BASICS OF FREIGHT FORWARDING

WHAT CUSTOMERS WANT

by Atty. Romeo R. Sto. Tomas

EXPECTATIONS
Customers want their expectations met. They want excellent quality at a fair price -- real value, consistently and reliably provided.

WHAT DO CUSTOMERS WANT?

1. Results the product or service performs effectively 2. Reliability in the product and all services that support the product 3. Live, warm, friendly and courteous service (from both people and systems) 4. Empathy a genuine understanding of their individual needs 5. Knowledgeable, well-trained suppliers

WHAT DO CUSTOMERS WANT?

6. Strong communication to be kept informed 7. Integrity open, honest, and fair treatment 8. A sense of partnership sharing of values 9. Creative solutions to problems 10. Value a fair price to be paid for meeting expectations

A SAMPLE L/C

TEST 12345XYZ99 WITH PHILIPPINE COMMERCIAL INTL., MANILA DATE: MAY 12, 2002 AMOUNT: USDLRS 2,700 ISSUE DATE 12MAY02 L/C NUMBER 61196 ADVISING BANK APPLICANT CHINA BANKING CORPORATION ABC HANDICRAFTS OF TAMPA, INC. DASMARINAS CORNER JUAN LUNA ST. 1313 GRAY STREET PO BOX 611 TAMPA, FLORIDA MANILA 2804, PHILIPPINES BENEFICIARY EXPIRY DATE / PLACE XYZ INTERNATIONAL, INC. 20AUG02 PHILIPPINES 4 MEALLA MUGROSA ST. SAN ANTONIO VALLEY 111, SUCAT PARANAQUE, MANILA, PHILIPPINES CURRENCY AMOUNT USD ===========2,700.00 TWO THOUSAND SEVEN HUNDRED AND 00/100 USDOLLARS WE HEREBY ISSUE THIS IRREVOCABLE DOCUMENTARY LETTER OF CREDIT IN YOUR FAVOR WHICH IS AVAILABLE AT SIGHT BY DRAFTS DRAWN ON NCNB NATIONAL BANK OF FLORIDA, TAMPA, FL FOR 100 PERCENT OF THE INVOICE VALUE BEARING THE CLAUSE DRAWN UNDER IRREVOCABLE LETTER OF CREDIT 61196 ACCOMPANIED BY: SIGNED COMMERCIAL INVOICE IN QUADRUPLICATE. PACKING LIST IN QUADRUPLICATE. CUSTOMS INVOICE IN ORIGINAL AND TWO COPIES. VISA INVOICE IN ORIGINAL AND TWO COPIES. CERTIFICATE OF ORIGIN IN ORIGINAL AND TWO COPIES. SINGLE COUNTRY DECLARATION IN ORIGINAL AND TWO COPIES. CERTIFICATE SIGNED BY BENEFICIARY THAT ONE FULL SET OF NONNEGOTIABLE DOCUMENTS HAVE BEEN AIRMAILED TO APPLICANT. CERTIFICATE OF ORIGIN GSP FORM A. FULL SET AND ONE NON-NEGOTIABLE COPY OF CLEAN ON BOARD OCEAN BILLS OF LADING ISSUED TO THE ORDER OF NCNB NATIONAL BANK OF FLORIDA, TAMPA, FL, MARKED FREIGHT COLLECT AND MARKED NOTIFY SACK AND MENENDEZ, (CUSTOMS BROKER) PO BOX 986, TAMPA, FL 33601 COVERING: HANDICRAFTS FOB MANILA SHIPMENT FROM ANY PORT TO TAMPA, FLORIDA PARTIAL SHIPMENTS NOT ALLOWED. TRANSHIPMENTS ALLOWED. INSURANCE COVERED BY BUYER. SPECIAL CONDITIONS: THIS CREDIT IS TRANSFERABLE SHIPMENT TO BE EFFECTED NO LATED THAN 31JUL02 PRESENTATION TIME: WITHIN 20 DAYS AFTER THE DATE OF ISSUANCE OF SHIPPING DOCUMENTS BUT WITHIN CREDIT VALIDITY. DOCUMENTS TO BE FORWARDED TO NCNB NATIONAL BANK OF FLORIDA, INTERNATIONAL DEPT., P.O. BOX 31590, 400 NORTH ASHLEY ST., 16 FLOOR, TAMPA, FL. 33602 IN ONE REGISTERED AIRMAIL. ALL BANKING CHARGES OUTSIDE USA FOR ACCOUNT OF BENEFICIARY SUBJECT TO UCP500 WE HEREBY ENGAGE WITH THE BONA FIDE HOLDERS OF ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LC THAT SUCH DRAFTS WILL BE DULY HONORED UPON PRENTATION TO US. THIS IS THE OPERATIVE INSTRUMENT TO BE ACTED ON. NOTIFY BENEFICIARY. NCNB NATIONAL BANK OF FLORIDA, TAMPA, FLORIDA 33602

