Introduction
In international trade, cargo transportation and management of related documents play a crucial role in the trade process. Choosing the appropriate transportation method, understanding international commercial terms (Incoterms), being familiar with customs documents, and clearly dividing responsibilities and costs between buyer and seller can facilitate transactions, reduce risks, and save costs.
This article covers various transportation methods, key Incoterms and parties’ responsibilities, essential customs documents, and a detailed breakdown of buyer and seller duties.
1. Different Methods of International Cargo Transportation
1.1 Road Transport
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Use of trucks and trailers
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Suitable for transporting small to medium-sized shipments over short to medium distances between countries
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Moderate cost and acceptable speed
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High flexibility for precise delivery locations
1.2 Rail Transport
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Use of freight trains
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Suitable for bulky and heavy cargo on international rail routes
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Lower cost than road for large volumes
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Limited to fixed railway routes
1.3 Sea Freight
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Use of container ships, bulk carriers, tankers, etc.
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Suitable for transporting very large volumes over long intercontinental distances
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Low cost relative to volume and distance
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Slower compared to air and road transport
1.4 Air Freight
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Use of cargo airplanes
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Suitable for light, high-value, perishable, or time-sensitive goods
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Very high cost compared to other methods
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Very fast, ideal for urgent and valuable shipments
1.5 Pipeline Transport
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Transport of liquids or gases such as oil and natural gas
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Low operational cost for continuous, high-volume transport
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Requires significant investment and fixed routes
1.6 Intermodal Transport
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Combination of two or more transport methods (e.g., sea and road)
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Use of standardized containers for seamless transfer between modes
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Reduces cost and time by choosing the best methods for each leg
2. International Commercial Terms (Incoterms) and Their Role in Transportation
Incoterms are a set of internationally recognized rules that define the responsibilities of buyers and sellers regarding the delivery of goods, risk transfer, costs, and customs clearance. The current version is Incoterms 2020.
| Term | Description | Seller’s Responsibilities | Buyer’s Responsibilities |
|---|---|---|---|
| EXW (Ex Works) | Seller makes goods available at their premises; buyer handles all transportation and clearance | Prepare goods for delivery at seller’s location | All loading, transport, insurance, customs clearance |
| FCA (Free Carrier) | Seller delivers goods to carrier or specified place | Deliver goods to carrier at agreed location, export clearance | Transport, insurance, import clearance |
| FOB (Free On Board) | Seller loads goods onto ship at port; risk transfers then | Packaging, loading on ship, export clearance | Sea freight, insurance, unloading, import clearance |
| CFR (Cost and Freight) | Seller pays freight to destination port; risk transfers at ship loading | Freight cost to destination port, loading, export clearance | Risk from loading, insurance, unloading, import clearance |
| CIF (Cost, Insurance and Freight) | Like CFR, but seller also provides insurance | Freight and insurance costs to destination, loading, export clearance | Risk from loading, unloading, import clearance |
| DAP (Delivered at Place) | Seller delivers goods at named place, no import clearance | Transport to destination, unloading | Import clearance and related costs |
| DDP (Delivered Duty Paid) | Seller bears all costs and risks including import clearance | All costs and risks until delivery at destination | Receive goods at destination |
3. Customs and Transportation Documents
In international trade, several official and contractual documents are essential for customs clearance, ownership transfer, cargo receipt, and shipment tracking.
3.1 Bill of Lading (B/L)
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A maritime transport document serving as contract of carriage and receipt of goods
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Also represents ownership of goods
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Types: Straight B/L (non-negotiable), Order B/L (negotiable)
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Buyer needs B/L to claim goods at destination
3.2 Air Waybill (AWB)
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Air cargo document acting as contract and receipt
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Unlike B/L, non-negotiable and non-transferable
3.3 Commercial Invoice
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Main financial and contractual document detailing the transaction, price, quantity, and product description
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Basis for customs duties calculation
3.4 Packing List
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Details packaging, weight, dimensions, and number of packages
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Facilitates inspection and customs clearance
3.5 Certificate of Origin
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Certifies the country where goods were produced
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Necessary for tariff determination and preferential trade benefits
3.6 Other Documents
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Insurance Certificate
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Export/import licenses
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Quality or standard certificates
4. Division of Responsibilities and Costs Between Buyer and Seller
The allocation of responsibilities and costs depends on the chosen Incoterm. General guidelines:
| Task | Seller | Buyer |
|---|---|---|
| Packaging and preparing goods | Usually seller | – |
| Loading goods at seller’s premises | Buyer in EXW; usually seller otherwise | Buyer in EXW |
| Transport to delivery point (per Incoterm) | Per agreement (e.g., seller pays freight & insurance in CIF) | Per agreement |
| Cargo insurance | Usually seller in CIF; otherwise buyer | Usually buyer |
| Export customs clearance | Usually seller | – |
| Import customs clearance | Usually buyer unless DDP | Buyer or seller per Incoterm |
| Delivery at final destination | Per agreement | – |
| Payment of additional or delay charges | Per contract and Incoterm | – |
5. Conclusion
Accurate knowledge of transportation methods, correct selection of Incoterms, thorough understanding of required customs documents, and clear division of responsibilities between buyer and seller are key to successful international trade. Any ambiguity or mistake in these areas can cause delays, extra costs, or financial losses.
Therefore, it is strongly recommended that parties clearly define transport, delivery, insurance, and customs clearance terms in their contracts before commencing international transactions.
