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Module 1
NQF 2 - International Trade – Air, Land,
Sea and Rail Transport
Reference Material
Global Maritime Learning Solutions
Study guide compiled by:
Mark Goodger
Edited date – 14 April 2020
# Page layout by Charity Mukwevho
Copyright 2020 edition. Date of revision April 2020
Global Maritime Legal Solutions (Pty) Ltd
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third party without the express written permission of GMLS.
No part of this book may be reproduced in any form or by any means without written permission from
the publisher.
WARNING AGAINST PLAGIARISM
ASSESSMENTS ARE INDIVIDUAL TASKS AND NOT GROUP ACTIVITIES. (UNLESS
EXPLICITLY INDICATED AS GROUP ACTIVITIES)
Copying of text from other learners or from other sources (for instance the study guide, prescribed
material or directly from the internet) is not allowed – only brief quotations are allowed and then only
if indicated and referenced as such.
You should reformulate existing text and use your own words to explain what you have read. It is
not acceptable to retype existing text and just acknowledge the source in a footnote – you should be
able to relate the idea or concept, without repeating the original author to the letter.
The aim of the assessments is not the reproduction of existing material, but to ascertain whether you
have the ability to integrate existing texts, add your own interpretation and/or critique of the texts and
offer a creative solution to existing problems.
Be warned: students who submit copied text will obtain a mark of zero for the assessment and
disciplinary steps may be taken by the Faculty and/or University. It is also unacceptable to do
somebody else’s work, to lend your work to them or to make your work available to them to
copy – be careful and do not make your work available to anyone!
“Welcome to MODULE 1 of the GMLS NQF 2 integrated International Trade
Bridging skills training programme. This Module 1 contains 5 Chapters which
you should read and study before completing the final assessment to achieve
your Level 1 Competency Certification. You will find your international trade
competency essential and beneficial to your successful basic related trade
operations and understand trade compliances in the future. We wish you every
success in completing this Module.”
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ICONS LEGEND – WHAT DO THEY REPRESENT?
When you see the “LEARN” Icon on the left, this means
the Outcome required of you in that part of the Chapter.
This is the skill we need you to learn!
When you see the “WRITE” Icon on the left, this means the
Criteria required to test you to see if you have learnt that
skill in that part of the Chapter. This is what you will be
tested on!
MODULE 1 – INTERNATIONAL TRADE
This Module 1 consists of 5 Chapter relevant to International Trade and will be dealt with as an
integrated module with 1 integrated assessment for competency on the below:-
Mod Chapter No Type US No
No
Description NQF Credits
1 1 Core 252380 Explain transport principles used in Level 2 7
international trade
1 2 Core 252375 Apply knowledge of basic geographical Level 2 7
principles
Demonstrate an understanding of the
1 3 Core 252372 concepts underlying importing and Level 2 9
exporting
Demonstrate an understanding of security
1 4 Core 252374 and confidentiality awareness Level 2 3
procedures
1 5 Core 114974 Apply the basic skills of customer service Level 2 2
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Chapter 1
Explain transport principles used in
International Trade
Reference Material
Global Maritime Learning Solutions
PURPOSE OF THE CHAPTER
The person credited with this chapter is able to understand transport related legislations and
contractual conditions of the transport carrier. They will also have the ability to distinguish between
the various transport services available in South Africa and to make a choice of transport mode based
on this knowledge.
The qualifying learner is capable of:
Explaining transport legislation in international trade.
Explaining standard trading conditions of transport and support service providers.
Distinguishing between the different transport services available for South African importers
and exporters.
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EXPLAIN TRANSPORT LEGISLATION IN INTERNATIONAL TRADE.
INTRODUCTION
The role of transportation in the global supply chain is to move cargo from one point to another within
the supply chain. The condition of the cargo must be maintained throughout the movement cycle in
order to reach the end-user or final destination within the agreed timeframe and at the agreed cost,
terms and conditions. Such movement of cargo may be transported on land (Road and Rail), on sea
or in the air.
ROAD TRANSPORT
Systems, Information Technology
Transportation is one of the most expanding industries, based and supported by both globalisation
and economic growth. With increased demand for transport services, more cargo will be out for transit
during sea, land and air transports in the future. When the amount of traffic increases accidents due
to inadequate cargo securing many more frequently lead to severe consequences. Accidents can,
however in many cases, be prevented by the knowledge of risks associated to the specific transport
mode.
The majority of transport companies as well as industries generating goods, frequently transport
cargo between different countries and sometimes also between different parts of the world. Regarding
cargo security, especially for road transports, this has historically led to confusion, since the
harmonisation of regulations between different locations is deficient. The result of inaccurate
harmony in the legal field of the transport sector has many disadvantages and in some instances
companies are not fully aware of how they should arrange their cargo security policies and
procedures for compliance with all the applicable regulations. In South Africa, the legislation relevant
to Road Transportation is the National Land Transport Act 5 of 2009.
Road freight (also sometimes referred to as 'road haulage' or 'road transport') is often the most
effective mode of transport for Southern African countries, particularly when exporting to the land-
locked countries of Zambia, Zimbabwe, Malawi. Road haulage also operates between South Africa
and Swaziland, Lesotho, Botswana and certain parts of Mozambique, Angola, and the Democratic
Republic of Congo, Tanzania and Namibia.
Not only is road freight a consideration for exports into Africa, but also a large portion of exports from
land-locked cities such as Johannesburg, Kimberly, Pretoria, etc. are moved down to the ports
(Durban, Cape Town, Port Elizabeth, etc.) by road. Even if you are based near a port, you are likely to
use road transportation to move your goods from your factory to the quayside. Thus road
transportation may form part of your transportation considerations, even if you are shipping your
goods by sea.
Factors influencing the choice of road haulage for export
The decision to use a road haulier for the whole or part of the transit, to a foreign destination is
influenced by a number of factors:
Speed
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The transit time for over-the-border consignments can be shorter by road than by rail (or sometimes
even by air). This is because the road haulier controls the delivery of the goods right up to the final
destination (which may be near the border and far from the main airport), whereas goods transported
by rail can be delayed when railway trucks are handed over from one railway authority to another.
Convenience of distribution
When goods are being exported to a neighbouring country, a road haulage service may provide
either direct delivery to the importer or to a convenient point nearby.
Freight rates
Freight rates in respect of road freight rates are generally lower than those rates offered for carriage
by air. However consideration should be given to the higher risk which cargo is exposed to when
freighting goods by road, and, as an example of this, it is worth noting that insurance cover for war
and riots, is not available when goods are dispatched by road or rail freight. Road freight movements
are prepaid, as road hauliers are reluctant to deliver cargo into an African country without having the
freight prepaid in South Africa.
VAT and customs requirements for road freight
There are many delays associated with customs clearance of goods at the border posts. To avoid
unnecessary delays, the exporter or his freight forwarder must ensure that all the necessary
documentation has been supplied and accurately completed, to ensure ease of movement through
the border post.
The goods moving into African countries can be cleared at the closest customs office at their place of
origin in South Africa. The following documents are required:
o A customs-authorised bill of entry
o A commercial invoice
Unlike ocean or airfreight, there is no standard transport document for road haulage. Road hauliers
normally design their own waybills, which resemble road manifests. Customs and Excise require a
border stamped copy of the bill of entry as proof of export. If the exporter cannot ensure receipt of this
copy he must charge VAT to the importer, and this amount would be stated on the commercial
invoice.
Import permits
In many African countries there are severe foreign exchange shortages and import permits have to be
obtained by the importer prior to the importation of goods. It is the responsibility of the exporter to
ensure that the import permit will be available at the border at the time of customs clearance. The
import permit number should be stated on all necessary documents these are:
o Commercial Invoice
o Road consignment note
o Packing list
With this in mind, special attention must be given to the evaluation of routines for ensuring that cargo
securing procedures are performed in accordance with applicable regulations, in order to minimize the
risk of accidents, loss and/or damage. This is however obstructed by the non-confirmative or even
conflicting regulations that apply in different regions and for different modes of transport.