TEST 12345XYZ99 WITH PHILIPPINE NATIONAL BANK, MANILA DATE: MAY 12, 2003 AMOUNT: USDLRS 2,700 ISSUE DATE 12MAY03 L/C NUMBER 61196 ADVISING BANK CHINA BANKING CORPORATION DASMARINAS CORNER JUAN LUNA ST. PO BOX 611 MANILA 2804, PHILIPPINES BENEFICIARY XYZ INTERNATIONAL, INC. 4 MEALLA MUGROSA ST. SAN ANTONIO VALLEY 111, SUCAT PARANAQUE, MANILA, PHILIPPINES APPLICANT ABC HANDICRAFTS OF TAMPA, INC. 1313 GRAY STREET TAMPA, FLORIDA

EXPIRY DATE / PLACE 20AUG03 PHILIPPINES

CURRENCY AMOUNT USD ===========2,700.00 TWO THOUSAND SEVEN HUNDRED AND 00/100 USDOLLARS

WE HEREBY ISSUE THIS IRREVOCABLE DOCUMENTARY LETTER OF CREDIT IN YOUR FAVOR WHICH IS AVAILABLE AT SIGHT BY DRAFTS DRAWN ON NCNB NATIONAL BANK OF FLORIDA, TAMPA, FL FOR 100 PERCENT OF THE INVOICE VALUE BEARING THE CLAUSE DRAWN UNDER IRREVOCABLE LETTER OF CREDIT 61196 ACCOMPANIED BY: SIGNED COMMERCIAL INVOICE IN QUADRUPLICATE. PACKING LIST IN QUADRUPLICATE. CUSTOMS INVOICE IN ORIGINAL AND TWO COPIES. VISA INVOICE IN ORIGINAL AND TWO COPIES. CERTIFICATE OF ORIGIN IN ORIGINAL AND TWO COPIES. SINGLE COUNTRY DECLARATION IN ORIGINAL AND TWO COPIES. CERTIFICATE SIGNED BY BENEFICIARY THAT ONE FULL SET OF NON-NEGOTIABLE DOCUMENTS HAVE BEEN AIRMAILED TO APPLICANT CERTIFICATE OF ORIGIN GSP FORM A. FULL SET AND ONE NON-NEGOTIABLE COPY OF CLEAN ON BOARD OCEAN BILLS OF LADING ISSUED TO THE ORDER OF NCNB NATIONAL BANK OF FLORIDA, TAMPA, FL, MARKED FREIGHT COLLECT AND MARKED NOTIFY SACK AND MENENDEZ, (CUSTOMS BROKER) PO BOX 986, TAMPA, FL 33601 X X X X

COVERING: HANDICRAFTS FOB MANILA SHIPMENT FROM ANY PORT TO TAMPA, FLORIDA PARTIAL SHIPMENTS NOT ALLOWED. TRANSHIPMENTS ALLOWED. INSURANCE COVERED BY BUYER. SPECIAL CONDITIONS: THIS CREDIT IS TRANSFERABLE SHIPMENT TO BE EFFECTED NO LATED THAN 31JUL03 PRESENTATION TIME: WITHIN 20 DAYS AFTER THE DATE OF ISSUANCE OF SHIPPING DOCUMENTS BUT WITHIN CREDIT VALIDITY. DOCUMENTS TO BE FORWARDED TO NCNB NATIONAL BANK OF FLORIDA, INTERNATIONAL DEPT., P.O. BOX 31590, 400 NORTH ASHLEY ST., 16 FLOOR, TAMPA, FL. 33602 IN ONE REGISTERED AIRMAIL. ALL BANKING CHARGES OUTSIDE USA FOR ACCOUNT OF BENEFICIARY SUBJECT TO UCP500 WE HEREBY ENGAGE WITH THE BONA FIDE HOLDERS OF ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LC THAT SUCH DRAFTS WILL BE DULY HONORED UPON PRENTATION TO US. THIS IS THE OPERATIVE INSTRUMENT TO BE ACTED ON. NOTIFY BENEFICIARY. NCNB NATIONAL BANK OF FLORIDA, TAMPA, FLORIDA 33602

