International Chamber of Commerce (ICC)

International Chamber of Commerce (ICC)

Chambers of Commerce exist in a wide variety of shapes and sizes. At one end there are small associations of traders in a single shopping area through those which represent the commerce and industry of a town, city or region up to National Chambers which speak for an entire country.

As their name implies, they are groupings of traders, manufacturers and merchants some of whom may be in direct competition one with another but who come together to deal with problems affecting all of them. Many of their activities have no discernible impact upon shipping but some of them most certainly do. An example is that their independence and integrity are sufficient for their validation of, say, a Certificate of Origin being an acceptable document either in its own right or as a prerequisite before such a document receiving a visa from a consulate.

In some countries, businesses must by law be registered with their local or regional Chamber of Commerce. Others are given the responsibility for conducting commercial auctions and other market activities, thus making them into influential and powerful bodies. They may also be involved in commercial arbitrations or provide references for local companies and trade contacts for national or international purposes. Where they have had a significant influence in international trade is through their having formed the International Chamber of Commerce (ICC).

In the same way as national shipping associations have benefited from the formation of an international body, the International Chamber of Commerce (ICC) has more than made its mark by its publication of such handbooks as Incoterms, an internationally agreed glossary of terms used in international trade.

International Chamber of Commerce (ICC) published Uniform Customs and Practice for Documentary Credits (UCP) has proved to be of great benefit in this vital aspect of international trade. These are only examples of the many areas where the International Chamber of Commerce (ICC) has proved of immense value.

In the field of shipping business, International Chamber of Commerce (ICC) sponsored both the International Maritime Bureau (IMB), which is concerned principally with Maritime Fraud, and the Centre for Maritime Co-operation to encourage an open market approach to maritime developments and to foster maritime joint ventures. All International Chamber of Commerce’s (ICC) publications may be seen on the ICC website at www.iccwbo.org

International Chamber of Commerce (ICC)

The International Chamber of Commerce (ICC) is a renowned global organization that represents business interests at an international level. Here’s a brief overview:

History and Background: Founded in 1919, the International Chamber of Commerce (ICC) was established in the aftermath of World War I, with the intent of fostering trade and peace among nations. Its inception was to address the challenges of international business, particularly given the massive disruptions caused by the war.

Key Features:

  1. Global Reach: The International Chamber of Commerce (ICC) has a broad membership base that includes businesses of all sizes and sectors from across the world. It has national committees and direct members in over 100 countries.
  2. Advocacy: One of its primary roles is to act as the voice of global business. It engages in discussions and negotiations with major international organizations, such as the United Nations, the World Trade Organization, and the G20, to ensure that business views and concerns are represented.
  3. Rule Setting: The International Chamber of Commerce (ICC) plays a significant role in establishing rules and guidelines that facilitate international business. For instance, the ICC’s Incoterms rules provide a standard set of terms for international trade.
  4. Dispute Resolution: The ICC International Court of Arbitration is one of the world’s foremost institutions for resolving international business disputes. It provides a neutral framework for parties to settle their disputes amicably, without resorting to litigation.
  5. Combating Economic Crime: The International Chamber of Commerce (ICC) also addresses challenges like corruption, fraud, and other forms of economic crime, providing businesses with tools and resources to counteract these issues.
  6. Sustainable Development: The organization promotes the UN Sustainable Development Goals (SDGs) and offers guidance to businesses on how they can contribute to sustainable development.

Challenges and Criticisms: Like many international institutions, the International Chamber of Commerce (ICC) faces challenges and criticisms. Some of these relate to its perceived western-centric orientation or claims that it tends to favor the interests of large multinational corporations over those of smaller businesses or developing countries. However, the International Chamber of Commerce (ICC) continually works to refine its approach and engage with a diverse array of stakeholders to remain effective and relevant in an ever-changing global business environment.

The International Chamber of Commerce (ICC) continues to play a pivotal role in shaping the global business landscape. By providing a platform for dialogue, setting rules for business, and offering mechanisms for dispute resolution, it facilitates smoother and more efficient international trade and cooperation.

