Incoterms - A must Know in Freight Forwarding

Incoterms

To better understand the above incoterms let me make you aware of the cost involved, so that you can have a better idea.

The main costs involved in freight forwarding is as below:

• Origin charges
• Freight
• Destination charges
• Storage / Demurrage / Detention Charges

Origin Charges: Origin charges comprises of charges incurred at origin i.e exporter's end. These are as below;

• Pick up cost
• Transportation
• BL fee
• Origin Terminal Handling charge (THC)
• Storage/ CFS charge 
• Custom clearance charge
• Picking-packing
• Stuffing & other charges.

Freight Charge: Freight charge is the amount that is payable to carrier from Port to Port services. It doesn't include terminal handling charges. 

Destination Charges: Destination charges comprises of charges incurred at destination i.e importer's end. These are as below;

• Delivery Charges
• Transportation
• Delivery Order Fee
• Destination Terminal Handling charge (THC)
• Storage/ CFS charge 
• Custom clearance charge
• Destuffing & other charges.

Storage / Demurrage / Detention Charge:

In case of LCL (Less than container Load) consignment, storage of goods destuffed from a FCL (Full Container Load) in custom bonded warehouse, ICD, CFS and in case of FCL consignment, storage of container untill it gets cleared by customs.

Demurrage : A free-time of 7 days is allowed to clear out the cargo by consignee(s) from Port premises. Thereafter, demurrage is applicable at the rate of SAR 20/day/gross tonne (including container tare weight), which is charged and collected by the port authorities directly from consignee(s), without any influence and/or involvement of shipping lines/agents.

Detention:A free-time of 7-15 days from the date of vessel arrival is allowed by carrier to the consignees to take full boxes from port premises to their warehouse, devan the cargo and return the empty container(s) to our depot. Thereafter, the detention charges are SAR 50 per TEU per day for dry container(s) and SAR 100 per TEU per day for reefer container(s).

Please find below chart that shows responsibility of importer and exporter. 

Freight-Forwarding: How Does It All Starts

The beauty of nature is that not everything exists at the same geography otherwise the world would not have been exciting and beautiful. And that's where starts the sharing of resources to fulfill each others needs, definitely at some cost.

To move these goods from one geography to other needs certain facilities and specialization so that goods can be moved in safe and sound condition. Here comes the role of a freight forwarder. Freight forwarders are specialized in moving these goods from one place to other in cost effective manner. The other thing matters in moving these goods to different geographical location or lets say countries for easy understanding, is their country specific rules and regulation. Global Freight forwarders are specialized with these rules and regulation due to their global presence. 

Now, lets familiarize ourselves with some basic terminology used in freight forwarding industry.

• Exporter
• Importer
• Incoterms

Exporter

Exporter is the person/company who ships the goods/services out of the port of a country.

Importer

Importer is the person who buys these goods/services from the exporter.

Incoterm

Incoterms are a series of a predefined commercial terms which divides cost and risk associated in transportation and delivery of goods. These rules is published by International   chamber of commerce (ICC) and the same is accepted worldwide by the govt. and legal authorities. 

Please refer to http://en.wikipedia.org/wiki/Incoterms  for more details on incoterm.

Now as we are familiar with Export, Import and Incoterm, lets move on.

Import places an order with exporter and they both choose the mode of transport & incoterm based on their requirement. At the same time they choose a freight forwarder, who moves their shipment on their behalf cost effectively. From here role of a freight forwarder and CHA (Custom House Agents) starts. 

Same will be discussed in my next blog. Be patient and keep an eye on my updates.

***These import and export are thus part of international trade and of great importance not only for the importer and exporter only but also for national economy. As it helps in maintaining flow of foreign reserves and to boost development.