Logistics and transportation operations are often overwhelmed with the vast amount of data they deal
with. Information systems are designed to interpret information to decision-makers in a more
understandable manner and the choice of systems are usually prescribed by the users’ needs.
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Let us have a look at the below table as illustration of the different needs of a Shipper, a Carrier and
a Receiver:-
Import and Export Processes for Land Transport
We focus here on the significance of imports and exports to land transport. The management of land
transportation would involve much planning, implementation and control of the use of freight
transportation and related service providers to achieve business objectives. Several issues need to
be considered, such as Customs regulations, infrastructure, exchange rates, culture and language.
It is important to note that there is a significant difference between domestic and international
transport in the amount of documentation required for imports and exports. For example:-
Export Documents would include:-
Bill of Lading
Dock Receipt
Delivery Instructions
Export Declarations
Approved Letter of Credit
Consular Invoice
Commercial Invoice
Certificate of Origin
Cargo Insurance Certificate
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Transmittal letter
Import Documents would include:-
Arrival Notice
Customs Entries
Carrier’s Certificate and Release Order
Delivery Order
Authorisation for Freight release
Special Customs Invoice
A brief summary of the various types of transportation methods for exports and imports are:-
Containerised General Cargo
Conventional (Non-containerised) General Cargo
Transhipment
Trade and Business Portals
THE NEED FOR REGULATION IS EXPLAINED IN THE CONTEXT OF INTERNATIONAL
TRANSPORT.
International regulation of international transport in the context of international trade is important for
various reasons. This list of issues illustrates the need:
Economical – ensuring a fair system for all trading partners
Commercial –governance of business practices on global basis
Political – combating political crimes, terrorism
Social – working together to address development and upliftment
Security – measures against piracy, cargo security
Safety – dealing with dangerous goods and emergency situations
Environmental – working together to minimise CO2 omissions
Legal – agreeing on standard trading conditions and practices
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Continuous improvement – uplifting standards through standardisation
Sharing the pool of expertise – creating opportunities to share best
practice and lessons learnt
THE BODIES RESPONSIBLE FOR REGULATING TRANSPORT ARE IDENTIFIED AND THEIR
ROLES DESCRIBED IN THE CONTEXT OF INTERNATIONAL TRADE.
International Air Transport Association (IATA)
Air transport is one of the most dynamic industries in the world. The International Air Transport
Association (IATA) is its global trade organisation.
IATA seeks to improve understanding of the industry among decision makers and increase
awareness of the benefits that aviation brings to national and global economies.
It fights for the interests of airlines across the globe, challenging unreasonable rules and charges,
holding regulators and governments to account, and striving for sensible regulation.
IATA‟s aim is to help airlines help themselves by simplifying processes and increasing passenger
convenience while reducing costs and improving efficiency. Moreover, safety is IATA‟s number one
priority, and IATA‟s goal is to continually improve safety standards, notably through IATA‟s
Operational Safety Audit (IOSA). Another main concern is to minimize the impact of air transport on
environment.
IATA ensures that people and goods can move around the global airline network as easily as if they
were on a single airline in a single country. In addition, it provides essential professional support to all
industry stakeholders with a wide range of products and expert services, such as publications, training
and consulting. IATA‟s financial systems also help carriers and the travel industry maximize
revenues.
International Civil Aviation Organisation (ICAO)
The International Civil Aviation Organisation, a UN Specialized Agency, is the global forum for civil
aviation.
ICAO works to achieve its vision of safe, secure and sustainable development of civil aviation through
cooperation amongst its member States. To implement this vision, the Organisation has established
the following Strategic Objectives for the period 2005-2010:
Safety - Enhance global civil aviation safety
Security - Enhance global civil aviation security
Environmental Protection - Minimize the adverse effect of global civil aviation on the
environment
Efficiency - Enhance the efficiency of aviation operations
Continuity - Maintain the continuity of aviation operations
Rule of Law - Strengthen law governing international civil aviation
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International Maritime Organisation (IMO)
The IMO is a specialised agency of the United Nations. The result is a comprehensive body of
international conventions, supported by hundreds of recommendations governing every facet of
shipping.
Then there are measures which recognize that accidents do happen, including rules concerning
distress and safety communications, the International Convention on Search and Rescue and the
International Convention on Oil Pollution Preparedness, Response and Co-operation.
Thirdly, there are conventions which establish compensation and liability regimes - including the
International Convention on Civil Liability for Oil Pollution Damage, the convention establishing the
International Fund for Compensation for Oil Pollution Damage and the Athens Convention covering
liability and compensation for passengers at sea.
Today, we live in a society which is supported by a global economy, which simply could not function if
it were not for shipping. IMO plays a key role in ensuring that lives at sea are not put at risk and that
the marine environment is not polluted by shipping - as summed up in IMO's mission statement: Safe,
Secure and Efficient Shipping on Clean Oceans.
International Standards Organisation (ISO)
The International Organisation for Standardization widely known as ISO, is an international-standard-
setting body composed of representatives from various national standards organisations. ISO defines
itself as a non-governmental organisation, its ability to set standards that often become law, either
through treaties or national standards, makes it more powerful than most non-governmental
organisations. In practice, ISO acts as a consortium with strong links to governments.
Examples of standards related to the transport and freight industry include:
Packaging -- Transport packages for dangerous goods
Graphical symbols for diagrams -- Part 14: Devices for transport and handling of material
Automatic vehicle and equipment identification -- Intermodal goods transport -- System
parameters
Supply chain applications of Radio frequency identification -- Freight containers
Freight containers -- Electronic seals
THE CONSEQUENCES OF NOT COMPLYING WITH TRANSPORT REGULATIONS ARE
EXPLAINED IN THE CONTEXT OF INTERNATIONAL TRADE.
Non-compliance to transport regulation is expensive for everyone involved – the individual,
organisation, client and even the world community at large.
The list of reasons why people would not comply is almost endless. If compared to the list of
consequences, however, none of these reasons seem a strong enough motivation to risk compliance
in any of your daily duties.
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The individual may lose his/her job over non-compliance issues, or even be charged with a criminal
offence. The organisation on the other hand, may face the following:
Penalties, e.g. Cargo not delivered on time as a result of delays at the harbour because
documentation did not contain the required information
Criminal charges, e.g. Dangerous goods not declared
Clients choose another freight forwarder to work use in future, e.g. Client was not informed of
customs procedure, and cargo was confiscated by customs damaged reputation, e.g. The
client was not informed about packaging requirements and cargo was damaged as a result
Profits, e.g. Freight forwarder was not informed about all costs and selected an inappropriate
mode of transport. Unplanned costs incurred by his company resulted in a loss.
These examples emphasise how important it is to be up to date with regulations and comply with
them all.
EXPLAIN STANDARD TRADING CONDITIONS OF TRANSPORT AND SUPPORT SERVICE
PROVIDERS.
THE NECESSITY FOR STANDARD TRADING CONDITIONS FOR TRANSPORT OPERATORS IS
EXPLAINED IN TERMS OF THE PRAETOR'S EDICT.
1. The Praetor’s Edict
South Africa is governed by the Roman Dutch code of law, which incorporates the doctrine of
Praetors edict, which enforces strict liability against carriers. This originated many hundreds of years
ago, when the Roman Praetor published an edict, which said (translated):
"I will grant an action against carriers, innkeepers and stable keepers if they fail to restore to any
person any property of which they have undertaken the safekeeping."
The Praetor wanted to discourage dishonesty amongst these classes of people, and the reason for
the edict was that they had, in the course of their business, the opportunity to conspire with thieves
against their customers.
The current position is that a carrier will be held liable for loss/damage to goods in their care, unless
they can show that such loss/damage was not caused by their own negligence. The owner of the
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goods does not need to prove negligence; it is up to the carrier to demonstrate that the loss/damage
was not as result of their wrongdoing.
This situation gave cause to the development of Standard Trading Conditions.
Standard Trading Conditions usually refers to the terms and conditions for accepting cargo by
Shipping Lines, Airlines and Logistics Services providers like Freight forwarders and customs Agents.