 

Other Notable Initiatives:

  1. Digital Innovations: With the digital era transforming global business, the International Chamber of Commerce (ICC) is committed to keeping up with these changes. It works towards understanding the implications of digital trade and aims to set guidelines that can help businesses navigate the digital landscape safely and efficiently. The International Chamber of Commerce (ICC) also focuses on the digital economy, data privacy, and cybersecurity, ensuring that businesses are equipped to face modern challenges.
  2. Education and Training: Recognizing the need for continuous learning in the dynamic world of international business, the International Chamber of Commerce (ICC) offers various training programs and workshops. These programs help professionals stay updated with the latest trends, rules, and best practices in international trade and business.
  3. World Chambers Federation (WCF): An integral part of the International Chamber of Commerce (ICC), the WCF directly links the ICC to thousands of chambers of commerce around the world. This network allows the ICC to tap into local business communities and understand their unique challenges and needs.
  4. Taxation and Economic Policy: The International Chamber of Commerce (ICC) provides guidance on complex international taxation issues, advocating for transparent, stable, and predictable tax regimes. It opposes harmful tax practices and supports the removal of tax barriers to international trade.

Impact: The ICC’s initiatives and guidelines significantly influence international business practices. By acting as a bridge between governments and the private sector, the ICC ensures that policies and regulations are conducive to open trade and investment. Many countries and businesses worldwide often refer to International Chamber of Commerce (ICC) guidelines and rules as benchmarks.

Future Outlook: As the world becomes increasingly interconnected, the importance of institutions like the International Chamber of Commerce (ICC) will likely grow. Issues such as climate change, the digital transformation of economies, and growing geopolitical tensions all highlight the need for a cohesive and representative platform where businesses can communicate their concerns and collaborate on solutions. The ICC, with its century-long experience and vast network, is poised to remain at the forefront of these discussions.

In an evolving global scenario, the International Chamber of Commerce (ICC) stands as a testament to the power of collaboration and dialogue. By continuing to advocate for businesses and providing them with the necessary tools and resources, the International Chamber of Commerce (ICC) aims to ensure that international trade remains a key driver of prosperity, innovation, and peace in the 21st century.

 

What is the role of the International Chamber of Commerce ICC?

The International Chamber of Commerce (ICC) plays a multifaceted role in the global business landscape. Here are the key functions and roles of the ICC:

  1. Promoting International Trade: One of the primary objectives of the ICC is to promote and facilitate international trade. It aims to do so by creating an environment in which businesses can operate efficiently and effectively across borders.
  2. Setting Global Business Standards: The ICC develops rules and guidelines to streamline business operations globally. For instance, it has formulated the Incoterms rules, which define the responsibilities of sellers and buyers in the international sale of goods.
  3. Dispute Resolution: The ICC’s International Court of Arbitration is one of the most well-known and respected arbitration institutions in the world. Businesses from different countries often choose the ICC to resolve their disputes, given its impartiality, expertise, and global recognition.
  4. Advocacy: The ICC represents the voice of the global business community in major international forums, including the United Nations, G20, and World Trade Organization. It lobbies for policies and regulations that support open trade and economic growth.
  5. Combating Economic Crime: The ICC actively works to combat various forms of economic crime, including corruption, money laundering, and commercial crime. It provides tools, resources, and training to businesses to help them address these challenges.
  6. Sustainable Development: Recognizing the importance of sustainable development, the ICC encourages businesses to adopt sustainable practices. It provides guidelines and tools to help companies incorporate sustainability into their business models.
  7. Networking and Knowledge Dissemination: Through conferences, seminars, and publications, the ICC offers platforms for businesses and experts to network, share knowledge, and collaborate on pressing global issues.
  8. Training and Certification: The ICC provides training and certification programs in various areas of international business, such as trade finance, arbitration, and contract drafting.

In essence, the International Chamber of Commerce acts as a bridge between businesses and governments, ensuring that the interests of the global business community are represented and that international trade can flourish in a stable, secure, and sustainable environment.

 

How many countries are in International Chamber of Commerce?

The International Chamber of Commerce (ICC) is not made up of countries; rather, it is a global organization that represents businesses from around the world. It has national committees or direct members in over 100 countries, but it’s important to differentiate between this and the idea of countries being “members” of the International Chamber of Commerce (ICC). Instead, businesses, chambers of commerce, and business associations from these countries are the ones affiliated with the International Chamber of Commerce (ICC). The number of countries with a presence or representation in the International Chamber of Commerce (ICC) can vary over time as more national committees or direct memberships are established.

