Expeditors International of Washington, Inc. (EXPD) Earnings Call Transcript & Summary

Okay. Hello, everyone. Thank you for joining us today for our Introduction to Incoterms Webinar. My name is Sarah Maas, and I am in the regional sales operations role for the Midwest based in our Minneapolis branch. I will be your webinar host for today. Before we begin, I do want to cover a couple of items to note for today's webinar. So today's webinar will be about 60 minutes in length. There will be about 40 to 45 minutes of content presented with 15 to 20 minutes at the end for Q&A. [Operator Instructions] We'll address as many questions at the end of the webinar as possible. But if we do not get to your question, we will follow-up after the webinar and make sure that your question is answered. So today's webinar will be recorded as you probably have received the pop-up screen. And all attendees will receive a thank you e-mail from myself, which does include a short survey that we would like you to complete with feedback from today's webinar. And after you complete the survey, you will receive the presentation material. So now I'd like to introduce our speaker for today. Erin Doan is our Regional Risk and Insurance Manager for the Midwest. She graduated from California State University, Dominguez Hills with a bachelor's degree in history, with a minor in political science. Erin joined the Expeditors team in August of 2022 shortly after moving to the Chicago suburbs from Ann Arbor, Michigan. She does hold her state licensing for property and casualty lines and has successfully completed the Expeditors risk management and insurance course in early of 2023. [Operator Instructions] And with that, I'll turn it over to Erin.

