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Hello and welcome back to Business English Pod for the third lesson in our series on English for Logistics.
In this lesson...
We'll focus on duties, tariffs, and other cost factors.
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There was a time when logistics was a lot simpler than it is today, when economies were not nearly so interconnected.
But in the second half of the 20th century, governments took down barriers to international trade.
Soon, companies were relying on complex supply chains stretching around the world as they outsourced production and sold their goods abroad.
With so many moving parts to these modern supply chains, it can be challenging to control costs.
You're likely paying several different companies involved in moving and storing goods across oceans and continents and through the air.
Each of those companies is trying to make a buck.
And in many cases you're also moving things across borders, which means you need to consider duties and tariffs.
The taxes governments charge on imported goods.
Talking about costs involves specific terminology used in logistics, but you'll need to know about more than just tariffs, duties and other taxes.
You'll also have to speak about regulations and compliance.
And any conversation about costs will likely involve the vocabulary of risk, as you try to minimize the chances of something going wrong.
In today's dialogue, we'll rejoin a conversation between Cam and Anna.
Cam is a production manager with a clothing company, while Anna works for a logistics firm.
Cam is getting Anna's support with moving their clothing lines from manufacturers in Eastern Europe to markets in the United States.
As you listen to the dialogue, try to answer the following questions.
One, what does Anna say are the biggest factors in discussing customs?
Two, what point does Cam try to clarify by asking a more specific question?
Three, what might be included in landed costs when discussing logistics?
Yes, I know you have some concerns there, but we can handle most of that with our usual customs brokerage service.
Yes, that's a big help.
But I want to understand our tariff exposure before we lock in a route.
Of course.
The biggest factors with customs are duties, import taxes and surcharges.
At the moment, the duty rate on apparel is holding steady, but, well, you know how things work.
Um, what do you mean?
Well, general volatility and all that.
Wait.
You're saying we could still see adjustments in port fees or additional charges?
Yep.
Even a small percentage swing in duty or fees and you'll see an impact.
Yeah, we had that issue last year.
So, what about trade agreements?
Good question.
There is a trade preference agreement here with Albania.
That means preferential duty.
You'll get reduced or even zero import duty.
Well, that would be something.
What's the paperwork like?
Certificates of origin, commercial invoices, packing lists, and consistent HS codes.
Clean paperwork keeps your exemption secure, as you know.
Of course.
And just so we're clear landed cost includes the base freight rate, all import duties and surcharges and clearance fees at both ends right.
Yes, origin and destination.
We'll lay this out for you, showing the landed cost estimate per unit comparing both routing options.
I mean Greece versus Italy.
The base cost is slightly lower on the Greek route, but it's less stable.
Understood.
If we're comparing apples to apples, I'd rather pay a predictable rate than get blindsided by hidden fees.
That's smart.
Going via Italy comes with a small premium, but reduces risk exposure.
We can also build in a contingency for potential surcharges.
I'll put all this in a cost comparison. and get it to you before Friday.
Now let's go through the dialogue again and look at the language that Cam and Anna used to discuss costs.
At the start of this part of their discussion, Anna mentions a custom brokerage service.
Customs refers to the part of a government that controls the movement of goods into and out of the country.
Yes, I know you have some concerns there, but we can handle most of that with our usual customs brokerage service.
Yes, that's a big help.
But I want to understand our tariff exposure before we lock in a route.
Of course.
The biggest factors with customs are duties, import taxes, and surcharges.
At the moment, the duty rate on apparel is holding steady.
But, well, you know how things work.
As you heard, CAM's main concern is tariff exposures.
Exposure is a word we use to talk about risk.
If you are exposed to something, then it can affect you.
Tariff exposure refers to the special taxes that you might have to pay as you move goods through different countries.
Governments use tariffs to protect domestic companies and generate revenue.
Hannah mentions several important ideas here, including duties.
Which are the actual fees paid on tariffs?
These are a type of import tax set by the government.
She also mentions surcharges, which are special costs supplied by governments or companies themselves.
How can we use this vocabulary related to customs and taxes?
Let's practice with a few more examples.
If we source suppliers from different countries, we could reduce our tariff exposure.
With rising oil prices, some carriers are adding fuel surcharges.
Hannah mentioned that duties on clothing are steady or consistent, but she followed this by saying But you know how things work.
Let's listen as Cam tries to clarify what she means.
Um, what do you mean?
Well, general volatility and all that.
Wait, you're saying we could still see adjustments in port fees or additional charges?
Yes.
Anna was suggesting that things can change because of general volatility.
Volatility refers to the amount of change happening.
A volatile situation has a lot of uncertainty and change.
Of course, Cam wants to control costs, especially because of volatility.
So he asks Anna to clarify.
He wants her to be more specific and asks specifically if she means that port fees might change.
Port fees are charges paid by shipping companies to use a port.
Controlling costs often requires us to ask clarifying questions.
So let's practice some more examples.
Just to be clear, Will the invoice include all customs duties and surcharges?
Could you just confirm exactly what's included in this estimate?
I see a different duty rate here compared with previous shipments.
Could you explain?
So what exactly is causing this delay?
Are the goods held at port?
Now let's get back to the dialogue, as Cam asks about trade agreements.