 

Who can be members of International Chamber of Commerce?

The International Chamber of Commerce (ICC) is primarily an organization for businesses. A variety of entities can become members of the ICC, including:

  1. Businesses and Corporations: Companies of all sizes, from large multinational corporations to small businesses, can join the International Chamber of Commerce (ICC).
  2. Business Associations: National and regional business federations or associations can become members.
  3. Chambers of Commerce: Local, regional, or national chambers of commerce can join the ICC.
  4. Professional Service Firms: Firms that provide services such as law, finance, consulting, and others might become members to stay connected with global business trends and practices.
  5. Other Business-Related Organizations: Various other entities that have a stake in global trade, commerce, and economic development might opt for ICC membership.

Members benefit from the ICC’s wide range of services, including its rule-making activities, dispute resolution services, and advocacy efforts. Moreover, being part of the International Chamber of Commerce (ICC) provides opportunities for networking, knowledge sharing, and influence on international business policies and standards. Membership requirements and procedures might vary based on the local International Chamber of Commerce (ICC) national committee or the specific nature of the entity seeking membership.

How do I start International Chamber of Commerce (ICC) Arbitration?

Starting an arbitration under the rules of the International Chamber of Commerce (ICC) involves a series of steps. Here’s a general overview of the process:

  1. Arbitration Agreement: Before any dispute arises, parties usually include an arbitration clause in their contract agreeing to resolve any future disputes through International Chamber of Commerce (ICC) arbitration. If a dispute arises without a pre-existing arbitration clause, the parties can still agree to International Chamber of Commerce (ICC) arbitration through a separate agreement.
  2. Request for Arbitration: The party initiating the arbitration (the claimant) submits a “Request for Arbitration” to the Secretariat of the ICC’s International Court of Arbitration. This document outlines the nature of the dispute, the relief sought, and the relevant agreements between the parties.
  3. Payment of Filing Fee: Along with the Request for Arbitration, the claimant must also pay the appropriate filing fee.
  4. Answer to the Request: After receiving the Request for Arbitration, the Secretariat sends a copy to the other party (the respondent). The respondent then has a set period (usually 30 days) to submit an “Answer to the Request for Arbitration,” which should include its comments on the nature of the dispute, any counterclaims, and any comments on the arbitrators’ selection.
  5. Constitution of the Arbitral Tribunal: Based on the parties’ agreement or the ICC’s rules, one or more arbitrators are appointed to form the Arbitral Tribunal. The typical number is either one or three. The ICC’s International Court of Arbitration confirms the arbitrators’ appointment.
  6. Terms of Reference: Once the tribunal is constituted, it draws up the “Terms of Reference,” which is a foundational document outlining the scope of the tribunal’s mandate, the issues to be determined, and other relevant details. Both parties must sign this document.
  7. Procedural Timetable: The tribunal, after consulting the parties, establishes a procedural timetable, outlining the steps for the arbitration, including document submissions, witness statements, and hearing dates.
  8. Conduct of Proceedings and Hearing: The proceedings are carried out based on the procedural timetable. This may include written submissions, document production phases, and eventually, a hearing where parties present their case.
  9. Final Award: After considering all evidence and arguments, the tribunal issues its final award. The ICC’s International Court of Arbitration reviews the draft award before it’s rendered to ensure adherence to the ICC’s rules.
  10. Enforcement: The final award can be enforced in most countries under the New York Convention, an international treaty that facilitates the recognition and enforcement of foreign arbitral awards.

Throughout this process, the ICC’s Arbitration Rules and the tribunal provide the procedural framework. It’s crucial for parties to consult these rules and engage experienced legal counsel familiar with International Chamber of Commerce (ICC) arbitration to guide them through the process.

