The Logistics of Managing Plant and Equipment Relocation Projects

 
Relocating entire industrial plants or their large-scale components poses a major logistical challenge. The physical logistics involved with moving the equipment are certainly not the only issues to overcome.  Here are some recommendations for investment recovery (IR) practitioners involved in projects of this kind.
 
Terms of Sale Irrelevant
Many companies prefer to sell equipment on an “ex works” basis (i.e., as is, where is). Others take  responsibility for delivering the equipment to a client, often overseas. And obviously, the first option is to attempt to transfer assets internally, sometimes internationally. Yet regardless of the terms of sale,
someone has to handle the logistics, and most often, that responsibility falls to the IR department of the company disposing of the equipment. What follows are some of the issues that must be dealt with in order to handle after-the-sale responsibilities.
 
Proper Identification is Critical
For large-scale plant relocation projects, one of the most important considerations is thorough marking and tagging of the equipment. This is vital for a number of reasons. First and foremost, eventually the plant or major equipment from the plant, must be reassembled and installed at another location. Marking and tagging equipment speeds up the process of putting the pieces of the plant reconstruction puzzle back together. But for international transportation of used plants and plant equipment, this process is also vital from a documentation standpoint.
 
• Detailed packing lists—Itemizing everything that is being shipped and in which containers these items are packed (including the weight and dimensions of each package) is almost always necessary in order to import the equipment. Without a good process for marking, tagging, and documenting equipment as it is dismantled, a bottleneck in the process can result.
 
• Tracking systems—Systems that allow access to shipment status, package numbers, container numbers, transport, and other details are also very helpful in that they provide visibility of the shipment status to those who need to know. Freight forwarders use these systems and also offer access to their customers.
 
• Bar coding—In some cases, bar-coding systems can provide a very convenient and detailed method for tagging. These systems are common for food process equipment that will be installed mostly or completely indoors. Bar coding, while very helpful, can be less effective for outdoor equipment, because the bar codes can become unreadable due to exposure to the elements.
 
Coordination of resources
For large-scale plant relocation projects, there are generally a number of contractors or specialists involved, such as a dismantlement contractor,a packing contractor and an international freight forwarder. The freight forwarder would generally engage trucks, ships, stevedores, and others involved in the logistics process. In some cases, the freight forwarder may also contract for the export packing process as well. Additionally, the export packing company may even subcontract the freight forwarder, or the dismantlement contractor may serve as the prime contractor who subcontracts all other necessary services.
 
With several different entities involved in the process, it is very important that there be a strong working relationship between the dismantlement contractor,the export packer, and the freight forwarder. This is particularly important when documenting and tagging the equipment as it is being dismantled. This needs to be done in a way that results in a packing list that is both detailed and accurate, as well as providing for equipment that is clearly tagged for the reconstruction effort.

Preparation for export
For international relocation projects, export preparation is another key part of the process. Used equipment that will be transported on trucks, loaded on ships, and handled multiple times must be properly prepared. This does not always mean crating everything. On the contrary, a lot of equipment can be skidded or palletized, and loaded in containers. But smaller equipment, parts, and components should generally be export packed. Electrical equipment, such as motor and distribution control centers, should generally be vacuum packed so as to avoid damage from humidity and “sweating,” which can result when ships pass through various climates.
 
Large tanks and vessels must be placed on properly constructed shipping saddles to provide stability during the transport process. In some cases, shrink-wrapping equipment may also be advisable. Export packing companies and freight forwarders can generally provide very good guidance regarding the extent to which packing is required. And while they clearly stand to benefit from more packing, given the competitive nature of packing and shipping used plant equipment, they will generally advise using just the right level of packing—not too much, and not too little.
 
Field Prep
Often Preferable Depending upon the scale of the project and the volume of equipment to be transported, it may be best to have export packing and other preparation work done in the field at the plant site, space permitting. Not only is this often necessary, but it usually results in lower overall logistics costs. Smaller boxes for instruments and other small parts can often be prefabricated and delivered to the dismantlement jobsite,but larger equipment is often packed to specifications at the jobsite itself.
 
Pros and Cons of Carrier-Owned Shipping Containers
With equipment often being consolidated in a lay-down yard during the dismantlement and packing process, and again during the re-construction project, many companies involved in plant relocation projects elect to buy shipping containers instead of using those provided by the shipping lines as part of the container transport service. There are a few reasons for this choice. Namely, containers are provided free of charge by container shipping companies—but only for a limited amount of time, generally about 7 to 10 days prior to loading on board, and another 7 to 10 days after discharge from the ship at the destination port.
 
