Navigating the Corruption Risks of Foreign Customs Clearance

If you look closely at the list of FCPA enforcement actions, a large percentage of FCPA violations have focused on illegal payments made to secure customs clearance.  This is not surprising.  The equities facing a company can be very risky – customs clearance is a bottleneck critical to the company; and foreign customs officials know that they have leverage to extract illegal payments from a company or a company’s agent.

Ready to take the simple and prudent steps required to create the building blocks required for a comprehensive compliance program?  Tired of worrying about your exposure to FCPA enforcement actions?

More Than Shipping is a logistics and supply chain blog with readers from over 140 countries worldwide.

Did you ever wonder why most forwarders advertise themselves the same as every other? Are they all exactly the same? Of course not. And yet so often their pitches are identical. But as a business owner I’m savvy to that, and I’ve developed a “secret” method of evaluating a potential service partner. 

It may sound harsh – if so I apologize politely for offending you, but not for quickly screening overtures that would otherwise waste my time. 

Here’s my secret…. I don’t care about your NVO abilities, house bill of lading, the ISF filing or any of that junk. And yet every time I hear from a logistics provider trying to get my business they start rattling off the same list of acronyms and industry terms. Do you not realize you sound like the last 73 people that called? And did it occur to you that I am not interested in any of it? 

To be fair I understand that it’s important to you. This is how you buy your children’s Christmas presents. I get it. And I also understand that all those details are important in making sure that my product moves quickly, safely and as cheaply as possible. But the ability to toss around terms hasn’t helped all the acronym empowered logistics firms that have failed to move product as promised. 

Will I even know you're there?

So here’s my standard – are you transparent? If not, don’t waste my time. I am only interested in working with you if you can promise that I won’t even know you’re there! 

You think that sounds crazy? Here’s why it’s not. You think you are coordinating the movement of freight. That’s way too simplistic a view. You are actually:

• Determining the success or failure of my lengthy new customer acquisition. Screw up their first shipment and my work is in vain.
• Controlling the new product release for the company awaiting these materials for final assembly and synchronized launch
• Impacting the huge late delivery fines that I will have to pay if this product isn’t delivered as scheduled
• Carrying the livelihood of my workers who need that machine to arrive on time to allow them to increase productivity and manufacture economically here in the US 

My "nine neins" - or "are you the right one?"

That’s not melodramatic. Your TEUs are just stats and triplicate forms, but they are my livelihood. So before you assure me your service is “the best” here’s my “nine neins” list of questions. Answer no to any of them and save us both time. Don’t bother! 

1. Are you transparent?

No offense intended, but I don’t want to know you are there. I have enough to do. When I get off a plane 12 time zones away after 24 hours of travel and have to deal with personnel questions, that’s my job. If I am fighting an email outage, that’s my burden (but rest assured my checklist for IT providers is similar to this!) But answering logistics questions that should have been asked and answered long ago is not. 

2. Can you get me accurate prices, quickly?

Too often deals come down to small details like shipping cost. We know it’s work for you. Sorry, but we are asking you because we are being asked. And, if we ask for CIF, don’t send DDP. Details matter! 

3. Will you provide consistent pricing?

We’ll reward you with loyalty, and won’t waste your time with extraneous requirements. But don’t waste ours by making us compare rates. Treat us fairly every time. 

4. Will you take responsibility?

I could care less about the local delivery complications. You’re the forwarder. End of discussion. 

5. Will you learn my business?

If you know I normally ship DG, then “double check” with us when you see a shipment which doesn’t indicate that. 

6. Will you proactively feed me information?

If I have to call you to find out what’s happening, you’ve failed. You should be keeping me up to date on any wrinkles, including how you are addressing them, and provide an on-line tool for me to track any shipments in transit. 

7. Is your invoicing easy to understand and invariably accurate?

If I have to read through 30 line invoices for a single shipment to catch the ones which are incorrect, you are wasting my time. 

8. Are you going to honor your quotes?

Demurrage may be a “standard charge” but you had all the details when you provided a quote. You knew how far the delivery location was from the port, and how long the turn would take. Not my problem. 

9. Will you anticipate my requirements before I do?

Will you take the initiative to address details that I don’t know are important? Will you proactively keep my shipments “on track”? 

Bonus Question: Is “Well, I assumed you knew” part of your lexicon?

Remember, logistics is your business, not mine. I don’t expect you to understand anything about my manufacturing, but I don’t care to understand the intricacies of what happens once product leaves my dock.
 

I’m sorry (not really) if this sounds harsh. But it’s reality. My customers demand precision and dependability every time. If you want to share in my success you will also share that responsibility.

Ready to work with an expert to help you improve the areas of your export / international business development program that aren't as smooth as you'd like?

 

More Than Shipping is a logistics and supply chain blog with readers from over 140 countries worldwide.

 

If you live in the Midwest USA, as I do (Wisconsin), have you ever wondered how your children’s Christmas toys, your flat screen television, or your furniture got to the stores where you made your purchases? You knew that they were not “made in USA” but were likely from some off shore location in Asia. But what were the transportation methods that got them from so far away into the stores and onto the store shelves for you to so easily and inexpensively make your purchases? Here is a little historical information you may not have known. 

