Global Trade Management
Containerized Cargo
Twenty-Foot Equivalent Units (intermodal shipping container)
1 TEU – 20’ long container
2 TEUs per 40’ long container
Logistics
World Trade Practices
Chapter 14
FCL= full container load
LCL= less than full container load (door to door)
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RoRo
Specialized Containers
Bulk
Reefers
Side Loading
Open top
Ventilated
Insulated
Flat rack
Non-containerized
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Air Containers
Movement from Ship
Can be owned and
loaded by airline
Some companies
choose to own the
units for ease of
loading and
security issues
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College of Business, University of Northern Iowa
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Global Trade Management
Airport Codes
World Air Codes
Usaircode
Leonards guide
Customs Trade Partners Against Terrorism
Validation process
Security profile
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INCO Terms
What are INCOTERMS?
13 terms of sale created for use in
international sales transactions
Created by International Chamber of
Commerce
Translated into 20 languages
Widely understood by experienced foreign
traders
Periodically updated
ALWAYS accompanied by geographic
location
ICC Publishing Inc.
Publication # 560
ISBN: 92-842-1199-9
http:www.iccbooksusa.com
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WHERE
Transfer of risk takes place
Reference
cards for
quick review
WHAT
Cost factors are included
WHO
Has responsibility for forwarder and
carrier selection
WHAT
Documents each party must provide
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College of Business, University of Northern Iowa
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Global Trade Management
INCOTERMS are not:
Four Groupings
Law- need to identify in sales
agreement
All inclusive
Made to be used in U.S. Domestic sales
E – reflects departure point
F – Main carriage (freight) unpaid
C – Main carriage paid
D – Arrival point
Use the UCC terms instead
Conveyors of title
Solutions for all potential foreign trade
challenges
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EXW (ExWorks)
EXW- Exworks (named place)
Departure Terms
Example: EXW Parkersburg, Iowa
Seller makes goods available at premises to the buyer
(factory or warehouse)
Not responsible for lading goods on vehicle provided by
buyer
Buyer Possession at
the seller’s premises
•
Little risk of
transport to seller
ONLY term seller is
not responsible for
export clearance.
•
Loading is potential conflict with union rules
Very difficult for buyer to handle U.S. export clearance
Buyer bears all costs and risks involve in movement of
goods
Minimum obligation for the seller
Transfer of risks at seller’s facility
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Group F
FAS
Main Carriage is unpaid
Buyer selects carrier and pays
for the freight
Free Alongside
Ship
Risk remains with
seller until the
product is in the
port ready to load
onto the ship
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College of Business, University of Northern Iowa
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Global Trade Management
FAS Free Along Ship
(named port of shipment)
FCA
Example: FAS Port of Milwaukee
Free Carrier
Seller fulfills his obligation once the goods have
been placed alongside the vessel either by delivery
on the pier or by bringing alongside via other
conveyance.
Costs beyond delivery point are buyer’s
Export clearance is now a seller obligation under
INCOTERMS 200.
Can only be used for marine or inland waterway
transport.
Transfer of risk occurs when seller delivers to the
vessel designated by the buyer.
Buyer chooses a
delivery location
Transfers of title
and risk occurs at
buyers chosen site
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FOB
FCA Free Carrier (named place)
Free on Board
Example: FCA Port of Charleston
As soon as the cargo
passes over the side of the
ship, risk and title are
transferred
FCA Waterloo Airport ALO
Seller fulfills delivery responsibility when goods,
cleared for export, are loaded on the means of
transport by the buyer chosen carrier at the
seller’s premises, or delivered to the terminal of
the buyer’s appointed carrier, forwarder or other
appointed party. (Simplified 2000 version)
Costs of delivery to the first carrier or person
are for seller.
All costs beyond first delivery are for buyer.
Transfer of risk takes place when seller delivers
to the carrier or person determined by the buyer.
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FOB Free on Board
Group C
(Named Port of Shipment)
Example: FOB Port of Tema
FOB USS Iowa, Port of San Diego
Main Carriage is Paid
Freight is prepaid
Seller fulfills his obligation when goods have passed
over the ship’s rail at the named port of shipment
Costs beyond ship’s rail at the named port of shipment
are responsibility of buyer
Seller is required to clear the goods for export
Can only be used for marine or inland transport.
