A
wide range of services are essential to the smooth functioning
of international trade. International freight forwarders are the
intermediaries between sellers (exporters) and air, ocean, truck
and rail carriers. Freight forwarders make all the necessary
arrangements for these modes of transport. They coordinate the
transportation, any needed warehousing, finance, and insurance.
A freight forwarder can also clear goods for import into the US
if the company is a licensed Customhouse Broker. Forwarders are
licensed to handle international ocean shipments by the Federal
Maritime Commission, and by the International Air Transport
Association for international airfreight.
In
recent years, the forwarding industry has incorporated revenue
management and cost control systems, electronic data interface
(EDI) systems, and on-site and overseas services as clients’
needs have increased. Many forwarders have been at the forefront
of the technological advances in computer telecommunications and
shipping. Other major developments include the growth of
information and liability issues, global competition, major
market shifts, intermodalism, and professional certification.
A
seller must build a strong relationship with its forwarder by
providing information quickly, allowing adequate time for
shipments to be processed, paying invoices quickly, and,
establishing one person with the forwarder’s organization to
handle emergency situations. In order to avoid delays in
shipping, consider providing your forwarder a supply of blank
company stationery, commercial invoices and packing lists in
case last-minute changes to your original documents are
required. Discuss the legal implications with your attorney
before doing this.
With
power of attorney, a forwarder acts as your agent. The forwarder
prepares (or assists you in preparing) the documents involved in
a shipment to ensure they are complete, accurate, and in
compliance with both US and import destination legal
requirements.
At
your request, the forwarder will also distribute all documents
and will submit the entire package of documents to your bank to
expedite payment. They will also advise you of the foreign
marking and labeling that may be required for shipping
containers.
The
services a forwarder offer must include:
-
Logistic options to
destination
-
‘Delivered’ services to
exporters
-
Letter of credit
services
-
Electronic exchange of
documents
-
Internet tracking for
shippers, consignees and service providers
-
Compliance reviews
-
Cost analysis
-
Hazardous materials
audits
-
Marine insurance
-
Logistics options based
on customer goals
-
A single source for
knowledge about the export process
Compliance is a growing management issue. Government audits,
fines, and penalties are alerting exporters to the liabilities
involved in international transportation. Freight forwarders are
well-positioned to act as the exporter compliance officer. The
expertise available from reputable international freight
forwarders is invaluable to the success of an exporter’s
international trade business.
Freight forwarders will continue to expand their
services to manage the requirements of numerous governmental
entities that control various aspects of the export process. For
example, the US Department of Transportation controls transport
of hazardous material and the US Department of Commerce controls
the sale of sensitive technology to undesirable parties in
foreign destinations.
Most freight forwarders will find it necessary to encourage
exporters to interface their document preparation with the
forwarder’s automated programs. Internet tracking and the
ability to download shipment data will be a necessity for many
exporters. Duplicate keystroking is becoming an increasingly
significant cost issue. Both exporters’ and forwarders’ staff
will little time to devote to re-keying data.
Automated Export System (AES) is a central point through which
export shipping data that is required by multiple agencies can
be filed electronically with Customs, using Electronic Data
Interchange (EDI). Errors can be detected and corrected at the
time of filing. AES is a nationwide system and is operational at
all ports, for all methods of transportation. AES assures
compliance to export laws, improves the accuracy of trade
statistics and reduces duplication of reporting to numerous
agencies.
- The forwarder makes the
shipping arrangements and transmits the export data using AES.
- AES system validates the
data against editing tables and government agency requirement
files.
- A confirmation or error
message is generated and sent to your forwarder.
- Corrections as needed are
transmitted back to AES.
A
particular benefit to exporters is the increased reliability of
US export data as a research tool for information about foreign
markets.
Automatic electronic document sharing between the exporter and
forwarder will become increasingly important to both as they
seek to streamline the export process and manage export costs.
AES
is a joint venture between US Customs, the Bureau of Census
Foreign Trade Division, the Bureau of Export Administration, the
Office of Defense Trade Controls, other federal agencies, and
the export community.

As your
agent, a full service forwarder should be able to carry out the
following functions, to help keep your costs, volume of
paperwork and staff involvement to a minimum:
-
Ocean freight:
Supervise ocean shipments from your
facility to the foreign port of import and, if requested by
you or the importer, on to the customer’s location in the
export market.
-
Airfreight:
Expedite regular (and emergency) air
shipments (when your customer requests immediate delivery of
critically-needed spare parts).
-
Consolidation:
Combine several sellers’ goods into
a larger container to reduce your shipping costs. They should
be able to consolidate without unnecessary delays.