 

Importance of International Chamber of Commerce (ICC) in Dry Bulk Shipping

The International Chamber of Commerce (ICC) plays a pivotal role in global trade, and its influence extends to various sectors, including dry bulk shipping. Dry bulk shipping refers to the marine transportation of bulk cargo items such as coal, grain, iron ore, and other dry commodities without the use of packaging. Here’s an overview of the importance of the International Chamber of Commerce (ICC) in dry bulk shipping:

  1. Standardized Trade Terms (Incoterms): The International Chamber of Commerce (ICC) introduced and regularly updates the International Commercial Terms, commonly known as Incoterms. These are a set of pre-defined commercial terms widely used in international commercial transactions. Incoterms help clarify elements like delivery points, transfer of risk, and responsibilities for freight and insurance in dry bulk shipping contracts, ensuring clarity and reducing disputes.
  2. Dispute Resolution: Given the global nature of dry bulk shipping, disputes between parties from different countries can arise. The ICC’s International Court of Arbitration is a preferred institution for many in the shipping industry to resolve their disputes, providing an efficient, neutral, and globally recognized platform.
  3. Trade Facilitation: The International Chamber of Commerce (ICC) promotes open trade and works against trade barriers. This advocacy helps ensure that the dry bulk shipping industry, essential for international trade, operates smoothly and without unnecessary hindrances.
  4. Standardized Contracts and Documents: The International Chamber of Commerce (ICC) provides model contracts and standardized documents that can be used in international trade, including dry bulk shipping. These templates can save time, ensure compliance with best practices, and reduce the potential for misunderstandings.
  5. Advocacy and Representation: The International Chamber of Commerce (ICC) represents the interests of businesses, including those in the dry bulk shipping industry, at major international forums. It lobbies for regulations and policies that support the growth and sustainability of global trade and transportation.
  6. Training and Knowledge Sharing: Through its various initiatives, the International Chamber of Commerce (ICC) offers training, seminars, and conferences where stakeholders from the dry bulk shipping industry can update their knowledge, learn about new trends, and network with peers.
  7. Promotion of Sustainable Practices: The International Chamber of Commerce (ICC) encourages businesses to adopt sustainable and environmentally responsible practices. Given the environmental concerns related to shipping, the ICC’s guidelines and tools can help dry bulk shipping companies transition towards more sustainable operations.
  8. Combatting Economic Crime: The International Chamber of Commerce (ICC) works to address economic crimes like fraud, corruption, and money laundering, all of which can impact global industries, including dry bulk shipping. The International Chamber of Commerce (ICC) provides tools and resources to help companies mitigate these risks.

International Chamber of Commerce (ICC) plays a critical role in facilitating and standardizing international trade practices, and its impact on the dry bulk shipping sector is significant. Through its rules, advocacy, and resources, the International Chamber of Commerce (ICC) helps ensure that the dry bulk shipping industry operates efficiently, sustainably, and with a reduced risk of disputes.

Standardized Trade Terms (Incoterms)

Incoterms, short for International Commercial Terms, are a set of standardized trade terms that are published by the International Chamber of Commerce (ICC). They’re used worldwide in international and domestic contracts for the sale of goods. Incoterms provide specific guidance to individuals participating in the import and export of goods globally.

The primary purpose of Incoterms is to clearly communicate the tasks, costs, and risks associated with the global or international transportation and delivery of goods. These terms are universally recognized and help avoid confusion in different countries or between different legal jurisdictions.

Here are the key roles of Incoterms:

  1. Define Responsibilities: They specify the responsibilities of sellers and buyers, detailing who is responsible for each stage of the shipping process, including packaging, loading, transporting, unloading, and insurance.
  2. Transfer of Risk: They specify the point at which the risk of loss or damage to the goods transfers from the seller to the buyer.
  3. Cost Distribution: They detail how various costs associated with the shipping process are to be allocated between the buyer and the seller.

Incoterms are typically followed by a location. For example, “FOB New York” means “Free On Board at New York,” specifying that the seller’s obligation is met once the goods pass over the ship’s rail at the port of New York.

The ICC has updated the Incoterms several times since their introduction in 1936, with the latest version being Incoterms 2020. The terms in this version are:

  1. EXW – Ex Works
  2. FCA – Free Carrier
  3. CPT – Carriage Paid To
  4. CIP – Carriage and Insurance Paid To
  5. DAP – Delivered At Place
  6. DPU – Delivered At Place Unloaded (This is a new term introduced in the 2020 edition, replacing the previous DAT – Delivered At Terminal.)
  7. DDP – Delivered Duty Paid
  8. FAS – Free Alongside Ship
  9. FOB – Free On Board
  10. CFR – Cost and Freight
  11. CIF – Cost, Insurance, and Freight

When entering into a contract, it’s crucial for both sellers and buyers to understand the specific Incoterm they’re agreeing to, as it dictates responsibilities, risks, and costs. It’s also essential to specify the version of Incoterms being used (e.g., Incoterms 2020) to avoid ambiguity or misunderstandings.

