• Pickup and delivery locations
• Dates
• Equipment and driver identification
• Detailed description of the load
• Weight and piece count
• Level of insurance coverage

The National Motor Freight Classification (NMFC) is a standard that provides a comparison of goods (commodities) moving interstate, intrastate, and internationally. Commodities are grouped into one of 18 classes ranging from 50 to 500 based on four transportation characteristics:

• Density
• Stowability
  
• Handling
  
• Liability
  

Density being the most important factor in determining a freight class. The more dense the product is the lower the freight class. Class 50 is the least expensive and 500 is the most costly. The NMFC also includes rules and packaging requirements for each type of commodity being shipped, to ensure there is sufficient packaging for products that could possibly shift or move while in transit.

The National Motor Freight Classification guide is used by shippers, carriers, third party logistics to properly rate shipments moving interstate and via intrastate transport in North America. When shipping your product, extra care is required to select the correct freight class, otherwise the carrier hauling the goods is under obligation to re-classify the shipment, which ultimately could result in higher freight costs.

The Incoterms® rules are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods. First published in 1936, Incoterms® rules provide internationally accepted definitions and rules of interpretation for most common commercial terms of sale.

The rules have been developed and maintained by experts and practitioners brought together by the International Chamber of Commerce and have become the standard in setting international business rules. Incoterms® is a trademark of the International Chamber of Commerce.

Benefits Of Incoterms®

• Incoterms® help determine how prices and risks are designated between the importing buyer and the exporting seller with respect to shipping of products.
• Shippers can control their transport cost and risk responsibility by deciding what method is most beneficial for them.
• They help improve supply chain performance by avoiding confusion created by varied interpretations of the rules in different countries.
• The understanding and the proper use of applicable terms of sale may make the difference between future success and failure.
• Understanding Incoterms® and their implications to your business transactions is crucial, especially with regard to importing and exporting goods.
• You determine your financial and commercial fate when you manage your terms of sale.

The Incoterms® Rules
Below are short descriptions of the 11 rules from the Incoterms® 2020 edition.

Group E – Departure
EXW – Ex Works (named place)
The seller makes the goods available at his premises.

Group F – Main Carriage Unpaid
FCA – Free Carrier (named place)
The seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road and containerised / multi-modal transport.

FAS – Free Alongside Ship (named loading port)
The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export; this changed in the 2000 version of the Incoterms. Suitable for maritime transport only.

FOB – Free On Board (named loading port)
The classic maritime trade term, Free On Board: seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. Maritime transport only.

Group C – Main Carriage Paid
CFR – Cost and Freight (named destination port)
Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Maritime transport only.

CIF – Cost, Insurance and Freight (named destination port)
Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only.
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CPT – Carriage Paid To (named place of destination)
The general / containerised / multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier.
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CIP – Carriage and Insurance Paid to (named place of destination)
The containerised transport / multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

Group D – Arrival
DDP – Delivered Duty Paid (named dest. place)
Seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term "Free Domicile."

DPU – Delivered At Place Unloaded (named dest.place)
Seller is responsible for export clearance, delivery of the goods packed to destination place, all transport costs to named place and unloading (only term to include unloading). Buyer is responsible for import clearance and freight beyond unloading at named place. No insurance obligation by either party.

DAP – Delivered At Place (named dest. place) (replaces DDU, DAF, DES, DEQ)
Seller is responsible for export clearance, deliver the goods appropriately packed at named destination and pay all transport costs to named destination (no unloading). Buyer is responsible for unloading, import clearance and freight beyond unloading at named place. No insurance obligation by either party.

Official excerpts can be found in the ICC publication "Incoterms® 2010".

A Letter of Credit (LC) also referred to as a documentary credit, is a common method for payment of goods in international transactions. It is a commitment by a bank on behalf of the importer (foreign buyer) that payment will be made to the beneficiary (exporter) provided that the terms and conditions stated in the LC have been met. It acts as security for the exporter.
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The primary issue in an international transaction is the seller’s assurance that he/she will get paid. Establishing an Irrevocable Letter of Credit solves this issue by introducing the buyer's and seller's banks into the transaction. The buyer instructs his bank, the issuing bank, to open a Letter of Credit in favor of the seller, the beneficiary. The issuing bank substitutes its credit standing in place of the buyer, thereby lessening the risk of non-payment to the seller. The issuing bank then forwards the Letter of Credit to the seller's bank, the advising bank. This advising bank can either forward the Letter of Credit to the seller or it can add its confirmation, meaning the advising bank assumes the obligation to pay if all of the conditions are met.

Revocable and Irrevocable Letters of Credit

Letters of Credit can be either Revocable or Irrevocable.

• A Revocable Letter of Credit can be modified or cancelled by the issuing bank at any time for any reason without notification to anyone.
• An Irrevocable Letter of Credit cannot be cancelled or modified without the agreement of the issuing bank, the confirming or advising bank and the beneficiary.

Either way, a Letter of Credit must state on its face whether it is Irrevocable or Revocable.

Risks
The seller faces the risk of cancellation of a Revocable Letter of Credit until it presents the proper documents, meets the required conditions and the advising bank honors the draft. After this time, the Revocable Letter of Credit cannot be modified or cancelled.

With an Irrevocable Letter of Credit, the seller protects itself since it has the time available until the stated expiration date of the Letter of Credit to make the shipment and present the necessary documentation.

Uses
Most Letters of Credit are irrevocable because the seller is usually not willing to accept the uncertainty of receiving payment for his merchandise. Even though a bank issues a Letter of Credit, it is usually in a foreign country, and the seller will more than likely not be familiar with the foreign bank. In such cases, the seller will request that a domestic bank confirm the Letter of Credit. This confirmation reduces the risk of non-payment to the seller. An Irrevocable Letter of Credit can be confirmed, whereas a Revocable Letter of Credit cannot be confirmed.

Cargo or shipping insurance is strongly recommended, and makes for good commercial sense to ensure that shipping insurance adequately covers your shipment. Never assume your goods are covered by insurance, either by yourself or your customer. Note that your customer’s insurance is meant to cover them and may not offer you any coverage or protection.
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Many customers assume their corporate insurance may cover your goods while they are being shipped. This again may not be the case; or, even if there is coverage, it may not be enough.
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It is crucial that you ensure that your goods are adequately covered for any and all contingencies prior to shipment - be it an export or import. Insurance must be in place prior to the shipment of the goods in order to offer the shipment full protection.

PCB Customs Brokers offers Freight and Shipment Insurance solutions. To find out more you can speak with our logistics specialists today.

Most exporters rely on an International Freight Forwarder to perform these services because of the multitude of considerations involved in physically exporting goods.