-
Banking:
Prepare and present documents to your bank
for collection and deposit to your account.
Importing: It may be
advisable to work with a forwarder who is also a licensed
Customhouse Broker. You may decide to import foreign goods as
new additions to your own product line, as components in your
current products, or in payment for some foreign orders (Countertrade).
Credit terms: A
forwarder may ask you to pay within seven days after receipt of
their invoice. They may be on seven to ten day terms with the
carriers they contract with for shipment of your goods. Clarify
your payment terms at the very beginning of your relationship.
Operating hours: Ocean
freight shipments: forwarder need only be open during normal
business hours. International cargo flights: usually depart in
the evenings- the forwarder should have someone available
overnight.
Local, National, International:
You may frequently need to deliver
last-minute documents, forms and merchandise in emergency
situations. Using a forwarder with an office near your facility
will reduce costs and time lost in travel, faxes and telephone
calls.
A
forwarder with other offices (branches or affiliates) in the US
is important for securing the most economical freight rates and
for tracing delayed or misrouted shipments.
In
emergency situations, it is very useful to have a forwarder with
offices or affiliations in foreign markets. When needed,
shipments can be traced quicker through the original forwarders,
without involving third parties.
References: Contact
references to learn how routine, non-routine and emergency
shipments are handled. In addition to the references provided by
the forwarder, talk to other service providers such
international bankers, who also have working relationships with
various forwarders through their export clients.
Choose two or three forwarders to meet with personally and
select one to work with. File information on the other
forwarders that rated highly. If your initial forwarder does not
meet expectations, you will have a ready list of screened
alternates for review.
Modes Of Transportation

|
MODES OF TRANSPORTATION |
PRO
|
CON
|
|
COURIER SERVICES
|
DHL, UPS offer efficient
service for shipments generally under 400 lbs.
From major trade lanes.
|
Extremely high cost. Some
evidence of poor Customs compliance. |
|
AIR FREIGHT
DIRECT |
Book directly with airline.
Priority transit.
Quick transit. |
Expensive particularly at
“book” rates. |
|
AIRFREIGHT CONSOLIDATION
|
Book with forwarder who may
match your freight with others. Transit time variable. |
Cost is significant but much
less than courier and “book’” rates. Some risk of “bumping.” |
|
AIRFREIGHT
‘EMERY’ |
‘Emery’ type service that
allows you to choose service level. More control over costs
and still preserve most of the benefits of airfreight. |
Significant cost savings and
higher probability of “bumping.” |
|
AIRFREIGHT/OCEAN COMBINATION
|
Somewhat popular with
Chinese freight.
Air to Korea; Ocean into US |
Considerable cost savings
but longer lead-time. Be sure that you control the service
provider. |
|
OCEAN FREIGHT
DIRECT |
The default choice for most
products. |
Inventory management must
account for shipping lead times. Advantageous only if you
are moving a container. |
|
OCEAN FREIGHT CONSOLIDATION |
Similar to airfreight but
with ocean transit, |
Wide range of services
available from incompetent to excessively expensive.
Interaction by freight forwarder /broker is essential.
|
|
OCEAN FREIGHT TRANSLOAD* |
Cargo is laden on board one
vessel, which takes the goods to another port for loading
onto a vessel bound for named destination. |
Longer transit time.
Increased handling = higher risk of loss. Sometimes
unavoidable. |
|
OCEAN FREIGHT
LAND BRIDGE
|
Ocean and rail combined. |
Periodic rail congestion. |
|
OCEAN FREIGHT
‘ALL WATER’
|
Ocean to closest port. Less
expensive where available. |
Relatively slow. |
|
TRUCK |
Mexico, Canada |
Wide range of competencies. |
Basic Shipping Documents
Bill of Lading
A document
signed by the captain, authorized agents or owner of a vessel as
a contract for the transportation of merchandise from a named
point or points to some other point or points of destination. It
is both a receipt and a contract for delivery of merchandise.
Air
Waybill 
A receipt and contract signed by an airline
company or its authorized agent, signing as the carrier for the
transport of merchandise to a specific place of destination. By
its nature an Air Waybill is not a negotiable instrument. It is
a common requirement that the Air Waybill show the flight number
and date.

Certificate of Origin
A signed
statement sometimes required in connection with shipments of
merchandise from one country to another for tariff purposes or
simply for confirmation of the origin of the goods. Usually it
is required that such a statement be made by a specific
independent party like a Chamber of Commerce. For some countries
the signature of the Consul of the importing nation may also be
required.
