive
advantage!!! These skills must be applied to global trade but will need to be mod-
ified, adapted, and enhanced for the complexities and unique persona of interna-
tional business.
The U.S. exporter will grow and prosper in direct proportion to the quality of
customer service. And this will hold true for small and large business, alike. One
certain factoid in global trade is that business is “relationship” driven and the qual-
customer
ity of service
customer dictates
service dictatesthe
thequality
qualityofofthe
therelationship.
relationship.This
This section
section presents
an overview of the “competitive advantage” issue and “quality communication”
as the starting point of global effectiveness.

Competitive Advantage
American exporters face stiff competition in global markets due to many factors,
including the proximity of competitive sourcing, pricing after cost of logistics, po-
litical and cultural differences, currency fluctuations, communication and infras-
tructure imbalances, and trade finance incapabilities.
Those American export companies that show creative talents, exalt patience and
persistence, ally with key vendors, and master the skills of global trade and inter-
national customer service will be staged for competitive advantage.
This not
not only
onlyrefers
referstotoproviding
providinga price that
a price is competitive,
that which,
is competitive, while
while a critical
a critical is-
issue,
sue, it may
may bebe only
only one
one ofof many
many issues
issues that determine who a foreign buyer pur-
chases from. Look at your own personal buying habits. Some, but not all individ-
uals buy with only price in mind. All experienced business people know that
following that guideline only can be deadly.
We sometimes pay a higher price for a multitude of reasons: convenience; pos-
itive relationship with the people we buy from; the service attached to the pur-
chase; the sales and marketing factors tied into the transaction; the technical and
knowledgeable sales/customer service personnel; responsive, timely communica-
tion, and follow-up; and more.
I believe that the majority of purchasing decisions brings an array of factors into
play. As a general rule, if the pricing from one company to another is within a rea-

18
sonable range, the company with the higher price will win eight of ten times if
many of the other attributes are offered with greater advantage. I have found this
true time and time again in my own global sales efforts and have been witness to
it within my clients’ activities. A critical factor for making all these issues work for
you is communication.

Quality Communication
Quality communication can be broken down to three key disciplines:
1. The Art of Communicating
2. Responsiveness
3. Persistence
In the art of communicating one must recognize that different cultures have dif-
ferent means of communication. How to address a written fax, letter, or e-mail and
when to send it, whether to use first or last names, and who to copy will all play
an important role in how the customer will respond, how seriously they will take
your company, or how mad they will get if you have insulted them.
While most foreign buyers speak some degree of English, commit yourself to
know the basic rudimentary and business language of your buyer’s country. You
will be respected for the effort, and it will provide a definite advantage in under-
standing what is going on in negotiations and trade meetings. I maintain a little
“cheat sheet” next to my phone. It provides the basic “hello,” “good-bye,” “thank-
you,” etc. in a number of key foreign languages. It goes a long way in developing
a better relationship with my overseas customers.
All written communication should be typed. Foreign communication is difficult
enough without having to decipher poor handwriting. It also expresses your pro-
fessional commitment to doing the job correctly, which sends conscious and sub-
liminal signals with positive impressions.
Responsiveness can be a major factor that will provide immediate favorable
“feelings” on the part of foreign buyers. This means following up in a timely fash-
ion and acknowledging all communication, even if it is just to say, “We’re work-
ing on it.” Meet all time frames promised.
promised. If
If you
you need
need more
moretime,
time communicate that
and request an extension when necessary.
A complaint I hear time and time again is how poor response can sour a deal,
and ultimately, long-term relationship opportunities. As world communication
becomes more high tech, there will be numerous options presented, including the
Internet, Intranet, electronic data interchange (EDI), web-based technologies, in-
ternational fax, e-mail, cell phones, mobile telecommunications, and satellite ca-
pabilities to assure timely and quality communication to gain global advantage.
A timely response and quick decisions are generally characteristics of the Amer-
ican culture. This can
can be
be bad
badand
or good
goodnews
newsdepending
dependingonon which
which side
side of
of the table
you sit on and the expected results. Regardless, our culture looks to an immediate
response to inquiries and rapid decision making. Unfortunately, most of the world
operates using a different frame of reference. Many American individuals and
companies lose patience and walk away from lucrative opportunities in the pro-
cess. The key to overcoming this obstacle is persistence.
The steps in being persistent must be tailored to the particular culture you are
exporting to. Decisions in Japan are typically lengthy and made by management
groups in lieu of individuals only. Being too diligent and persistent will cause ag-
gravation and probably loss of the opportunity. In the Middle East, persistence is

19
 considered a good quality when intermingled with developing a personal rela-
tionship with the buyers.
buyers. In
In Latin
LatinAmerica,
America too, much follow-up
too much follow-up too
too soon will elicit
a lack of response and frustration on your part.
Knowledge of local cultures can be achieved by researching the culture. There
are numerous reference books in the library and business bookstores that outline
the “do’s” and “don’ts” of all trading cultures. The country deck officers at the De-
partment of Commerce, consulates, and embassies are excellent sources of infor-
mation. The Chamber of Commerce, international service providers, and trade as-
sociations are often good references as well.
No matter what the culture is, one must have a system of follow-up/persistence
to accomplish the sale. The persistent effort that follows local customs must be or-
ganized and focused, while using all the powers of influence and networking with
a balance of patience to obtain the order. Persistence is well served when accom-
panied by a developing personal relationships.

Building Personal Relationships

In many countries, developing a close personal relationship exudes confidence in
both parties that will result in long-term partners in trade. If you have a product
that is in high demand with no competition, then being an “order taker” is the
method of operation. However, most of us deal with intense foreign competition,
and we must maximize our opportunities.
A key strategy is to develop the personal relationship. This works in most cul-
tures and becomes a necessary tool in developing the sale and maintaining future
activity. A personal relationship will facilitate the negotiation process and make
the transaction easier to accomplish. It also opens the door of mitigation. “Break-
ing bread,” an expression for a business lunch
lunch oror dinner,
dinner is often a necessary part
of developing sound global business and personal relationships. Foreign buyers
often “buy” from the individual first and the company second.
Problems are likely to occur in an international trade. Shipping the wrong
product, logistics delays, government intervention, and cargo claims are all going
to happen if you are in this business long enough. The strength of the personal re-
lationship,
lationship, and
the the trust
trust andand bond
bond that
that parallels
parallels this,
this, willcarry
will carryyou
youthrough
throughthe
the diffi-
culty of the problem to a favorable resolution. International litigation generally is
not a workable option. It is costly, difficult to achieve, and a favorable settlement
is dismal at best. A good working relationship, cultivated by the personal rela-
tionship is a much better option.
Strategic partnerships were a method of survival in the late 1990s and will fol-
low into the new millennium. These require a lot of good faith between the part-
ners, which is fostered in the development of the personal relationship. Most par-
ties have to “like” the other party before doing business. Breaking the bread or the
pasta, sushi, knishes, tacos, or whatever,
whatever and doing all the other things necessary
to facilitate the personal relationship become key to all the other factors in devel-
oping your export business.

