For CIF imports, is it common practice for an exporter's designated freight forwarder partner to refuse inland transportation, prioritizing risk over margin? Can I ask a customs broker? Released

The phenomenon where an exporter's designated forwarder's import-side partner refuses inland transportation when importing under CIF or CFR terms 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 import-side forwarders do 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 are conditions where the exporter's designated carrier bears the freight cost from the export destination to the designated port (or designated place) at the import destination. Under these terms, the transport 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 export-side forwarder's instructions and contract. Their main task is to assist with procedures prior to 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 transport 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 for LCL (Less than Container Load) cargo has relatively low unit costs, 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 deteriorating relationships with the importer and a loss of trust, which is a significant burden for 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 tighter.

c. Differences in Business Models (Comparison with FOB/EXW)
Under terms like FOB, EXW, and FCA, where the importer directly designates the forwarder and entrusts transportation, that forwarder has secured the cargo by soliciting the importer. Therefore, they actively respond to the importer's requirements and generate profit by providing overall 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, this motivation is lacking, and the import-side forwarder tends to limit themselves to mere agency work.

In conclusion, the practice where an exporter's designated forwarder's import-side partner refuses inland transportation, prioritizing risk over margin, can be seen as a highly common and rational business decision.

2. Possibility of Requesting Inland Transportation Through a Customs Broker

a. Customs Broker's Main Duties and Role
Instead of directly contacting an inland transportation company, it is possible for importers to request inland transportation through a customs broker's office. In fact, many importers wish to handle customs clearance and inland transportation together. However, the 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 broker offices possess expertise in customs clearance, they hold a similar stance 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 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 transportation companies and encourage the importer and the carrier to enter into a direct contract.
• In some cases, they may comprehensively arrange inland transportation in conjunction with customs clearance, but even then, they clarify that the responsibility for the transportation itself lies with the carrier. This happens more actively when the customs broker office partners with comprehensive logistics service providers or operates its own logistics department.

In conclusion, it is entirely possible to request inland transportation through a customs broker, 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 handled in the form of introduction or linkage.

3. Recommendations for Importers

If you are consistently importing 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 entering into 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 integrated logistics providers: Using an integrated logistics provider that offers various logistics services, such as customs clearance and inland transportation, all at once is another option. In this case, you can streamline operations conveniently by having a single point of contact.
• Consider switching to FOB terms: If possible, you might consider discussing with the exporter to switch the transaction 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 party and responding wisely, you will be able to establish an efficient import process.