Define Supply Chain Infrastructure Commerce Essay

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To understand further the complicated nature of the supply chain it is worth spending time examining some of the supply chain infrastructure used to move cargo. The infrastructure required to move cargo in and out of countries and around the world differs between air and sea cargo. These differences are quite fundamental due to the history, rationale and cargo size in the two modes of transport.

Maritime Cargo

In today's global economy, the effort involved in transporting goods between manufacturers, retailers and consumers across the planet is remarkable in its scale and sophistication. The enormous quantities and economic value of cargo being transported through seaports demands a flexible, efficient and well-organized supply chain.

The sea cargo system as we know it today is made possible through the use of the metal cargo containers, which revolutionized the maritime industry soon after they were introduced in the late 1950s. Cargo containers act as individual storage units that can be moved easily between ships, trucks and trains. Cargo containers hold just about any consumer item -- shoes, computers, auto parts or frozen seafood.

Sea cargo imports generally start at an overseas manufacturer, supplier or consolidation facility, where items are boxed and placed inside a container. The buyer or seller, depending on the terms of trade, will usually contact a "freight forwarder," or logistics company, to coordinate transportation of the cargo. The container will be transported to the export port and placed aboard a container ship that will either deliver it to the buyers port of choice, or to a transhipment port where it will be transferred to another ship that will take the container to the import port..


There are approximately 85.000 commercial ships of more than 100 tons throughout the world; about half of this number being "trading" ships which carry cargo and passengers, the other half being "service" craft , like tugs and tenders, offshore vessels and harbour craft.

The commercial cargo ships tend to operate in either the tramp or liner trades, which can best be explained by using the analogy of a taxi with a bus. The ship operator is a sea carrier, who provides a service to shippers who put their cargo aboard the ships. The liner, in a cargo not passenger sense, can be thought of as the bus, a ship working a regular schedule, arriving and departing port on specified dates and times. Cargo liners these days tend to carry containers, and a liner operator might own many thousands of these , fleets of trucks and even trains, taking responsibility not just for the sea voyage, but for the whole journey.

The tramp ship, on the other hand, is the taxi of the world's sea lanes, with the shipper renting or chartering the whole vessel to take a cargo on a single voyage between two ports, or perhaps a series of voyages. Tramp ships tend to carry bulk, liquid (in the case of tankers), grain, ore, coal, timber or other industrial cargoes, in dry cargo ships.

The commercial shipping market is mostly free and open internationally, with the freight rates the ships can earn depending on the balance of supply and demand of cargo and ships. When there are too few cargoes being chased by too many ships, then freight rates are low and the shipper gets cheap transport. If ships are scarce, then shippers will pay more.

Ships have became very much larger and more productive, but also more sophisticated. Specialist vessels are designed to carry cold cargoes, chemicals and gases, heavy lifts or cars. Some ships are self-sufficient, with their own loading and discharging equipment; others depend entirely upon the shore cargo handling gear. Some vessels are designed to fit into shallow ports, or pass under bridges, others sized by their designers to be the biggest that will pass through the locks in the Panama Canal, or up the Saint Lawrence Seaway. Trading patterns, cargo specialities, size and dimensions, operating costs and speed are all important criteria. (Bimco)

The increase in size of container vessels is having an effect on the logistics of maritime transport. Ship owners have found that it is uneconomical to stop at a number of ports in a region to pick up or deliver limited amounts of freight. These vessels prefer to stop at only one port in a region with "feeder vessels" then providing the service to or from the smaller ports. These "mega-ports" are being developed to handle the new larger container ships that are capable of carrying up to 11,000 TEU.

The developments of the last decade or so have seen a shift in the balance of power between shipping lines and ports - a shift in favour of shipping lines. The greater volumes that are now controlled by a single line or alliance mean that the capacity of an individual line to seriously affect the business of even a major port is now much greater than it has been in the past.

The most dramatic example is Maersk Line's transfer of its business to the new port of Tanjung Pelepas where it became a part-owner. One of the main considerations in this and a number of other recent shifts is control - more and more lines are seeking dedicated terminal facilities and direct control over landside operations.

Finally, for most ports what comes in by sea must go out by land. Larger ships with faster discharge rates place increased stress on the land transport interface, and generate a need for faster and more efficient intermodal connections. These demands for enhanced port performance and increased investment in port facilities have in turn led to changes the port policy of many countries.

