The “C” terms
There are certain key components that need to be in place prior to starting your import or export transaction and one of these is your trade terms or definitions commonly known as Incoterms 2000.
These help you manage your risk, costs, documentation and cargo control. Is your business managed by your supplier or do you run your business at present?
What is meant by this comment? Well certain Incoterms give the control of the shipment to the seller and certain Incoterms give the control of the shipment to the buyer. Depending on whether you are the buyer or the seller and what term your company uses will dictate this so may we suggest you investigate to see who is in control of, at times, your business.
By means of an example look at the “C” terms. Remember the risk is transferred from the seller to the buyer from the time the goods are passed to the first carrier or have crossed the rail of the vessel. What this tells us is that the seller will pay for the main carriage (transport) without assuming the risk of passage. Who will benefit from this trade term – the seller as he pays for transport and the buyer carries the risk from the time the goods are given to the first carrier or have crossed the ships rail at destination.
This means the seller has this as an advantage whilst the buyer is at a disadvantage. Why? The seller is paying the freight and transferring the risk long before the goods have arrived in the buyer’s warehouse and has control of the cargo and documentation which often creates delays for the buyer and results in storage.
In conclusion, we suggest if you are the seller CPT (Carriage Paid to…) or CIP (Carriage and Insurance Paid to…) is a good Incoterm to negotiate with the buyer, i.e. exports and if you are the buyer (importer) negotiate a better suited term to your business, i.e. FCA (Free Carrier at ….) as this allows you to control your flow of cargo and documentation and manage your risks and costs.
Did you know that you are unable to Airfreight under the Incoterms FOB (Free on Board), CFR (Cost and Freight) and CIF (Cost, Insurance and Freight) amongst others. To find our more we are running our courses at the centre on: