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Incoterms – A Brexit Term You Need To Know!

With Britain’s exit from the EU on the 1st January this year, it’s not surprising that new acronyms, words and phrases are flying about to facilitate Brexit trade requirements. In a post-EU world, Britain has had to forge its own path following other European countries who have left or not joined the EU trade union. This means that things like EORI numbers, Commodity Codes and Customs Declarations are all phrases that have started to join our freight dictionary, as we change the way we import and export with the EU from here in Britain.

One of the terms those importing and exporting need to be aware of is ‘incoterms’, which relates to international commerce. Incoterms, simply put, are the set of international commercial terms published by the International Chamber of Commerce (ICC). These international commercial terms are recognised all over the world, and help to facilitate foreign trade contracts. There are various different types of incoterms, and these can relate to different forms of transportation – for instance, some incoterms apply to any means of transporting goods internationally, whilst others only relate to transportation across water. 

These incoterms are useful because they clarify where responsibility lies for the costs involved in the movement and delivery of goods internationally; including insurance, freight/shipping and duty, as well as import/ export declarations and filing costs. Essentially, incoterm rules are simply standard sets of trading terms and conditions, designed to assist traders when goods are sold and transported. Take a look at the variety of incoterm codes here: 

 

Term

Seller’s responsibility

Buyer’s responsibility

EXW (EX Works) (at seller´s premises or another named place, i.e. works, factory, warehouse)
to place the goods at the disposal of the buyer at the seller´s premises,
not loaded on any collecting vehicle
when the goods have been placed at the seller´s premises.
FCA (Free CArrier) (named place, i.e. seller´s premises)
to deliver the goods to the named carrier at the seller’
s premises and load them on the means of transport provided by the carrier,
cleared for export.
 when the goods have been   delivered to the carrier at the named place (loaded vehicle).
FCA (Free CArrier) (named place, i.e. any other place
to deliver the goods to the named carrier at any other place, cleared for export.
The seller is not responsible for unloading.
when the goods have been delivered unloaded at the carrier.
FAS (Free Alongside Ship) (named port of shipment)
to place the goods alongside the vessel at the named port
of shipment, cleared for export.
when the goods have been delivered alongside the vessel at the named port of shipment.
FOB (Free On Board) (named port of shipment)
to deliver the goods on
board the vessel at the
named port of shipment
and bear all risks of
loss of or damage until
that moment.
when the goods are on board the vessel nominated by him.
CFR (Cost and FReight) (named port of destination) to deliver the goods on
board the vessel at the port of shipment.
when the goods are on board at the port of shipment and must receive the goods from the carrier at the named port of destination.
CIF (Cost, Insurance and Freight) (named port of destination)
– in addition to CFR –
procure marine insurance (only with minimum cover including 10% anticipated profit) during the carriage.
when the goods are on board at the port of shipment and must receive the goods from the carrier at the named port of destination.
CPT (Carriage Paid To) (named place of destination)
to deliver to the carrier
nominated by him and
pay the costs of carriage necessary to bring the
goods to the named place
of destination.
when the goods have been delivered to the carrier and must receive them from the carrier at the named place.
CIP (Carriage and Insurance Paid to) (named place of destination)
– in addition to CPT –
procure cargo insurance
(only with minimum cover including 10% anticipated profit) during the carriage.
when the goods have been delivered to the carrier and must receive them from the carrier at the named place.
DAP (Delivered At Place) (named place of destination)
to bear costs and risks until 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.
when the goods – not cleared for import – have been placed, not unloaded from any arriving means of transport.
DAT (Delivered At Terminal) (named terminal at port or place of destination, i.e. a warehouse, container yard, quay, or road, rail or air cargo terminal)
to place the goods – unloaded from the arriving means of transport – at the disposal of
the buyer at a named terminal at the named port
or place of destination.
when the goods – not cleared for import – have been placed at the named terminal, unloaded from the arriving means of transport.
DDP (Delivered Duty Paid) (named place of destination) to bear costs and risks (including any duty for import) involved in
bringing the goods at the named place in the country of destination.
when the goods – cleared for import – have been placed at the named place of destination, not unloaded from any arriving means of transport.

 

What do Incoterms Specify? 

Though they may vary, incoterm rules all set out the below two specifications:

 

  •  the obligations of each party (e.g. who is responsible for services such as transport; import and export clearance etc)

and

 

  • the point in the journey where risk transfers from the seller to the buyer.

 

Arranging Your Incoterm

Arranging your incoterm is actually one of the simplest post-Brexit requirements for traders here in the UK looking to move goods between Britain and EU countries. In order to do this, you must engage with your EU counterpart to agree which terms best apply to your shipment of goods. These incoterms, as stated, can apply to multimodal transport in addition to just sea transport, so it’s important to ensure that the correct incoterm has been applied. 

 

 

Who needs to know my incoterm code? 

 Here at Speedy Freight, the majority of our clients use the same incoterm code. This tends to be RO/RO DAP – which refers both to the mode of transport in addition to the delivery agreement (DAP – delivered at place).

 

When it comes to sharing this information, there are several groups involved in the interaction that need to be kept up-to-date of your incoterm code. Your courier, of course: Speedy Freight needs to have all the relevant incoterm information before embarking on your delivery. Secondly, of course, the EU agent (recipient of the consignment) needs to be aware of the incoterm, in addition to both sets of customers.

 

Keeping up-to-date with all things Brexit legislation can be complex and hard-to-follow for many clients. Check out Speedy Freight’s Brexit Jargon Buster to ensure you’re covered and compliant with all non-EU transportation codes, paperwork and registration requirements before you embark on your international shipping journey. If you need further support or logistics for your organisation, don’t hesitate to get in touch with Speedy Freight and one of our international freight experts will be happy to help. 

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