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Monkeys in the cargo hold: international businesses hand their headaches off to freight forwarders.

The shipment for the Washington Park Zoo arrived on time, but with a slight complication. One of the monkeys being imported gave birth. Now the vessel manifest didn't match the U.S. Customs Service documentation. No matching papers, no cargo release.

For companies breaking into international or even cross-country markets, bureaucratic snafus are all too familiar. Global trade brings a cartel of headaches, the least of which are byzantine governmental rules. But one person's grief is another's fortune. The widening marketplace has given rise to a growing number of freight forwarders, ambassadors of sorts, who help companies negotiate the regulatory obstacles that daunt most businesses.

In the case of the reproductive monkey cargo, Judith Haggin, a partner with George S. Bush & Co., arranged for the supplier to issue a new invoice and for the ocean carrier to revise the manifest. The problems were resolved and the freight was released to live happily ever after.

Like Haggin, the best freight forwarders are problem solvers and full-scale international business advisers. Through a specialized knowledge ranging from international currency conversion, to NAFTA, to nuts and bolts such as labeling and packaging, freight forwarders help companies move their products from the manufacturers' loading dock to the overseas buyers.

Although their product - the ability to cut through red tape - is invisible to most of the general public, freight forwarders in the Portland area move billions of dollars of goods into international markets and facilitate imports into the state.

"Freight forwarders don't own airplanes, trucks or ships - they're advisers, negotiators, and sourcing wizards - but without them, people wouldn't have tires on their car," says Ray Canarios, a former corporate executive with Air Express International, one of the world's largest logistics companies.

A word borrowed from military supply lines, logistics describes the combination of trucking, warehousing, freight forwarding, customs brokering and distribution that takes products in the global marketplace from the point of origin to the final destination as efficiently as possible.

Nowhere have computers made a bigger impact than in the world of trade logistics, says Canarios. "Before personal computers, most freight forwarders were longshoremen who were given a phone book, a desk, and a few weeks of hands-on training. Now it's a suit and tie job and the sharpest high-tech people are being recruited."

As a sales rep covering Oregon and Southwest Washington, Canarios helped local businesses move their wares from the factory to the overseas suppliers by air, ocean, truck, rail and camel.

Initially, many small companies rely on UPS or Federal Express to export goods overseas. Jan Heinrich, the owner of Set-N-Me Free Aloe Vera Products, first used Federal Express to ship her goods to Sweden but she knew it wasn't a long-term solution. One day she was explaining to a customer, Patrice Iverson-Summer, that the demand for her natural skin creams was growing in Europe but she didn't know how to get them there. Iverson-Summer, a freight forwarder, convinced her to try ocean consolidated shipments.

With Iverson-Summers' help, Set-N-Me Free began breaking into new markets, and today her company sends out daily shipments to far-flung places such as Zimbabwe, Benin and most of the Middle Eastern and Asian nations. Heinrich, whose overseas sales now account for 30% of her company's $1.5 million annual revenue, says freight forwarders free her from the tangles of documentation and allow her to focus on her core business.

"I still fill out the pro-forma [an invoice] but that's about it."

Now the vice-president of 3-year-old Global Trading Resources on Marine Drive, Iverson-Summers handles an equal amount of export and import services. Initially aiming for eight transactions a week, Global now does twice that many on an average day. But Iverson-Summers works 14-hour days, seven days a week, and admits that the cumulative stress can take a toll. Although Global charges a base fee for routine services, it also adjusts the cost according to the complexity of the work and the amount of time it requires.

Global is one of about 65 Portland-area freight forwarding companies, ranging from giants such as AEI to mom and pop operations. While freight forwarding is usually associated with overseas shipments, a good deal of the business is done right here. Local cartage, the pick up and delivery of goods in the metro area, is one of the first steps in getting the product, be it bull sperm, grass seed, athletic shoes or Oregon hazelnuts, to its cross-continental destination.

With Pacific Rim trade exploding and Oregon exports soaring, these are profitable times for freight forwarders, and Portland, the second largest West Coast export port, is the place to be. Trade through the Columbia Snake River Customs District reached a record $17.7 billion in 1996. Oregon businesses exported $9.8 billion worth of goods, nearly doubling the figures from five years ago. High-tech companies accounted for nearly half of the exports ($4.7 billion) racking up a 200% increase since 1991.

But with the booming trade opportunities comes increased competition. Although customs brokers are licensed by the federal government and must pass comprehensive examinations, anyone with a personal computer, three years exporting experience, and three letters of recommendation can start a freight forwarding business.