The NAFTA Certificate of Origin is
required for qualifying products traded in the NAFTA territories
(US, Canada, Mexico) to certify the goods qualify for
preferential tariff treatment accorded by the North American
Free Trade Agreement. Only importers who possess a valid NAFTA
Certificate of Origin may claim preferential tariff treatment
for originating goods.

Shipper’s Export
Declaration
A statement
prepared for the US Government on a specific form, used for
statistical purposes, which lists the merchandise being exported
from the US.
Transfer Of Title
And Risk Of Loss
Title or
Ownership of Goods
The
ownership of goods (title transfer) passes from the seller to
the buyer at some point in every transaction. When title
transfers, risk of loss or damage to the goods is also
transferred. We would advise every shipper to discuss this
important issue with his or her attorney.
In
many contracts for the sale of goods the parties involved do not
express their intention as to when, how or under what conditions
title to the goods is to be transferred. Title to the goods may
not even be discussed in the negotiations. It is implicit or
taken for granted. The parties are more interested in reaching
agreement on matters such as price, quantity, quality,
warranties, delivery schedule credit terms, discounts, and other
important features. Seldom does the abstract concept of title
enter into discussions.
Transfer of title to goods which have been identified to the
contract of sale passes from the seller to the buyer in any
manner and on any conditions agreed upon by the parties to the
contract of sale.
The rule is that
title to the goods passes when the parties intend it to pass.
Where parties have no explicit agreement as to the transfer of
title, then title passes to the buyer:
-
At the time and place at
which the seller completed his performance with reference to
delivery of the goods.
-
At the time and place of
shipment, if the contract authorizes shipment but does not
require the seller to deliver the goods to the buyer at
destination.
-
Upon tender of the goods
to the buyer at destination, if the contract requires delivery
at destination.
-
Upon delivery of a
document of title where the contract calls for delivery of
such document without moving the goods.
-
At the time and place of
contracting where the goods at the time are identified to the
contract, no documents are to be delivered, and delivery is to
be made without moving the goods.
-
Title can only be
transferred on existing, specific, identified goods. Title
cannot pass under a contract of sale prior to their
identification.
After
formation of the contact of sale, the seller obtains,
manufactures, prepares or selects goods with which to fulfill
his obligation under the contract. Once the goods have been
identified, relative to the contract, title to the goods may
pass to the buyer. Title need not pass to the buyer at this
point in the transaction! However, once the goods have been
identified to the contract of sale, the buyer assumes a
special property interest in the goods.
-
This special property gives the buyer an insurable interest
in them, even though, in fact, they may not conform to the
contract of sale.
-
Identification
of the goods to the contract does not shift the risk of loss.
-
After identification, the seller may under the contract have
duties to perform with respect to the goods.
Risk Of Loss
According to the general rule, the risk of loss or damage to
goods is borne by the person who is the owner at the time of the
loss or damage. This is true in every case.
-
Even
where the buyer may have assumed risk of loss, the holder of
title to the goods still bears risk of loss.
-
There is nothing to prevent both the buyer and seller at the
same time carrying insurance on goods in which they both have
a property interest (title, security interest or special
property).
Risk
of loss, as the term is used in the law of sales, means
placement of the ultimate loss upon the buyer or the seller. If
placed upon the buyer, he is under a duty to pay the price for
lost or damaged goods even though he never received them or
became owner of them. If placed upon the seller, he has no right
to recover the purchase price from the buyer.
There
are specific rules that impose risk of loss upon the buyer or
the seller irrespective of title or ownership of the goods:
Agreement of the parties.
Delivery to a carrier.
-
If
the contract does not require the seller to deliver the goods
at a particular destination, risk of loss passes to the buyer
upon delivery of the goods to the carrier. If the seller is
required to deliver them at a particular destination, risk of
loss passes to the buyer at destination upon tender even
though the goods are in the possession of the carrier.
Goods and possession of bailee
(warehouseman) to be delivered without being moved.
-
Where the goods at the time of the contract are held by a
bailee and are to be delivered without being moved, the risk
of loss passes to the buyer on his receipt of a negotiable
document of title covering the goods or receipt of a
non-negotiable document of title or other written direction to
deliver the goods unless the buyer reasonably objects.
Goods not to be shipped by
carrier.
-
If
they are in the possession of the seller, buyer or other
bailee, if they are in the possession of the third party
bailees, the contract may provide for delivery to the buyer
either without moving the goods or by moving them.
Transfer of title is essential to a sale of goods. Transfer
of title is not essential to the imposition of risk of loss to
the goods.
Risk
of loss may follow ownership of the goods but this is not
necessarily so. Risk of loss may exist independently of
ownership of the goods.
