Design report of international cargo transportation and insurance business of virtual foreign trade company

Course Title: International Cargo Transportation & Insurance

Surname: Zhang Zijing

学 号 218111557223

Faculty of Commerce

Specialized in international economics and trade

I. Introduction

In today's globalized economic environment, the flow of goods has become more frequent and extensive, and efficient cargo transportation plays a pivotal role in the operation and development of enterprises. In this complex and ever-changing business world, different modes of transportation are like unique tools, each with its own distinctive characteristics and applicable scenarios. Whether it is fast air transportation, sea transportation with large carrying capacity, stable railway transportation, or flexible road transportation, etc., they all play an indispensable role in the arena of cargo transportation. The reasonable choice of transportation plan is not only a simple decision, but also directly related to whether the cost of the enterprise can be effectively controlled, whether the operational efficiency can be significantly improved, and whether it can gain a firm foothold and stand out in the fierce market competition. Enterprises must use keen insight and accurate judgment to select the most suitable transportation plan for their own needs and development strategies, so as to achieve the optimal allocation of resources and maximize benefits.

2. Overview of the basic knowledge and business procedures of international cargo transportation

1. The basic concepts and characteristics of international cargo transportation

International cargo transportation refers to the movement of goods across national borders, which is a key link connecting buyers and sellers and realizing the exchange of goods. Its basic characteristics include complexity, riskiness and transnationality. Complexity stems from the laws, customs regulations and shipping rules that involve multiple countries; The risk arises from the possible loss or delay of the goods in transit; Transnationality, on the other hand, requires that the transportation process be adapted to the business rules and logistics networks of different countries.

2. Common modes of transportation and their characteristics

International cargo transportation mainly includes ocean transportation, air transportation, land transportation (including road and railway) and multimodal transportation (such as sea, land and air combined transportation). Ocean transportation is inexpensive and large, but the speed is slow, which is suitable for long-distance and large-scale transportation; Air transport is fast, but the cost is high, suitable for urgent or high value-added goods; Land transport is greatly affected by geographical conditions, suitable for transport between neighbouring countries, and the cost and speed are between sea and air transport; Multimodal transport can combine the advantages of different modes of transport to achieve efficient transportation.

3. The main links of the international freight business process

The business process of international freight transportation includes, but is not limited to: negotiation and contract signing between exporters and importers, preparation and inspection of goods, customs declaration and export procedures, selection of transportation methods, loading of goods, transportation monitoring, insurance arrangements, cargo unloading and inspection, import customs clearance, and delivery of goods. Every step of the process requires precise planning and coordination to ensure that the cargo arrives at its destination safely and on time.

2. Selection and analysis of cargo transportation schemes

1. Selection of cargo transportation scheme

When developing a plan for the transportation of goods, virtual foreign trade companies need to consider numerous factors to ensure that they choose a mode of transportation that is both economical and safe. Here are some of the key influencing factors:

Cargo characteristics: The type, size, weight, fragility, shelf life, and special handling needs (e.g., refrigerated or dangerous goods transportation) of the cargo will influence the choice of mode of transport. For example, high-value or fragile goods may need to be transported by air to ensure speed and safety; Large, low-value cargoes may be more suitable for ocean freight.

Destination and delivery time: The final destination and delivery deadline of the shipment also have a significant impact on the transport concept. If the delivery time is tight, air freight may be the first choice; On the contrary, if the time is relatively free, the cost advantage of sea freight is more obvious.

Cost: The cost of transportation is a direct economic factor that determines the choice of solution. This includes shipping costs, insurance, duties, storage fees, and possible delay costs. Virtual foreign trade companies often balance shipping speed and cost through cost-benefit analysis.

Shipping risks: Risks of goods in transit, such as loss, damage, theft, or delay, can have an impact on shipping scenarios. When choosing an insurance option and shipping method, you need to weigh the risks and costs to ensure the safety of your cargo.

Regulations and policies: Trade policies, customs regulations, and shipping regulations of various countries may affect the way goods are brought in and out, as well as how they are transported. Virtual foreign trade companies need to understand and comply with these regulations in order to avoid potential legal risks.

Environmental considerations: As global environmental awareness increases, the carbon footprint and environmental impact of transportation solutions are becoming a choice factor. Green modes of transport, such as rail or sea, may become more attractive options.

