10 January 2015
With the majority of suppliers of specialised industrial equipment being based overseas, Australian food and beverage companies regularly find themselves left with the decision to import this essential equipment.
There are a number of potentially costly risks involved in these ventures, so I decided to speak with a few colleagues about some recent and relevant situations our clients had found themselves in.
In one case, a client relocating equipment from overseas requested a door to door service, but in fact later discovered the shipping costs were excluded. The forwarding company used underhanded tactics to increase the contract sum for the relocation.
For another client, their overseas installers left site to return to their country for a cultural event, when they were meant to be commissioning their equipment. In the planning stage, the client had ensured the contract was clearly detailed to cover all risks and the supplier was obligated to complete the commissioning on time. In this case, the site works resumed and major delays, cost overruns and headaches were avoided.
Importing equipment can be a difficult task relying on the expertise of a number of specialists, particularly regarding currency exchange risks, customs etc.
From a project management perspective, there are several areas that need to be actively managed to maintain control of quality, time and cost. The following is an initial guide to these areas.
CONSIDERATIONS WHEN IMPORTING EQUIPMENT
Initially, you need to establish which building will accommodate and supply services to the new equipment. A general checklist can apply. The following areas should be considered during the design phase when importing equipment from overseas:
Freight forwarding and customs
Consider using professional companies to ensure timely passage and customs clearance. Ownership and insurance of the goods should be clearly defined and documented contractually for each transit stage. It is important to insure for machine value and additional delay and/or replacement costs. If these areas are handled poorly, it can result in costly time delays that will impact your project.
Delivery of overseas equipment can be delayed for a number of reasons and should not form part of the critical path. This will allow other site activities to continue, avoiding delays to the entire project.
The project schedule should also consider the installation and commissioning sequencing to expedite the overall installation time. Suppliers will want to fly in and fly out as quickly as possible, meaning the construction methods or sequence must be planned to make these specialists on-site installation time as fluid and efficient as possible.
Commissioning cannot always immediately follow installation, as work by others may still be in progress. Problems occur in production lines where one piece of equipment relies on the output of another, and therefore final commissioning and product validation cannot be completed.
In both cases, the overseas installers may need to return overseas and then come back to Australia to complete commissioning tasks. This causes disruption to the suppliers work flow and would be a costly exercise paying for twice the flights. This is not optimal, however if it is unavoidable, the supply contract must compel the installation staff to return to site according to the agreed price, schedule and formal sign-off procedure.
Unless there is a principal contractor with overall safety responsibility, the owner is responsible for managing the work of overseas suppliers and this is particularly important in relation to safety.
Often a supplier will provide an international supervisor with local labour and equipment required to complete the installation. This local labour and equipment is generally not included in the supplier’s quotations and is therefore an added cost. This must be considered in the planning and budget stage.
It is important to ensure that any work associated with the equipment requiring a trade licence is performed by relevant Australian companies.
To ensure reliable operation, the contract should allow for additional supervision time on site after the equipment is commissioned.
You should have access to, or the ability to change, computer programs once the supplier returns overseas.
To keep expensive down time to a minimum, ensure adequate supplies of parts and consumables are included with the overseas order. It is worth researching the long term costs and availability of crucial overseas parts. If a part is discontinued according to demand in its country of origin, it could cause costly disruption to your operations.
A visual inspection of the equipment should be carried out as soon as possible after it arrives to ensure there is no obvious transit damage. Delaying this inspection could delay the entire project, as damaged goods will take time to repair, and may even need to be returned to the country of origin.
Equipment packed in crates rather than containers will have substantial outer timber packaging. Removal of the packaging should be allocated to suitable skilled site staff to avoid costly damage to equipment. Containers should be unpacked quickly to avoid container demurrage costs.
As the timing of overseas deliveries is harder to control than equipment purchased locally, the site should be flexible. A lay down area should be set-aside for containers and equipment should be stored and assembled on-site prior to installation in the new building and may require cover and security.
Overseas installers must undergo General Induction Training before they can work on an Australian building site. Check with the supplier that installers speak English to the required level to allow for a smooth induction
Local site staff experienced in installing imported equipment will be able to head-off potential problems early and will save time and money. Don’t expect to use backpackers or even your own staff, who may lack skill in this area. Time, reliability and safety are paramount at this point of a project.
There are several payment options that exist to ensure both parties are contractually protected. Important items to consider are international currency fluctuations, title to equipment, insurance limit points and transport responsibilities. You should consider seeking professional advice from banks or other institutions early, to manage these risks.
Sometimes grants and import duty relief are available for importing equipment that is not available in Australia. Check with the freight forwarder or specialist consultant to see if your project is eligible. Free trade agreements and other schemes can save your project a lot of money.
When importing equipment for your project, consider using specialists — project management, customs, currency risks etc. Establish sound contracts to ensure the contractors and suppliers meet their financial, time and performance obligations.
Taking time to carefully design and plan for your new equipment will help you avoid the potential risks involved with importing and installing this equipment from overseas suppliers. Ensure you get what you ordered and most importantly get what you paid for.
About the author
Andrew Newby is the Business Development Director at Wiley and can be contacted on:
1300 385 988 or email firstname.lastname@example.org.
Importing machinery into Australia.
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