Letter of Credit
Meaning ~ A trade finance instrument issued by a bank that guarantees payment to a seller upon the presentation of compliant shipping and commercial documents.
Ocean Carriage
Meaning
Transportation methods involving the movement of cargo across international waters represent the primary means of bulk goods delivery. This ocean carriage is the most cost-effective way to move large volumes of material. It is governed by international maritime laws and shipping contracts.
Transport Clause
Contracts specify the terms of this transport, including who pays for the freight and who bears the risk of loss during transit. This ocean carriage is governed by the bill of lading, which is a receipt and a document of title. The choice of carrier directly affects the cost and transit time.
Freight Risk
Cargo is exposed to various risks while at sea, including rough weather, delays, and physical damage. Importers must secure adequate marine insurance to protect their investment. The responsibility for obtaining this insurance is determined by the Incoterms used in the contract.
Sourcing Impact
Selecting the right transit route and carrier prevents inventory shortages and high warehousing costs. Delays at sea can disrupt manufacturing schedules and lead to cancelled customer orders. Sourcing managers must balance the lower cost of slow transport against the speed of air freight when planning their supply chain, especially when importing components that are critical for assembly lines.