Exchange Rate Pass-Through To Import And Export Prices - Discussion And Challenges In Transportation Process

Discussion

Discuss about the Exchange Rate Pass-Through To Import And Export Prices.

The current trend in the international business is much more competitive than it was a few years ago. This is mainly due to the reason that in the current time, goods are being exported and imported throughout the world. In addition, all types of goods including both perishable and non-perishable goods are also being exported. Thus, these factors are leading to the gain in importance for the transporters and the shippers (Yang & Wei, 2013). This is due to the reason that, efficiency and effectiveness of the shipping lines and the transporters determines the safe, secure and swift transportation process of the consignments.

This report will discuss about the entire transportation process along with the process of documentation that will be required in transporting the live oysters from Australia to China. It is told that 10000 ton of live oysters will be imported from Australia to China.

One of the major challenges that are being anticipated in transporting the live oysters is the perishable nature of the items. This is due to the fact that oysters are perishable in nature and it should be transported in minimum time possible (Mason & Nair, 2013). The less time will be incurred in the transportation process, the more will be the time for processing the products in the further stage. However, the major challenge is to have fast, safe and cost effective way of transporting the live oysters.

Another major challenge is to maintain proper infrastructure in transporting the oysters. This is due to the reason that oysters cannot be transported in any containers. They should be transported in controlled temperature and facilities in order to make them stay alive throughout the process.

Another challenge is the cost of the transportation process. This is due to the fact that having fast shipping options such as airways will incur huge cost. On the other hand, slow process of transportation such as waterways will cost less but it will take more time.

The last challenge will be in relation to the rules and regulations in terms of importing food items in China. They are having different rules and regulations regarding the importing of seafood from other countries. Thus, it will be difficult to comply with all these regulations and transport the items in minimal time.

The first step involved is transporting the goods from the exporter’s place to the forwarder’s place. This process will ensure that all the goods are accumulated in one place and they are ready for final process of transportation. In this case, piggyback process of transportation will be initiated. This is due to the reason that transportation of oysters should be made in less time. Initiation of the piggyback will ensure that railways and the roadways will be used and lees time will be incurred in transporting the goods to the forwarder’s place (yang et al., 2014). Using of railroad will also ensure those roads disturbances will not get emerge.

Challenges to the shipment

The next step is clearing the documentation process in export customs. This is important due to the reason that without having cleared certification, the goods cannot be decked with the shipping lines. In this case, the licensed custom house brokers will be used. They will help in clearing the documentation process at earliest and it will take less time in decking the final consignments with the shipping stream.

In this step, the final consignments will be forwarded to the origin port where the final inspection and certification will be initiated. In this case, dry port can be used if the origin port is not having the facilities to store perishable items. However, it is to be noted that dry port should be nearer to the origin sea port in order to incur less time in transporting the goods from dry port to sea port. It is also to be ensured that all the inspections and certifications should be done itself in the dry port. This will prevent the loss of time in final loading of the goods with the shipping stream.

It is the most core step of the entire process of transportation. In this step, ocean freight will be used in transporting the good from Australia to China. The sea distance between Australia and China is 7,448 kilometers. Moreover, the sea route is chosen due to the reason that the route will be direct involving only the Pacific Ocean. Moreover, seaways will also ensure that the cost of transportation will be lower (Visser, Nemoto & Browne, 2014).

The last step will be the import haulage. This step will involve unloading the goods from the freight and transporting them to the destination port. This step will also involve checking of the goods according to the papers and documents. In this step also, piggyback transportation will also be initiated in order to cut the cost along with incurring less time. The responsibility of shipping line will get stop from this place when the importer will take the charge of the consignments.

One of the major risks for the exporter will be the physical risk. This is due to the reason that accidents can happen in any point of time in the sea freight. This will cause physical as well as financial loss (Coleman, 2013). Another risk that will be faced by the exporter will be the risk associated with the payment. This is due to the reason that, in case of using of letter of credit, the exporter will always be at risk regarding receiving the payment from the importer’s bank. Exporter will also face the risk of financial loss in relation to the change in the exchange rate. This is due to the reason that if the valuation of Chinese yeans against Australian Dollar gets changed, and then it may have negative impact on the exporters.

Steps in transportation process

It is important for the importers to have proper letter of credit from the Chinese bank with having SWIFT code. Agricultural bank of China with having SWIFT code of ABOCAU2S will be selected. This is due to the reason that this bank is having their branch in Australia and thus it will enable the exporter to have the access to the finance. It is also important for the importers to have the bill of lading from the shipper and the shipping line is nominated by the importer. It is important for the importers to check the consignments in the destination port according to their required standards.

Fremantle harbor port will be used to export the goods due to the reason that it is the largest most accessible port in the Western Australia. Thus, being the shipper is from the Western Australia, it will be beneficial to use this port in order to have less time incurred in transportation. On the other hand, Tianjin port will be used as the import destination due to the reason that it is the only port which is nearest to the Forbidden City of China that is the location of the importer. Thus, the route of shipping is being designed by considering the less time incurred in the process. The major objective of this shipping route is to have less time incurred in the transportation process.

Letter of credit will be used as the payment option. This will have safe options for both the importers and exporters. This is due to the reason that initiation of the letter of credit will ensure that importers will only pay the money by receiving the right goods (Schmidt-Eisenlohr, 2013). On the other hand, exporters will also have the safer options in terms of payment due to the presence of banks in the transaction process. The shipping line will be paid by the exporters upon receiving the bill of lading.

