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Understanding The Transportation Chain - INCOTERMS 2020

Among all the logistics and supply chain elements, transportation is the most crucial. The supply chain of commodities from the time and location of manufacturing till delivery is a part of the transportation chain. The reduction of costs and lead times associated with supply chain management is significantly influenced by transportation and elements of the transportation chain. To deliver the items at the ideal time for the lowest cost, transportation must be controlled effectively.

  • In order to fully comprehend the Incoterms 2020 regulations, it is first necessary to grasp the chain of transportation, or the method by which commodities are imported and exported. Logistical Chain is another name for it.

  • The term "transportation chain" describes the process by which commodities are moved from one place to another, i.e., from the moment they are picked up from a exporter's warehouse and delivered to the customer's door in the importing country.

Now, let us understand all the costs involved with th epricing of a product from the point of dispatch at the exporter's warehouse to the final destination of your distributor/buyer.

  1. Export packging charges - the exporter packages the goods that the buyer/distributor has bought and holds them in his warehouse.

  2. Loading charges - when the items are loaded on to the mode of transport for delivery to the exporter's port

  3. Delivery to Port - this cost if for the transportation of the goods from the exporter's warehouse to the exporter's port.

  4. Export Duties, Taxes and Customs - the duties and taxes paid at the customs, including the customs process adds a charge to the landing cost of the products.

  5. Origin Terminal Charges - this cost is for un-loading the good that has already been cleared by customs and ready to be loaded in the transport vehichle/aircraft/watercraft. The costs may involve any labour charges, use of machinery, etc.

  6. Loading on Carriage - these are the loading charges of the goods on to the carrier. The cost involves labour, use of machinery for loading, etc. these are also called "Terminal Handling Charges".

  7. Carriage Charges - this is the freight charge that is implied for the transportation of the goods from the ecporter's port to the importer's port. This is the last stage at the exporter's port in term sof processing of goods for export.

  8. Insurance - in most of the transactions, the incurance is a mutual agreement between the exporter and the importer, and it depends on the INCOTERMS agreed by both the parties. For example: in case on CIF, the exporter covers the Cost, Insurance, Freight.

  9. Destination Terminal Charges - this is the beginning of the importation process. The carrier arrives atthe importer's custom port and the goods are unloaded at the port and the cost of unloading is declared here.

  10. Import Duties, Taxes and cutoms - at the importer's port, the customs clearance process includes the payment of import duries, and other taxes for the clearacne of the goods. Usually done with the help from a registered custom;s house or agent, who is appointed as per the INCOTERMS. The custom's agent guides the clearance and delivery of the goods out from the custom.

  11. Delivery to Destination - the goods cleared from the customs are loaded on the the transport vehicle and couriered to the destinitation specified by the importer/buyer.

  12. Unloading at the destination - onec the goods finally reach the buyer's point of delivery, the cost of unloading, and any other machinary charges are accounted for.

On top of all these costs, which will be added to the cost of your product, the importer's margin, distributor's margin and the final seller's margin adds up to the final cost your consumer has to pay for the the product.

Now, keeping the transportation chain in mind, let usunderstand the INCOTERMS 2020.

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