As a result we are seeing a change in the basic paradigm of port-carrier relations. The traditional paradigm is that ports serve basically local trade, and shipping lines come to the cargo. Under the emerging paradigm, shipping lines serve regional, largely non- local trade, and the cargo is moved - by feeder or intermodal service - to the ship.

Over the last 15 years major shipping operators that concentrating purely on the provision of line haul services on the sea leg have diversified and enhanced the services they provide. They have sought to establish seamless intermodal services, extending their operations to include inland haulage and offering door-to-door transportation. Some have developed other elements of the logistics chain, expanding their warehousing, cold storage and related activities.

They have developed price and service packages tailored for particular customers. The bigger lines with the capacity to do so have sought to negotiate global service arrangements with clients to improve the quality of the service that they offered to customers by increasingly sophisticated cargo care, improved information systems allowing continuous container tracking, and the introduction of a range of e-commerce initiatives. (ESCAP 2006)

Growth of Sea Container Turnover

Source: Port of Hamburg,en/

Sea Ports

In most ports, a port authority co-ordinates the proper use of the common facilities, oversees the design of port facilities and is responsible for port safety and security. Historically, ports were both owned and managed by public entities, mainly through port authorities, which performed most functions including navigation, infrastructure/ superstructure development, ship and cargo operations and management. Today the organization of most world ports lies somewhere between purely private ports and totally public ports. Typically they would operate, as a variation of private/public combinations, starting from totally private form of organization to the purely public administrative form, e.g. private company, semi-public company, municipal or regional authority, port national office, public administration, etc. (UNCTAD 2004)

The fundamental rationale of commercial ports is that of international trade. Sea ports provide the infrastructure for the transfer of goods between land and sea. The ports provide the necessary services for the berthing of ships - pilotage, towing and tying. Port authorities can provide these services or they can be undertaken by private firms.

One of the more important services provided is cargo handling which covers all activities related to the movement of cargo to and from the ships and across port facilities. Historically there was a separation between the movement of goods from the ships side to safe storage within the vessel (stevedoring) and those movements form berth to the ship's side (loading). Today specialized firms provide all cargo handling services using equipment such as cranes and surface handling equipment.

The cargo handling process varies according to the type of goods involved - specialization of firms according to types of cargo has become a trend. The equipment required can be specifically designed to be cost efficient leading to specialized berths in which operations concentrate on one type of cargo - containers, grain, break bulk, vehicles, ores. Container terminals are the best example of this trend - handling containers requires large gantry cranes and land storage is easy as long as you have enough space and adequate lifts and trucks. Cargo handling costs are the largest part of the total costs of moving goods through a seaport (70-90%)

Specialized agents hired by the shipping companies handle all the paperwork and permits (import/export documents, quarantine certificates, port charges and taxes etc.) They also arrange all the required services for the ship - repairs, provisioning etc. Ports should have modern IT systems to minimize the paperwork burden for port users.

Shipping companies are required to report a manifest of the cargo that is on each ship entering a port. The report of cargo is required by both Customs and the port authorities. Both parties need to know the quantity of cargo that is being off-loaded to determine their charges but they also need to know the commodities that are being discharged, particularly cargo that requires special treatment such as hazardous cargo.

Often there are a number of different charterers of space or "slots" on each vessel who arrange the shipping of containers for importers. For example, one vessel may have three charterers with a number of other freight forwarders organizing containers within their chartered space on a vessel. All will be required to report the contents of their containers.

Case Study


The 'supply chain' is a sequence of activities necessary to get products from the factory to the consumer. The port of Rotterdam is one of the links in this chain. Characteristic of a main port such as Rotterdam is that all kinds of different cargo flows come together. In the port of Rotterdam, all imaginable types of goods are loaded, unloaded and distributed via different modes of transport.

These various cargo flows are handled by specialized companies. The port is equipped to handle chemicals, ores, liquid bulk, dry bulk, vehicles, general cargo, refrigerated cargo, food and containers simultaneously. Whenever possible, the companies are clustered; consequently, Rotterdam can be typified as a collection of specialized ports. 

The region offers a complete range of companies specialising in storage and transshipment, transport, industrial processing and auxiliary services. In Rotterdam there are also many business service providers such as banks, insurance companies and trading houses. The exceptional concentration of facilities, know-how and experience in this one single area gives the best possible guarantee for optimum service levels and customized solutions.

