In the import/export business, it is important that everyone is speaking the same language. This allows English and non-English countries to work together, and leaves no doubt what is requested. For this purpose, terminology that is easy understood is imperative. Some of the most common terms are listed below.
Shipment Costs:
FOB (Free on Board)—This is the part of the contract for cost per Kg to get an item to an overseas port. It means the exporter is responsible and pays for everything up to departure port, including export charges.
FOB Factory (Freight on Board Factory)—Be warned, that this term has different meaning altogether from FOB. It means that you pay onward costs to the local port or airport. It can increase the price considerably, especially if the factory is located inland.
C/F (Cost and Freight)—This is the part of the contract for same goods cost per Kg including the sea freight. It means the exporter has included the cost of goods, freight, and export charges.
Ex-Works—This states you are responsible for all costs once merchandise leaves the supplier’s door.
CIF (Cost, Insurance & Freight)—The supplier pays to send the goods to the port of destination, and arranges the minimum cover marine insurance.
DDU (Delivered Duty Unpaid)—The supplier delivers to the buyer’s door and pays all costs except duties.
DDP/Carriage Paid (Delivered Duty Paid)—The supplier delivers to the buyer’s door and pays all costs including duties.
Shipment Size:
The costs of your shipment will depend on the weight or volume you ship. It will be in one of two container loads.
Full Container Load—This load has standard sizes of 20 or 40 feet in length. It is the most efficient way to ship, because costs savings can be made on packaging and less labor is required. Processing, handling, and haulage costs are more economical due to the fact that full containers are calculated as a single transaction. If you are purchasing from one supplier, the container is taken to the premises, loaded on site, sealed and collected for shipment.
Lesser Container Load—For this container, rates are calculated by volume taken up in cubic meters by your goods. They require more packaging and more labor, and greater loading and unloading costs.
Invoices and Forms:
Pro Forma Invoice—An advance copy of the final invoice sent to you by the seller when you have negotiated a deal. It includes shipping terms, price of goods, and packaging. You pay it according to the arrangements negotiated. It is needed to apply for a letter of credit (L/C) or foreign exchange allocation.