international cargo shipping terms

SHIPPING TERMS: MEANING IN NIGERIA CONTEXT

What are shipping terms? In international commerce, there are a lot of jargon or terms often abbreviated as incoterms. These are sometimes referred to as trading terms. The terms FOB, CNF, C&F, FCA, Ex Works, Shipper, Exporter, Importer, Consignee, Consignor, Shipping Line, etc. are often used wrongly. Wrong usage could cause some shipping documentation complication down the trading line.

This article will provide meanings in Nigerian contest of national and international shipping terms, abbreviations and acronyms.The reason for writing the article is to enable importers and exporters, or just anyone who trade in the Nigerian space avoid costly mistakes. Hence, the ultimate aim is to enhance cargo clearing with the Nigerian Customs.

SHIPPING TERMS: FREE ON BOARD (FOB)

The term FOB is an arrangement in which the seller of goods bears all expenses/risks in bringing the goods on-board. This means the seller pays for export haulage, export documentation, export clearance and handling at the supply country. Once loaded on-board, the seller is free from every other risk down the line. Consequently, the buyer assumes costs, and risk once loaded. Such cost and risks include damage/loss, import haulage, import Customs clearance, and even loading and unloading at the arrival port. In Nigeria, the buyer must pay and obtain marine insurance certificate under this arrangement before he can process documents necessary to clear his imported goods.

SHIPPING TERMS: MORE ABOUT FOB

The term is much more than just definitions, but has some mathematical connotation.

FOB = Total value of goods + Ancillary Charges. Ancillary charges are charges not for value of goods, but for supporting services. Such as local transport of goods to port, or rapping, or packing, or any other service of the kind. Ancillary charge value usually required during Form M application.

Read Also: HOW TO PROCESS AND OBTAIN FORM M IN NIGERIA

SHIPPING TERMS: EX-WORKS (EXW)

This is an arrangement where the buyer takes full responsibility of the cargo from the supplier’s warehouse. That means that he would have to pay for the costs associated with haulage to the freight Forwarder’s warehouse or the port of loading. Also, the buyer pay loading and unloading costs, all shipping documentation, demurrages (if any), any handling costs and risks. This arrangement is perfect if the buyer or his agent has local presence in the country of supply of goods and services. Otherwise, he would have to depend on the seller or the forwarder to hire services for him. So, when you see pro forma invoice written ex or ex works under terms of trade or sale, know that this is what is meant.

COST AND FREIGHT (CNF or C&F) OR COST INSURANCE AND FREIGHT (CIF):

In CNF arrangement the risk and cost by the seller end as he delivers the goods or items at the port of departure. CIF is similar to CNF the only difference is that the seller also pays for cargo insurance for CIF. In Nigeria, it does not matter whether CNF and CIF when it comes to marine cargo insurance certificate needed for import clearance. All standard clearance must be accompanied by marine insurance certificate.

Total C&F Value = Total FOB Value + Total Freight Cost.

Read Also: HOW TO PURCHASE MARINE CARGO INSURANCE IN NIGERIA.

SHIPPING TERMS: DELIVERED AT TERMINAL (DAT) OR DELIVERED AT A PLACE (DAP) OR DELIVERED DUTY PAID OR UNPAID (DDU or DDP)

These are all similar arrangements, with the seller bearing most costs and risks. For DAT, the seller’s risks and costs bearing stops at the destination terminal in Nigeria, the buyer arranges all other things including local trucking and pays for import duties with the government. DAP is divided into DDU or DDP depending on if seller pays import duty or not, and is all other cost borne by seller until an agreed place with the buyer.

In Conclusion:

In my next article I will talk about local terms and acronyms used within the Nigerian trading space. Meanwhile, this article has explained what most shipping terms mean in the Nigerian context. The importance of understanding these is in the fact that correct shipping documentation means easy cargo clearing with the Nigerian Customs.

 

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