Tutorial - 02

01. Logistics and Modes of Transport

Question:
a) Fill in the blanks:
"Logistics is the process of planning, implementing, and controlling procedures for the efficient and
effective A and B of goods, including C and related information, from the point of origin to the point
of consumption."

b) List down the strengths and weaknesses of the following modes of transport: Rail, Water, Air.

c) Briefly explain the benefits of shipping ocean freight in FCL compared to LCL.

Answer:

a) Fill in the blanks:

 A: In-bound

 B: Out-bound

 C: Transportation

Explanation:
Logistics includes managing goods coming into a business (in-bound) and goods going out (out-
bound) along with transport and information flow.

b) Strengths and weaknesses:

Mode Strengths (Sri Lankan & Global) Weaknesses (Sri Lankan & Global)

Rail - Cost-effective for bulk goods (e.g., tea, rubber - Limited coverage in Sri Lanka;
in Sri Lanka) infrastructure aging

- Efficient over long distances globally - Slow compared to road and air

Water - Cheapest for bulk and heavy cargo (exporting - Slow transit times, weather-
tea, garments from SL) dependent

- Essential for global trade (majority of - Port congestion issues in Sri Lanka
container shipping) (Colombo Port)

Air - Fast delivery of perishables (seafood exports - High cost limits volume
from SL)

- Global rapid movement of high-value goods - Limited cargo size and affected by
fuel price volatility

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c) Benefits of FCL over LCL:

 Sri Lanka: FCL reduces risk of damage and delays when exporting garments or tea in full
containers.

 Global: FCL offers cost advantages for large shipments, reduces handling, and improves
security compared to LCL where cargo is consolidated with others.

02. International Trade Concepts

Question:
a) Define international trade.

b) List three key reasons for increasing demand for foreign trade.

c) Match the following descriptions to Comparative Advantage or Absolute Advantage.

d) Explain how cultural values influence international market entry.

Answer:

a) International Trade:
Exchange of goods and services across international borders.

b) Reasons for demand increase (Sri Lanka & global):

1. Access to scarce resources (Sri Lanka imports machinery, crude oil).

2. Market expansion for exporters (e.g., Sri Lankan tea and apparel brands expanding overseas).

3. Benefit from comparative cost advantages (global outsourcing).

c) Matching:

Description Theory

Developed by Adam Smith Absolute Advantage

Focus on producing goods with lowest opportunity cost Comparative Advantage

Using fewer resources to produce a unit Absolute Advantage

Developed by David Ricardo Comparative Advantage

d) Cultural values influence:

03. Maritime and Rail Transport

Question:
a) Name three main maritime routes.

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b) Name two types of maritime ships and typical cargo.

c) List commodities carried by rail (bulk, containers, special cargo).

d) Why use freight forwarders instead of dealing directly with carriers?

e) Define Entrepôt trade and list two key locations historically.

f) Match trade history questions with answers.

Answer:

a) Maritime routes:

 Asia-Europe (via Suez Canal)

 Trans-Pacific (Asia to North America)

 Trans-Atlantic (Europe to North America)

b) Ships and cargo:

 Bulk carriers: coal, iron ore (Sri Lanka exports minerals)

 Container ships: garments, electronics (Sri Lanka exports apparel globally)

c) Rail cargo:

 Bulk: tea leaves, coal

 Containers: consumer goods, electronics

 Special cargo: livestock, oversized machinery

d) Freight forwarders:
They handle documentation, customs clearance, consolidate shipments, and reduce costs, which is
important for Sri Lankan exporters unfamiliar with complex global logistics.

e) Entrepôt trade:
Goods imported and re-exported without domestic consumption.

Key hubs:

 Singapore (regional hub for South Asia)

 Dubai (Middle East gateway)

f) Matching:

Question Answer

Venetian merchant on Silk Road Marco Polo

Chapter reserved in HS system Seventy Seven

Aircraft origin United States

Number of HS chapters Ninety Nine

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Question Answer

Railway introduction United Kingdom

First European to India by sea Vasco da Gama

Containerization start year 1956

Panama Canal opening year 1914

04. Container Shipping and Cut-Off Times

Question:
a) Name documents to send container for loading.

b) Explain FCL container delivery procedure with flowchart.

c) What is export cargo cut-off time?

Answer:

a) Documents:
Shipping instruction, container gate pass, export customs declaration (CUSDEC), commercial invoice,
packing list, bill of lading.

b) FCL procedure:
Factory stuffing → Weighing & sealing → Transport to port → Gate entry & verification → Customs
clearance → Loaded onto vessel.

c) Export cargo cut-off time:

05. INCOTERMS in International Trade

Question:
Discuss the role of INCOTERMS in sales contracts, carriage contracts, and insurance with examples.

Answer:

INCOTERMS clarify seller and buyer responsibilities on costs, risks, and logistics in global trade. In Sri
Lanka, exporters use terms like FOB Colombo or CIF Europe to specify responsibility. For example:

 FOB Colombo: Seller delivers goods onboard ship at Colombo port.

 CIF London: Seller pays cost, insurance, and freight to London port.

INCOTERMS affect insurance — CIF sellers arrange insurance; FOB buyers do.

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06. Bills of Lading and Bills of Exchange

Question:
a) Primary functions of Bill of Lading and why it’s not a contract of carriage.

b) Role of Bill of Exchange in payment settlement.

Answer:

a) Bill of Lading functions:

 Evidence of contract of carriage

 Receipt of goods

 Document of title

Not the contract itself because the contract forms earlier with shipment booking.

b) Bill of Exchange:
A financial instrument ordering payment on demand or at a fixed date, used to ensure payment in
trade transactions, often linked with Letters of Credit.

07. Cargo Damage & Insurance Claim Procedure (LCL Shipment)

Question:
Advise clearing agent about cargo damage, insurance survey, and claim procedures.

Answer:

 Do not clear damaged cargo immediately; keep intact.

 Notify insurance company promptly.

 Arrange surveyor inspection and report.

 Gather documents: insurance policy, bill of lading, invoice, packing list, survey report.

 Submit claim with evidence to insurer.

 Follow insurer’s instructions until claim settlement.

 Retain damaged goods as insurer may require inspection.