IncoDocs Trade Guide March 2020
IncoDocs Trade Guide March 2020
IncoDocs Trade Guide March 2020
TRADE
GUIDE
Learn key information around the Import / Export process
Incoterms® are also referred to as International Commercial Terms, which are published by the International Chamber of Commerce
(ICC), which relate to International Commercial Law. They are accepted by governments and legal authorities around the world. The
ICC published new Incoterms® 2020 that have come into effect from the 1st of January 2020. The ICC originally published
Incoterms® in 1936 and have continually published updates to reflect the changes to the Global Trade environment. It's important
that all parties involved in trade clearly understand the changes and how they apply to global supply chains.
The IncoDocs chart displays Incoterms® 2020 in an easy to understand format. Our chart states each Incoterm® and explains the
obligations and charges that are accepted by the seller and the buyer. This is general information for guidance purposes only. For a
full and complete description, refer to the full version of Incoterms® 2020 by the International Chamber of Commerce at the ICC
website.
Rules for any mode or modes of transport: Rules for sea and inland waterway transport:
EXW - Ex-Works or Ex-Warehouse FAS - Free Alongside Ship
“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or
premises or at another named place (i.e.,works, factory, warehouse, etc.). The seller does not need to load the a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when
goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
applicable.
FOB - Free On Board
FCA - Free Carrier “Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named
“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the
at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible goods are on board the vessel, and the buyer bears all costs from that moment onwards.
the point within the named place of delivery, as the risk passes to the buyer at that point.
CFR - Cost and Freight
CPT - Carriage Paid To “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must
seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
pay the costs of carriage necessary to bring the goods to the named place of destination.
CIF - Cost, Insurance and Freight
CIP - Carriage And Insurance Paid To “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods
“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The
nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the
‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should
the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to
cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly make its own extra insurance arrangements.”
with the seller or to make its own extra insurance arrangements.”
What does ‘Freight Collect’ and ‘Freight Prepaid’ mean?
DAP - Delivered At Place
“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on
Freight Collect and Freight Prepaid are common terms used in International Freight. It is very important to understand
the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks
the difference, it is basically a statement of who will be paying for all the International freight charges. If you export your
involved in bringing the goods to the named place.
goods on ‘Freight Collect’ terms (EXW, FCA, FAS and FOB are all Freight Collect terms) that means that the importer (your
buyer) will ‘collect’ and pay all of the freight charges on their side, you will not have to pay any freight at all.
DPU - Delivered At Place Unloaded
“Delivered At Place Unloaded” means that the seller delivers when the goods, once unloaded, are placed at the
If you are the exporter and sell the goods on CFR, CIF, CPT, CIP, DAP, DPU or DDP terms, this means that you will pay for
disposal of the buyer at a named place of destination. The seller bears all risks involved in bringing the goods
the freight charges (‘Freight Prepaid’ – you will pre-pay the freight charges). These are linked to the selling terms of your
to, and unloading them at the named place of destination.
invoice, if you are selling your goods on ‘FOB’ terms (Free on Board) then you are only covering the costs to get the goods
loaded on board the vessel. All charges thereafter will be charged to the receiver of the goods (consignee) – so it will be
DDP - Delivered Duty Paid
Freight Collect. These freight terms are stated on the Bill of Lading, the document issued by the shipping line or freight
“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of
forwarder.
the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of
destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination
and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export
and import and to carry out all customs formalities.
Resources
International Chamber of Commerce (ICC) Incoterms® 2020
This is general information for guidance purposes only. IncoSolutions Pty Ltd is not responsible for these contents nor do the contents listed above contain all details.
For a full and complete description, refer to the full version of Incoterms® 2020 by the International Chamber of Commerce at the ICC website.
Popular Shipping Methods
When exporting product around the world there are different shipping methods to consider. It mainly depends on the overall
product packing sizes, cubic measurement, or total weight of the products to be shipped.
The most popular shipping method all over the world is the popular 20 foot long shipping container (20’ container). Shipping containers
are the most efficient means of transport all over the world as they are designed to seamlessly transport between trucks, trailers, port
handling equipment, shipping vessels and railheads. They exist is many variations to transport different size and shaped cargo.
The International Air Transport Association (IATA) is responsible for publishing regulations around the use of Unit Load Devices. They
can also be referred to as a 'cargo pallet' or a 'PMC pallet'.
Freight Forwarders are companies which specialize in all of the components of International Freight and logistics. They are experts which have
experience and understanding of the complex transport and logistics arrangements that are involved to get your goods delivered all the way
through to your International customers. When your goods leave your warehouse, there are so many important processes involved to get goods
cleared through the port, comply with all regulations, supply the correct documentation, delivered to the correct container yard and loaded onto
the correct vessel. Freight forwarders also specialize in integrated modes of transport, so can easily arrange the movement of freight between
road, rail and sea.