Negotiating Problems with International Customers: Three Key Steps

Probably nothing has the potential to
to frustrate
frustrateacustomers
customer more than their perception
of how they are treated when a problem occurs. Poor treatment during a problem is
probably the number one cause for a customer to go elsewhere. For any global busi-
ness this means lost revenue with little opportunity for regaining a client’s business.

20
 We all have and know of unreasonable clients, but in reality most customers are
reasonable. They understand that mistakes occur and certain things happen that
are out of everyone’s control. With the reasonable client, which is the majority of
our fold, how we respond in a difficult situation or when a problem occurs is how
we will be ultimately judged.
The following three steps are guidelines to follow when faced with the in-
wewhich
evitable problems in the transportation business in all earn
weour
all living in. living.
earn our

Be in Their Face
The worse thing you can do is to hide or not face up to the problem. The customer
knows when you are avoiding the issue and so do you. Think of a scenario from
your own
own personal
personalcircumstances,
circumstancessuch
like as
thethe mechanic
mechanic whowas
who wasfixing
fixingyour
yourcar,
car, the
bank teller sorting out your account, the store clerk attempting to rectify your pur-
chase. When something went wrong in any of the scenarios, you would be more
upset, more frustrated, fighting mad, when they would not return your calls, were
unavailable to take your call, were suddenly not available, etc. The “hiding” be-
comes more frustrating than the initial problem itself. Remember what you said
when faced with these situations, “I will never use this mechanic again,” “I will
never shop in this store again,” “I am finding a new bank tomorrow.”
Well, our customers can feel the same way. The best course is to face the prob-
lem head on. Don’t hide. Be up front and demonstrate a willingness to be honest
and open with all potential solutions.

Mitigation Is Key
In the
the sales
salesdialogue
dialoguewith
withpotential
potentialglobal customers,
global I often
customers, useuse
I often thethe
terminology that
terminology,
we are the best “mitigators” in the business. I further explain that in this business
things will go wrong. It is inevitable. Most experienced importers and exporters
know this. I then let them know that we will advise them immediately and begin
the steps necessary to “mitigate” the problem ASAP. This might mean calling the
receiver and advising of the revised estimated time of arrival (ETA), rerouting the
freight to catch the next flight, finding a new carrier that can meet the delivery re-
quirements, sending
quirements, send thethe sales
sales or customer
or customer service
service manager
manager overover personally
personally to look
to look for
for
the the freight,
freight, etc.etc.
The experienced shipper appreciates this attitude in the sales process. More im-
portantly, they appreciate it when reality shows its ugly head and a problem oc-
curs. Then they see our customer service and operations personnel do everything
possible to mitigate the problem and make a bad situation turn out to be a mole-
hill instead of a mountain. They also appreciate honesty and acknowledgment
when a mistake is made, however disheartening or frustrating this may be.

Follow-Up and Communication Are Critical

Follow-up and communication is critical following the disaster. Make a telephone
call or make a visit. Apologize again and again if necessary. Make sure you com-
municate that you are aware of the problem and how it affected their operation
and how much you care about the chain of events and the circumstances that oc-
curred. Timely communication and reaction can turn around the worst situation.
Emphasize the positive. Demonstrate how you mitigated the problem. Some-
times creative dialogue will allow you to show how the actual blame was someone
else’s responsibility. This is when “Band-Aids” can prove effective. Eliminating

21
 the invoice or reducing the costs or charges may prove a good course of action.
This is sometimes referred to as “dancing,” but it works.
Outlining what steps will be taken to make sure this will not happen again usu-
ally will bring on a favorable reaction from the client. Providing an outlet for their
frustration and having them participate in the solution can also prove beneficial.
The key is responding quickly, facing the problem head-on with an honest and
responsible approach, offering solutions for the future, and, most importantly, cre-
ating the perception that you care. Treat them as you wish to be treated by your
vendors.
The bottom line is that the export business has certain inherent problems asso-
ciated with it. How we deal with these problems with our customers will deter-
mine not only our ability to maintain a client but our profitability and opportuni-
ties for long-term success.

Third Party Logistics in Imports/Exports

Imports/export transactional logistics costs are on the rise. This is true for all types
of companies, those with 10,000-pound machinery to ship and those moving fifty
pieces of small packages express, and for all modes of transit anywhere in the
world.
The boards and senior operating management of many corporations have to
come to recognize that long-term survival could hinge on the structure of the logis-
tics costs and control systems. The more “international” a company is, the more in-
volved in exporting, the more serious this challenge. Foreign competitors in Europe
and the Far East have mastered certain shipping techniques and acquired a com-
petitive advantage. To meet the competition, some U.S. companies have elevated
the traditional role of “traffic manager” to vice president of logistics and/or direc-
tor of distribution. Others have turned to third party logistics (TPLs) providers.
Though the concept of TPL has existed for more than twenty years, it has now
come into vogue and is at the forefront of transportation technology. The industry
is still young and evolving, but the basic concept involves part of a late 1980s trend
toward downsizing. As part of this phenomena, corporate management evaluated
the cost of maintaining in-house capability against the cost of outside vendor ser-
vices. In many cases,
cases itit served
served the
the company’s
company’s best
best interest
interest to reduce staffing and
look to outside third party support.
In the field of transportation this was called third party logistics or TPLs. As we
begin the new millennium, it has grown into a diverse range of transportation and
logistics services provided to corporations by third party vendors. The field chal-
lenges every aspect of export business in professional, creative, and comprehen-
sive worldwide
worldwidetransportation
transportationservices. Major
services. transportation
Major transportationcompanies,
companiessuchlike
as
Maersk, Ryder, Yellow Freight, United Parcel Service (UPS), Roadway, Airborne
Express, Federal Express, and the Hub Group, have started
Group have started TPL
TPL service
service divisions.
divisions.

