Welcome to Arco Transport Group’s mini handbook for beginners in logistics. Various topics are covered that should be of interest to anyone dealing with international transportation issues for the first time.
If anything is unclear or you need further information, or you have any suggestions for improvements, please contact us by e-mail firstname.lastname@example.org.
Transport Companies and their Classification
Transport companies may roughly be divided in two large groups: forwarders and carriers.
What is a forwarding company?
A forwarding company is a transportation arranging company, in which generally a large number of people handling transportation, i.e. freight forwarders, are employed. The company may or may not own any vehicles. The freight forwarders communicate with the customer, offering them the most expedient transport solution for delivering their cargo. Success of a forwarding company is largely dependant on the subcontractors and agreements concluded with the subcontractors. By seeing cargo move only on paper, a forwarder may move thousands of tons of goods per year. Today’s forwarder generally has storing (terminal) facilities, either their own or belonging to a cooperation partner. Forwarders are often required to deal with customs formalities too.
What are the customer’s advantages in using a forwarder?
The task of the company’s logistic is to organise the delivery of cargo timely and without losses. Naturally, the easiest way to execute the assumed task would be to delegate it to someone else whose cargo flows from the same region are considerably larger. Apparently this ‘someone else’ with whom one would cooperate would be a competitor, operating in the same field and supplying goods from the same factory. On the other hand, such cooperation may prove to be much more dangerous than it would appear; after all, a competitor is a competitor. The alternative is to find a carrier who has a truck in the given region and sufficient extra room in the truck for the additional cargo.
Finding such a company and truck is highly time-consuming, considering the fact that there are over 1 400 companies holding international trucking licences in Estonia (ERAA 2007). This is exactly when the advantage of a forwarding company becomes clear: it is much easier for the transportation customer to call a forwarder and order the transportation from them, as the forwarder has a good overview of trucks that are located in a given region at a given time and have an opportunity to deliver the goods at a time and to a place suitable for you.
Fast and timely movement of cargo is most certainly based on information received from the customer. Often the movement of information affects the movement of cargo. The freight forwarder should possess at least the same amount of information on execution of a transportation process as the consignor (sender) does. On several occasions a relevant marking regarding the nature of goods or package is left out from the transport order. However, such ‘small slip’ can grow into a claim of tens of thousands of Euros and result in destroying good cooperation relationships. A good freight forwarder appreciates the devil is in the detail.
What is the task of carriers?
The carriers are transportation companies that own vehicles and that deliver the cargo from point A to point B. The carriers hold international transportation license and most of them are the members of ERAA (Estonian Truckers Association), where the transportation company receives the necessary papers, such as the TIR Carnet workbooks, road permits, CEMT permits. Today carriers are increasingly leaning towards subcontract-based relationships with forwarders, as minimising costs has become a generally recognised success factor.
Why don’t carriers handle forwarding?
Actually, the question could be rephrased: why don’t forwarders handle transportation? Many of them do, however, these two things are largely different: working tools of a forwarder include a mobile phone, computer and a pen, while the carrier’s tools include truck road trains that require maintenance and repairs, they must deal with personnel problems, obtain the necessary transportation documents, certificates, etc.
Who are the customers of carriers?
The carriers’ customers mainly include forwarding companies that have extensive customer bases and large transiting cargo flows. From the carrier’s point of view it is important that its truck is in constant motion, so the truck would not have to wait in e.g. Germany or Holland to find a new cargo before it could head back to its home country. This is also one of the reasons why it is easier for carriers to use forwarding company, rather than looking for cargoes from the potential customers itself. The price of truck standstill is significant. If a truck is idle without a cargo for 5 days, the loss would already be EUR 750 (average).
Different loading units
In transportation industry, a large number of different cargo quantity measuring units are used, and below the most common cargo measuring units in trucking and sea cargo are described.
How much can be loaded on a truck?
Loading capacity is stipulated by different international requirements, such as dimensions and weights of vehicles allowed on roads. The most common max cargo measuring units are the following parameters:
24 000 kg
34 EUR pallets (1 200 x 800 mm)
26 FIN pallets (1 200 x 1 000 mm)
85 m³ … 112 m³ (depending on the trailer type, either full or semitrailer)
13,6 ldm (loading metres).