TYPES OF L/C
IRREVOCABLE - The L/C can be amended or cancelled only with the agreement of the parties. Issuing Bank is irrevocably committed to pay the Beneficiary provided all conditions are met.

TYPES OF L/C
REVOCABLE - The L/C can be amended or cancelled by the Account Party at any time without prior notification to the Beneficiary. However, it cannot be cancelled AFTER the documents have been found in order and paid.

TYPES OF L/C
CONFIRMED Carries the commitment of a bank outside the Account Partys country, usually the Advising/Paying Bank which adds its obligation to pay to that of the Issuing Bank.

TYPES OF L/C
UNCONFIRMED L/C The advising bank merely informs the Beneficiary of a Letter of Credit and does not add its own obligation to pay. It carries only the Issuing Banks commitment to pay.

TYPES OF L/C
STRAIGHT L/C The beneficiary must present his documents to the bank named in the L/C. The obligation of the Issuing bank extends only to the Beneficiary. The Paying Bank is specifically authorized to pay the Beneficiary and charge its customer either the Importer or Issuing bank

TYPES OF L/C
NEGOTIATION L/C it assures anyone who negotiates drafts under the L/C that these will be honored by the Issuing Bank provided all the terms are complied with. The Negotiating bank advances the funds to the beneficiary by buying the draft, thus it becomes a holder in due course of the negotiable instrument.

TYPES OF L/C
SIGHT L/C refers to the tenor of the draft. Payment is effected after presentation of the draft and documents that conform to the terms of the L/C USANCE L/C payment will be made at some specified time after presentation of the draft and documents

TYPES OF L/C
RED CLAUSE L/C Clause in L/C which allows advances to the beneficiary prior to the presentation of documents. This means that the exporter may draw on the credit prior to the shipment of goods. All the exporter has to do is to draw a draft on the credit and issue a certification that the amount being drawn is an advance.

TYPES OF L/C
GREEN CLAUSE L/C similar to a red clause L/C. However in this case, advances are available only if the beneficiary can show proof that the goods are in a warehouse. Presentation of a warehouse receipt or quedan is required. This is usually available availed of by exporters of commodities like sugar.

Documents Against Payment

Otherwise known as DP, an arrangement whereby the supplier ships the goods to the buyer and sends through his bank for collection the documents of trade together with a draft drawn at sight on the buyer. This means that the buyer must honor and pay his obligation upon presentation of the documents. In exchange for payment, the bank releases the documents to the buyer including the bill of lading, which he will then use to claim the goods from the shipping company.

Documents Against Acceptance

Otherwise known as DA, an arrangement whereby the goods are shipped and the relevant bill of exchange (draft) is drawn by the seller with the tenor of X days on the buyer. Documents are sent to the sellers bank with clear instructions for collection through one of its correspondent banks located in the domicile of the buyer. Title of the goods and relative documents are released to the buyer only upon acceptance of the draft.

OPEN ACCOUNT
An arrangement whereby the seller ships goods and sends the shipping documents (NO DRAFT, as distinguished from that of a documentary collection where a draft is required to prove a liability) directly to the buyer but prior agreement provides for payment at some stated specific future date.