They are usually printed as the fine print behind the shipping documents like Bill of Lading, Air Way
Bill, Consignment Note and Multimodal Transport BL etc.
Standard Trading Conditions limit the liability of the transport operator.
THE NECESSITY FOR FORWARDERS STANDARD TRADING CONDITIONS IS EXPLAINED IN
THE CONTEXT OF INTERNATIONAL TRANSPORT.
The role of the freight forwarder is to make arrangements which enable goods to travel from seller to
buyer. This often involves a journey of several thousand miles, using more than one mode of
transport.
There must have been a sale - and contract - agreed between a seller and buyer for the supply of
goods before a freight forwarder is needed. Many of the elements of this contract impact directly on
the nature and detail of the contract eventually agreed between the forwarder and its client - which
could be the seller or buyer of the goods.
To ensure the client and the forwarder fully understand - and agree upon - their responsibilities in the
transportation process, the client must be made aware of the forwarder's trading conditions. This
needs to be done before details of the contract are agreed - ideally at the quotation stage.
Trading conditions establish the circumstances under which any service is provided and usually
include limiting the forwarder's liability in the event of a claim against them. Failure to do this could
leave the forwarder with unlimited liability - which could prove very costly.
Trading conditions also:
ensure the client knows their goods are not automatically insured
provide safeguards to help ensure the forwarder is paid once the job is done
protect the forwarder if the client fails to fully disclose the contents of a consignment, e/g.
hazardous material or goods of an exceptionally high value
THE RELATIONSHIP BETWEEN THE STANDARD TRADING CONDITIONS OF TRANSPORT
OPERATORS AND FREIGHT FORWARDERS IS EXPLAINED IN ORDER TO SHOW THEIR
INTERDEPENDENCE.
Freight forwarders are responsible for organising the movement of goods. They communicate daily
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with carriers - such as road, rail, air and sea companies - confirming arrangements by fax or email.
They liaise with their customers on the costs of transporting goods and the arrangements they have
made.
If working on international shipments, they transmit the necessary customs documentation – e.g. bills
of lading - and arrange for duties and taxes to be paid.
All transport is subject to national and international laws, and each mode has its own legal regulations
that limit the liability of the carrier. These conventions play a similar role to trading conditions.
Close co-operation is required with transporters in every mode – road, rail, sea and air. Freight
forwarders are constantly negotiating freight rates with transport providers, comparing the costs of
moving cargo along different routes via different modes and then designing logistics infrastructures
which provide the best compromise between cost, speed and reliability. In the process of designing
and executing these logistics plans has earned for the forwarder the title "Architect of Transport".
Freight forwarders frequently control goods and documents - owned by third parties - that represent
large sums of money. Good risk management is the key to running a successful forwarding business
and can prevent costly problems.
Freight forwarders can limit their liability and cover some of the potential risks with insurance.However,
it is easy to invalidate the benefits of limited liability, e.g. through carelessness, ignorance or taking
risks.
Some risks are uninsurable – e.g. losses caused by terrorism. Risks can never be eliminated
completely, but with good practices and training, they can be minimised to acceptable levels. This
reduces the likelihood of unwanted claims that could severely reduce profits.
The seamless integration of trading conditions throughout the supply chain is the responsibility of the
freight forwarder. This will contribute to minimising those risks.
It is important that forwarders bring the trading conditions of all providers to the attention of the
customer before the contract is concluded. Failure to do so could prejudice insurance cover and
invalidate the protections of limited liability.
THE TRANSPORT LIMITATIONS OF LIABILITY ARE IDENTIFIED FOR DIFFERENT
INTERNATIONAL TRANSPORT MODES.
The Warsaw Convention is an international convention which regulates liability for international
carriage of persons, luggage or goods performed by aircraft for reward.
The principal purpose of the Warsaw Convention was to determine the liability of air carriers in the
case of an accident, both in regards to passengers and also baggage and cargo.
In particular, the Warsaw Convention:
mandates carriers to issue passenger tickets;
requires carriers to issue baggage checks for checked luggage;
creates a limitation period of 2 years within which a claim must be brought (Article 29); and
limits a carrier's liability to at most:
o 250,000 Francs or 16,600 Special Drawing Rights (SDR) for personal injury;
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o 17 SDR per kilogram for checked luggage and cargo, or $20USD per kilogram for non-
signatories of the amended Montreal Protocols
o 5,000 Francs or 332 SDR for the hand luggage of a traveller
A Special Drawing Right (SDR) is the monetary unit of the reserve assets of the International
Monetary Fund (IMF). The SDR unit is defined as a weighted sum of contributions of four major
currencies, re-evaluated and adjusted every five years, and computed daily in terms of equivalent
United States dollars. Special Drawing Rights are not a currency, but they represent potential claims
on the currencies of the IMF members.
SDRs are used as a unit of account by the used to denominate some private international financial
instruments. Warsaw convention, which regulates liability for international carriage of persons,
luggage or goods by air, uses SDRs to value the maximum liability of the carrier.
Hague Rules
Under the common law the parties to contract of carriage of goods by sea covered by a bill of lading
or similar document had complete freedom to negotiate their own terms. This led the carrier to a
stronger bargaining position. Ship owners/carriers went on incorporating exclusion clauses in the bills
of lading, which provoked the cargo owners.
Most shippers were expected either to ship on terms dictated by the carrier or not to ship at all. The
object of Hague Rules and Hague-Visby Rules was to protect cargo owners from widespread
exclusion of liability by sea carriers. This objective was achieved by incorporating standard clauses
into the bills of lading, defining the risks which must be borne by the carrier and specifying the
maximum protection he could claim from exclusion and limitation of liability clauses. The carrier shall
properly load, handle, stow, carry, keep, care for and discharge the goods carried.
THE CONSEQUENCES OF NOT AGREEING TO STANDARDS TRADING CONDITIONS ARE
EXPLAINED IN TERMS OF FORWARDING AND TRANSPORT OPERATIONS.
The consequences of not agreeing to standards trading conditions (STC‟s) are that, unless a person
wanting to use the services of a freight forwarder agrees to that forwarder’s STC‟s, then that
forwarder will in all likelihood not want to do business with them and thus the party concerned will
deprive himself of the opportunity of availing himself of services which could be exactly suited to his
needs.
For a freight forwarder not to have STC‟s or (more likely) not to insist on applying those STC‟s should
therefore raise alarm bells in the mind of any importer or exporter. Why would any freight forwarder in
his right mind be prepared to waiver this very important protection unless he is really desperate for
business? If he is that desperate for business why should I entrust him with my precious cargo?
After all, marine insurance will make good those losses against which the forwarder would be able to
claim protection under the STC‟s and, for those against which the forwarder cannot claim STC
protection he should have Professional Indemnity insurance.
On the other hand it is true that, under certain large contracts, forwarders may be prepared to
negotiate certain of the terms contained in their STC‟s so that forwarding operations become more
collaborative between the forwarder and his client.
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DISTINGUISH BETWEEN THE DIFFERENT TRANSPORT SERVICES AVAILABLE FOR SOUTH
AFRICAN IMPORTERS AND EXPORTERS.
AVAILABLE TRANSPORT SERVICES ARE IDENTIFIED FOR SOUTH AFRICAN IMPORTERS
AND EXPORTERS.
South Africa's ports, railways, road and air transportation infrastructure are well developed and
support the efficient distribution of imported and domestically produced goods. The road, rail, and air
transport service is good throughout most parts of the country. The quality of infrastructure in the rural
areas varies.
The one main transport type which is not available to South African business is the inland waterway.
In Europe and America there are vast river systems on which huge quantities of goods are conveyed.
This is not possible in our country.
However, there are opportunities for sea transport between our coastal cities. In the main, the
transport services operated within South Africa are by rail, road and air.
Transnet
Shipping Services
Rail Transport
Air Transport
Road Transport
Courier Services
Postal Services
THE REASONS FOR CHOOSING A PARTICULAR TRANSPORT MODE ARE IDENTIFIED FOR
SPECIFIED IMPORT AND EXPORT TRANSACTIONS.
A mode of transport refers to the method of carriage. We saw that the four main types are sea, air,
road or rail. Multi-modalism takes place when more than one mode is used during the same shipment.