Thank you, Sarah. Hello, everyone. Thanks for joining the webinar today. So I do want to start off with a quick overview of Expeditors, our company. I do recognize that there are quite a few people on this call who are probably familiar with Expeditors as in who we are, what we do. But there may be some new attendees that would like a little bit of a background. So we were founded in 1979. Our global headquarters [indiscernible] in Seattle, and that's where we started as well. We have about 350 locations across the globe in about 100 countries with regional headquarters residing in London, Dubai, Singapore and Shanghai. We are a Fortune 500 company. And we do have an excellent culture within our company that focuses on our people, our processes and our customer service across the board. And speaking about risk management in the supply chain specifically, that expertise comes from our wholly owned subsidiary called Expeditors Cargo Insurance Brokers. We are also headquartered for ECIB in Seattle. And we have offices in Monterrey, Mexico and Amsterdam as well with about 28 claims administrators across the board who manage 27,000-plus claims per year. It's important to note here that all 27,000 of those claims are not specifically filed against Expeditors. We do work with all the major carriers to help support our customers from a liability claims perspective as well as over deductible insurance claims for our insurance brokered customers. So if you'd like more information about that and our programs, you see the website there, ecibglobal.com, has a great wealth of information that you can have access to or feel free to reach out to me after the webinar as well. So just to dive right in, we're going to start off with kind of an overview of risk is everywhere in the supply chain. As you can see here from the list on your screen, there are a lot of touch points within the supply chain that put your cargo and your freight at risk. We have buyers and sellers. You have to worry about the factory or the manufacturer, if that is not necessarily the seller pushing out the product. The steamship line or the air carriers are going to be touching your freight at some point as well as the rail lines and the truckers. Sometimes when your freight is sitting in a warehouse, it can also be considered at risk with all of the different things that we're experiencing around the world with regards to climate change and conflicts, most notably in Ukraine as well as the Red Sea crisis that we're dealing with right now. So these are kind of just the things that you want to think about when you're looking at where risk could exist in your supply chain. This here is a depiction of a shipment flow diagram. It is important to note that this is a very high-level overview, simple depiction of a supply chain and how the operations will look from this particular perspective. We understand that not everyone on this call has a supply chain that directly reflects this particular linear movement. It is important to note that this is a flat document, and it doesn't always look like this when it comes to supply chain movement. You'll notice here that returns, if returns are something that you deal with as a buyer or a seller, are not listed on this particular document. But it does give us a good idea of what the flow should look like as we're dissecting these Incoterms and understanding where the risk, cost and obligation transfers occur. So you'll notice here that the shipment is made available by the seller, picked up in pre-carriage either via truck or rail and then taken to the forwarder or the consolidator, where they will prep the shipment to take to port. And then load it either on board the ship, the truck, whatever the vessel is that's being utilized to move the freight. Once at port destination, it's picked up by the handling agent, which you'll see here, usually done via truck, which is not depicted on the document here. But then it will be deconsolidated at the forwarder's location or moved on to final destination if there's no deconsolidation process, which would eventually reach that end to the buyer or the consignee. Please do keep this flow in mind as we're moving through the Incoterms, and there is going to be -- each of the slides will have a similar depiction to help keep that process fresh for you. So the question that I'm sure everyone is asking themselves now is how do we determine which party is at risk when it comes to supply chain management. Well, if you answered Incoterms, you would be correct. So with that, we're just going to dive right into the topic at hand here. Incoterms 2020 is the most recent reiteration of Incoterms that was put together by the International Chamber of Commerce. Incoterms does stand for international commercial terms. And 2020 is the particular revision that we will be discussing today. It was first developed by the International Chamber of Commerce in 1936. And since that point in time, there have been 8 revisions since the inception, the most recent one being 2020. And you can see on the document around the slide here, 1980 forward is when they started to do 10-year increments with regards to when the revisions were being made available. So 2030 is likely the next time we'll see the new revision come out for the new Incoterms book. The purpose of Incoterms is to provide a set of international rules that buyers and sellers agree upon, outlining the obligations, costs and risks associated with international trade. And all of this information is available through the International Chamber of Commerce's publication, which is called Incoterms 2020, as you can see here, I believe. Yes, there. Perfect. So this is available either from the International Chamber of Commerce's website. I purchased mine specifically from Amazon just for ease, but it is readily available. And this is a book that we recommend everyone involved in supply chain management and international trade should have access to any time a question comes up about Incoterms and contractual obligations surrounding Incoterms. Okay. So some of the changes that were made with Incoterms 2020 are depicted on the slide here. The top 3 are specific to the terms themselves. So you'll see CIP. Default insurance coverage was changed. It was actually determined that Cargo Clause A needed to be utilized for anybody utilizing CIP terms rather than the original Cargo Clause C from Incoterms 2010 and before that. There were changes to STA and the onboard bill of lading. And then DAT was removed as an Incoterm and then replaced with DAP -- excuse me, DAP named place. And then a new Incoterm was added from this particular year called DPU. So we'll get into that a little bit further down in the slide deck here. The changes that were made in black on the lower part of the slide are just changes that were made to the book itself. So regarding structure, information flow and things like that, nothing specific to the Incoterms themselves. Okay. First to start, it's good to talk about what Incoterms 2020 are not. So it's important to note that they are not law. They're not considered international law. They're more so guidelines on what a buyer and seller can agree to in a contract to determine how their international trade is going to facilitate. They must be specified in the contract orders, so that would be the sales order or the purchase order, whatever contract you have in place with your buyer or your seller to stand. And