Thanks to Malcom McClean’s introduction of a standardized container box in the mid – 1950’s the first generation of intermodal infrastructure was born here in the USA. Soon afterward, USEC exporters would no longer be dependent upon the labor intensive and costly method of break bulk shipping of dry goods. At that time, hand loading a ship cost $5.86 per ton of freight. Using McClain’s method of standardized containers reduced that cost to only 16 cents a ton to load a ship, a 36-fold savings. Containerization also greatly reduced the time to load and unload ships. McClean knew that an ocean vessel is only earning money for the ship owners when it is at sea moving cargo. Not while it is at port being loaded or unloaded. 

McClean’s first product in 1956 was developed for RO-RO or roll-on, roll-off vessel transportation with the truck taking on a dominant role in the infancy of intermodal transportation. Initial service offerings were from port NY to Florida, Texas, and Puerto Rico. Acceptance however of this new transportation method was slow due to resistance from the stevedore unions and the lack of heavy crane equipment at the port/terminals to load and off load. Still, with the standardization of container design and the very evident reduction of labor costs and dock service time the industry grew with competitors joining this new market. The old method of moving ocean cargo solely by break bulk has ultimately been pushed aside globally for what was a revolutionary new method of ocean transportation. 

The next or second generation of intermodal infrastructure was heavily influenced by the American consumers demand for goods being imported from Asia. Starting in the late 1960’s containership transportation was inaugurated from the Far East to the United States. As the Asia to USA trade grew the need for cost effective intermodal land bridge services across North America between the US West Coast and the US East Coast as well as into the USA Midwest led to heavy focus on steel wheel transportation. That is the rail intermodal system. 

The great distances between the US West Coast and the USA Midwest made rail combined with truck transportation a very competitive way to transport imported ocean container freight. The intermodal industry became even more cost competitive with the introduction of double stack rail cars (lower chassis to allow 2-high stacked containers) and time-definite scheduled services. In today’s system we are accustomed to ocean containers moving through the ports quickly and effectively with the combination of rail and truck service to the USA inland destinations. 

With the widening of the Panama Canal currently underway, a third generation of intermodal transportation in the USA is still possible. Inland waterways and rivers such as the Mississippi and Illinois can offer the intermodal transportation industry ability to move containerized freight via “Marine Highways”. Marine Highways with barge traffic is not a new concept. In China, many manufacturing facilities are moving away from coastal areas into the interior. China effectively uses its rivers to move container freight by barge to an ocean seaport for loading onto a mother-ship. This same concept could be used here in the USA, adding an additional intermodal arm to the current intermodal solution here in the USA. 

However intermodal transportation is handled in the future it is clear that inland ports are here to stay and multiplying. The Journal of Commerce (JOC) recently hosted an event in Chicago, the inland Port Logistics Conference. Most people with geographic knowledge of the USA would not consider cities like Chicago, Kansas City, Atlanta, Memphis, Denver, Atlanta among other locations as a US Seaport. Set aside the fact that none of these cities is actually located on an ocean and consider for a moment that they are simply a waystation for these “ocean freight containers” moving to their final destination in the USA Midwest or other interior locations in the USA. 

Not all of these USA inland ocean import shipments are moved intact in the ocean container. Some are transloaded from the original ocean container into domestic intermodal equipment and then still moved inland on steel wheels (railroad service) to the “inland port”. With improved on-time performance by the railroads and in conjunction with the trucking companies (drayage service) who move these containers from the rail the ocean carriers are able to commit to their customers a higher percentage of on-time arrival. The Class 1 railroads played an active role in developing this logistics model in the 1990’s by further developing the inland ports. Establishing intermodal logistics parks that combine rail access with extensive warehouse space and easy access to the USA highway system has made the long-haul rail and short-haul truck intermodal model very cost effective for US importers. 

CenterPoint Properties was the host of the JOC Port Logistics Conference this year. In 2002 CenterPoint opened its intermodal center in Elwood Illinois (outside of Chicago) with the BNSF (Burlington Northern Santa Fe) Logistics Park as its centerpiece. This year an adjoining intermodal facility was opened with the Union Pacific Rail facility as its centerpiece. Combined, the Joliet and Elwood facilities will handle about 2.5 million TEU’s (twenty foot equivalent units) this year. If you look at these Chicago area facilities as an “inland port” it puts them in the top 5 ranking of USA ports. With further build out and construction these locations are capable of handling an additional 3.5 million TEU’s annually. 

There is still and always will be an ebb and flow between shipping intact containers versus transloading to domestic intermodal trailers on the US West Coast. Labor costs, fuel prices, intermodal rail pricing, and the availability of manpower for trucking will influence importers decisions on the most effective method for their individual needs. Still another factor will be the demand for ocean containers to move US ocean export shipments. Container repositioning costs are important to the ocean carriers in determining where or whether they will allow their containers to move inland in the USA. 

I hope that this has given you some insight into how many factors go into placing product on store shelves for the American consumer and additionally how those factors drive the final cost.

Ready to learn more about taking control of your international business and export logistics?

 

About Michael Martin

Michael was born and raised in Wisconsin, where he got his bachelors degree in business management from Cardinal Stritch University. Michael’s background is in sales for the packaging and international transportation industry. He joined the MTS Logistics team in March of 2011 and works from his home office as a sales representative covering the Midwest USA. 

Fun Fact: Michael and his wife have done the Lake Michigan Circle Tour on their Harley motorcycles!

 

More Than Shipping is a logistics and supply chain blog with readers from over 140 countries worldwide.

The Daily Green reports that container architecture is taking the world by storm. Recycled freight containers bring efficiency, flexibility and
affordability to innovative green buildings, from small vacation cabins to movable cafes, schools and skyscrapers. This apartment building (below) is a prime example.