Reasons for Downsizing in Corporate Transportation

The two major reasons for companies to downsize in transportation are cost and
control.
When companies expand export distribution operations, they often build large
internal infrastructures of personnel, equipment, warehousing, computers, and
systems to service the expansion. The cost of such infrastructures can be enormous,
particularly for
for small
small to
to medium-size
medium-sizeexporters.
exporters.In
Inmany
manycases,
cases,large
largeand
andmid-sized
mid-size

22
companies are reducing the size of these in-house entities to just a few manage-
ment and operating personnel and transferring their functions to TPL companies.
These companies have decided that an outside vendor could do the job in a
more cost-effective way and with a wider range of service capabilities, potentially
higher quality, and with greater access to professional talent. In addition, it is typ-
ically easier to terminate a vendor than in-house personnel, who may be tenured,
unionized, or “just too difficult.” This offers management more flexibility.

Cost and Benefits of Third Party Import/Export Logistics

Each industry, company, and logistics manager must evaluate the individual situ-
ation and determine the best direction to fit the needs of the company. Such an
evaluation will have a lot to do with the direction the company is heading, the mis-
sion statement, and the position regarding in-house versus third party. Many com-
panies are quite clear in this regard. Many have no interest in increasing corporate
staff or empires within their newly downsized management teams. Others believe
firmly that it can best be done by in-house staff that is fully controlled, trained, and
managed. Every situation is unique.
In the simplest form, the current and future cost of in-house export logistic op-
erations must be compared with bids from potential third party providers. Evalu-
ation guidelines will need to be established to allow equal comparison of the bids
from the third party compared to in-house operations. Cost and scope of services
should be the bottom-line guidelines
guidelines for
for the
the decision-making
decision making process.
process The current
trend strongly suggests that most of these matrix comparisons favor the export
third party option.
Potential benefits of the third party option include:
• Immediate savings in direct personnel and overhead costs and in long-term
costs, such as tenured
like tenured employee
employee benefits
benefits
• Access to quality and experienced personnel
• Access to vast transportation support resources, compliance and security ca-
pabilities
• Ease of setting goals, performance standards, and ultimate termination
• Savings in export transportation costs can be achieved when the logistics
provider can place you in group purchasing networks (GPNs)
Following are two examples of these benefits at work. The first is a situation
where a retail company with stores around the country needs to position certain
inventory at various key points. In terms of space, however, its needs may be
small, for example, one to three trailer loads at any one time. It has access to many
options, but costs are high. Through a TPL company who may be involved with
other retailers, such a company might enter the TPL company network and pur-
chase the space at the same cost as a much larger buyer, and therefore pay much
less. Savings can vary in every situation, but our review has shown potential sav-
ings of 5 to 25 percent.
The second example is when a large domestic shipper enters a new market over-
seas, using small, less than container load ocean shipments. Initially transport
rates are high, but through a relationship with a TPL company who purchases
ocean freight through a subsidiary nonvessel operating common carrier
(NVOCC), such a shipper could buy into a much larger purchasing network and
obtain lower rates than if approaching the ocean carriers directly. Potential savings
could range from 5 to 30 percent.

23
 One of the major advantages of an association with a TPL company is access to
a quality, professional export support team. Their skill level, combined with years
of trial and error,
error, produces more cost-effective
produce more cost-effective transportation.
transportation. They can analyze
any set of current shipping systems and bring many other options to the table.

Intermodalism in Import/Exports
TPLs bring a diverse background of integration that typically can provide better
service and lower transportation costs at the same time. Integration can mean in-
termodalism. Intermodalism is the use of several modes of transit or distribution
systems to accomplish transportation goals. A good example of intermodalism is
the mini land-bridge combination of rail and ocean shipments in the United States.
A Northeastern U.S. exporter shipping to the Far East traditionally will load the
shipment in Port Newark. It will take six to eight weeks for delivery. Another cost-
effective option is to put the shipment on a rail car to Long Beach, then transfer to
an ocean vessel. This could reduce transit time by half and, depending on volume,
could cost the same or only slightly more. If time is money, the overall savings
could be significant.
TPLs are becoming increasingly supportive of intermodalism to accomplish
transportation objectives. Rail, air, ocean, and truck combinations are on the rise
and when the connections are properly constructed, they can provide more timely
deliveries at cost-effective pricing.
TPLs recognize that there is an entire supply chain for most export companies
that needs to be linked to meet all the needs of the company it is serving. Areas of
sales, customer service, manufacturing output, raw material and supplies pur-
chasing, inventory management, distribution, and collection of funds are all inte-
gral in this process.
Any one factor or any set of circumstances can affect any or all parts of the en-
tire supply chain. The TPL staff understands this issue and can matrix all factors
relative to one another to find the best solution.

Electronic Data Interchange (EDI) and Management Information Systems (MIS)

An integral resource in TPL performance is their computerized information capa-
bility. Use of EDI and MIS can reduce the duplication of export shipping docu-
ments, which could be extensive on an international transaction. It can link carri-
ers with export banks, customs, and other government agencies. It can also link
export sales with inventory control, tie inventory to production, and so on.
The goal is paperless transportation. Many carriers and government agencies,
along with all transportation service providers, are currently working together
and testing out
out paperless
paperlessinternational
internationalshipments.
shipments.ByThe usetoof2005,
2003 EDI they
in exporting
may reachis
vast.
their We have
goal. Theonly scratched
use of the surface,
EDI in exporting but we
is vast. Weknow
have it to be
only integral the
scratched in bringing
surface,
together all facets
but we know it to of
be TPL.
integral in bringing together all facets of TPL.
Almost every export trade magazine and journal is touting TPLs. Advertising
of vendor services has increased, evidencing the growth of TPLs. Intermodalism
has played an integral part in the development of TPLs. Integration of many as-
pects of the export supply chain process: trucking, international freight, inventory
management, and sales all become synergistic with common goals of:
• Cost-Effective Export Distribution
• Cohesive EDI Networks
• Successful Transportation Purchasing Management

24
 This development holds many challenges. Many transportation companies are
at the cutting edge of this technology. Those that do not move quickly or chose to
ignore this trend will be at a serious disadvantage. Exporters must study their own
shipping profiles to determine if TPLs make sense for them. Shippers who do not
take an investigative look may be leaving a very cost-effective logistics option for
the competition to master.