they are utilized in a court of law even though they are not law. So it's really utilized to determine who's responsible for the cost, risk and obligation at any point in the supply chain. But because they're not law, you don't have to use them. If you don't have Incoterms that you're utilizing on a regular basis, by all means, continue to operate that way. And we just do this as an opportunity for buyers and sellers to be on the same page with regards to where their responsibilities are from a contractual perspective. They do not address passage of title and they do not address recognition of revenue. However, there is kind of a caveat to that. In 2011, we started noticing quite a few CFOs and finance teams were trying to incorporate their Incoterms and revenue recognition in the same process. The reason for that is because there was a change in the GAAP laws and rules that occurred, that we weren't necessarily privy to at the time the change was made. We just had a lot of people from those finance teams reaching out to us, asking about tying Incoterms to recognition of revenue. The International Chamber of Commerce has stated essentially that they are not ever going to agree at this point to address recognition of revenue and passage of title in Incoterms. But if that's something that you choose to do as it pertains to the GAAP rules, then that would be something that your organization would determine internally and doesn't actually have anything specific to do with Incoterms. And then the other thing with Incoterms 2020 is they don't do well in a drop shipment environment or a direct shipment. And so what that means is you'll have an Incoterm in your contract between your buyer and you as the seller, but you would also have your Incoterm between you and your customer. There are plenty of instances where you'll have your seller direct ship to your customer as the end consignee, but you wouldn't necessarily want them to send your commercial invoice to them as well because then some proprietary information that your customer doesn't typically have access to would then have access to that information. So Incoterms typically do not work well in that particular arena just because of the nature of how a drop shipment is structured. So you do want to be careful about the information that you're providing to your customers and be very specific about the information that you're providing to your sellers as well. Okay. So with that being said, we can talk a little bit about how to properly use Incoterms. It is important to note that there are only 11 Incoterms based on the information that's provided by the International Chamber of Commerce Incoterms subcommittee. We have seen instances of customers in the past who have asked us to review the Incoterms that they are utilizing, both internally and with their contracts. And I know of a story in particular where one customer came to us and said, "Review these, and tell us if we're using it right." Upon review, we realized they were using about 35 different Incoterms, both internally and between their buyers and sellers. The problem with that is officially there are only 11. But if you looked at the breakdown of the Incoterms that they were using from that list of 35, they all had reasons for those particular Incoterms. And they all made sense from an internal perspective. The problem with that is what happens if the person who's responsible for creating and understanding those Incoterms moved on to another role or another company or decides to retire or any one of the other things that could happen in the process of running an organization. If you don't have that person to properly interpret the Incoterm that the organization has decided to use outside of the structure of 11 that we're going to be looking at today, it becomes difficult to manage the contractual obligation that you have between buyers and sellers. So if you are utilizing Incoterms outside of this 11 that we're about to look at, I recommend really making sure that you have a contingency plan in place if any changes occur to your organization at any point where those Incoterms might be ineffective after that change. They are used to facilitate trade, again, helping to understand where the cost, risk and obligation lie for both buyers and sellers. And that does need to be again listed on a contract of some sort, either the purchase order or other contracts that you have in place with your buyer or seller. It helps to reduce the potential for misunderstanding, especially when it comes to [indiscernible] and working with companies that are not necessarily in the same country that you may be operating out of. It is good to note that they are represented by 3 letters. The example here is FCA and then a named place. And you want to be as specific with that named place as possible. If you're utilizing Incoterms, let's just say FCA London. The question comes out and you're thinking, well, Erin, are you talking about London, U.K.? Or are you talking about London, Ontario in Canada? Same thing could go for Paris, for example. Are we talking about Paris, France or are we talking about Paris, Texas? So a lot of that is -- a lot of that confusion is taken away when you are as specific with the named place as possible. It would also help keep cost down because if you have someone who delivers the goods to the wrong named place because of that easy confusion, there are going to be costs that come up from the correction that needs to be made either distance-wise or import fees, export fees depending on which country the freight ended up in. So it's really important to make sure everyone has understanding of where that named place is, and that's typically easier when you can be as specific as possible. So when you're importing -- or inputting the Incoterm into your contract, you want to have it look like that structure there at the bottom of the slide. You'll have your Incoterm, the 3 letter code as well as your named place point or port and then Incoterms 2020. We say Incoterms 2020 because any Incoterms from any previous revision is still valid as long as you are utilizing in the contract the year of the Incoterms that you are utilizing. So for example, DAT, which we had mentioned before in the changes that occurred with this last revision of Incoterms, no longer exists in Incoterms 2020. But DAT Incoterms 2010 is still effective. So if that is an Incoterm that you utilize with your buyer or a seller, that is still a valid Incoterm because you're specifying the 2010 version of Incoterms, and DAT is still valid in that particular revision. Okay. All right. So this is a great tool that we utilize internally, specifically with our customers. And we'll make this document available for you at the end of this webinar when Sarah sends out the additional information for everyone. It is a flat document. So again, just with the supply chain diagram from the beginning of the presentation, it doesn't necessarily do justice based on exactly what your particular supply chain might look like. But it does give you an idea of where the cost, risk and obligation will transfer based on the Incoterm that you're using. You'll notice the C terms in the middle. That one will be a little bit different from the rest of the terms because the risk transfers at an earlier point than the cost or the obligation of moving the freight. And we'll get into that a little bit later as we break down the particular Incoterms