Source; Port of Rotterdam website -

Container Terminals

'A container terminal is a complex system with highly dynamic interactions between the various handling, transportation and storage units' (Kim & Gunther 2007) They are laid out as multi-modal facilities directly linked to rail, road and, in some countries, inland waterways. Seaport container terminals vary considerably in size, function and layout although they consist of basically the same operational systems.

The ship operations area is equipped with ship-shore gantry cranes for the loading and unloading of vessels. They are mounted on rails and are able to traverse up and down the quay to exactly align themselves with the "bays" in or over the ship's hold, where the cargo is to be handled. The outreach of the horizontal jib of the crane permits a carriage to roll from over the quay to over the ship.

Based on the ship's stowage plan, planners in the container terminal determine the sequence of unloading inbound containers and loading outbound containers. As part of the planning for outbound containers the planners must determine the loading sequence and the slot in the vessel that the container will be placed.

On the quay ground handling equipment moves the containers to or from the import or export container stacks. These may be straddle carriers, tall diesel driven and rubber-tyred vehicles which pick up the containers by their corner posts, or a front end truck, which is a derivation of a giant fork lift truck.

Modern container terminals employ remotely driven electric trucks in a system that is almost automated, trundling the containers in and out of the yard on rubber-tyred trains according to their computerised programme. Special areas are reserved for reefer (refrigerated) containers which need electrical supply to maintain the desired temperature. There are also separate storage areas for hazardous goods containers and empty containers.

The process for handling containers in the container terminal can be described in the following way. The export container arrives at the terminal by truck or train, is identified and registered with its key data (container number, content, destination, outbound vessel, shipping line), picked up by the terminals internal transport and handling equipment and placed in one of the storage stacks in the yard. Once the outbound vessel has arrived the container is then moved from the stack in the yard and taken to the wharf for loading onto the vessel in the pre-determined position.

For import containers the process is basically the reverse. Once Customs clearance has been given the containers are moved out of the terminal either by truck or train. Trucks usually enter the terminal and containers are loaded directly on to the truck. Movement of trucks into and out of the terminal is usually managed by a truck booking system which also ensures there are not long queues of trucks outside the terminal. Containers moving by train are usually loaded at an intermodal container transfer facility which is located adjacent to the container terminal.

Most sea cargo containers are shipped as full container loads (FCL) with the intention that the container once it is cleared from the wharf can be taken straight to the importer's premises.

The remaining containers are usually "less-than-container load" or LCL. These containers comprise consignments for a number of importers whose consignments were too small to fill a container. The containers require deconsolidation before delivery to the importers. The deconsolidation usually takes place at a Customs licensed depots which can be on the wharf or close to the wharf.

Case Study

Increased Cargo Capacity at Port of Savannah

The opening of the. new Chatham Intermodal Container Transfer Facility (ICTF) at the Georgia Ports Authority's Garden City Terminal features three working tracks at 2,145 ft. each and a total of 12,406 ft. of storage tracks. The Port of Savannah is the only single facility on the U.S. East Coast with two on-terminal ICTFs.

The Port of Savannah's two Class I rail providers offer unrestricted double-stack service with two- to five-day transit times to major hubs throughout the Midwest, Gulf Coast and Southeast.

Construction of GPA's second ICTF was completed in early December and received its first train on December 22, 2008. CSX will provide seven weekly services through the facility. The use of Rubber-Tired Gantry (RTG) cranes at the ICTF will increase efficiency and utilize cleaner burning ultra-low-sulfur diesel fuel, cutting emissions by 10 percent and creating a reduction in nitrogen oxide, carbon and particulate matter emissions.

"Part of our mission at the GPA is to maintain the natural quality of the environment, and we take that responsibility very seriously," said GPA's Chairman of the Board Steve Green. "The completion of this project will increase our reliance on rail to move cargo and in turn will help Georgia and the nation reduce fuel usage and carbon emissions throughout the transportation chain."

The combination of marine, rail and truck transportation services will continue to be how consumer goods are delivered affordably and on time.

