{"id":951,"date":"2026-01-19T20:05:44","date_gmt":"2026-01-19T20:05:44","guid":{"rendered":"https:\/\/sailorvikas.com\/?p=951"},"modified":"2026-01-19T20:05:44","modified_gmt":"2026-01-19T20:05:44","slug":"international-trade","status":"publish","type":"post","link":"https:\/\/sailorvikas.com\/index.php\/2026\/01\/19\/international-trade\/","title":{"rendered":"International Trade"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">International Trade<\/h2>\n\n\n\n<p>A sound knowledge of various points, such as an international sales contract, the purpose and relevance of the international commercial terms (Incoterms), common methods of payment in international trade, and the role of the bill of lading in international transport, is an essential requirement for one to participate in the freight market.<br>Generally we are well aware of the following<\/p>\n\n\n\n<p>UNDER CIF-Cost, Insurance and Freight, as paid to a specific place, say, \u201cCIF Belgium\u201d.&nbsp;<\/p>\n\n\n\n<p>It is a contract based on the \u201cdischarge port\u201d. The basic purpose of a CIF contract, is more related with the \u201csale of the documents pertaining to the goods\u201d, rather than the \u201csale of goods\u201d. This enables the negotiability of the \u201cbill of lading\u201d. Goods will cost more on CIF terms, than on FOB terms. Notwithstanding this, on account of the advantages of CIF as related to normal international sale of goods, in which the \u201cdocumentary credit system\u201d of the banks necessitates the transfer of the \u201ctitle\u201d of the goods by way of \u201cpassing of the documents\u201d(including the bills of lading and certificate of insurance), the major volume of international seaborne cargo shipments are \u201cCIF\u201d.<\/p>\n\n\n\n<p><strong>The \u201cseller\u201d must:<\/strong><\/p>\n\n\n\n<p>Pay all costs, including marine insurance and freight for transporting the goods to the specified destination. As stated earlier, the risk passes from the \u201cseller\u201d to the \u201ccustomer\u201d, as soon as the goods cross the ship\u2019s rail at the loading-port.<\/p>\n\n\n\n<p>Supply the goods and execute a contract at his own expense, for the carriage of the goods to the mutually-agreed port of destination, by paying freight and charges for the loading\/unloading. Since the freight is paid by the \u201cseller\u201d, the bill of lading is usually marked as, \u201cfreight Pre-paid\u201d. The Master is to make sure that the freight has been paid, before he signs the bill of lading.<\/p>\n\n\n\n<p>Arrange at his own expense, a marine insurance cover with respect to the goods, against the \u201crisk of carriage\u201d for the (CIF-price + 10%). War risks insurance cover as required by the \u201ccustomer\u201d, needs to be arranged by the \u201cseller\u201d, but at the expense of the \u201ccustomer\u201d.<\/p>\n\n\n\n<p>Provide the \u201ccustomer\u201d with clean, negotiable, bills of lading, an invoice (i.e. a list of goods sent or services provided, with a statement of the sum due for these), and, an insurance cover policy. If the bill of lading contains a reference to a charter-party, the \u201cseller\u201d must also provide a copy of the charter-party.<\/p>\n\n\n\n<p><strong>The \u2018customer\u201d must:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Accept the documents when tendered by the \u201cseller\u201d.<\/li>\n\n\n\n<li>Pay the mutually-agreed \u201ccontract-price\u201d.<\/li>\n\n\n\n<li>Bear all costs and charges, excluding freight, marine insurance cover and the unloading-costs unless included in the freight when collected by the carrier.<\/li>\n\n\n\n<li>Bear the risks during the voyage. However, the \u201ctitle\u201d of the goods is transferred when the documents are taken-up by the \u201ccustomer\u201d.<\/li>\n\n\n\n<li>Make the \u201cseller\u201d wholly responsible for arranging the \u201cshipment\u201d, which is an advantage of CIF to the \u201ccustomer\u201d. The \u201cseller\u201d is protected against loss or damage before payment by the insurance company.<\/li>\n<\/ul>\n\n\n\n<p><strong>UNDER FOB<\/strong><\/p>\n\n\n\n<p>Free on Board (as per the specified port of shipment), e.g. FOB Antwerp. This is advantageous when the cargo is of a typical type, say, oil, and size, such that the \u201ccustomer\u201d wishes to charter a particular vessel. The other case where this may be advantageous where foreign currency restrictions, compel an importer to use FOB, e.g. where government wants the importers to deploy national-flag vessels. The FOB contract is based on the \u201cloading port\u201d, so that the \u201ccustomer\u201d is free after loading to re-sell the goods, even while these are on the vessel. The FOB \u201cinvoice price\u201d is lower than the CIF price.