INTL TRADE - INCOTERMS

The most commonly used rules for the interpretation of trading terms in international trade are those defined by the International Chamber of Commerce (ICC). They are internationally recognised and are known as Incoterms. Incoterms signify to the buyer what is, and more importantly what is not, included in the selling price. They also indicate where the exporter's responsibility ends and the importer’s responsibility begins in respect of the goods exported. Which term will apply to a particular export transaction is a matter for negotiation between buyer and seller. However, inclusion of the appropriate term in export quotations is crucial in order to determine the responsibilities of both parties in the contract of sale.

EXW - Ex Works (... named place)
This term signifies that the price quoted is for supply of goods, packed for export, at the seller’s premises. The seller’s contractual obligation is discharged when the goods are made available to the buyer at the seller’s premises. The seller is not responsible for any element of transport or insurance cost or the cost of compliance with export formalities. However, the seller does have an obligation to load the goods onto the buyer’s collecting vehicle.

FCA - Free Carrier (... named place)
The seller’s obligations are fulfilled when goods are delivered to a carrier nominated by the buyer at a named point. It is the seller’s responsibility to clear the goods for export. If delivery takes place at the seller’s premises the seller has an obligation to load the goods onto the buyer’s collecting vehicle.

FAS - Free Alongside Ship (...named port of shipment)
This term means that the seller’s obligations are fulfilled when the goods are placed alongside a ship at a designated port. It is the seller’s responsibility to clear the goods for export. Note FAS can only be used for sea or inland waterway transportation.

FOB - Free On Board (... named port of shipment)
FOB is one of the most commonly used trading terms. The seller is responsible for all costs up to the point where the goods actually cross the ship’s rail at the named port of loading. This term should only be used for non-containerised sea transport. For airfreight and containerised seafreight use FCA.

CFR - Cost and Freight (... named port of destination)
“The seller’s price includes all charges up to the arrival of the goods at the point of discharge from the vessel. It does not, however, include the cost of insuring the goods against loss or damage while in transit to that point. This term should not be used for airfreight or containerised seafreight – see CPT

CIF - Cost, Insurance and Freight (... named port of destination)
Very widely used, use of this term indicates that the seller’s price includes all charges up to the arrival of the goods at the point of discharge from the vessel including the cost of insuring them against loss or damage whilst in transit. This term should not be used for airfreight or containerised seafreight – see CIP.

CPT - Carriage Paid To (... named place of destination)
The seller is responsible for the cost of freight up to the point where the goods are delivered to a specified destination but is not responsible for insuring the goods against the risk of loss or damage whilst in transit. It is the buyer’s responsibility to clear the goods for import.

CIP - Carriage and Insurance Paid To (... named place of destination)
“CIP” indicates that the seller is responsible for the cost of freight up to the point where the goods are delivered to a specified destination including the cost of insurance against loss or damage during transit.

DAF - Delivered At Frontier (... named place)
Use of this term indicates that the seller’s obligation is fulfilled when the goods are delivered to a specified point at the frontier. There is no responsibility on the part of the seller to declare the goods to the customs in the importing country but it is the seller’s responsibility to clear the goods for export.

DES - Delivered Ex Ship (... named port of destination)
The seller accepts responsibility to make the goods available to the buyer on board the ship at the port of discharge. Obviously this term cannot be used for airfreight consignments. It is the seller’s responsibility to clear the goods for export but not for import at the port of discharge.

DEQ - Delivered Ex Quay (duty paid) (... named port of destination)
The seller is responsible for making the goods available to the buyer on the wharf at the port of discharge. The seller must bear all costs and risks involved in placing the goods at the disposal of the buyer at the port of destination. This term cannot be used for airfreight shipments.

DDU - Delivered Duty Unpaid (... named place of destination)
The seller’s obligation is fulfilled when the goods have been made available at a specified point in the seller’s country. The buyer bears all costs incurred in delivering them to that point. The buyer is responsible for duties and taxes etc. payable when goods are cleared through customs.

DDP - Delivered Duty Paid (... named place of destination)
The seller’s obligation is fulfilled when the goods have been made available at a specified point in the buyer’s country. In this case the seller is also responsible for payment of duties, taxes and other customs clearance charges.

INTL TRADE - Measurement Caculation - Air & Sea

Sample:

Carton Dimensions: 40cm X 40cm X 60cm each carton
Carton Gross Weight: 6kg each Carton
Inner Packets: 24 Packets per export Carton

Calculate Airfreight cost:

If known Cartons No.: 15 Cartons / Freight Rate: AUD 2.90/kg, Calculation as below:

Actual Weight = 6kg x 15 = 90 kg
Total CBM / Cartons = 96000 cm 3 1kg = 6000 cm3
Volumetric Weight = 96000 cm3 x 15 cartons / 6000 cm3 = 240 kg

As we choose the greater weight as the chargeable weight, we use volumetric weight which is 240kg to calculate total Freight Cost.

Total Freight = 240 kg x $2.9/kg = $696


Calculate Ocean Freight Cost.

If known: Cartons No: 150 Cartons / Freight Rate: AUD 80.00/cbm, Calculation as below:

1. Actual CBM = 96000 cm3 x 150 = 0.096m3 x 150 = 14.40m3
2. Gross Weight = 6kg x 150 = 900 kg 1000kg = 1m3
CBM = 900kg / 1000kg = 0.9 m3

As we choose the greater Volume as the chargeable Volume, we use actual CBM 14.40m3 to calculate total Freight Cost.

Total Freight = 14.40m3 x $80.00/cbm = $1152

INTL TRADE & EXPORT - Definition

1. What is Bill of Lading? What does the Endorsement “Shipped on Board” indicate

It is the primary document between the ship’s operator and the exporter, it is the receipt from ship’s operator for the cargo, it is also a documentary evidence of contract of carriage, it is a document of title of goods specified, it is no negotiable instrument, but can used to transfer title to the goods described and provided it is correctly endorsed.
And it usually specifies on the reverse the operator’s terms and conditions for the contract of carriage.

“Shipped on Board” is conclusive evidence that the goods have been received ad shipped in accordance with the details on the face of the Bill of Lading. And after the cargo has been physically loaded onboard the vessel as nominated on the face of B/L, the bill of lading then is released after the vessel has sailed from the port.

2. ATA Carnet

A carnet is an international customs document that allows goods to be brought into Australia without the payment of customs duty and taxes and without the need for a formal customs entry.

ATA carnet are used for a wide variety of goods coming into Australia temporarily (or member countries), it will only be accepted for goods being temporarily imported under those conventions, which have been acceded to by Australia. (ie Exhibitions, Samples, Scientific/professional equipment, welfare material etc. Listed in Sec 162A)

ATA carnet normally related to goods other than private motor vehicles.

3. Export Permits:

Export Permits are to be obtained from the relevant PIA for all goods subject to export prohibition or restriction prior lodging an export entry.

4. EDN’s

Export Declaration Number, if the permit numbers (incl. permit prefix) are correctly shown on export entry declarations to enable the issue of an export clearance. (EDN suffixed with a “C”)

5. Embargoes

If export the goods listed in the DSGL to the specified country are subject to export restriction, and the countries to which this form of embargo applies are listed in the DoD publication. It is like a trade choice between countries, ie US and Cuba.