Common Incoterms explained

You’ll probably come across the phrase ‘Incoterms’ while working with shipping, transport and freight forwarding companies, and many people aren’t sure what these terms actually mean, so here’s the t ward Shipping guide to the most popular terms.

Incoterms are simply trade terms which are used to define each of the obligations of seller and buyer when moving goods. The term makes it clear who is responsible for which aspect of the cost/risk at each stage of movement, according to Tate's Export Guide.

You should always try and negotiate Incoterms into your sales contract, to avoid disputes at a later date.

EX Works EXW

This term is used in domestic and international trade, and means that the seller should deliver the goods, either to the buyers’ own premises or a place named by the buyer. The seller is responsible for all costs and risks until the goods reach the place of collection but does not have to load them onto a carrier's vehicle or enter them to customs for export.

Free Carrier FCA

This term can be used whichever mode of transport will be used to move the goods. It’s used for containerised goods which are to be delivered to a carrier at an inland container terminal. The seller delivers the goods to the carrier on behalf of the buyer, either at the seller's premises or another place, specified precisely by the seller. The goods are considered delivered once loaded onto the vehicle provided by the buyer if they are delivered to the seller’s premises, but if delivered elsewhere, they have to be on the seller's vehicle and ready for unloading to be delivered.

Carriage Paid To CPT

This term may be used whatever mode or modes of transport will be used. The seller must deliver the goods to the carrier or to a nominated person (by implication, goods must be unloaded from the seller's vehicle) at an agreed place (which is not the final destination) and the seller covers the costs of transporting the goods to their final destination. It’s important that the seller and buyer agree on the exact place of delivery, the point where the risk passes to the buyer, and the final destination.

Carriage and Insurance Paid CIP

This term may be used whatever modes of transport is to be used. The seller delivers the goods either to the carrier or to a person specified by the seller, and the goods must be unloaded from the seller's vehicle, at a named place agreed by the seller and buyer. The seller is responsible for the carriage, insurance and any other costs involved in getting the goods to their end destination.The seller is also responsible for getting export licences, entering the goods to customs for export and any transit arrangements. Insurance only has to be minimal, though and so the is responsible for the cost of any extra insurance cover he wants added, along with giving the seller all the information needed to obtain it. The place named in this Incoterm is not the final destination.

Delivered at Terminal DAT

This term may be used regardless of the modes of carriage to be used. The seller transports the goods to a named terminal, which might be at a port, rail or air cargo terminal but could also be a named container yard, warehouse, or even a lorry park. The seller must inform the buyer when the goods are ready for collection.  Once they are unloaded, the seller places them at the buyer's disposal on date(s) agreed.

Delivered at Place DAP

This term can be used for whatever modes of transport will be used. The seller isn’t obliged to insure goods to or from the named place but can choose to do so if he prefers.  The seller has to bear the full costs of carriage, insurance and anything else to the named place, which must be specified exactly and included in the contract. If the seller and buyer can’t agree on the place of delivery, the seller has the final say.

The seller can only recover the costs of unloading at the named place if the buyer agrees, and if the buyer doesn’t collect the goods, he is also responsible for any costs, including warehousing, loss or damage, from the agreed time of delivery

Delivered Duty Paid DDP

This term is to be used whatever mode or modes of transport may be used. The goods are considered to be delivered when the seller puts them at the the disposal of the buyer, they are cleared for import on the arriving means of transport and  are ready to be unloaded at the named destination at an agreed time or within an agreed time period.

The seller must bear all risk and cost up to that point, including clearing goods both for export and import, and is also responsible for paying import charges, VAT and taxes. This places a great deal of responsibility onto seller and so it shouldn’t be used if it’s likely that the seller won’t be able to get import clearance.  If the buyer is expected to obtain import clearance, DAP should be used instead.

Free Alongside Ship FA

Only used for sea and inland waterways. The seller is considered to have delivered the goods once they are placed (on a quay or a barge) alongside a nominated vessel at the named port of shipment.

The vessel is nominated by the buyer.

The place and time where cost and risk transfer must be specified exactly.  The seller must deliver the goods alongside the ship or, if he is one of a string, secures the goods from a previous owner in the string. For goods in containers, it’s common for the seller to pass goods to a carrier at an inland terminal a- in which case FCA should be used.

Free on Board FOB

Used for sea and inland waterways. The seller is said to have delivered the goods when they are delivered to a ship previously nominated by the buyer at the named port of shipment - or when the seller procures goods which have already been already delivered there. Risk of loss or damage passes to the buyer as soon as the goods are resting on or in the vessel, but not when they are on a crane or being handled over the ship's side. If goods will be passed to a carrier before being loaded on a ship, as goods in containers are received by a carrier at an inland container terminal, FCA should be used.