Supply chain partners: Partnerships with logistics providers, freight forwarders, insurance companies, etc., can also influence the choice of transportation options. A good partnership can ensure a smooth transportation process and reduce communication and coordination costs.

Historical Data and Market Trends: Analyzing past transportation data, combined with market trends, can help predict possible future transportation demand and develop more effective transportation strategies.

Customer preference: Understanding customer expectations for transportation speed, cost and reliability can help foreign trade companies meet the specific needs of customers and provide customized transportation solutions.

2. Comparison and evaluation of different transportation schemes

Speed: Air transport is known for being fast and is generally suitable for urgent shipments or high-value goods, while sea freight is a slower but more economical option for time-insensitive bulk cargo or transactions with limited budgets. The transit time of land transportation is somewhere in between and is greatly affected by geographical conditions.

Cost: Sea freight is often the most economical mode of transport, especially for large volumes of cargo, but its cost advantage diminishes as the volume and weight of the cargo decreases. Air freight, while fast, is costly and suitable for transporting small, high-value, or time-sensitive shipments. The cost and speed of land transport depends on the specific route and mode of transport (road or rail).

Reliability: Air and road transport generally have higher transport reliability due to their low exposure to weather and relatively fixed transport distances. Although sea freight may be affected by force majeure factors such as storms and congestion of shipping lanes, in large-scale transportation, the risk can be reduced by choosing a reputable shipping company and route.

Type of cargo: Fragile, high-value, or goods that require special handling, such as works of art, precision equipment, or dangerous goods, often require a safer and more controllable mode of transport, such as air freight or sea freight with special handling capabilities. Whereas, bulk cargo, such as ores, grains, is more suitable for sea or land transportation.

Environmental impact: As sustainability becomes a global focus, the carbon footprint and environmental impact of transport solutions are becoming increasingly important. Sea and rail transport are often seen as greener options because they can transport large quantities of goods at a lower unit cost, thereby reducing carbon emissions per unit of cargo.

Supply chain integration: Multimodal transport, i.e. combining two or more modes of transport, can complement each other, increase efficiency and potentially reduce costs. For example, shipping to the destination port by sea and then using land transport to get the goods to their final destination can combine the economics of sea freight with the flexibility of land transport.

Cargo Insurance: Different shipping methods may affect the cost of insurance and the terms of insurance. Understanding the insurance needs and potential risks of each mode of transportation can help you set a sound insurance strategy.

Regulations and policies: International trade policies and regulations may affect the choice of mode of transportation, for example, certain countries may have specific preferences or restrictions on certain modes of transportation, and virtual foreign trade companies need to ensure compliance with these regulations.

3. Determination of the combination of reasonable transportation modes

Determining a reasonable combination of transportation modes is the key to ensuring the safe, economical and efficient transportation of goods. This portfolio strategy should be based on an in-depth analysis of the factors discussed in the previous sections, including cargo characteristics, destination and delivery times, costs, transportation risks, logistics infrastructure, regulations and policies, environmental considerations, supply chain partners, and historical data and market trends. Specifically, the steps to construct a combination of modes of transport can be summarized into the following phases:

Needs analysis: First, the company needs to clarify the specific needs of each transaction, including the type, size, weight, special requirements, delivery date, and the shipping speed expected by the customer. This helps to identify a preliminary shortlist of modes of transport.

Cost-benefit assessment: A detailed analysis of the cost of each candidate mode of transportation, including freight, insurance, customs duties, possible delay costs, and additional costs associated with it. Calculate the total cost of each mode of transport and compare it with the value of the goods and the expected profit to determine the most cost-effective option.

Risk Analysis: Assess the potential risks of each mode of transport based on historical data on the sensitivity of the cargo and the mode of transport. For example, assess the risk of loss or damage to goods in sea freight, the risk of delays in air freight, and geopolitical risks in land transport. Assign weights to each risk based on risk appetite and factor it into overall decision-making.

Environmental considerations: Where possible, calculate the environmental impact of each mode of transport, such as carbon emissions. Appropriate weight is given to environmental features in accordance with the company's environmental policy or customer requirements to promote the choice of sustainable modes of transport.

