Understanding international shipping terms is vital for a smooth & successful export process.
Especially for a bulk wine importer or exporter from South Africa. In this comprehensive guide, we will delve into essential shipping terms such as Ex Works, FOB, and more, providing you with detailed explanations and insights to help streamline your wine shipments to Europe. Here are the Top 10 Shipping Terms that you should know.
EXW – Ex works:
“Ex works” means that the seller’s responsibility is to make the goods available at their own premises or another named location (e.g., their warehouse or factory). The buyer is responsible for all transportation costs, risks during transit, and any necessary export/import formalities. This term puts the most responsibility on the buyer, and the seller’s obligations end once the goods are made available.
FCA – Free carrier:
In an FCA arrangement, the seller is responsible for delivering the goods to a carrier or another party nominated by the buyer at a specified location. The seller clears the goods for export. After delivery, the risk of loss or damage transfers from the seller to the buyer. The buyer then assumes responsibility for transportation costs and risks during transit.
FAS – Free alongside ship:
Under the FAS term, the seller is responsible for placing the goods alongside the vessel at the named port of shipment. The seller covers export clearance, but the risk transfers to the buyer once the goods are alongside the ship. The buyer bears all costs and risks from that point onward, including loading the goods onto the vessel.
FOB – Free on board:
FOB is a term where the seller is responsible for all costs and risks associated with delivering the goods on board the vessel at the named port of shipment. The risk transfers to the buyer once the goods are on board, and the buyer handles the costs and risks beyond that point, such as transportation and insurance.
CFR – Cost and freight:
CFR means that the seller pays for the cost of goods and the freight necessary to bring the goods to the named port of destination. The risk transfers to the buyer when the goods are on board the vessel at the port of shipment. However, the buyer is responsible for unloading the goods, customs clearance, and any further transportation or insurance costs.
CIF – Cost, insurance, and freight:
Similar to CFR, the seller covers the cost of goods, freight, and additionally, maritime insurance to the named port of destination. The risk transfers to the buyer when the goods are on board the vessel. The buyer is responsible for unloading, customs clearance, and any costs after the goods have been unloaded from the vessel.
CPT – Carriage paid to:
In CPT, the seller arranges and pays for the transportation of goods to the named destination, which could be a port, airport, or other location. The risk transfers to the buyer at that point. The buyer then assumes responsibility for unloading, customs clearance, and any further transportation or insurance costs.
CIP – Carriage and insurance paid to:
CIP is similar to CPT, but the seller also includes insurance coverage for the goods during transportation to the named destination. The risk transfers to the buyer at the destination. The buyer is responsible for unloading, customs clearance, and any costs after the goods have been delivered.
DAP – Delivered at place:
Under DAP, the seller is responsible for delivering the goods to the buyer at the named place of destination, not unloaded. The seller bears all risks and costs of transportation up to that point, including import clearance. Once the goods are ready for unloading at the destination, the buyer takes over the responsibility and cost.
DDP – Delivered duty paid:
DDP places the maximum responsibility on the seller. The seller is responsible for delivering the goods to the buyer at the named destination, including all costs, risks, and import duties. The buyer only needs to receive the goods at the destination.
DPU – Delivered at named place, unloaded:
DPU is similar to DAP, but with the additional responsibility for the seller to unload the goods at the named destination. The risk transfers to the buyer once the goods are unloaded.
*Remember, the choice of shipping term can significantly impact the overall cost and risk allocation in international trade. It’s essential to agree on the shipping terms clearly with your trading partners to avoid misunderstandings and ensure a smooth export process.
Ranked from least to most onerous on the Seller
Certainly! Here’s the list of the shipping terms from least onerous to the seller (meaning the seller has the least responsibility) to most onerous to the seller (meaning the seller has the most responsibility):
- EXW – Ex works
- FCA – Free carrier
- FAS – Free alongside ship
- FOB – Free on board
- CPT – Carriage paid to
- CIP – Carriage and insurance paid to
- CFR – Cost and freight
- CIF – Cost, insurance, and freight
- DAP – Delivered at place
- DPU – Delivered at named place, unloaded
- DDP – Delivered duty paid
Summary
In EXW, the seller’s obligations end once the goods are made available, and the buyer takes on most of the responsibility. As we move down the list, the seller’s responsibilities increase, with DDP being the most onerous, where the seller is responsible for almost everything until the goods are delivered to the buyer’s location, including covering import duties.
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PS, we keep it simple and use Hillebrand as our freight forwarder, a DHL company to ensure that you are in good hands.