ur last column preached the virtues of cross training. This gives me an opportunity to provide some examples, and continue writing about cross training and intracompany communications. Let's start with the most obvious area of concern, forwarder and carrier selection.
Main carriage transport documents convey title (or at least possession rights) by indicating the conditions under which main carriers may release shipments.They often serve as trigger documents for letters of credit, and as a means of enforcing sight draft documents against payment (also called cash against documents) payment terms. Forwarders prepare main carriage transport documents, and carriers validate them.
Last time, we saw that a buyer and a buyer-designated forwarder could conspire to deprive a freight collect shipper of the original transport document. This seldom happens, but it is possible, when the contract of carriage is between the carrier and the buyer.
A second potential for risk occurs when a buyer-designated forwarder fails to follow the shipper's instructions. For instance, contrary to shipper instructions, a main carriage transport document may be consigned directly to the buyer rather than to order of shipper or order of the buyer's bank.
A straight consignment vessel shipment increases the seller's risk, as the buyer may be able to get delivery without the original bill of lading. That applies to air shipments, which should be consigned to the order of the buyer's bank (with their permission) when shippers desire to restrict access.
UNINTENTIONAL MISTAKES LIKELY DUE TO OVERWORK
An honest error by the forwarder presents a third possible risk. No buyer-designated forwarder cannot possibly know how your company functions as well as your own forwarder does.
Since most forwarders are overworked, time constraints force them to accommodate their regular shippers first, and handle ''walk-in'' shippers with whatever time remains. You are always a walk-in shipper when using a forwarder other than your own.
As risk managers, credit departments should be concerned with successful order execution and resulting correct documentation. This means attempting to capture as many shipments as possible for one's own forwarder, which means using a sales term that makes arranging and paying for carriage a seller responsibility.
It also means carefully communicating one's instructions to forwarders and/or carriers, especially when they are designated by the designated. But credit people seldom make sales quotations or communicate with forwarders. Sales people and traffic people do.
Suggestions: Improve communication between the credit and the sales and traffic functions. Propose sales terms that permit you to arrange carriage through your forwarder.
Cross training can also help with sales and whoever controls product availability. Buyers usually require an estimate of lead time as part of their purchasing decisions.
MULTIPLYING MISTAKES DOWN THE SALES CHAIN
Sales people who fail to obtain accurate product availability information can mislead their customers. The same goes for those in charge of availability when replying to such requests from sales.
Keep in mind that any foreign buyer understands the phrase ''shipment date'' to mean shipment from seller's country, not from the seller's loading dock.
Distances from ports and airports and frequency of carriage transport services can result in these events being weeks apart.
Suggestion: Provide customers with realistic shipping date estimates.
CHECK WITH CUSTOMERS ON USE OF INCOTERMS
Sales terms can pose unnecessary risk if you do not know and understand the current Incoterms version. If you are not using Incoterms 1990, ask yourself what definitions apply to the terms of sale you are using. Better yet, ask your customers, as they probably believe you are using Incoterms.
Suggestion: Learn and use the more common Incoterms.
Insurance also requires intracompany dialogue to avoid problems. Only two Incoterms specify insurance. Both, c.i.p and c.i.f, make it a seller responsibility, so the question becomes who insures if you are using any of the other eleven.
Don't be too quick to say the buyer - it's a gray area that must be addressed outside the sales term. Once you decide who is insuring, the next question becomes what the level of coverage will be. The Incoterm insurance obligation is satisfied by minimum cover, called FPA in the United States. (The same is true under UCP500 letter of credit rules.)
FPA provides very limited coverage, and is inadequate for most shipments. The opposite, all risk, written on a warehouse to warehouse basis and enhanced with war and strike/civil commotion options, is preferable. Ask yourself whether loss or damage to the goods will increase your payment risk.
Suggestion: Propose the Incoterms that enable sellers to insure, and always provide all risk coverage.
This country has an export control regime that imposes strict obligations on exporters. Since penalties can be severe, it behooves sellers to understand their responsibilities.
Suggestion: Provide a formal written compliance policy statement, assigning each department its appropriate role.
None of this should come as news. Frequent readers have seen one or another of these points in previous columns and elsewhere. Still, it's important to draw them together. Cohesive export procedures work better than the alternative, where every export shipment becomes a risky adventure.