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International traders need to choose the mode which best suites their requirements. The choice of
one mode over another may be influenced by factors such as a product's life span, the planned
destination and the costs involved.
There are three forms of shipment used in shipping depending on the type of cargo, the size of the
consignment, the cost and the type of transport vehicle used. These are:
Breakbulk
Bulk
Containerisation
The decision maker has to balance quite a number of factors to make the best possible choice. The
final choice is likely to depend on the most important factor at the time. Here are some examples:
If cost is more important than time, airfreight would not be selected;
If the potential for damage to the goods is high, roadfreight would be a better choice than rail;
If urgency is the prime need, then airfreight would be selected over seafreight. To make the
best choice it is necessary for the decision maker to have all the facts at his disposal.
used in multimodal transport along with sea and road freight. A rail road infrastructure is however
needed if intended destinations are to be accessible and tends to be slower than road transport.
To summarise:
(i) relatively slow;
(ii) relatively inexpensive;
(iii) goods transported at owner's risk;
(iv) good for bulk commodities;
(v) specialised wagons for certain products;
(vi) the packaging of goods needs to be strong and robust;
(vii) use of private sidings can have a cost advantage;
(viii) deliveries can be made to many African countries.
THE CONSEQUENCES OF NOT CHOOSING THE CORRECT TRANSPORT MODE ARE
DESCRIBED IN TERMS OF THEIR IMPACT ON THE IMPORTER AND/OR EXPORTER.
There are four major cost components in international trade and choosing the wrong mode of
transport may have an effect on any one of the first three of these costs. This will in turn have long
term effects on the organisation’s client service, competitiveness, and profitability:
Transport costs. The full costs of shipping goods from the point of production to the point of
consumption. Containerization, intermodal transportation and economies of scale can reduce
transport costs significantly.
Time costs. The delays related to the lag between an order and the moment it is received by
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the purchaser. Long distance international trade is often related with time delays that can be
compounded with custom inspection delays.
Transaction costs. The costs related to the economic exchange behind trade. It can include
the gathering of information, negotiating, and enforcing contracts, letters of credit and
transactions, including monetary exchange if a transaction takes place in another currency.
Tariff and non-tariff costs. Levies imposed by governments on a realized trade flow.
References
www.businesslink.gov.uk
www.exporthelp.co.za
www.iata.com
www.icao.int
www.imo.org
www.internationaltransportforum.org
www.iru.org
www.iso.org
www.mbendi.com
www.people.hofstra.edu
www.uic.org
www.wikipedia.com
This Chapter relates to the below:
SAQA US ID CHAPTER TITLE
252380 Explain transport principles used in international trade
THE END OF CHAPTER 1
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CHAPTER 2
Apply Knowledge of Basic
Geographical Principles
Reference Material
Global Maritime Learning Solutions
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PURPOSE OF THE CHAPTER
The person credited with this chapter is able to apply knowledge and understanding of the principles
of geography to enable the effective movement of freight locally and internationally.
The qualifying learner is capable of:
Interpreting maps for the purpose of planning logistic procedures.
Determining the route cargo will follow between point of load and discharge.
Explaining South Africa's geographical conditions and location with regard to international trade.
Explaining the impact of cultural difference on international trade.
INTERPRET MAPS FOR THE PURPOSE OF PLANNING LOGISTIC PROCEDURE.
THE WORLD'S HEMISPHERES ARE IDENTIFIED BY LABELLING THEM ON A MAP.
Four Hemispheres
The word Hemisphere means half of a sphere; and sphere means a perfectly round shape – like a
ball.
In the context of geography, it refers to any half of the earth. This includes the following:
Eastern Hemisphere
Western Hemisphere
Northern Hemisphere
Southern Hemisphere
The equator
The Equator is an imaginary line on the Earth's surface, the same distance from the North Pole (the
northernmost point on Earth) and the South Pole (the southernmost point on the surface of the Earth)
that divides the Earth into a Northern Hemisphere and a Southern Hemisphere.
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All countries (with a few exceptions) north of the Equator are in the Northern Hemisphere, while all
countries south of the Equator are in the Southern Hemisphere. The Northern Hemisphere includes
all of North America, the northern reaches of South America, about two-thirds of Africa, all of Asia
excluding (parts of Indonesia) and all of Europe. The Southern Hemisphere includes of most of South
America, one-third of Africa, all of Antarctica, a small sliver of Asia (parts of Indonesia) and all of
Australia/Oceania.
1. The Prime Meridian
In addition, all countries west of the Prime Meridian are in the Western Hemisphere while those east
of the Prime Meridian are in the Eastern Hemisphere.
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Generally the Eastern Hemisphere includes most of Africa, about half of Antarctica, all of Asia and
Australia/Oceania, and most of Europe. The Western Hemisphere includes about half of Antarctica
and all of North and South America which includes the Caribbean and Central America as well as
Greenland.
CONTINENTS ARE IDENTIFIED BY LABELLING THEM ON A MAP.
A continent is one of several large landmasses on Earth. Seven regions are commonly regarded as
continents – they are (from largest in size to smallest): Asia, Africa, North America, South America,
Antarctica, Europe, and Australia.
LINES OF LONGITUDE ARE IDENTIFIED IN RELATION TO TIME ZONES.
Introduction to the longitude and latitude grid
The earth can be divided into lots of lines called latitude and longitude.
Latitude lines run from east to west and longitude lines run from north to south.
The lines measure distances in degrees. But where do you start? Where is 0 degrees?
Well, that depends on whether you're looking for 0 degrees latitude or 0 degrees longitude. They are
different things.
The equator is 0 degree latitude. This imaginary line, which runs through parts of South America,
Africa, and Asia, is officially the halfway point between the North Pole and the South Pole.
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The prime meridian is 0 degrees longitude. This imaginary line runs through the United Kingdom,
France, Spain, western Africa, and Antarctica.
We already saw that by using the equator and prime meridian, we can divide the world into four
hemispheres, north, south, east, and west.
Latitude and longitude are two of the most basics terms in all of geography. To understand them, you
need to think of Earth as a globe. Further, you need to think of the globe as divided into lots of little
sections. Some go east. Some go west. Some go north; Some go south.
So, you know how a circle has 360 degrees? Well, that's true for Earth as well. If you put your finger
on the city of Paris and trace all the way around the globe, from right to left, you will trace the full 360
degrees. Go just halfway and you get 180 degrees.
Longitude is lines that run north and south that measure east or west. The
Prime Meridian, in Greenwich, England, is at 0 degrees longitude.
Latitude lines run east and west and measure north or
south. The Equator is at 0 degrees latitude. See how
Paris is almost halfway between 45 degrees and 50
degrees markings? You'll have to estimate here. It's
probably about 47.5 degrees. Let's call it 48.
Introduction to Time Zones - A time zone is a region on Earth, more or less
bounded by lines of longitude, which has a uniform, legally mandated
standard time, usually referred to as the local time. Within each time zone, the hour and minute
of the day is the same.
Time zones eliminate the problem that local noon (defined according to the elevation of the Sun)
actually occurs at a different time for nearby towns at slightly different longitudes, so that each town's
clocks differ by a few minutes from those of neighbouring clocks. Defining time zones means than
watches need only be adjusted in one hour steps upon crossing of a time zone boundary.
Since the earth rotates 15 degrees of longitude per hour, the earth’s 360 degrees were divided into 24
zones, each measuring about 15 degrees in width. The 0° longitude line, or meridian, was defined as
a line running through the old Greenwich Observatory in Greenwich, England. Time in each of the 12
zones east of Greenwich increases one hour for each zone. Time in each of the 12 zones to the west
of Greenwich decreases by one hour. The International Date Line lies at the 180° meridian on the
opposite side of the earth from Greenwich and divides the eastern and western time zones. The time
difference between each side of the International Date Line is 24 hours.
Thus, a traveller heading west across the date line loses one day while a traveller headed east gains
a day.
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LINES OF LATITUDE, THE EQUATOR AND THE TROPICS ARE IDENTIFIED IN TERMS OF
LOCATION COORDINATES.
