Here are some frequently asked questions and common terms used for shipping. Feel free to contact us with any other questions
FAQ and TERMS
Shipping Terms
Shipping containers internationally can seem like a daunting task, one that comes complete with an intimidating set of shipping term to learn, as well as customs regulations, taxes, and protocol for the country you are shipping goods to.
The International Chamber of Commerce (ICC) define and publish a set of standardized terms known as the Incoterms in order to make sure all parties are always clearly aware of the delivery terms of any shipment.
FOB - Free On Board
This term means that the seller delivers when the goods pass the ship's rail at the named port of shipment. This means the buyer has to bear all costs & risks to the goods from that point. The seller must clear the goods for export. This term can only be used for sea transport. If the parties do not intend to deliver the goods across the ship's rail, the FCA term should be used.
CIF - Cost, Insurance, Freight
The seller delivers when the goods pass the ship's rail in the port of shipment. Seller must pay the cost & freight necessary to bring goods to named port of destination. The seller also has to procure marine insurance against buyer's risk of loss/damage during the carriage. Seller must clear the goods for export from the country of origin, but is not responsible for any destination customs duties or clearance. This term can only be used for sea transport, but can apply to both full container shipments, or smaller, consolidated “LCL” (Less Than Container Load) shipments.
If the consignee is able to handle the process of hiring a local customs agent to arrange for the clearance, as well as final local inland delivery, then CIF often results in the lowest final cost.
DAP - Delivered At Place (named place of destination)
This is a door-delivery service to a specific destination named by the customer, whether it be a home address, business address, or shipping container yard/depot. The seller pays for carriage to the named place, EXCLUDING costs related to import clearance, local duties, and taxes, and assumes all risks prior to the point that the goods are ready for unloading by the buyer. It is very similar to the old incoterm that it replaced, DDU (see below).
DDU - Delivered Duty Unpaid
This is an old Incoterm that was officially phased out and replaced by DAP in 2010. However, because it was an old standard that many sellers, buyers, and shipping companies are familiar and used to working with, many still use the term.
This term means the seller delivers the goods to the buyer, not cleared for import, and not unloaded from arriving means of transport at the named place of destination. The seller bears all costs & risks involved in bringing the goods to the named place other than "duty" (which includes the responsibility for customs formalities & payment of those formalities, duties & taxes) for import into the country of destination. Due to ambiguity in the wording regarding the responsibility of the on-site unloading, as well as confusion over the responsibility of costs related to customs clearance, DDU has been replaced with the term DAP.
DDP - Delivered Duty Paid
This term is identical to the term DDU term with the added exception that the seller also pays all costs & risks of carrying out customs formalities including the payment of duties, taxes & customs fees. It is typically better and cheaper (for both the buyer and seller) to book shipments CIF or DAP instead of DDP (with all the duties and taxes included), and often many shipping agents will not offer DDP terms to countries that have ambiguous, or constantly changing customs procedures and import duty costs.
Because of the potentially immense and unknown liability of local taxes/import duties in a DDP shipment, the freight forwarding companies add extra margin on top of the expected duties and taxes for handling the paperwork. Often if they are international companies, local governments try to charge them more because they are not local. Therefore, it is almost always cheaper in the end to book a CIF or DAP shipment, and have the consignee pay whatever import duties or customs clearance fees on their end.
Ex-Works
Ex Works (EXW is used when a buyer would like to arrange their own transportation. Under ex-works terms, the seller is only responsible for packing the goods and making them available for pickup at a designated location, such as the seller's warehouse/factory.
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