Setting Up Quality Control Procedures for Import/Export

Supply Chains
To gain a competitive advantage, U.S. exporters must ship in a timely fashion, be
accurate, and communicate intelligently and responsibly. Foreign competitors
gain ground against their U.S.-based rivals due to better logistics management.
They export on schedule. They ship what they are supposed to. Their methods for
quality control and mitigation of problems and systems for communication are
simply better.

U.S. exporters generally have a superior product or service. Combining this

with a higher form of logistics management, the result is a winning duo that
can’t be beat.

Accomplishing this is as much an art as a science. I will outline some of the con-
siderations that the U.S.-based exporter can follow. This is the “science” part. The
“art” part is more subtle, accomplished over time, mostly through a learning
curve, experience, and diligence.

Ship in a Timely Manner

Timely
When our foreign plants, distributors, and customers buy from us, it is typically
planned around their needs to meet inventory, production, or sales requirements.
JIT inventory systems require “tight” and intensive scheduling standards.
While international shipping has numerous variables that can play havoc on
scheduling, most carriers represented by the ocean, air, rail, and trucking compa-
nies can count on 90 percent on-time performance, within reasonable parameters,
for their international interests. That is not bad for global trade.
Therefore, the exporter can have a reasonable expectation that their goods, if
shipped on time, willarrive
time will arriveonontime.
time.The
Thekey
keywords,
words being “shipped on time.” This
calls for the exporter to make sure that sales and customer service are communi-
cating in a timely fashion to operations and that inventory and production com-
mitments that are required can be maintained.
Export intermediaries and export management companies that typically buy
from third parties, in lieu of their own production sites, must maintain even tighter
relations and communications with these suppliers to assure timely availability.
Good coordination with freight forwarders and international carriers rounds
out the
the steps
stepsnecessary
necessarytotoship in timely.
ship a timelyRealistic
manner. use
Realistic use of shipping
of shipping schedulessched-
and
ules and building
building schedulesschedules and in
and building building in “hedges”
“hedges” and “leeways”
and “leeways” for potential
for potential short de-
shortwill
lays delays
go awill
longgoway
a long way in assuring
in assuring timely shipping.
timely shipping.
The use of TPL companies is popular today. These third party service providers
can assist greatly in providing systems for management to follow and execute to
coordinate the meeting of export shipping schedules.

25
 Ship Accurately
Ship quality product and the amount you are supposed to export and you will
have completed a second “third” of the puzzle. Tie that in to shipping timely and
you have won 66 percent of the battle.
Internal operating systems and methods for accountability will typically ad-
dress this concern. Export management companies must use reliable suppliers
who have these systems of control, or they will need to have a facility to bring the
freight into a preexport location for checking prior to export. This is usually a more
expensive option than dealing with reliable suppliers.
The loading dock in most plants and warehouses is where freight will be staged
prior to export. It is typically at this point where operating systems can be set up
for maximum control. Count, check, weigh, and document, then recount, recheck,
reweigh, and document again. Have the person sign off who did the checking and
a supervisor sign off on the recheck. All of this should be documented to a file for
access and qualification in case it is needed at some later date.
Automation and technology offer ease of this process, but at some point a per-
son who physically checks is usually necessary. If technology is used, the docu-
mentation to the EDI file must be made in a timely manner with internal checks for
accuracy and personnel accountability.
The product, the count, and the systems for quality control must be part of the
export documentation chain, whether it be the invoice, the packing lists, the bills
of lading, or other documentation.
International shipping is an expensive cost in the export transaction. For some
products and destinations, the cost of shipping exceeds the value of the goods.
Mistakes that occur can be costly, if not deadly. It is better to take some extra steps
before the goods leave, even allocate a small amount of funds, than handle the ad-
ditional unknown and potentially greater costs in lost or stolen merchandise to
mitigate a problem, reship at a later date, or deal with a dissatisfied customer,
which inin the
the long
longrun
runwill
willresult
resultinina loss
a loss
of of business.
business. Keep
Keep in mind
in the mind that
that it
it can
take years to gain a customer and only moments to lose one. Time and money
spent up front is a known factor. At the other end, end is
is an
an unknown
unknown potentially
potentially
greater hazard.

Communicate Intelligently and Responsibly

To ship timely and accurately is critical, but to complete the last “third piece” of
the puzzle,
puzzle, one
one must
must communicate
communicatethe thestatus
statusofofthe
theshipping
shippingininananintelligent,
intelligent,a
“foreign articulate,” and responsible process. This starts with the negotiation and
completion of the sale. Be honest, up front, and exact on realistic production, in-
ventory, and shipping schedules. Don’t promise something that can’t be delivered,
bite you
“it will bite you in
in the
thebutt,”
butt” at a later
later date.
date.
Keep the customer updated on the status of future and current shipments. Prob-
lems and delays do occur. If you report these responsibly and in a timely manner,
the customer will appreciate the information and may be able to replan accord-
ingly, mitigating your delay.
The key is timely communication that is honest and direct. Customers usually
react favorably to this. More often than not, you can make a good impression from
a poor situation. Offer options. Be creative. Make sure the client feels that you are
doing everything possible to mitigate the problem. Their perception of what you
are doing will often dictate how they will handle future orders.

26
 Technology can make the communication chain work more effectively. Use of
e-mail, the fax, the Internet, etc. can prove to be cost-effective options. In many
countries, the communication infrastructure does not work well. You must then be
creative and use several methods to make sure the communication gets through.
Cell phones in some countries work better than direct line systems.
However, do not rely only on impersonal technology. Pick up the telephone and
call. This might mean a late evening or early morning wake-up to accommodate
global time zones, but often hearing your voice will go a long way toward making
the client feel more comfortable, even if some abuse comes with the call. Keep in
relationship driven
mind that export sales is relationship driven and
and personalized,
personalized,and
caring service
caring is the
service is
bestantidote
the antidoteto
topotential
potentialshipping
shippingdifficulties.
difficulties.In
Inmost
mostcountries,
countries export
export sales is “re-
lationship driven.” So make the most of the relationship and be honorable in the
communication process. Your foreign customers will even favor the relationship
with more trust and enhancement for the long term.

Controlling the Terms of Sale

The International Commercial (INCO) Terms, published by the International
Chamber of Commerce, advises on and provides definitions for terms of interna-
tional trade. They include CIF (cost, insurance, freight), FOB (free on board), FAS
(free along side)—all acronymsfor
side), all acronyms for potential
potential terms
terms of
of sale
sale that
that the U.S. exporter
needs to understand and conduct successful international trading. An exporter can
obtain a copy
copyofofthe
theINCO
Incoterms booklet,
Terms booklet,which
whichshould
shouldbebepart
partof
ofevery
every exporter’s
exporter’s
library, from any International Chamber of Commerce Office or ICC Publishing
Corporation, Inc., 1212 Avenue of the Americas, New York, NY 10036.
In attempting to understand who should control the terms of sale and what the
parameters are in the decision-making process, several critical factors must be re-
viewed.

