Taking A Close Look Into Transshipment And Cross Trade At Jebel Ali Free Zone JAFZA

Port of Jebel Ali aka Mina Jebel Ali, holds the title of being the 12th busiest port in the world after Antwerp port in Belgium and behind Rotterdam port in the Netherlands. The port has 67 berths, undergoes 80+ weekly services, and connects to more than 180 ports worldwide. It has been voted the best seaport in the Middle East for 24 consecutive years. The port also provides an opportunity to connect with 3.5 billion people. It also has the world’s largest man-made harbour.

The Jebel Ali port is operated by DP World. It is an Emirati-owned company that was formed in 2005. Jebel Ali Free Zone or JAFZA is the largest free zone owned by them and has been the driving force in bringing businesses to Dubai. It has generated over AED 53.7 billion in revenue in 2011. RAIL ecosystem (Reach, Automation, Infrastructure, and Logistics) helped the free zone to achieve this milestone. Companies in the retail industry have vastly benefitted from this ecosystem. Due to that reason, most of the transshipment and cross trade activities pass through this free zone. This article will take a closer look into how businesses can conduct transshipment and trade operations within the Jebel Ali Free Zone (Dubai, UAE).

Understanding Cross shipment and Transshipment:

When goods are moved from origin to destination by avoiding warehouses and distribution centers, it is known as cross shipping. This will help in saving time and money and will be able to keep up with the speed of the market. This way of transportation avoids unwanted touch points and nodes by focusing on how to transport the items as fast as possible.

Transshipments is the process of transfer of goods from one mode of transport to another, in the transit between the origin and destination. Rail, trucks, vessels, smaller ships, and planes are a few common modes of transport.

Advantages of Transshipment:

  • There will be situations where a port won’t be able to handle a large container vessel and hence the contents are transshipped into a smaller ship in this way the products could then be unloaded into the port. For instance, a carton of shipment is coming from China and is supposed to reach Abu Dhabi. Then from the port, it could be transferred to Etihad Rail. After reaching a certain leg of Abu Dhabi, it will then be transferred to a smaller truck and finally reach the receiver’s location.
  • When the shipper doesn’t have enough volume to fill an entire truck, then opting for cross shipping will shoot the costs through the roof. It is only sensible to consolidate the shipments along with shipments of others. Transshipping creates an opportunity for consolidation and it will significantly reduce the overall costs.
  • Sometimes the final leg of the journey might be somewhere far away from the main port and hence the shipments will have to go through multiple transfers in order to reach there. This could be from the ship to a large truck to a smaller truck and then finally through vans. This is how the efficiency of the routing is tweaked. Goods are able to areas which were considered inaccessible in this way.
  • Situations where the direct transfer of goods between country A to country B can’t be conducted due to any reason, could easily be solved through Transhipment. Suppose goods from China have to be shipped to KSA and for some reason that is prohibited to do it. A third country like the UAE can come into play and hence the shipments are first transferred from China to the UAE and then from the UAE to KSA. This is very similar to taking connected flights while travelling to another country like from Dubai to Canada.

Understanding Cross Trading

  • If you’re someone who has set up their business in UAE and your products are manufactured in China and now you have a customer in Qatar who needs your products. Then instead of first shipping your products from China to UAE and then from UAE to Qatar, they could be directly shipped from China to Qatar. This process is cross trading. It is when products are transported between two countries, none of which the seller is based in.
  • Cross trading has other names like Triangle shipments, triangle trade, third-party shipments, and foreign-foreign shipments. The three countries involved in the process namely the country of origin, the country of destination, and the country where your business is setup are the reason why it is also known as triangle trade.

Why should you be taking advantage of cross trade?

  • You will be able to reduce the transit time significantly. Cutting off unnecessary stops along the transit path will definitely make an impact in the amount of time taken for the shipment to reach its destination. If the distance between the origin and destination is shorter than the country where your business is set up, then it only makes sense to conduct a cross trade.    
  • Creates opportunities to access a market that was previously considered to be impossible. If your shipments can’t cross between two countries due to any reason but if a third country that doesn’t have any such restriction with the destination country comes into play then this gives you access to that market.
  • If the transit time between the country of production and the country of destination is closer than shipping to the country of business and then to the destination, then it will actually bring the production closer to the destination through cross trade.
  • Costs associated with importing the products to the country of business, like freight costs, import duty, and taxes could be avoided, which will reduce the overall costs associated with the supply chain when you opt for cross trading.