A
determination of whether title to goods has been transferred is
important with respect to liability for taxes, duties, inventory
management and it’s effect on the balance sheet.
There
are many costs to consider that
may or may not apply to a particular shipment. To a great
extent, most of these costs can be ascertained. Some cannot be
anticipated. Others might occur and may or may not be within
your ability to control. Expenses might change in response to
changes in fundamental factors such as the price of oil,
political changes, labor strikes, or natural disasters. Most of
these cost factors can affect any shipment, domestic or
international. But, the cost
factor most effecting the international shipment is that it must
travel longer distances, over a greater period of time, and
across international borders. This increases the probability of
an unfavorable event occurring that will adversely affect
customer service levels on an export shipment or, cost of goods
sold for an imported product.
Some
you will see on every shipment (ocean freight for goods shipped
by ocean). Others may never appear, such as detention.
Cost Factor Analysis
Check List
|
COSTS*
|
Who pays? Importer
or Exporter?
|
|
Cost of Letter of Credit
|
A |
X
|
|
Cost of the product |
A |
X |
|
Packing and loading |
S |
X |
|
Delivery from Factory door
to Port of Lading |
S |
X |
|
Ocean Freight, Air
Freight, Truck |
S |
X |
|
Terminal Transfer fees |
S |
X |
|
Container restriction |
S |
X |
|
Inland transportation from
Port of Unlading to Customs clearance point
|
S |
X |
|
Customs examination
charges |
T |
X |
|
Local cartage to Customs
exam site |
S |
X |
|
Customhouse clearance fees
|
T |
X |
|
Bond premiums
|
A |
X |
|
Marine Insurance
|
A |
X |
|
Duty |
A |
X |
|
Special duties |
A |
X |
|
Merchandise processing
Fees |
A |
X |
|
Harbor Maintenance Fees |
A |
X |
|
Delivery costs to
destination |
S |
X |
|
Credit Insurance |
A |
X |
|
VAT (Value added Tax) |
A |
X |
|
Excise Taxes |
A |
X |
|
Permits |
T |
X |
|
Detention
|
T |
X |
|
Terminal fees
|
T |
X |
|
Handling charges
|
T |
X |
|
Document Transfer fees |
T |
X |
*T(transactional)
S (shipment) A (ad valorum)
Who Pays These Fees?
It is
the exporter who can guide the negotiations to determine which
costs are paid by the exporter and which are paid by the
importer.
The
fees might be divided into three subgroups:
Costs associated with the purchase of the goods. The shipment may be 1
cubic meter of imported goods or 20 containers. Transactional
costs are relatively inflexible as to the size of the shipment.
For instance, our service fees would remain about the same
(small increases might result from multiple duty classifications
or delivery orders) whether the shipment was a single container
or several dozen containers. Other costs that are transactional
in nature are: terminal fees, handling charges, document
transfer fees, and, most importantly, the cost of the product.
Costs associated
with the size or volume of the cargo. They might have some
elements of a transactional cost or might be more of an ad
valorum cost. They tend to be associated with the volume of
cargo being moved. An example of a shipment cost is the ocean
freight. If you are moving a container of goods, there is a
charge for moving the container. It is irrelevant as to whether
the container is filled to it’s ceiling with goods or that the
goods are set on the floor.
Costs that are unrelated
to the physical size of the import shipment but rather to its
Customs value. Customhouse Brokers call Customs value the
entered value. Duty, merchandise maintenance and harbor
maintenance fees are all based on the entered value. Marine
insurance is assessed on entered value plus ocean freight and
duty. To a certain extent, the letter of credit costs are also
associated with the value of the cargo rather than a
transactional cost.
Incoterms 2000
pt. 1
The Incoterms are standardized
international terms for quoting prices, published by the
International Chamber of Commerce. The most familiar terms are
FOB, CFR and CIF. However, even these are sometimes misused and
there are may be others that should be specified in particular
situations. Confusion and disagreement often result from
incorrect references to Incoterms.