here. But this really does help us kind of focus on what we want to understand when it comes to determining which Incoterms we want to utilize with our teams. Here we go. All right. These are the ocean-only terms. People are always asking us which terms are the best ones or the right ones to use. There really isn't a right term to use. It's really just decided between buyer and seller and what the 2 parties have agreed upon as to who will be responsible for what part of the transportation process with regards to cost, risk and obligation. The ocean-only terms don't necessarily translate well in a modern world, which we will also dive into as we break down the terms a little bit more, but they are still being utilized by the International Chamber of Commerce, although there have been rumors over the last few years that they may be moving away from the ocean terms all together just because of the access that buyers and sellers don't necessarily have to the ports any longer. So that is something to kind of keep an eye on as the new revisions come out in the next 6 or 7 years and beyond just to see what changes happen from the International Chamber of Commerce. Okay. So we'll go ahead and jump right into the Incoterms, starting with Ex Works. So you'll see here is that 3-letter code for the Incoterm at the top of the screen and then the named place. And for Ex Works, it's particularly on the seller side because it's so far to the left in the supply chain movement. You'll see that arrow is right over the seller's factory. And that is for cost, risk and obligation. So in this particular instance, the buyer is going to be responsible for export clearance, packaging and loading the truck or container. And that packaging does have to be made export ready. With export -- sorry, Ex Works, the buyer, theoretically on paper, is also going to be responsible for loading the truck at the seller's facility, which doesn't necessarily make sense from a customer service perspective. So we typically recommend that Ex Works is not necessarily the Incoterm that should be used in this particular instance because your seller is not going to give you free access to their warehouse, right? You're not going to have the ability to utilize their forklifts. There are OSHA regulations that they have to follow with regards to facility safety and different things like that. And so from a customer service perspective and a safety perspective, they are going to be the ones to typically load the truck. However, what happens if something goes wrong? If something does go wrong, and I'm mentioning this because we have seen it happen before. If something goes wrong, and let's say the cargo falls off the dock as it's being loaded into the truck, for whatever reason. I know that's kind of a far-fetched example, but it would be an instance where the seller is technically not responsible for the damage to the freight on Ex Works terms because it is the buyer's responsibility to package the freight and load it on to the truck. Now if you're using Ex Works and you have a great relationship with your buyer and you don't necessarily have to worry about that particular instance, then that is an example where, by all means, continue utilizing the Ex Works terms. However, if you do have concerns about something happening at the seller's factory or facility where damage could occur and you would be responsible for that risk, we recommend utilizing the FCA term instead. And we'll move to the slide here so that you can see the difference in where that arrow moves. So you see here the FCA, Free Carrier Paid To, the arrow is just on the other side of the seller's factory here. So here, it wouldn't -- it would be the seller's responsibility to make sure that the freight is loaded onto the truck and packaged properly for export. The great thing about FCA is that we consider it probably the most versatile of all of the Incoterms. So again, with this being a flat document and not necessarily depictive of what an exact supply chain structure would look like for usage of FCA Incoterms. This arrow, even though here in the presentation is right after the seller's factory, you can really move this arrow kind of up and down the supply chain line as you see fit. And that's where it becomes so important to understand where your named place and point of transfer is going to be. So you can have it say FCA seller's factory or you can have it, say FCA Port of Hamburg, for example. Or if you want to have it FCA destination port, let's say, FCA Port of Chicago. I utilized that just because I'm located here in Chicago. But because that named place allows FCA to be so versatile, if you've got that agreement in place with the buyer and seller as to where that transfer is going to happen, that transfer can really be at any point along this line here. It doesn't necessarily have to be right as it leaves the seller's dock as you can see here on this document. Okay. So moving on to the C terms. We have CPT here, Carriage Paid To, plus named place again on the buyer's side. Under the C terms, we're looking at a little bit of a different risk model. Named place is always going to be the port or airport at destination. So you'll see this green line here is going to be on the other side of where the destination port would be. And the risk transfers from the seller to the buyer when the truck leaves the facility. So the cost and obligation are going to be here at destination port, but the risk is going to transfer here when the truck leaves the dock. So it's a little bit of a different model compared to the last 2 that we were looking at. This red arrow here would be considered first touch if you're looking through the Incoterms book to try and understand the CPT Incoterm here. If you're buying CPT and you have a global insurance program covering your cargo, generally, you're okay in the risk area with the way that CPT is structured. However, if you're selling CPT, it's important to make sure that all parties understand where the risk transfer happens in the supply chain because the people that you're -- or the company or group that you're selling to may not understand that even though they don't start paying until after it reaches port destination, the risk transfers earlier in the supply chain, as you can see here. So this is one of those instances where you want to make sure, from a contractual perspective, buyer and seller understand the agreement that you're entering into. With CIP, Carriage and Insurance Paid To, you can see that the risk model doesn't change much compared to CPT. But the difference is the very nature of the Incoterm has the buyer requesting that the seller purchases insurance on their behalf. The question that you're probably asking yourself is, how good is the insurance have to be? Truth be told, with Incoterms 2020, it has to be really good. So we're looking at Cargo Clause A insurance, which is what is required with this Incoterm. And that is essentially all risk cargo insurance that covers loss or damage of the cargo while it is in transit at any point while it's being moved down the supply chain line here. Prior to 2020, Cargo Clause B was enough to fulfill this obligation, and Cargo Clause B is pretty low on the totem pole when it comes to the type of cargo insurance that you're looking at. So if you're utilizing CPT 2010 Incoterms, you want to make sure that you're double checking the cargo clause insurance that is included with