Supply chain optimization: Communicate with supply chain partners to understand their capabilities and constraints in order to select the most suitable mode of transport, while considering the synergies between different modes of transport. For example, multimodal transport can combine the advantages of sea and land transport to achieve transport efficiency and cost optimization.

Regulatory compliance: Ensure that the selected mode of transportation complies with all relevant international and local regulations, including trade restrictions, customs regulations, shipping regulations, and insurance requirements. Avoid potential fines or delays due to non-compliance.

Customer satisfaction: Adjust the mix of transportation modes based on customer expectations for speed, cost, and reliability to ensure that the company remains competitive while meeting customer needs.

Real-time monitoring and adjustment: Continuously monitor cargo status and market dynamics during transportation in order to adjust the mode mix if necessary. For example, if there is force majeure on sea freight, it may be necessary to quickly switch to air freight to ensure delivery time.

Periodic Review & Update: Regularly review the company's transportation mode mix to reflect market changes, technological advancements, and strategic adjustments to the company. Ensure that the combination of modes of transport is always in line with the company's business objectives and market dynamics.

3. Formulation and implementation of transport procedures

1. Formulation of transportation plan

Developing a transportation plan is the first step in the transportation procedure, which involves the preparation of goods, shipment, selection of transportation methods, and the setting of transportation schedules. Here are some of the key steps:

Cargo Assessment: Determine the nature, size, weight, special requirements and delivery time of the cargo, ensure the selection of the appropriate mode of transport, and provide a basis for packaging and loading preparation.

Mode of Transport: Based on the modes of transport comparison and evaluation discussed in Chapter 2, select the combination of modes of transport that best suits the characteristics and needs of the current cargo.

Shipping timeline: Create a clear transportation schedule based on the delivery date and the estimated time of the shipping method, including the expected time points for each stage of the cargo preparation, shipment, transportation, unloading, and customs clearance.

Risk assessment: Consider possible transportation risks and develop countermeasures, such as insurance arrangements and alternate transportation options.

Resource allocation: According to the transportation plan, the logistics resources are reasonably allocated, including transportation vehicles, storage facilities, personnel and funds.

Coordination with supply chain partners: Communicate with logistics providers, freight forwarders, insurance companies, etc., to ensure that all parties understand and cooperate with the transportation plan.

2. Production and management of transport documents

Transport documents are indispensable documents for the international transportation of goods, and they ensure the smooth flow of goods in different countries and links. Foreign trade companies need to produce and manage the following main documents:

Bill of Lading: In sea transportation, issued by the shipping company, certifying that the goods have been loaded on board the ship and detailing the cargo information, the carrier's responsibilities and the conditions of delivery.

Air waybill: In the case of air carriage, issued by the airline to certify that the goods have been delivered, containing cargo information and terms of carriage.

International Commercial Invoice: Records the specifications, quantities, prices, and payment terms of the goods on both sides of the transaction.

Packing list: Lists the details of each box of goods in detail, such as name, quantity, weight, etc.

Import and export licenses and certificates of origin: Supporting documents that may be required according to the trade policies of each country.

Insurance policy: Confirm that the goods are insured, as well as the coverage and liability of the insurance.

Customs declaration form: used to declare goods to the customs, including HS code, tax number, value and other information.

Documentation should be produced accurately and in accordance with relevant international standards and national regulations to avoid delays or fines due to documentation issues. At the same time, companies need to establish an effective document management system to ensure that documents are updated, filed and retrieved in a timely manner for subsequent audits or dispute resolution.

3. Calculation and accounting of freight

Freight is an important cost component of international cargo transportation, and reasonable calculation and control of freight costs is crucial for the company's profits. Here are the main steps to calculate the shipping cost:

Shipping cost analysis: Calculate the basic freight, surcharges (such as fuel surcharges, port fees, etc.) and insurance costs based on the mode of transportation, type of goods, weight, volume, destination, and distance traveled.

Optimize costs: Reduce freight costs by negotiating with shipping suppliers, taking advantage of volume discounts, choosing economical shipping routes and transit times, and more.

Freight settlement: Negotiate with the customer or supplier on the payment method of freight, such as prepayment, collect or letter of credit, according to the contract of carriage.