The below table demonstrates the interdependency of different cargo measuring units.
|2||0,8||5||1480||EUR pallets (1200 x 800 mm)|
|6||2,4||15||4440||(total meters used of trailer length)|
|14||5,6||35||10360||The transport price of part-loads|
|15||6||37,5||11100||is calculated on the basis of the|
|16||6,4||40||11840||biggest feature of either weight or|
|18||7,2||45||13320||E.g. 1 EUR pallet, 1 m3, 300 kg,|
|19||7,6||47,5||14060||would be considered 1 EUR pll|
|20||8||50||14800||Here the “biggest” indication is pallet.|
|22||8,8||55||16280||but for 1 EUR pallet, 1 m3, 1 400 kg,|
|23||9,2||57,5||17020||the biggest indication is weight|
|24||9,6||60||17760||therefore if invoiced still in pallets, it|
|25||10||62,5||18500||would be amount for two pallets.|
Review of trucks used in international freight transportation
In Europe trucks of different manufacturers are used: DAF, Iveco, MAN, Mercedes-Benz, Renault, Scania, Volvo. All of the above companies have their own all-European sales and maintenance networks. There are other manufacturers of heavy* trucks that operate in local markets but do not have a Europe-wide network, which in turn makes operating in international transportation risky.
* Trucks with a full weight of over 16 tons are classified as heavy trucks.
Bolster-type truck with a semi-trailer
A bolster-type truck usually has a bridge combination of 4×2 and the semi-trailer has 3 bridges. Such combination is designed for a full weight of 40 tons, which is valid in most European countries. Among semi-trailers, tent trailers with aluminum ribs, tent trailers with ‘curtain sliders’ and without ribs, isothermal refrigerator trailers, container trailers, articulated trailers, tilting trailers and cistern trailers are used.
All the above semi-trailers have different models, depending on the nature of work.
Truck with van built on the chassis and a full trailer
The same possibilities apply as for a semi-trailer.
Truck with van built on the chassis and a centre axis trailer
Truck, chassis 6×2 and trailer with 2 bridges (Euro truck train). Lately, this has become a very popular combination all over Europe. It enables transport of 38 EUR pallets. All lengths are strictly stipulated by European law. Total length from the nose of the truck to the rear point of the trailer is 18,75 metres. Distance from the rear point of the cabin to the rear point of the trailer is 16, 4 metres. Length of the cargo space, length of the truck’s van + the trailer’s van is 15,65 metres.
Containerised goods can be transported on roads as well as on sea. If two or more different modes of transportation are used in a single shipment, then it’s called multimodal transport. The rates and cargo capacity in marine transport are often stated in TEU’s (20ft container equivalent unit). It is based on the volume of a 20ft long intermodal container, a standard-sized metal box which can be easily transferred between different modes of transportation, such as ships, trains and trucks. 40ft container = 2TEU.
How much can be loaded in a container?
The storage capacity of a container depends on its size. The most well-known and widely used containers are 20- (20’DC) and 40- (40’DC) foot containers. However, to meet the diverse needs of freight transportation, containers with larger storage capacity are used: e.g. 40’HC, a foot higher of the above-mentioned, and 40’PW and 45’HCPW in which standard size (EUR-, FIN-) pallets can be loaded side by side.
Container sizes in metric system (metres):
|Parameters||20’ DC||40’DC||40’HC||40’PW||45’ HCPW|
|Max. weight (t)||21,6||26,7||26,5||26,7||29,5|
Multimodal transport (multimodal, intermodal, combined transport)
Multimodal transport is the transportation of goods under a single contract, but performed with at least two different means of transport (rail, road, sea, air). Intermodal freight transport, i.e. combined transport involves the transportation of freight in an intermodal container of vehicle, using multiple modes of transportation, without any handling of the freight itself when changing modes.
Multimodal transport is an increasing trend in Europe. In order to avoid risks arising out of the nature of cargo, such as possible breakage (e.g. furniture), the forwarders use combined transportation. It is a common fact that trucks rattle and vibrate while driving which can result in damaged goods. So forwarders use the services of marine transportation as an intermediate link in combined transportation (read: in order to avoid Polish roads). A semitrailer is sent directly from e.g. Belgium or Germany to Tallinn by ship.
More and more goods are transported in 45’HCPW containers instead of trailers. Containers can be transported on road as well as on sea. For instance goods are loaded into a container in France, transported on truck to the port in Belgium from where a vessel ships the cargo to Estonia, where the truck delivers goods to the client’s door. Such delivery chain is greener, cheaper and more secure than road transport; moreover, delivery time is often shorter.