that movement. Because if it is Cargo Clause B, that would be valid. It's just not going to be great coverage compared to Cargo Clause A. Okay. Moving on to the D terms, and we are still in the omni model terms. So just to reiterate, these terms that we're going over right now, they are considered good for ocean or air. They're not specific to one or the other. So it's good to keep that in mind when you're looking at these particular Incoterms. So prior to 2020, there was a term called DAP. DAP ended -- or excuse me, intended to end somewhere still in transit. So you can see here that the arrow is placed over the truck on this particular slide. Further than the port but sooner than the buyer's door, just to reiterate the depiction here. What the International Chamber of Commerce was realizing is that people were kind of interchangeably using DAP and DAT. And it didn't really make much of a difference because that named place was specified with regard to both of those Incoterms. Like FCA, the named place is open to interpretation. And that is where it becomes important to be specific about the named place and making sure that the buyer and seller agree to what that named place is for the point of transfer. So this blue line, again, can move any point along the supply chain movement structure. It doesn't necessarily have to be over this particular truck here. It can be closer to the destination location or it can be closer to the port as long as that named place is specifically mentioned in the contract to know where that point of transfer takes place. Okay. So they removed DAT in Incoterms 2020 when the revision came out but added DPU. So this is Delivered at Place Unloaded. The only difference been DAP and DPU is that the seller is responsible for unloading. So you can see here, we've got DAP. The arrow doesn't move much, just a smidge. So we typically see more use of DAP, where the buyer is responsible for unloading just because, again, that goes back to what I was saying from an Ex Works perspective. You as the buyer would not necessarily have anyone that the seller has hired come into your warehouse, unload the truck utilizing your forklift, having access to your probably secured location and making sure that you're following the OSHA requirements or anything else that would be in place regarding operating your own facility. Where DPU makes sense is going to be for some different cases with regards to oversight to cargo or large and unusual equipment that may be moved. The one that kind of comes to the top of my mind frequently is the hospital machines, MRI machines. A lot of those times, machines like that are delivered whole. And so they can't necessarily be put together on site once all of the pieces have been taken into the building. So we have seen instances in special cases where cranes need to be utilized to move the freight within a building because of how heavy it is or how large it might be. From that particular instance, it might make more sense for DPU to be used, where the seller is hiring someone to unload the freight for special large project cargo-type moves, if you need cranes, additional people, anything that isn't necessarily as easy as unloading cartons from a truck. But if you are in the place of just utilizing removal of cartons from a truck, DAP and DPU may be more interchangeable for you just because it's a little bit easier to manage from a moving piece perspective. But again, you want to be wary of where that risk transfer takes place because you wouldn't have the seller come into your warehouse just to unload that particular truck. All right. Okay. So the last of the omni modal are going to be DDP with named place. And you can see on this particular slide how far right we've moved the arrow with regards to that supply chain movement here. So with DDP, the seller is responsible for almost everything throughout the supply chain. And because of that, there are concerns that come with DDP. So you want to be very wary, both on the side of selling DDP and buying DDP. There are certain countries that don't allow for a foreign importer of record. Latin America is the big red flag there for that one. They do not operate that way. Mexico does not allow for a foreign importer of record. And then there are some places in the Middle East that operate that way as well. If you do choose to operate as a foreign importer of record, be mindful that you're taking on all the rules, laws and regulations of the importing country. That could involve fines, penalties, anything else that may occur if the laws and rules are misinterpreted for any reason. If you're really thinking about it and it's kind of hard to do because I'm not seeing anyone in particular, with regards to presenting to the group today, but if I were to ask any one of you, if you had an understanding of what the rules and regulations were for importing to Norway or South Africa, you wouldn't necessarily, off the top of your head, be able to understand what that process would look like. So being the importer of record in a foreign country can have its difficulties. From an importer perspective, on buying DDP, it can be considered easy because you really don't have to worry about anything. You can kind of just sit back and wait for your shipment to arrive on your dock. The concern that some people have with DDP is that you don't necessarily have the visibility to your supply chain in understanding when your shipments are going to arrive and when you would be able to fulfill your orders to your own customers based on that information. The other thing that you want to be careful of is there may be a cost saving in moving your terms from DDP to something else. Because your seller is taking on full risk and responsibility and cost of getting these goods to you, they may be also charging a premium for the services. So it might be more beneficial for you to explore the options that would be available if you were utilizing another Incoterm outside of the DDP option. And then you would have more control as to when your goods arrived and what your supply chain look like as well. Moving on to the ocean-only terms. It is important to note that these terms are challenging with the way the modern world works. Ocean-only terms are not really meant for cargo that's being moved in containers. With FAS specifically, the seller is responsible for cost, risk and obligation of getting the shipment nestled alongside the ship and not on board at origin. So you'll notice that this arrow here in the line is just on the left side of the ship rather than pointing directly over the ship. And this makes it a little different from the FOB terms. The thing with FAS is that you typically don't have access to the section of the port that the containers are stored in when you are delivering FAS. And so again, that goes back to the idea that the International Chamber of Commerce might be doing away with the ocean-only terms at some point just because of the rules and regulations that exist with having poor access, the security requirements that exist, the fact that almost all goods that are moving via ocean are placed in containers. So it just -- it makes a more complicated structure for ocean-only terms rather than using something a little more versatile like FCA as discussed earlier in the presentation. And with FOB, you'll see, again, that line, the arrow over the ship, that moved very, very little. See the difference there. With