INTERNATIONAL TRANSPORTATION

INTERNATIONAL TRANSPORTATION The topics are: • international transportation ways • Incoterms Exporters have to choose the carrier, and therefore the mean of transportation, and Incoterms, that is the rule governing the delivery of goods Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION The choice of the carrier depend on: - choice of type of shipment (sea, air, land) - destination (what country or continent) You have to consider that some international carriers may take care of shipment with every means of transportation and to every country in the world, while others are specialized in specific ways of shipment and for specific destinations Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION Each way of transportation has advantages: a) Air: very fast and very expensive; it’s suitable only for small and worthy merchandise b) Sea: very cheap but slow: it’s the only way when shipment has a very far destination, and it’s the best solution for bulk loads (i.e. commodities), or merchandise in containers c) Land: • rail: it has characteristics similar to sea transport, even if it’s faster than sea transport, and it’s useful for medium distances • truck: it’s faster but costlier than rail Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION The task of shipment is ruled by a carriage contract (i.e. bill of lading), which is governed by the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, issued by Uncitral This convention points out rules about: - transport documents - obligations and liability of the carrier - obligations of shipper - transfer of rights - jurisdiction and arbitration Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION The carriage contract can include different services: - loading - stowage - shipping - unloading Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION Incoterms rules are used in international sale contracts where goods pass across national borders (including inside a trade bloc as Eu) for determining means of transportation, place of delivery, charges included in the price Incoterms spell out rights and obligations of the parties of an international contract of sale with respect to the delivery of goods sold Incoterms rules indicate: - where and how the goods are delivered • consequently when risk passes from one party to another • how costs of shipment, insurance and duties are allocated between seller and buyer Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION Incoterms (International Commercial Terms), drafted by Icc, help avoid legal uncertainty by spelling out clear responsibilities between the buyer and seller in cross-border sales contracts, and have been endorsed by the UN Commission on International Trade Law They have been foreseen the first time in 1936 and renewed in 2010 (7th edition) The document specifying rules on Incoterms has to be purchased from Icc Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION Incoterms are useful to: - protect parties’ interests (making clear which is the place of delivery, when and where there is the transfer of risk) - reduce risks (having agreed modalities of shipment) Furthermore Incoterms are the trade-union between sale contract and contract with the carrier, and between sale contract and insurance contract Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION Incoterms are inserted in contracts as a clause It’s up to the parties to decide whether an Incoterm has to be used as a provision of the contract But once it is adopted, the rules to be respected are the ones of Incoterms, as indicated by Icc Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION It goes without saying that the Incoterm adopted must be compliant with other clauses of the contract (i.e. place of delivery, means of transportation) Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION The Incoterms are 11, of which 7 are independent from the way of transportation: - EXW (Ex Works) - FCA (Free Carrier) - CPT (Carriage paid to) - CIP (Carriage and insurance paid to) - DAT (Delivered at terminal) - DAP (Delivered at place) - DDP (Delivered duty paid) Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION The remaining 4 Incoterms, which are specific to transport by cargo are: • FAS (Free alongside ship) • FOB (Free on board) - CFR (Cost and freight) - CIF (Cost insurance and freight) Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION EXW - Ex Works After the abbreviation Exw you have to point out the place of the factory (or the warehouse) where goods have been produced or stored Under this Incoterm the seller delivers the goods at his location Therefore the buyer has to collect the goods with his own carrier, and pays all expenses for the transportation and has whole responsibility for the shipment The seller’s obligations are only to keep goods ready to be loaded and to prepare proper documentation It’s useful for commodities or semi-manufactured products, for which there is price competition Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION FCA – Free Carrier After the abbreviation Fca you have to point out the place where the seller delivers the goods Under this Incoterm the seller delivers goods to the carrier’s premises (named by the buyer). Therefore costs and risks are born by the seller till the delivery of the merchandise to the carrier’s custody The buyer pays freight and insurance, while it’s up to the seller the paperwork and duties for export formalities (customs clearance) Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION CPT – Carriage Paid To After the abbreviation Cpt you have to point out the destination where the seller has to deliver the goods The seller pays for carriage to the agreed point of destination, but risk passes to the buyer when the goods are handed over to the carrier indicated by the buyer This term differs from the previous for the fact that the seller has to pay a part of the shipment Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION CIP – Carriage and Insurance Paid After the abbreviation Cip you have to point out the destination where the seller has to deliver the goods Under this term the seller pays for carriage and insurance to the named destination point, but risk passes to the buyer when the goods are handed over to the first carrier Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION DAT - Delivered at terminal The risk passes to the buyer when the carrier has arrived at the terminal of destination (harbour, airport, or station), and the goods made available for unloading to the buyer The seller pays the same freight and insurance costs as he would under a Cif arrangement, but unlike this term, the seller has agreed to bear not just cost, but also risk up to the arrival of the cargo at the named terminal Costs for unloading the goods and any duties are in charge of the buyer This Incoterm is used for bulk commodities (i.e coal, grain) Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION DAP - Delivered at place You have to specify which is the place of destination The seller delivers the goods to the buyer to the named place of destination Under this term 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 Cost ands risks are in charge of the seller as in DAT term Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION DDP - Delivered duty paid You have to specify which is the place of destination The seller pays for all transportation costs and bears all risk until the goods have been delivered and the duty paid This is the most comprehensive term for the buyer, and on the other hand it’s the most expensive for the seller In most of the importing countries, taxes, such as Vat and excises, should not be considered prepaid, being handled as a "refundable" tax (Vat and excises usually are not a direct cost for the importer since they will be recovered against the sales on the local market) Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION FAS - Free alongside ship It’s only for maritime transport The seller must place the goods at the docks alongside the ship at the named port The seller must clear the goods at the customs for export, and he bears risks until the merchandise is placed next to the ship, ready to be loaded This term is typically used for heavy-lift or bulk cargo Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION FOB - Free on board The seller must load the goods on board the ship nominated by the buyer, who is in charge of cost and risk once the goods are loaded on board The seller must clear the goods for export at the customs Only for maritime transport The buyer must instruct the seller on details of the vessel and port where the goods are to be loaded Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION CFR - Cost and freight The seller must pay the costs and the freight to bring the goods to the port of destination. This entails that the choice of the carrier is a seller’s task The risk is transferred to the buyer once the goods have crossed the ship's rail It’s a term only for maritime transport Insurance is at buyer’s charge, but he must receive the bill of lading from the seller Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION CIF - Cost insurance and freight The seller must pay the costs, including insurance and freight, and he is in charge of delivering goods to the port of destination The seller has to choose the carrier and the insurance company The risk is transferred to the buyer once the goods have been loaded in the ship It’s a term only for maritime transport Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION Massimiliano Di Pace

INTERNATIONAL TRANSPORTATION