"The Chatham Intermodal Container Transfer Facility represents an investment in the future and is a model for how transportation modes can work together for the efficient, environmentally friendly delivery of freight," Clarence Gooden, executive vice president for CSX Corporation, said. "CSX is proud to be a partner in this growing enterprise, which provides an international gateway through which to export North American goods. We look forward to offering expanded intermodal and carload services over our rail network of more than 21,000 miles."

Cargo received by rail accounts for 18 percent of business at Garden City Terminal. During the past five calendar years, Savannah's on-dock rail volumes have increased 67 percent.

While the global recession has significantly affected international trade, the GPA is focused on preparing for future growth by improving efficiencies and increasing capacity. "We are taking the opportunity during this time to improve rail connectivity, increase on-terminal capacity and decrease the time it takes to process cargo," said GPA's Executive Director Doug J. Marchand. "These projects will give our customers additional choices when it comes to moving cargo - enabling them to better import and export their products throughout the world."

Source: Georgia Ports Authority

Air Cargo Movement

Although air freight only accounts for a small volume of the trade in goods by volume it accounts for just under 40% of total world trade as measured by the value of the goods traded. (Nordbank 2007) The major advantage of air freight as compared to other forms of transport is speed. Air cargo transport has proven to be a realistic option for high valued commodities and is seen as a key way to reduce inventory costs and improve customer service. Some cargoes only move by air e.g. jewels, artwork, currency, perishable foods and short lived commodities such as radioactive isotopes and biological materials.

Air cargo can be divided into the following three categories.

Express cargo - by definition, this type of cargo includes a guaranteed time component. Typical express cargo such as mobile phones, laptop computers, etc. must normally be transported quickly around the globe due to their short lifecycles and are not suitable for alternative forms of transport.

Special cargo - in addition to the time component, this category comprises additional types of services. Special cargo includes animal transports, perishable products, goods requiring constant temperatures as well as shock-sensitive materials and goods susceptible to theft. For these goods, too, there are only limited transport alternatives.

Normal cargo - this cargo type comprises all cargo for which no additional services are agreed.

While normal cargo accounted for 82.1% in 1997, a share of only just under 54% is projected for 2009.

Cargo can be shipped in various forms, including large containers known as unit loading devices (ULDs) that allow many packages to be consolidated into one container which can be loaded on an aircraft, wooden crates, assembled pallets, or individually wrapped/boxed pieces, known as break bulk cargo.

Service Providers

Just about every passenger flight is carrying some freight along with the passengers and their baggage. Dedicated freighter aircraft represent about 10 percent of the world's total commercial jet fleet but now provide more than half the world's total air cargo capacity. This volume is expected to increase because capacity for commercial cargo in passenger airplane lower holds will not grow as quickly as dedicated freighter capacity.

There are several types of providers in the air freight market, who differ by the length of the value chain covered or the width of the services offered. The different service providers considered to be integrators, all cargo airlines, combination airlines and contract carriers.


Integrators are also known as express carriers. Apart from the delivery of express cargo, they offer a wide range of freight services such as door-to-door transport and special cargo services. Integrators cover the complete transport chain from the customer to the recipient with air and ground transports. They focus on satisfying customers' requirements for time sensitive cargo. In terms of revenue, the express cargo segment accounts for 80% of the US market.

As the share of special and express cargo is expected to increase in the long term it is anticipated that integrators will be able to further expand their market share. Their advantage is that they can fill unused freight capacities with other cargo types at lower rates, subsidised by their very profitable main business, i.e. express cargo. FedEx and UPS are the market leaders in North America, while DHL is strong in the European market and Asia.


Airlines such as Cargolux or Nippon Cargo Airlines focus their activities entirely on the cargo segment and usually operate large air freighter fleets, which almost exclusively comprise models from the Boeing 747 series.

Combination airlines

Combination airlines operate in both the passenger segment and the air freight segment. Many airlines have spun off their cargo operations into subsidiaries. In some cases airline cargo divisions such as Lufthansa Cargo or Korean Air Cargo are independent subsidiaries that operate separate air freighters as well as use the belly capacity of their passenger aircraft. Other airlines such as American Airlines or British Airways only use the belly capacity of their passenger planes for their cargo activities.

Contract carriers (ACMI)

Contract carriers operate air freighter fleets and lease the capacity on an ACMI basis (wet lease). The most important service providers in this segment are Atlas Air Worldwide Holdings and Air Atlanta Icelandic. Other well-known providers are Evergreen, World Airways and Gemini Air Cargo. Boeing estimates that the market for ACMI services accounts for approx. 8.7% of the total air freight market. Apart from greater flexibility, a wet lease offers customers an efficient way to control their operating costs.

