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In the last few blogs, we highlighted various factors that concern sea freight, payment terms and responsibilities between buyers and sellers. We’re highlighting the rest of the IncoTerms in this blog, to ensure that you have an all-round view of the ins and outs of all transport modes for whatever your freight forwarding requirement is.

Here are the rest

IncoTerm SELLER BUYER
EXW

 

Ex

Works

 

All costs up to goods placed for pickup at buyer’s disposal All costs from loading from warehouse of sellers
FCA

 

Free

Carrier

All costs up to delivery to carrier at mutually agreed upon location between Buyer & Seller

Includes customs clearance (at origin)

All costs from handover to carrier

Excludes customs clearance (at origin)

 

CPT

 

Carriage

Paid

To

All costs up to delivery to carrier at mutually agreed upon location between Buyer & Seller

Excludes customs clearance and insurance (at origin)

All costs after delivery to mutually agreed upon location between Buyer & Seller

Includes customs clearance (at destination)

Transportation and insurance for whole carriage

CIP

 

Carriage

and

Insurance

Paid to

All costs up to delivery at mutually agreed upon location between Buyer & Seller

Includes customs clearance (at origin)

All costs after delivery to mutually agreed upon location between Buyer & Seller

Includes customs clearance (at destination)

Transportation and insurance after delivery

DAT

 

Delivered

At

Terminal

All costs up to delivery to terminal mutually agreed upon location between Buyer & Seller

Pick up ready

Excludes customs clearance (at destination)

All costs after delivery to terminal

Includes customs clearance (at destination)

DAP

 

Delivered

At

Place

All costs up to delivery to past the terminal,

Mutually agreed between Buyer & Seller

Pick up ready

Excludes customs clearance

All costs after delivery from past the terminal

Mutually agreed between Buyer & Seller

Includes customs clearance

DDP

 

Delivered

Duty

Paid

All costs up to delivery to past the mutually agreed point between Buyer & Seller

Includes customs clearance, duties, VAT

All costs after point of delivery mutually agreed between Buyer & Seller

 

 

For the rest of the IncoTerms to cover all the transport modes, refer to our previous blog “IncoTerms Rules across the Scope of Buyer and Seller for Sea Freight Transactions” , or the following infographic.

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If you have been following our blog for the last few weeks, you would have realised that we highlighted a few things that relate to sea freight transactions. Last week, we looked at “Sea Freight Shipments and Payment Terms” and highlighted the scope of incoTerms. In this blog, we’re trying to make things more transparent or even easier to understand at first glance. IncoTerms Rules can be hard to decipher depending on the scope that falls on the buyer or the seller when it comes to sea freight transactions.

The following table looks at the IncoTerm Rules for sea freight transaction over the ocean as well as inland waterway transportation.

IncoTerm SELLER BUYER
FAS Free Alongside Ship All costs of delivery up to shipside

Nominated by Buyer

Includes customs clearance (at origin)

Excludes cargo loading costs (at origin)

All costs from cargo (on shore)

Includes cargo loading costs (at origin)

FOB Free

On

Board

All costs up to loading on board ship

Nominated by Buyer

Includes customs clearance & cargo loading costs (at origin)

All costs from cargo boarding ship

 

CFR Cost

and

Freight

 

All costs up to delivery at named destination port

Mutual agreement between Buyer & Seller

Includes customs clearance (at origin)

Excludes insurance

All costs from delivery at named destination port

Includes customs clearance (at destination)

Transportation

 

 

CIF

 

Cost

Insurance

Freight

All costs up to delivery at named destination port

Mutual agreement between Buyer & Seller

Includes customs clearance and insurance (at origin)

All costs from delivery at named destination port

Includes customs clearance (at destination)

Transportation

Excludes insurance

 

Image: edited image by FlamingoHoldings

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Even in the olden days, trade occurred with the barter of a good or service, and presently it’s done in exchange of money. Whilst merchants of the past paid for new goods in kind, in sea freight nowadays there are sea freight shipments and payment terms that come attached to it to ensure that transactions occur smoothly to facilitate better global trade.

