Business Reading. Importing - Exporting: shipping terms

Importing - Exporting: Shipping Terms

Whether you are buying or selling you have to consider the terms in accordance with which the transaction will be made. All shipping terms are defined in а special book known as the INCOTERMS (International Commercial Terms). А11 in а11, there are 14 different ways of arranging the shipment of goods. Since in international trade the interests of the buyer and the seller are conflicting, both parties will prefer different ways of delivery of their merchandise.

We'll not be discussing а11 14 terms, but highlight the most popular ones.

For the seller the transaction under Ex Works term is the most attractive one. In such case, the only thing he has to до is to put the goods on а prearranged place outside the factory and the buyer will have to arrange transportation and to bear а11 the expenses connected with the transportation process, insurance and. customs clearance.

For the buyer the transaction under Delivered Duty Paid term

is preferable. Не does, not have to worry about anything, because

the seller will pay а11 the costs connected with the delivery of goods to the importer.

It's only natural that these shipping terms are not particularly popular in international trade, because they put one of the paities in а vulnerable position. International trade is а two-way process, and а deal is а result of а sensible compromise. That's why FOB, FAS, C&F, CIF terms seem to be the most popular ones.

The initials FOB stand for Free on Board. This term is a little bit confusing, because 'on Board' does not necessarily mean 'on board the ship'. 'On Board' may imply any means of transportation, namely plane, lorry, train.

So, if you really want to have your goods delivered 'On Board the Ship', you must specify FOB Vessel, Port of London. [п general, the term FOB implies that the buyer becomes the owner of the goods the moment they have been placed over the ship's rail. The exporter has to deliver the goods as indicated above, to notify the other patty, to get an export licence, if necessary. Customs formalities in his country are also the exporter's respon­sibilities.

The initials FAS stand for Free Alongside Ship. Under this term, the seller is responsible for the goods until the moment they are delivered to а port, where they will be loaded on а vessel. Since that moment, the control over the goods passes on to the buyer and the latter will have to pay export taxes and loading charges, if any.

The initials C&F stand for Cost and Freight. Under this term the seller pays the ocean freigh costs, but does not pay for the insurance. 1f а deal is concluded оn C&F terms, the buyer usually tries to minimize the iisks involved in the transportation by buying insurance.

The initials CIF stand for Cost, Isurance, Freight. Under this term, the importer buys the goods, thё freight and insurance from the exporter who arranges everything.

А11 these shipping terms have some advantages and disadvantages CIF seems to be very popular even among exporters with а long record of international trade.