Important lines of latitude
Latitude is an important factor in determining climate and also gives an indication as to the length of
day and night expected.
The most important line of latitude is called the Equator. It is located at zero degrees latitude; (North
or South) and divides the Planet Earth into the Northern
Hemisphere and Southern Hemisphere.
Therefore all countries north of the Equator are in the Northern
Hemisphere, while all countries south of the Equator are in the
Southern Hemisphere.
Tropics of Cancer and Capricorn: Located at 23.5 degrees North
and/or South of the Equator, this area of Planet Earth between
the two lines is known as the "Tropics”.
This area experiences no dramatic change in season because
the sun is high in the sky.
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THE LOCATION OF COUNTRIES IN SPECIFIC CONTINENTS IS IDENTIFIED IN ORDER TO
ROUTE CARGO.
In order for you to decide the best route for your cargo, you need to know where each country is.
Let’s have a look at the seven continents and the countries on each continent. simply having maps is
not enough – the information must be in text form as well, i.e. can be lists of countries on each
continent and must also be examples of routing of cargo from one country to another
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DETERMINE THE ROUTE CARGO WILL FOLLOW BETWEEN POINT OF LOAD AND
DISCHARGE.
CARGO CHARACTERISTICS ARE EVALUATED IN ORDER TO DETERMINE THE TRANSPORT
MODE AND ROUTE.
THE PHYSICAL CHARACTERISTICS OF THE POTENTIAL TRANSPORT ROUTES ARE
EVALUATED IN ORDER TO DETERMINE MOST EFFICIENT CARGO ROUTE.
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TRANSPORT DOCUMENTATION IS EXPLAINED WITH EXAMPLES SHOWING POINT OF
LOADING AND DISCHARGE.
This Bill of Lading clearly shows the “Port of Discharge” and the “Port of Destination”. Can you find it
on the document?
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This Air Waybill clearly shows the “Airport of Departure” and the “Airport of Destination”. Can you find
it on the document?
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SAILING AND FLIGHT SCHEDULES ARE EXPLAINED WITH EXAMPLES OF LOADING AND
DISCHARGE PORTS.
The sailing schedule below lists the names of the shipping lines, time period for departure and route.
Flight schedules available from www.saflyer.co.za
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EXPLAIN SOUTH AFRICA'S GEOGRAPHICAL CONDITIONS AND LOCATION WITH REGARD TO
INTERNATIONAL TRADE.
CLIMATIC CONDITIONS IN DIFFERENT REGIONS ARE DESCRIBED IN ORDER TO DETERMINE
THE EFFECT IT HAS ON TRADE.
To determine the climate of a region, one needs to know the average weather conditions. Weather
conditions are factors like rainfall and temperature.
Rainfall
Rainfall in South Africa decreases form east to west. In other words there is much more rainfall in the
eastern part of South Africa. This is an important fact for South Africa, because not only is there more
rainfall in the eastern part of the country, there is also a higher population density and much more
industrial activity in this region of the country. Different areas of South Africa experience rain during
different seasons.
Temperature
South Africa is considered to have a temperate climate. This means that we have a very average
climate with no extremes of heat or cold. January is considered to be the hottest month and July is
considered the coldest month of the year.
South Africa's geographical conditions
South Africa is located at the southernmost region of Africa, with a long coastline that stretches along
two oceans (the South Atlantic and the Indian). South Africa is the 25th-largest country in the world
and is comparable in size to Colombia. The interior of South Africa is a vast, flat, and sparsely
populated scrubland, the Karoo, which is drier towards the northwest along the Namib Desert. In
contrast, the eastern coastline is lush and well-watered, which produces a climate similar to the
tropics.
Climate
South Africa has a generally temperate climate, due in part to being surrounded by the Atlantic and
Indian Oceans by its location in the climatically milder southern hemisphere and due to the average
elevation rising steadily towards the north (towards the equator) and further inland. Due to this varied
topography and oceanic influence, a great variety of climatic zones exist.
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CLIMATE CONDITIONS AND THE EFFECT ON TRANSPORT AND TRANSPORT EQUIPMENT
ARE EXPLAINED WITH EXAMPLES OF THE IMPACT ON TRADE.
The effects of external weather
It is very important that you are well aware of the world's weather, the oceans, their currents and
tides, Ports and their characteristics, so that you can make the correct decisions. The actual voyage
the weather patterns must be well known to ensure a safe and profitable voyage.
The external weather can affect cargo in many ways. This day and age the shippers and ship owners
have been able to use the results of many years of experience and tests concerning the
transportation of cargo from North to South, East to West and from Summer into Winter, from
sunshine through rain into sleet and snow. Yet, all these extreme temperatures have an effect on the
cargo and consideration must also be given to the packaging as well as, the stowage (placing the
cargo) either in the hold of the vessel or the container. Prior to packing the cargo may have been
exposed to the atmosphere for a period of time. The change in temperature during a journey can lead
to the cargo being damaged through heat and condensation. When air condenses moisture is
released. This can have detrimental effect on certain cargoes. Moisture can cause rusting and/or
discolouration, mould, caking /clogging.
If the container is exposed to very high temperature the cargo in the container may:
Expand (liquids and gases) and strain or bust the packaging materials.
Undergo distortion and cracking (linoleum).
Soften permanently or temporarily changing their appearance (chocolates, fats, coatings).
If the container is exposed to low temperatures (sub-zero):
Freezing of fresh fruit vegetables.
Freezing of bottled liquids, canned goods, and liquids can cause bursting.
Change of chemical state of goods.
Waterproof wrapping is sometimes used to protect cargo against moisture damage. Solid drying
agents are also used to absorb moisture and thereby protect goods against rusting. Silica gel is an
example of a solid substance, which acts as a drying agent.
There are two types of condensation, which can be described as:
1. Cargo Sweat
2. Container sweat
Each is caused by separate set of circumstances.
There must be a source of moisture.
There must be a temperature gradient.
The source of moisture may be:
The cargo itself
The pallets/skids
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The container walls
The vessels holds
The temperature can change drastically by sudden change in the outside temperature or change of
cargo temperature.
SOUTH AFRICA'S GEOGRAPHICAL POSITION IS EXPLAINED IN TERMS OF ITS ADVANTAGES
AND DISADVANTAGES TO INTERNATIONAL TRADE.
South Africa occupies the southern tip of Africa, its long coastline
stretching more than 2,500km from the desert border with
Namibia on the Atlantic coast, southwards around the tip ofAfrica,
then north to the border with subtropical Mozambique on the
Indian Ocean.
Busy harbours exist at Richards Bay and Durban in KwaZulu-
Natal, East London and Port Elizabeth in the Eastern Cape, and
Mossel Bay and Cape Town in the Western Cape. An additional
commercial port, the Port of Ngqura, is being developed off the
coast from Port Elizabeth. Ports and shipping handle around
96% of the country’s exports, and are a transit hub for trade
between the Americas, Europe and Asia, as well as for Africa’s east and west coasts. Durban is
Africa’s largest container port; Richard’s Bay is the world’s largest bulk coal terminal. Other major
ports in South Africa include East London, Port Elizabeth, Saldanha, Mossel Bay, and Ngqura.
Traditionally, the South African economy has been based on the mining industries that made the
country famous, and agriculture, especially cattle, viticulture and grain cultivation. Yet the services
sector is now the largest in the South African economy, representing more than 62%.
In particular, there has been strong growth in recent years in the financial sector, tourism and
retailing, as well as a burgeoning community services sector.
The country’s main export markets are the US, the UK and Japan. South Africa also conducts
extensive trade with neighbouring African countries. Its most significant export earners are minerals
and metals, most particularly gold, diamonds and platinum, followed by machinery and equipment.
Apart from the services sector, agriculture remains one of South Africa’s largest sources of
employment, with 11% of the active workforce working on the land. This has been surpassed by the
manufacturing sector, which now accounts for 14.8% of those in employment.
The main focus of South Africa’s manufacturing sector is mining, metalworking, machinery and
textiles. This sector is however facing stiff competition from other international producers.
