Although we live in a globalized economy, there are certain things which have not changed when it comes to global trade. One of these things include the shipping of items from one country to the other. Every country is involved in a certain amount of import and export activities, which means that logistics and freight shipping and delivery, whether domestic or international, is a must. Very large companies engaged in domestic and international freight shipping and delivery have their own dispatch and transport systems; however, smaller companies and individuals rely on freight forwarders and shipping companies to transport their shipment from one country to the other. For those of you who are not familiar with a freight forwarder, this is a company that will receive and store your shipment and then prepare and ship it to its final destination.
Let’s say for example, you are the owner of a car center in Australia and need to import cars for the local economy. You will mostly be importing your cars in bulk and will need to ship them. Based on the Incoterms that you agree upon with your supplier, the manner of shipment to Australia will be determined. What are Incoterms? These are international rules that are used to interpret the terms of trade. For example, if you agree on the Incoterm EXW which stands for Ex-Works, only the costs of packing and commercial documents will be covered by the supplier. This would mean that you will need to pay for all other costs including inland freight, shipping, customs documentations, import duties and delivery to the final destination. However, if you would agree on CIF which stands for cost, insurance and freight, all of the above including insurance will be the responsibility of the supplier. It is therefore important that you know the Incoterms that are applicable to Australia if you will be shipping to and from Australia.
Below is a chart providing an overview of the different Incoterms that exist in Australia. This chart shows which costs are covered by which party.