<\/p>\n\n\n\n<p><strong>The \u201cseller\u201d must:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Supply the goods and documents, as stated in the contract of sale.<\/li>\n\n\n\n<li>Load the goods on board the vessel as specified by the buyer, at the mentioned port of shipment, within a stipulated period.<\/li>\n\n\n\n<li>Bear all costs and risks of the goods, until they have crossed the ship\u2019s rails, at the specified port of shipment, in addition to the export charges, packing charges and taxes.<\/li>\n\n\n\n<li>Notify the \u201ccustomer\u201d when the loading of the goods have been completed.<\/li>\n\n\n\n<li>Give necessary information to the \u201ccustomer\u201d for him to arrange for insurance cover, failing which the risk stays-back with the \u201cseller\u201d.<\/li>\n<\/ul>\n\n\n\n<p><strong>The \u201ccustomer\u201d must:-<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Charter a vessel or reserve the necessary space on a vessel and notify the \u201cseller\u201d of the vessel\u2019s name, loading berth and the dates of loading.<\/li>\n\n\n\n<li>Bear all costs, including the insurance which he ought to arrange, in addition to freight, right from the time the goods cross the vessel\u2019s rails at the loading port, from where he is liable to pay the contract price.<\/li>\n\n\n\n<li>Pay the \u201cseller\u201d for providing the required documents, e.g. bills of lading. The \u201ctitle\u201d of the goods, does not pass to the buyer, until the shipment.<\/li>\n<\/ul>\n\n\n\n<p>We are all aware that commercial ships are run by their owners for making earnings. This is achieved in moving goods by sea, from the \u201cseller\u201d of such goods to the \u201ccustomer\u201d (i.e. the buyer) interested to buy these goods. This process of buying\/selling, invariably involves a number of entities in this \u201ctransaction-chain\u201d, who are termed as Parties. Let us see, which are these prominent Parties, which are involved in this \u201ctransaction chain\u201d.<\/p>\n\n\n\n<p>The \u201cseller\u201d and the \u201ccustomer\u201d, are the Parties who get into a contract, agreeing on the \u201ctrade terms\u201d, with each other for having the goods handed over to the appropriate entity. The \u201cseller\u201d may be either of the following:-<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The manufacturer of the goods;<\/li>\n\n\n\n<li>An agent of the manufacturer of these goods.<\/li>\n<\/ul>\n\n\n\n<p>The trade-terms decide on the type of the shipping documents, which ought to be involved, e.g. bill of lading.&nbsp;<\/p>\n\n\n\n<p>To the ship owner, the \u201cshipper\u201d (in some countries, the \u201cshipper\u201d is called the \u201cconsignor\u201d) is the one who gets into the contract for carriage of the goods by sea and delivers the goods in the care of the \u201csea-carrier\u201d. The \u201cseller\u201d could be engaging a \u201cfreight forwarder\u201d, whose function is to perform the various steps which are involved with exporting the goods. It is quite possible that the \u201cfreight forwarder\u201d who gets into the contract for carriage of the goods with the ship owner. In that case, the \u201cfreight forwarder\u201d becomes the \u201cde jure (i.e. legal) shipper\u201d.<\/p>\n\n\n\n<p>A \u201cfreight forwarder\u201d is basically an \u201cinter-link\u201d, involved with liner-trades (i.e. either for ferrying passengers or cargo, on fixed-routes, with pre-advertised sailing schedules. Most liners are container-ships, ro-ro or multi-purpose vessels. The ship\u2019s operator may be the owners or the bare-boat charterers or time charterers), who arranges the export of another Party\u2019s goods, by land, sea or air, and forwards the goods onto the care of the \u201csea-carrier\u201d. The functions of \u201cfreight forwarders\u201d include:-<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Advise on routeing of the ship;<\/li>\n\n\n\n<li>Arranging, carriage of goods with a \u201csea-carrier\u201d, involving activities like booking space, paying freight charges etc;<\/li>\n\n\n\n<li>Dealing with all customs activities, such as preparing customs documents, processing customs clearance of goods;<\/li>\n\n\n\n<li>Arranging the packaging and warehousing of goods before shipment;<\/li>\n\n\n\n<li>Arranging for the insurance of goods-in-transit.