Your Incoterms – are they working for you?

Your Incoterms – are they working for you?

The world of importing (and exporting!) can become a huge rabbit warren of information.  The amount of information that can be required for just a single shipment can be huge and quite often scary.

Today we’d like to point out one huge downfall when it comes to importing under the terms CIF (Costs, Insurance, Freight) or C&F (Cost and Freight).  Under both of these incoterms, the shipper (supplier) is responsible for the arranging and paying of the freight to the named port of destination.  It may seem simpler and cheaper to go ahead and let your shipper arrange your freight for you, but this is when huge problems can occur.    When shippers arrange the freight on your behalf, they will often pick the most cheapest service / shipping line.  This is beneficial to them, but it is a huge disadvantage for you and your wallet.

These freight rates that are obtained at the port of loading are very low and in order to sustain these rock bottom rates the local agents in Australia charge the consignee (yourself) astronomical, unreasonable local charges.  From these local charges collected, a rebate is given back to their agents in China.

It seems like a strange way of practice, but it happens every day in the freight forwarding industry.  The one person that ends up losing in this process is you, the buyer.  The cost of your freight is incorporated into the cost of your product, whilst you end up being out of pocket here in Australia with excessive local charges.

So how do you protect yourself from being ripped off when your freight arrives in Australia?

It’s pretty easy really.  When ordering with your supplier it is preferred that you select the terms as FOB (from the named port of loading).  With the terms FOB (Free On Board) you, the buyer, nominate EES Shipping (or our named agent) as the freight forwarder that you wish to utilise for the shipment. Once you have notified us of your shipment, that’s when we take over.  There are multiple benefits to shipping under the terms FOB.

We list these as follows:

1.  Constant tracking of your cargo.  EES have a comprehensive on-line tracking system which allows up-to-date and accurate real time information through synchronised origin data.

2. The ability to set not only your freight rate from your named port of loading, but also your local charges.  If a quotation has been raised for your shipment, this is what you will be charged.

Do you want to know more about Incoterms?  Head to our handy reference chart.  Our sales team have also created an informative CFR vs FOB fact sheet.  Contact Heinrich Roth today for your copy.

Have any further questions about shipping terms?  Contact us today.

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