PARTIES TO AN L/C
APPLICANT Buyer/Importer/Account Party - Arranges opening of the credit BENEFICIARY Seller/Exporter - Party in whose favor the credit is opened

PARTIES TO AN L/C
ISSUING BANK Importers bank, issues the credit ADVISING BANK Usually a bank located in the exporters locale which advises the credit to the beneficiary without engagement on its part CONFIRMING BANK Bank which adds its obligation to the beneficiary to ensure payment or acceptance of a draft

PARTIES TO AN L/C
PAYEE BANK Drawee Bank, the bank on which the draft is drawn NEGOTIATING BANK The bank that gives value for drafts and/or documents under credit. The bank becomes a holder of the draft by advancing its own funds to the beneficiary REIMBURSING BANK The bank named in the credit through which the negotiating bank will seek reimbursement

Common Discrepancies
Unclean bills of lading No evidence of goods being actually shipped on board Shipment made between ports other than those stated in the credit Goods shipped on deck BL does not indicate whether freight is paid or not

Common Discrepancies
Insurance document different from that required by credit Insurance risks not covered as specified in the credit Under-insurance Insurance not effective from the date indicated in the transport document

Common Discrepancies
Documents inconsistent with each other Description of goods on invoice differs from that in the credit Weights differ between documents Amounts differs between invoice and bill of exchange Short-shipment

Common Discrepancies
Marks and numbers differ between documents Absence of documents called for in the credit Bill of exchange drawn on the wrong party Bill of exchange drawn on an indeterminable date

Common Discrepancies
BL, insurance document, or bill of exchange not endorsed correctly Absence of signatures, where required, on documents presented Credit amount exceeded Credit expired Documents not presented in time Late shipment

TRANSPORT DOCUMENTS
By Romeo R. Sto. Tomas

FIATA FCR
Acknowledgement that FF has assumed responsibility of goods Can be handed to consignor after goods received by FF EXW Buyers Consolidation Is it negotiable?

FIATA FCT
Obligation to deliver the goods at destination thru agent of FF Can be handed to consignor after goods FF only responsible for forwarding and delivery; not as carrier FCT may be negotiable

FIATA FWR
When FF needs to provide warehousing services Issued as a receipt for the goods Mainly used on national level Not negotiable, unless otherwise indicated

10

FIATA FBL
Negotiable FIATA Multimodal Transport Bill of Lading Carrier-type transport doc for use by FF acting as MTO May also be used as marine Bill of Lading

FIATA FBL
Mentioned in Article 26, UCP 500 FF assumes responsibility for delivery as well all carriers and 3rd parties engaged by him

QUESTION
Is the FIATA Multimodal Transport Bill of Lading (FBL) an acceptable document under UCP 500 where a documentary credit calls for a marine bill of lading covering a port-to-port shipment and does not indicate that an FBL is not acceptable?

11

ANSWER
The FBL is acceptable as a marine bill of lading provided that it complies with the requirements of UCP 500 Articles 23 and 30.

Functions of a Bill of Lading

Evidence of contract of carriage Serves as a receipt Serves as a document of title

Types of Bills of Lading

Shipped on board bill of lading Received for shipment bill of lading

BL according to Beneficiaries
BL to a named person BL to order BL to bearer

12

BL according to Voyages
Direct Bill of Lading Through Bill of Lading

Clean Bill of Lading

No remarks regarding goods are made on the bill of lading

Unclean/Claused Bill of Lading

Reservations are made on the bill of lading regarding condition of cargo

13

SEA WAYBILL
Replacement of traditional ocean bill of lading and is non-negotiable

Advantages of a sea waybill

Allows consignee to claim goods merely by producing identification Suitable for in-house documentation Suitable for open account trading

14

15

What is a contract?

Civil Code of the Philippines

Title II. - CONTRACTS CHAPTER 1 GENERAL PROVISIONS

What is a Contract of Sale?

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

16

Civil Code of the Philippines

Title VI. - SALES CHAPTER 1 NATURE AND FORM OF THE CONTRACT Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Art. 1460. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. (n)

WHAT BUYERS WANT What Buyers and Sellers Want

Contract Fulfillment Convenience Credit Expert Assistance Payment Options: In advance Time of shipment After Shipment

17

WHAT SELLERS WANT

Contract Fulfillment Convenience Prompt Payment Advice Payment Options: In advance Time of shipment After shipment
ITC

International Sale of Goods Contract

1. Buyers obligations 2. Sellers obligations 3. Product description 4. Quality & quantity 5. Incoterm & related transport terms and conditions 6. Payment 7. Remedies
M10:U2:2.1-8