Trade transaction usually occur between two parties, the buyer who is seeking a product(s) or service(s), and the seller who has the sought after product(s) or service(s). Now, with concern to sea freight shipments which include goods obviously, there are various payment terms that they can opt for, whereby either one or both the buyer or seller may end up paying, concerning the different processes it takes to get the goods from Point A to Point B.

Essentially when a trade occurs, there is what we usually refer to loosely as a “Sales Contract” which essentially outlines the goods being traded, the specification and other essential information pertaining to the buyer/seller and modes of transport, and etcetera            a. When it comes to sea freight shipments, these are outlined in what is referred to as IncoTerms, which are internationally accepted. With IncoTerms, the risks and obligations are detailed and can thus reduce trade complications. Thus, in sea freight shipments, the payment terms, i.e, IncoTerms, will detail the following;

  1. The Buyer’s and Seller’s obligation pertaining to the transaction
  2. Outlines the risks, and rules, and the point of which they pass from seller to the buyer
  3. Defines how the costs of the trade transaction is divided between the buyer and the seller

However, one must keep in mind that the IncoTerms cannot be considered the Sales Contract – there will be another form of documentation that the seller will issue the buyer separately. It should also be noted that the IncoTerms will not supersede the laws that govern the sales contract, and does not outline to where/whom the title of goods transfers to, and nor does it indicate the price, currency or credit terms. All those items will be included within the Sales Contract in detail. The additional costs will be allocated to the seller/buyer based on the chosen IncoTerms. It should be kept in mind that there are eleven IncoTerms, in the last updated 2010 edition, and the rule pertaining to selected terms will govern responsibilities/risks.

For more information related to IncoTerms and past blog posts, please refer to the following;

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Transshipment and shipside are not words that are commonly used when dealing with personal effects shipping, but are known for those dealing with commercial trade.  In this blog, we look at what transhipment and shipside is and what it all entails.

Transshipment

Transshipment is essentially the transfer of a shipment from a vessel or a carrier to another while it’s still in transit. Vessel to vessel transfer is the most common. Whilst most transshipments occur in transport hubs, there are also some exemptions whereby they occur in designated customs areas when it comes to international transhipments. These transport hubs can either be sea transport hubs or air transport hubs. The need for transhipment of cargo comes down to practicality; restrictions in coverage of ports by carrier lines or trade lanes are examples of such practicalities. The following are the global trade lanes and transshipment incidence (which means the share of containers transhipment traffic – traffic to traffic – takes in with regards to total volume handled by port).

Shipside

Shipsde includes transfer of cargo to the area adjacent to a shipping vessel, at a dock or at sea where freight is unloaded usually to a smaller vessel (lighter/barge). A shipside transfer requires written authority to discharge the cargo as per customs regulation. This permit will be handed over to the Customs Inspector onboard the vessel.  A barge is a flat bottomed barge used in the transfer of  goods to and from moored vessels that is other powered or towed by another boat, whereas a lighter are traditionally unpowered.

For a shipside transfer, it must be carried out under guard of authority and done so continuously. Due to the sensitive nature of this transaction, all cargo needs to be checked against the Permit and inward foreign manifest with descriptions weight and quantity. The Customs Inspector onboard the vessel must take due caution and strictly adhere to the conditions and/or requirements mentioned in the permit, and furthermore also issue a Boat Note with mention of pertinent criteria which will act as a receipt to the master of the ship as well as  ascertain responsibility of the transfer and proceedings. This Boat Note will include the following information; Name of vessel, date or arrival, and registry numbers, Name of lighter/barge, Name of Broker and/or Consignee, Shipside permit numbers, Shipping marks numbers, Type and description of cargo, Time & date of lighter/barge leaving vessel, names and signatures of Customs Inspector, Customs guard or guards in charge of lighter/barge.

