Russian law on international freight forwarding defines the term “international freight forwarding” to mean freight forwarding in which the point of origin and the point of destination are located in two different countries.

International freight forwarding. Behind these words hides an entire system of operations, a veritable production line requiring coordinated efforts of dozens of people. To understand the scale of what is meant by international freight forwarding, let’s break it down into distinct steps. It is indeed an impressive operation, for this sequence of processes – that appear simple, but in fact require a lot of attention, concentration, and fast decision-making – cannot fail to impress.

Let us consider cargo delivery from China to Russia as an example that will allow us to demonstrate the complexity of any international freight forwarding.

Cargo delivery from China to Russia can be implemented using different routes: via Germany, the Baltic states, Finland, St. Petersburg, Novorossiysk or the Primorsky Krai. The shortest and most reliable route is the one via the Primorsky Krai, which is the one we will examine.

Step 1. Purchasing the goods in China.

Step 2. Export clearance of the cargo in China.

Step 3. Delivery of the cargo to a consolidation warehouse.

Step 4. Delivery of the cargo to a Russian customs post.

Step 5. Customs clearance of the cargo in Russia.

Step 6. Delivery of the cargo in Russia.

Step 1. Purchasing the goods in China. At this stage it is important to understand whether it will be better to purchase the required product directly from the manufacturer or through an agent. Dealing directly with the manufacturer can be complicated by things such as the language barrier or cultural differences in business practices.

When contracting with the manufacturer it is important to pay close attention to the terms of the contract, all possible options are included in Incoterms – a list of terms used in international commercial transactions.

HISTORICAL NOTE. The International Chamber of Commerce first published a list of international sales terms in 1936, it is known as “Incoterms 1936”. These terms were later amended and supplemented in 1953, 1967, 1976, 1980, 1990 and, for the last time so far, in 2000 – in order to bring the terms up to date with the modern practice of international commerce. The current version, “Incoterms 2000”, has been translated into 31 languages.

Since Incoterms are modified on a regular basis, it is important that, if a reference is made to Incoterms in the sales contract, the edition of Incoterms be specified.

Step 2. Export clearance of the cargo in China. According to article 18 of the “Customs Law of the People’s Republic of China”, the exporter of export goods shall submit the export licensing documents and relevant papers to the customs for examination. In the absence of export licensing documents, goods subject to export restrictions by the State shall not be released.

Because of this feature of Chinese legislation, it is necessary that the contract of sale and delivery from China be concluded with a Chinese company that has an export license. This part can be played both by the manufacturer of the product and by its sender.

Step 3. Delivery of the cargo to a consolidation warehouse or to a port or a railway station in China is accomplished by Chinese carriers. At this stage it is important to decide what mode of transport will be used for shipping the cargo out of China, which will determine whether it should be taken to a consolidation warehouse, a sea port, an airport, or a railway station.

Step 4. Delivery of the cargo to a Russian customs post. Before the cargo can get to a customs post it needs to cross the frontier. In the case of delivery by sea or air this happens at the destination port, in the case of delivery by rail – at a frontier railway station, in the case of delivery by road – at special frontier check-points.

In the case of delivery by road it is important that the consolidation warehouse of the freight forwarder be located at one of the frontier check-points, in order to minimize cargo transloading. For that reason the cargo is taken to a frontier check-point by a Chinese carrier and, after transloading, is transported out of China by Russian trucks. According to article 3 of the “Law of the People’s Republic of China on Control of the Entry and Exit of Aliens”, for entry, exit and transit, foreign-owned means of transport must pass through ports open to aliens or other designated ports and must be subject to inspection and supervision by the frontier inspection offices. There are four such designated ports on the Chinese-Russian border in the Primorsky Krai: Turiy Rog – Mishan, Pogranichniy – Suifenhe, Poltavka – Dunin, and Kraskino – Hunchun.

Step 5. Customs clearance of the cargo in Russia. According to Russian law, a part of imported goods is subject to a 100% customs examination which, naturally, increases the time required for customs clearance and, consequently, increases expenses for storage, cargo handling, and paperwork. Customs clearance includes the payment of customs duties (determined by the Customs Code of the Russian Federation) and VAT. Furthermore, certain types of goods require additional permits in the form of certificates, exemption letters, sanitary and epidemiologic inspection reports, and so on. The controlling authority is the Federal Customs Service of the Russian Federation. Customs clearance results in a customs freight declaration with a stamp saying “Cleared”.

Step 6. Delivery of the cargo in Russia. Once the customs freight declaration is issued, the cargo is cleared for free circulation on the territory of Russia. It can thus be delivered to its final destination by any means of transportation.

2010-04-06

Author: Mrs. Elena Kolycheva