massimiliano di pace1 international transportation the topics are: - international transportation...

Massimiliano Di Pace 1

INTERNATIONAL TRANSPORTATION

The topics are:

- international transportation ways

- Incoterms

Exporters have to choose the carrier, and therefore the mean of transportation, and Incoterms, that is the rule governing the

delivery of goods



The choice of the carrier depend on: - choice of type of shipment (sea, air, land)- destination (what country or continent)

You have to consider that some international carriers may take care of shipment with every means of transportation and to every country in the world, while others are specialized in specific ways of shipment and for specific

destinations



Each way of transportation has advantages:a) Air: very fast and very expensive; it’s suitable only for small and worthy merchandiseb) Sea: very cheap but slow: it’s the only way when shipment has a very far destination, and it’s the best solution for bulk loads (i.e. commodities), or merchandise in containersc) Land: - rail: it has characteristics similar to sea transport, even if it’s faster than sea transport, and it’s useful for medium distances- truck: it’s faster but costlier than rail



The task of shipment is ruled by a carriage contract (i.e. bill of lading), which is governed by the United

Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by

Sea, issued by Uncitral

This convention points out rules about:- transport documents- obligations and liability of the carrier- obligations of shipper- transfer of rights- jurisdiction and arbitration



The carriage contract can include different services:

- loading

- stowage

- shipping

- unloading



Incoterms rules are used in international sale contracts where goods pass across national borders (including inside a trade

bloc as Eu) for determining means of transportation, place of delivery, charges included in the price

Incoterms spell out rights and obligations of the parties of an international contract of sale with respect to the delivery of

goods sold

Incoterms rules indicate:- where and how the goods are delivered - consequently when risk passes from one party to another- how costs of shipment, insurance and duties are allocated between seller and buyer



Incoterms (International Commercial Terms), drafted by Icc, help avoid legal uncertainty by spelling out

clear responsibilities between the buyer and seller in cross-border sales contracts, and have been endorsed by the UN Commission on International Trade Law

They have been foreseen the first time in 1936 and renewed in 2010 (7th edition)

The document specifying rules on Incoterms has to be purchased from Icc



Incoterms are useful to:- protect parties’ interests (making clear which is the place of delivery, when and where there is the transfer of risk)- reduce risks (having agreed modalities of shipment)

Furthermore Incoterms are the trade-union between sale contract and contract with the

carrier, and between sale contract and insurance contract



Incoterms are inserted in contracts as a clause

It’s up to the parties to decide whether an Incoterm has to be used as a provision of the

contract

But once it is adopted, the rules to be respected are the ones of Incoterms, as

indicated by Icc



It goes without saying that the Incoterm adopted must be compliant with other clauses of the contract (i.e. place of delivery, means

of transportation)



The Incoterms are 11, of which 7 are independent from the way of transportation:- EXW (Ex Works)- FCA (Free Carrier) - CPT (Carriage paid to)- CIP (Carriage and insurance paid to)- DAT (Delivered at terminal)- DAP (Delivered at place)- DDP (Delivered duty paid)



The remaining 4 Incoterms, which are specific to transport by cargo are:

- FAS (Free alongside ship)

- FOB (Free on board)

- CFR (Cost and freight)

- CIF (Cost insurance and freight)



EXW - Ex Works

After the abbreviation Exw you have to point out the place of the factory (or the warehouse) where goods have been produced or stored

Under this Incoterm the seller delivers the goods at his location

Therefore the buyer has to collect the goods with his own carrier, and pays all expenses for the transportation and has whole responsibility for

the shipment

The seller’s obligations are only to keep goods ready to be loaded and to prepare proper documentation

It’s useful for commodities or semi-manufactured products, for which there is price competition



FCA – Free Carrier

After the abbreviation Fca you have to point out the place where the seller delivers the goods

Under this Incoterm the seller delivers goods to the carrier’s premises (named by the buyer). Therefore costs and risks are born by the seller till the delivery

of the merchandise to the carrier’s custody

The buyer pays freight and insurance, while it’s up to the seller the paperwork and duties for export

formalities (customs clearance)



CPT – Carriage Paid To

After the abbreviation Cpt you have to point out the destination where the seller has to deliver the goods

The seller pays for carriage to the agreed point of destination, but risk passes to the buyer when the

goods are handed over to the carrier indicated by the buyer

This term differs from the previous for the fact that the seller has to pay a part of the shipment



CIP – Carriage and Insurance Paid

After the abbreviation Cip you have to point out the destination where the seller has to

deliver the goods

Under this term the seller pays for carriage and insurance to the named destination point, but risk passes to the buyer when the goods

are handed over to the first carrier



DAT - Delivered at terminal

The risk passes to the buyer when the carrier has arrived at the terminal of destination (harbour, airport, or station), and

the goods made available for unloading to the buyer

The seller pays the same freight and insurance costs as he would under a Cif arrangement, but unlike this term, the

seller has agreed to bear not just cost, but also risk up to the arrival of the cargo at the named terminal

Costs for unloading the goods and any duties are in charge of the buyer

This Incoterm is used for bulk commodities (i.e coal, grain)



DAP - Delivered at place

You have to specify which is the place of destination

The seller delivers the goods to the buyer to the named place of destination

Under this term the goods are placed at the disposal of the buyer on the arriving means of transport,

ready for unloading at the named place of destination

Cost ands risks are in charge of the seller as in DAT term



DDP - Delivered duty paid

You have to specify which is the place of destination

The seller pays for all transportation costs and bears all risk until the goods have been delivered and the duty paid

This is the most comprehensive term for the buyer, and on the other hand it’s the most expensive for the seller

In most of the importing countries, taxes, such as Vat and excises, should not be considered prepaid, being handled as a

"refundable" tax (Vat and excises usually are not a direct cost for the importer since they will be recovered against the sales on the

local market)



FAS - Free alongside ship

It’s only for maritime transport

The seller must place the goods at the docks alongside the ship at the named port

The seller must clear the goods at the customs for export, and he bears risks until the merchandise is placed next to the ship,

ready to be loaded

This term is typically used for heavy-lift or bulk cargo



FOB - Free on board

The seller must load the goods on board the ship nominated by the buyer, who is in charge of cost and

risk once the goods are loaded on board

The seller must clear the goods for export at the customs

Only for maritime transport

The buyer must instruct the seller on details of the vessel and port where the goods are to be loaded



CFR - Cost and freight

The seller must pay the costs and the freight to bring the goods to the port of destination. This entails that the choice of

the carrier is a seller’s task

The risk is transferred to the buyer once the goods have crossed the ship's rail

It’s a term only for maritime transport

Insurance is at buyer’s charge, but he must receive the bill of lading from the seller



CIF - Cost insurance and freight

The seller must pay the costs, including insurance and freight, and he is in charge of delivering goods to the port of

destination

The seller has to choose the carrier and the insurance company

The risk is transferred to the buyer once the goods have been loaded in the ship

It’s a term only for maritime transport

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