Each of the facts related to the geographical position described in this holds advantages and/or
disadvantages to international trade for South Africa. The impact will be further investigated in your
assignment.
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EXPLAIN THE IMPACT OF CULTURAL DIFFERENCE ON INTERNATIONAL TRADE.
THE CONCEPT OF CURRENCY IS EXPLAINED AND APPLIED IN TERMS OF THE
INTERNATIONAL TRADING ENVIRONMENT.
The value of Money
The value of money is determined when people are willing to accept it in exchange for goods and
services. Money did not always exist. Prior to money, barter was how goods were exchanged,
however barter was not very efficient, as trading animals for other goods proved inconvenient. Money
acts as an intermediary market good, which may be exchanged for other goods. Through history,
money has taken many different forms, including scarce metals. Today, the majority of money
exchanged takes no physical form, and only exists as bytes and bits in a computer's memory.
As the exchanges became more and more complicated, a standard system had to be devised. The
result was money, and eventually each nation developed its own form of currency.
The South African Rand is the currency in South Africa. The South African Rand is also known as
Rands. The symbol for ZAR can be written R. The South African Rand is divided into 100 cents.
A strong Rand or a weak Rand – Pros and Cons
When the South African Rand is strong or increases in value against all other currencies, the following
situations will most likely occur.
1.1. Pros for a strong South African Rand (ZAR)
It is cheaper for S.A. businesses to import from foreign countries because the rand is strong so
foreign S.A. citizens to travel abroad since the consumer would be getting more for their South African
Rand. This usually makes things like food, hotels, and souvenirs cost less.
1.2. Cons against a strong South African Rand
Foreign businesses are less likely to import from South Africa because they can trade more goods for
their money with a different country that has a currency weaker than the rand.
S.A. is less likely to export goods when the Rand is strong; thus, foreign demand for goods will
decrease. When this happens, it tends to hurt South African companies by reducing their international
sales.
Generally, a foreign country will buy agricultural exports cheaper from a country with a weaker
currency exchange rate than the S.A. Rand. The result is that South African farmers will develop a
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surplus of crops, which may lead to lower prices. Getting less for what they produce is a disadvantage
to farmers.
When the South Africa Rand is weak or decreases in value against foreign currencies the following
situations will probably occur.
THE CONCEPT OF RATES OF EXCHANGE IS EXPLAINED IN TERMS OF THE CALCULATION
FORMULAS.
You can easily convert currency either by hand or by using a currency converter program. Currency
rates fluctuate continuously so one way to convert money involves finding the most current exchange
rates.
Below you find examples from a currency converter on the internet, converting ZAR into 4 different
currencies.
Where ZAR is converted into US Dollar: exchange rate is 0,1297. With R10 I can buy $1,30.
Where USD is converted into ZAR: exchange rate is 7.7125. With $1 I can buy R 7.71.
THE EFFECT OF DIFFERENT LANGUAGES ON INTERNATIONAL TRADE IS EXPLAINED WITH
EXAMPLES OF IMPORT AND EXPORT TRANSACTIONS.
Few companies venture into international trade totally unfamiliar with the English language. But
international trade involves vocabularies and procedures that differ from domestic commerce in many
respects. The reason is obvious – the parties are in different countries, and this brings obstacles not
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normally found in domestic business. Law, commercial practice, language, currency and culture differ
among nations. Distances in both place and time are often greater, and information can be more
difficult to obtain. Goods are frequently handed off from one carrier to another, increasing
transportation risk.
Over the years, traders have devised ingenious ways of overcoming these obstacles. More recently,
the internet revolution has taken the breakthroughs made over time in the procedures and
documentation to an amazingly high level.
Despite faster and better ways of doing nearly everything, the vocabularies and procedures unique to
international trade are still very much alive. They present barriers for novices and even for
experienced practitioners outside their own disciplines.
THE CONSEQUENCES OF DISREGARDING CULTURAL SENSITIVITIES IN NEGOTIATING AND
ADMINISTERING INTERNATIONAL TRADE IS EXPLAINED WITH EXAMPLES OF IMPORT AND
EXPORT TRANSACTIONS.
The very thought of doing business in a foreign culture can be a major barrier to negotiations, but it
shouldn’t be. After all, traders are known for their spirit of curiosity, inquisitiveness and risk taking.
Developing overseas alliances does present new elements of risk and due diligence along with the
inherent challenges brought by distance, differing cultural motivations and priories, and the effective
integration of differing approaches and objectives.
The best way to appreciate other culture is to "'walk in the other person's shoes"; that is, visit or live in
the country and get a feel for the similarities and differences. Short of that, this section of this chapter
is the next best thing, because its purpose is to help you break through culture barriers. You are
cautioned that, to be effective in your business dealings, it is essential to be prepared. Do your
homework before you interact in a new country and then get on with doing business.
Consider all the following:
Seven Elements of Business Culture
Relationships
Language
Body Language
Religion
Values and Attitudes
Laws and Legal Environment
Education
References
Microsoft® Encarta® Reference Library 2003. © 1993-2002 Microsoft Corporation.
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©This Reference material is the property of GMLS and may not be copied, sold or distributed to any
third party without the express written permission of GMLS.
Nelson, C.A. 2008. Import/Export: How to Take Your Business Across Borders. McGraw-Hill
Reynolds, F. 2002. A to Z of International Trade. A Dictionary with a Difference. Prentice-hall.
www.articlesbase.com/business-articles/cargo-characteristics-in-transportation-742442.html
www.howtodothings.com/business/a3708-how-to-choose-a-cargo-container.html
www.mapsofworld.com
www.moneyinstructor.com/history.asp
www.southafrica.info/about/geography/geography.htm
www.wikipedia.com
www.wikipedia.com
www.worldatlas.com
www.worldatlas.com
www.worldbusinessculture.com/
This Chapter relates to the below SAQA Unit Standard
SAQA US ID CHAPTER TITLE
252375 Apply knowledge of basic geographical principles
THE END OF CHAPTER 2
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CHAPTER 3
Demonstrate an understanding of the
concepts underlying importing and
exporting
Reference Material
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PURPOSE OF THE CHAPTER
The person credited with this module is able to understand the concept of supply chain management
and the relationship between the various role players involved. The learner will also be able to explain
how the trade cycle works and the role played by each participant, and why the meeting of deadlines
are important. The learner will also be able to understand and apply the cost benefit of using various
modes of transport and the measures and compliance bodies responsible for the enforcement of
compliance within the international trade environment.
The qualifying learner is capable of:
Describing the operation of a simple international supply chain.
Illustrating the operation of the international trade cycle.
Assessing various modes of international transport in terms of costs and benefits.
Demonstrating and understanding of the importance of compliance in the international trade
context.
Demonstrating an understanding of South Africa's international trade environment.
Applying knowledge and understanding of international trade documentation.
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DESCRIBE THE OPERATION OF A SIMPLE INTERNATIONAL SUPPLY CHAIN
THE CONCEPT OF THE INTERNATIONAL SUPPLY CHAIN IS EXPLAINED BY USING
EXAMPLES WHICH SHOW IT TO BE A SYSTEM OF INTERRELATED ELEMENTS
A supply chain is a network of companies which source, produce, handle, transport, manufacture,
distribute and sell a specific product. This involves all the steps to get a product or a service from the
supplier to the customer. The customer is the end-user of the product or service.
Supply chains include every company that comes into contact with a particular product (note that this
does not mean physically coming into contact with the product).
For example, this means that the supply chain for most products encompasses all the companies
manufacturing parts for the product, assembling it, delivering it and selling it. These companies work
together to improve the efficiency of chain.
Supply Chain definition:
A supply chain is the movement of materials and information as they flow from their source
to the end customer, and includes purchasing, manufacturing, warehousing, transportation,
customer service, demand planning, supply planning and supply chain management.
It is important to visualize information, funds, and product flows along both directions of this chain. A
manufacturer may receive material from several suppliers and then supply several distributors. Thus,
most supply chains are actually networks.
