Question

Summarize the article on incoterms and freight forwarding, Focus on the various incoterms and its impact on freight forwarding.

Article: The Significance of the Incoterms Rules in the Freight Forwarding Services Market

Answer 1

Shipping goods requires planning and agreement between seller and buyer. Questions that need to be agreed upon before shipping include:

• Who will arrange for carriage?
• Who will pay for carriage?
• Who will bear risk of loss or damage to goods?

As part of shipping agreements, INCOTERMS (International Commercial Terms) are utilized. INCOTERMS rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. These trade terms often define the roles of the buyer and seller including ownership, risk and responsibilities of both parties and the transfer of goods throughout the shipping process. In the following, we will talk in detail about the meaning and definiton of all different incoterms and provide a chart with a complete list of all terms. A description of the 11 general rules is provided below,

EXW – Ex Works – The seller delivers when it places the goods at the disposal of the buyer at the seller’s location or at another specified place. The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export.

FCA – Free Carrier – The seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s location or another named place.

FAS – Free Alongside Ship – The seller delivers when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

FOB – Free On Board – The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

CPT – Carriage Paid To – The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place. The seller must pay the costs of carriage necessary to bring the goods to the destination.

CFR – Cost and Freight – The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

CIF – Cost, Insurance and Freight – The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The seller is only required to obtain minimum insurance coverage. However, should the buyer wish to have more insurance protection, it will need either to agree with the seller or to make its own extra insurance arrangements.

CIP – Carriage and Insurance Paid To – The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place. The seller must pay the costs of carriage to bring the goods to the destination. In addition, the seller is required to obtain minimum insurance coverage. Should the buyer wish to have more insurance protection, it will need either to agree with the seller or to make its own extra insurance arrangements.

DAT – Delivered At Terminal – The seller delivers when the goods are unloaded and are placed at the disposal of the buyer at a named terminal at the named port or place of destination. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

DAP – Delivered At Place – The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the destination. The seller bears all risks involved in bringing the goods to the named place.

DDP – Delivered Duty Paid – The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on arrival and ready for unloading at destination. The seller bears all costs and risks involved in bringing the goods to destination and is obligated to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.