Overview: Sales Terms

The various terms of sale have significant consequences regarding responsibilities,
liabilities,
liabilities,costs,
costs,and
andprofits/loss
profits/lossconfonting
confronting thethe
importer
importerandand
exporter.
exporter.TheThe
Incoterms
INCO
are European
Terms in foundation,
are European reflecting
in foundation, a different
reflecting mind-set.
a different The The
mind-set. terms combine
terms com-
documentary
bine documentary and and
transactional requirements
transactional requirements forfor
passage
passageofoftitle
titleand
and payment
Thereare
terms. There aremany
many hidden
hidden costs
costs involved
involved in international
in international trade trade that
that the the
INCO
Incoterms
Terms helphelp to define.
to define. TheThe exporter
exporter should
should bebe awarethat
aware thatterms
termsofofsale
saledirectly
directly af-
fect costs and could affect an exporter’s competitive advantage. The more respon-
sibility assumed, the higher the price. For example, the price might be $4,500 from
the plant dock, $4,800 to the U.S. port of export, and $5,800 delivered to the cus-
tomer’s door in Oslo, Norway.
The INCO
Incoterms
Terms advise
advisewho
whois isresponsible
responsiblefor forarranging
arrangingtransportation
transportation ser-
vices, freight charges, insurance, etc., but freight forwarders, banks, carriers, and
experienced shippers are the best resource for figuring out what they are all
about.

Name the Terms and the Point of Shipment

When using the terms, a point of destination or a site must be named. For exam-
ple, if you were selling FOB, the question is “FOB at what point?” According to the
definitions of the terms, once the goods are loaded on board the transportation
conveyance, title passes to the buyer. But does this occur at the plant or at the port?

27
 If you sell FOB plant, the title will pass once the freight has been loaded on
board the inland conveyance. This means that the buyer will arrange to pay for the
inland transportation. They will also assume responsibility for loss or damage to
the freight during transit.
Choosing to sell FOB port of loading requires that the exporter arrange for the
inland freight. The exporter will then assume all transit liabilities until the freight
is transferred to the international carrier. If it is an ocean shipment, the risk trans-
fers once the freight passes the rail of the vessel, illustrating the extent of the defi-
nition of the terms.
If you had an international transaction in France that called for a CIF sale with
named point,
a named point,such
like Paris, and
as Paris, thethe
and shipment was
shipment wasbybyair,
air,the
theexporter
exporterwould
would be
be re-
sponsible for arranging the transportation. The shipper would assume all transit
liabilities and provide marine insurance up to the point of pickup from the Paris
airport. In such a case, the exporter has taken on a great deal of responsibility and
with it an equal amount of risk. This is when the exporter needs to be a good traf-
fic manager and/or have a quality freight forwarder. The marine insurance, the
underwriter, and the claims systems must be in place to deal with potential losses
in an international transaction.

Terms of Payment
At the time the export sale is being consummated, the terms of payment need to be
decided as this will have a great effect on the decision making for the terms of sale.
Assume, for example, that you complete the transaction with all i’s dotted and t’s
crossed, with the terms of sale as FOB/NY. The shipment is made with the terms
of sale calling for a payment from your buyer in Paris in sixty days. The shipment
arrives missing three of ten pieces. They represent approximately $12,000 of the to-
tal invoice value, for which your buyer discounts your bill. You argue that the
“risk” passed in New York; therefore the insuring responsibility, with a clean bill
of lading, was with the buyer from the time the freight was received on the inter-
national conveyance.
The buyer argues that the shipment showed up short and that under no cir-
cumstances, if the U.S. exporter is to keep the account, will they contribute to the
loss, holding the exporter fully responsible. According to this scenario, while the
terms of sale “appeared” to offer less exposure to the exporter, the terms of pay-
ment that allowed sixty days provided greater exposure. The position of the im-
porter was both unreasonable and incorrect, but it is a common path when the
buyer holds the advantage of not yet having paid for the freight.
Without contingency insurance or unpaid vendor protection, the exporter may
have to sue to collect at the cost of losing a customer, unnecessary aggravation, and
great expense.

Additional Considerations
A very general conclusion that can be drawn is that in most export situations, the
exporter should control the terms of sale and the terms of payment. Every factor
must be considered
considered in
inthis
thisevaluation,
evaluation,such
like,as,
butbut
notnot limited
limited to to,
thethe following:
following:
• Price and Payment Terms
• Competitive Pressures
• Forwarder and Carrier Options
• Opportunities for Loss and Damage