 

What are the most used Incoterms in Dry Bulk Shipping?

Dry bulk shipping primarily deals with commodities like coal, grain, iron ore, and other unpackaged bulk cargo. The choice of Incoterms in dry bulk shipping often revolves around the point at which risks are transferred and the nature of the bulk goods being transported. Some Incoterms are more commonly used in dry bulk shipping than others:

  1. FOB (Free On Board): This term is prevalent in dry bulk shipping. Under FOB, the seller’s responsibility ends once the goods have passed over the ship’s rail at the agreed port of shipment. The buyer then assumes all responsibilities, risks, and costs from that point onward, including freight, insurance, unloading, and transportation beyond the initial port of destination.
  2. CFR (Cost and Freight): Under CFR, the seller arranges and pays for the transportation of the goods to the agreed port of destination. However, the risk transfers from the seller to the buyer as soon as the goods pass over the ship’s rail at the port of shipment.
  3. CIF (Cost, Insurance, and Freight): Similar to CFR, but in addition to arranging and paying for transportation to the agreed port of destination, the seller also provides insurance against the buyer’s risk of loss or damage during transit. Like CFR, the risk of loss or damage transfers from seller to buyer when the goods cross the ship’s rail at the port of shipment.
  4. FAS (Free Alongside Ship): Less common than FOB, but still used in dry bulk shipping, FAS requires the seller to deliver the goods alongside the vessel at the specified port of shipment. This means the goods are placed within reach of the ship’s loading equipment but not actually on board. From there, the buyer takes over all responsibilities, risks, and costs.

While these Incoterms are among the most commonly used in dry bulk shipping, the choice of a specific Incoterm will depend on the agreement between the buyer and the seller, considering factors such as the nature of the commodity, shipping practices, and commercial customs. Always ensure that the chosen Incoterm is clearly specified in contracts to avoid ambiguity and potential disputes.

 

Importance of Incoterms in Dry Bulk Shipping

Incoterms, or International Commercial Terms, are essential in global trade, and their significance in dry bulk shipping—a sector that handles commodities like coal, grain, minerals, and other unpackaged bulk cargo—cannot be overstated. Here’s why Incoterms are crucial in dry bulk shipping:

  1. Clarity in Responsibilities: Dry bulk shipping often involves large quantities of goods. Incoterms specify who (buyer or seller) is responsible for each phase of the shipping process, from loading, transportation, insurance, to unloading. This clarity is vital to ensure smooth operations.
  2. Risk Management: Incoterms clearly define the point of transfer of risk from the seller to the buyer. Given the nature of dry bulk goods and the potential hazards during maritime transport, knowing exactly when the risk shifts is crucial for both parties to manage liabilities and insurance.
  3. Cost Allocation: Dry bulk shipping can incur various costs, from port charges to logistics. Incoterms precisely outline which party is responsible for which cost, ensuring no unexpected expenses for either party.
  4. Standardization in Global Trade: Dry bulk commodities are traded globally, involving multiple countries and jurisdictions. Incoterms provide a standardized set of terms recognized worldwide, eliminating ambiguities stemming from language barriers or differing trade practices.
  5. Dispute Reduction: By offering a clear framework that both parties agree upon, Incoterms reduce the potential for misunderstandings and disputes. In an industry where disputes can be costly and time-consuming, this is particularly valuable.
  6. Flexibility: Different Incoterms cater to varied trade practices. Whether a seller wants to provide comprehensive services, including delivery to the buyer’s door, or limit responsibilities to just delivering goods at their premises or a nearby port, there’s an Incoterm suitable for the arrangement.
  7. Efficient Contract Formation: Incoterms provide shorthand to a lot of complex obligations and terms. Instead of writing out lengthy clauses, parties can simply refer to an Incoterm in their contract, making the process of contract drafting more efficient.
  8. Informed Decision Making: By understanding Incoterms, traders in the dry bulk shipping industry can make more informed decisions about the costs, risks, and logistics associated with their chosen shipping terms, leading to more strategic business decisions.

