4 INCOTERMS 2020 Grupo C

Analysis of Incoterms 2020: Group C

Overview of Group C Incoterms

• Adolfo Carreño introduces the analysis of Incoterms 2020, focusing on Group C.

• The four Incoterms in Group C are CFR (Cost and Freight), CIF (Cost, Insurance, and Freight), CPT (Carriage Paid To), and CIP (Carriage and Insurance Paid To).

• The session aims to analyze these terms in detail, including obligations for exporters and importers, risk transfer points, logistics cost distribution, and related transportation modes.

Detailed Analysis of CFR

• The discussion begins with CFR as the first term in Group C. It emphasizes the importance of understanding the flow of operations involved.

• A practical example is provided where a Peruvian buyer places an order for goods from a Chinese manufacturer.

• The process starts with the Chinese manufacturer preparing goods for transport under CFR terms, which includes loading them into a container.

Export Process Under CFR

• The manufacturer must complete customs export procedures by hiring a customs agent to handle necessary documentation.

• Once customs clearance is successful, indicated by receiving "levante" (export authorization), the container is loaded onto a truck for shipment to the vessel.

• After loading onto the ship, international freight charges apply along with insurance covering from port to port.

Arrival at Destination

• Upon arrival at Callao Port, Peru, the cargo is unloaded from the ship and transported to a temporary storage facility or terminal.

• This section highlights that while local freight costs exist throughout shipping stages, only international freight and insurance are relevant under these Incoterms.

This structured approach provides clarity on each aspect discussed regarding Group C's Incoterms within this segment.

Importation Procedures and Incoterms Explained

Overview of Importation Modalities

• The import process has two main modalities: SADA (Sistema Anticipado de Despacho de Dinero) and exceptional procedures.

• In the SADA, importation is processed before the goods arrive at Callao port, while in the exceptional procedure, it occurs after arrival.

• There are three types of import procedures, including one for emergencies or natural disasters.

Steps in the Import Process

• Once a container arrives at a temporary deposit, the import procedure is executed leading to customs clearance (levante aduanero). This grants authorization for actual importation.

• After obtaining customs clearance, the container is transported to the importer’s warehouse where goods are unloaded. The empty container must then be returned to its owner (the shipping line).

• The operation concludes when the empty container is returned to the shipping line's depot for empty containers. This marks the completion of the import process.

Risk Transfer in CFR Incoterms

• When using CFR (Cost and Freight), risk transfer occurs at delivery point which aligns with FOP (Free on Board) terms; specifically at the ship's hold. Thus, once goods reach this point, responsibility shifts to the buyer.

• If an incident occurs post-delivery that results in loss (e.g., sinking of a ship), it is typically borne by the buyer despite freight being paid by seller; risk was transferred upon delivery at ship's hold.

Understanding CIF and SIF Incoterms

• CIF (Cost, Insurance & Freight) shares similar delivery points as FOP but includes insurance costs along with freight charges assumed by seller until destination port. Thus, costs include preparation and loading expenses plus insurance coverage during transit.

• For SIF (Insurance & Freight), all costs from FOP are included plus insurance fees until goods reach their destination; effectively making it more comprehensive than CFR due to added insurance obligations on part of seller.

Responsibilities Under Different Incoterms

• Under both CFR and CIF/SIF terms, exporters bear various responsibilities such as preparing merchandise for international transport and handling export documentation alongside local transportation costs up until shipment reaches designated vessel or location for loading purposes.

Understanding Incoterms: CPT and CIP

Overview of Cargo Handling and Responsibilities

• The process begins with obtaining the cargo lift, where goods are transferred to another truck for shipment alongside the vessel.

• Once loaded into the ship's hold, the seller assumes risk until this point but must also pay freight and insurance for the goods.

• Insurance is primarily in favor of the importer, covering international transit; buyers should request insurance in their name from sellers.

Key Incoterms: CFR vs. CIF

• Two additional incoterms discussed are CPT (Carriage Paid To) and CIP (Carriage and Insurance Paid To), which are simpler to understand compared to previous terms.

• CFR (Cost and Freight) and CIF (Cost, Insurance, and Freight) apply exclusively to maritime transport, while CPT and CIP can be used across all transport modes.

Delivery Points in Incoterms

• CFR specifies delivery at FOB (Free on Board), indicating that responsibility transfers when goods are loaded onto a ship; CPT uses FCA (Free Carrier).

• Under FCA, sellers deliver goods once export procedures are completed at the carrier's loading terminal.

Risk Transfer in CPT

• In CPT terms, risk transfers at the carrier's loading terminal after export procedures are finalized; costs include freight paid up to destination.

• The seller covers transportation costs up to a specified point while transferring risk at the loading terminal.

Understanding CIP Terms

• CIP includes costs similar to CPT but adds insurance coverage; it ensures that both freight charges and insurance are covered until delivery.

• The place of delivery under CIP aligns with FCA conditions; it encompasses all handling fees plus freight charges along with insurance.

This structured overview provides clarity on key concepts related to incoterms such as CFR, CIF, CPT, and CIP while highlighting responsibilities regarding cargo handling.

Incoterms Overview and Key Concepts

Introduction to Group C Incoterms

• The speaker confirms the identification of the four Incoterms in Group C, indicating a review of previously discussed content.

• The focus is on CFR (Cost and Freight), explaining that delivery occurs when goods are aboard the vessel at the agreed port of shipment.

Understanding CFR Responsibilities

• The seller's responsibilities include preparing goods for international transport, loading onto the receiving vehicle, and handling export clearance.

• International freight costs are added to CFR, differentiating it from FOP (Free on Board).

Freight Terms and Conditions

• It’s noted that international freight may include unloading at the destination port if specified in the shipping terms.

• For liner terms, unloading is included; however, under FO terms, it is not.

Transitioning to CIF Incoterm

• CIF (Cost Insurance and Freight) is introduced as similar to CFR but includes insurance coverage during transit.

• Seller obligations under CIF mirror those of CFR until reaching the destination port without unloading.

Key Differences Between CFR and CIF

• Under CIF, insurance must cover from port to port with minimum clause C requirements.

• Cost structure for CIF includes FOP plus freight and insurance costs.

CPT: Carriage Paid To

Overview of CPT Responsibilities

• CPT (Carriage Paid To) is explained as equivalent to FCA (Free Carrier), where delivery occurs once goods are handed over to a carrier designated by the seller.

Seller's Obligations Under CPT

• Similar responsibilities apply as with FCA: preparing goods for transport, internal loading, and export clearance.

Transport Costs in CPT

• International transport costs are covered up to an agreed destination; unloading charges depend on contract stipulations.

This structured approach provides clarity on key concepts related to Incoterms while allowing easy navigation through timestamps for further reference.

Understanding CPT and FCA in Shipping

Key Concepts of CPT and FCA

• The Cost, Insurance, and Freight (CPT) includes the cost of goods plus transportation and handling fees. It is essential to understand how these costs are calculated.

• The term "zip with P" refers to a shipping agreement similar to Free Carrier (FCA), which encompasses costs including handling, freight, and insurance under Clause A for the buyer's benefit.

• In the context of FCA, delivery occurs when the seller hands over goods to an international carrier. This involves temporary storage or terminal loading processes.

• The internal transport costs up until the point where goods are loaded onto a transport vehicle fall under FCA. From this point onward, it transitions into Free on Board (FOP).

• For CPT agreements, at minimum, insurance must cover from the delivery location to at least the designated destination port. Negotiating coverage up to a warehouse is advantageous if possible.