International Trade (Intl Trade) 101: Logistics and Transportation - Containerization Container Types, Dry Reefer Open Top Flat Rack Tank Container Sizes 20ft 40ft 40HC

What This Is

Containerization is the process of transporting goods in standardized containers, which simplifies and streamlines international trade. Containers come in various types, sizes, and configurations to accommodate different goods and shipping requirements. For instance, a US importer might receive a shipment of fresh produce from Chile in a refrigerated container (reefer) to maintain the quality of the goods during transit.

Key Terms & Rules

• Container Types:
  • Dry Container: General-purpose container for non-perishable goods.
  • Reefer Container: Refrigerated container for perishable goods.
  • Open Top Container: Container with removable roof for oversized or heavy goods.
  • Flat Rack Container: Container with a flat platform for heavy or bulky goods.
  • Tank Container: Container with a tank for liquids or gases.
• Container Sizes:
  • 20ft Container: Standard container size for most goods.
  • 40ft Container: Larger container size for bulk goods or multiple shipments.
  • 40ft High Cube (40HC) Container: Taller container size for oversized goods.
• Incoterms:
  • EXW (Ex Works): Buyer bears all costs and risks from seller's premises.
  • FCA (Free Carrier): Seller bears costs and risks until goods are handed over to the carrier.
  • FAS (Free Alongside Ship): Seller bears costs and risks until goods are alongside the vessel.
  • FOB (Free on Board): Seller bears costs and risks until goods are on board the vessel.
  • CFR (Cost and Freight): Seller bears costs and risks until goods are delivered to the buyer's destination.
  • CIF (Cost, Insurance, and Freight): Seller bears costs and risks until goods are delivered to the buyer's destination, including insurance.
• URC 522: Uniform Rules for a Demurrage Code – governs demurrage charges for containers.
• UCP 600: Uniform Customs and Practice for Documentary Credits – governs LC transactions globally.

Step-by-Step Process

1. Choose the right container type and size: Select a container that matches the goods' dimensions, weight, and shipping requirements.
2. Determine the Incoterm: Choose an Incoterm that suits the trade agreement, considering the costs and risks borne by the buyer and seller.
3. Prepare the commercial invoice and bill of lading: Ensure accurate and complete documentation, including the Incoterm, container details, and shipping information.
4. Arrange for container transportation and delivery: Book a carrier or freight forwarder to transport the container to the destination.
5. Clear customs and pay duties: Ensure compliance with customs regulations and pay any applicable duties or taxes.

Common Mistakes

• Mistake: Confusing CIF and CIP.
• Correction: CIF includes insurance, while CIP does not. Example: A seller ships goods CIF, but the buyer claims the goods were damaged during transit. The seller may be liable for the damage under CIF, but not under CIP.
• Mistake: Assuming "open account" is risk-free.
• Correction: Open account means the buyer pays the seller without a letter of credit or other payment guarantee. This can expose the buyer to credit risk. Example: A buyer purchases goods from a seller on open account, but the seller goes bankrupt. The buyer may not receive the goods or recover the payment.
• Mistake: Misusing "free on board" with air freight.
• Correction: FOB applies to sea or inland waterway transport, not air freight. Example: A seller ships goods FOB to an airport, but the buyer claims the goods were damaged during air transport. The seller may not be liable for the damage under FOB.

Exam / Certification Tips

• FOB vs FCA: FOB transfers risk when goods are on board the vessel, while FCA transfers risk when goods are handed over to the carrier.
• Confirmed vs unconfirmed LC: A confirmed LC is guaranteed by a bank, while an unconfirmed LC is not. Example: A buyer purchases goods with an unconfirmed LC, but the seller claims the LC is not valid. The buyer may not receive the goods or recover the payment.
• DPU (Destination Port Unloaded) successor to DAT (Destination Arrival Terminal): DPU applies to shipments where the buyer is responsible for unloading the goods at the destination port.

Quick Practice Scenario

A Chinese exporter sells goods to a US importer under FOB Shanghai. Who pays for the main carriage?

Answer: The buyer pays for the main carriage under FOB.

Explanation: FOB transfers the risk and costs of the main carriage from the seller to the buyer when the goods are on board the vessel.

Last-Minute Cram Sheet

• Container types: dry, reefer, open top, flat rack, tank.
• Container sizes: 20ft, 40ft, 40HC.
• Incoterms: EXW, FCA, FAS, FOB, CFR, CIF.
• URC 522: governs demurrage charges for containers.
• UCP 600: governs LC transactions globally.
• FOB: transfers risk when goods are on board the vessel.
• CIF: includes insurance, while CIP does not.
• Open account: means the buyer pays the seller without a letter of credit or other payment guarantee.
• DPU: applies to shipments where the buyer is responsible for unloading the goods at the destination port.
• Under FOB, risk transfers when goods are on board the vessel – not at the port gate or on the dock.