Trade terms and conditions

At United Packaging, we accept these trade terms and conditions (price term), called as Incoterms 2020, explained as below

EXW - Ex Works (Place of Delivery)

Explained
Ex-works terms make the seller responsible to place the goods at the disposal of the buyer at the seller’s facilities or any other named place. The named place can be other than the seller premises. Delivery occurs when goods are placed for the buyer’s disposal without necessarily to be loaded. If the loading operation is performed by the seller, it is difficult for the buyer to assume any responsibility. A good alternative for the buyer is to choose FCA.

This rule can be used for any mode of transport.

Doing Business
EXW represents the minimum obligation to the seller and the seller’s obligations end when goods are placed at disposal to the buyer. Usually, EXW is used when a seller is not willing to be responsible for the movement of goods to other warehouses or ports. It is common practice for the seller to load goods into the vehicle.

With this term, the seller has a minimum obligation and the buyer must bear all costs and risks involved in pick up and transportation of goods from the seller’s premises. This term can have one variation that mentions explicitly that the seller must clear customs or load goods into the vehicle and its similar to the FCA term.

Seller and Buyer obligations
This is the term with less risk for the seller. Goods are delivered at the agreed place and there is no obligation for the seller to load goods into the vehicle. However, it is common practice to agree on loading at the buyer’s expense and risk.

The seller must provide and collaborate with all documentation for export and insurance.

FOB - Free on Board (Port of Shipment)

Explained
By using FOB the seller must clear the goods for export and delivers when the goods pass the ship’s rail at the agreed port. This term is only used for water transportation either sea or inland water. If both parties do not agree to have goods delivered on board, then FCA is the term to be used.

Doing Business
This term was commonly used when commodities were sold and the carrier confirmed the reception of goods “on board”. When goods are packed in containerized cargo, then FCA is the most recommended term to use. Because goods will be delivered in the container terminal prior to being loaded on the vessel. The term is used in commodities like oil, bulk cargo or grain. There is a common misuse of this term when goods are loaded onto a truck, in that case FCA is the right term to use. In FOB, origin terminal handling charge and all other costs associated to move the goods on board are paid by the seller.

FOB suits better for bulk cargo and not containerized cargo (use FCA instead). FOB can only be used for ocean transportation, the seller’s responsibility ends when the goods are placed on board of the vessel. All cost after loaded onboard must be assumed by the buyer.

Export customs clearance and origin terminal handling charge must be assumed by seller. This term is traditionally created for bulk transportation, where some cargo can be lost during the process of loading (i.e. grains taken away by wind or boxes dropped in the ocean). It is still the most misused term.

Seller and Buyer obligations

FCA – Free Carrier (Place of Delivery)

Explained
If the place of delivery is at the seller premises, the seller must load the goods. If delivery takes place in a different place, the seller is not responsible for unloading.

The term carrier refers to any party who is in charge of the contract of carriage and will transport the goods by any mode of transportation.

There can be 2 types of places of receipt when using FCA, sellers facility or another place (usually a freight forwarders facility or port/airport terminal). The seller must load goods into a transport vehicle (arranged by the buyer) only when the place of receipt is the seller’s facility.

When the place of delivery is an inland point, Incoterms® 2020 allows the buyer to instruct the carrier to issue a bill of lading with an onboard notation. The seller must provide the buyer with the documentation with the same clause as explained in the contract. It has to be noted that the seller is under no obligation to carrier clauses.

The seller must clear customs for exports and freight and international transport arrangements must be performed by the buyer.

Doing Business
When the named place is another than sellers facility, the seller is not required to unload as it is assumed that the receiving facility has the means for it (i.e a warehouse freight station for LCL cargo or a Container Terminal).

FCA can be used for any mode of transportation or a combination (multimodal)

It is advised that the buyer selects clearly the place of delivery. For instance "Kuehne and Nagel - East Shanghai Road NO. 5 Room 1103, Huaqiao Mansion, 215400 Suzhou City" is more explicit than simply "Kuehne and Nagel Shangai Warehouse".