FOB, it's very similar to FAS with the exception that the seller is responsible for making sure that the goods are nestled onboard the ship safely rather than alongside the ship. I'm going to read something to you from the Incoterms book, just so you have a better understanding of why it's difficult to utilize these ocean-only terms. So if we're looking at the first page of the Incoterms book and down towards the end, it says mode of transport number two, for anyone who's taking note, this particular excerpt says, this rule is to be used only for sea or inland waterway transport, where the parties intend to deliver the goods by placing the goods on board a vessel. Thus, the FOB rule is not appropriate, where goods are handed over to the carrier before they are on board the vessel. For example, where the goods are handed over to a carrier at a container terminal. Where this is the case, parties should be considered -- should consider using the FCA rule rather than the FOB rule. So what this is saying is based on the way the port operations work nowadays, it is impossible for the seller to ensure that the freight is nestled safely onboard the ship because we, as the buyer or the seller, are not able to move freely about the port based on, as I mentioned, rules and regulations and security clearances and things like that. Similar to FAS, the seller is responsible for the cost, risk and obligation of getting that freight nestled on board the vessel. But going back to what I read from the book, ocean-only terms are hard to use because we just don't operate the same way that we did 100 years ago. You can't just drive up to the ports, stand next to your container, jump on the forklift that's going to put the container on the ship. It's just not the way the port operates. And if we were put in a position where we tried to do that, I'm sure we wouldn't get very far in that conversation. So really like you want to keep in mind the buyer and the seller are so far removed from access to the ports and loading the vessel that it's just not a direct translation of utilizing FAS or FOB when it comes to these ocean-only terms. And they can be problematic when it comes to determining risk in the supply chain under these terms. Okay. So we have another C term here, CFR, again, ocean-only. With this particular one, you'll see it's similar to the other C terms that we've already discussed because we're going back to that risk model here. Here, the seller is responsible for the cost and obligation of getting it to the named port at destination, that green arrow here. But the risk transfers when it's nestled safely onboard the boat. So you'll see that arrow here in red. The problem with that can be if the truck gets into an accident on the way to origin port, the seller is going to be at risk. But if the truck leaving destination port, for the final destination, gets into an accident, that would be where the buyer is at risk. So it's a little different from CPT as the risk transfer is a little bit further up in the supply chain than it was for CPT. Okay. And then this is the last one of the last of the C terms as well and ocean-only CIF plus named place, Cost Insurance and Freight. With this particular Incoterm, seller is responsible for cost and obligation of getting it to the named destination port, but the risk transfers once it's loaded on the vessel at origin. So again, there's not much of a difference here between the transfer. You can see the arrows on CFR and CIF are in the same place. The only main difference is, for CIF, you have insurance included. So you see here Cost Insurance and Freight. And the question comes, again, does it have to be good insurance? For CIF in particular, it does not need to be Cargo Clause A insurance. This is where the Cargo Clause B requirement comes into play, and that's not the all-risk cargo insurance that we were discussing under Cargo Clause A earlier in the presentation. So you're going to want to understand the type of risk you're taking on with this particular Incoterm and know that it falls within your risk appetite or your organization's risk appetite. Questions that arise with this particular Incoterm. Would the seller buy the same type of insurance you would for your own shipment? What would it be like to potentially deal with the claim in a foreign country? Is it going to be a language barrier issue? These are the kinds of questions that you would want to ask yourself before entering into a contract under this term because you want to really plan for the worst-case scenario when it comes to your supply chain and what that movement is going to look like. So that pretty much covers all of the Incoterms as outlined in the book. Again, this is just a really high-level overview of what Incoterms look like and how they're supposed to be used versus how they're not supposed to be used. I do really want to reiterate. I know we have a lot of customers that utilize drop shipments, both with their buyers and their own customers. Incoterms are not a great structure for drop shipments. So you just want to be really careful about how you're utilizing that and making sure that proprietary documentation is not being sent to your customer if you are in a position to keep your pricing information private. If you need additional information on Incoterms, you can always access the International Chamber of Commerce's website, and there is an available form there on the website. Again, we recommend ordering the book and having that in your toolkit if you are responsible for imports and exports for your particular company. Again, you can do that either directly from the International Chamber of Commerce or on Amazon, which is where I got my copy. And then the International Chamber of Commerce does have just general information about Incoterms from their website. So they do really make it easy to access the information. I've also noticed recently that there is an Incoterm 2020 group on LinkedIn. If you're interested in joining that, just do a search in the search function at the top of the page there. I haven't utilized that group myself or really kind of dived into what it looks like and what kind of information they're providing. But it is helpful from a business perspective if you're looking for more of like an open forum option where you can ask questions and kind of interact with other people that are utilizing Incoterms as well. And then as always, you can reach out to your Expeditors representative to ask any questions that you might have about Incoterms. We'd be more than happy to help you either better understand the process or any translation you need for internal conversations because this is not an easy topic. If it was, we probably wouldn't have as many webinars and trainings that we do throughout the year. So that's no problem. Please feel free to utilize us as a resource. And then at the end of the day, it's important to remember, Incoterms are like the pirates' code in Pirates of the Caribbean. It's more what you called guidelines than actual rules. And as long as everyone agrees to the guidelines, then you're setting your organization up for success. You just want to make sure that everyone agrees to the terms that you are utilizing and that everyone understands where the cost, risk and obligation lie for each of those parties. And with that being said, it looks like I'm right about on time with ending. So Sarah, I will go ahead and turn it back to you.

