Supply Chain Security Roles

Answer

Supply Chain Security Roles

Introduction

As globalization continues shaping international trade, countries are reporting increased benefits of bilateral and multilateral trade agreements. As a result, the intensity of business activities between countries has increased. Countries are simplifying customs operation to ease trade between them. Even while doing this, they are cautious of the risks caused by international trade. This includes risks of terrorism, biological weapons, dumping and smuggling among other vices (Altemöller 2016).  The need for national and international security justify the tough laws at entry points into different countries.  The countries are mandated to guard and regulate their borders while keeping stock of what is leaving or entering through customs authorities at the entry and exit points (Grainger 2016). This way, they ensure the security of the supply chain. It is the role of the different stakeholders and actors within the supply chain to ensure the security and efficiency of operations. This essay, therefore, uses the case study of Compretudo to illustrate supply chain security roles and relationships between different logistics parties.

Case Study

Compretudo is a leading supermarket chain based in Brazil. It sources for different goods form China and India which are two neighboring countries with different border control processes. These goods have to move through diverse processes and logistics parties in order to be checked, certified and cleared for the next process along the supply chain. The bottom-line being ensuring the security of the transactions, products, and participants as the goods move from India, a neighboring country into China through land. The goods have to be cleared at the border customs between the two countries to allow entry into China where they will be consolidated into a container ready for shipping to Brazil. This supply chain process will require the involvement of many partiers. Thus the following section discerns the responsibilities and roles of the traders selling and buying the goods, and other commercial players and border managers including customs in promoting national security and international security along the movement from India to China and shipping to Brazil.

Purchasing Goods A, B and C in India and Exporting into China via Inland Customs

                Compretudo will use a broker to facilitate the initial processes of sourcing for the three product lines from India. The broker will search for the suppliers proposed by Compretudo. The buyer will then negotiate with the seller after which the broker will inspect and facilitate the movement of the goods from the three suppliers to the customs. The goods will be moved through road or via air to the Nathu La Pass border between India and China. The broker will liaise with a freight forward appointed by Compretudo. The forwarder will receive documents from the broker and coordinate clearance of the goods at the border customers from India. By this time, the broker would have bundled together with the goods into trucks for transportation across the border. The process involves a thorough inspection of the goods. The inspection agents will take the goods through a rigorous test and ascertain their quality with that written on the consignment notes and other import documents.

Abraham (2018) notes that to import goods from the Indian side of the border into China, the forwarder will be required to sign up an importer register and seek the approval of the Indian Chamber of Commerce. The forwarder will then pay the customs duty and extra legalization fees that are levied on all commercial shipments entering the country. The goods will further be subjected to customs duties depending on the value of the goods or on per unit basis. These processes have been automated and made available through online platforms thus easing documentation. In order to cross over through the customs, China has stringent import regulations than India (Mashiri & Sebele-Mpofu 2015). The country’s import laws require that all commercial shipments through its borders are examined by the customs officials before they are cleared and allowed into the country.

Other documentation processes have to be done through the customs system which is a single window system that facilitates coordination of documentation, payment, and e-government systems. The country has regulations on illegal trade. Its inspection officers make sure that fake products do not enter the country. They request to inspect the original invoices for the purchased goods in India to ensure they are not stolen. Additionally, the border managers ensure that the goods being imported have a non-removable marking of their manufacturer and the place of manufacture. Such markings are important in securing customers clearance across the Nathu La Pass border between India and China. The forwarder will also be required to issue a certificate of conformity from the suppliers in India. Alternatively, the goods can be backed by an original commercial invoice accompanied by a stamp and a signature. The goods should also be attested by the Chinese Chamber (Abraham 2018). The Chamber ensures that the goods are properly packaged, paid for and that the packing list of all the consignment has information such as volume, weight and the number of pieces.

The Indian customs officials have other requirements. This includes mandating that importers procure an HS code which is an international system for classification of traded products. The code is linked to the import license and commercial registration of the trader. The key documents required in ascertaining the security of products and processes include the customs entry documents duly signed by the Indian clearance officers. The document is prepared by the buyer’s forwarder. The other documents include customs declarations, import licenses, insurance certificates, health certificate for foods and certificates of inspection of the goods (Abraham 2018). The inspection process has to be done by internationally recognized inspection agencies such as BVQI and SGS or any other credible agency (Bichou 2017). Upon clearance from the Indian side, the forwarder liaises with a transporter on the Chinese side of Nathu La Pass border and orders the goods to be sent to the Port of Shanghai where they will be received by a broker assigned to a warehouse leased by Compretudo to store the goods before shipping. The option to use a broker is viable since Chinese suppliers cannot be trusted with consolidating all the goods. In addition, they could use substandard export packaging materials thus compromising the safety of the cargo.

Purchasing Goods D, E, and F in China and Exporting into Brazil by Shipping

Upon completing the first phase, Compretudo who is the buyer, in this case, is informed. The firm then contacts suppliers for goods D, E and F. They agree on the quantity, quality, and pricing. The manufacturers, who are also the suppliers then package the goods, prepare the necessary documents and contact the broker. They agree on transporting the goods to the Port of Shanghai. All the three suppliers ensure their goods reach the point of exit at the port with the necessary documents such as commercial invoices containing product description, unit price, amount, and product description in addition to delivery conditions. The other document is a packing list. The broker assembles all the six consignments at a warehouse and packages them into a 40ft dry container. The broker has to gain a certificate of origin from either of the two bodies mandated with issuing the document. Gronkvist (2017) clarifies that these are either China Entry-Exit Inspection and Quarantine Bureau (CIQ) or China Council for the Promotion of International Trade (CCPIT).

Second, the broker will require a GSP certificate of origin form A. Other documents include; bill of lading,  shipping list, sales contract and customs declaration in addition to specialized documents such as; import license, import quota certificate for general commodities, inspection certificate dispensed by the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) among other safety and quality licenses (Gronkvist 2017; Altemöller 2016). The broker will then verify these documents with a border official to ensure their authenticity while also inspecting the cargo in the container. This is a security measure aimed at ensuring that China does not trade in illegal goods.

This process is followed by the selection of a shipping plan as denote using the word shipping incoterms. These are international standard codes used for shipping cargo. Slater (2015) advises the use of Full Container Load (FCL) since it is a container load. This option is cost effective since it uses cost per volumetric unit. The broker will then select the option where the shipper will Deliver at Place (DAP). This option is accompanied by freight insurance. Insurance is cheap and hardly costs between US$50 to US$100. The insurance only protects Compretudo against transportation damage and not product development costs or lost sales in case of a delay. Shipping via sea from Port of Shanghai to Port of Santos in Brazil is a 13256nm distance that takes 55 days (Gronkvist 2017). Given that the shipper will use DAP, the goods will be offloaded and transported directly to Compretudo’s warehouse in Brazil. Compretudo does will then clear with the shipper and take responsibility for ensuring the goods reach their warehouse and are prepared for distribution across their supermarket chains in Brazil.

Conclusion

This essay breaks down the process of importing goods from India into China then Brazil. The process has to begin with communication between the buyer and the seller or retailers. Compretudo who is the buyer will have to contact manufacturers in India and purchase the three products. The suppliers will deliver the goods to a central point and contact a broker who facilitates acquiring of documents that will allow the goods to cross over into China. A freight forwarder will facilitate clearance at the border and organize for transport to the warehouse at the Port of Shanghai. Compretudo then contacts three suppliers who take their consignments to the warehouse. The goods will be received by a broker who takes the responsibility of acquiring documents such as the bill of lading, DAP, FCL and insurance certificates. This facilitates transportation across the sea into Brazil where Compretudo inspects and picks the goods at the designated place in Brazil.