The main documents governing the Regulation of international carriage by sea are:
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Brussels Convention for the Unification of Certain Rules of Law relating to Bills of Lading (Hague Rules), adopted August 25th, 1924.
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UN Convention on the Carriage of Goods by Sea (Hamburg Rules) of 1978. These two documents are essentially the basic rules applicable to the carriage of goods by sea.
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The main document of maritime carriage is the Bill of Lading. The Bill of Lading is a document of title issued by the ocean carrier to the shipper at the time the cargo is accepted for carriage. At the same time, the Bill of Lading is a receipt, bill of lading, and confirmation of the contract of carriage of goods by sea.
After accepting a container with cargo for transportation, the Seafarer shall issue three originals of the Bill of Lading to the shipper. In order to receive cargo at destination port the sender of cargo must give originals of the Bill of Lading in quantity of 3 pieces to the consignee (consignee), to whom cargo is sent, and he in his turn must submit these originals to the office of the Line for receiving his cargo at the port of destination.
Nowadays the original Bill of Lading is replaced by an electronic notification procedure via Telex Release.
In such a case, the Sender himself or herself submits the originals of the Bill of Lading to the Line's office at his location, with information about the Consignee, thus simplifying the procedure of document exchange. Line then sends an electronic notification to the destination port about the receipt of the Bill of Lading and with instructions about who exactly should be issued with the cargo. Such service is very convenient, time-saving and it reduces the risk of losing the Bill of Lading to the sender who is in most cases located in a foreign country.
Incoterms 2020
Incoterms (Incoterms International commercial terms) are the international commercial rules that provide a unified interpretation of the commercial terms most frequently used in world trade in contracts for the purchase or sale of goods.
Incoterms rules define:
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Boundaries of transfer of risks for damage, loss or destruction of goods from the Seller to the Buyer.
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Allocation of costs associated with transporting, insuring and clearing the goods between the Seller and the Buyer.
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Place of actual delivery of goods from the Seller (the Seller’s Representative) to the Buyer (the Buyer’s Representative).
The first publication of trade rules was in 1936. Later on, Incoterms underwent numerous changes and nowadays the wording of Incoterms 2020 is the most up-to-date one.
In total Incoterms 2020 contains 4 groups of 11 international trade rules, marked with a three-letter English abbreviation.
Group E
Shipment
EXW
EXW stands for Ex Works named place. It determines the Seller’s cargo pickup from the Buyer directly at the Factory or Facility.
Seller’s duties and expenses include handing the cargo over at the factory.
Duties and expenses of Buyer consist of customs clearance export procedure, loading onto a vehicle, shipment to the country of destination and delivery to the final point.
Risks pass from Seller to Buyer at the Seller’s factory.
Group F
Carriage Paid by Buyer
FCA, FAS, FOB
FCA stands for Free Carrier named place. It defines the transfer of cargo from Seller to Buyer at a place designated by the Seller.
The Seller's obligations and expenses are as follows: cargo delivery to the place of handover to the Buyer, customs clearance, export duties and taxes.
Duties and expenses of Buyer include the transportation of cargo to the destination country, import clearance with payment of customs duties and delivery to final destination.
Risks pass from Seller to Buyer at the point of delivery.
FAS is Free Alongside Ship named shipment port. It designates the point at which goods are transferred to the Buyer.
Seller's obligations and expenses, as follows: customs clearance for export, delivery to the port of shipment and berthing at the quay.
Duties and expenses of the Buyer include loading onto a ship, sea freight to the destination port, unloading from a ship, import customs clearance with payment of customs duties, and delivery to final destination.
Risks pass from Seller to Buyer at the point of origin.
FOB stands for Free on Board named port of shipment. It establishes the place of transfer of cargo from Seller to Buyer on board.
Seller’s obligations and expenses include customs clearance for export, cargo delivery to the port of departure, loading on board.
Duties and expenses of Buyer, as follows: sea freight to the destination port, discharging from the ship, importing customs clearance with payment of customs duties, delivery to the place of final destination.
Risks are transferred from Seller to Buyer on board.
Group C
Carriage Paid by Seller
CFR, CIF, CIP, CPT
CFR translates to Cost and Freight named port of destination. The following determines the destination to which Seller will pay for the transportation.
Duties and expenses of Seller are, as follows: customs clearance exporting, delivery of cargo to the port of departure, loading on board, sea freight to the final destination.
Duties and expenses of Buyer include unloading from the ship at the destination port, importing customs clearance with payment of duties and delivery to final destination.
Risks pass from Seller to Buyer on board upon loading.
CIF is Cost, Insurance and Freight named port of destination, which specifies the destination to which Seller will pay for the shipment.
Duties and expenses of Seller, as follows: customs clearance exporting, delivery of goods to the place of delivery to the Buyer.
Duties and expenses of Buyer include the transportation of cargo to the destination country, import clearance with payment of customs duties and delivery to the final destination.
Risks pass from Seller to Buyer at the point when the Seller hands over the goods to the carrier.
CPT stands for Carriage Paid to named place of destination. It tracks down the destination at which Seller will pay for the shipment.
Seller's obligations and expenses, as follows: export customs clearance, carriage to agreed destination.
Duties and expenses of Buyer include unloading of goods, import clearance with customs duties, delivery to the final destination.
Risks pass from Seller to Buyer at the time the Seller hands over the goods to the carrier.
Group D
Carriage Paid by Seller
DAP, DPU, DDP
DAP stands for Delivered at Point named point of destination. It defines the destination where the Seller delivers the goods to the Buyer.
Seller’s obligations and expenses are, as follows: customs clearance export, shipping to the agreed place of destination.
Duties and costs of Buyer consist of unloading of goods, import clearance, customs duties.
Risks pass from Seller to Buyer at the destination point.
DPU is Delivered Named Place Unloaded named place of destination, which identifies the unloading place where the Seller delivers the goods to Buyer.
Seller’s obligations and expenses are: customs clearance exporting, delivery to the agreed place of destination and unloading of the goods.
Duties and expenses of Buyer, as follows: customs clearance importing and payment of customs duties.
Risks pass from Seller to Buyer at the destination point, upon the complete cargo unloading.
DDP translates to Delivered Duty Paid named place of destination.
Seller’s obligations and expenses include customs clearance exporting, delivery to the agreed place of destination, customs clearance import with payment of duties, delivery.
Duties and expenses of Buyer consist of unloading and receiving the goods.
Risks pass from Seller to Buyer at the destination point.
The necessity to indicate the goods delivery terms from the international sale-purchase agreements according to Incoterms 2020 considerably simplifies the cooperation between Seller and Buyer. Furthermore, this is the most significant point, in accordance with which the Customs authorities of the Russian Federation determine the value of goods to calculate the duty and VAT required to be paid.
By the way, if the Incoterms determine the obligation of Seller to pay for transportation and cargo insurance to the place of destination and / or transfer of cargo to Buyer, the latter may claim a reduction in the customs value of goods, by deducting from the invoice value the costs in Russia, and, as a consequence, may legally save some customs payments. This is conditioned by the rules for determining the customs value according to the Federal Law № 289, at the border of the Customs Union.
Contact our specialists. They will help you to choose and draw up a set of documents so you do not have to pay unnecessary customs costs under the relevant terms of delivery.