 

Images: portoeconomics, maritime connector,

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If you are planning a move, be it an office relocation, moving to a new home (either in the same city, same state or even country) or an overseas relocation, or what about planning for a trip overseas for the likes of exhibitions and more, there is much planning to be done to ensure that you have everything in your task list taken care. You really need to pay heed because if you don’t plan your shipment ahead of time, you may have numerous issues to deal with and not to mention the unwanted stress. We have put together some tips to plan your shipment ahead of time; keep reading!

Plan Your Shipment – Set Aside Packing Time

When it comes down to meeting deadlines, we usually plan backwards from that date. Thus, you keep ample time for various tasks and a bit of buffer time as well for anything that gets delayed for realistic timings. It’s always a good idea to plan for Plan B so that you don’t drop the ball and miss your deadline and still get everything done efficiently and accurately. So, when it comes to ensuring you plan your shipment ahead of time, set aside time for packing. Packing takes a lot of time depending on the type of goods – thus get started early or get help. From there onwards you also need to account for your goods get from your address to port, and then loaded onto the vessel and also for it to reach the destination.

Plan Your Shipment – Be Wary of Extenuating Circumstances

As with any sea freight shipment, you need to keep in mind that bad weather and natural disasters, as well as other delays such as transshipment issues, and various other factors than can be attributed for delays. Whilst you can get shipping insurance, keeping a buffer time between your deadline would be smart.

Plan your Shipment – Communicate

Whether it’s a relocation or an event shipment, keep the different parties informed and communicate effectively between the shipping line, freight forwarder (that’s us, Transco Cargo), clearing agent, documentation teams, banks, etc so that everything falls in line and everyone is aware of the transit time and lead time kept aside for any issues that come up. Factoring in budgeted transit time, and keeping a buffer/lead time can ensure that you have enough time to meet your deadlines effectively without an issue.

Plan your Shipment – Stick to a Direct Route

Transshipment means delays as you have stops and deconsolidation at different ports enroute. This occurs during LCL (less than container load) shipments, thus you can choose FCL shipment even through you may not have enough to fill a 20 foot container. If you plan your shipment this way, you will not need have transshipment delays in mind.

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When it comes to shipping documents, we know that they differ from the type of shipment; sea, air, and land. In our previous blogs, we looked at the types of Bill of Lading. You can read about them in our blogs, The Types of Bill of Lading, and An Air Waybill and how it Differs from a Bill of Lading. In this blog, we look at land transportation documents.

Land Transportation Waybill

A Land Transportation Waybill is used with land-based shipments, whereby it acts as a concise form of contract of carriage with not much detail or conditions related to the tariffs that the carrier must pay. By finding out what the waybill contains, the shipper will be able to find out the limits of liability. Much like an Air Waybill (AWB), it’s a non-negotiable form of document and is never consigned on “to order” basis. However, a waybill can fall under terms of “Collect on Delivery” with add-on handling fees by the carrier to safeguard both the buyer’s and the seller’s interests.

Uniform Bill of Lading

This is a type of Bill of Lading that is used for land based shipments and is subjected to shipping terms and conditions that are “uniform” with transportation tariffs or contract of carriage agreements that are accepted widely.  The Uniform Bill of Lading is also referred to as a Uniform Waybill. It can be consigned on “to order” basis and thus becomes a negotiable type of Bill of Lading much like an Ocean Bill of Lading (as explained in our previous blog – An Air Waybill and how it Differs from a Bill of Lading ).  This uniform bill of lading is a longer version of the “Waybill” including the terms and conditions in entirety as opposed to a waybill referring only nominally.

Hand Tag

A hand tag is used for a cargo pickup when a truck driver shows up at a shipping dock or door (at the origin’s address) and is filled in by hand. It’s a short-form contact with a brief set of terms and conditions. However, it is still covered by the limits of liability by the carrier, and also carries the tariff’s that they must pay.   It is sometimes also used in air freight and local shipping couriers for its convenient nature. Electronically dispatched trucks hired for cargo pickups from shippers that have not prepared a uniform waybill for the driver to sign as means of a cargo receipt often use a hand tag.

