When importing CIF, is it common for the exporter-designated forwarder partner to refuse inland transport, prioritizing risk over margin? Can I inquire through a customs broker? Released

In situations where you are importing under CIF or CFR terms, the phenomenon of the exporter-designated forwarder's import-side partner refusing inland transportation is an extremely common practice in trade operations. Behind this phenomenon are clear reasons related to the forwarder's business model, profit 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 bears the freight cost from the place of export to the designated port (or designated place) of import. Under these terms, the transportation contract is concluded between the exporter and the export-side forwarder. In other words, the import-side forwarder acts as a partner to the export-side forwarder, performing tasks according to the instructions and contract of the export-side forwarder. Their main duties involve assisting with procedures until import customs clearance, such as issuing A/N (Arrival Notice) and D/O (Delivery Order) for arrived 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 additional requests from the importer (e.g., inland transportation).

b. Low Profitability and High Risk
Inland transportation of LCL (Less than Container Load) cargo has relatively low unit prices, and there is a possibility of various incidents such as cargo damage, delays, or loss during the transportation process. If a forwarder directly arranges inland transportation, they bear a 'moral responsibility' for potential incidents. Even if this is not a contractual liability, it can lead to strained relationships with importers and a decrease in trust, posing a significant burden on forwarders. They often conclude that taking on potential risks for small margins is not highly 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, or FCA, where the importer directly designates a forwarder and commissions transportation, that forwarder has secured the cargo by attracting the importer's business. Therefore, they actively respond to the importer's requirements and generate profit by providing comprehensive logistics services, including inland transportation. In such cases, the import-side forwarder has sufficient motivation to arrange and take responsibility for transportation across all segments. However, under C-terms, such motivation is lacking, and the import-side forwarder tends to limit itself to simple agency tasks.

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
Instead of directly contacting an inland transportation company, it is possible for importers to request inland transportation from a customs broker's office. In fact, many importers wish to handle customs clearance and inland transportation together. However, a customs broker's primary duty 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 brokers have 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 'moral responsibility' for incidents occurring during inland transportation. Therefore, when a customs broker's office receives such a request, they often handle it in the following ways:

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

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

3. Suggestions for Importers

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

• Direct Contract with Inland Carriers: By directly contracting with a few reliable inland carriers and using them regularly, you can increase your freight negotiation power and stably manage service quality.
• Utilizing Comprehensive Logistics Providers: Another method is to use comprehensive logistics providers that offer various logistics services, including customs clearance and inland transportation, all at once. In this case, you can centralize the contact person and proceed with tasks conveniently.
• Considering Transition to FOB Terms: If possible, you could consider negotiating with the exporter to switch to FOB terms. In this scenario, the importer can designate the forwarder for all transportation segments, allowing them to proactively manage logistics and enhance cost efficiency.

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