As mentioned in earlier columns, these “Basics” articles are not intended for the experienced, while hopefully those new to the Supply Chain or entering the Logistics world from a different business function might benefit from them. In the first two Parts we defined the major Supply Chain partners who actually touch your freight or directly manage its movement and storage. In this segment we’ll look at some key supporting Players, starting with one who never touches - or even sees - your cargo.

A CUSTOMS BROKER is perhaps the single most important key point of success - or failure - in your international Supply Chain. In the U.S., “Customs Broker” refers to either an individual who has passed the Department of Homeland Security exam to earn a U.S. Customs Broker License, or a company who employs such credentialed individuals to offer their services to importers and exporters. Customs Brokers are the experts who know how to legally and lawfully facilitate exports from the U.S. and imports into the U.S. In addition, they can connect you to their overseas counterparts for shipments between foreign shores, plus work with those international resources to support your U.S. imports and exports. Without the guidance of a qualified Broker, your cargo could be delayed for improper paperwork or even detained for a physical inspection – at your cost. And violations could subject your company to fines plus the loss of import/export privileges.

A FOREIGN TRADE ZONE, or FTZ, is a unique “special teams player” for U.S. importers (the EU version is known as a Free Trade Zone). An FTZ is a secure warehousing and/or manufacturing area, usually located at or near a port, which is recognized by U.S. Customs as being outside of the commerce of the U.S. It is therefore a duty-free, intermediate destination for imports. Why use one? If your imports are subject to quotas that have been filled, they can be held for immediate import at the start of the next quota year. Or, if duty rates are scheduled to drop, goods can be entered at the lower rate as soon as it becomes effective. Also, ingredients or components with high duty rates can be imported duty free and made into products with lower duty rates for import. Finally, goods in an FTZ can be exported elsewhere without the need to pay duty and then file for refunds. You really do need the services of a Customs Broker as described above to correctly utilize an FTZ.

Your INSURANCE COMPANY should be one of your important supply chain partners. Aside from providing a financial cushion if something should go wrong (cargo loss or damage not covered by a carrier, liability coverage, etc.) a good insurer will physically inspect the facilities in your supply chain. They will use these visits to assess risks, make recommendations to reduce risk exposure, and establish your annual insurance premiums. Since insurers do not want to pay claims, they will do anything they can to reduce or eliminate them. Think of your personal car insurance discounts for anti-lock brakes, air bags, and anti-theft devices, vs. the surcharges you pay for young drivers, recent accident history, or owning one of the top ten stolen models. In the Supply Chain world, think of the higher rates you would pay for a warehouse without sprinklers or proper dock and door security, or a facility located in a flood zone, or on containers of cargo moving through known pirate waters. There might even be a difference in your cargo insurance rates depending on whether the vessels you select carry armed guards in those dangerous waters. Constructive dialogue with your insurance provider can actually lower your risk of Supply Chain disruption, and your premiums, while improving service to your customer.

Next month, in our final “Players” segment, we’ll look at a handful of other critical logistics service suppliers who can keep your Supply Chain moving by either mitigating problems or avoiding them entirely.

This article is part of the monthly series authored by ISM’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain topics.

George Yarusavage, CTL, C.P.M., CICSM, is a principal in Fortress Consulting, LLC, specializing in Transportation, Logistics, and Sourcing issues. He is also the Treasurer of ISM’s Logistics & Transportation Group and can be reached at gyarusavage@yahoo.com, or (203) 984-4957. Membership in the L&T Group is open to all ISM members who are responsible for or have an interest in Logistics & Transportation.
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