The
13 Incoterms are divided into four categories. Categories are
defined as to where the seller makes the goods available to the
buyer. For each successive Incoterm, risk and costs shift
away from the seller, to the buyer.
|
Group E
Departure |
EXW |
Ex Works |
|
Group F
Main
Carriage Unpaid |
FCA
FAS
FOB |
Free Carrier
Free
Alongside Ship
Free On
Board |
|
Group C
Main
Carriage Paid |
CFR
CIF
CPT
CIP |
Cost and
Freight
Cost,
Insurance and Freight
Carriage
Paid To
Carriage and
Insurance Paid To |
|
Group D
Arrival |
DAF
DES
DEQ
DDU
DDP |
Delivered At
Frontier
Delivered Ex
Ship
Delivered Ex
Quay
Delivered
Duty Unpaid
Delivered
Duty Paid |
Applicable for ocean transport only

Importing -The Role Of The Customhouse Broker

The customhouse broker is
a vital link in the clearance of merchandise entering the United
States. The customhouse broker is a professional advisor to
importers through his or her knowledge of the manners and
procedures for entering merchandise. The broker is uniquely
qualified to handle the practical aspects of bringing commercial
shipments into the US. More than 90 percent of all shipments are
handled by a customhouse broker on behalf of importers.
The customhouse broker is
licensed by the United States government. A broker acts as the
importer's agent in his or her business dealings with Customs.
Except for the importer himself, the customhouse broker is the
only party authorized by law to transact Customs business with
regard to the entry and clearance of goods.
The broker is frequently the
importer's only point of contact with the US Customs Service. A
broker helps the importer understand his critical responsibility
to Customs in matters of proper valuation and duty
classification of his imported goods. The broker strives to
establish a partnership with the importer in all matters
concerning their imports. Because of their continuous
interaction with the US Customs Service, brokers are often able
to prevent importer problems before they develop and, should
they develop, assist in their resolution.
Important services offered by
brokers include advice on and assistance with:
-
the technical requirements of
importing,
-
preparing and filing entry
documents,
-
obtaining the necessary bonds,
-
depositing US import duties,
-
securing release of goods,
-
arranging delivery to the
importer's premises or warehouse,
-
and, meeting the burden of
informed compliance.
Customhouse brokers play a vital role in facilitating the entry,
clearance and movement of import cargo. There are over 200 laws
that US Customs must implement and enforce. Experienced
customhouse brokers constitute a valuable resource for Customs
in their efforts to facilitate trade.
The work of customhouse brokerage is only a portion of the
service that can be provided to an importer. Brokers can also
offer:
-
overseas consolidations,
-
ocean and airfreight routing at
competitive prices,
-
marine insurance,
-
domestic routings,
-
auditing of import processes,
-
unused merchandise drawback,
-
foreign trade zone entries,
-
and, consultations and other
important services that many importers require.
Importer Self-Audit Review

Your History
Classification
- Review samples of your
imported merchandise and compare invoice descriptions to
samples
- How do you classify the
imported articles for duty purposes?
- Have you obtained binding
rulings or other guidance from attorney, customs or other
customs consultant?
- How is information
relayed to broker?
- Are any goods being
entered in conflict with advice received from customs?
- Beginning with the
countries of export, have you determined any duty preference
for your product?
- Are imported goods
subject to quota?
- Who makes arrangements
for obtaining quota?
- If textiles, how do you
verify country of origin and insure against transshipments?
- Is merchandise subject to
anti-dumping or countervailing duty investigation?
Marking
- Have you determined the
suitability of country of origin markings?
- Have you received a
marking notice, ruling or advice from customs?
- Does you resell the
merchandise in imported condition or do you manufacture and/or
repack it?
- Is the merchandise
properly marked at time of resale?
- Is more than one country
involved in production? If so, what is done where?
Valuation
- Are assists of any kind
provided (i.e R & D, molds, tools, dies, machines, material,
production drawings)?
- Does the cost appear on
invoices?
- How is the value
derived and does the cost include transportation?
- Do you pay any royalties
(for licensing, etc.)?
- On imported goods?
- To whom and for what?
- Are there written
agreements and are payments disclosed to customs?
- Do you work with an
overseas office or are “buying agents” employed?
- What are their duties?
- How are they
compensated?
- Are there written
agreements and have copies been files with customs?
- Are agents related to
the vendors?
- Is the merchandise
purchased at “arm’s length” (related or unrelated)?
- Do you act as a buyer
or agent of the seller?
- Are any goods shipped
in “consignment”?
- Are any separate
payments, over and above invoice price, remitted to the seller
or a third party at any time?
- How are these
remittances disclosed to customs?
- Is the merchandise
purchased from a “middleman”?
- Is it being entered at
the proper price?
- Are any invoice prices
reduced by reason of credits due from the seller?
- Are the terms of purchase
clearly reflected on the invoice?

Record Keeping
- Are you aware of customs’
record keeping requirements?
- Are records computerized?
- Is there a company import
manual?
- Who, how and where does
the importer maintain its import records?
- What coordination takes
place between the import (Customs) department and the
purchasing, accounting and traffic departments, relating to
verification of invoice details?
- Is there an in-house
“post entry” review process?