Things you should know while conducting cross-trade

  • The goods will go through multiple loading and offloading and the more contact points involved the higher are the chances for them to get damaged. It is important to get insured to avoid such situations.
  • Get familiarized with the benefits of free trade agreements if they exist. When two or more countries come to an agreement to reduce the overall barriers to trade and investment then that is termed as free trade agreement. This could be reduced customs tariffs and customs formalities. The UAE has free trade access to over 40 countries, which includes the European Union, Mercosur member countries, most countries in the Middle East and North Africa, India, and EFTA countries.
  • Ask the forwarder to hide the details of the manufacturer from the buyer. This is to prevent the buyer from contacting the manufacturer and eliminate the seller altogether.
  • Always make sure to use the appropriate ‘Incoterms’. The International Trade Administration has created a set of 11 rules that specify the responsibilities of buyers and sellers. It explains who is accountable for paying and managing insurance, documentation, customs clearance, and other activities.

How Bonded Trucks & Free Zone Warehouses come into play in JAFZA?

  • There will be cases where companies might want to move their goods from one free zone to another free zone located in another GCC country. This is where bonded trucks come in handy. The goods would be sealed and transported from one free zone port to another, with less transit times.
  • When the goods need to be stored for a certain period, free zone warehouses are where it is stored. Since they are managed by forwarding professionals, goods are stored in ideal storage conditions along with proper inventory management.
  • Suppose the manufacturer only produces products that are low in volume and the customers are mainly based in the GCC, then they could be cross shipped to JAFZA and stored here until there’s a requirement. When it’s time to deliver to say Bahrain, the transit time is drastically reduced to under a week, which won’t be possible if the shipments are transported from China to Bahrain. You will be able to reach more audiences in the Middle East for a fraction of the warehousing costs through Three Lines Shipping.
  • In cases where you have unsold products still left in the warehouses of JAFZA, we’ll help you take them back to their origin without paying any duties.
  • The free zone has an open storage area of 250,000 m2 and 20,000 m2 of covered storage area. The warehousing solutions provided in JAFZA are cool storage, cold storage, dry warehouse, and Jebel Ali Hub Storage.
  • You will stay on track and reduce operational costs while getting access to new markets by assigning JAFZA as your centre of operations.

How can JAFZA be useful?

  • Industries such as logistics, manufacturing, and trading can find JAFZA to be very helpful. Closeness to major continents like Europe, Asia, and Africa, and provides major advantages for trade and other business activities. Tax incentives and customs clearance support services are some of them.
  • It has 24/7 trade connectivity to multiple destinations, which grants retail enterprises to gather and consolidate their shipments in one place and only move the required quantities when a requirement for sale arises.
  • It has 11 terminals and 100 berths across 25 Km of the quay (area surrounding a ship berth). This can drastically reduce port congestion.  
  • No duties to be paid, if the goods are moved from JAFZA to any other free zone facility.

Problems Associated with Transshipment and Cross Trade

  • Port congestion is one of the major causes of delays in transshipment. It is a situation that occurs when there are backlogs of ships waiting to load or offload cargo at a port. This can disrupt the normal flow of operations. Even during such situations, transshipment continues to be essential for most major economies.
  • Delays can also happen due to clearance procedures and documentation checks in customs.
  • When the product goes through multiple points of contact, higher are the chances for it to get damaged, which further results in insurance claims.
  • Multiple legs of transport reduce the visibility and control of the shipments as they will be getting shifted from one to another.

Why you should be choosing Three Lines Shipping for your Transshipping and Cross Trade requirements?

  • 23 years of experience handling cross-border shipments across the GCC.
  • Local market knowledge.
  • Clearance done for 100+ countries across the world.
  • End-to-end visibility for major legs of the transit for most services.
  • Customized route and transport combinations as per the client’s requirements.
  • Will be able to handle direct delivery through road, sea, and air.
  • Helps you to store your products within the freezone until a sale has to be made or return it back without paying any duty. This also increases faster access to neighbouring GCC countries.
  • Can help you out with immediate requirements for cross shipping and transshipping.
  • Will be able to assist you with shipping, dismantling, consolidating, and sending them to 5 more GCC free zones.

Conclusion

  • JAFZA is the largest free zone in Jebel Ali port, owned by DP World. The zone has generated over AED 53.7 billion in revenue in 2011 and has helped the retail industry.
  • Cross shipping is the process of moving goods from origin to destination by avoiding warehouses and distribution centers.
  • When goods are transferred between various vehicles during transit, then that is termed as Transshipping.
  • When goods are shipped between two countries, none of which is the country of the seller, then it is known as Cross Trading.
  • Bonded trucking and bonded warehouse helps in the transport and storage of goods from one free zone to another.
  • Logistics, manufacturing, and trading can vastly benefit from JAFZA.