Useful abbreviations in trucking
ADR – European Agreement concerning the international carriage of dangerous goods by road, dated September 30 1957
ATP – (Agreement of Transportation Perishable) agreement on international transportation of perishables and on use of special vehicles for the transportation thereof
CEMT – Conference of European Transportation Ministers
ERAA – Association of Estonian International Road Carriers
EEA (EFFA) – Estonian Freight Forwarders Association
AL – Autoettevõtete Liit – Union of Estonian Automobile Enterprises
TIR – system developed according to the TIR convention for speeding up customs procedures
IRU – International Road Transportation Association
ARK – Autoregistrikeskus – Estonian Motor Vehicle Registration Centre.Address: Mäepealse 19, Tallinn, Estonia
Links to International organisations
The following topic is inserted in order to provide a quick overview of delivery clauses. This is indirectly related to transportation, but closely related to the customer-supplier relationship.
Incoterms are delivery clauses ratified by the International Chamber of Commerce(ICC), which have an explicit meaning for the parties of a sales transaction in international trade, be it in Estonia or in America. The delivery clauses divide different obligations and costs between the parties throughout the entire sales process. There are 13 different clauses, which specifically state the obligations of both parties and the costs of the parties during the entire journey of goods from the warehouse of the supplier or the seller to the ‘door’ of the buyer.
ICC first published their version of delivery clauses in 1936. The latest version was published in 2010.
11 terms are divided into 2 categories based on method of delivery: 7 for any mode of transport & 4 for sea and inland waterway transport. Below you will find our simplified interpretation of the Incoterms® 2010:
Delivery clauses for any mode of transport
|EXW (place of delivery)||Ex Works||The seller makes the goods available at its premises. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination. Used for inland transportation.|
|FCA (place of delivery)||Free Carrier||The seller delivers goods, cleared for export, to the buyer-designated carrier at a named location. The seller must load goods onto the buyer’s carrier.|
|CPT (place of destination)||Carriage Paid to||The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier at place of shipment in the country of export.|
|CIP (place of destination)||Carriage and Insurance Paid to||Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.|
|DAT (terminal at port or place of destination)||Delivered at Terminal||Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal.|
|DAP (place of destination)||Delivered at Place||Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer.|
|DDP (place of destination)||Delivered Duty Paid||Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is responsible for unloading.|
Delivery clauses for inland and waterway transport
|FAS (port of shipment)||Free alongside Ship||The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Typically used for heavy-lift or bulk cargo; not for multimodal sea transport in cotnainers.|
|FOB (port of shipment)||Free on Board||The seller must load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel. The seller must clear the goods for export. Not for multimodal sea transport in containers (FCA to be used for that)|
|CFR (port of destination)||Cost and Freight||Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is not included.|
|CIF (port of destination)||Cost Insurance and Freight||The same as CFR except the seller must in addition procure and pay for the insurance.|
In summary, Incoterms® 2010 are:
- 11 explicit delivery clauses of international trade
- translated into major languages that are used in international trade
- comprehensively used worldwide, especially in Europe
- neutral, i.e. as ICC is not a business entity, ICC cannot be held liable for setbacks resulting from use of the delivery clauses
- designed to cover the entire journey and is defined and described in detail
- flexible, i.e. the seller and the buyer decide and agree on the clause they are going to use in a given situation
- applicable with the UN ‘Contract Law’ on international trade, in conformity with the Vienna Convention
The Incoterms® should not be:
- construed as the law, since ICC is a private sector organisation and does not hold legislative power, the delivery clause should always be defined in an agreement
- used alone, they should be associated with a specific geographical location
- used without consideration and without defining them in detail in transactions, as some of the clauses also determine the form of payment for the goods
- over emphasised in concluding of a transaction, as to some extent, they are still vague.
In conclusion, it should be noted that the delivery clauses certainly play an important role in simplifying the transactions of international trade, however, prudence and consideration should be applied here as much as anywhere else.
Insurances and Guarantees
Upon transporting of the customer’s goods, all transport companies take responsibility to deliver the goods from the consignor to the consignee intact and without losses. But it is important to keep in mind that both the liabilities of the carrier and the forwarder are limited. For the road transport, the upper limit of the carrier’s liability by the CMR Convention is 8,33 SDR per one brut kg of the goods. SDR (Special Drawing Rights) is an official monetary unit of International Monetary Fund (IMF) and its exchange rate is usually stated together with the other currency exchange rates. If your cargo is light but valuable, extra cargo insurance which entirely covers the value of the goods would be reasonable to consider.