•
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Seller selects carrier
When the ship’s rail provides no purpose (such as RORO) use
FCA term
Transfer of risk occurs when cargo passes ship’s rail
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College of Business, University of Northern Iowa
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Global Trade Management
CFR Cost and Freight
CFR
(named port of Destination)
Cost and Freight
Paid
Example: CFR Singapore
Seller pays costs and freight necessary to bring goods
to named port of destination
Buyer pays costs beyond destination port
Can only be used for marine or inland waterway
transport.
Seller arranges for
transport
•
When the ship’s rail provides no purpose (such as RORO) use
CPT term
Transfer of risk occurs when cargo passes ship’s rail
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CIF Cost, Insurance, Freight
CIF
(named port of transportation)
Example: CIF Hamburg, Germany
Cost
Insurance
Freight
Seller has same obligations as CFR
Additional seller obligation includes contracting
for marine insurance against buyer’s risk of loss
or damage of goods during the carriage.
Seller is only required to obtain minimum
coverage
Can only be used for marine or inland waterway
transport.
Marine insurance
obligation of seller
•
When the ship’s rail provides no purpose (such as
RORO) use CIP term
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CPT Carriage Paid to
CPT
(named place of Destination)
Example: CPT Heathrow Airport
CPT Accra, Ghana
Carriage Paid to a
particular point
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College of Business, University of Northern Iowa
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Similar to CFR term
Used for any mode of transport including
intermodal
Seller fulfills responsibility when goods have
been delivered to the carrier
Seller responsible for export clearance, fees
and carriage costs up to named destination
place
Transfer of risk takes place when goods are
delivered to the first carrier.
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Global Trade Management
CIP Carriage & Insurance Paid
CIP
(named place of destination)
Carriage and
Insurance Paid to a
certain point
Marine insurance
obligation of seller
Similar to CIF term
Seller has same obligations under the
CPT with addition of insurance
responsibilities of CIF
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Group D
Arrival Terms
Delivered at
frontier
Seller Delivers to a
Destination Point
DAF
Delivered to an
accessible site
Cleared for export but
not cleared for import
Can be used for
multimodal, but
designed primarily for
truck/rail transport
Example: DAF Laredo,
Texas- Seller responsible
for cost and risk of cargo
to Laredo, Texas border
crossing- buyer assumes
risk and cost when freight
crosses U.S. border.
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DAF Delivered at Frontier
DES
(named place)
Delivered to
Ex-Ship
Example: DAF Laredo, Texas
DAF Canadian Border
Seller fulfills obligations to deliver when goods
have made available (cleared for export) at
named point and place at the frontier
•
Seller arranges
carriage
Risk transfers
when buyer has
access (on ship)
But before customs border of adjoining country
DAF term primarily for goods transported by
rail or road, but can be used for any mode of
transport
Transfer of risks occurs when goods have been
transferred at the frontier.
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College of Business, University of Northern Iowa
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Global Trade Management
DES Delivered Ex Ship
DEQ
(named port of destination)
Delivered ExQuay
Example: DES Hamburg, Germany
Seller fulfills his obligation to the deliver when
the goods have been made available to the
buyer on board the ship but uncleared for
import at the named port of destination
Seller bears all costs and risks involved in
bringing the goods to this point.
Can only be used for marine or inland waterway
transport
Transfer of risk takes place when vessel
arrives at destination port
Carriage arranged by
seller
Risk transfers to
seller when good are
place at disposal of
the buyer on the quay
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DEQ Delivered Ex Quay Duty Paid
DDU
(named port of destination)
Delivered Duty
Unpaid
Example: DEQ Hamburg, Germany
Seller fulfills obligation when goods have been
made available on the quay of at the port of
destination, cleared for importation.
Seller bears all costs including duties, taxes,
and other charges and risks to deliver the
goods to port unloaded.
Import clearance is now a buyer obligation
under INCOTERMS 2000.
Can only be used for marine and inland
waterway transport.
Delivered cleared
through customs
Import
documentation and
duty responsibility
with buyer
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DDU Delivered Duty Unpaid
DDP
(named place of destination)
Example: DDU Toronto, Canada
Delivered Duty
Paid
Seller fulfills obligation to deliver when goods have
been made available at the named place in the country
of importation
Seller bears all costs involved in bringing the goods to
this point EXCLUDING duties, taxes, and other
official charges payable upon importation, as well as
the costs and risks of carrying out customs
formalities.
