INCO TERMS: Know the risks along the supply chain
What do INCO Terms and vacations have in common?
Each service provided when shipping a product incurs a cost. Being aware and understanding those services can make or break a shipment. When negotiating INCO Terms the buyer and seller of the product must agree on who is responsible for what costs. This is where INCO Terms come into play. INCO Terms are the agreement between a buyer and seller confirming who will be taking on the costs along the shipping supply chain.
Think about it like going on vacation and the steps you must take to get there. Some people like to plan every little bit themselves. It gives them more control but may be expensive if there are errors. Others may like the concierge service where a travel agent (Freight Forwarder) takes on all of the planning, less work but also less control.
Others want it 50/50 or 70/30, whatever the breakdown; INCO Terms are what define that relationship. The International Shipping experience can be very unpredictable if you lack the knowledge for pertinent information such as INCO Terms
Note: processes vary from domestic to international. INCO Terms also differ.
Export Packaging - Packaging, Labeling, Packing
Like packing a suitcase for vacation, this is where you make sure everything you want from the warehouse is in its boxes. The items must be properly packed to avoid any shifting or breakage of the materials inside. Much like placing your shampoo inside a plastic bag in case it spills during transit. It is here that labeling is also an essential part of the process and that different countries have different; sometimes very strict requirements.
When shipping internationally the required packaging and organization of the product is a far more involved process than that of a domestic ride. Ever tried transporting a bottle of wine from your International vacation without tightly wrapping it for dear life in your most plush clothing before placing it in your suitcase? If you are not experienced in the art or properly packing for international travel, you may still be sporting that trendy wine stained outfit!
Loading Charges - Load, Stow & Count
Don’t forget to put your luggage in the car! This is where you load the container making sure everything is inside that needs to be. That the product inside must be secured, and container sealed properly for international travel.
Blocking and bracing your cargo is essential, the jostling oceans will damage your product if it isn’t properly packed. More importantly the shifting of the cargo could push it against the doors. Oh my! What an unpleasant surprise that will be for the person opening the container doors!
Inland - Rail & Trucking
How are you going to get to your boat or on your plane for this great vacation? Book a taxi, of course! Inland transit is very similar to you traveling to the port for your cruise. However, with international shipping Inland transit may consist of multiple taxi rides. It is important to know the distance between your location and the port or the rail depending upon your shipment’s routing. Make sure your trucker arrives in enough time to meet the cutoff times required or you’ll miss the boat for sure.
Be aware of the routing to know if the trucker will go straight from your location to the port or if it must go to the railroad and be shifted to a rail car for further transit to the port. (Oh, my if you are shipping your stuff as a less than container load (LCL) it may switch hands more than 5 times! We will talk more about that in another blog- for now stay focused!) You are in the taxi and on your way to the port to party hard on your cruise!
Terminal Receiving - Receiving of Freight
In some cases like with the Inco Term FAS terminal handling charges are separate. For your vacation purposes this is where you pay the people at the port to receive your luggage. Such handling is not as popular now that most carriers include this fee in their Terminal Handling charges. So when negotiating using the FAS Inco Term both the buyer and sell may be paying for the same service.
Just one is hidden in other costs. This can be compared to when the handling of your luggage cost a fee and now that you handle your own luggage with the help of Kiosk the cost of your luggage handling did not change. Hmm? Technology, such a love hate relationship isn’t it?
Terminal Handling - Moving Freight on/off Vessel
This is where you get where you’re going, you’ve handed your bags off and now you are on your way. The port has your container and will be using equipment like cranes to stack it in the proper location to get it ready for the ship.
Insurance- Freight & Transport Protection
It is essential to have your cargo insured. What if it gets lost or damaged on the trip? Insurance can vary depending on the INCO Terms. At times it can cover from export packing all the way to the destination including the cost of the transit! When deciding on insurance there are many factors. But the rule of thumb is: You don’t need insurance until you need insurance. Go figure.
Freight - Ocean/Air Cost
This is your ticket to get on the cruise! The freight cost is the fee you pay for the trip of cargo to go from the origin (start place) to the destination (end place) port.
Arrival charges - Handover Fees
You have arrived but you’re not ready just yet. Make sure you have your documents in order. There may be some handover fees between parties that you will be responsible for depending upon the INCO Terms negotiated.
Duty taxes and customs clearance - Freight Tax, Clearance & Broker Fees
It’s all about trade agreements and HTS/HTC (Harmonized Tariff) codes. These codes control how much tax is applied to your cargo. Like a passport making sure you can into the country and begin your fun vacation. Your cargo must also be cleared for arrival through Customs and Border Protection.
Deliver to Destination - Truck/Rail Costs
You’re here! This is the last step bringing your cargo to its destination so it can sip margaritas on the beach! A transportation company must pick up your cargo to deliver it to its destination. Whether you are responsible to pay or set up this service will be determined by your INCO Terms.