Is it common for exporter-designated forwarder partners to refuse inland transportation, prioritizing risk over margin, when importing CIF? Can I make the request through a customs broker? Released

In situations where you import under CIF or CFR terms, the phenomenon of the exporter-designated forwarder's import-side partner refusing inland transportation is a very common practice in trade. Behind this phenomenon are clear reasons related to the forwarder's business model, revenue structure, and scope of responsibility. As a customs broker, I will explain this situation in detail and discuss alternatives.

1. Reasons why the import-side forwarder does not get involved in inland transportation when importing under CIF/CFR terms

a. Forwarder's Contractual Relationship and Role
CIF (Cost, Insurance and Freight) or CFR (Cost and Freight) terms specify that the carrier designated by the exporter is responsible for the freight charges from the place of export to the designated port of import (or designated place). Under these terms, the carriage contract is concluded between the exporter and the export-side forwarder. This means the import-side forwarder acts as a partner to the export-side forwarder, carrying out tasks according to the export-side forwarder's instructions and contract. Their primary duty is to assist with procedures until import customs clearance, such as issuing A/N (Arrival Notice) and D/O (Delivery Order) for arriving cargo. Therefore, the import-side forwarder, acting as the exporter's shipping agent rather than the importer's, tends to focus on the exporter's requirements and does not prioritize the importer's additional requests (e.g., inland transportation).

b. Low Profitability and High Risk
Inland transportation of LCL (Less than Container Load) cargo typically has relatively low unit prices, and there's a high potential for various incidents during transit, such as cargo damage, delays, or loss. If a forwarder directly arranges inland transportation, they bear a 'moral responsibility' for potential incidents. Even if this isn't a contractual liability, it can lead to strained relations with the importer and a loss of trust, which is a significant burden for the forwarder. Often, they conclude that taking on potential risks for small margins is not significantly beneficial from a business perspective. Especially for LCL inland transportation, competition among carriers is fierce, making profit margins even thinner.

c. Differences in Business Models (Comparison with FOB/EXW)
Under terms like FOB, EXW, and FCA, where the importer directly designates the forwarder and requests transportation, that forwarder has acquired the cargo by soliciting the importer. Therefore, they actively respond to the importer's requests and generate profit by providing overall logistics services, including inland transportation. In such cases, the import-side forwarder has ample motivation to arrange and be responsible for transportation across all segments. However, under C-terms, this motivation is lacking, and import-side forwarders tend to stick to simple agency duties.

In conclusion, the practice of an exporter-designated forwarder's import-side partner refusing inland transportation and prioritizing risk over margin can be seen as an extremely common and reasonable business decision.

2. Possibility of Requesting Inland Transportation through a Customs Broker

a. Customs Broker's Primary Duties and Role
It is possible for importers to request inland transportation from a customs broker's office instead of directly contacting an inland carrier. In fact, many importers wish to handle customs clearance and inland transportation together. However, a customs broker's main task is to act as an agent for import customs clearance, and arranging inland transportation is a supplementary service.

b. How Customs Brokers Get Involved
While customs broker offices possess expertise in customs clearance, they hold a similar position to forwarders regarding the potential risks that arise when arranging inland transportation. That is, they may be reluctant to become a direct party to the transportation contract to avoid a 'moral responsibility' for accidents occurring during inland transportation. Therefore, when customs broker offices receive such requests, they often handle them in the following ways:

• They introduce reliable inland carriers and encourage the importer and the carrier to conclude a direct contract.
• In some cases, they comprehensively arrange inland transportation in conjunction with customs clearance, but even then, they clearly state that the responsibility for the transportation itself lies with the carrier. This is more actively done when the customs broker's office partners with a comprehensive logistics service provider or operates its own logistics department.

In conclusion, requesting inland transportation through a customs broker is entirely possible, and the customs broker will also want to cooperate for the importer's convenience. However, it is important to understand that the customs broker's role focuses on customs clearance, and inland transportation is often provided in the form of introductions or linkages.

3. Suggestions for Importers

If you continuously import under CIF/CFR terms, it is important to establish a clear strategy for inland transportation at the import destination.

• Direct contracts with inland carriers: By establishing direct contracts with a few reliable inland carriers and using them regularly, you can increase your freight negotiation power and stably manage service quality.
• Utilize comprehensive logistics providers: Using a comprehensive logistics provider that offers various logistics services, such as customs clearance and inland transportation, all at once, is another method. In this case, you can streamline processes by having a single point of contact.
• Consider switching to FOB terms: If possible, you could consider discussing with the exporter to switch to FOB terms. In this case, the importer can designate the forwarder for all transportation segments, allowing them to proactively manage logistics and increase cost efficiency.

Although trade logistics may seem complex, by accurately understanding the roles of each entity and responding wisely, you will be able to establish an efficient import process.