Okay, Erin. That was a great informative webinar that you just gave. I'm going to stop the recording, and then we'll move on to the Q&A session. So one of the questions that was asked while you were presenting, Erin, was, how is the named place or named point determined?

The named place or named point is determined pretty much just between the buyer and the seller. So as you're negotiating your Incoterms and your contractual obligations, you as the buyer or the seller would want to interact with your buyer or seller to determine what your agreed upon named place is, and then that would be where that transfer occurs. So as long as both parties agree to the named place and you're specific about the named place, there should be no confusion as to where that transfer point is.

Okay. Great. Some other comments in the Q&A were, some Incoterms used by their companies are widely misused based on the presentation material you just gave. And why do you think Ex Works, FCA and DDP are all misused? Do you have any feedback about that or...

In my experience and conversations that we've been having with our particular customers about those particular Incoterms, it really just boils down to the fact that people don't necessarily understand how those Incoterms work, which is one of the reasons why we like to present these webinars and do trainings with our customers as well. So if there is anyone on the call today that is interested in having more of an internal conversation with a larger group of people, specifically salespeople, because I know a lot of the confusion comes from salespeople when they're talking about buying and selling with Incoterms. If we just need to help reset that bar to make the changes that you're looking to make within your organization, we're more than happy to help participate with that. And really, it's just -- if you're reading the book and kind of going through, when I first got hired on to Expeditors, I bought the book. I started reading it and really reading it direct from the book, it's not always the easiest information to digest. I got a lot of my training and a lot of my understanding of Incoterms from watching other people present webinars like this and then just constantly having conversations about what each of the Incoterms are, to really understand how they should be used. So it really just boils down to the misunderstanding overall because the book may not necessarily be clear if that's not how your brain processes verbiage correctly. And then just the lack of utilization within the organization. If you only have a small group of people who use the Incoterms on a regular basis and are understanding it, it may not translate to anyone else within the organization.

