We live in the world where time is money, especially in the perishable business of cut flowers. So understanding and correctly applying International Commercial Terms (Incoterms) becomes a key factor for success. These rules, developed by the International Chamber of Commerce, serve as a universal language that defines the basic terms of delivery of goods, including cut flowers, worldwide. They play a critical role in providing clarity and predictability in international transactions, minimizing risks and misunderstandings between sellers and buyers.
With the introduction of Incoterms 2020, the latest version of these rules, companies involved in the transportation of cut flowers faced new opportunities and challenges. These updated regulations reflect recent trends in logistics and transport technologies, making them particularly relevant to the flower trade sector. Incoterms 2020 provide more flexible options for coordinating and managing flower delivery, which is critical to keeping them fresh in the delivery process worldwide.
Thus, for companies working in the international trade of cut flowers, a deep understanding of Incoterms 2020 is not only useful, but absolutely necessary. This knowledge will allow them to optimize their logistics processes, reduce risks and increase the profitability of their business.
What is Incoterms?
Incoterms (International Commercial Terms) is a set of standardized rules that define key aspects of international freight transportation. These rules, developed and updated by the International Chamber of Commerce, serve to standardize the terminology related to the delivery of goods, including cut flowers, from the seller to the buyer.
In the context of global flower trade, Incoterms act as fundamental guidelines determining responsibility for transportation, insurance, customs procedures, and other key logistical aspects. They help clarify the point at which risks and costs transfer from the seller to the buyer, which is crucial for maintaining the integrity and freshness of flowers during their journey to the end consumer.
With the introduction of Incoterms 2020, significant changes have occurred, updating the rules for modern business. One of the key updates is the introduction of clearer definitions of insurance and transportation obligations, particularly important in the floral industry where the risk of damage to the goods in transit is high. Conditions regarding transport vehicles were also clarified, allowing for a more flexible approach to organizing multimodal transportation – the primary method of delivering flowers over long distances.
Understanding these rules enables participants in the flower business to more effectively manage logistical processes, optimize costs, and minimize risks associated with international delivery of fresh flowers.
The Role of Incoterms in the Transportation of Cut Flowers.
Incoterms play a critical role in international transportation of cut flowers, defining rules and conditions that directly impact the success of this delicate process. The transportation of live flowers requires strict control and precision, as any negligence can lead to damage of the goods. It is precisely in this context that Incoterms rules become indispensable, providing clarity in the distribution of responsibilities and risks between the seller and the buyer. The proper selection of Incoterms terms during the transportation of cut flowers is crucial to ensuring their freshness and quality upon delivery to the end consumer.
Description of Incoterms 2020 Rules
Choosing the most suitable Incoterms rules for the transportation of cut flowers is a crucial decision that can significantly impact the success of your business. For companies in the floral industry, it is especially important to select Incoterms conditions that ensure maximum freshness and quality of products during delivery.
FCA (Free Carrier) This term implies that the seller delivers the goods to the carrier chosen by the buyer at a specified location. This gives the seller control over the initial stage of delivery, crucial for flowers requiring specialized transportation conditions. After handing over the goods to the carrier, the risk of damage shifts to the buyer.
EXW (Ex Works) Under this condition, the seller is considered to have fulfilled their obligations when the goods are made available at their premises, such as a greenhouse complex or warehouse. This means that all responsibilities and risks associated with further transportation rest with the buyer, allowing the buyer to have complete control over the delivery process, critical for products requiring special care during transit.
FAS (Free Alongside Ship) This term means that the seller has fulfilled their obligations when the goods are placed in close proximity to the ship at the loading port. From this point onward, all subsequent expenses and risks, including transportation and export, are transferred to the buyer. This is particularly important for flowers that may require special storage and transportation conditions in subsequent stages.
FOB (Free on Board) Under FOB terms, the seller fulfills their obligations when the goods are loaded onto the ship at the loading port. From this moment, all costs and risks associated with further delivery and export transfer to the buyer. This allows the seller to ensure proper care of the goods until they are loaded, critical for delicate flowers.
CFR (Cost and Freight) Within this term, the seller agrees to pay the costs of transporting the goods to the designated port. However, the risk of loss or damage to the goods, as well as any additional expenses after loading onto the ship, shifts to the buyer. This approach allows the seller to control the initial stage of delivery, crucial for maintaining the quality of flowers.