Sellers obligations
Deliver the goods Deliver the related documents Transfer the title of ownership Assure conformity Act in good faith & fairly Offer civil liability
ITC

Buyers obligations
Accept the goods or services Pay the agreed price Act in good faith & fairly Accept civil liability

M8:U1:1.2-1

ITC

M8:U1:1.2-2

18

CONTRACT TERMS
Price Currency Payment Terms Packing Volume Dimensions Quantity

CONTRACT TERMS
Quality Specifications Documents Required Transport Mode Freight Charges Insurance INCOTERMS

INCOTERMS 2000

INCOTERMS 2000
by Romeo R. Sto. Tomas

International rules for the interpretation of trade terms Provides an internationally recognized standard for commercial contracts between a buyer and seller in two different countries First issued by the International Chamber of Commerce (ICC) in Paris 1936, and have been updated in 1967, 1976, 1980, and 1990.

19

Using Incoterms 2000

Agreement to abide by a set of internationally applicable rules in the arrangement and operation of international transportation A standard three-letter abbreviated terminology Translated into various languages Covers thirteen main options The rules associated with each term clearly describe the key obligations of sellers and buyers.

Hierarchy of contractual terms and clauses

CONTRACT FOR SALE OF GOODS Terms, conditions and applicable jurisdiction Any specific clause relating to carriage and delivery

Incoterms

M10:U2:2.2-1
ITC

t trac Co n

INCOTERM specified in the contract

M10:U2:2.2-2

ITC

Incoterms are grouped into four categories:

E Terms - Ex-works F Terms - Main carriage not paid by seller C Terms - Main carriage paid by seller D Terms - Delivered on arrival

The FOUR PILLARS

DELIVERY Where and when has the seller fulfilled his obligation to deliver the goods? DOCUMENTS Who has to provide what documents or equivalent EDI messages? RISKS Who bears the risk of loss of, or damage to the goods? COSTS Who pays for what?

ITC

M10:U2:2.2-5

20

VALID INCOTERMS?
FOB Factory FOB Plant FOB Ex Sellers Works FOR / FOT FOB Airport C&F

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 Delivered Delivered Delivered Delivered

at Frontier Ex Ship Ex Quay Duty Unpaid Duty Paid

E FAMILY
EXW - EX WORKS (...named place)

EXW Delivery
Seller makes the goods available at the sellers premises (loading dock of factory/ warehouse) Seller to give Buyer reasonable notice as to when and where the goods will be placed at the Buyers disposal
Examples:
EXW 123 Factory Tokyo, Japan EXW ABC Carving Shop Paete, Laguna

21

EXW Documents
S commercial invoice, packing list B all others (export declaration/ license, truck waybill, commodity clearance, OBL, insurance, etc.)

EXW Transfer of Risk

Sellers premises (loading dock) (origin), after the goods have been placed at the buyers disposal, on the date or within the period agreed upon, or if no such time is agreed, at the usual time for delivery of such goods

EXW Costs
S manufacturing, packing for export, handling up to loading dock of premises at factory/warehouse B loading from sellers premises to the vehicle provided by the Buyer, Customs doc, loading and port expenses all others till final destination

F FAMILY
FAS - FREE ALONGSIDE SHIP (...named port of shipment) FOB - FREE ON BOARD (...named port of shipment) FCA - FREE CARRIER (...named place)

22

FAS Delivery
Seller must place the goods alongside the vessel nominated by the buyer at the loading place named by the buyer at the named port of shipment on the date or within the agreed period
Examples: FAS Port Elizabeth, South Africa FAS Cagayan de Oro

FAS Documents
S commercial invoice, packing list, truck waybill, commodity clearance, export declaration/ license B Bill of lading, insurance

FAS Transfer of Risk

Alongside ship at quay or lighter

FAS Costs
S all costs till cargo placed alongside ship at quay or lighter B cost to load the goods on board the vessel, freight, insurance, and all other costs beyond that

23

FOB Delivery
Must place the goods on board the vessel nominated by the buyer at the named port of shipment on the date or within the agreed period Past the ships rail
Examples: FOB Port Klang, Malaysia FOB Long Beach, California

FOB Documents
S commercial invoice, packing list, truck waybill, commodity clearance, export declaration/ license, OBL freight collect B insurance, and beyond

FOB Transfer of Risk

Ships rail

FOB Costs
S all costs till cargo placed on board the vessel, past the ships rail B freight, insurance, etc.

