Headquartered in U.S., Airlift USA Inc is a global logistics company offering customized supply chain management solutions to all industries. With a closely-knit network of major transportation carriers present globally, we render multi-modal shipping solutions across all continents. This blog is to share information about global supply chain management solutions.
Are you an
international trader struggling to understand when to use which INCOTERM?
Are you a new entrant
in the shipping world who just learned about the existence of this acronym, but
don't know what it means yet?
If the answer is yes,
then we have some good news for you! Today all those questions and doubts are
going to be put to rest.
Let's begin with
understandingwhat exactly are INCOTERMS.
International Commercial Terms refer to a set of predefined trade terms that
explain the roles and responsibilities of the buyer and the seller in an
international sale contract. They were first published by the International
Chamber of Commerce (ICC) in 1936 to reduce the confusion regarding the
obligations of both the seller and the buyer in the shipping process. By
clearly defining who is responsible for what and up to which point while
shipping freight, these definitions provide clarity to traders and help
facilitate the smooth functioning of the global supply chain.
Why is it important
to know about Incoterms?
Incoterms define how
the costs and risks associated with moving goods across borders will get
divided between both the parties. Failure to employ the right incoterm can
leave either the buyer or the seller with higher financial and legal
responsibilities in comparison to the other party. Not knowing who is
responsible to pay what duty can also result in seizure of goods and cause
unnecessary delays and fines. This can really affect your bottom line and also
render your business conduct as illegal or non-compliant with global trade
rules. To help avoid such circumstances, it's vital for both the parties to
have a thorough understanding of these terms before negotiating a contract.
So what exactly do
these Incoterms determine?
Who arranges and pays for
Who arranges and pays for
Who handles the export and
Terms of delivery for the
The point of transfer of
risks and costs from the seller to the buyer
It's important to
note that just because a party arranges for transport or insurance, doesn't
mean it also bears the risk. The point of transfer of risk from the seller
to the buyer differs from Incoterm to Incoterm.
THE CURRENT 11:
In order to keep up
with the changing landscape of international trade, ICC revises Incoterms once
every 10 years. Currently, Incoterms 2010 is the version that's in use.
Before that, Incoterms 2000 was being followed worldwide.
As per Incoterms
2010, there are 11 Incoterms available to help facilitate international trade.
They can be classified into two categories based on the mode of
Category A -
INCOTERMS FOR ANY MODE OR MODES OF TRANSPORT
Incoterms form a part of this category :
1. EXW - Ex Works
2. FCA - Free Carrier
3. DDP - Delivered
4. CPT - Carriage
5. CIP - Carriage and
6. DAT - Delivered At
7. DAP - Delivered At
Category B -
INCOTERMS ONLY FOR SEA/INLAND WATERWAYS
8. FAS - Free
9. FOB - Free On
10. CFR - Cost and
11. CIF - Cost,
Insurance & Freight
With this, you now
know what exactly are Incoterms, their significance and how to classify them.
Don't worry! We're
not winding up this topic here.
We'll be going over
each term individually and explain what it means in the next blog.
continued... In the last blog,
we tried understanding Incoterms as a concept. Now let's bring you up to speed
on what each of the 11 terms mean by categorizing them based on the mode of
transport. INCOTERMS FOR ANY
MODE/MODES OF TRANSPORT: 1. EXW (Ex-Works): The seller has to
only make the goods available at his premises / agreed location. From then on,
all risks and costs are borne by the buyer. 2. FCA (Free Carrier): The seller is
responsible for loading the goods, cleared for export, onto a buyer-nominated
carrier at the seller's premises/specified place.The delivery takes place once
the goods are loaded onto the carrier at the seller's premises or when the
loaded carrier arrives at the agreed location. Once delivered, all the risks
and costs get transferred to the buyer. 3. DDP (Delivered duty
paid): This is the exact
opposite of EXW. Here, the seller is responsible to deliver the goods from his
premises to the buyer's premises / agreed location. All the co…
So in the
last blog, we tried making sense of demurrage and detention. But why should an
exporter or an importer know about them? Can demurrage and detention really
hurt your bottom line?
is YES. With rates varying from country to country and charges being calculated
per day and per container, these penalties can blow up quickly and leave a dent
in your profits. In some cases, the charges run so high that the
shippers/importers are forced to abandon the cargo. To help you avoid facing
such circumstances, here are 6 tips that you can follow. 1. Plan in
advance: Time is
money literally in logistics, and it's vital you use it to your advantage. Plan
ahead always. By working out a mechanism to execute the loading and unloading
of your cargo, arranging for pick-up and return, informing third parties well
in advance etc., you can ensure smooth execution of all processes. Pre-planning
also wins you the time to focus on unexpected problems that might crop up,