Notes

*Incoterms are the set of international terms that establish who assumes responsibility for the merchandise during transport. Experts from the International Chamber of Commerce have compiled the conclusions in 11 Incoterms, which must be chosen and applied between buyers and sellers. FOB, CIF and Ex Works are the most common.

FOB (Free On Board). Under this condition, it must be understood that as soon as the purchased product enters the ship or plane, the risks of possible loss or damage to the merchandise become the responsibility of the buyer. The buyer must take charge of the freight, unloading at the port of destination, customs procedures and insurance. It is the most widely used Incoterm in container transport.

CIF (Cost, Insurance and Freight). In this case, the selling company delivers the merchandise on board the ship and must hire and pay the costs, all customs procedures and freight to the port of destination. However, the buyer assumes the risk of loss of or damage to the merchandise at the port of shipment. For this reason, the insurance is contracted by the seller, but gives the buyer the right.

What are the main differences between these two Incoterms? The most obvious is the degree of responsibility that each one has. With the CIF each aspect of the transport is in charge of the seller, while with the FOB the buyer must be in charge of organizing and paying for all the details of the transport.

With the CIF Incoterm, the seller will select the transport company, the type and the route to use to move the cargo. With the FOB the buyer will be able to choose some aspects of the transport according to his particular needs.

In this sense, the FOB Incoterm gives the buyer greater control and the possibility of maneuvering in transport and reception, since he will take care of everything once his product is on the ship.

The CIF Incoterm limits any last-minute maneuver that the buyer needs to do, since the seller is in charge of the entire operation and it is unlikely that he will skip his own process due to an unexpected request by the buyer.

EXW (Ex Works) In this Incoterm, the seller limits himself to making the goods available to the buyer at the door of his warehouse or factory. In other words, it is limited to delivery, it does not collaborate in transport or process documentation. It is the buyer who assumes the risks and expenses from then on.

Thus, the documentation, the export documentation and any expense derived from customs management are all paid by the buyer, as well as the transportation expenses from the point of origin, to the port, including maritime freight, and all other expenses in destiny. The seller is solely responsible for packing and having the cargo ready for the buyer to take away.

*What is a freight forwarder?

A freight forwarder or freight forwarding company is in charge of organizing and coordinating the transport of its clients’ goods. It acts as an intermediary, managing transport of any kind (land, sea, air or multimodal). The figure of the freight forwarder has a very important role in any international freight transport, since he will be in charge of providing the appropriate logistical solutions to meet your needs.

*Main ports in China.

Shanghai port

This port is considered the busiest port in the world and the most important in China. Each year it receives more than 42 million TEUS*.

In addition, it has the largest automated container terminal in the world, which is located in the port of Yangshan.

Shenzhen port

It is located in the Guangdong province and connects the south of the country with the rest of the world. It has access to Hong Kong and manages more than 20 million TEUS each year.

Its location attracts the world’s largest companies such as Wal-Mart. But merchandise handling is focused on technology products, due to the large number of technology companies located in the province.

Ningbo Zhoushan Port

It is located in Zhejiang province. Every year it manages more than one billion tons of cargo. Its main terminal is focused on oil and mineral products.

It is located on the economic land silk route and the maritime silk route of the present century. In addition, it has 242 maritime routes that allow it to connect with more than 600 ports around the world.

Guangzhou port

This port is also located in the Guangdong province and receives around 22 million TEUS each year.

Its main connection is with the European continent, especially with the port of Rotterdam, one of the most important for the European Union.

Qingdao port

It is located in Shandong province. It receives around 19 million TEUS annually and, like the port of Guangzhou, its main connection is with the European continent.

*Customs clearance is the aggregate of operations and procedures that are carried out in customs, necessary to supervise and authorize the entry and exit of merchandise in a territory, during an international commercial operation. This set of procedures consists of the declaration of certain information related to the import or export before the customs authority of the particular territory. Customs clearance is done by the customs broker; a professional who represents one of the parties (importer or exporter) before the customs authority, responsible for the communication between his client and customs, also responsible for paying taxes and duties on behalf of his client.

*Teu is the acronym for the English term Twenty-foot Equivalent Unit. Represents an imprecise unit of measurement of maritime transport capacity (container ships and container port terminals) expressed in containers. It is the carrying capacity of a 20-foot (6.1 m) standard container, a metal box of standard size that can be easily transferred between different forms of transportation such as ships, trains, and trucks.