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A typical simple supply chain:
Supplier/ Manufacturer Warehouse Distributer
Consumer/end-user
raw materials
To summarise:
A supply chain is a system of organisations, people, finance, technology, activities,
information and resources involved in moving a product or a service from supplier to
customer. Supply chain activities transform natural resources, raw materials and components
into a finished product that is delivered to the end customer.
Supplier / Manufacturer Warehouse Distributer Consumer/end-userraw
materials
Supplier A Supplier B Page No: 40
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Manufacturer
Warehouse
Transport
Consumer X Consumer Y
THE VARIOUS RELATIONSHIPS BETWEEN THE FREIGHT FORWARDER, THE
EXPORTER AND IMPORTER IN THE INTERNATIONAL SUPPLY CHAIN ARE
EXPLAINED WITH EXAMPLES.
Quite often, many people confuse the term logistics with supply chain. In general, logistics
refers to the distribution process within a company. As we have seen in the section above,
supply chain includes multiple companies such as suppliers, manufacturers, and the
retailers. These companies collaborate or work together to improve the entire supply chain
efficiency. Logistics is a part of that supply chain where it seeks to position inventory
throughout the supply chain.
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Logistics has to make a plan to move the products, whereas supply chain management
involves linkage and co-ordination between processes and companies in all parts of the
chain, including suppliers, manufacturers, logistics providers, and the final end user.
Freight forwarders often refer to themselves as logistics providers and are vital parts of the
supply chain. The freight forwarder as well as the importer and exporter are all links in the
supply chain and therefore have special relationships with each other which they need to
maintain so that the supply chain can function efficiently.
THE CONSEQUENCES OF THE FORWARDER'S ROLE NOT BEING FULFILLED IN THE
INTERNATIONAL SUPPLY CHAIN ARE EXPLAINED IN TERMS OF THE EFFECT IT
WILL HAVE ON THE SUPPLY CHAIN.
The forwarder has enormous responsibilities which cover booking the shipment and securing
cargo space, preparing and submitting export and import documentation, arranging marine
insurance, payment of export and import duties, costing and booking transport, and
arranging cargo examinations to name just a few.
Any number of reasons could be the result for a disruption to a supply chain and the
discussions on them could be as endless as the permutation of things that could go wrong,
however the point is to illustrate the consequences, which could be loss of revenue, loss of
jobs, or loss of business contracts.
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Illustrate the operation of the international trade cycle.
The international trade cycle and the respective roles played by each participant are
described from the time a need is identified to the finalisation of all payments and
claims.
An economy tends to experience different trends. These can be categorized as the trade
cycle and may feature boom, recession, slump and recovery. The three different cycles you
need to be aware of and which are explained below are the trade cycle, the business cycle
and the product life cycle. We will only look at the trade cycle and the product cycle in further
detail.
A trade cycle – also known as an economic cycle – is the recurrent
fluctuation between boom time and depression. It includes a slump and a
recovery. We look at this in more detail in the notes below.
A business cycle is a sequence of economic activity typically
characterized by recession, fiscal recovery, growth and fiscal decline. We
will not look at this in more detail as it is sufficient here only that you are
aware of this cycle.
A product life cycle is the time period between the launch of a product
into the market until it is finally withdrawn from the market. This cycle is
split into four different stages which encompass the product's journey
from its entry to exit from the market introduction stage, growth stage,
maturity stage and decline stage. We also look at this in more detail
below.
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THE IMPORTANCE OF THE INTERNATIONAL TRADE CYCLE IS EXPLAINED IN
RELATION TO THE FULFILMENT OF DEADLINES.
A supplier of raw materials needs to transport those raw materials to the manufacturer within
his timeframe allocation. A delay here would have a negative knock-on effect all the way
down the supply chain. We have seen from section 2.1 above that trade cycles fluctuate and
a delay with raw materials could delay manufacture or production and instead of the finished
product reaching the consumer within the boom stage it could reach the consumer market in
a recession stage and we have already learned that in the recession stage individuals may
save rather than spend, there will be a fall in fall consumption and a rise of stock of unsold
goods. So, something that started as a seemingly not-too-serious delay could have
disastrous end results.
It stands to reason then that it applies not only to the supplier of raw materials but to all the
participants in the supply chain that they have to fulfil their deadlines otherwise they too will
be the possible cause of the delay for the product reaching the consumer on time.
Labour unrest and strike action leads to delays in transport, shipping, and procedures and
this can also affect the supply chain and impact on deadlines and eventual consumer
confidence. Loss of consumer confidence can accelerate the slide to recession and ultimate
job losses. Loss of jobs means loss of individual income, companies closing, banks
foreclosing on properties, and an increase in crime (because of high unemployment levels).
ASSESS VARIOUS MODES OF INTERNATIONAL TRANSPORT IN TERMS OF COSTS
AND BENEFITS.
THE RELATIVE COSTS AND BENEFITS ARE IDENTIFIED FOR THE VARIOUS MODES
OF TRANSPORT USED IN INTERNATIONAL TRADE.
There are four modes of transport used in international trade - rail, road, air and water.
Water includes rivers and oceans.
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Three of these four are surface transport - rail, road and water. It could be argued that a fifth
mode of transport is via pipeline, however we will only concentrate on rail, road air and
water.
Rail transport
Rail transport can be used for just about any commodity, and from small packages to large
loads. Rail transport can be used for loose parcels or for containers, or for bulk loads such
as chemicals, timber, minerals, oil, liquids, grain, fertiliser, agricultural produce and steel.
Road Transport
Road transport is the most flexible of all the transport modes. It is not tied to exact schedules
such as the departure times/dates of a vessel or an aircraft.
Road transport offers a door-to-door service which is convenient because the goods are
delivered direct to the customer.
Most products can be transported by road including fresh fruit and vegetables, livestock,
perishable cargo, refrigerated cargo, valuable cargo, fragile or delicate cargo, and general
cargo.
Road transport is often combined with air transport, sea transport and rail transport so that
the cargo can be uplifted from the airports, harbours, container depots, rail sidings, sheds or
warehouses.
Air Transport
Air transport is the fastest mode of transport over long distances but not always over shorter
distances serviced by a road delivery service.
Air transport is restricted to size and weight and is well suited to perishable goods such as
foodstuffs, fresh flowers, pets, valuables, time-sensitive cargo, diplomatic mail, fragile items,
and newspapers for example.
Transport by air is safe and secure and because of this insurance is normally less with than
other modes of transport.
Water transport – sea and rivers
Transport on water in South Africa is restricted to sea freight. In many European countries as
well as other countries such as Canada, the USA, China, and Russia to name but a few who
have large rivers, transport by river or canals is extensive.
Sea freight is slow compared to other modes of transport but the scheduled services offered
to shippers today is a vast improvement on what shipping used to be.
Sea freight is the especially suitable for bulk commodities such as oil, petroleum, coal,
sugar, grains, sand, and minerals, as well as bulky items of machinery and other large
consignments.
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Sea freight is versatile in that it can accommodate large shipments, bulk shipments, many
small shipments put together (consolidated), break bulk cargo, containerised cargo, as well
as abnormal shipments.
Containerised shipping has revolutionised sea freight and it is now a safe and reliable
service.
RECOMMENDATIONS ARE MADE FOR THE USE OF THE MOST SUITABLE MODE OF
TRANSPORT IN LIGHT OF COMPARISONS MADE BETWEEN COSTS AND BENEFITS
FOR GIVEN SCENARIOS.
Before a choice of transport is made an analysis must be made and many factors taken into
account. These factors are as speed and security, distance, the type of cargo (urgent or
not?), the size, the weight, the dimensions, and the commodity. A cost comparison must be
done so that the client can be advised. Cheaper does not always mean better and all the
factors need to be taken into account and not just the cost of transport.
Some consignments dictate what mode of transport is to be used, i.e. bulk cargo must go by
sea and valuable cargo by air. Often the shipper or the consignee (whoever is paying)
requires a cost comparison to be done before selecting the mode of transport. Many times it
can be the INCOTERM which dictates the mode of transport or the terms of a letter of credit
which must be followed.
