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Sept.21, 2015

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Q&A 36 THE JOURNAL OF COMMERCE SEPTEMBER 21.2015 By Colin Barrett Q: HOW CAN I get the most up-to- date definitions of freight terms? I have a copy of your recent compilation of your columns, but I believe a lot has changed since these were prepared. My company is switching over to SAP software with a contractor for installation and training. However, questions seem to keep coming to me on transportation issues because of my previous experience in transportation (work history and transportation stud- ies at college). But I'm a little rusty on the topic of freight terms. Our company no longer has a formal Traffic Depart- ment. Our contracted logistics provider now takes care of the day-to-day traffic duties with motor carriers. Our SAP installation/training pro- vider wants to focus on Incoterms. I like the "f.o.b." terms myself, but the major- ity of my parent company's revenue is outside the United States. Can you help me? A: YOU KNOW, I'VE FOUND THAT a lot of companies have downsized or eliminated their transportation departments since deregulation of the industry and sunsetting of the old Interstate Commerce Commission, apparently on the misguided premise that there's no longer anything par- ticularly special about procurement of transportation services. A s you're f inding, t hough, transportation remains a fairly spe- cialized field, with aspects that are unique to it and requiring knowl- edgeable managers to deal with providers — carriers and third par- ties — on which the organization must rely. And, as in many areas of commerce, there are special- ized terms that must be learned and properly understood by those responsible for an organization's forays into fulfillment of its needs in that field. The older terminolog y with which you're more comfortable, which you're calling "f.o.b. terms," is more properly known as UCC terms, deriving from the Uniform Com- mercial Code that has been adopted into law pretty well throughout the United States. "F.o.b." — standing for "free on board" — is, of course, one of the key UCC terms, and, modified by some identification of a point or locale, refers to the place where title to goods in transit generally passes from seller to buyer, as well as establishing the responsibilities of the two parties for various actions that must be taken to facilitate the movement of the goods. UCC terminology is still valid, but because of increasing U.S. involvement in the global market - place, has lately given way to the more international standard of Incoterms, developed and promul- gated by the International Chamber of Commerce. Incoterms tend to be a good deal more specific in their application than do UCC terms, although they don't of themselves specify where title passes, but rather are concerned solely with the duties of sellers and buyers during the course of transportation. It's beyond the scope of a column such as this to provide a detailed definition of each of the numerous Incoterms in use, and in any event those def initions are modif ied every decade. The present edition is Incoterms 2010. For a complete dictionary, the International Cham- ber of Commerce sells a lexicon that gives you full detail along with illus- trations, but you can access short versions on the Internet by simply Googling a specific Incoterm or, more generally "Incoterms." Be aware, however, that many Incoterms have been the subject of specific judicial construction that may affect their legal meaning in conjunction with particular cir - cumstances. Obviously it's a good idea to have someone around who's conversant with the meaning of this terminology beyond what can casually be obtained from an ad hoc search on a desktop computer (or a review of printed material). To give you an idea of where you can run into problems, consider the distinction between the Inco- term "Ex Works" (usually abbrevi- ated "EXW") and the UCC term "f.o.b. orig in." They 're w idely viewed as roughly synonymous, but while "f.o.b. origin" typically entails the loading of goods aboard the ca rrier 's vehicle by the seller, "EXW" assigns this duty to the buyer unless otherwise stated. In other words, the practitioner famil- iar with UCC terminology who is trying to simply translate to Inco- terms, such as yourself, can easily run into trouble. I think it would benefit your company to bring in somebody con- versant with Incoterms or arrange for you to take some formal train- ing. This is probably beyond the scope of what your SAP contractor can do for you during the course of installation of your new computer software. I don't want to overstate the complexity of the situation or the learning curve involved, but it's more than just a casual shift in your organizational paradigm. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone 843-559-1277; e-mail Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. WORDS MATTER: UCC VS. INCOTERMS

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