Used for all modes of transport
Transfer of risk takes place when goods delivered to
destination point not cleared by customs or duty paid.
Delivered cleared
through customs
Import
documentation and
duty responsibility
with seller
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College of Business, University of Northern Iowa
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Global Trade Management
ANY MODE OF
TRANSPORTATION
DDP Delivered Duty Paid
(named place of destination)
EXW (named place)
Usually seller’s place
Example: DDP Duseldorf, Germany
FCA (named place)
Seller’s place with door/door transport
Buyer appointed carrier’s terminal on
seller’s side
Seller fulfills obligation to deliver when goods have
been made available at the named place in the
country of importation.
Seller bears all costs and risks INCLUDING duties,
taxes, and other charges of delivering the goods,
cleared for importation.
This term should not be used if seller is not able to
directly or indirectly obtain and import license.
Used for all modes of transport
DDP represents the MAXIMUM risk to the seller.
CPT (named destination)
Somewhere on buyer’s side
CIP (named destination)
Somewhere on buyer’s side
DAF (named place)
A border location
DDU (named destination)
Somewhere on buyer’s side
DDP (named destination)
Somewhere on buyer’s side
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Marine and Inland
Waterway transport only
INCOTERMS
FAS (named port of shipment)
A port on the seller’s side
FOB (named port of shipment)
A port on the seller’s side
CFR (named port of destination)
A port on the buyer’s side
CIF (named port of destination)
A port on the buyer’s side
Ocean
Transport
Breakbulk/LCL
Ocean
Transport
FCL/RoRo/LCL
Air
Transport
Truck/Rail
Transport
DELIVERY POINT
Risk Transfer
EXW
EXW
EXW
EXW
Seller’s premises
Risk tranfers at pickup
FAS
FOB
CFR
CIF
FCA
FCA
FCA
Seller delivers shipment to
carrier selected by buyer
Risk transfers at delivery
CPT
CIP
CPT
CIP
CPT
CIP
Seller delivers to carrier
selected by seller.
Seller pays shipping to
destination location
Risk transfers when carrier
has possession
DES
DEQ
DDU
DDP
DDU
DDP
DAF
DDU
DDP
Seller delivers shipment
to foreign destination
Risk transfers at foreign
destination delivery
location
DES (name port of destination)
Usually used for charters
A port on the buyer’s side
DEQ (duty paid) (name port of destination)
A pier on the buyer’s side (unloaded)
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Questions
Factors to Consider
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What mode of transportation?
Buyer
Country
Method of shipment
Type of cargo
Payment method
Origin of shipment
Easiest term
If ocean transport, what type of shipment?
2. What Delivery Point?
3. What specific INCOTERMS trade term will
be selected?
4. What is place and geographic location?
Example:
1)
2)
3)
4)
Air
Delivery Point F
FCA
Warehouse, Chicago, IL
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College of Business, University of Northern Iowa
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Global Trade Management
Buyer
Country
Indirect export buyers usually require
delivery to a Domestic point
Country requirements or restrictions must
be followed to avoid any penalties!
EXW, FCA, FAS, FOB are most common
Buyer designates main carrier and
freight collect
If main carriage must be prepaid
eliminates utilization of E or F groups
If regulations require marine insurance must
be with a insurance company in buyer’s
country
Restricts use of CIF or CIP
Use “F” terms unless carrier restricts
freight collect
Common when selling to government
entities
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Method of Shipment
Type of Cargo
Terms used specifically for marine or
inland waterway only
Terms used for all modes
DAF used for all modes, but generally for
rail or truck with delivery obligations at
Frontier
FCL, RoRo, LCL delivered to carrier’s
terminal
Eliminates FAS, FOB, CFR, CIF, DEQ, and DES
Hazardous materials restrict mode of
transportation
EXW shouldn’t be used for products with
validated licenses
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Payment Method
Origin of Shipment
EXW, FCA, FAS, FOB
Sellers may be in better position to
select routing if buyer unfamiliar with
inland freight procedures.
Sellers may be in better position to
negotiate rates of transport.
for
less than a container
Allows buyer to select
carrier and freight
forwarder
Seller should control
shipment to ensure
service providers
perform on its behalf
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College of Business, University of Northern Iowa
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Global Trade Management
Easiest Term
Is the buyer experienced in trading
with home country?
What terms are your competitors
offering?
Do you cover the risks of quoting
freight costs?
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College of Business, University of Northern Iowa
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