ACMI/Wet Lease - Aircraft, Crew, Maintenance & Insurance.

When an aircraft is leased on ACMI basis. One airline (the Lessor) provides the aircraft, one or more complete crews (including engineers) including their salaries and usually allowances, all maintenance for the aircraft and insurance. The Lessor will charge for the block hour and depending on the aircraft type sets a minimum guaranteed block hours limit per month.

The lessee has to provide all fuel, landing/handling/parking/storage fees, crew HOTAC (allowances) including meals and transportation as well as visa fees, import duties where applicable as well as local taxes. Furthermore the Lessee has to provide passenger/luggage and cargo insurance and in some cases need to cover the costs for War Risk.



While this trend was first seen in the passenger segment some years ago, air cargo carriers are now increasingly forming alliances as well. The purpose of these alliances is to cut costs through the shared use of cargo capacity, an enlarged route network and a larger product range as well as to defend and expand their competitive positions. Alliances in the passenger segment are driven by these same rationale but in the cargo segment, the fierce competition from integrators is an additional reason. At present, two cargo alliances exist in the market. The first, WOW, was formed by three members of the Star Alliance passenger alliance, while the second, SkyTeam Cargo, is the cargo counterpart of the SkyTeam passenger alliance. A growing trend towards cooperation is also evident between airlines and forwarders with these partnerships aimed at increasing the alliances competitiveness against the integrators.

Freight hubs

By including hubs in their flight plans, airlines can offer a much larger number of connections with the same number of airplanes. Hub systems thus have a so called multiplier effect. In addition, cost advantages can be realised through the use of larger aircraft on the connections between the hubs. A disadvantage is the fact that the total transport route is longer than a direct connection. Nevertheless, the past years have seen a strong concentration on a few freight hubs.


Airports are vital part of a country's infrastructure and are the essential interchange between air and land. Traditionally they have been owned by central or local governments and even in some cases by the armed forces. In the last 15 years there has been a change in this thinking and as airports have come to be considered as businesses there has been increasing private sector involvement in the operation of airports.

Airports are complex enterprises comprising runways, aprons and taxiways; terminal buildings for both passengers and cargo and a control tower.

The essential operational services in an airport are the air traffic control system, meteorological services, telecommunications, security, fire services, ambulance and first aid services, and grounds and tarmac maintenance. These services determine the safety and security of the airport and are essential to its operation.

There are also handling services in the airport and they consist of aircraft ground and ramp handling cleaning providing fuel, loading and unloading luggage and freight. Then there are traffic handling aspects such as processing passengers, baggage and freight through the terminal buildings. There are of course a range of other commercial services located in the terminal buildings - restaurants, bars, duty free shops, other retails hops, banks- and then hotels, parking services.

Busiest Air Cargo Airports

Air Cargo Terminals

A typical air cargo terminal has three main users - airlines, air cargo terminal operators and for­warders/cargo-agents who are the prin­cipal contributors to the revenue of air cargo terminals. The air cargo terminal operator controls the movements of the cargo at the airport. On the export side they accept cargo from the freight forwarder, they store the cargo until it has either been released for export by Customs and then they arrange for the cargo to be loaded onto the designated plane. On the import side, an air cargo terminal operator accepts cargo from arriving planes and stores the cargo until it has been released by Customs and can be collected by the freight forwarder.

An air cargo terminal is a complex combination of information and material flows with many processing stages within the operation. These processing stages are customs inspection, documentation, build up and break down of air cargo containers (known as unit load devices, or ULD), transportation, and other material handling operations. The arrival and service rates vary throughout the day and the storage systems must be capable of dealing with the uneven elements in the process.

Case Study

Toronto Pearson International Airport - Cargo Terminal Operations

The terminal is divided into an import area and an export area. The flow of goods through the terminal is either from the airside to the landside (terminating freights or connecting freights requiring the road feed service), from the landside to the airside (originating freights or connecting freights arriving from a road feeder service), or from the airside to the airside via the terminal (connecting freights).