The type of cargo can also be a determining factor. Dangerous goods are restricted to size,
quantity, hazardous class type and type of packaging; different quantities are permitted by
sea transport compared to air. Certain classes of hazardous cargo are only permitted by sea
transport. Limited quantities may be permitted by air transport but only if certain conditions
are adhered to such as packaging, quantity and documentation.
THE CONSEQUENCES OF SELECTING AN INAPPROPRIATE MODE OF TRANSPORT
ARE EXPLAINED IN LIGHT OF DIFFERENT SCENARIOS.
Most forwarding agents make use of a standard document known as a shipping instruction
for exports and a clearing instruction for imports. This reduces the margin for error because
it puts the onus on the client to stipulate in writing what the mode of transport must be.
However, in practice many clients do not fill these forms out correctly – they leave vital
blocks unchecked or unmarked so that crucial information is lacking. In many instances they
simply sign the form and leave it completely unfilled in so that the forwarder must complete
it. This leaves a huge gap especially if the file passes across the desk of an inexperienced
clerk. Also, an importer’s clearing instruction may be vague on what transport mode is to be
used to deliver the cargo from the port to the final destination.
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Once again, the simple use of communication can avoid any mistakes. If in doubt always
communicate and clarify with the client. Obtain instructions in writing, or failing that (if the
urgency is so over-riding) then follow up later with a written confirmation of what was an
initial verbal instruction. Also, it helps to apply common sense.
When a shipment goes wrong and the witch hunt for a culprit starts and the paper trail is
checked then it can do your career no harm if the evidence clearly indicates that of all the
operators, you were the one who had clearly gone beyond the call of duty in obtaining
written instructions, checking and re-checking facts and figures, recording evidence and
following up with third party contractors, and generally being pro-active on behalf of your
client.
DEMONSTRATE AND UNDERSTANDING OF THE IMPORTANCE OF COMPLIANCE IN
THE INTERNATIONAL TRADE CONTEXT.
THE VARIOUS MEASURES AND THE COMPLIANCE BODIES RESPONSIBLE FOR
THEIR ENFORCEMENT ARE IDENTIFIED IN THE INTERNATIONAL TRADE
ENVIRONMENT.
There are types of pre-shipment inspection certificates which could include for example, a
loading certificate, consular certificate, insurance certificate of examination, fumigation
certificate, certificate of origin (COO), certificate of value, phytosanitary certificate, veterinary
certificate and certificate of health.
Without these certificates difficulties may be experienced when the cargo arrives at its
destination. There could be lengthy and expensive delays or even confiscation of the cargo
by the authorities.
You must ensure that the cargo complies with what is stated in the certificate, that the
certificate is the correct certificate, and is acceptable to the exporting or importing
authorities.
A certificate of origin (COO) certifies which country the imported goods were manufactured
in. If goods are exported from Germany then Germany is the country of export but not
necessarily the country of manufacture. The goods may have been manufactured in Italy but
exported from Germany. The certificate of origin may be a requirement of the customs
authorities to ascertain origin because of duty preferences.
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A certificate of value can be combined with a certificate of origin. A certificate of value
confirms the value of the shipment as well as freight costs, packing costs, insurance,
overseas services and charges, commissions, discounts and royalties. It may be required by
the customs authorities to determine value for duty purposes.
A fumigation certificate is always required by countries such as Australia, New Zealand,
Canada and the UK, to name but a few. The fumigation certificate provides proof that the
wooden crates and packaging material (even the inner packaging inside a crate such as
paper, cardboard, wood ships or wool) are free of insects and infestation. The certificate
states the fumigation procedure as well as the cargo, the packing and the chemicals used.
Certificates of health ensure that goods such as livestock and plants (and seeds) are healthy
and disease-free. The two types of health certificates are phytosanitary certificate and
veterinary certificate. Veterinary certificates cover livestock as well as fresh, chilled or frozen
animal products such as, for example, frozen meat or chilled chicken drum-sticks.
A loading certificate could be requested by an insurance company to ensure that the insured
goods are correctly loaded, adequately packed and in good order at time of loading.
The exporter is responsible for the pre-shipment inspection certificate and this is handed
over to the forwarder. The pre-shipment inspection must be done prior to the cargo being
loaded or packed and sealed. A pre-shipment inspection may be a requirement of an
insurance company.
Many of the pre-shipment inspections which are other than those of the government
departments are carried out by independent contractors who are recognised experts in their
fields and are certified and accredited to conduct such inspections.
THE CONSEQUENCES OF NON COMPLIANCE ARE EXPLAINED IN TERMS OF THE
REQUIREMENTS OF EACH OF THE COMPLIANCE BODIES RESPONSIBLE FOR
ENFORCEMENT.
If a consignment was subject to compliance of any type and this has not been done there will
be consequences which could range from delays of the cargo to penalties imposed. Non-
compliance could mean that the documentation is either incorrectly completed or not
completed at all. If it is not a case of actual documentation being completed but rather a
case of the cargo being fumigated or examined for example, then the documentation will
attest whether or not that procedure has been done, so it still comes back to the
documentation which attests to the act having being completed.
The consequences of non-compliance depends entirely on a number of factors such as the
type of shipment, the country of departure, the country of destination, the compliance body
and its regulations, and the type of offence. Some consequences could be:
fines imposed by the relevant compliance body
penalties
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storage charges
financial loss
risk of losing the client
the cargo being confiscated or impounded
complete loss of cargo
non-payment of insurance claims
criminal charges and imprisonment
DEMONSTRATE AN UNDERSTANDING OF SOUTH AFRICA'S INTERNATIONAL
TRADE ENVIRONMENT.
SOUTH AFRICA'S FIVE TOP EXPORT TRADING PARTNERS ARE IDENTIFIED USING
THE CRITERIA OF TONNAGES SHIPPED AND VALUE.
The SARS’ website and the website of the Department of Trade and Industry have drop-
down lists which make it possible to select a certain HS (Harmonised System tariff heading)
number to or from a certain country or region for a certain time period such as one month or
one year. This provides a report which can be very specific.
Amongst South Africa’s main exports are commodities such as gold, diamonds, other metals
and minerals, machinery and equipment.
South Africa’s major imports are commodities such as machinery, foodstuffs and equipment,
chemicals, petroleum products and scientific instruments to name but a few.
South Africa has rich mineral resources. It is the one of the world's largest producers and
exporters of gold as well as platinum. Another major export commodity is coal. In the year
2000 platinum overtook gold as South Africa's largest foreign exchange earner. South
Africa’s diverse manufacturing industry is a world leader in several specialized sectors,
including motor vehicles and parts, railway rolling stock, synthetic fuels, and mining
equipment and machinery.
South Africa’s major agricultural crops include citrus and deciduous fruits, corn, wheat, dairy
products, sugarcane, tobacco, wine, and wool. South Africa has many developed irrigation
schemes and is a net exporter of food.
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SOUTH AFRICA'S FIVE TOP IMPORT TRADING PARTNERS ARE IDENTIFIED USING
THE CRITERIA OF TONNAGES SHIPPED AND VALUE.
The top five countries from which South Africa imports can be identified by checking on the
website of the Department of Trade and Industry. These figures are continuously changing
from month to month and year to year.
Top countries include Germany, China, Saudi Arabia, Japan and the United States of
America.
SOUTH AFRICA'S FIVE TOP EXPORTED COMMODITIES ARE IDENTIFIED USING THE
CRITERIA OF TONNAGES SHIPPED AND VALUE.
SOUTH AFRICA'S FIVE TOP IMPORTED COMMODITIES ARE IDENTIFIED USING THE
CRITERIA OF TONNAGES SHIPPED AND VALUE.
Top 10 imported commodities August 2004
No Tariff Description Cod Quantity Rand Value
e R
1 2709.00. Petroleum Oils, KG 1,735,685,13 2,660,861,810
00 Crude 0
2 9801.00. Original Equipment, KG 20,607,427 1,120,574,819
30 Motor Vehicles 607,263,919
570,435,305
3 7108.12. Gold, unwrought G 16,104
00
4 8525.20. Transmission NO 581,240
00 apparatus incorp.
reception apparatus
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