<\/li>\n<\/ul>\n\n\n\n<p>A \u201csea-carrier\u201d is a Party who gets into a contract with a \u201cshipper\u201d for the transportation of the goods by sea. A \u201cconsignee\u201d is the entity to whom the goods are \u201cconsigned\u201d or, sent by the shipper. The consignee can always be the \u201cbuyer\u201d of the goods, or a Party acting as an \u201cimport agent\u201d for the buyer. The \u201creceiver\u201d is the Party who takes delivery of the goods from the \u201csea-carrier\u201d at the port of delivery of such goods. Although a few consignees may take direct delivery of the goods from the \u201csea-carrier\u201d, it is common for consignees in the liner-trades to employ an agent, e.g. a \u201cfreight forwarder\u201d to perform the duties of a \u201cclearing agent\u201d as required for the customs and for allied formalities related to the importing of goods and transporting them to their ultimate destination. In case there is reason for suspicion (i.e. say due to loss or damage of such goods) in the condition of the goods that have been discharged from the \u201csea-carrier\u201d, it is the \u201creceiver\u201d which informs the \u201csea-carrier\u201d. Most \u201cbills of lading\u201d and \u201cseaway bills\u201d contain a terminology called, \u201cnotify party\u201d. The \u201cnotify party\u201d, is the entity which must be intimated by the \u201csea-carrier\u201d of, the ship\u2019s arrival, so that collection of the goods can be arranged. This may be the consignee or the receiver. Needless to state, when payment for the goods is made by means of a \u201cLetter of Credit\u201d (LC), the relevant \u201cbank(s)\u201d will automatically become an inextricable link with the \u201ctransaction chain\u201d.<\/p>\n\n\n\n<p>The following entities are important in determining the passage of transportation of goods by sea:-<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The \u201cseller\u201d of the goods<\/li>\n\n\n\n<li>The \u201ccustomer\u201d of the goods<\/li>\n\n\n\n<li>The involved \u201cbankers\u201d<\/li>\n\n\n\n<li>The \u201ccargo insurers\u201d<\/li>\n\n\n\n<li>All the \u201ccarriers\u201d involved in the full journey of the goods<\/li>\n<\/ul>\n\n\n\n<p>The other important factor is to determine with precision, when the \u201cright to ownership\u201d and \u201crisk of loss or damage\u201d, passes on from the \u201cseller\u201d to the \u201ccustomer\u201d. This will enable the determining of the respective obligations, rights and liabilities of each entity, such that the scope for any disputes can be avoided. The terminology related to the trade in question ought to reflect the obligations of the seller and buyer, related to the delivery of the goods (including the allocated functions, costs and risks) and so indicated in the \u201ccontract of sale\u201d.<\/p>\n\n\n\n<p>In this regard, INCOTERMS, which are basically a set of terminology published by the \u201cInternational Chamber of Commerce\u201d, so that when these are used in the \u201cinternational trade contracts\u201d (i.e. defining the key parts of freight forwarding), there is no scope for misinterpretation or controversies.<\/p>\n\n\n\n<p>In general, 13 INCOTERMS are laid-down, arranged in 4 groups E, F, C and D, delineating the seller\u2019s basic obligations, as seen below:-<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>E: goods are to be made available to the \u201ccustomer\u201d, at the premises of the \u201cseller\u201d;<\/li>\n\n\n\n<li>F: the \u201cseller\u201d and the \u201ccustomer\u201d must agree to the goods being delivered to a carrier, as appointed by the \u201ccustomer\u201d;<\/li>\n\n\n\n<li>C: the \u201cseller\u201d must contract for the carriage of the goods, without bearing the risk of loss of, or damage to the goods,\u00a0 or additional costs, following the shipment; and,<\/li>\n\n\n\n<li>D: the \u201cseller\u201d is bound to bear all the costs and risks involved in bringing the goods to their specified destination (i.e. upto the point of delivery).<\/li>\n<\/ul>\n\n\n\n<p><strong>Note:<\/strong> For E, F and C: the risk of loss or damage during transportation, is that of the \u201ccustomer\u2019s\u201d. However, for \u201cD\u201d, the \u201cseller\u201d bears all the risks, upto the point of delivery.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>International Trade A sound knowledge of various points, such as an international sales contract, the purpose and relevance of the international commercial terms (Incoterms), common methods of payment in international trade, and the role of the bill of lading in international transport, is an essential requirement for one to participate in the freight market.Generally we 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