28
 • Previous Experience with Buyer
• City and Country of Destination
• Customs Clearance in Buyer’s Country
• Current Economic and Political Situation in Buyer’s Country
An additional consideration in controlling terms of sale offers the exporter
short- and long-term options for maintaining competitiveness. If you choose to sell
on terms, where all the basic shipping, documentation, insurance, and freight
choices are in your control, then you have the ability to affect the CIF costs. You are
not forced to accept a particular insurance company whose marine rates may be
higher than you can obtain in the open market. If you are free to choose steamship
lines, you have the option to look at possible nonconference carriers that might of-
fer lower shipping costs. Each variable must be evaluated. Controlling the option
to evaluate will afford the more competitive choices that will work to the ex-
porter’s advantage.
Another important consideration in determining the terms of sale is to look at
the pitfalls of attempting a “door-to-door”
“door to door” sale,sale, if required to do so, particularly in
certain countries where customs law and practice work to the disadvantage of the
exporter.
As “importer of record” in door-to-door
door to door sales, you assume certain liabilities in
the import country that you might want to reconsider.
In certain
certain countries,
countries,suchlike as Mexico
Mexico (thoughthis
(though thissituation
situationisischanging),
changing), U.S.
U.S. ex-
porters have
have found
foundititpreferable
preferabletotosellsellFOB
FOBport
portof of
entry such
entry likeasLaredo,
Laredo,in
in lieu
lieu of a
CIF sale point of destination. Mexican customs (their trade and practice) have af-
forded the importer a better opportunity to arrange clearance than with the ex-
porter’s agent.
agent.This
Thisisisalso
alsotrue
trueininother
othercountries such
countries as,but
like, butnot
notlimited
limited to, Thailand,
to Thailand,
Algeria, and Iraq. Each situation must be carefully evaluated on its own merits.
The exporter’s freight forwarder’s local relationship with foreign clearance agents
plays a vital role in this regard.
The current political and economic situation in the buyer’s country is critical.
Take thethesituation
situationinin certain
certain parts parts of new
of the Eastern
Eastern Europe. While
Europe. Whilethere
thereisisaa big
demand for U.S. products, payment is difficult at best. To make the sale, the U.S.
exporter may not be able to sell completely on secured terms but may be willing to
sell on a collect or sight draft basis. This arrangement might meet the need of the
importer and reduce some of the exporter’s exposure.
The key word is “reduce” not “eliminate.” The exporter will need to make ar-
rangements through the freight forwarder or the carrier not to release the freight
until the payment is made to the local representation. Good communication and
tight monetary controls will be critical to successful execution of this option.
Equally important is attention to the minutia of transactional detail for the pas-
sage of title and payment terms. Although title may transfer, responsibility, par-
ticularly fiscal responsibility, may not end.
Quality marine insurance affords protection to the exporter in all situations.
The marine insurance contract should have features that protect the exporter re-
gardless of who is responsible to insure and where title passes. “Unpaid vendor”
or “contingency” insurance can be part of any successful export program. It will
afford the
the exporter
exporterfull fulltransportation
transportation insurance
insurance in cases
in cases wherewhere
theyitare
is not
not re-
sponsible for insurance, but may be exposed to payment or contract terms.
It is also critical when letters of credit are used for international transactions that
the term of the sale conform to INCO practice and Uniform Customs and Practice
(UCP) 500 for payment terms.

29
 The bottom line is that the exporter must evaluate many issues in determining
the best terms of sale for a particular export transaction. In any case, the exporter
should negotiate a controlling advantage that will mitigate potential loss and max-
imize protection of profits.

Increase Your Export Sales Through Credit Insurance

U.S. exporters are in an excellent position to use a tremendous resource in devel-
oping a significant increase in export sales activity. Export credit insurance has
been around for more than twenty years, but is now becoming increasingly avail-
able for all U.S. companies. It has become easier to access and obtain and is more
competitively priced and flexible in design to meet the various and specific needs
of individual corporations.
Accepting a foreign receivable is risky business. Some U.S. companies see it as
an obstacle in doing international export business. But the reality is that our for-
eign competition is offering terms and, more often then not, selling on terms,
which makes the difference between getting the deal or losing it.
However, what we see as an obstacle is really an opportunity, when managed
creatively and responsibly.
There are
arenumerous
numerous insurance
insuranceentities, both government
entities, both governmentand private
and that offer
private,
U.S.
that companies
offer U.S. insurance
companies policies to protect
insurance their export
policies sales their
to protect from receivable ex-
export sales
posures,
from and political
receivable risk exposures,
exposures like those
and political risk seen most recently
exposures. in India and
U.S. Government
Pakistan.
programs, U.S. Government
such programs,
as with Ex-Im banklike
andwith Ex-Im bank
Overseas andInvestment
Private Overseas Private
Cor -
Investment Corporation
poration (OPIC) (OPIC) are
are designed designed toU.S.
to encourage encourage U.S. companies
companies of all sizesofand
all
sizes
makeupandtomakeup
export,toand
export, and if a receivable
if a receivable is created,is offer
created, offer insurance
insurance as a
as a “safety
“safety
net.” net.”
The export credit insurance tool is often used in conjunction with banks to ob-
tain favorable trade finance for the funding of the international transaction. This
becomes a significant side benefit.
The bottom line being that the export credit insurance is leveraged as collateral
to obtain trade finance. When the cost of borrowing in foreign countries can be as
much as 30 percent, letters of credit costing as much as 7 to 15 percent, offering
terms can provide competitive advantage in export sales. Export credit insurance
can be considered the assurance of payment when all else fails.
The cost of credit insurance varies, depending on spread of risk, commodities,
countries of destination, specific terms offered, limits, deductibles, etc., but typi-
cally costs less then 1 percent of the values at risk. This amount could easily be ab-
sorbed into gross profits or transferred to the customer in the cost of the sale.
The U.S. Government entities that provide these coverages are doing so to
promote export trade from the United States in consideration of creating jobs and
reducing the deficit. Most of their decisions have political influence and conse-
quences.
Private
Private companies,
companies such as the
like the Foreign
Foreign Credit
Credit InsuranceAssociation
Insurance Association(FCIA),
(FCIA), CNA,
American International
InternationalGroup
Group(AIG),
(AIG), and Fidelity
Fidelity &&Deposit
Deposit,that
thatoffer
offerthese
these export
insurances are
credit and political risk insurance’s are motivated
motivated by by profit
profit and sometimes are a
more expensive option. However, they will insure risks in certain countries that
are off limits to the government options. They also can be more flexible in the un-
derwriting terms and conditions from one insured to another. The policies insure
such exposures as confiscation, nationalization, expropriation, deprivation, em-
bargoes, transfer and currency risks, contract frustration, unfair calling of letters of
credit, and protracted
protracted default.
default.

30
 A good source is also a quality credit insurance broker, who can assist the ex-
porter in finding options.
Policies can be obtained after an extensive application process. You obtain terms
and conditions at a set premium charge. Deductibles, coinsurance, and waiting pe-
riods are all applicable to individual accounts.
We recommend that exporting companies use consultants and/or qualified in-
surance brokers to review your risk profile and to evaluate what options might
best suit your specific needs. Professionals in export credit insurance can easily cut
through the “red tape,” expedite the whole process, and be available to “hand-
hold” through the underwriting cycle. They are also available to assist with claims
handling and renegotiating policy terms when warranted.
The world economic crisis has clearly identified a need to extend terms. Export
credit insurance is available to most countries and will allow you to maintain mar-
ket share, openopen
share and newnew
doors, eveneven
doors, in theinface
the of these
face challenging
of these times.times.
challenging
Export credit insurance managed properly can be an important tool for the ex-
porter in protecting foreign receivables and increasing international sales.

