From Ray Stannard, International Trade Financial Solutions.
The title of this post might be an unfortunate choice, but consistency is everything. Good news re Incoterms – after ‘F’, there are no more! As a result, I think we’ll start getting through letters more quickly.
FAS Incoterm
Free Alongside Ship [named port]. The seller clears the goods for export and delivers them the relevant ship at a named port. Thereafter, the buyer is responsible for the goods.
FCA Incoterm
Free Carrier. Similar, but different, to FAS. Again, the seller is responsible for the goods up to a location named by the buyer. This could be the seller’s premises, or those of a carrier/forwarder. If the term is FCA Seller’s Premises, the seller is only responsible for the loading of the goods; however, FCA Named Place means that the seller is also responsible for the inland freight to that named place.
FCL
Full Container Load. This is NOT an Incoterm. This is where a container is used exclusively by one shipper. Exclusive use, if you can fill the container, can result in lower shipping costs.
FCR
Forwarder’s Certificate of Receipt. This is a document issued by the Freight Forwarders nominated by the buyer to collect goods from the seller which confirms the receipt of goods in its custody. An FCR can replace the transport document under a Letter of Credit, but only if it is specifically mentioned as the acceptable document evidencing transport.
FIATA
The International Federation of Freight Forwarders Association. FIATA is an independent organisation which represents many [but not all] freight forwarders in many countries throughout the world.
FOB Incoterm
Free on Board. Probably one of the most well known of the Incoterms and, technically, the most mis-used, since title passes when the goods pass over the ship’s rail. FOB was designed in pre containerisation days, when goods were lifted by crane at the dockside. Technically, FCA should be used for containerised shipments, but old habits are hard to break….
Foreign Currency Accounts
The holding of an account in any currency other than Sterling. Normally used where a business either has 2 way currency flows and/or operates a foreign exchange policy, grouping several invoices before conversion to another currency. The possible downside of operation such accounts can be on cashflow insofar as funds ‘may be in the wrong currency’.
Foreign Exchange Risk
Anyone who trades in a foreign currency will have a degree of Foreign Exchange risk. The risk is caused by the minute by minute fluctuations in exchange rates. An appreciationof this risk and understanding of what steps can be taken to mitigate this risk isa vital tool for anyone who wants a successful overseas trading strategy [buying or selling].
Forwarding Agent
Often used by smaller businesses to clear customs for goods coming into the UK from outside the EU.
Forward Contracts
Used as part of the strategy to mitigate against adverse movements in exchange rates; an example of a widely available tool to manage foreign exchange risk [see above]. You agree to buy/sell a specific amount of currency at either a fixed future date or between a range of dates, agreeing the rate today.
Free Circulation
Goods that are already in circulation within the EU, having either previously entered into the EU, with all relevant duty paid, or having originated in the EU. In the eyes of HMRC, goods in free circulation are not classified as imports or exports.
Free Trade Zone
A designated port/area in a Country where duty free import of non prohibited goods is permitted. Often seen in developing countries to attract business and inward investment.
Freight Forwarder
A freight forwarder will look after the shipment of goods between seller and buyer, taking care of the freight, customs clearance, insurance, etc. Many freight forwarders specialise in certain parts of the world, so it’s important to ensure that you use one with suitable knowledge and understanding of the Countries/regions in which you trade.
Sorry for a slightly long section, but on to G’s [and more?] next month.