Exporting Woodchips from Australia to Japan - Assignment Example

Exporting woodchips from Australia to Japan [Name] [Professor Name] [Course] [Date] Exporting woodchips from Australia to Japan Abstract: This paper discusses how woodchips would be exported from Australia to China. The company chosen to ship the product is APEC. The paper further discusses the way products would be transported by sea freight, air freight, road freight, the route, what the shipment company will provide for the shipment, (documents, sign the contract). It further explores what could happen for the product from weather, fire or accidents, the insurance covers that should be sought and documents to claim them as well as the cost and pricing of the shipment. In all, it covers six assignments. 1.1. Business context of cargo movement Australian wood chips manufacturers interested in exporting the materials to Japan should ensure that the products meet the Japanese industry standards, particularly the Japanese Agricultural Standards (JAS) for timber products. Failure to comply with these standards will limit the market potential for the woodchips in Japan. In Japan however, wood chips do not require import licenses and can be imported into the country freely. An import license would however be required, as well as shipping documents such as packing list, commercial invoice and signed bill of lading and any other document indicating compliance with JAS (HKTDC Research 2007). Albany Plantation Export Company (APEC) is selected for the shipment of wood chips to Japan since it specialises in low-cost and low-risk freight forwarding of wood chips (full container load and less container load) to Asia. Its criteria for cargo movement from Australia to Asia includes quotation for the exporter and the buyer of the contract sale, acquisition of the confirmation of freight contract and lastly, supplement to the original quotation to track any change in the range of cost components (APEC 2013). 1.2. Factors for considering in route/mode selection The wood chips will be shipped to Japan by sea through containerization. Since it is typically a large shipment as well as being durable thus does not require fast delivery. It is also the most economical and feasible option compared to air and road. The freight will be packaged and then loaded into shipping containers (isotainers). The most appropriate route would be the Far-East to Australia route, since it is the shortest to Tokyo, Japan or Okinawa Kume Island. The route is appropriate as it evades hazardous weather and oceanic environment such as fog, intersection and ice during navigation (IMO 2012). Far-East- Australia See Route (adapted from Internetpower.com) 1.3. Conditions and risks of routes Wood chips freight faces potential risks due to the nature of cargoes, as they are high-density and heavy commodities, which are prone to accidents since the bulk carriers have also resulted to considerable loss of commodities. Other risks include fire, theft, collision, piracy and loss of ship (Hewiki 2010). APEC provides insurance cover for such risks in case they happen during the course of shipment. 1.4 Tracking status of particular transport routes APEC further provides the exporter with a tracking number once the wood chips freight is packaged onto the ship ready for shipment. The tracking number enables the exporter to ensure instant cargo tracking for the freight cargo, enabling the exporter to know when his shipment is due to dock. For instance, an exporter is able to note when the cargo will leave Australia to Japan, and the time it will arrive in Japan ready for offloading (APEC 2013). References APEC. 2013. About APEC. Albany. Albany Plantation Export Company. (Online) Retrieved from: Accessed 19 June 2013 Hewiki. 2010. See Route. (Online) Retrieved from: Accessed 19 June 2013 HKTDC Research. 1 Dec 2007. Trade Regulations of Japan. Hong Kong. Hong Kong Trade Development Council. (Online) Retrieved from Accessed 19 June 2013 IMO. 6 Mar 2012. International Shipping Facts and Figures-Information Resources on Trade, Safety, Security, Environment. Maritime Knowledge Centre. (Online) Retrieved from: Accessed 19 June 2013 2.1. Airlines and air cargo services operating in and out of Australia Four of Australia's major air cargo companies that operate within and outside the country have been identified. DHL Global Forwarding is a pre-eminent freight forwarder in a range of facets of cargo movements into and outside Australia. The company estimates indicate it carries some 12 percent of the overall worldwide market. The company’s has operations in 150 countries. The company offers chartered planes and scheduled flights for exports and imports. Japan is the company’s major export freight market (DHL 