24

FCA Delivery
Must deliver the goods to the carrier or another person nominated by the buyer at the named place on the date or within the agreed period for delivery. If the delivery is at a place other than the sellers premises, the seller is not responsible for unloading from the delivery vehicle. If the delivery is at the sellers premises, the seller is responsible for loading
Examples: FCA Sprite Freight CFS Hamburg, Germany FCA Dive Air Lines SFO International Airport) FCA ZA Freight Forwarders Tokyo Japan

FCA Documents
S invoice, packing list, ed, RSBL (received for shipment BL) or truck or train waybill or consignment note, or AWB, freight collect (indicating that the carrier has received the goods) B insurance, and beyond

FCA Transfer of Risk

Delivery to the carrier / carriers acceptance

25

FCA Costs
S all costs till cargo handed over to the carrier designated by the buyer B freight, insurance, etc.

C FAMILY
CFR - COST AND FREIGHT (...named port of destination) CIF - COST INSURANCE AND FREIGHT (...named port of destination)

CFR Delivery
Must place the goods on board the vessel selected by the seller at the named port of shipment on the date or within the agreed period
Examples: CFR Manila, Philippines. CFR Sydney, Australia

CFR Documents
S commercial invoice, packing list, truck waybill, commodity clearance, export declaration/ license, OBL freight prepaid B insurance, and beyond

26

CFR Transfer of Risk

Ships rail

CFR Costs
S all costs till cargo placed on board the vessel, past the ships rail, and freight B insurance, etc.

CIF Delivery
Must place the goods on board the vessel selected by the seller at the named port of shipment on the date or within the agreed period
Examples: CIF New York, U. S. A. CIF Yokohama, Japan

CIF Documents
S commercial invoice, packing list, truck waybill, commodity clearance, export declaration/ license, OBL freight prepaid, insurance policy B import documents, etc.

27

CIF Transfer of Risk

Ships rail

CIF Costs
S all costs till cargo placed on board the vessel, past the ships rail, freight, and insurance premium B all costs after cargo has been loaded on board and insurance premium paid

C FAMILY
CPT - CARRIAGE PAID TO (...named place of destination) CIP - CARRIAGE AND INSURANCE PAID TO (...named place of destination)

CPT Delivery
Seller must deliver to the carrier contracted by him, and in case of more than one carrier, delivery to the first carrier
Example: CPT South Harbor, Manila, Philippines CPT JFK Airport, New York, U. S. A.

28

CPT Documents
S commercial invoice, packing list, truck waybill, commodity clearance, export declaration/ license, freight prepaid B insurance policy, import license and import customs formalities, all docs for goods to transit other countries

CPT Transfer of Risk

Upon delivery to the carrier designated by the seller

CPT Costs
S all costs till cargo delivered to the carrier selected by the seller, plus freight B insurance premium, import license and import customs formalities, all docs for goods to transit other countries

CIP Delivery
Seller must deliver to the carrier contracted by him, and in case of more than one carrier, delivery to the first carrier
Examples: CIP NAIA, Paranaque, Philippines CIP Zurich, Switzerland

29

CIP Documents
S commercial invoice, packing list, truck waybill, commodity clearance, export declaration/ license, freight prepaid, insurance policy for amount and risks agreed upon B import license and import customs formalities, all docs for goods to transit other countries

CIP Transfer of Risk

Upon delivery to the carrier designated by the seller

CIP Costs
S all costs till cargo delivered to the carrier selected by the seller, plus freight, as well as cost of insurance premium B import license and import customs formalities, all docs for goods to transit other countries

D FAMILY
DAF - DELIVERED AT FRONTIER (...named place) DES - DELIVERED EX SHIP (...named port of destination) DEQ - DELIVERED EX QUAY (...named port of destination)

30

D FAMILY
DDU - DELIVERED DUTY UNPAID (...named place of destination) DDP - DELIVERED DUTY PAID (...named place of destination)