- If goods subject to
textile quota, who tracks it and verifies that proper visa
obtained?
- Who maintains any records
required under the “(a)(1)(a)” list? How long are they
retained?
- Is importer aware of
customs’ audit programs and the files, which will be reviewed?
Drawback
- Do you export any
imported merchandise in unused or manufactured condition? Are
claims being filed?
- Are you aware aware of
record keeping requirements?
Other agency requirements
- Are other government
agencies involved? (if so, review data, which must be
supplied to other agencies.)
- Is merchandise subject to
dumping or CVD investigation?
- Is importation subject to
licensing?
- Is merchandise subject to
any quota requirements?
- Is merchandise subject to
any intellectual property rights (IRP)?
- Are the rights owned by
importer and/or are they registered with customs?
Other

- Does company employ
customs counsel?
- Does company employ a
customhouse broker?
- Review bond requirements.
- How do you maintain
granted powers of attorney?
- Have you carefully read
the terms and conditions under which your broker works with
you?
-
Advantages of paying duties though ACH;
- What process do you have
in place to notify the broker of changes relating to
importations.
Incoterms 2000
pt.2
(EXW) EX
WORKS _______________ (named place)
The seller must:
1. Make the goods available for the buyer at the seller’s
premises packaged for normal shipment.
2. Notify the buyer of the time and place of the goods’
availability and provide a commercial invoice.
3. Be responsible (assume all risks) for the goods until the
buyer picks them up.
4. At buyer’s request, help with any aspect of exporting from
the US and importing into the buyer’s country at buyer’s
expense.
The buyer must:
1. Clear the goods for export, pay for the goods, pick up
the goods from the seller’s premises at the time and place
designated and move the goods to destination at the buyer’s
expense.
2. Be responsible (assume all risks) for the goods from the
time they are picked up.
3. Pay for any pre-shipment inspection.
The buyer and seller should:
1. Agree that the seller will load the goods onto the
buyer’s conveyance. In this case the better term to use is FCA.
2. Avoid using this term.
NOTE: WHO IS THE EXPORTER?
It is very important to note that, even though this Incoterm
places the burden of “clearing the goods for export” on the
buyer, our U.S. Government has stated that it will make the
seller responsible for the information reported on the Shippers
Export Declaration.
(FCA)
FREE CARRIER ______________ (named place) (Use on any transport
mode.)
The seller must:
1. Clear the goods for export.
2. Deliver the goods to the carrier nominated by the buyer and
at the agreed time and place, and bear all risks for the goods
up to that point.
3. Never be required to unload.
4. Provide a commercial invoice and proof of delivery and
necessary information for the buyer to insure the shipment.
5. Provide export license and/or other export formalities, if
required, and pay all costs thereof.
6. Provide any documents at buyer’s expense required to enter
the importing country or to transit any country.
The buyer must:
1. Pay for the goods.
2. Provide and pay for import customs formalities, duties,
taxes, etc., as well as those in #6 above.
3. Provide for the carrier at the agreed time and place, and
bear all risks for the goods after that point..
4. Pay for any pre-shipment inspection, unless required by the
exporting country.
(FAS) FREE ALONGSIDE SHIP ___________ (named port of
shipment) (water transit only)
The seller must:
1. Clear the goods for export. (This is exactly opposite
of Incoterms 1990.)
2. Deliver the goods to shipside at the named port at the
agreed time.
3. Provide export license and/or other export formalities, if
required, and pay all costs thereof.
4. Give buyer sufficient notice of delivery and proof of
delivery and commercial invoice.
The buyer must:
1. Pay for the goods and any import duties, taxes, etc., as
well as formalities in import country.
2. Provide for the ship at the named port with sufficient
notice to the seller to make delivery.
3. Pay for any pre-shipment inspection, unless required by the
exporting country.
NOTE: If buyer and seller persist in using this term,
they should agree to a transport document other than a clean on
board BOL.
(FOB) FREE ON BOARD ____________ (named port of shipment) (water
transit only) (If the
ship’s rail serves no purpose, as in roll-on/roll-off or
container shipments, FCA should be used.
The seller must:
1. Clear the goods for export and pay for any export
license, formalities, duties, taxes, etc.
2. Deliver the goods over the ship’s rail on board the vessel
and bear all risks to that point.
3. Provide commercial invoice and any export formalities, such
as export license, if required.
4. Provide normal packaging for the trade, sufficient notice of
delivery and sufficient information for insurance and provide
proof of delivery.
The buyer must:
1. Pay for the goods and take delivery of and risks for the
goods as in number 2 above.