These are agreements between countries to give each other special or preferential rates on duties and taxes.
Yep.
Even a small percentage swing in duty or fees and you'll see an impact.
Yeah, we had that issue last year.
So, what about trade agreements?
Good question.
There is a trade preference agreement here with Albania.
That means preferential duty.
You'll get reduced or even zero import duty.
Well, that would be something.
What's the paperwork like?
Certificates of origin, commercial invoices, packing lists, and consistent HS codes.
Clean paperwork keeps your exemption secure, as you know.
Navigating customs typically involves a lot of paperwork, meaning there are different documents, contracts and certificates that we need to arrange.
And sometimes to get preferential duties, there is extra paperwork, as Anna explains.
She mentions several requirements, including documents of origin.
She also talks about commercial invoices, or records of transactions, and packing lists, or detailed lists of what is included in a shipment.
Hannah explains that all this paperwork is necessary to get exemptions.
If you get an exemption or if you are exempt, It means you don't have to pay something that you might normally have to pay.
Let's try some more ways of using vocabulary related to trade agreements and compliance.
This new trade preference agreement will mean lower duties on some goods.
We'll need to show certificates of origin to verify where these were manufactured.
Our shipper prepares the commercial invoice for every international order.
In an emergency, some medical supplies will receive an exemption from duties.
Clearly there are a lot of factors to think about when discussing customs, so it's not surprising that Cam has some more questions.
Let's listen.
Of course.
And just so we're clear landed cost includes the base freight rate, all import duties and surcharges and clearance fees at both ends right.
Yes, origin and destination.
We'll lay this out for you, showing the landed cost estimate per unit comparing both routing options.
I mean, Greece versus Italy.
The base cost is slightly lower on the Greek route, but it's less stable.
Understood.
If we're comparing apples to apples, I'd rather pay a predictable rate than get blindsided by hidden fees.
Cam is using several important terms to discuss costs, including landed cost.
This is the total cost of getting something from the factory to its final destination, including the base freight rate or basic cost of transporting goods.
That base cost is a starting point for talking about the costs involved in shipping.
The landed cost also includes duties, taxes and clearance fees, which are the fees we have to pay for all the administrative work done by customs agencies.
In calculating costs, ultimately, we want to be able to determine cost per unit.
This refers to how much it will cost for each item we are transporting.
This number is useful for comparing different options.
All in all, Cam is hoping that costs will be as predictable as possible.
That is, he doesn't want any big surprises.
Let's go through some more ways of using vocabulary related to costs.
The landed cost includes shipping, duties, insurance, and handling fees as well.
Hopefully we can negotiate a better base freight rate for the next shipment.
All customs handling and documentation should be covered by the carrier's clearance fees.
Before we confirm this order We'll need to see a cost estimate per unit.
Keeping costs predictable is one way of managing risk.
Let's hear Anna talk more about risk management.
That's smart.
Going via Italy comes with a small premium but reduces risk exposure.
We can also build in a contingency for potential surcharges.
I'll put all this in a cost comparison and get it to you before Friday.
Premium can actually have two meanings.
If you pay a premium for something... then you're paying a bit more to get something better.
But premiums are also what we pay to insurance companies for policies that control risks.
And risk is simply the potential for something to go wrong.
Besides buying insurance, companies might manage risk by keeping a contingency in their budgets.
This means setting aside money just in case something happens.
And there's always a chance of something happening.
It might be a small chance, in which case your risk exposure is low, or it might be a big chance.
Risk management, including controlling costs, is a critical part of effective logistics.
So let's try some more ways of talking about it.
If we're really concerned about our risk exposure, then we should go with a more experienced carrier.
We need to build in a contingency in case shipping rates increase.
Sounds like there are potential delays due to the typhoon in Asia.
As we have heard, determining and controlling costs is very complex in modern logistics.
With so many companies involved in moving goods through different methods and across borders, things can get expensive fast.
It is important that you are able to speak the language of costs in order to succeed in business.
Now it's your turn to practice some of the key terms we've looked at in this lesson.
In a moment, you'll hear a series of sentences with a word replaced with a beep.
Repeat the whole sentence, including the missing word.
Pay close attention to the words before and after the beep as clues to the missing word.
For example, if you hear...
I heard the duty on food products is going up to 25%.
You can say, I heard the duty rate on food products is going up to 25%.
After each response, we'll provide the correct answer.
Ready?
Let's give it a go.
The government just signed a new trade with China.
Answer.
The government just signed a new trade agreement with China that your carrier hasn't told you about.
Check your invoice carefully for hidden fees that your carrier hasn't told you about.
According to the certificate of Answer.
According to the certificate of origin, these jeans were made in Vietnam.
You will have to pay duties and other fees on top of the base...
Answer.
You will have to pay duties and other fees on top of the base cost.
Could you please tell me the cost estimate per on the shipment?
Answer.
Could you please tell me the cost estimate per unit on this shipment?
We've reached the end of this lesson on discussing costs and duties.
We've learned some important vocabulary for talking about tariffs fees prices, compliance and risk.
We've also looked at how to clarify specific costs as you consider all these issues.
For more practice.
Premium members can access the online quizzes and PDF transcripts for this and other lessons on the BEP website.
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Thanks for listening and see you again soon.
