Sea Freight

Sea Freight Why FOB Still Trips Up First-Time Ocean Shippers TermFOB (Free On Board) — an Incoterm rule for sea and inland waterway transport RiskRisk passes from seller to buyer when the goods are placed on board the vessel nominated by the buyer at the named port of shipment; before that point the seller bears loss or damage, after it the buyer does. CostSeller pays costs up to and including loading on board at the port of shipment; buyer pays the main ocean freight, marine cargo insurance, and import duty, taxes, and destination charges. ModeSea and inland waterway only; not appropriate for containerized cargo handed over at a terminal rather than lifted onto a ship, and not for air, road, or rail. FOB, short for Free On Board, is one of the oldest and most familiar rules in the Incoterms family. Sea Freight CIF and CIP: Insurance Is the Hidden Difference TermCIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid To) RiskUnder CIF, risk passes when goods are placed on board the vessel at the port of shipment. Under CIP, risk passes when goods are handed over to the first carrier at the named place of delivery. CostSeller pays freight to the named destination and cargo insurance. Buyer pays import duties, taxes, and any costs after arrival, unless otherwise agreed. ModeCIF applies only to sea and inland waterway transport. CIP applies to any mode, including air, road, rail, and multimodal. CIF and CIP are two Incoterms rules that look nearly identical on a quotation sheet. Sea Freight FAS, FOB, and the Rail on the Quay TermFAS (Free Alongside Ship) and FOB (Free On Board) RiskFAS: risk passes when goods are placed alongside the vessel at the named port of shipment; FOB: risk passes when goods are on board the vessel at the named port of shipment. CostFAS: seller pays costs until goods are alongside ship; buyer pays loading, main freight, insurance, and import duties. FOB: seller pays costs until goods are on board; buyer pays main freight, insurance, and import duties. ModeSea and inland waterway Free Alongside Ship (FAS) and Free On Board (FOB) are two Incoterms rules designed for sea and inland waterway transport. Sea Freight CPT and CFR Look Alike Until You Read the Risk Clause TermCPT (Carriage Paid To) and CFR (Cost and Freight) RiskCPT: risk passes when goods are handed to the first carrier; CFR: risk passes when goods are loaded on board the vessel at the port of shipment CostSeller pays main carriage (freight) to named destination; buyer pays insurance and any import duties/taxes unless otherwise agreed ModeCPT: any mode (sea, air, road, rail, multimodal); CFR: sea and inland waterway only CPT and CFR are two Incoterms rules that often get lumped together because both require the seller to pay for main carriage to a named destination. Sea Freight Bills of Lading and the Difference Between Straight and Order TermBill of Lading (Straight vs. Order) RiskRisk in the goods passes according to the underlying sale contract and its Incoterm, not the bill of lading itself; the bill governs who may claim the cargo from the carrier at destination. CostFreight, insurance, and duty costs follow the sale contract and its Incoterm; the bill of lading is the carrier's receipt and contract of carriage, not the pricing document. ModeSea and inland waterway carriage; the equivalent air document is the air waybill, which is not negotiable. A bill of lading is the document a carrier issues when it takes cargo on board. Sea Freight Demurrage and Detention Charges at the Container Yard TermDemurrage and Detention (container yard charges) RiskRisk of demurrage and detention passes to the party that controls the container when free time expires—typically the consignee after discharge, but can remain with the shipper if the container is not returned empty in time. CostThe party responsible for the container at the time charges accrue: demurrage is usually paid by the consignee or their customs broker; detention is usually paid by the consignee or the party that holds the container after pickup. Freight and insurance are separate and follow the sale contract and Incoterm. ModeSea freight (including inland haulage by truck or rail when the container moves under a through transport document). Demurrage and detention are two separate charges that arise when a shipping container stays in the wrong place for too long. Sea Freight How Incoterms Decide Who Pays When a Shipment Goes Wrong TermIncoterms 2020 rules as a system for allocating risk, cost, and obligation between seller and buyer in international sales contracts RiskEach Incoterm specifies a named point or event where risk of loss or damage passes from seller to buyer; for example, under FOB risk passes when goods are on board the vessel, while under DAP risk passes when goods are ready for unloading at the named destination CostThe Incoterm determines which party pays for main carriage, insurance, and import duties; for instance, under CIF the seller pays freight and insurance to the destination port, while under DDP the seller pays for everything including import duty, and under EXW the buyer bears nearly all costs from the seller's premises ModeRules are either for any mode (EXW, FCA, CPT, CIP, DAP, DPU, DDP) or for sea and inland waterway only (FAS, FOB, CFR, CIF); choosing a sea-only rule for containerized cargo moving by air or multimodal transport creates mismatches Incoterms are a set of internationally recognized trade terms published by the International Chamber of Commerce. Sea Freight Freight Forwarders Versus Customs Brokers: Two Jobs, Not One TermFreight forwarder vs customs broker (roles in international trade) RiskRisk transfer is governed by the Incoterms rule in the sales contract, not by the forwarder or broker; typically risk passes at a named point such as when goods are loaded on board (FOB) or delivered to the buyer's premises (DAP). CostThe seller or buyer pays freight, insurance, and duty according to the agreed Incoterms rule; the forwarder arranges transport and the broker handles customs formalities, but neither bears these costs unless separately contracted. ModeAny mode (sea, air, road, rail, or multimodal) In international shipping, two distinct professionals often get lumped together: the freight forwarder and the customs broker.