Worldwide Shipping: Know, Name, and Control the Destination

Having been involved in many aspects of international trade for more than 21
years, the consistent mistakes that exporters make in selling their goods and ser-
vices to global markets never cease to amaze me. Two years ago I wrote about the
importance of understanding and controlling the terms of sale. One great source
this information
for this informationisisINCO
Incoterms.
Terms.AAkey
keyelement
elementofofthe
theterms
termsofof sale
sale is
is specifi-
cally naming a point where you as the exporter are responsible to tender the freight
to the customer and potentially also transfer certain obligations, responsibilities,
and risk at that time.
To understand the importance, it might be best to review a specific example. I
met an exporter based in Philadelphia, who had an opportunity to sell used ma-
chinery for shoemaking to a manufacturing company just outside Mexico City.
The sale was very price-sensitive. When the order came through, the Philadelphia
company had to ship some 39,000 pounds of used equipment, crated, by truck
from a point in Camden, New Jersey to Mexico City. The buyer was under the im-
pression that the sale was made contemplating a delivery to site. The exporter was
under the impression that he was to get the freight to Mexico City and did not take
the time to determine where in Mexico City the client wanted the product deliv-
ered. Negotiations took some nine weeks and no one asked the “where” question.
Mexico City is just that, a city, not a point to receive freight. Particularly for the in-
experienced international
experienced internationaltrader,
trader,like
as both
boththe
theU.S.
U.S.exporter
exporter and
and the
the Mexican
Mexican con-
signee were in this case.
Well, it turned out that the trucker who was used to ship the freight had indeed
provided a quote for shipping the used equipment to Mexico City, but only as far
as their depot on the western side of the city (U.S. side of Mexico City). The con-
signee or importer was on the southeastern corner of Mexico City. As it was to be
known, the distance between truck depot and ultimate destination was just over
fifty-five miles. The consignee would be charged an additional $580 to have the
freight delivered to the final destination.
To digress for a moment, I often run into this situation when someone is ship-
ping to a local point in the New York metropolitan area, only to find out that the

31
 freight will arrive at JFK Airport to be trucked to a local point, called Parsippany,
some forty miles plus in distance through some of the worse congestion in the
world. This
This can
canoccur
occurininany
anymajor
majormetropolis,
metropolis, such
likeasLos
LosAngeles,
Angeles, Jacksonville,
Paris, Moscow, or Sydney. While fifty miles may be “local” in the panhandle of
Texas, it most certainly is not in most major cities on this small, and getting smaller,
planet we trade on.
Getting back to Mexico City. This is a typical example of poor planning, bad
communication, and not paying attention to detail on both sides of the export. Ir-
respective of who is legally liable, a disgruntled customer makes for an unsuc-
cessful deal. In this case, if the exporter sold CIF (cost, insurance, freight) Mexico
City or under newer or similar terms, then the carrier’s depot would be an accept-
able final destination to conclude the transaction. It would have had to name a spe-
cific point in the terms of sale, with an address, for it to go anywhere else.
On a transaction worth $280,000 with a 20 percent profit margin, $550 may
mean very little. But in a $12,000 sale, it is almost 4 percent, which could be all or
part of the entire profit. I have born witness to many a faux pas that have cost one
party or
or the
theother
othertens
tensofofthousands
thousandsofofdollars in in
dollars additional expenses,
additional such
expenses, as in
like in this
Mexico City example.
Quality freight forwarders, logistic executives, and the international consul-
tants who are working for you should be able to point these issues out and cause
you to take the necessary precautions to mitigate the potential pitfalls, but they
need to be advised of just what you are and how you are completing the transac-
tion. They can be excellent partners in keeping you out of trouble.
Awareness, common sense, and taking the time to check, review, and check
again are all essential ingredients to prevent this type of error. Visualize the trade
and act accordingly. When you buy furniture and have it delivered, you do not ex-
pect to pick it up at the local gas station, you expect it to be delivered to your door,
brought in, unpacked, and put next to your bed. You envisioned it, agreed on it,
signed the bottom line, and it happened. Well, when you’re completing the next
global trade, visualize the trade, and make sure that both yours and your client’s
expectations are going to be met when it comes to the delivery point.
Another issue to keep in front of you when determining the point of delivery is
to make sure you know what all the additional costs are and who will pay them. If
you are required to go “door to door,” sometimes referred to as a “free domicile
delivery,”
delivery,” then
thenissues,
issuessuch
like as who
who will
will payfor
pay forinland
inlandtrucking,
trucking,customs
customs clearance,
duty, taxes,
duty, taxes, and
and other
other local
local costs, need to
costs need to be
be identified
identified before the freight is shipped.
Freight held up at point of clearance while a debate is going on as to who pays
will be more costly, bring on excessive delays, and expose the cargo to additional
potential for loss and damage. The best advice is to know, name, and control the
delivery point in agreement with your customer. You will minimize future
headaches and secure the best opportunity for successful global trade.

Gaining Competitive Advantage: Customer Service and Logistics

The subject of international logistics is considered by many executives involved in
world trade to be somewhat the “dirty” part and certainly one of the more difficult
aspects in this global arena. In an attempt to simplify the discussion and address
all the areas in detail, a review of the information will be presented in four parts:
(1) the difficulty of world trade, (2) the relationship of transportation to the whole
picture of global business, (3) eight steps toward competitive advantage, and (4) a
summary, focusing on the concept of competitive advantage.

32
International Transportation and Logistics: Potentially the More Difficult Part
While there are many reasons why transportation and logistics can be the most dif-
ficult part of the export business, they can be summed up as, once something goes
wrong and the goods are already on their way, there is very little you can do to mit-
igate the potential problems you will face.
That time to mitigate, the cost to mitigate, and the opportunity to mitigate be-
come dismal realities in the face of a global logistics problem. When compared to a
domestic shipment, you can always turn the truck around, make a phone call, and
deal with the problem. However, I’d like to see you turn around the 3800 trailer ex-
change units (TEUs) SS Maersk/Sealand Houston on its way to the Dominican Re-
public or a Lufthansa 747 freighter half way across the Atlantic on its way to Frank-
furt. I’d like to see you call the Mexican customs inspector in Neuvo Laredo and tell
him that the North American Free Trade Agreement (NAFTA) certificate of origin
can be in English and does not have to be in Spanish...are you loco or something????
Or attempt to negotiate the Societé Generale de Surveillance (SGS) inspection re-
quirement with an Indonesian government official “on the take” in Jakarta. Or at-
tempt to get freight through customs in Moscow, which is now about at the top of
the list in the world for corruption.
The risks and complications involved are numerous. The distance involved, legal
issues, difference in language and customs, changes in documentation requirements,
variations in transportation infrastructure, differences in time, third world politics,
andterrorism,
war and terrorism,compliance
compliance management,
management, people
people issues,
issues, and soandon,soand
on so
and
onso
is
on
whatmakes
makes it difficult. But
it difficult. Butwhat
whatwe
wereally
reallyare
aresaying
sayingisisthe
theall
allof
ofthese
these come
come under
the category of lack of control or influence once the freight leaves the point of origin.