Freight accounting: At the end of each shipping cycle, the company should check the actual freight paid against the budget, analyze the difference and adjust the cost control strategy.

4. Handling and risk management of insurance business

1. Classification of insurance products in international cargo transportation

Land Insurance: Applicable to road and rail transportation, it covers the risks of goods during land transportation, such as fire, theft, collision, natural disasters, etc.

Marine insurance: Mainly for marine transportation, the common ones are marine transportation cargo insurance (such as safety insurance, water damage insurance and all risks), which can cover losses caused by natural disasters and accidents during transportation.

Air Transport Insurance: Applicable to air transportation, it covers the risk of goods in the air, including aircraft accidents, theft, fire, etc.

Multimodal insurance: Covers the risks of goods when they are transferred between different modes of transport, such as from sea to land, ensuring insurance coverage of the goods throughout the transport chain.

Warehousing insurance: provides protection for goods during storage to prevent losses during storage, such as theft, fire, flood, etc.

Credit insurance: provides protection to the exporter against the risk that the buyer will not be able to pay for the goods after purchasing them.

Product Liability Insurance: Provides liability compensation for injuries or property damage that may be caused by exported goods.

2. Factors to consider when choosing insurance products:

Cargo type and value: Different types of goods face different potential risks during transportation, and high-value goods may require more comprehensive insurance coverage.

Mode of transportation: Choose an insurance product that matches the mode of transportation of goods to ensure that there is effective protection throughout the transportation process.

INCOTERMS: FOR EXAMPLE, IN CIF, CPT, FCA, ETC., THE DIVISION OF INSURANCE LIABILITY WILL AFFECT THE TYPE OF INSURANCE PRODUCT AND THE AMOUNT OF INSURANCE THAT THE COMPANY CHOOSES.

Legal and regulatory requirements for the destination: Understand the destination country's regulations on insurance for imported goods to ensure compliance.

Customer Needs: Understand and meet customer insurance needs, such as customers may request specific insurance coverage or insurance amounts.

Reputation of the insurance company: Choose an insurance company with a good reputation and efficient claims service to ensure that you can get timely and effective compensation in the event of a loss.

3. The process of handling insurance matters

Risk assessment:

Before taking out insurance, the company first needs to conduct a risk assessment of the goods, including the nature, value, mode of transportation, destination, etc., in order to determine the type and extent of the risks that may be exposed.

Select Insurance Plan:

Based on the results of the risk assessment, select the appropriate insurance product. For example, if the goods will be shipped by sea, you may need to purchase marine cargo insurance, including safety, water damage, or all risks. At the same time, consider whether additional insurance is required, such as warehousing insurance, intermodal transport insurance, or credit insurance.

Determine the sum insured:

The insured amount should cover the full value of the goods, including costs, freight, duties, and expected profits, to ensure that they are adequately compensated in the event of loss.

Preparation of relevant documents:

Provide the necessary documents and information such as commercial invoices, packing lists, shipping documents, and other documents that may be required such as certificates of origin, export licenses, etc., for underwriting by the insurance company.

Fill in the application form:

Fill out the policy completely as required by the insurance company to ensure that all information is accurate. The insurance policy usually includes the information of the insured, the description of the insurance subject, the scope of insurance liability, the amount insured, the insurance premium and the insurance period.

Pay the premium:

The corresponding premium is paid according to the premium calculation provided by the insurance company. Payment methods may include upfront, installments, or payment via letter of credit, depending on the terms of the insurance contract.

To get an insurance policy:

After receiving the application and premium, the insurance company will issue an insurance policy that specifies the start date, end date, insurance liability, insurance amount and other information of the insurance. An insurance policy is an official proof of the insurance contract and needs to be kept in a safe place.

Communicate with customers:

Provide a copy of the insurance policy to the buyer or related parties to prove that the goods are covered by insurance, meet the requirements of the contract or the regulations of the importing country.

Understanding of the terms of the insurance:

Ensure that both the company and the customer understand the terms of the insurance, especially the key elements such as liability exclusion, indemnity limits, claims procedures, etc., to avoid misunderstandings or disputes at a later stage.

Stay updated:

In the process of transportation, if there is a change in the quantity, value or mode of transportation of the goods, the insurance contract should be updated in time to ensure that the insurance is always consistent with the actual situation.