2013). Qantas Air Cargo is the largest and the oldest continually operated airline that operates within and outside Australia. The airline flies to 20 destinations inside Australia and In 14 countries globally, including Asia, Americas, Africa, Oceania and Europe. Along with its subsidiaries, including Australia Asia Airlines, Impulse Airlines, Australian Airlines, QantasLink, Jetstar Airways and Network Aviation, the airline serves 27 global destination and 65 domestic ones. Japan and China are the major export markets for Qantas Freight (O'Sullivan 2013). Toll Air Express is a freight subsidiary for Virgin Australia, handling cargo products within and outside Australia. The airline covers over 350 destinations across the globe. Toll Air Express offers air charter and time-critical freight. The company operates across Australia, Asia, New Zealand offering logistics and supply of a range of industrial raw materials and products such as telecoms equipment, timber products, mining equipment, health care equipment among others (Virgin Australia Airlines 2013). 2.2. Configuration and carrying capacity of different types of aircraft Boeing 747-400 Freighter Boeing 747-400 has the capacity to carry up to 110 metric tons of cargo at more than 4,400 nautical miles. Its nose-loading system has been specifically designed to use the main deck maximally, that can contain up to 3-meter high pallets. It has a maximum take-off weight of around 4123,770 kilograms, which allows the aircraft to fly an extra 525 nautical miles, or hold an extra 10,000 kilograms of payload (Boeing 2013). Boeing 747-8 Freighter Boeing 747-8 Freighter is the leading freight carrier. The aircraft has 16 percent more cargo carrying volume compared to its predecessor Boeing 747-400, allowing it to carry 7 more pallets with similar nose-door loading capacity. It has 3-meter pallets and cargo density capacity of 9.8 pounds per cubic feet. Its payload capacity is 134 tonnes. The aircraft allows operators to carry greater revenue payload up to an extra 20 tonnes. Boeing 777 Freighter Boeing 777 Freighter has a maximum takeoff weight of around 347,450 kilograms. The aircraft has a revenue payload capacity of 103.9 tonnes. It offers 3-meter interior height as the 747-8. The aircraft can fly at 4,895 nautical miles. Boeing 767-300 Freighter Boeing 767-300 Freighter has the capacity to carry 54.4 tonnes of cargo at 3,200 nautical miles (Boeing 2013). 2.3. Shipping services and types of ocean vessels operating in and out of Australia Major shipping services in Australia include general cargo shipping, bulk cargo handling, tanker, containerization, tramp trade and passenger services. Many types of vessels operate in and outside Australia, the distinguishing factor between them being the different needs of the international traders. Simply put, different types of ship are intended to carry specific types of cargo. Container ships carry cargoes packaged in standard 20-inch by 40-inch containers loaded on or under the deck. Feeder ships, usually smaller in size, convey containers on inland or coastal waters. Roll-on carriers are large enough to carry passenger vehicles and road haulage. General cargo ships on the other hand handle loosely packed cargo of any type. Bulk carriers are designed to carry large volumes of unpacked single-commodity goods such as fertilizers, cereals or coal. Tankers are intended to transport liquids, such as liquefied petroleum gas (LPG), oil and petrol. 2.4. Different types of shipping services Australian shipping industry provides different types of services that can be categorized into two, namely liner services and tramp services. Liner services are ships that pry designated routes using schedules. They are appropriate for transit of small volumes of cargo that do not demand for charter services. They are mostly used for transporting electronics, clothes, toys or vehicle spare parts. Tramp services on the other hand are shipping services that operate on-demand or on-call. They are particularly availed when a customer has to carry large cargo volumes that need to be shipped in vessels, such as woodchips or crude oil. The capacities of these ships range between 5000 metric tons to 500,000 metric tons. Such chartered services can further be classified into time charter, single voyage charter, trip charter and consecutive voyage charter. 2.5 Configurations and carrying capacities of different of ocean vessels Different types of ships have different configurations depending on what they are intended to carry. Cargo ships are intended for marine cargo transit, with capacities that range from 10,000 to 30,000 Deadweight tonnages (DWT). Very large crude carrier (VLCC) carries an estimated 200,000 DWT. References Boeing. 2013. Commercial Airplanes.