Often, the logistics process simply doesn’t permit the time needed to use “carrier-owned”containers. Further, due to the somewhat complex process of importing an entire plant or part of a plant, it is more convenient to have all equipment arrive on one ship. If there is over-sized equipment to be transported on conventional ships (as opposed to container carriers), most such ships do not provide containers. Another advantage to buying used containers is that equipment can be stored in them at the jobsite until needed. Sometimes, in cases where all of the equipment does not need to arrive on the same ship, a combination of “shipper owned”(i.e., used, purchased containers) and “carrier-owned”containers (i.e., provided by the container shipping companies) can be used.
 
Lifting and Handling
Another important factor to consider is how equipment will be handled. New equipment generally arrives at plants properly packaged and with detailed lifting instructions. But inplant relocation projects, quite often, the lifting and handling documentation is no longer available. For large tanks and vessels, it is imperative to ensure that lifting locations be marked so that there is no guesswork in the placement of slings. Crane weights should be noted while equipment is dismantled in order to allow for the proper documentation of weights for safety purposes, as well as for trucking permits, and to ensure that the proper cranes are used. It is important not to rely solely upon the original engineering documents in regards to weights. Tanks and vessels are often field insulated, and the additional insulation, as well as other added equipment, can have a significant impact on the overall weights.
 
Proper Cleaning
It is also vital to ensure that all equipment—especially food and chemical/petro-chemical process equipment—is properly cleaned as part of the dismantlement process. Leaking equipment, especially at a port or on board a ship, can result in major headaches for all parties involved.
 
Export Considerations: Learn the rules!
Some countries, notably China, limit the import of used equipment. In the case of China, a Chinese government-appointed inspection agency is tasked with inspecting and approving equipment for import to China. This is done before cargo is shipped in order to avoid major costs and other issues. In the past, inspectors had to be flown from China, with travel costs being paid by the company responsible for exporting the equipment. Currently, there is a U.S.-based inspection agency(although travel costs must still be paid). Any company responsible for importing equipment into China must educate itself about this process, both on the Chinese side and on the North American side.
 
Export Documentation
If you’re not a fan of red tape, then you should stay away from exporting equipment! It is essential that proper documentation—including a proper packing list, itemizing all parts and components in each package or skid, along with the weights and dimensions of those skids—be prepared. It is also important that a commercial invoice be prepared. The extent to which this invoice must be detailed varies in accordance with each project and the amount of equipment being shipped. But because each item being shipped could have a separate tariff item number, the commercial invoice must typically be fairly detailed. Similarly, for U.S. or Canadian export customs clearance, the details must be reported. This may often involve estimating equipment values or using the values advised by an appraiser. A “lump sum” invoice for a large volume of different kinds of plant equipment is almost never acceptable.
 
A U.S. or Canadian company selling plant equipment on an “ex works” basis(i.e., as is, where is) is still responsible for compliance with U.S. and Canadian export regulations, unless it is selling to a U.S. or Canadian company,which, in turn, is selling the equipment overseas. In the latter case, the company with a fiduciary interest in the transaction with an overseas company would be considered the“principal party of interest.” Certain equipment made with nickel alloys  or other equipment that could be considered “dual use” (military/industrial)applications may be restricted for export. As such, a validated license may be required from the proper governmental agency. All equipment being exported must be classified in accordance with U.S. and Canadian export regulations or serious penalties,including potential incarceration,can result.
 
That said, classifying the equipment properly is usually not difficult.If the sale of such assets will be paid through a Letter of Credit (L/C), it is very important that someone with a good knowledge of the logistics process, such as a freight forwarder,review the L/C. Often, initial drafts of L/Cs are written without regard to the logistics process and can include many restrictive provisions, such as the assignment of specific ports(when the flexibility of using various ports in the origin and destination country may allow for better cost control) or the restriction of partial shipments. A freight forwarder can assist in reviewing drafts of L/Cs
 
Conclusion
The logistics of major plant relocation projects can be particularly complicated, especially if equipment is being exported overseas. To help in the smooth completion of these projects, many of the dismantlement,export packing, and logistics contractors who are Associate members of the Investment Recovery Association,can provide a great deal of guidance.Companies that are considering or planning such projects can learn from the experience of these contractors. Furthermore, these contractors are typically eager to provide general guidance and to bid on the work.
 
Reprinted from ASSET 2.0, the Investment Recovery Business Journal, Vol. 5, 2009

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