Introduction to Air Cargo Logistics

Ports and Logistics

Since ancient times, ports have been the hubs of economic prosperity and growth and the focal
points of urbanization. They remain so today and have grown astronomically in response to the need
to interconnect, to integrate as nucleus of world trade.
Global Shipments:
At least ninety percent of the worlds goods by weight are transported by
ships and this mode of transportation has seen dramatic increases in the last two decades.
Innovation in the export / import logistics service chain is attempting to make the process more
reliable, cost effective and time saving.

National Development and Logistics

A country is defined by the strength of its communities, urban and rural, and how well they are
connected and integrated. Transport, infrastructure and logistics is by nature a multi- and
interdisciplinary field. The resources managed in logistics can include physical items, such as food,
materials, animals, equipments, project cargo, gas, and liquids, as well as abstract items, such as
time, and information. The minimization of the use of resources is a common motivation in logistics
for import and export.
The logistics of physical items - which is material handling, production, packaging, inventory,
transportation, warehousing, and security - usually involves the integration of information flow.
Investments made toward sustainable infrastructure and associated logistics systems positions a
nation to remain globally competitive into the next century.
Logistics infrastructure is a critical enabler of India's agenda for economic development and
urbanization. Recognizing its pivotal role, the Indian government have significantly enhanced annual
spending on logistics infrastructure.

Logistics Services

Air Freight/Air Cargo/Air Shipment,

Sea Freight/Ocean Freight,

Rail Freight,

Road Freight (Trucking), and

3PL Services

Air Freight/ Air Shipment

Air freight logistics has grown to be one of the most efficient, flexible, faster, and secure means of
transportation during the past century. Airplanes and airports operate as separate entities requiring
separate preparation in allowing completion of LOGISTICS functions. As essential facilities
connecting cities worldwide, airports help in growing urban economies.

Airports play an integral role in providing on-demand access, around the clock, for the distribution of
often high value, time sensitive goods. Air Cargo industry presents a wide variety of service providers
coming together to move goods both domestically and internationally with a single minded purpose
of faster and efficient delivery. These business entities in Air Cargo logistics industry in turn interact
with a number of cross-border regulatory agencies, the principal among them is the Customs
establishment.
Air Cargo sector moves only 2% of the global volume of goods but a huge 35% by value, reserved for
the most costly and time-sensitive products. Air logistics is an economically and strategically
important industry from logistics /SCM point of view. Historically, sea cargo has been the most
dominant form of shipping cargo from and to India whereas air cargo has accounted for only a
miniscule proportion of the total cargo trade with India. The main goods transported by air are
perishables, pharmaceuticals, garments & textiles, electronics, and valuable cargo and express mail
items with time-definite delivery.

Air Cargo Logistics Players

Air cargo logistics play a vital role in the economic development of a nation and key players in the
entire air cargo logistics services .

Airlines,

Air Cargo terminal operators,

Ground Handling service providers,

Integrated Express Service Providers,

Forwarders,

Domestic Cargo Transport service providers and

Custom House Agents

Key Abbreviations & Terminologies (partial list)

A2A - Airport of origin to Airport of destination

Air Operator - Company operating aircraft

Allotment - Assigned volume on board of a flight/ day

ARR - Arrived, cargo and documents arrived at airport of destination

ATA - Actual Time of Arrival

ATD - Actual Time of Departure

AWB - Airway Bill

HAWB - House Airway Bill

MAWB - Master Airway Bill

Blocked-space Agreement - A continuous reservation (allotment) for space at one or more

flight / date combinations with an airline

Bonded Goods - Goods on which the customs duty has not yet been paid, and which
therefore, are under the control of customs; usually in a Bonded warehouse.

Bonded warehouse - A depository for goods on which the customs duty has not been paid;
the warehouse proprietor must provide a bond (often in the form of a bank warranty or a
mortgage) to the customs authorities as a security for any duties which may not be paid by
the customer

Carrier - The party responsible for transport of goods from one point to another, this can be
for example an airline or a forwarder

Certificate of origin - A certificate proving the country of original production of goods; used
for customs declaration purposes

Classifying - Assigning the right import classification number to goods as part of the
customs declaration process

CNEE Consignee; The person or company that is physically and administratively

responsible for accepting the goods at final delivery

Commodity Code (HS code): Code used in the Harmonised System for the classification of
goods, which are most commonly produced and traded

Consolidator/ consolidation: A collection of shipments belonging to different shippers

travelling to one destination or area to be distributed to several consignees.