(Online) Retrieved from: accessed 19 June 2013 DHL. 2013. Freight Transportation. (Online) Retrieved from: Accessed 19 June 2013 O'Sullivan, M. 2 Oct 2013. Qantas puts its focus on air freight. The Sydney Morning Herald. (Online) retrieved from: Accessed 19 June 2013 Virgin Australia Airlines. 2013. Australian Freight Services (Online) Retrieved from: Accessed 19 June 2013 3.1. Protection, presentation and preservation requirements  The woodchips should be preserved and presented in a way that will add value to the product in the Japanese export market. The chemicals used in preservation should comply with the Japanese Industry Standards (JIS), particularly the Japanese Agricultural Standards (JAS) for timber products, which require that the product is environmentally friendly. They should as well meet the approved timber and wooden products preservation chemicals such as methyl bromide fumigation, sulphuryl fluoride fumigation and heat treatment (Inamarmarine n.d). 3.2. Containers available for international cargo Open top containers These types of containers have end doors that allow for flexibility and free mobility during loading and offloading of commodities onto the container. They are usually covered with tarpaulin and are appropriate for carrying timber (Marine Insight 2012). . Reefer containers They are refrigerated containers essential for transporting perishable goods that require controlled temperatures. Dry containers They comprise in-built aluminium containers that have slightly larger payload than steel. They come in 20 and 40 inches and are appropriate for a range of cargo types. They are the most appropriate for carrying woodchips. High-cube dry containers They are appropriate for bulky or voluminous cargo. Usually, they are high cube containers and are a foot higher than dry containers. They come in steel or aluminium. They are also appropriate for carrying woodchips. Platform containers These types of containers have no walls or roof and are used in transporting commodities that cannot fit into closed containers (Marine Insight 2012). 3.3. Marking requirements and prepare correct marking advice The marking should be placed at a conspicuous spot, although it must be visible when the items on transit are being handled. The marking should also be at a spot where they cannot be concealed by succeeding attachments. If the commodities, such as woodchips, cannot be marked, it is fitting that the mark be placed at the exterior of the container indicating the country of origin (in this case Australia). The marking should also be legible, the writings or symbols must be clear enough to be read by an individual with normal vision (Inamarmarine n.d). 3.4. Risk Factor in Relation to Packaging Packaging and storage risk factors associated of woodchips are numerous and include: Coniferous woodchips pose a risk of pathogen invasion, as quarantine pests and nematodes (such as (Bursaphelenchus xylophilus), are often associated with wood products. Woodchips also carry the risk of introducing hazardous pathogens to Japan. To avoid this risk, the wood packaging used to pack the woodchips should be subjected to heat treatment a minimum temperature of 56 degrees Celsius for more than 30 minutes all through the profile of the wood. The woodchips packaging materials such as particle board, chip board, plywood, or oriented strand board run the risk of either catching fire, or absorbing moisture thus making the woodchips to become damp, thus decaying. To avoid the risks, plastic pallets of crates should be used for packaging the plastic pallets (Metla 2013). There is also the risk of stability. For instance, the vessel must be stable at all stages through the voyage relative to the amount of cargo it is supposed to load. Cargos for timber products such as woodchips can absorb up to a third of their weight on water, which may cause the risk of stability. To avoid the risk, packaging materials made of plastic should be considered. References Inamarmarine. n.d. Marks and Symbols. (Online) Retrieved from: Accessed 19 June 2013 Marine Insight. 2012. 16 Types of Container Units and Designs for Shipping Cargo. (Online) Retrieved from: Accessed 19 June 2013 Metla. 2013. No pine nematodes found in timber imports from Russia. Metla Bulletin. (Online) Retrieved from: Accessed 19 June 2013 Ting, E. n.d. The Different Types of Ocean Shipping. National Taiwan Ocean University. (Online) Retrieved from: Accessed 19 June 2013 4.1. Type of rates, volume-to-weight ratio factors and methods of rating cargo for international carriage by sea. The volume/weight relationship for shipment of goods is usually 6,000 cm3 to one kg. Shippers calculate the volume of each cargo to determine the cost of freight. Measurement of cargoes refers to the cargo on which the freight is rated on volume the cargo occupies. This type of cargo is usually bulky stowing at more than 1.2m3/tonne. Deadweight cargoes refer to cargos that the freight is charged. It is often rated on weight. This type of cargo stow at less than 1.2m3/tonne (Hummels 2009). 