Incoterms play a foundational role in dry bulk shipping. They ensure clarity, reduce potential disputes, and streamline the process of global trade, allowing businesses to operate more effectively and with greater confidence in the international market.

 

What is FOB (Free On Board) in Dry Bulk Shipping?

“Free On Board” (FOB) is a commonly used term in international trade, particularly in shipping, and while it is not exclusive to dry bulk shipping, it is often used within that context as well.

Free On Board (FOB) refers to a set of incoterms (international commercial terms) which detail the responsibilities and liabilities between a buyer and a seller for the delivery and transportation of goods. Here’s a breakdown of FOB in the context of dry bulk shipping:

  1. Point of Responsibility Transfer: Under FOB terms, the seller is responsible for the goods until they are loaded onto the ship. Once the goods are on board the ship, responsibility (and often risk and cost) transfers to the buyer.
  2. Costs: The seller bears all costs leading up to and including the loading of the goods onto the ship. This can include production, transportation to the port, loading charges, and any local taxes or duties.
  3. Risks: The risk of loss or damage to the goods transfers from the seller to the buyer once the goods have been loaded on board. This means that if the goods are damaged after they’ve been loaded but before the ship leaves port, the buyer bears the risk.
  4. Freight and Further Costs: After the goods are loaded, the buyer is responsible for all further costs, which might include sea freight charges, insurance, unloading costs at the destination port, and any further transportation.
  5. Clearance: The seller must clear the goods for export. This means handling any formalities, paperwork, or inspections required to legally ship the goods out of the country.
  6. Benefits: One of the main advantages for buyers using FOB terms is that they have greater control over the shipping costs and choice of freight forwarder or shipping agent. They can negotiate their own rates and routes.

In sum, FOB is about defining where the responsibility and risks shift from seller to buyer. For dry bulk shipping, this often involves commodities like grains, coal, minerals, or other bulk goods. But, the term FOB can be applied to many types of goods and not just those shipped in dry bulk.

Always remember to carefully review any contract or shipping term agreement to fully understand the specific responsibilities, costs, and risks involved, as actual details can vary based on the agreement between the parties.

 

What is CIF (Cost, Insurance, and Freight) in Dry Bulk Shipping?

“Cost, Insurance, and Freight” (CIF) is another term used in international trade, similar to FOB. It is one of the incoterms (international commercial terms) which designate the responsibilities and liabilities between a buyer and a seller for the delivery and transportation of goods. Here’s a breakdown of CIF in the context of dry bulk shipping:

Cost, Insurance, and Freight (CIF)

  1. Responsibilities: With CIF, the seller is responsible not just for delivering the goods to the ship (like in FOB) but also for paying the cost of shipping the goods to the destination port, providing necessary insurance for the journey, and ensuring the goods reach the destination.
  2. Costs: The seller covers the costs of the goods, insurance, and all shipping and transportation charges up to the destination port. This includes production costs, transportation to the port, loading charges, sea freight charges, and insurance costs.
  3. Risks: The risk of loss or damage to the goods transfers from the seller to the buyer once the goods have been loaded on board the ship at the port of origin. However, because the seller is providing insurance under CIF terms, if the goods are damaged or lost during transit, the insurance should cover it.
  4. Insurance: A distinctive feature of CIF compared to other incoterms is the requirement for the seller to procure insurance for the goods during transit. The insurance is typically in the name of the buyer, and any claims would typically be made by the buyer directly to the insurance company.
  5. Destination Costs: Once the goods arrive at the destination port, the buyer is responsible for unloading costs, local duties, taxes, and any further transportation.
  6. Clearance: Similar to FOB, the seller under CIF terms is responsible for clearing the goods for export. This includes managing any formalities, paperwork, or inspections required to legally export the goods.
  7. Benefits: One advantage for buyers using CIF terms is the convenience. They do not have to coordinate freight or insurance since the seller handles these aspects. However, this might also mean the buyer has less control over the choice of shipping agents or insurance providers.

“Cost, Insurance, and Freight” (CIF)provides a higher degree of responsibility for the seller compared to FOB. For dry bulk shipping, which involves transporting commodities like grains, coal, minerals, or other bulk goods, the choice between CIF and other terms would depend on the preferences and negotiations of the trading parties. As with any shipping term, it’s crucial to review any contract or agreement in detail to understand all specific responsibilities, costs, and risks involved.