Freight forwarders have vast experience dealing with complex customs regulations, different port services, quarantine/inspections services,
stevedores and shipping lines. You should carefully research and deal with an experienced freight forwarder who takes the time to come out and
meet at your premises to clearly understand your business and your requirements. Don’t just deal with a freight forwarder based on price as you
will need someone with experienced shoulders to overcome any obstacles and potential delays, and a company that will provide you with a high
level of service. Choosing a forwarder based on price can cost your business more in the long run.
A good freight forwarder will work out exactly what you need and breakdown their services – from container pickup from your warehouse, delivery
through the port and loading onto the vessel. A local representative will also give you International shipping rates to get goods shipped through to
the country of destination. Because freight forwarders move large volumes of shipments through several different shipping lines they will be able
to give you better shipping rates than if you were to try to deal with shipping lines directly.
Your freight forwarder will have to receive all correct shipment details and paperwork from you so they can organize the export process. When you
create all of your export documents using IncoDocs, you can email them directly through to your freight forwarder so they can streamline the
export process.
Free Trade Agreements are special agreements between 2 countries that eliminate the import tariffs (import
duty fees) that are paid on imported goods.
Import Tarriffs
Import tariffs are charges that are payable when goods are imported into the country of destination, but
when the country of import and the country of export have a 'Free Trade Agreement' in place then this
agreement eliminates the import duty fees in the country of import. It is primarily designed to increase
two-way trade between the countries. This helps both nations and both the Exporter and Importer
because it decreases the overall associated import costs, which makes many products more competitive
and appealing to International buyers. FTAs also help with overcome some internal barriers which
impede the trade of goods and services between countries and they also encourage increased
investment and cooperation.
Certificate of Origin
The importer will request that the shipper provides a signed and stamped Certificate of
Origin so that they can give this to their customs agent when importing into their
country to reduce or eliminate import duty fees. It's important to note that the importer
will require this Certificate BEFORE the shipment arrives so that they can pass onto
their customs clearance agent. You can easily create your Declaration of Origin
document using IncoDocs, and get it certified online.
There are a few things to understand in the difference between selling your goods on FOB (Free On Board) or
CFR (Cost and Freight) terms.
You must ensure that the International seafreight charge is paid before the goods arrive
at the destination.
The exporter will offer their product details and pricing information to the buyer. The exporter must ensure that all
information is clearly stated in correctly formatted sales documents - Quotation, Proforma Invoice, Order Confirmation
& Purchase Order (Buyer)
Quotation
A quotation document will offer all details of the products and selling terms to the buyer. Exporters must ensure all
information is clearly stated in a correctly formatted Quotation document to avoid any confusion or disputes relating to
product quality, specifications, pricing, delivery terms and expectations. A badly formatted quote document reflects
negatively on the company that is offering the goods for sale.
Order Confirmation
The exporter can send an Order Confirmation document to the Importer to reconfirm all of the details of the new order. An
order confirmation document is usually sent to the buyer after the buyer has issued a Purchase Order document to confirm
the new order. The Exporter must ensure that all information is clearly stated in a correctly formatted Order Confirmation
document to avoid having any disputes relating to product quality, specifications, pricing and delivery terms.
Purchase Order
A Purchase Order is a document issued by the buyer of goods, sent to the seller of goods to confirm the details of
products that are ordered. The Purchase Order is the official order document from the buyer's company that will contain
all details of the new order. If the Purchase Order does not contain all relevant information it can cause confusion and
delays to orders. The seller will also issue a Proforma Invoice document that will match all details of the buyer's
Purchase Order. Both parties will have to counter sign both documents as these documents represent a legally binding
agreement between the seller and buyer.
Countersigning Proforma Invoices, Purchase Orders and Sales Contracts used in Global Trade
Countersigning proforma invoices, purchase orders and sales contracts requires both buyer and
seller to add their company stamp or company seal, and their signature onto both documents.
Countersigned Proforma Invoices, Sales Contracts and Purchase Orders represent a legally binding
agreement between the buyer and seller. If there are any problems or disputes relating to the order
or shipments, these documents will be referred to in a court of law.
In the past, both buyers and sellers (importers or exporters) have had to manually print, sign, scan,
upload then mail documents between each other. Throughout the history of trade, this has been the
adopted process to get contracts signed.
In today’s world, buyers and sellers can now use IncoDocs to countersign each document to
eliminate the manual print, sign, scan and email process. Importers and exporters are
countersigning trade documentation to transition to paperless operations. This allows companies to
close deals faster, sign contracts from anywhere, increase administration efficiency and reduce
paper & operational costs.
2 - The seller uploads their digital company stamp or seal and inserts their electronic signature.
2 - The buyer uploads their digital company stamp or seal and inserts their electronic signature.
Click to Pay Invoices
Get Paid Faster. Allow your buyers to click to pay invoices online.