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An Air Waybill also abbreviated for ease of use as AWB, is also known as an air consignment note. This is a document that is issued when goods are transported by air as a means of acknowledging receipt. Much like other bill of lading types, they are non-negotiable. Once the goods arrive at the destination airport, it is handed over to the consignee or the customs broker, if one has been hired to help with customs clearance services, for delivery.  It’s important to remember that though a Bill of Lading acts a title of goods, an air waybill is not so.

An Air Waybill functions in the following ways;

A Contract of Carriage – The conditions of contract for carriage are included within.

An Air Cargo Receipt and Delivery Instructions – the Air Waybill acts as the receipt of goods to ensure that the air cargo has been handed over and in the good condition along with the delivery/shipping instructions (as per the Shipper’s Letter of Instructions). Once this is carried out and the transaction is complete, the original copy is handed over to the shipper as proof.

Freight Bill – the Air Waybill will also be used as a freight bill or invoice along with the other documents to indicate the freight charges to be paid by the consignee or any other chargers due to the freight agent or the carrier. An original copy of the air waybill is handed to the carrier too.

Certificate of Insurance –  The Air Waybill also acts as proof if the carrier is able to insure the shipment and where the shipper has request the carrier to undertake shipping insurance.

Customs Declaration – The Air Waybill is also proof of the freight amount billed for the air cargo and can be used for customs clearance along with other documents like the commercial invoice, packing list and more.

How the Air Waybill differs from the Bill of Lading are as follows;

Bill of Lading (B/L) Air Waybill (AWB)
Negotiable (various other types of B/L can be non-negotiable though) Non-negotiable
Issued after complete consignment has been loaded onto vessel Issued after complete consignment has been received by airline
Issuing of B/L falls on the vessel company Issuing of B/L falls on the carrier company
Goods are delivered to the bearer of Original B/L except in the event of a Telex Goods are delivered to a specific person as mentioned in the Air Way bill

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You may be aware of what is referred to as a Bill of Lading, but did you know that there are up to 8 different types of Bill of Lading, out of which 4 are commonly used. Based on the mode of transportation and your shipping terms, this can differ. Let us explain!

Essentially, a Bill of Lading functions in three ways; as a receipt for goods, as proof of contract of carriage, and as a document title to the goods. There is what is referred to as a “Master Bill of Lading” or MBL which is a document that used for shipping company by the shipping carriers as a means of receipt of transfer of goods. The MBL will include the terms of transporting the freight, and the name and address of the shipper (or consignor) as well as the consignee (the person who is in possession of the good). However, there are other types too. Let’s break down how a Bill of Lading applies to you based on the mode of transport; ocean transportation, air transportation, and land transportation.

Straight Bill of Lading

It’s a non-negotiable form of a bill of lading, address directly to the buyer with the buyer’s customs broker being listed as the “notify party”. With a straight B/L, three sets of original bill of lading documents will be issued by the carrier, one of which will be endorsed by the consignee and presented when collecting the goods at the destination. A straight bill of lading is typically issued when there is a balance payment to be made.

Order Bill of Lading

Another non-negotiable form of bill of lading, of which this type is addressed as “to order’ or as “to order of a party” without being consigned to the buyer. The cargo shipment will hand over the shipment to whoever presents this specific bill of lading (as long as the bearer has been endorsed on the back) as the bearer will be considered the owner of the shipment. This type of bill of lading is typically used when the purchase of such goods is carried out via a letter of credit or in the instance when the goods are expected to be traded on a mercantile exchange platform whilst its being shipped.

Electronic or Telex Release

This form of bill of lading is essentially digital and there will be no need for the original bill of lading to be presented at the destination when requesting the release of goods. What an electronic or telex release will do is the shipper will endorse the original B/L, submitting it to the carrier’s agent at the point of origin, who then will notify the agent at the destination. The goods will be then instructed for released without the hard copy of the original bill of lading. The name comes from the past use of telex services, but nowadays emails or integrated systems will do the needful. This type of bill of lading is used when a balance payment is due, but payment goes through before the cargo arrives at the destination.