Claims Processing:

If a loss occurs during transportation, notify the insurance company as soon as possible in accordance with the claim process in the insurance policy, and provide relevant evidence, such as cargo loss report, accident certificate, etc., to initiate the claim procedure.

4. Common transportation risks and their prevention methods:

Natural risks: including natural disasters such as storms, floods, earthquakes, etc., which may lead to loss or damage to goods. Preventive measures include choosing a carrier with a good ability to deal with risks, properly packing and securing the cargo, and purchasing appropriate insurance to transfer the risk. At the same time, pay attention to the weather forecast and disaster warning information at the destination, and make emergency plans in advance.

Operational risks: such as improper loading and unloading operations, failure of transportation equipment, etc., which may damage the goods. By choosing a logistics company with a good operating record, we ensure that the goods are properly handled during the loading and unloading process. Regularly maintain and inspect the transportation equipment to reduce the equipment failure rate.

Legal risks: including trade regulations, tariffs, customs inspections, etc., which may lead to detention of goods, fines or detention. Understand and follow the relevant regulations of the destination country, such as import licenses, tariff policies, inspection and quarantine regulations, and ensure that all documents are complete and meet the requirements. Work with a professional legal advisory firm to ensure compliance.

Logistics risks: such as shipping delays, lost or stolen goods, which can affect delivery times and customer satisfaction. Optimize transportation plans, choose reliable transportation methods and partners, and implement multimodal transportation to improve transportation efficiency. Adopt an advanced logistics tracking system to monitor the location of goods in real time and adjust the transportation route in time to deal with possible delays.

Market risks: such as exchange rate fluctuations, changes in raw material prices, etc., which may affect transportation costs and profit margins. Risk hedging through financial derivatives or in partnership with financial institutions. Regularly assess market dynamics so that you can adjust your shipping strategy and prices.

Supply chain risks: Supplier defaults and logistics disruptions can lead to unstable supply of goods. Build a diversified supply chain and build partnerships with multiple suppliers and logistics service providers to diversify risk. Regularly review the operations of supply chain partners to ensure their stability and reliability.

Information risks: Data loss, cybersecurity threats can lead to the disclosure of trade secrets, and mistaken decisions related to shipping. Strengthen data protection measures, use encryption technology, and back up data regularly. Conduct information security training for employees to raise risk awareness.

Credit risk: The deterioration of the financial position of the buyer or other parties involved in the supply chain may result in the inability to pay for freight or goods. Conduct credit assessment of business partners, and reduce risks by using credit insurance or using advance payments. Use credit management tools to monitor the financial health of your counterparties.

Environmental risks: Goods may cause environmental impacts, such as pollution, during transportation. Choose environmentally friendly transportation methods, such as rail and sea, to minimize carbon emissions. Follow environmental protection regulations and use biodegradable packaging materials to reduce environmental risks.

Political risks: such as trade frictions, wars, or policy changes, which can lead to transportation disruptions or increased costs. Keep a close eye on global political and economic developments, and work with professional advisors to assess potential impacts. When necessary, consider diversifying the market and reducing dependence on a single market.

By systematically identifying and implementing preventive measures, foreign trade companies are able to reduce risks and protect their interests during the transportation of goods. At the same time, risk management strategies are continuously monitored and updated to adapt to changing market conditions and customer needs.

V. Conclusions

This study delves into the key aspects of the establishment of a virtual foreign trade company in the international cargo transportation and insurance business. In the selection and analysis of cargo transportation schemes, the key factors influencing the decision-making are systematically analyzed, the advantages and disadvantages of different transportation modes are compared, and a set of strategies for constructing a reasonable combination of transportation modes is proposed, which provides a practical tool for the company to optimize transportation decisions. In the formulation and implementation of transportation procedures, the whole process from the formulation of transportation plans to document management, as well as freight calculation and accounting is elaborated, providing detailed guidelines for foreign trade companies to standardize operations and ensure the efficiency and compliance of the transportation process. In the part of insurance business management and risk management, combined with the knowledge of insurance theory, the selection of insurance products, the insurance process, and the methods of identifying and preventing transportation risks are discussed, which provides comprehensive guidance for the company to formulate a comprehensive insurance strategy. Completed the business of international cargo transportation and insurance business.