Some True and Interesting Sea Stories (Slightly Modified to Protect

the Innocent)
All of these stories emphasize the importance of transportation in global business.
It is the nature of the beast or is it the beasts involved?! In 1988, a major U.S.-
based truck manufacturer delivered 288 trucks to an Indian consignee in Port Chit-
tagong only to have the trucks arrive the same week the monsoon season started
and the longshoreman went on strike. The trucks are still sitting in the port yard
rusted to the ground that they came ashore on twelve years ago. Now they’re a
tourist attraction!
A mid-size apparel importer brought 300 leather jackets into the United States
from Brazil only to find out after the boxes were opened that all the jackets were
infested with a weevil-type critter found in Brazilian sisal crops. The importer then
learned that to cut shipping costs their Brazilian exporter had used a consolidator
who coloaded the jackets in a 20-foot container with three pallets of sisal rope. I
wonder where the bugs came from?
A southern-based chemical company exported $1.5 million worth of pharma-
ceuticals to their Mexican subsidiary two days before the devaluation. To this day
only 30 percent of the preexport value has been repatriated to the U.S. parent. How
would you like to be the export manager explaining his excellent sense of timing?
A New York exporter shipped $3 million worth of glass making machinery to
Spain. The carrier dropped the single container during vessel discharge in
Barcelona. The damages sustained and confirmed by appointed marine surveyors
fixed the loss at $2.1 million or almost 60 percent of the value. The carrier who was
sued hid behind the $500 limitation of liability per package defense (read the small

33
 print on an ocean bill of lading!) on the basis that the container was the “export
package.” The exporter claimed negligence, hoping to supersede the limitation of
liability argument. But in the end, the courts held in favor of the defense, claiming
negligence was not proven, an accident was the cause, and that the $500 held up
as the goods as they had been packaged would not survive the international tran-
sit without the benefit of the steamship container. The traffic manager was as-
signed to duty in an Anchorage plant that year. He wasn’t sure why. Need we il-
lustrate more?
The illustrations demonstrate that the importance of transportation and logis-
tics in global trade is twofold. It affects capability to perform and it affects price.
If we cannot perform at a certain price then we will not be competitive with the
Canadians, British, French, Germans, Japanese, Koreans, or the Chinese. Foreign
competitors are breathing down our necks and we need every competitive advan-
tage we can muster. Control all the aspects of international transportation and you
control a very important aspect of your competitive profile. The product, your ser-
vice, and where in the world you operate could make logistics as important as the
FOB Fort Wayne price.
Control all the aspects of logistics: warehousing, preexport inventory manage-
ment, export packing, documentation, mode of transit, EDI capabilities, choice of
forwarders and customhouse brokers, the marine insurance coverage, the ocean
and air carriers, and so forth and you begin to control all the factors that have a di-
rect and indirect relationship to your competitive advantage.

Eight Steps Toward Competitive Advantage

Following are eight steps to use to gain a competitive advantage.
1. Identify what your capabilities are in-house and then what your needs are.
Once these are determined, you can focus on the carriers and service providers that
best suit your needs. One of the advantages of being in the United States is the
close proximity to a significant transportation infrastructure and major gateways,
where the selection of carriers and service providers is the best in the world. The
options to find specialists in your areas of need is great indeed.
2. While you may leave the logistics job to third party professionals, learn the
basics and become familiar with the terminology, your options, and the me-
chanics involved in moving freight from Cleveland to Durban. Develop a grasp
of the basic knowledge of shipping, its components, and what your resources are
and how to use them. It is the two thirds of the iceberg you don’t see that will kill
you. Gain knowledge,
knowledge forforknowledge
knowledgehelps
helpsyou
younavigate
navigatearound
aroundthetheicebergs!
icebergs!
3. Choose your forwarders, customhouse brokers, warehouseman, truckers,
etc. by
who meet
those your
that meetneeds and specialize
your needs in your
and specialize product,
in your your
product, countries
your of
countries
origin or destination
of origin and and
or destination havehave
compatibility with with
compatibility your operating requirements.
your operating require-
There
ments. is nothing
There wrongwrong
is nothing with with
having oneone
having or two carriers
or two carriersworking
workingforfor you.
One might have the bulk of work, but the other works as a safety measure or in a
specialty capability. No forwarder or carrier is all things to all people.
4. Get competitive pricing. You may want to favor a particular carrier, but
keep them honest by getting bids and working with them to keep pricing and ser-
vicing in line. Loyalty is important and should always be factored in, but subtle
competition can have advantages.
5. Group your purchasing clout when you can. Savings could be achieved by
offering a more capable and comprehensive carrier or service provider most of the

34
 work. By having them handle the trucking, the warehousing, the clearance, and
the freight, savings of 15 to 40 percent can be obtained.
6. A quality international transportation program is supported by a quality
insurance program that provides protection from many of the risks involved in
global trade. Marine insurance, political risk, export credit, foreign products lia-
bility are just a few of the exposures that can be transferred to third party insur-
ance companies to reduce your overseas exposure.
7. A quality international transportation program includes attention to detail
in areas
areas,like
suchpackaging,
as packaging, stowage,
stowage, marking,
marking, andand labeling—all
labelingCall knownknown as cargo
as cargo loss
loss control.
control. Monies
Monies spent
spent up up front
front will
will have
have favorablelong-lasting
favorable long-lastingeffects
effects in
in better
product out turn, more satisfied customers, and more orders.
8. Look to your transportation service providers as partners in your business
with common goals and a team approach to getting the job done. Having a pos-
itive attitude of being on the same side of the fence will go a long way in achieving
successful international buying or selling, importing or exporting and ultimately
profitable results.

The Concept of Competitive Advantage

Successful purchasing of international transportation services begins with the un-
derstanding of the risks and difficulties of global trade. Knowledge and informa-
tion is a critical ally in managing your purchasing process and tying this to long-
term team relationships with partners in your carriers and service providers who
at the end of the day will provide you with the best opportunity to mitigate risk
and maximize profit to give you the best opportunity for a competitive advantage.

Foreign competitors are breathing down our necks and we

need every competitive advantage we can muster.

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