But hanging an "open for business" sign in the window and actually surviving are different matters. Freight forwarders, not unlike stock brokers, operate in a constant pressure cooker. A tiny mistake, such as misplacing a single decimal point, can spell doom.

With customs officials rigorously enforcing all codes, and violators subject to stiff penalties, use of an experienced freight forwarder is advisable, says international trade consultant Paul DiVecchio of DiVecchio & Associates in Boston, Mass.

"There's a ton of rules and regulations for freight forwarders, but no licensing requirements, no certification, no nothing. There've been more fines and penalties assessed in the last six months than I've ever seen."

For the forwarders, achieving profitability means constant comparison shopping and walking a tight rope: cutting the best deals possible, but also delivering the goods to the right place at the appointed time. And while much of the buying and selling is wide open, the regulation, depending on volume, weight, dimensions, frequency of shipment and type of product, is intense and complex.

It takes a combination of skills, knowledge, and experience that comes only from the college of hard knocks, Canarios says. "It takes a helluva lot of guts to do it. And if you screw something up, you fix it, even if it means staying up all night."

Whether the exports are computer chips or bulk fertilizer, the goal is to move it fast. Stuff doesn't stack up in warehouses like it did in the old gangsters-on-the-waterfront movies.

Freight consolidation, which cost-conscious agents have been using for ages, is now reaching unprecedented levels of sophistication. Companies will buy freight space in wholesale quantities on airplanes or ships, then turn around and sell the room to smaller shippers, passing along a portion of the cheaper, wholesale price. Consolidators will try to find space for one or more small shippers when space is available in air or sea containers, says Frank Dausz, also a partner at George S. Bush & Co. It's frequently the cheapest option for entrepreneurs whose shipments amount to less than full containers.

A recent trend, international order processing, sees the customs broker getting involved earlier in the shipping transaction and helping put deals together.

"Since we know all the parties involved," Haggin says, "we can step in and help the client save money."

For example, on an inbound shipment, the seller will often quote the buyer a price for the product which includes transportation costs, but shrewd shippers will ship free-on-board, leaving the buyer rather than the seller to pay for the transportation costs. The shippers then involve their brokers to get the best routing and to negotiate the lowest possible rates.

Like similar companies on the West Coast, Bush & Co. offers customs brokerage and freight forwarding services. But on the Eastern Seaboard, the two services are usually separate businesses.

Brokers and freight forwarders play similar roles, but on opposite sides of the trade equation. Both represent shippers or consignees in dealing with government, transportation and banking, the three vital areas of the industry. Brokers and forwarders also handle routing and documentation activities, but the broker's prime responsibility is to act as an agent representing the importer before U.S. Customs.

Both help with cargo routing, insurance, risk management, and problem solving. Freight forwarders, unlike brokers, specialize in export shipments and prepare the needed documentation for government export clearance and customs clearance overseas.

While trying to simplify the paper trail, Set-N-Me-Free's Heinrich once designed a flow chart and ended up with a full sheet of single spaced instructions listing requirements and forms required by dozens of different nations. "It didn't even deal with actual shipping - it was just invoices, documents and paperwork."

But her freight forwarder, which she now thinks of as the exporting arm of her company, gives her peace of mind, which is hard to put a price-tag on. "Everybody that touches the shipment has to know that each previous step has been fulfilled. It's awfully complicated, but to an expert like Patti, it's simple, plus, she gets the best routing and pricing possible."


International shippers often fear they won't get paid. To them, letters of credit are the next best thing to cash in advance. The two other most common methods of reimbursement are prepayment and draft, which is not guaranteed.

To get a letter of credit, an overseas customer first takes the pro-forma invoice (a detailed description of the freight) to a bank official, fills out an application, and the bank drafts a contract that is agreeable to both buyer and seller.

Because the letter protects both sides, all documentation must follow its conditions to the tiniest detail. A freight forwarder will sometimes fine-tune the letter, which can be simple and straightforward or excruciatingly complex.

The letter, usually no shorter than three pages and not longer than 10, spells out all requirements such as certifications, special handling instructions, pre-export third-party inspections, and warehouse-to-warehouse insurance.

Letters of credit usually cost either $150 or 1/8th of 1% of the total cost of the shipment.
COPYRIGHT 1997 Oregon Business Media
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Title Annotation:Insight: Transportation
Author:Rumler, John
Publication:Oregon Business
Date:Nov 1, 1997
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