Arranging Shipment

Whether the firm is large or small, the weight of the cargo is light or heavy, the freight forwarder and customs broker will take care of it from “dock to dock” if requested by a client. They will take care of the logistics for transportation and customs clearance.

Forwards and custos brokers will deal with many of the details involved with the logistics of exporting their goods. The process of transportation includes the correct filing of export documentation, packing, crating, storage and customs clearance needs. In addition, freight forwarders typically have access to shipping discounts so that they charge modest rate.

Issue a power of attorney for your customs broker to act on your behalf when the goods arrive in your country. However you may be called on for additional information.

What is a freight forwarder?

The forwarder advises and assists clients on how to move goods most efficiently from one point A to Point B. A forwarder’s extensive knowledge of documentation requirements, regulations, transportation costs and banking practices can ease the exporting process for many companies.

What is a customs broker?

A customs broker performs transactions at ports on behalf of other parties. It guides goods into a country. The broker can also estimate the landed costs for shipments entering the country. The transactions costs for the importer will include the entry of goods into a customs territory, payment of taxes and duties and duty drawback or refunds.

Exporters typically do not book shipments directly with a foreign customs broker, because freight forwarders often partner with customs brokers overseas who will clear goods that the forwarder ships to the overseas port.

Correctly use of Incoterms will provide the legal certainty upon which mutual confidence between business partners must be based.

What are INCOTERMS and when are they used?

Incoterms is an abbreviation of International Commercial Terms. They are standard trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce. The Incoterms provide a common set of rules for the most often used international terms of trade. The goal of the Incoterms is to alleviate or reduce confusion over interpretations of shipping terms by outlining who is obligated to take control of and/or insure goods at a particular point in the shipping process. Furthermore, the terms outline the obligations for the clearance of the goods for export or import and packing requirements. The Incoterms are used quite frequently in international contracts and an official version of the Incoterms should be referenced in the text of the contract.

What are some examples of INCOTERMS?

Incoterms fall into four different groups:
Departure (E)
Main Carriage Unpaid (F)
Main Carriage Paid (C)
Arrival (D)

EXW Ex Work (delivered at seller's premises)
FCA Free Carrier (delivered at carrier's premises)
FAS Free Alongside Ship (port of departure)
FOB Free On Board (port of departure)
CIF
CFR Cost, Insurance and Freight (named port of destination)
Cost and Freight (named port of destination)
DES
DEQ Delivered Ex Ship (named port of destination)
Delivered Ex Quay (named port of destination)
DDU
DDP Delivered Duty Unpaid (named place of destination)
Delivered Duty Paid (named place of destination)

Caution must be exercised when using Incoterms because they relate to particular modes of transportation. For example, Incoterms such as FOB (Free on Board) and CIF (Cost, Insurance and Freight) are only applicable to sea transport. FOB indicates that the shipper (seller) has upheld his/her part of the agreement when the goods pass the ship’s rails at the port of exit. The receiving party (buyer) assumes risk and costs associated with the goods once they pass the ship’s rail in the seller’s homeport. Due to the specific mention of the ship's rails, an aircraft or other mode of transport could not be used with FOB. For a shipment scheduled for delivery by air, rail, or some other form of transport with the same agreement as FOB one would need to use the Incoterm FCA, or Free Carrier. FCA can include other modes of transportation such as road, rail, inland waterway and air. Whereas transfer under FOB takes place when the cargo passes the ship’s rails, transfer with FCA occurs when delivery of goods has been made at a destination previously outlined by the buying party.

These examples are not a definitive guide, but serve to highlight common Incoterms used in exporting.