When a deal is confirmed, the seller will usually share a Proforma Invoice requesting a deposit payment from the buyer. When sellers provide payment options
on their invoices, buyers will have an easy 'click to pay' experience to get paid faster. Sellers can get setup in IncoDocs to receive payments from their buyers.
Shippers must ensure they create compliant shipping documentation to pass off to the freight company to
correctly arrange the export of goods. Errors will cause costly delays, fines and demurrage charges.
IncoDocs ensures compliant shipping documents to get products exported without problems or delays.
Below is an overview and explanation of some of the most important shipping documents required for export:
Commercial Invoices
Packing Lists
Shipper's Letter of Instruction
Forwarding Instruction Documents are created in line with United Nations
Verified Gross Mass (VGM) Layout Key (UNLK) recommendations for
Certificate of Origin (COO) International Trade.
Commercial Invoice
The commercial invoice for export provides all important information and instructions for your buyer, freight forwarder,
customs, agents and your bank (if required). The commercial invoice does not show tax as International transactions for
export are not subject to local taxes.
Shipper's details
Consignee's details (buyer)
Detailed product information
Incoterm
Port of loading
Port of discharge
Commercial product sale value
Currency sold
Packing List
A packing list is a detailed document that states all of the product and packaging details of each shipment. Your freight
forwarder will use this information when preparing the Bill of Lading with the shipping line so that the cargo can be
moved around accordingly. It can be used by customs in the country of import to understand exactly how shipments are
packaged and loaded to check product and packaging compliance and any import duties or taxes payable in the country
of destination. Key information detailed in the packing list includes:
A packing declaration is an important document which states the type of packing materials that are used to
pack the goods inside your container.
It is to ensure that any timber packaging used are ISPM15 compliant, to protect the spread of insects and disease which can be hiding
away in timber packing materials such as pallets, create and dunnages. The shipper will have to provide a statement on company
letterhead which states the type of packing materials used and if they have been treated or marked in compliance with ISPM15 or
DAFF fumigation treatment requirements. ISPM 15 is a wood treatment standard that address the need to treat wood materials that
are used to ship products between countries. If you are using this type of packaging to pack and export your goods then you must
ensure that the materials are debarked and correctly heat treated or fumigated with methyl bromide and then stamped with the ISPM
marking. Below is an example of pallets which have already been heat treated and stamped with the ISPM15 markings. ISMP15
Export compliant pallets and packaging are available from local suppliers.
If you export your products and have used timber packaging that has not had the correct
treatment or ISPM stamping it can cause some big problems when it arrives into the country of
destination. The shipment will be pulled aside and correctly treated and inspected at the port of
delivery before it will be cleared through customs, which can be quite expensive and you may also
be fined for not complying to rules and regulations. Worst case the whole shipment could be
refused entry into the country and completely destroyed. Your freight forwarder will be able to
arrange the correct treatment and supply you with a fumigation/treatment certificate that you can
pass onto your buyer to prove the goods have been correctly treated.
The ISF is also known as a "10+2" as it requires importers to provide 10 data elements to CBP and 2 other documents from
the carrier of goods (shipping line). An ISF document can be created to contain all of this information to be passed on to
different parties.
Manufacturer (or supplier) name and address
Seller (or owner) name and address
Buyer (or owner) name and address
Importer of record number, name and address
Consignee number(s)
Country of origin
Ship-to name and address
Container stuffing location
Consolidator (stuffer) name and address
Commodity Harmonized Tariff Schedule number for each product on the shipment
Master bill of lading number
House bill of lading number (if applicable)
Manufacturer's Declaration
A manufacturer's declaration is a flexible document that usually contains statement from the issuing company. The
document can be used for many purposes, including Newly Manufactured Declaration, Non-Asbestos Declaration, New
Prefabricated Units Declaration & New Shipping Containers Declaration.
The top of the document will include the Manufacturer's details (including name and address), the middle section will contain
a general statement from that company. The bottom of the document will include a signature from an authorized
representative from the company.
When sourcing products from overseas suppliers, it is essential to accurately calculate the Landed Cost of Imported Goods. In order to do that, you must
clearly understand all of the additional costs and charges involved in the supply chain process. Before contacting an overseas supplier and get quotations for
products, make sure you have a clear idea of all the landed price of the products. Below we describe all the information you will need by the time the goods
are ordered, shipped, customs cleared and delivered to your door.
1 - Receive a detailed quotation from your supplier with all details confirmed.
Click here to read the full guide, and download the Landed Cost calculator.
Glossary of Shipping Terms
The International shipping and marine transport industry is full of unique shipping terms and shipping abbreviations. And these are
used every day to describe everything from modes of transport, units of measure, pricing structures, IncoTerms and much more.
It's important that importers, exporters and freight companies correctly communicate freight terms to avoid problems or disputes
arising from misunderstanding them.
We've put together this shipping glossary chart to help you navigate global trade.
Click to:
1) Download the full glossary chart online
2) Enter your search terms to view results