FCA is one of the most favorable terms when the buyer wants to have control of costs at origin and international transportation through a nominated freight forwarder. FCA is commonly used in conjunction with a Forwarder Cargo Receipt (FCR), a document that proves that cargo has been received by a forwarder with the intention to be transported as per buyer’s conditions. FCR is a proof of delivery and can be used for document compliance instead of Bill of Lading

FCA requires that buyers pays for origin terminal handling charge when cargo is containerize. A "carrier" means any company that has been nominated by the buyer to act as a transport agent, meaning that a freight forwarder qualifies as carrier in this case.

It is recommended to use FCA instead of FOB for containerized cargo. In the case of FCL, the container can be placed at the seller's facility. If cargo will be transported as LCL, in most cases it is required that seller deliver goods into a nominated warehouse for consolidation.

Carriers clauses
There are different carrier types that could take delivery. An inland carrier for road transportation, a freight forwarder for multimodal transportation, an airline, rail transport company or a shipping line. For ocean shipments, it is common to use “On Board” when goods are on the vessel. When the Bill of Lading is issued before on board, “Received for Shipment” is allowed by carriers (i.e. Freight Forwarders).

Seller and Buyer obligations

CFR – Cost and Freight (named port of destination)

Explained
In CFR the seller delivers when the goods are on board and cleared for export. The seller pays for freight to transport the goods until the final port of destination. However, the risk transfer occurs when goods are on board.

This term is used in ocean and inland waterway transportation. The contract must specify the exact port of discharge, whereas the port of loading is optional. The risk and delivery happens at the port of loading. The seller covers the cost of freight until port of discharge. The buyer covers discharge and import clearance cost.

Doing Business
Deliver happens in the port of loading, the risk for seller ends at the port of origin. In addition to this, the seller must arrange international freight transportation and provide all documentation to the buyer. The seller must also clear export customs. In summary, the seller arranges transportation under buyers’ risk, therefore it is recommended that the buyer gets additional insurance coverage.

This term is exclusively used on waterway transportation. This term is commonly used for agricultural or chemical products where seller has expertise and buying power on loading and transportation until port of discharge.
If shipment is containerized, it is preferred to use CPT. This term is usually applied when goods are in bulk cargo like grains and oil, oversized cargo or cargo that exceeds the normal dimensions to fit inside a container.

The usual transport document is a Bill of Lading showing the onboard date. The Bill of Lading allows the buyer to transfer the property of goods while in transit. It is common practice to have the Bill of Lading as proof for shipment to letters of credit or payments from buyer to seller.

Unloading costs (i.e. Destination Terminal Handling Charges) are under buyers responsibility unless agreed in the contract of sale.

When carriers have multiple legs and transshipment points, it is common practice that delivery happens at the first port of loading. For instance, transporting the first leg from Jakarta to Singapore and second leg from Singapore to Long Beach, California.

Seller and Buyer obligations

CIF - Cost, Insurance and Freight paid to (Port of Destination)

Explained
In CIF terms, the seller clears the goods at origin places the cargo on board and pays for insurance until the port of discharge at the minimum coverage. Even though the seller pays for insurance during the main carriage, the risk is transferred to the buyer at the time the goods are on board. The term is used for ocean and inland waterway transportation only

Doing Business
Deliver happens in the port of loading, the risk for seller ends at the port of discharge and must acquire insurance coverage. In addition to this, the seller must arrange international freight transportation and provide all documentation to the buyer. The seller must also clear export customs.
This term is exclusively used on ocean transportation. If cargo doesn’t fit into a container, use CIT. This term is commonly used for agricultural or chemical products where the seller has the expertise and buying power on loading and transportation until the port of discharge and capacity to insure goods.

This term is commonly used in bulk cargo, oil and oversized. The unloading cost is to be covered by the buyer.

The insurance must cover the price of goods plus 10%.

Seller and Buyer obligations