 

 

What is CFR (Cost and Freight) in Dry Bulk Shipping?

“Cost and Freight” (CFR) is yet another term from the realm of international trade and is part of the incoterms (international commercial terms). It describes the obligations, risks, and costs associated with the transportation and delivery of goods. Let’s break down CFR in the context of dry bulk shipping:

Cost and Freight (CFR)

  1. Responsibilities: Under CFR terms, the seller is responsible for delivering the goods to the ship and also paying the cost of shipping the goods to the destination port. The significant difference between CIF and CFR is that under CFR, the seller is not responsible for insuring the goods during transit.
  2. Costs: The seller covers the costs of the goods and all shipping and transportation charges up to the destination port. This includes production costs, transportation to the port, loading charges, and sea freight charges.
  3. Risks: The risk of loss or damage to the goods transfers from the seller to the buyer as soon as the goods are loaded onto the ship at the port of origin. This means that even though the seller is paying for the transportation, the buyer bears the risk during the voyage. If anything happens to the goods while in transit, the buyer is responsible unless they have independently secured insurance.
  4. Insurance: Unlike CIF, the seller is not obliged to insure the goods under CFR terms. If the buyer wishes to have insurance for the cargo, they must arrange and pay for it separately.
  5. Destination Costs: When the goods arrive at the destination port, the buyer is responsible for all costs associated with unloading, local duties, taxes, and any further transportation.
  6. Clearance: Just as in FOB and CIF, under CFR terms, the seller is responsible for clearing the goods for export, encompassing any formalities, paperwork, or inspections required to legally ship the goods out of the country.
  7. Benefits: The CFR term can be seen as a middle ground between FOB and CIF. The seller handles freight costs and export formalities, but the buyer retains the choice and responsibility of insuring the goods. For buyers who have their preferred insurance arrangements or those who wish to decide on whether to insure at all, CFR might be the preferred choice.

In the context of dry bulk shipping, which entails the transportation of commodities such as grains, coal, and minerals in bulk, the choice between CFR and other shipping terms would hinge on the negotiations between the parties and their individual preferences regarding costs, risks, and responsibilities. Always ensure to thoroughly review and understand any contractual agreements related to shipping terms to be clear on the division of responsibilities, costs, and risks between the parties.

 

 

What is FAS (Free Alongside Ship) in Dry Bulk Shipping?

“Free Alongside Ship” (FAS) is another term within the framework of incoterms (international commercial terms). It dictates the roles, obligations, and costs shared between a seller and buyer in the transportation and delivery of goods. Here’s a breakdown of FAS, especially within the context of dry bulk shipping:

Free Alongside Ship (FAS)

  1. Responsibilities: Under FAS terms, the seller’s responsibility is to deliver the goods alongside the designated ship on the quay (or wharf) at the specified port of shipment. This means the goods are placed within the reach of the ship’s loading equipment but not actually loaded onto the ship.
  2. Costs: All costs (including production, transportation to the port, and other local charges up to the point the goods are placed alongside the ship) are borne by the seller. After the goods are delivered alongside the ship, any further costs, such as loading onto the ship, freight charges, insurance, and unloading at the destination, fall on the buyer.
  3. Risks: The risk of loss or damage to the goods transfers from the seller to the buyer once the goods are placed alongside the ship. This means that any events causing damage or loss to the goods after this point are the buyer’s responsibility.
  4. Insurance: Under FAS terms, insurance is the buyer’s responsibility. If the buyer wishes to insure the goods, they must make arrangements separately.
  5. Clearance: The seller handles the clearance of goods for export, addressing any formalities, paperwork, or inspections required to legally export the goods from the country.
  6. Benefits: FAS is often chosen when the buyer wants more control over the main carriage and the loading process. This can be especially relevant in dry bulk shipping, where specialized handling might be needed, and the buyer has specific preferences for carriers and routes.

For dry bulk shipping, which involves the transportation of commodities like grains, coal, minerals, and other similar goods in bulk form, terms like FAS come into play based on the specific agreements between the buying and selling parties. It’s important for both parties to understand their respective responsibilities under the chosen incoterm to ensure smooth trade operations. As always, when dealing with shipping terms and contractual agreements, it’s essential to review and comprehend all specifics related to responsibilities, costs, and risks.