Incoterms Theory: Essential Logistics and Customs Practices

Incoterms Theory Exercises

1. Definition of F Terms

The F terms require the seller to deliver the goods for carriage in accordance with the instructions of the buyer.

2. Meaning of Customs Clearance

Customs clearance involves the preparation and submission of documentation required to facilitate exports or imports. This includes representing the client during customs examination, assessment, payment of duty, and taking delivery of cargo from customs after clearance.

3. Customs Clearance Channels in Spain

When shipping goods from Spain to Germany, three channels may be encountered:

• Green Channel: Indicates that all documentation is correct and goods are cleared for transit.
• Orange Channel: Indicates that submitted documentation requires verification. Additional documents, such as a dual-use letter, may be requested. Goods are held until requirements are met.
• Red Channel: Indicates errors in documentation or a decision to physically inspect the goods.

4. Differences Between EXW and FCA

Under EXW (Ex-Works), the seller delivers goods to the buyer at the seller's premises, and the buyer arranges insurance. Under FCA (Free Carrier), the seller delivers export-cleared goods to the carrier at a named location defined in the contract.

5. Allocation of Costs for FCA

The seller must pay all costs relating to the goods until they have been delivered, including customs formalities, duties, taxes, and other charges payable upon export.

6. Cargo Types for FAS

FAS (Free Alongside Ship) is typically used for bulk or non-containerized cargo, as the goods must be placed alongside the vessel.

7. Delivery Cases for FCA

The two possible cases for FCA delivery are: 1) Delivery at the seller's premises (loaded on the buyer's vehicle) or 2) Delivery at another named place (ready for unloading from the seller's vehicle).

8. Allocation of Costs and Risk for FAS and FOB

The seller delivers goods alongside the ship (FAS) or on board the vessel (FOB). From that point, the buyer bears all costs (loading, freight, insurance) and risks. Under FAS, the buyer is responsible for export clearance and loading costs.

9. Importance of the Bill of Lading

The Bill of Lading serves as evidence of the contract of carriage and receipt of goods by the carrier. It is essential for the seller to prove delivery to the carrier. This is standard in maritime Incoterms like FOB, CFR, and CIF.

10. Naming Rules for Incoterms

Incoterms are typically structured as: [Incoterm Code] + [Named Place] + [Incoterm Version (e.g., ICC 2020)].