4.2. Variations in calculating shipping charges caused by surcharges and other variants Variations in calculating shipping charges caused by surcharges vary significantly across countries, product and duration of shipping. The value addition services, such as offloading and loading when taken into account may attract surcharges. All in Rate means that the costs of shipping comprise all the surcharges charged under the conditions of carriage. This means that surcharges would vary depending on loading and offloading of the shipment aside from shipping (KKFreight 2013). Basic service rate additional (BSRA) are surcharges resulting from sorting, storing and ultimately loading the goods on the buyer’s containers for delivery to the ultimate buyer. Fluctuations in the cost of fuel may also cause surcharges when taken into account during the shipment of the goods. Such surcharges are called Bunker Adjustment Factor (BAF). The effect of current fluctuation when also taken into account may attract surcharges called Currency Adjustment Factor (CAF). Shipment of hazardous commodities, such as those specified by UN’s International Marine Dangerous Goods code (AMDG) may also attract surcharges when taken into account. This is due to additional handling requirement at the expense of the shipping company. Such surcharges are called IMO surcharge (HMRC 2011). 4.3. Calculate and compare costs of shipping a variety of goods by the several types of ocean service  A container with capacity of 1990 m3 has to be packed with 1210 tonnes of bales of jute (measuring measure 60cm x100cm x 60cm and weigh 190 Kg each) and bales of gunnies (measuring 60cm x 100cm x 80cm and weigh 260 Kg each). To calculate the price, the number of bales of each woodchip that have to be loaded to fill the container with the required weight will have to be first determined. This is because freight is paid depending on weight. The broken stowage, which refers to the amount of unused space die to cargo space, is expressed as percentage of the total space that is available. It often occupies over1 cubic metre f space per tonne weight. On the other hand, deadweight cargoes occupy not more than 1 cubic metre per tonne weight. Therefore: Jute volume = 0.6 x 1.0 x 0.6 = 0.36 cubic metre Gunnies volume = 0.6 x1.0 x 0.8 = 0.48 cubic metre If a and b represents the amount of bales of jute and gunnies to be loaded, then: Therefore 0.19a + 0.26b = 1210 -------- i) 0.3a + 0.4b = 1990 -------- ii) From ii) b = 4980 – 0.75a ------ iii) Putting iii) into i), 0.19a + 1245 – 0.1875a = 1210 ‘a = 4400 bales ‘b = 1680 bales From the weights established, the cost of shipment will depend on the pricing by the shipping company. References HMRC. 2011.Ships, aircraft and associated services. (Online) Retrieved from: Accessed 19 June 2013 Hummels, D. 2009. Globalisation and Freight Transport Costs in Maritime Shipping and Aviation. Paris. ITF. (Online) Retrieved from: Accessed 19 June 2013 KKFreight. 2013. Shipping Surcharges - CAF, BAF, All In. (Online) Retrieved from: Accessed 19 June 2013 5.1 Postal and courier freight rates and size/weight factors and limitations Postal and courier services offer two-way connection that links the seller and the buyer, thus creating markets and building business relationships. Unlike freight hauliers however, postal and courier rates are much cheaper and carry lighter dispatches or packages. They are also faster, more secure, having tracking signatures and more convenient as can be easily specialised into express services. Small packages and letters should weigh up to 2 kilograms, while post special delivery service (SDS) should weigh up to 30 kilograms. Tariffs for the freights are divided into zones. Tracking the freights may however be difficult. 5.2 Rates and costs associated with chartering vessels and aircraft Air- and waterborne transit efficiency depends on several factors such as the operating cost of the vessel or the aircraft, the cost of handling the cargo, the port time and most importantly, the communication system. The rates and costs of communication are often dependent on what the trading chain entails, for instance, if it proves more intricate by interlinking many mediators, such as charterers, ship-owners, buyers, service providers and even brokers, then it means it will be more expensive. Technically, decision making before, during and after the freight depends heavily on information. The shipping company should properly invoice the cost of communication while the charterer should be knowledgeable of the cost of communication to be able to estimate the cost. Since most vessels charge differently for use of internet, the charging rate should be presented to the charterer at the safety briefing (Cullinane & Khanna n.d.). 