Cost and Freight CFR

Term used for sea and inland waterways. As with CPT, CIP and CIF, the seller is responsible for delivering the goods on board a vessel at the port of shipment or procuring goods that are already delivered aboard. Again, risk passes to the buyer at the named port of destination but the goods don’t have to be unloaded first. The seller is responsible for all costs and freight needed to transport the goods to their named port of destination. He must also clears the goods for export if applicable, but isn’t responsible for import procedures or charges. The seller should also pay for any pre-shipment inspection if required.

Cost Insurance and Freight IF

Term used for sea and inland waterways.  The risk of loss or damage to the goods passes once they are on the vessel at the port of shipment, or if the transaction is one of a string, during carriage by sea. The seller delivers goods on board the vessel at the port of destination or procures the goods already on board.

The seller contracts for and pays the costs of the carriage to the port of destination and also pays for insurance to cover the buyer's risk of damage or loss during carriage. The seller is also responsible for entering the goods to customs for export if necessary.

If you need advice on your shipping and forwarding needs, contact the experts at t ward Shipping and we’ll be delighted to help.

Investment in Port of Grangemouth is good news for Scottish Exports

There was good news for Scottish importers and exporters this month when it was announced that Forth Ports will be more than doubling its refrigerated container capacity at the Port of Grangemouth.

The total value of Scottish food and drink exports was valued at £5.1 billion in 2014 and figures released this year revealed that the 3.5 per cent increase in food exports alone was mainly driven by an increase in fish and seafood, which was up a massive £38m.

There’s strong demand for Scottish fresh produce from markets such as the Middle East, where Scottish salmon and seafood has been particularly successful. Other fresh food export successes include dairy, which is up 6 per cent.*

The investment in the port of Grangemouth can only help the already impressive figures, as it means that the electricity supply infrastructure will be increased from 126 specialist power supply points to 432, giving a further boost to Scotland’s fresh produce import/export freight trade. The investment is part of a major investment programme for the port, designed to increase its capacity for storing conventional and refrigerated containers.

A feasibility study has also been commissioned into the deepening of the shipping channel to allow the port to handle larger vessels.

Refrigerated containers, also known as reefers, need to be supplied with power as soon as they arrive in port so that their contents can be kept fresh until they are loaded onto refrigerated vehicles to be exported, or delivered to their UK destinations. The expansion is a result of increased demand, mostly from Scotland’s fresh food exporters, and will help exporters to offer a much longer season for shipping produce including cheese, fish and seafood around the world.

Grangemouth is Scotland's largest container port and already handles more than 155,000 containers every year. With frequent sailings to Rotterdam, Antwerp, Felixstowe and Hamburg, Grangemouth is an important part of Scotland’s import/export infrastructure and increasing its capacity for handling fresh produce will further establish the port’s reputation in the UK and abroad.

The installation should be finished by the end of October, and should help to maintain the Port of Grangemouth’s position as the largest reefer facility in Scotland.

Stuart Wallace, Forth Ports’ Director of Scottish Operations, said:

“Scotland has a growing reputation right across the world for the quality of our fresh produce and that’s resulted in increasing demand for reefer capacity. That’s good for the Scottish economy and good for business and we’re committed to investing in support of this growth through increasing our reefer capacity at the Port of Grangemouth.”

For more information on our shipping services from Grangemouth and other UK ports, contact us.

*Figures from http://news.scotland.gov.uk/News/New-record-for-Scottish-food-exports-1933.aspx

T ward shipping - helping firefighters abroad

As a responsible local business and supporter of good causes, we’re delighted to work with the International Fire and Rescue Charity (IFRA), a fantastic organisation that has been sending unwanted emergency vehicles, equipment and clothing to less fortunate countries since 2002.

The charity was set up in 2001 after founder David Kay, a serving firefighter at Lochgelly Fire Station, Dunfermline, saw for himself the need for fire equipment in Bosnia. The services were woefully under-funded and David returned to Scotland and with help from a local school he managed to organise fundraising efforts to buy an Isuzu Trooper which was sent to help the firefighters of Kljuc.

Since then, the work of the charity has been expanded to help firefighters in Mexico, Argentina, Paraguay, Albania and Bosnia, where fire services are extremely under-developed.

IFRA also helps to train firefighters in countries where the fire services need extra assistance.

We have been able to support the work of the charity by arranging for transportation of some of the equipment to Mexico, Bosnia and Argentina. We shipped two crates of equipment to Mexico at the beginning of August and we’re sending three more to Argentina, Mexico and Paraguay later in the month.

The pallets contain specialist clothing like tunics, boots, helmets, gloves and trousers, all essential gear for helping to kit out around 4,500 firefighters- helping to keep them safe while they carry out their important work. This specialist clothing can’t be used in the UK for health and safety reasons and would only have to be destroyed if they weren’t gifted. Destroying them costs money so sending the unusable items abroad doesn’t just help the fire teams in other countries, it also saves the UK money; a real win-win situation.

