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DELIVERY TERMS (INCOTERMS ® ) AND INTERNATIONAL TRANSPORT MODES

In document Food & Bev. Trade SA (Page 149-152)

8.1 INCOTERMS®

Incoterms® are standard international trade terms developed by the International Chamber of Commerce and are recognised by abbreviations such as “FOB” and “CIF”. These terms are essential elements of a properly drafted international contract of sale, as they notify the buyer what is “included” in the sales price. Incoterms® allocate the following key contract elements between the seller and buyer:

• transport cost

• risk of loss or damage to the goods

• export and import customs clearance and payment of duties

• insurance responsibilities

• responsibilities between seller and buyer

Incoterms® are divided into two distinct classes: those for all modes of transport (road, air, rail, sea) and those for sea and inland waterway.

Rules for all modes of transport (road, air, rail, sea):

INCOTERM® DESCRIPTION

EXW Ex-Works

The seller’s responsibility is to make the goods available, packed and ready for collection, either at its own premises or another named warehouse or factory. The buyer bears all cost and risk of transport.

This term carries the minimum obligation for the seller.

FCA Free Carrier

The seller is responsible for delivering the goods to the transport car- rier or another person (such as a freight forwarder) nominated by the buyer. The responsibility for, and the risk of damage to or loss of, the goods are transferred from the seller to the buyer at this point. It is re- quired of the seller to customs clear the goods for export.

CPT Carriage Paid To

The seller delivers the goods to the carrier and contracts for and pays the cost of carriage to named place of destination. It is required of the seller to custom clear the goods for export.

CIP Carriage and Insurance Paid To

In addition to the obligations under CPT, the seller also procures insur- ance cover against the buyer’s risk of loss of or damage to the goods during carriage.

DAT Delivered At Terminal

The seller is responsible for making the goods available to the buyer at a named terminal at the named port or place of destination. The seller is responsible for unloading of the goods but not for import customs clearance. NOTE: A terminal can refer to any place whether covered or not, such as a quay, warehouse, container yard, road, rail or air cargo terminal.

DAP Delivered At Place

The seller is responsible for delivering the goods to a named place/point of destination. The buyer is responsible for unloading the goods from the transport vehicle as well as import customs clear- ance.

DDP Delivered Duty Paid

The seller is responsible to deliver the goods, not unloaded from the transport vehicle, to the named place/point of destination and to clear the goods through customs for import. This term represents the maxi- mum obligation for the seller but is not recommended if unable to ob- tain import clearance.

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Rules for sea and inland waterway (when point of delivery and the place to which goods are carried are both ports):

This summary only serves as an awareness of the importance of Incoterms® when engaging in international transactions. It is recommended that potential exporters attend an Incoterms® workshop at their local Chamber of Commerce or refer to other training institutions noted in Chapter 10.

8.2 INTERNATIONAL TRANSPORT MODES

Freight options for the exporter of processed fruit, vegetables and nuts are road freight, airfreight, sea or rail or a combination of these methods. This is obviously dependent on various factors such as:

• Nature of the product (for example frozen vegetables need to be shipped in a temperature regulated container whereas this is not a requirement for groundnuts).

• Place of destination (does the destination port/airport/depot etc., have the necessary equipment to handle and off-load the cargo).

• The time-frame within which the buyer wants the goods vs. the transit time and route for a selected transport mode.

• The frequency with which the transport service is offered to a destination as well as the reliability of such service.

• The most cost-effective transport method, taking the quantity ordered and the infrastructure at the place of destination into account.

• Security issues, both on the transport route and in the country of destination.

8.2.1 Containers

There are various types of ISO containers available to accommodate the international shipment of products. For example, most products are exported in a general purpose container (GP) whereas products that require a regulated temperature for shipment would make use of a reefer container. When making use of a reefer container (example the shipment of deep frozen vegetables) PPECB needs to be contacted in order to manage and regulate the correct temperature setting for product, for shipment.

8.2.2 Sea Freight

The majority of products relating to processed vegetables, fruit and nuts will be shipped in containers via sea. Making use of seafreight leaves the exporter with two options:

Full Container Load (FCL): Full Container Load (FCL) refers to when the exporter has sufficient cargo to utilise a whole container.

Less Container Load (LCL): With a LCL shipment the exporter delivers the goods to a container depot (or a groupage operator’s warehouse), where the goods are packed

together with other consignments in order to fill up a container.

INCOTERM® DESCRIPTION

FAS Free Alongside Ship

The seller is responsible for delivering the goods, customs cleared, alongside (quay or barge) the ship at the nominated loading point at the port of dispatch. The buyer must bear all cost and risk from that point onward. This term applies best to bulk and breakbulk cargo.

FOB Free On Board

The seller is responsible for delivering the goods, cleared for export, on board the vessel at the named port of shipment. The risk of dam- age to or loss of, the goods pass from the seller to the buyer when the goods are on board the vessel, and the buyer bears all cost and risk from that moment onwards.

CFR Cost and Freight

The seller delivers the goods on board the vessel and contract for and pays the costs and freight necessary to bring the goods to the named port of destination. The risk of loss or damage to the goods passes when the goods are on board the vessel.

CIF Cost Insurance and Freight In addition to obligations under CFR, the seller also contracts for insur- ance up to the named port of destination.

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STEP-BY-STEP MANUAL FOR SA EXPORTERS OF PROCESSED PRODUCTS SECTION 3

8.2.3 Air Freight

Airfreight allows for fast delivery of goods but is expensive and will substantially increase the price of the product in the for- eign market. Exporters must also take into consideration limitations such as weight, volume and cargo restrictions.

8.2.4 Road Freight

Road transport is often the most effective mode of transport for freight in Southern African countries, especially when ex- porting to land-locked countries such as Zambia, Zimbabwe and Malawi. Other countries that are also serviced by road are Namibia, Angola, Democratic Republic of the Congo (DRC), Botswana, Lesotho, some parts of Mozambique and Tanzania.

8.2.5 Rail

For South Africa, Transnet’s Freight Rail division offers rail services and maintains an extensive rail network across South Africa that connects with other rail networks in the sub-Saharan region. For services offered visit website:

www.spoornet.co.za

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CHAPTER 9

In document Food & Bev. Trade SA (Page 149-152)