5.4 Rating principles and methods in domestic, sea, road, rail and air transport Determination of rates for domestic freight is often dependent on the weight of the commodity (per kilo basis). The rates are expressed in the local currency, which means Australian charterers receive quotes in Australian dollars. The rate might therefore be 3 per kilo, meaning 100 kilos will cost AU$300. The rates are dependent on the type of product, the service frequency, distance and lastly the cargo capacity that is available on the route. 5.5. Standard and extraordinary ancillary shipment costs on a door-to-door basis In door-to-door shipping, the quoted price of the shipping service comprises all the cost of shipping, customs duties, cargo handling, import duties, thus making it easy for buyers to import goods across countries. This is different from standard shipping where the price quoted comprises the expenses the shipping company incurs by moving a commodity across countries. Other ancillary shipments costs include break bulk fees, port charges, parcel posts, document and handling fees, customs clearances, inland haulage, insurance costs, dangerous goods and storage fees (Giannopoulos et al 2013). 5.6 Total cost concept Transport costs should be viewed alongside other costs. Choosing the mode of transport, whether by air or sea, is dependent on where the consignee and consignor are located, the type of goods, the legal requirements, cash flow, the duration required, the packing, the delivery terms and the frequency of service. The cost of air freight is relatively higher than by sea (Tseng, Yue & Taylor 2005). References Cullinane, K. & Khanna, M. n.d. "Economies of Scale in Large Container Ships." Journal of Transport Economies and Policy, Vol 33 Part 2, pp185-205 Giannopoulos, D. et al. 2013. The Marides project: Intelligent Chartering in the Maritime Industry. (Online) Retrieved from: Accessed 19 June 2013 Irish Exporters Association. 2013. Transport Selection. (Online) Retrieved from: Accessed 19 June 2013 Tseng, Y., Yue, W. & Taylor, M. 2005. “The Role Of Transportation In Logistics Chain.” Proceedings of the Eastern Asia Society for Transportation Studies, Vol. 5, pp. 1657 - 1672, 2 6.1. Need for cargo insurance There is need to insure the shipment against possible risks from fire, accident, loss, carrier damage, traffic incident delay, or injuries and death that may be caused by hazardous materials. 6.2. Standard types of cover arrangements used by underwriters Single-shipment policies cover the damage or loss of the shipment, which includes the entire shipment package from any kind of malicious damage or damages resulting from fire (FMCSA 2001). Annual policies cover the shipment of cargos over a one-year period. They are higher than single-shipment policies (Cargo Insurance 2013). Open policies is a type of cargo insurance policy that covers the whole shipment from the point of dispatch to the final destination. It has no designated expiry date. It covers all freight despite the value (Vero Marine 2013). 6.3 Documents for insurance claims To file cargo insurance claims, the following documents are needed, including copy of B/Ls for the air, inland or ocean freight, certificate of insurance, that cover the whole shipment together with freight bills, copies of the packing lists, the delivery receipts, statement of claim, carrier inspection documents, written confirmation from the ship-owner indicating inability to make the delivery, copy of the claimant’s letter to the ship-owner that place the ship-owner on notice and copies of any significant correspondence (Carex Shipping 2007). References Carex Shipping. 2007.Cargo Insurance Claims for International Shipping. (Online) Retrieved from: accessed 19 June 2013 Cargo Insurance. 2013. Annual Cargo Policy.(Online) Retrieved from: Accessed 19 June 2013 FMCSA. 2001. Comparative Risks Of Hazardous Materials And Non-Hazardous Materials Truck Shipment Accidents/Incidents. Colombus, Batelle. (Online) Retrieved from: Accessed 19 June 2013 Vero Marine. 2013. What is a Marine Open Policy?. (Online) Retrieved from: Accessed 19 June 2013  In conclusion, Japan is Australia’s major market for wood chips, specifically grown woodchips (Eucalyptus globules), due to its far-reaching domestic wood product processing industries that uses great quantity of imported woodchips as raw materials. Exporting the products to the country provides is therefore a viable business. Read More