One of the major incoterms that will be used is CIF. This incoterm will e used in order to cover all the cost including the cost of insurance. According to CIF (Cost, Freight and Insurance), it is the responsibility for the exporter to cover all the cost up to the shipment to the destination port. Moreover, in the case of CIF, it is also important for the exporter to insure the value of the goods up to the 110 percent of their value. Thus, from the perspective of the shipping line, CIF is a safer option due to the cost of insurance covered by the exporter and the payment of the shipping cost at the very first stage by the exporter.

Risks for the exporter

Another incoterm to be used is DAT. This refers to Delivered At Terminal. According to this incoterm, it is the responsibility of the exporter to cover all the cost including the charges of exports, shipping charge and unloading charge. Thus, in this case also, the risk of the shipping line will be less compared to other incoterms (Bergami, 2013). In this case also, carriers will get their payment from the exporters from the very first stage of the transportation process.

Choudhri and Hakura (2015) stated that in global marketplace, the shipping agents plays an important role in taking the products from the exporters and make timely delivery to the importer. The contract for the shipment includes the details of the offer, the acceptance statement, consideration and intention to create legal relations. The acceptance statement must be in identical terms with that of the offer which will be beneficial for the shipping agent in terms of maintaining transparency and loyalty. Moreover, the consideration statement comprise of the ‘price’ of the two sides of the bargain. Lastly, the intention to create legal relations document comprised of statement related to the agreed on treatment of the agreed on the legal consequence of the agreement. Moreover, the contract should also highlight the safeguarding clause, loading /discharging survey, vessel´s lay/can and nomination, vessel´s suitability, vessel´s notice of readiness, demurrage/ detention, transshipment, bills of lading, vessel´s classification and age, loading and stowage on vessel, taxes and dues and deviation en route All these elements provides small details to the exporter company through which they can easily reply on the shipping agents and the shipping agents can also perform their operation based on the contracts. The contract should also contain the details of the compensation amount if any oyster will found dead.

Das et al. (2013) stated that oysters should not be packed in standing water. Hence wet-lock boxes with liners and gel ice will be used. The box will be made more protected by using insulated Styrofoam boxes. The boxes are designed with ventilation so that air can be passed through the boxes as absence of air makes the oyster dead. Each of the container is then boxed in a wooden case and the outside of the box comprised of the details like name and address expediteur, name and adress costumer, salubrity number, weight, calibre, name of oyster, number of oysters, packaging date, expiry date and batch number.

Important considerations for the importers

The term FCL is termed as “Full Container Load” and is used in this case for shipping live Oyster from Australia to China. Less than Container Load (LCL) is not required as this shipment need full containers. All the containers are of height 20 feet which have the payload capacity of 25,000 kg which is equal to 25 tons. Thus, 10,000 tons of oysters need 400 containers to be filled. Thus, only FCL will be considered and not the concept of LCL.

The export country is Australia and the export documents for customs clearance should include commercial invoice, packing list, bill of lading, certificate of inspection, certification of Insurance, certificate of origin, bill of exchange and shipment advice. The Australian government also takes 10% of the total goods charge as GST but in this case, Seatrade Fowarding Worldwide is already registered for GST and hence all the GST tax are free for the company. The cost for 20 feet container for Dry Non-Hazardous products is AUD435 and thus the total tax payable to the government is AUD174000.

The forwarder need to get the customer clearance documents from China that comprised of bill of lading, invoice, shipping lists, insurance policy, customs declaration, sales contract, Hygiene / Health certificate, Sanitary Certificate, Tariff rate quotas (TRQs), Certificate of free sale, Sample of original label, Sample of Chinese label along with inspection certification issued from General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ). The invoice should present with the number and date of issue, name and address of shipper and receiver, description of goods, VAT numbers for shipper and receiver, harmonized system code, customs registration codes, value of goods, country of origin, payment terms, delivery terms.

The importer from China needs to show some documents in order to prove their genuineness. These documents used in port clearing contained Air waybill (AWB) which shows the details of the sample of original label and the charge of shipments. The other documents are Bank Bill (BB), Bank Guarantee (BG), Bill of lading, Certification of origin, details about the insurance policy, invoice details, packing list and the amount of the received objects, pro forma invoice and registration document (RD). 

Conclusion 

This report highlights the export procedure of live oyster from Australia to China, Forbidden city. This report discussed the detailed information of the challenges to this shipment, packaging of the oyster shipment along with route of the shipment, payment, insurance, INCOTERM, contract, packaging, FCL and customs clearance. This report shows that in order to transport 10,000 tons of Oysters, the exporter need 400 containers which are shipped through Ship. Moreover, details of amount of the Government Tax needed are also presented along with the food certificates that should be shown for both the exporter and importer’s side. Thus, it can be concluded that there will be different challenges to be faced in transporting the oysters from Australia to China. This report discussed about these challenges and in accordance to that, an effective and ideal process of transportation is being discussed. This report also discussed about the shipment route to be used along with the payment options. Two most effective incoterms are identified in this report, which will ensure the security of the shipping carriages. In addition, this report also discussed about the documents that are important in the import and export process between China and Australia. The custom clearance certificates mainly includes commercial invoice, packing list, bill of lading, certificate of inspection, certification of Insurance, certificate of origin, bill of exchange and shipment advice that is required for bit the parties. However when the shipment is received in China, the importer needs to show the port clearing documents, which comprised of Air waybill (AWB), Bank Bill (BB), Bank Guarantee (BG), Bill of lading, Certification of origin, details about the insurance policy, invoice details, packing list and the amount of the received objects, pro forma invoice and registration document (RD).

Reference List 

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