DAF Delivery
Named place of delivery, before crossing over into adjoining country of import, not unloaded on the arriving means of transport
Examples: DAF Mexican-Guatemalan border DAF Texas-Mexico border

DAF Documents
S all docs to customs border, before crossing into named place/ destination country, freight prepaid

DAF Transfer of Risk

Upon placing the goods at the buyers disposal on the named place at the frontier, on the date or within the agreed period

31

DAF Costs
S all costs till prior to crossing customs border of named place/destination country B customs clearance to cross into destination country

DES Delivery
Named port of delivery, not unloaded from the arriving ship
Examples: DES Manila, Philippines DES Le Havre, France

DES Documents
S all docs to bring goods to port of destination on board the ship, not cleared for import B all docs to unload and beyond

DES Transfer of Risk

Upon ships arrival on the named port of delivery

32

DES Costs
S all costs to bring goods to port of destination on board the ship, not cleared for import B discharge costs, customs clearance, and delivery

DEQ Delivery
Named port of delivery, discharged unto the quay (wharf) from the arriving ship
Quay - ki Examples: DEQ Port Moresby, PNG DEQ La Spezia, Italy

DEQ Documents
S all docs to bring goods to port of destination & discharged from the ship unto the quay (wharf), not cleared for import B all docs to take the goods out of the port and beyond

DEQ Transfer of Risk

Upon cargos being discharged onto the quay (wharf)

33

DEQ Costs
S all costs to bring goods to port of destination & discharged from the ship, not cleared for import B customs clearance, and delivery Variation: DEQ (Duty and VAT Paid) Genoa, Italy

D FAMILY
DDU - DELIVERED DUTY UNPAID (...named place of destination) DDP - DELIVERED DUTY PAID (...named place of destination)

DDU Delivery
Final destination, not unloaded from (still on) the arriving means of transport

DDU Documents
S all docs to bring goods to final destination, except customs formalities B all docs to customs clear the goods

Examples: DDU Subic Bay, Philippines *DDU (Unloading for Sellers Account) FTZ Singapore*

34

DDU Transfer of Risk

Upon delivery to final destination, not unloaded from the arriving vehicle

DDU Costs
S all costs to bring goods to final destination except for customs formalities B customs formalities, unloading from arriving means of transport

DDP Delivery
Final destination, not unloaded from the arriving means of transport

DDP Documents
S all docs to bring goods to destination final

Examples: DDP Alexandria, Egypt DDP (exclusive of VAT and/or taxes) Cebu City, Philippines

35

DDP Transfer of Risk

Upon delivery to final destination, not unloaded

DDP Costs
S all costs to bring goods to final destination, including customs formalities B unloading from arriving means of transport

36

E, F, C, D
E EXW F FAS, FOB, FCA C CFR, CIF, CPT, CIP D DAF, DES, DEQ, DDU, DDP

37

DISTINCTIONS
According to group - E, F, C, D According to transport mode Traditional Sea and Inland Waterway transport only Any mode, including multimodal

Maritime

FAS FOB CFR

CIF DES DEQ

Land

All Modes

DAF

EXW FCA CPT

CIP DDU DDP

38

DISTINCTIONS
Shipment Contracts vs. Arrival Contracts Notion of risk - critical point to determine sellers performance of delivery obligations Shipment Contracts - goods transported at buyers risk Arrival Contracts - goods transported at sellers risk

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 Delivered Delivered Delivered Delivered

at Frontier Ex Ship Ex Quay Duty Unpaid Duty Paid

GUIDELINES
Valid only if expressly stipulated in the sales contract or separate agreement Incoterms dont determine when payment for goods has to be made Incoterms dont determine full legal relationship between parties ownership, rights to goods, obstacles to delivery, complaints, conditions of payment, etc.

GUIDELINES
Incoterms are subject to applicable national laws Do not alter Incoterms, except to clarify payment of duties/taxes, insurance coverage Bank are not concerned with the Incoterms specified in sales contracts

39

GUIDELINES
Incoterms dont affect relationship of buyer and seller with third parties carrier, freight forwarder Container technology, integrated and intermodal transport have made FOB, CFR, and CIF virtually obsolete. New terms are FCA, CPT, CIP. They are expected to replace traditional terms.