2. Arrange for the ship, arrange for and pay for any import
formalities, duties, taxes, transit etc.
3. Give seller sufficient notice for delivery to ship and pay
any pre-shipment inspection, unless required by exporting
country.
(CFR) COST AND FREIGHT _________ (named port of destination)
(water transit only)
(If the ship’s rail serves no purpose, (roll-on/roll-off
or container shipments) CPT should be used.
The seller must:
1. Clear the goods for export and pay for any export
license, formalities, duties, taxes, etc.
2. Provide commercial invoice and any export formalities, such
as export license, if required.
3. Deliver the goods over the ship’s rail ON BOARD THE VESSEL
and contract for and pay freight to and unloading at port of
destination, and bear all risks to ON BOARD THE VESSEL.
4. Provide normal packaging for the trade, sufficient notice of
delivery, sufficient information for insurance and proof of
delivery.
The buyer must:
1. Pay for the goods and take delivery at ON BOARD VESSEL
and receive the goods from the carrier at the port of
destination.
2. Arrange for and pay for any import formalities, duties,
taxes, transit and movement from the ship to final destination.
3. Assume all risks from the ON BOARD VESSEL point at port of
shipment.
4. Pay for pre-shipment inspection, except when required by the
exporting country.
(CIF)
COST INSURANCE AND FREIGHT ___________ (named port of
destination) (water transport only)
(If the ship’s rail serves no purpose, CIP should be used
instead of CIF.)
The seller must:
1. Perform all functions as stated in (CFR) COST AND
FREIGHT above.
2. Provide and pay for insurance coverage for the buyer.
The buyer must:
1. Perform all functions as stated in (CFR) COST AND
FREIGHT above.
(CPT)
CARRIAGE PAID TO ________ (named place of destination) (any mode of
transport)
The seller must:
1. Perform all functions in items #1, 2 and 4 as stated in
(CFR) COST AND FREIGHT above.
2. Deliver the goods to the carrier with whom the seller
contracted to deliver the goods to the named place of
destination.
If more than one carrier is involved, the seller must
deliver to the first carrier.
3. Pay the freight to the contracted place of destination.
The buyer must:
1. Pay for the goods and take delivery at the first
contracted carrier and receive the goods from the carrier at the
point of destination.
2. Arrange for and pay for any import formalities, duties,
taxes, etc. and any transit from the contracted named place of
destination to any final destination.
3. Assume all risks from the delivery to the first carrier
point to the final destination.
4. Pay for pre-shipment inspection, except when required by the
exporting country.
(CIP) CARRIAGE/INSURANCE PAID TO ____ (named place of destn,) (any
mode of transport)
The seller must:
1. Perform all functions as stated in (CPT) CARRIAGE PAID
TO above.
2. Provide and pay for insurance coverage for the buyer.
The buyer must:
1. Perform all functions as stated in (CPT) CARRIAGE PAID
TO above.
(DAF) DELIVERED AT FRONTIER ______ (named place) (any mode of
transport to a land frontier) (If delivery shall take place on a
vessel or quay at water port, use DES or DEQ.
The seller must:
1. Clear the goods for export and pay for and arrange any
export license, formalities, duties, taxes, etc., plus any
requirements for transiting another country(ies) to the agreed
named place of FRONTIER.
2. Deliver the goods at the named place/frontier on the
carrier, but not unloaded, and not beyond the customs border of
the next country and not cleared for import at the frontier.
3. Provide a commercial invoice and contract for and pay the
freight to the named place/frontier.
4. Package the goods as per normal for that trade, provide the
buyer with sufficient notice to complete the buyer’s
requirements, provide proof of delivery and assume all risks for
the goods to the delivery point at the named place/frontier.
The buyer must:
1. Pay for the goods and take delivery at the named
place/frontier and arrange and pay for delivery from that
place/frontier.
2. Arrange for any import license, customs formalities for
import and pay any duties, taxes, etc. beyond the named
point/frontier.
3. Pay for pre-shipment inspection, unless it’s required by
the exporting country.
(DES)
DELIVERED EX SHIP __________ (named port of destination) (only water
transit)
The seller must:
1. Clear the goods for export and arrange for and pay for any
export license, formalities, duties, taxes, etc. in the country of
export plus any costs or requirements to transit any country up to
the named port of destination.
2. Deliver the goods on board the ship at the port of
destination, but not unloaded from the ship.
3. Provide a commercial invoice and pertinent insurance
information and contract for and pay for freight up to on board
the ship at the port of destination.
4. Provide packaging appropriate for the particular trade route
and transport document for receiving the goods.
