INBOUND LOGISTICS Flashcards
International Purchasing
buying goods or services from suppliers located in different countries
contracting work or services to external companies or individuals located worldwide
Global Outsourcing
clarify the rules and terms that buyers and sellers use in international and domestic trade contracts
INCOTERMS
INCOTERMS
– officially known as ____
international commercial terms.
The seven Incoterms 2020 rules for any mode(s) of transport are
EXW - Ex Works
FCA - Free Carriage
CPT - Carriage Paid To
CIP - Carriage and Insurance Paid to
DAP - Delivered at Place
DPU - Delivered at Place Unloaded
DDP - Delivered Duty Paid
The four Incoterms 2020 rules for Sea and Inland Waterway Transport are
FAS - Free Alongside Ship
FOB - Free On Board
CFR - Cost and Freight
CIF - Cost Insurance and Freight
- The seller makes the goods available at their premises or another agreed-upon location.
- The buyer is responsible for all transportation arrangements, costs, and risks from that point onward.
- The seller’s responsibility ends when they make the goods available for pickup by the buyer.
EXW - Ex Works (insert place of delivery):
- Seller delivers goods, cleared for export, to the buyer’s nominated carrier at a specified place
- The seller delivers the goods to a named place, which could be a carrier, a port, or another agreed-upon location.
- The seller is responsible for export clearance, while the buyer assumes responsibility from that point forward.
- This term allows for flexibility in choosing the delivery location.
FCA - Free Carrier (Insert named place of delivery):
- Seller pays for transportation to the named destination.
- The seller arranges and pays for the transportation of goods to the named destination.
- Risk transfers from the seller to the buyer when the goods are handed over to the first carrier.
- The seller is responsible for export clearance, but import clearance is the buyer’s responsibility.
CPT - Carriage Paid to (insert place of destination)
- Seller pays for transportation and insurance to the named destination
- Similar to CPT, but the seller also provides insurance for the goods during transportation.
- The seller arranges and pays for both transportation and insurance to the named destination.
- Risk transfers from the seller to the buyer when the goods are handed over to the carrier.
CIP - Carriage and Insurance Paid To (insert place of destination):
- Seller delivers goods to a named destination, ready for unloading.
- The seller is responsible for delivering the goods to a named destination.
- The seller bears all risks and costs until the goods are ready for unloading at the agreed-upon place.
- The buyer is responsible for unloading and further transportation costs.
DAP - Delivered at Place (insert named place of destination):
- Seller delivers goods to a named destination and unloads them.
- The seller is responsible for delivering and unloading the goods at the named destination.
- The seller assumes risks and costs until unloading at the agreed-upon place.
- Once unloaded, the responsibility transfers to the buyer.
DPU - Delivered at Place Unloaded (insert of place of destination):
- Seller delivers goods to the buyer, cleared for import, and pays all costs, including duties and taxes.
- The seller is responsible for delivering the goods to the buyer’s destination, covering all costs and duties.
- The seller bears all risks and costs until the goods are ready for unloading at the named place of destination.
DDP - Delivered Duty Paid (Insert place of destination)
- The seller delivers the goods alongside the vessel at the named port of shipment.
- The buyer bears all costs and risks from that point onward.
FAS - Free Alongside Ship (insert name of port of loading)
- The seller delivers the goods on board the vessel at the named port of shipment.
- The risk transfers from the seller to the buyer once the goods are on board.
FOB - Free on Board (insert named port of loading):
- The seller pays for the cost and freight of transporting the goods to the named port of destination.
- The risk transfers from the seller to the buyer once the goods are on board the vessel.
CFR - Cost and Freight (insert named port of destination):
- Similar to CFR, but the seller also provides insurance for the goods during transportation.
- The seller pays for cost, insurance, and freight to the named port of destination.
- The risk transfers to the buyer when the goods are on board the vessel.
CIF - Cost Insurance and Freight (insert named port of destination):
a method of payment that protects both the seller (exporter) and the buyer (importer) in a contract of sale.
DOCUMENTARY CREDIT
Documentary credits (D/Cs) are also known as
letters of credit (L/Cs).
Types of documentary credit
- revocable documentary credit
- irrevocable documentary credit
- confirmed documentary credit
- unconfirmed documentary credit
- transferable letter of credit
- standby letter of credit
- revolving letter of credit
- red clause letter of credit
Can be canceled or amended by the buyer without the seller’s consent.
Revocable documentary credit
cannot be canceled or changed unless all parties agree.
Irrevocable documentary credit
The exporter’s bank (the advising bank) may confirm a documentary credit if the documentary credit includes a request to that effect.
Confirmed documentary credit
only the issuing bank assumes a payment obligation
Unconfirmed documentary credit
Allows the original beneficiary (seller) to transfer a part or the entire credit to one or more secondary beneficiaries (sub-sellers).
Transferable Letter of Credit
Functions as a guarantee of payment if the buyer fails to fulfill their obligations. It’s often used as a backup or security measure in case of default or non-payment.
Standby Letter of Credit
Opens up automatically for a specific amount after a specified period or after the terms are fulfilled.
Revolving Letter of Credit
Includes a clause that allows the seller to receive an advance payment before shipment.
Red Clause Letter of Credit
Parties Involved in a Documentary Credit
-Applicant: The buyer who requests the issuance of the credit.
-Issuing Bank: The bank that issues the credit on behalf of the buyer.
-Beneficiary: The seller who will receive payment under the credit.
-Advising Bank: The bank that advises the beneficiary of the credit’s issuance.
-Confirming Bank: The bank that adds its confirmation to the credit.
Documents Required in a Documentary Credit
- commercial invoice
- bill of lading
- packing list
- insurance certificate
- inspection certificate
document issued by the seller to the buyer, detailing the goods sold. It includes information such as the description of the goods, quantity, price, terms of sale, and other relevant details for customs clearance and payment.
commercial invoice
issued by a carrier (shipping company or freight forwarder) to the shipper (seller) acknowledging receipt of goods for shipment. It serves as a receipt, a contract of carriage, and a document of title to the goods.
bill of lading
a detailed document prepared by the seller that provides information about the contents of each package being shipped. It includes details such as the quantity, weight, dimensions, and contents of each package.
packing list
document issued by an authorized entity (often a third-party inspection agency) certifying that the goods meet certain quality, quantity, or other specified standards.
inspection certificate
a document issued by an insurance company or broker, detailing the coverage and terms of insurance for the shipped goods.
insurance certificate