At the import level, freights on dollies or carts are transferred with a tractor-trailer from the aircraft to the airside level of the cargo terminal. Shipments on carts are transferred to the import bulk cart break-down station where they are sorted, scanned, placed into a roll box, conveyed and stored either in an automated storage and retrieval system (AS/RS) or in other dedicated storage areas upon their retrieval (terminating goods) or goods). Shipments on containers or pallets (referred to as ULDs) are introduced into the terminal throughout a manned operated and computer-assisted airside transfer vehicle (ATV).

From this point, the ULDs may be transferred either to the road feeder service (RFS) dock area, to the import ULDs storage area, to the import ULDs breakdown area or to the export ULDs storage. A fully automated ULD handling system is used for this purpose. It is equipped with such components as powered ULD conveyors for moving ULDs to different transfer points, turntables for ensuring that ULDs can be rotated or reoriented when changes in direction are required, unmanned operated elevating transfer vehicles (ETV) for ensuring ULDs storage, retrieval or transfer on multiple levels, lowerable workstations for enabling safe build-up and break-down processing, scissor lifts for ensuring transfer interface between conveyors and road trucks with various heights at the RFS area, fork lifts for transporting goods between various transfer points, transfer vehicles (TV) for enabling the interface in both ways between either non-rollarized vehicles and the first conveyor system set at the RFS area, between this last and the second conveyor system set at the RFS area, or between the import area and the export area.

After being stored in the import ULDs storage area, an ULD is retrieved and transferred without breakdown processing either to a customer, if terminating shipments (via the RFS dock or truck dock pick area), or to the airside if connecting(via an ETV and an ATV). A ULD may also be transferred to the ULD break-down area where its contents are sorted by airway bill, scanned, placed into a roll box, conveyed and stored into the AS/RS or other storage areas upon their retrieval for releasing to a customer (terminating goods), or transfer for preparation to the carts or ULDs build-up areas (connecting goods).

At the export level, shipments are received either loose or in ULD's. Shipments in ULD's may then be transferred from the RFS area or the export truck acceptance area to the airside area either directly or through the export storage area. An ULD handling system is used for this purpose and is equipped with the same components as described previously. shipments tendered loose are sent to the cart or to the ULD build-up area either directly or after being stored and retrieved from the AS/RS or from any other storage areas. Inthe first case, a small package conveyor system is used and in the second case the same system previously described isused. After completing the ULDs or the cart break-down processing the shipments on ULDs are sent to the airside area, either directly or after being stored and retrieved from the export ULD storage. The ETVs are generally used for this purpose. At the airside level, ULDs are placed on dollies throughout an ATV and delivered to the aircraft staging area with a tractor-trailer. Similarly, shipments on carts are transferred, according to a pre-established schedule, to the aircraft cargo loading area.

Finally, we should point out that a computerized inventory control system (ICS) is used to track the movement of units in the terminal. This means various information must be captured at different processing steps using various means such as scanners (wire or wireless), wired scanners, touch screens, card readers, printers, PC computers, etc.

(Nsakanda et al 2004)

Express Courier Gateways

Express cargo moves in the same way as general air cargo from the aircraft to the cargo terminal. In many countries express courier companies operate their own cargo terminal with direct access to the tarmac and their consignments will be taken directly into their Customs licensed premises. In other airports where express cargo is initially moved into the cargo terminal the cargo is usually moved underbond to the express courier company's depot before release.

Case Study

Fedex - Memphis SuperHub

A five mile perimeter, parking slots for 175 aircraft and 300 miles of conveyor belts. That's the Memphis Super Hub. With over 8,000 employees during the day and 4,000 at night, this unbelievable facility keeps Memphis and FedEx connected any point on the globe. Supporting the largest air cargo fleet in the world, the Memphis Hub handles about 3.3 million packages per day.

Video: Inside the Memphis SuperHub

Depots and Warehouses

When cargo arrives into a country there is often the need, due to the limited space available at gateway ports/airports, to move the goods to a depot/warehouse before the goods are cleared. Similarly, the final destination of many consignments is not known at the time of importation, or all the relevant information is not yet available. Customs therefore allows the storage of goods, for logistical reasons, in temporary storage. Temporary storage also permits commercial interests to check whether the goods concerned are in conformity with contract conditions. Because an increasing percentage of world trade is made up of intra-company movements or transactions between related firms and just-in-time delivery logistics that are managed by advanced automation and communication systems, the relative importance of temporary storage has decreased.