More information and good advice from the experts of this field in Estonia can be found at www.cmr.ee.
Overview of documents accompanying the cargo
Different documents are necessary for the international trade of goods include the following:
- Papers issued by the consignor
- Export documents of the country of origin
- Import declaration
- CMR – international waybill
Since Estonia joined the EU (in 2004), there is no need for neither export nor import declarations when crossing the country borders within EU anymore. In this case, having the following documents alongside will do:
- CMR – international waybill
- Packing List and Invoice (not obligatory, can be sent via e-mail).
Additional documents may be required in case of specific goods, e.g. alcohol and hazardous cargo.
Countries, where it’s still necessary to fill in export or import declarations in Europe are for exampleNorway, Switzerland, Liechtenstein and Andorra. TIR-type trailer (with the possibility to seal the whole load) is also required upon transport to/ from Russia, Albania, Bosnia and Herzegovina,Croatia, Macedonia, Serbia and Montenegro.
The papers issued by the consignor certainly include the invoice, which is necessary for determining the customs value, as well as other documents or special permits verifying the quality of goods.
Export documents of the country of origin include the customs export declaration issued by the consignor, unless otherwise agreed with the transportation company.
NB! The third sheet of the cargo export declaration prepared by the consignor is to be returned to the consignor. Based on that sheet the consignor is able to prove that the goods have left the country and the consignor does not have to pay the VAT.
Import declaration – for further description of customs declarations and formalities, please refer to the chapter on Customs and Customs Formalities.
CMR is the international waybill, completed by the carrier on site. One copy of the said document shall be given to the consignor, one to the consignee and one to the carrier as a proof of the transportation executed. The original shall be sent to the client together with an invoice for transportation services. Sample CMR.
Cargo agreements may be divided in two: long-term and single cargo agreements. Long-term cargo agreements are considerably more detailed than the single agreements. Long-term agreements are generally concluded for a period of one year and they stipulate the rights and obligations of the parties in the given legal relationship. Single cargo agreement is generally a simple e-mail or fax, which in addition to the loading and unloading addresses includes the contact persons and telephone numbers, quantity of goods, loading date, desired (requested) unloading date and the agreed transportation price.
Customs and customs formalities
As mentioned above, the trade with the members of EU is relatively easy and the amount of documents accompanying the cargo is significantly smaller in that case than the amount of papers accompanying the cargo from/to non-EU members. In the latter case, be prepared for some additional paperwork.
Below you will find a brief description of customs formalities, the documents accompanying the cargo while importing and exporting. In order to not frighten you with the huge of amount of the necessary paperwork, it should be mentioned, that our expert customs brokers are kindly ready to help you with the documents.
The documents necessary while importing:
The cargo, yet without the customs clearance, from outside EU will reach to Estonia whether:
- through other EU-countries, bonded warehouse, or customs terminal with transit declaration (T1), or;
- straight from the non-EU countries with TIR-Carnet, and;
- the movement of cargo to the inland customs house is also possible with the entry declaration (SD) from the border.
After that, import declaration is filled in. However, the goods may not be used before the final declaration (IM4) is prepared and customs charges (VAT, state duty, possible excise duties) are paid.
In addition to the above mentioned, the following documents are also needed for smooth customs clearance:
- CMR (the international waybill)
- Packing List
- The document confirming the country of origin (and often also allowing tax benefits) (EUR1, Form A, the certificate of origin)
- In case of certain Incoterms (e.g. FCA, FOB, EXW), the transport invoice is also necessary
- Some goods (e.g. edibles, groceries) require Phytosanitary Certificate for the border, or upon importing to EU, notification, that the goods meet the EU-norms.
The documents necessary while exporting:
For exporting from the European Union, the following possibilities can be used:
- Transit declaration (T1),
- TIR Carnet, or
- The cargo will move to the EU border with the export declaration.
In the latter case, it’s important to confirm the border crossing (in a customs institution of the European Union a note is made on the customs declaration), which proves the act of export to the Tax and Customs Board.
Other accompanying documents are similar to the ones used for import (invoice, CMR etc).