Top Shipping Mistakes and How to Avoid them | Interview with a Shipping Expert
We spoke to Johnatas Montezuma, a shipping expert and specialist in complex supply chain solutions for some useful incoterms and shipping suggestions for first time exporters.
Previously, he held jobs in American Airlines, Maersk and Damco. With more than 15 years of experience in the logistics field, Johnatas is an expert on logistics network design and supply chain operations for large customers in multiple countries. He has worked in 7 countries including Panama, Australia, Netherlands and USA. He is interested on supply chain trends, data science, e-commerce, blockchain and e-commerce fulfillment for small and mid size companies.
Johnatas is the creator of https://internationalcommercialterms.guru, a useful resource for commercial contracts and his material as reference to law schools, supply chain students, professors, forwarders and shippers.
What was your role in freight forwarding and what did it involve?
I started my career as airline cargo agent for American Airlines, then moved into more senior roles with Damco as regional operations manager for Latin America, Implementation Manager in Australia and Global Program Director in Netherlands. During my career, I started as operations lead for logistics and evolved into more senior roles where as part of a global team I designed and implemented supply chain operations for large customers like Procter and Gamble, HP, Unilever, Syngenta, Microsoft, etc.
Why are you interested in freight forwarding and IncoTerms?
What are incoterms?
What are the top 3 mistakes you’ve seen freight forwarders and importers make, and how would you suggest overcoming it?
Using FOB for containerised cargo: historically, FOB was named when the bulk cargo need to be loaded before the common use of a container and specified when goods were “passed over the rail by hand”. Nowadays, it is common to see agreements used FOB for air shipments or when cargo is delivered at the warehouse.
The typical solution is:
Less than Container Load: use FCA at forwarders facility
Using Incoterms without location: “FCA Hamburg” can mean a lot of different locations. Shippers must specify the warehouse and address.
Not knowing about THC charges. Shipping lines and port terminal operators treat THC different as per local practice. There could be big surprises in freight if buyers and sellers are not aware of these cost. To avoid this issue, get familiar with the carriers to be used and cost involved before shipping.
Can you give a real example of how you’ve helped structure a freight forwarding deal?
A very common scenarios are medium size retail customers located in Australia which are expanding sales in Asia. Products are sourced from different vendor locations in China under different terms like FOB, EXW, FCA.
Frequently, vendors in China deliver late, causing additional cost and buyers. A good solution is to set delivery terms as FCA Forwarders Warehouse in origin and instruct the forwarder to issue a Forwarders Cargo Receipt (FCA) at time of goods delivered. In this way, customers can control when goods should be delivered and decide when to ship them after the reception is confirmed.
By having a proof of delivery (FCA), the vendor benefits requesting the collection of payment earlier than FOB or CIF where a Bill of Lading is required to show the goods are on board.
What’s the future of freight forwarding?
Freight Forwarders are becoming more digital these days, changing from EDI to API and integrating systems with multiple parties. Start up forwarders like Flexport can handle shipments in a more effective way than traditional forwarders by having better operational systems.
We will see more blockchain initiatives in forwarding and shipping, specially by replacing document authentication and operational execution with smart contracts. Machine learning will become more popular now that more complex algorithms are publicly available through SaaS providers.
If you were to make changes to shipping terms, what would you do and why?
While working in a large project with Syngenta, I notice that some Incoterms didn’t meet the chemical industry requirements. Specially when the transfer of goods for DG products happen into containers that are rented or belong to a different company. I would include more terminology within the existing terms that are applicable to the chemical industry.
Finally, given the huge number of mistakes made, what’s the top tip you’d give to a first time importer?
Always use the right Incoterms and get professional advise to understand costs and risks before making your first import. Buyers can request freight forwarders on what would be the best Incoterms to use depending on the location and method of transportation.