The important of Incoterms - How to make full use of Incoterms

1. The important of Incoterms - How to make full use of Incoterms Julia Yu International buyer/Import Manager Craigdon Business Gifts Craigdon Mountain Sports www.craigdon.com www.craigdonmountainsports.com

2. Introduction • International Trade • Sale of goods – 90% • Sale of service – 10% • Sale of goods - Incoterms decides the way contract to be done Who is responsible for what

3. Where the goods will be delivered • Who arranges transport • Who insures the goods • Who handles customs procedures • Who pays duty and VAT

4. The parties involve import&export: (physically move the goods from A to B) A: shipper/seller AAA company in India B: consignee/buyer BBB company in Inverness C: shipper’s shipping agent(freight forwarder) D: consignee’s shipping agent(freight forwarder) E: shipping company (the agent of shipper’s agent in destination/UK), sometimes could act as D.

5. C prefers CIF type of freight prepaid terms, D likes FOB types of freight collect trade terms. • Generally recommend European and the American buyers who purchase goods from Asia use freight prepaid. (my experience) • As being a UK buyer, I prefer using CIF/CFR. • Sea freight is a lot cheaper than using collect terms FOB etc. • Reduce inland carriage by making full use of Incoterms

6. Example: ( how to make full use of Incoterms to reduce inland haulage/sea freight) • Trade terms: CIF Glasgow • Shipper: AAA Chennai India • Consignee: BBB Inverness Scotland UK • Loading port: Chennai • Destination: Inverness • Discharge port: Glasgow • Goods: 5sqm(LCL)

7. The charge on import side when goods arrive normally includes – (DDP and DDU excluded**) - Port charge: terminal handling etc. - Custom clearance: VAT + Duty**+ other official charges - Inland haulage: (D most likely makes money from this part)

9. CIF Glasgow vs. CIF Southampton (why CIF Glasgow not CIF Southampton) - Sea freight: almost no difference - Inland haulage: big different (from port to buyer’s premises)

10. Be careful to use small port to be discharge port, risk could involve: A. small port no custom clearance facilities B. service is not as efficient as big port C. shipping company transfers part of cost to Part B. (specially port charge, handle off- loading/loading more than once) D. Not every people works in the industry understand trade terms

11. In this case, I encountered C&D. Other cost: ignore Inland haulage quoted from shipping company was £286 (whichever from S/G) Operator explained as: the whole cost from India to Glasgow is: £343, deduct prepaid sea freight £57(which covered from Chennai to Southampton as they said) – This is their tradition way to operate as FOB.

12. My explanation: I can send my shipping agent to do custom declaration etc if you prefer us doing it in South port. But please send the goods to Glasgow afterwards, because this trade terms is CIF Glasgow, I have paid the freight till Glasgow. I could only pick up the goods in Glasgow. • Inland haulage finally cost: £84, save £202 for small shipment. A 20CT could save you up to £700.

13. **DDU & DDP • DDU, delivered duty unpaid ( it is understood as duties, taxes and other official charges unpaid, however, if the parties wish to include in the seller’s obligations some of the cost for example VAT payable, this should be made clear by adding words to this effect: Delivered duty unpaid, VAT paid etc.) • DDP – delivered duty paid ( it is understood as duties, VAT and other official charges paid, however, if the parties wish to exclude from seller’s obligations some of the cost for example VAT , this should be clearly state that: Delivered duty paid, VAT unpaid etc)

14. 13 types of Incoterms divided to 4 groups: • E terms • F terms • C terms • D terms