CIF (Cost, Insurance and Freight) This term implies that the seller bears the expenses for delivering and insuring the goods, such as flowers, to the destination port. The risk of loss or damage to the goods shifts to the buyer from the moment of loading onto the ship. The seller provides insurance, especially important for delicate shipments like fresh-cut flowers.
CIP (Carriage and Insurance Paid To) According to CIP, the seller pays for the transportation and insurance of the goods to the specified destination. The risk of loss or damage transfers to the buyer upon delivery of the goods to the first carrier. This ensures protection for flowers in the initial stages of their journey.
CPT (Carriage Paid To) Under this term, the seller pays the cost of delivering the goods to the destination. The risk of loss or damage transfers to the buyer from the moment the goods are handed over to the first carrier. This approach allows the seller to control the first stage of delivery, ensuring the safety of the flower shipment.
DAP (Delivered At Place) According to DAP, the seller is considered to have fulfilled their obligations when the goods are delivered and ready for unloading at the designated place. All costs and risks up to this point are borne by the seller, ensuring proper care of the flowers until the final stage of delivery.
DPU (Delivered at Place Unloaded) This term means that the seller is responsible for costs and risks until the goods, including flowers, are unloaded at the specified location. This approach guarantees that the transportation will be under control, and the goods will be in good condition until the moment of unloading.
DDP (Delivered Duty Paid) Under DDP terms, the seller bears all costs and risks associated with delivering the goods to the designated place, including import duties and taxes. This is the most burdensome condition for the seller, providing complete control and responsibility for the preservation of flowers until their delivery.
Tips for Using Incoterms in Flower Transportation
Before Choosing Incoterms Terms Evaluate the entire logistics chain, from production to the end consumer. This will help you identify the stages of flower transportation that pose the greatest risk of damage or loss. Consider potential risks, such as delays, temperature changes, and humidity. For instance, transportation delays can lead to wilting, while temperature and humidity changes can result in spoilage. Take into account the specific requirements of cut flowers, such as the need to maintain certain temperature and humidity levels to preserve their freshness. Collaborate with experienced logistics companies specializing in flower transportation. They can assist you in selecting the most appropriate Incoterms terms and ensure the safe delivery of flowers. Be prepared to adapt to changes in logistics requirements and market conditions. For example, if there is a sudden increase in demand for flowers in a specific region, you may need to modify the chosen Incoterms term to ensure faster and more reliable delivery.
Optimizing Logistics Routes
Choose the fastest and most reliable route for transporting cut flowers. This may involve using direct flights or express delivery services. Consider the geographical locations of flower production and consumption. For instance, if flowers are grown in tropical countries and consumed in northern regions, you'll need to select Incoterms terms that allow you to maintain optimal temperature and humidity during transportation.
Control of Climatic Conditions
Use vehicles with adjustable climates, such as refrigerated trucks or containers. This helps maintain optimal conditions during transportation and prevents flower spoilage. Ensure proper control of temperature and humidity in transportation vehicles using specialized devices and equipment.
Quality Packaging
Utilize specialized packaging materials that provide protection against mechanical damage and maintain the required levels of humidity and air permeability. Consider the specific characteristics of cut flowers when selecting packaging materials. For delicate flowers, it is necessary to use durable and soft materials to protect them from damage.
Cargo Insurance
Cover potential risks through cargo insurance, a key aspect of minimizing financial losses in case of damage or loss of flowers. Ensure that your insurance policy covers all possible risks associated with the transportation of cut flowers.
Examples of Incoterms Usage in Flower Transportation
For transporting cut flowers from the producer to the departure port, terms like EXW, FCA, or CPT can be used. These terms allow the producer to transfer responsibility for the flowers to the carrier at the location where they are grown. For transporting cut flowers from the departure port to the destination in another country, terms like DAP, DDP, or CIP can be used. These terms allow the importer to receive the flowers in proper condition at the destination. For transporting cut flowers from the producer to the end consumer within one country, terms like FAS, FOB, or CFR can be used. These terms enable the importer to receive the flowers in proper condition at the destination within the importing country. The specific choice of Incoterms terms depends on the specific circumstances of the transportation. When choosing terms, consider all the factors mentioned in the above tips.
Conclusion
Choosing the right Incoterms term for flower transportation can be challenging, especially for novice companies. Cargo Flowers is a platform that assists companies in organizing international flower shipments of any kind. With Cargo Flowers, businesses can avoid mistakes, ensure safe and timely flower delivery to the end consumer, improve operational efficiency, reduce risks, and comply with international standards. Register on the Cargo Flowers platform and receive comprehensive services to optimize your business processes.