The buyer must:
1. Pay for the goods and accept delivery of and all risks for
the goods on board the vessel at the port of destination and
arrange for and pay for unloading and arrange and pay all customs
formalities, duties, taxes, etc. for import.
2. Pay for pre-shipment inspection, unless the inspection is
required by the exporting country.
(DEQ)
DELIVERED EX QUAY _________ (named port of destination) (only water
transit)
The seller must:
1. Provide all function as in (DES) DELIVERED EX SHIP above, PLUS
2. Unload the goods from the ship to the quay/wharf at the port
of destination.
The buyer must:
1. Accept all requirements as in (DES) DELIVERED EX SHIP
above, except that the buyer accepts delivery of and all risks for
the goods on the quay/wharf, instead of on board the vessel and
the buyer does not have to pay for unloading the goods from the
ship.
NOTE: The seller no longer has to arrange for customs
clearance and pay duties, taxes, etc for import into buyer’s
country as formerly required under Incoterms 1990. Now the buyer
has this requirement.
(DDU)
DELIVERED DUTY UNPAID ____ (named place of destn.) (any mode of
transit)
The seller must:
1. Clear the goods for export from the exporting country, but
does not have to clear the goods into the importing country.
2. Provide a commercial invoice and provide and pay for any
export license, duties, taxes, etc. from the exporting country,
plus any transit cost for any country between buyer and seller,
but does not provide or pay for any import formalities, duties,
taxes, etc. into the importing country.
3. Contract for and pay for all freight and assume all risks for
the goods up to the buyer’s place of destination.
4. Provide usual packaging for that trade, transport document for
receipt of goods and proof of delivery.
The buyer must:
1. Arrange for any import license or formality and pay for
the goods.
2. Arrange import customs clearance and pay import duties, taxes,
etc.
3. Accept delivery and all risks for the goods from that point
and unload from the delivering conveyance.
4. Pay for pre-shipment inspection, unless required by the
exporting country.
(DDP)
DELIVERED DUTY PAID _______ (named place of destination) (any mode
of transit)
The seller must:
1. Perform all duties as set forth in (DDU) DELIVERED DUTY
UNPAID ____ above, PLUS
2. Arrange for any import license and arrange and pay for import
customs clearance, duties, taxes, etc.
The buyer must:
1. Pay for the goods and accept delivery and all risks for
the goods from that point and unload from the delivering
conveyance.
2. Pay for pre-shipment inspection, unless required by the
exporting country.

-
Ex Works (EXW) is the only one of the thirteen
Incoterms which does not require the seller to clear the goods
for export. However, the US Government. requires the seller to
be responsible for the content of the Shipper’s Export
Declaration.
-
Observe caution: In Incoterms 2000 “shipper” can
refer to the buyer as well as the seller.
-
Incoterms do not replace the contract between the
buyer and seller, but they affect the contract of sale and they
can affect the contract of carriage. They do not transfer
ownership.
-
Incoterms 2000 require the seller to clear the
goods for export under the FAS term. Incoterms 1990 required
the buyer to clear the goods for export under the FAS term.
-
Incoterms 2000 require the buyer to clear the
goods for import and pay duties, etc. under the DEQ term, while
Incoterms 1990 required the seller to arrange and pay for import
clearance, duties, taxes, etc.
-
The seller is never required to unload the goods
under the FCA term in Incoterms 2000.
-
“Delivery” in Incoterms 2000 refers to the point
or place or port at which the seller hands over the goods and
the buyer accepts the goods–not necessarily at the buyer’s
premises.
-
Not a single one of the thirteen Incoterms 2000
requires the buyer to contract for insurance.
Only CIF and CIP require the seller to contract
for insurance. Observe the coverage required by these two terms.
-
Note the “place of delivery” in Incoterms 2000
CFR and CPT.
-
EXW in Incoterms 2000 does not require the seller
to load the goods onto the buyer’s vehicle. Since the seller’s
loading is usually recommended, this should be added to the
contract of sale.
-
If any deviation from an Incoterm 2000 is
desired, details should be spelled out exactly, rather than
hoping that a word or two added to an Incoterm 2000 will be
sufficient.
-
The seller is required to provide packaging for
shipments under all Incoterms, but only to the extent that it is
usually required for that particular trade.
-
Look for a process called BOLERO to begin
replacing paper transport documents with electronic messages,
even on shipments involving banking.
- The following clause is
recommended by the ICC for all contracts, to help settle
disputes in ICC Arbitration: “All disputes arising out of or in
connection with the present contract shall be finally settled
under the Rules of Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with
the said Rules.”
Courtesy: Brahm & Krenz
International; Source: ICC Incoterms 2000
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