The items are no longer of any use in Scotland or the UK but are still perfectly usable, according to David, who added that there was absolutely nothing wrong with them, but they were considered redundant because their expiry dates had passed.

We at t ward shipping are pleased to be able to play a part in this important work, and we look forward to working with IFRA in the future. You can find out more about the work of this incredible organisation at: http://www.ifra.co.uk/

Find out more about our range of freight forwarding and shipping services at t ward shipping

What does a Ship’s Agent do?

t ward shipping is a full service ships agency that offers a wide range of services to help clients import, export and transport their cargos with as little fuss as possible. As ship’s agents, we aim to get things moving quickly and make sure that vessels spend as little time in port as possible, which helps to maximize the ship’s profitability.

As soon as we know the time of the ship’s arrival, we get the arrangements in place, and we ensure that everything runs smoothly from arrival to the next departure.

Our ships agency services cover all of the posts in the Firth of Forth ports:

 Leith
 Rosyth
 Babcock, Rosyth
 Grangemouth
 Methil
 Burntisland
 Kirkcaldy


We also serve:

 Hunterston
 Glasgow KG5
 Ayr
 Greenock
 Stranraer 

And other Scottish ports.

What is a ship’s agent?

So, what does our service actually cover? Well, we are on hand to act as your local representative, making the most of our local knowledge and expertise, plus our connections in the area, to get cargos moved as swiftly and efficiently as possible.

We’re expected to stay up to date with all the relevant regulations in any country to which we operate, and to know the rules and regulations applying to every port we serve. We’re your point of contact for anything to do with your cargo.

Before arrival, we start planning ahead. We pay particular attention to making arrangements for off-loading the cargo and organising any cranes or pump-out facilities. We make sure that everyone knows when the ship is due in port and when the cargo will be discharged, and arrange for personnel to board the ship to advise the captain on conditions and local requirements.  We also make sure that arrangements for docking and undocking are in place, arranging tugs if needed.

Once the cargo is in, we notify customs and arrange services from longshoremen to help with unloading cargo and book any trucks to move containerised freight to its final destination.We’ll make sure that any inspections or certifications are taken care of, and notify any authorities. If there are any repairs needed, we can arrange those too.

When it’s time to reload the ship, we make sure the cargo is there and ready to be loaded up, check that it’s in a good condition and make sure the arrangements are in place for transportation. We’ll also inform the parties and port of the projected date of arrival.

When the cargo is loaded, we liaise with the ship's master to arrange for departure and make all the necessary arrangements. If there have been any inspections while the ship has been docked, we pass the results on.

Once the ship has left port, we collect any payments due from consignees who received freight and any penalties from the ship management company for damage or late delivery.

We’ve had many years’ experience in the ports agency – over 80 years in fact – so when it comes to making sure all the arrangements for your cargo are in place and ensuring the process goes as smoothly as it can, we’re the people to talk to!

Helping businesses understand imports

The eBay and Amazon success stories have led to a surge in small businesses importing goods for sale in the UK, and opportunistic sellers looking for ways to make money have been getting their hands on anything from textiles to e-cigs, cables and packaging supplies at low cost and selling them on through online businesses.

It’s such a popular way to make money, possibly because there’s no need for a dedicated website, you can just set up your own shop on Amazon or eBay and off you go! Because it’s working out so much cheaper to import from abroad, we’re receiving many more enquiries from customers about the legal requirements and procedures, including INCOTERMS; and most first time importers don’t know the difference between Cost, Insurance & Freight (CIF) and Free on Board (FOB.)

Incoterms® are a set of rules internationally recognised rules which are used worldwide in international and domestic contracts for the sale of goods – they make life easier for international businesses by giving them a set of internationally accepted definitions and rules of interpretation for most common commercial terms.

So – what’s the difference between a CIF shipment and an FOB shipment? And which is best for you?

In the case of CIF, the cost of sea transport and insurance are included with the purchase price.  The only costs not included are Destination Terminal Handling, Customs Clearance Import vat & duty and any other fixed fees the arrival warehouse charges for shipments arriving on CIF terms (these warehouse charges can vary depending on the particular warehouse)
 
With a CIF agreement your supplier will choose the carrier that meets your needs for the cheapest possible price, which sounds great until you want a specific route or a faster transit time. Longer transit times can affect your profits and cash flow as you’re forced to wait longer for your goods to arrive.

Even worse; when you’re quoted for a CIF shipment, the Destination Handling Charge (DTHC) isn’t included in the quote, so you don’t always know the total cost of getting your goods transported from A to B. The DHTC charges are often artificially hiked up to well above market rates, and as a first time importer, you wouldn’t know that.

