1. Answer the questions

1. What is the main feature of the intermodalism?

2. What are ten possible intermodal service combinations?

3. Why are all combinations practical?

4. What does the abbreviation TOFC stand for?

5. How is it possible to visualize the trailer?

2. Make word combinations from the following words

1. long-haul a)flatcar

2. door-to-door b) mode

3. standardized c) weight

4. railroad d) service

5. single-transportation e) trade

6. dead f) container

7. intermodal g) economy

8. trucking h)rates

9. air freight i) equipment

10. international j)transfer

Unit 5 International transportation

Before you read

Discuss the following questions

1. How can you explain the success of transportation industry?

2. Does it depend on expanding the level of international trade?

3. Why the logistician must be knowledgeable about the special requirements for moving goods internationally?

Part 1

The dominance of particular transport modes is largely affected by the geography of the country and the proximity of major trading partners. Island countries, such as Japan and Australia, must use air and water modes extensively. However, many of the member countries of the European Union can make use of rail, truck, and pipeline modes.

Route choices become much more restricted than in domestic movement because goods must move through a limited number of ports and customs points in order to leave or enter a country. Although this may make routing easier and more obvious as compared with domestic movements, the problems brought about by the legal requirements of moving goods between two or more countries and the more limited liability of international carriers as compared with domestic carriers can make inter­national movement more complex. That is, international shipments must move under more documents than domestic shipments, are subject to delays brought about by the legal requirements for entering and exiting a country, and are subject to the routing restrictions of two or more countries. In addition, limited carrier liability (ocean carriers need only provide a seaworthy vessel as evidence of responsibility) results in increased protective packaging, and increased insurance and documenta­tion costs as a hedge against potential loss. This helps to explain some of the popu­larity of containerization for moving high-valued goods in international markets.

Physical Plant

The physical plant for international transportation differs only in a few respects from the domestic system. The transportation equipment is of the same type except the size may differ somewhat. The physical routes are different because they cover different geographic territories than do domestic routes. However, a distinct difference is the foreign trade zone and the role that it plays in the routing of international shipments.

Customers' expenses, tariffs, duties, and taxes are assessments that govern­ments place on imported goods. These often prove burdensome to the exporter. The exporter may find it a disadvantage to pay duties to the importing country at the time and in the form that goods are received for import, and/or the exporter might like to use the labor of the importing country or its strategic location for manufacturing and storage but finds it uneconomical because of the duties. Foreign trade zones, or free ports, eliminate this disadvantage, to the benefit of both the exporting and importing countries. There is no direct counterpart to the trade zone in domestic trade.

The important advantages of foreign trade zones can be summarized as follows:

• Imported goods may be left at trade zones for storage, manipulation to change custom classification, assembly, exhibition, grading, cleaning, selling, mixing

• with foreign and domestic merchandise, repacking, destruction, sorting, and

• other services and then shipped out of the zone to another country without cus­toms formalities or control.

• Foreign governments pay duties on goods in the trade zone only when they enter the customer's territory of the importing country.

• Imported goods that are improperly marked for entry into the domestic market can be remarked at the trade zones, thus avoiding fines on the goods.

• Goods may be repacked into smaller or larger quantities.

• Goods that undergo shrinkage to spoilage, evaporation, or damage do not incur duties on the amount lost.

• Savings sometimes can be realized through shipping goods unassembled to the zone and then assembling them.

• The capital tied up in duties and bonds can be released for more profitable uses when products using duty-subject foreign materials are shipped to the trade zones to remain until foreign buyers are found or buyers are, ready for delivery.

• Importers may obtain privileged foreign trade status whereby duties are frozen against future increases.

• Manufacturing conducted in trade zones incurs duties only on the imported materials and component parts in the finished product entering into the domes­ tic market.

• Tangible personal property is generally exempt from state and local taxes.

• Customs security requirements provide protection against theft.

• Merchandise may remain in a zone indefinitely.

Foreign (free) trade zones become forward bases for goods moving to or for goods received from foreign markets or suppliers. The advantages that they provide may well affect the routing of goods. Bonded warehouses, both public and private, can serve as foreign trade zones.

Agencies and Services

Another distinguishing characteristic of international transportation is the number and variety of middlemen, or agents, that can assist the shipper or buyer engaged in international transportation. These include customhouse brokers, international freight forwarders, export merchants, export agents, export commission houses, import commission houses, wholesalers (or jobbers), brokers, international depart­ments of banks, and the like. When agents are used, they provide more services than just transportation. They handle getting shipments across borders. This can include preparing paperwork for customs, coordinating customs inspections, shipment warehousing and consolidation, freight optimization, and shipment tracking. However, firms with significant international activity may establish special groups within their own traffic department to handle international trans­portation matters.

Exercises