It must be noted that temporary storage has characteristics which are fundamentally different from those of warehousing or free zones. Temporary storage is primarily intended to facilitate the logistical requirements in moving goods internationally, whereas warehousing and storage in a free zone have an important economic function independent of their transport.


These types of depots can be used for the deconsolidation of import cargo shipments (LCLs) and the consolidation of export consignments before they are taken to the wharf or airport. In many countries these depots can be in inland or some distance from the port. This allows importers who don't live near the international ports to undertake the clearance of their goods close to home. This is particularly advantageous to Customs if they need to examine the goods with the owner present.

To move the goods to these depots the depot owners or the shipping agents /airlines lodge a transhipment form/permit identifying the goods in accordance with the manifest lodged for the ship/aircraft and seeking approval for movement from the port cargo terminal to a licensed depot. Often the approval will require the goods to be sealed to ensure the goods aren't interfered with prior to the customs duty and taxes being paid.

To be licensed, depot owners usually have to meet strict requirements in terms of the facility suitability and physical security. Depot owners will also have to lodge a financial bond to cover for any losses that may occur with goods that have yet to be cleared. The licence will also specify the length of time cargo may be held at the depot before clearance.

The conditions of the licence will usually require the owner to provide office accommodation and suitable facilities for Customs officers to be stationed at the depot either permanently or on a temporary basis. These officers will undertake physical examination of cargo as well as undertake audit activity to ensure the depot owner is properly accounting for the goods entering and leaving his depot.

Goods cannot be moved out of the depot unless an import declaration has been lodged. In effect they are an extension of the port/airport. Goods cannot enter home consumption unless the correct revenue has been collected and all import permit requirements have been met.

Bonded Warehouses

It is sometimes not known at the time of importation how the imported goods will finally be disposed of (for example, new motor vehicles). This means that the importers may choose to store the imported goods for some time before they are finally disposed of. When the goods in question are intended for clearance for home consumption, the customs warehouse procedure enables the importer to delay the payment of the import duties and taxes until the goods are actually taken into home consumption. An importer may also choose to place the goods in a warehouse until they can meet the conditions relating to a permit.

The scope of this particular procedure may not cover only imported goods. For example, some administrations allow goods that are liable to, or have been subject to, internal duties and taxes to be stored in a customs warehouse in order that they may qualify for exemption from or repayment of such internal duties and taxes. Some administrations provide additional facilitation to the trade through a simplified warehousing procedure for special categories of goods, for example, aircraft spare parts in the UK.

Customs bonded warehouses are licensed and regulated facilities operated by either the government or the private sector. Goods in a bonded warehouse are considered to be imported into the country but have not been released from Customs. Imported and domestic goods destined for export may be also placed in a bonded warehouse.

Placing goods in Customs warehouses generally hold significant benefits for importers such as deferring the payment of duties and taxes and deferring compliance with some requirements such as marking and labelling. This deferral continues up to the point the goods are released for domestic consumption or exported.

Bonded Warehouses hold significant commercial benefit for importers because the goods can be stored for a period of time, after importation, without payment of duty which may assist the importer with cash flow.

Where a decision is made to place the imported goods into a bonded warehouse, the importer or his representative is required to present to Customs a special import declaration for warehousing in the prescribed form along with relevant documents. The duties and taxes liable on the goods are assessed but not required to be paid. Prohibited goods or restricted goods without permits are not permitted in a bonded warehouse.

The goods are then moved to the warehouse where they are usually stored under strict guidelines that are prescribed in the warehouse licence. To gain a warehouse licence an applicant must demonstrate a high level of security, good accounting processes and provide a suitable level of financial security/bond. Customs will also conduct regular audits of bonded warehouses to ensure that the owners have properly accounted for all goods leaving the premises.

Restrictions are also placed on the activities that can be carried out in bonded warehouses. These may include some of the following:



disassembling or reassembling goods that have been assembled or disassembled for packing, handling or transportation

inspecting and testing

marking, labeling, tagging, or ticketing

packing, unpacking, packaging or repackaging

removing from the warehouse, for the sole purpose of soliciting orders for goods or services, a small quantity of material, or a portion, a piece or an individual object that represents the goods.

Goods can only be removed from the bonded warehouse when the correct duties and taxes have been paid or they are exported.