Incoterms
Incoterms in brief - theory and experience:
–FCA
FREE CARRIER
(……… named place)
We deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place, bearing all the risks and relevant costs until that moment of delivery to the carrier.
From experience: We used to buy from MMK, Magnitogorsk, Russia. Those were FCA contracts. The mill was informing us about the planned date of readiness of the goods at mill's stock and a couple of weeks prior to that we were ordering railway wagons to arrive to the loading place by said date. The mill was loading the railway wagons and from that moment onwards, we had the goods and the risk. The mill's obligations were over after the loading of the wagons at their premises is completed. However, all of the documents which would enable us to perform exports were arranged by the mill before the material was loaded.
– FAS
FREE ALONGSIDE SHIP
( ………named port of shipment )
We deliver the goods, placed alongside the vessel, cleared for export at the named port of loading, bearing all the relevant costs and risks of loss of and damage to the goods, until that moment of delivery, alongside the vessel.
From experience: Several years ago, sunflower seeds were loaded from Moldova and had FOB contracts with the suppliers. They worked through Reni port and had to load the vessel and issue the Bill of Lading and after that they could receive the cash. But once their friendly forwarder left the port, they started to insist on FAS basis, which was more convenient to them as they just had to discharge the material onto the berth alongside the vessel and we had to go through all arrangements with forwarders to guarantee fast and proper loading.
-FOB
FREE ON BOARD
( ………named port of shipment.)
We deliver the goods, cleared for export, shipped on board of vessel, bearing all the relevant costs and risks of loss of or damage to the goods, until the goods pass the ship's rail at the named port of loading.
From experience: Most Black Sea contracts with long destinations are done on FOB basis especially if there is part cargo loaded in the vessel. You load your cargo, get the B/L and get the money without worrying on the vessel route, delays, destinations, insurance, risks during and after voyage at discharge port. Convenient? - Yes. Disadvantages? - You will not see the end-user. And possibly, people who make cfr sales make better margin when freight is stable or falling. And there is always a danger that the buyer will not send the vessel in time or not at all.
-CFR
COST AND FREIGHT
(………named port of destination)
We deliver the goods, cleared for export, on board the vessel at the port of destination, bearing all the relevant costs until the goods reach the port of destination. All the risks of loss or damage to the cargo, are born by the buyer after the loading has been accomplished.
From experience: You fix the vessel, control ETA of the vessel, loading procedures, pay freight, coordinate with receivers at discharge port. You have all the risks above and make more money if freight is ok. On the other hand, you lose when freight is jumping which happens more often then you would expect.
-CIF
COST INSURANCE AND FREIGHT
(………named port of destination)
We deliver the goods, cleared for export, discharging the vessel at the port of destination, bearing all the costs, including the freight and insurance premium. We procure marine insurance on minimum cover, against the buyers' risk of loss of or damage to the goods during the carriage. In case the buyers require protection of greater cover, the extra insurance agreements are on buyer's account.
From experience: All as above with insurance on your account as well. It is a must if you sell without Bank Guarantee.
-CPT
CARRIAGE PAID TO
(………named place)
We deliver the goods, cleared for export, to the carrier, nominated by buyer, at the named place of destination bearing all the relevant costs, including carriage and the risks of loss of or damage to the cargo, until the delivery to the named carrier.
From experience: If your supplier does not have too much experience with vessel loading and your forwarder is reliable in the loading port, you can take this burden off his shoulders - make a CPT contract and control the goods after they are discharged in the loading port under the strict supervision of your forwarders. FCR might be useful to transfer the property title as well. But don't do it with new forwarders.
-DAF
DELIVERED AT FRONTIER
(………named place)
We deliver the goods, cleared for export, on the arriving means of transport, not unloaded, at the named point and place at the frontier, but before the customs border of the adjoining country, bearing all the relevant costs and risks of loss of or damage to the goods, until the goods are placed at the disposal of the buyers arriving means or transport.
From experience: Within a year we shipped over 10.000 mt pipe billets to Romanian pipes mills. We sold at DAF Reni-Galati conditions, it was relatively simple, we loaded the wagons at the producing mill, paid the railway tariff till this border point and all the rest was at account of receivers. The danger is the frequent delay and demurrage of the wagons at the border. Check the congestion beforehand.
-DDU
DELIVERED DUTY UNPAID
(………named place of destination)
We deliver the goods, placed alongside the vessel, cleared for export at the named port of loading, bearing all the relevant costs and risks of loss of and damage to the goods, until that moment of delivery, alongside the vessel.
We deliver the goods to the buyer, cleared for export, but not cleared for import, and not unloaded from any arriving means of transport at the named place of destination, bearing all relevant costs and risks involved, in bringing the goods there to. All the costs and risks related to unloading and customs formalities and customs clearance, to be born by the buyers.
From experience: We sent angles by trucks to Benelux on DDU basis. Truck companies are professional and as soon as you pay their tariff, they will provide significant assistance and deliver the goods to the destination point - somewhere inside Luxembourg. Of course, the receiver pays the import duties and anything needed for importation into the country under these sales conditions.