Stay tuned for the next blog on An Air Waybill and how it differs from a Bill of Lading.

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What’s a “Consol Box” you ask? It requires a bit of background information, so let’s get you all caught up with how a Consol Box works in containerised shipments and why LCL cargos are related to Consol Boxes.

Containerisation revolutionised the shipping industry when it was introduced over six decades ago, making waves in globalisation for ease and quick shipping on a global level. As containerisation took off, the types, services and sizes of containers also evolved with it. The containerisation service types included the likes of FCL and LCL.

FCL which stands for Full Container Load is a container service type that involves a full container being utilised by a single customer for only their cargo, with exclusivity. One of the key factors with this container service type is the fact that the client takes full responsibility (as well as the liability involved) for the packing of their cargo and the condition in which the cargo is loaded and packed into the container too.

LCL is its counterpart for those clients who do not need a full container as the contents are less than s full container loads of goods. LCL stands for Less than Container Load. Essentially, there are several clients (shippers and consignees) allocated to share a single container space. The term consolidation involves the act of consolidating or grouping together the various cargo for the LCL containerisation service type by what is called the Consolidator. In such an event, the container is located at the freight forwarders or the packing station which is called the Container Freight Station (or CFS) where all the cargo designated for the particular container is grouped together and then loaded on.  This particular container is called the LCL Container if it is carried out by the shipping line and if it is done by a Consolidator, then it is referred to as a “CONSOL BOX”.

Whilst it sounds alike, there is a difference to LCL and Consolidation (or Groupage).  The main difference involves the documentation involved and the respective parties. The consolidators will issue House Bills of Lading to the shippers and thereafter secure a Master Bill of Lading for the container from the shipping line once booked (with the line on FCL basis) which will show the consolidator as the shipper.

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In our last post, we looked into the future of container shipping. To fully understand the trend and expectation of its future, we highlighted the history of the container shipping industry and how it has changed other industries for global trade with bringing in low cost shipping options with the introduction of both LCL and FCL freight, which stands for less than container load (LCL) and full container load (FCL) freight cargo.

The possibility of low cost shipping is available via the likes of Twenty-foot Equivalent Units (TEUs) which is the means by which container capacities are measured that allows for large amounts of cargo and goods being shipped across seas, with weekly departures makes trade and movement of goods easy.

FCL Low Cost Shipping

What are FCL shipments, you ask? They are simply “Full Container Loads” of twenty foot or forty foot containers, which allows for large quantities of cargo goods to be transported and the choice for global traders with manufacturing delivery deadlines to other countries. You may also take up this FCL low cost shipping option if you are looking for relocation, as in, if you need to pack up your household items or business items, everything from chairs to desks, and equipment and even vehicles. You can opt between the 20ft and 40ft container based on space required for all your goods. The process will involve a container being sent to the address for loading by the shipper themselves (assistance can be provided by the freight forwarder if required on case-by-case basis).

LCL Low Cost Shipping

So, what are LCL shipments as a low cost shipping option compared to FCL? As we said before, LCL stands for Less than Container Load. It means that that you are have less than a full container load worth of goods. You would rather not opt for a full 20ft/40ft container and pay the fees for the same. Thus, what happens is, you choose  the sharing option. Either a 20ft/40ft, will be shared between other shippers/parties and want to put to use this low cost shipping option. The process is different to that of FCL. Where the goods by each shipper need to be handed over to the freight forwarder for what is called consolidation of cargo into the container. It’s a popular choice due to being a low cost shipping option over air freight.

With Transco Cargo, being your global freight forwarding partner, you are able to make the best use of low cost shipping with LCL and FCL freight with ease,. We provide turnkey services from door to door delivery. You can enjoy the benefits of low cost shipping freight solutions with Transco Cargo through our global network of shipping partners and shipping lines.

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