A forwarder consolidating shipments before a flight; these shipments belonging to different

shippers and travelling to one destination or area in order to be distributed to several
consignees after the flight.

RCF: A Cargo-2000 (C2K) milestone: cargo has arrived in the cargo bay at final destination;
cargo and airwaybill are administratively received in the system after the flight.

IATA: The International Air Transport Association (IATA) is the trade association for the
worlds airlines, representing some 260 airlines or 83% of total air traffic. IATA support many
areas of aviation activity and help formulate industry policy on critical aviation issues.

INCO Terms
The Incoterms rules or International Commercial Terms are a series of pre-defined commercial
terms published by the International Chamber of Commerce (ICC). They are widely used in
international commercial transactions or procurement processes.
A series of three-letter trade terms related to common contractual sales practices, the Incoterms
rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the
transportation and delivery of goods.
The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for
the interpretation of most commonly used terms in international trade. They are intended to reduce
or remove altogether uncertainties arising from different interpretation of the rules in different
countries. As such they are regularly incorporated into sales contracts worldwide.

EXW - Ex Works (named place of loading)

FCA - Free Carrier (named place of delivery)

CPT - Carriage Paid To (named place of destination)

CIP - Carriage and Insurance Paid to (named place of destination)

DAT - Delivered at Terminal (named terminal at port or place of destination)

DAP - Delivered at Place (named place of destination)

DDP - Delivered Duty Paid (named place of destination)

EXW - Ex Works (named place of loading)

The seller makes the goods available at their premises. This term places the maximum obligation on
the buyer and minimum obligations on the seller. The Ex Works term is often used when making an
initial quotation for the sale of goods without any costs included.
EXW means that a buyer incurs the risks for bringing the goods to their final destination. if the seller
does load the goods, he does so at buyer's risk and cost. this must be made clear by adding explicit
wording to this effect in the contract of sale.
The buyer arranges the pickup of the freight from the supplier's designated ship site, owns the intransit freight, and is responsible for clearing the goods through Customs. The buyer is also
responsible for completing all the export documentation.
FCA Free Carrier (named place of delivery)
The seller delivers the goods, cleared for export, at a named place. This can be to a carrier
nominated by the buyer, or to another party nominated by the buyer. It should be noted that the
chosen place of delivery has an impact on the obligations of loading and unloading the goods at that
place. If delivery occurs at the seller's premises, the seller is responsible for loading the goods on to
the buyer's carrier.
CPT Carriage Paid To (named place of destination)
CPT replaces the heritage C&F (cost and freight) and CFR terms for all shipping modes outside of
non-containerised sea freight. The seller pays for the carriage of the goods up to the named place
of destination. Risk transfers to buyer upon handing goods over to the first carrier at the place of
shipment in the country of Export.
The seller is responsible for origin costs including export clearance and freight costs for carriage to
named place of destination (either final destination such as buyer's facilities or port of destination
has to be agreed by seller and buyer, however, named place of destination is generally picked due to
cost impacts). If the buyer does require the seller to obtain insurance, the Incoterm CIP should be
considered.

CIP Carriage and Insurance Paid to (named place of destination)

This term is broadly similar to the above CPT term, with the exception that the seller is required to
obtain insurance for the goods while in transit. CIP requires the seller to insure the goods for 110%
of their value. The policy should be in the same currency as the contract.
CIP can be used for all modes of transport, whereas the equivalent term CIF can only be used for
non-containerised sea freight.
DAT Delivered at Terminal (named terminal at port or place of destination)
This term means that the seller covers all the costs of transport (export fees, carriage, unloading
from main carrier at destination port and destination port charges) and assumes all risk until
destination port or terminal. Import duty/taxes/customs costs are to be borne by Buyer.
DAP Delivered at Place (named place of destination)
Can be used for any transport mode, or where there is more than one transport mode. The seller is
responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving
conveyance, at the named place. Duties are not paid by the seller under this term.
The seller bears all risks involved in bringing the goods to the named place.
DDP Delivered Duty Paid (named place of destination)
Seller is responsible for delivering the goods to the named place in the country of the buyer, and
pays all costs in bringing the goods to the destination including import duties and taxes. The seller is
not responsible for unloading.
This term places the maximum obligations on the seller and minimum obligations on the buyer. With
the delivery at the named place of destination all the risks and responsibilities are transferred to the
buyer and it is considered that the seller has completed his obligations
Cargo 2000 (C2K)
Cargo 2000 (C2K) is a self-funded, IATA sponsored interest group of major airlines and freight
forwarders. Cargo 2000 is an industry initiative aiming at implementing a new quality management
system for the worldwide air cargo industry.
The objective is simple: to implement processes, backed by quality standards, which are
measurable to improve the efficiency of air cargo issues.
Export forwarding is divided in 7 steps, air transport and handling also in 7 steps, and import
forwarding in 5 steps, to improve the efficiency of air cargo processes.
Air Transport Seven Milestones (C2K)