Neither would you know that your cargo suppliers insurance doesn’t fully protect you as an importer, it protects the supplier of the goods. If your cargo is lost or damaged, the supplier gets a pay-out but you don’t. You have to rely on the goodwill of the supplier to get a refund or any kind of redress. You could also find that you will still have to fork out for customs entry, import duties and transport inland, even if the goods are lost/damaged.

The other option is a Free on Board (FOB) shipment, which puts you in control of your cargo and gives you the total costs up front. With an FOB shipment you choose the vessel upon which your goods are transported, and the agreement stipulates that the obligations to deliver them are only fulfilled when the goods have passed over the ship's rail.

If you’d like advice on importing goods, INCOTERMS and different types of shipment, talk to the experts! We have many, many years’ experience with helping people with large and small cargos, and we’ll be delighted to help you find the best options for your business.

A sweet project for t ward

We have some very interesting clients at t. ward, and one of the most interesting we’ve worked with recently is also a potential award winner!

We worked with The Chocolate Tree to import a pallet of Peruvian coca beans last year, and this year we’ve also helped them import a special piece of confectionery making machinery from Italy. The machine, an FBM Unica continuous temperer with Californian Mod, sounds very impressive; according to Alistair Gower, the man behind the delicious chocolates, it boasts, “an enhanced motor, strengthened screw, pneumatic dosing and variable speed with dosing plate,” and is a “tempering dream machine engineered to handle the viscosity of proper craft chocolate – and it came in a blooming big box!”

The Chocolate Tree, which employs 12 members of staff, is being recognised for its skill in creating craft chocolate – the company picked up three prizes at the prestigious International Chocolate Awards British National Competition this month.  The company won GOLD in the chocolate bar with a filling and flavoured white chocolate bars categories, and BRONZE in the spreads dark chocolate (no milk powder) category.

Alastair said: “We are using exceptionally high-quality ingredients and they don’t contain any artificial flavourings. That is to be expected but our recipes are quite innovative and we use high-quality ingredients.”

The chocolates are made at The Chocolate Tree’s factory on Knox Place and sold to eager customers at farmers’ markets, farm shops and also at the company’s two shops in Edinburgh and Haddington. Alastair credits the whole team for the success of the delicious chocolate and says, “There is a great team behind Chocolate Tree and I’m trying to make it down for the awards ceremony.”

We’re wishing Alastair and the team good luck at the awards this month!

At t ward we’re always on hand to help clients ship anything they need from anywhere around the globe, and we cater for all sizes of cargo from 15kgs to 150,000 tonnes. We use our many years of experience to provide all levels of service, and our sea freight forwarders handle anything from chocolate to cars, and plant machinery to personal effects. We also make sure that we work alongside the best partners in the world, which gives us access to the most flexible freight network in Europe.

We’ll be happy to talk to you about arranging the collection or delivery of your goods at origin/destination and effecting Customs Clearance for you too – just call and speak to one of our agents.

Grangemouth – Scotland’s largest container port

Did you know that in addition to other ports across Scotland, t.ward shipping also covers the port of Grangemouth? 

We have been working alongside the port and supporting clients who use it for many years now, and so we are able to offer all varieties of ships agency from Grangemouth, which is Scotland’s largest container port. Grangemouth handles more than 150,000 containers every year, and there are daily sailings from here to Rotterdam, Antwerp, Felixstowe and Hamburg.

Grangemouth is a popular port for many reasons; obviously the size of the port makes it an ideal choice for many clients, and it’s also very well situated between Glasgow and Edinburgh, right at the centre of Scotland’s industrial heartland. 

Grangemouth is a popular haven for Scottish industry, handling around nine million tonnes of cargo per year. It handles over 2 million tonnes of dry cargo such as timber, granite and steel every year, which makes it an important hub – and it’s getting busier all the time. In November 2014 Grangemouth reported its busiest ever week, handling a record 4,200 containers. At the time, operators credited a good potato seed season as well as an increase of whisky and white spirit cargos.

Grangemouth is the UK’s largest feeder port, and the only one that exports more than it imports. It’s also estimated that 30 per cent of Scotland’s gross domestic product (GDP) goes through the port.

The facilities include;

•  Two gantry cranes
•  13 straddle carriers
•  Modern driver’s reception
•  Integrated Terminal Operating System
•  500,000 sqft of warehousing
•  365 acre estate
•  Private and common user jetties
•  LPG berth
•  Dedicated general cargo berths
•  Ability to handle ro-ro, side port and conventional vessels.

This, plus Grangemouth’s location, its proximity to national road, rail and sea links, and its land availability makes the port an ideal choice for development into a top class logistics and distribution
hub.

Grangemouth is just one of the ports served by t. ward shipping – for more information on our services please refer to our Ships Agency page.