Okay. Could DPU be used for buyers to inspect goods before transfer?

That's a good question, and that's not a question that I had before. So Sarah, if we could mark that one?

Sure. We will follow up on that. And then, Erin, I'm not sure if this is something that you would want to cover now or if we can follow up after. But do you know if there is a direct link between Incoterms and tax determination on sales invoices? Sometimes this can be confusing. So what are your thoughts on that?

Did I get kicked out?

Erin, I think we lost you for just a minute. I'm not sure if you heard the question or not. So I can read it one more time. Is there a direct link between Incoterms and resulting tax determination on sales invoices? This is sometimes confusing. Do you have any thoughts on that? Or is this something that we should follow up with?

That will be something that we can follow up with. But I would say that... [Technical Difficulty]

Everyone, I'm so sorry. I think we're having some difficulties with Erin's connection. So I think, Erin, sometimes you freeze up or we get -- you drop off by -- I'm not sure what's going on with our connection here. But I think...

An issue is going on with like Facebook and other social sites today. So I'm wondering if Zoom is one of those being affected or not. I'm not sure, but yes, I wasn't surprised. So...

Okay. Well, we will -- everyone, we'll end this webinar a little bit early and just note that we do have all of the questions that we didn't answer on the webinar today. And we will follow up with you directly. So once again, thank you, Erin, for the webinar and the content that you presented. For all the attendees on the call, I will be sending out a survey in a few minutes. It's very short. It should only take 1 to 2 minutes to complete. And then after that, you will receive the presentation material today. Thank you, everyone.

Yes. Thank you. It was a pleasure.