FWB = the shipment is booked at the airline, next an electronic air waybill is generated by
agent (forwarder) ; this creates the so-called route map in C2K in which all the steps are
followed
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RCS = cargo and documents are received 'Ready For Carriage' and accepted by airline
(handler)

DEP = cargo and documents departed at airport of origin

ARR = cargo and documents arrived at airport of destination

RCF = cargo has arrived in the cargo bay at final destination; cargo and air waybill are
administratively received in the system

NFD = cargo and documents ready for pick-up at airline (handler), the customer (forwarder)
is notified

DLV = cargo and documents delivered to customer (forwarder)

Airway Bill
An air waybill (AWB) is a document made out by or on behalf of the shipper which evidences the
contract between the shipper and the carrier(s) for carriage of goods over routes of the
carrier(s) . The AWB can be in the form of an:

Airline air waybill, with pre-printed issuing carrier identification

Neutral air waybill, without pre-printed identification of the issuing carrier in any
form

The industry is now transitioning from the use of the paper AWB to the electronic AWB (e-AWB).
Freight Forwarding, MAWB, HAWB
Freight forwarders are able to consolidate consignments from several shippers to the same
destination airport and dispatch them together using an air waybill (AWB) issued by the carrier. This
is the so-called master air waybill (MAWB).
The freight forwarder in turn issues to each shipper his own AWB, known as a house air waybill
(HAWB). Representing client/customer during customs examination, assessment, payment of duty
and taking delivery of cargo from customs after clearance along with documents.
Customs Clearance
Every port in every country around the world puts cargo through a customs clearance process. It is
the act of passing goods through customs so that goods can enter or leave the country and is
a document given by customs to a shipper to show that customs duty has been paid and the goods
can be shipped. Customs clearance work involves preparation and submission of documentations
required to facilitate export or imports into the country.

Customs Clearance -Exports

Some of the documents involved in customs clearance are:
1. Exports Documentation:

Purchase order from Buyer,

Sales Invoice,

Packing List,

Shipping bill,

Air way bill or Bill of Lading (Sea Freight)

Certificate of Origin and

any other specific documentation as specified by the buyer, or

as required by financial institutions or LC terms or

as per importing country regulations.

2. Imports Documentation:

Purchase Order from Buyer,

Sales Invoice of supplier,

Bill of Entry,

Bill of Lading or Air way bill,

Packing List,

Certificate of Origin, and

any other specific documentation required by the buyer, or

financial institution or

the importing country regulation.

Customs Brokers
The rules, regulations, and laws are a bit different from country to country, sometimes from port to
port within a country, making someone who specializes in customs clearance very important to a
shipper exporting and importing goods. These specialists are called customs brokers and the work
they do is called customs brokerage or sometimes customs broking.
When choosing a freight forwarder, select an agency/service provider with the experience to handle
customs clearance well and who knows what to do should any issues arise.
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Transit Air Cargo

A variant in the air cargo process can be to get to the destination in two or more steps instead of
one, then the shipment goes into a transit

Unit Load Device

A unit load device (ULD) is a pallet or container used to load luggage, freight, and mail on widebody aircraft and specific narrow-body aircraft. It allows a large quantity of cargo to be bundled
into a single unit. Since this leads to fewer units to load, it saves ground crews time and effort and
helps prevent delayed flights. Each ULD has its own packing list (or manifest) so that its contents can
be tracked.
Handling Agent
Besides the physical handling, other important functions of the handling agent are:

To control the overall weight & balance of the airlines aircraft on the cargo side, make
a load sheet and assure flight safety

To make a cargo manifest for all the goods on board, for the airlines import and
export declaration to customs
This is a high level customs declaration as opposed to detailed customs declaration by
the forwarder or customs agent

To make a notification to the captain of the aircraft (NOTOC) to inform the crew
about potential risks /details of the cargo on board

To plan & control bookings, slot-times, goods flows in the warehouse, and ULD and flight bag
flows from and to the aircraft in order to prevent delays

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