Please answer YES or NO:

1. You sell FCA Bangkok (Thailand). Cargo will move by ocean transport. Will you pay for the container stuffing? 2. You sell DDU Copenhagen (Denmark). Would you pay importation taxes? 3. You sell EXW Bujumbura (Burundi). Cargo will move by ocean transport from Mombasa (Kenya). Would you pay road transport up to Mombasa?

Please answer YES or NO:

4. You sell FCA Dusseldorf (Germany). Cargo will move by truck and roll-on/roll-off operation to Cairo (Egypt). Would you pay the cargo insurance premium? 5. You sell FOB Singapore. Cargo will move by ocean transport. Would you pay the export customs formalities? 6. You sell CIP Niamey (Niger). Cargo will move in an FCL container. Would you pay the freight bill?

Please answer YES or NO:

7. You send back defective car parts from Kaduna (Nigeria) to Sochaux (France) under Incoterm FCA Airport Kano (Nigeria). Would you pay the transport insurance premium? 8. You import from Switzerland electronic equipment in an LCL container, with a contract of sale stipulating CPT Dakar (Senegal). Would you pay for the container stuffing at the container terminal in Basle (Switzerland)? 9. You export DDU Glasgow (Scotland) an FCL container moving by ocean transport. Would you pay for unstuffing the container?

40

Please answer YES or NO:

10. You buy CIF Casablanca (Morocco). Cargo will move by ocean transport. Would you pay the transport insurance premium? 11. You sell a FCL container loaded with coffee under Incoterm FCA Lome (Togo). Would you pay the terminal handling charges (THC) in Lome? 12. You sell FOB Contonou (Benin) handicraft products packed in cases. Would you pay storage charges for the cases at the port of Contonou?

Please answer YES or NO:

13.You import a piece of equipment CPT Airport Colombo (Sri Lanka). Would you pay import duties and taxes? 14.You sell clothes EXW Sfax (Tunisia). Would you pay the loading of the cargo on to the lorry inside your facilities? 15.Groundnuts (peanuts) are sold FOB Bombay (India). Would the buyer pay the export Customs formalities?

1. YOU ARE THE SELLER You dont want to worry about either local transport in your country, ocean transport, export Customs clearance, or transport insurance. Your factory is located in Bogota (Colombia). 2. YOU ARE THE BUYER You want to get your order by air transport and you are ready to pay airfreight charges from Paris (France). Goods are obtained from the company TELEFILM located in Versailles (France). 3. YOU ARE THE SELLER You are quoting to your European customers prices in which goods are delivered at your own risks and costs by truck up to Modane, at the border between France and Italy.

4. YOU ARE THE SELLER Your client asks you to ship your goods by ocean transport and to take all ocean risks and costs, as well as the risks and costs related to the unloading of the goods at the destination port in Rotterdam (Netherlands). Your client will cover import Customs duties and taxes. 5. YOU ARE THE BUYER You deal with different service providers in Sweden and you want to consolidate your cargo in a container at the Container Freight Station of your freight forwarder NORD-EXPRESS located in Stockholm. You want to pay the bill on inland transport as well as on transport insurance.

41

6. YOU ARE THE SELLER Your client asks you to ship the goods in such a way that he does not have to pay the ocean transport freight. However, he accepts to bear the ocean transport risks because he has access to a cover insurance policy for transport insurance. The port of destination is Helsinki (Finland). The shipment is a conventional shipment with changes of modes. 7. YOU ARE THE SELLER Your premises are located in Le Havre (France), and are connected to a railway line. You want to ship a full wagonload of goods, payment at destination, to your customer in Dusseldorf (Germany). Ordering and loading of the wagon are done by your company.

8. YOU ARE THE SELLER You sell your goods to a client in Germany and you take care of freight and insurance. Destination is Frankfurt airport. 9. YOU ARE THE BUYER You buy goods from a provider located in Los Angeles. You dont want to worry about transport, insurance, and export and import Customs formalities. Delivery must be made in Lagos (Nigeria). Air transport should be used. 10. YOU ARE THE SELLER You load a road trailer on a roll-on/roll-off vessel sailing to Jeddah (Saudi Arabia). Your selling quotation includes ocean transport freight and insurance. However, transport risks are borne by your client.

42