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

Okay. So it's 1:00 past. Let's give all the others maybe one more minute, but not more. We always say -- even internally, we always appreciate those who join on time, and we are not waiting for the latecomers. So I can still see that there are people joining. Wonderful. So the number is increasing and the people are popping up. Yes. It's our pleasure to welcome you here at the importance of Incoterms 2020. And Steve, just to kick off, we do got here some housekeeping rules. And one of them is actually the first question that we have already received on the chatbox. So Steve, do you want to run through this?

Yes, of course. So you can see some participation is highly encouraged. So don't hesitate to send a message in the chat. Of course, we'll always try to interact with you. Place your questions in the Q&A box. You can see in Zoom, we have the Q&A section. About the Q&A, this will be done at the end of the session. We will tackle this at the end. And third rule, yes, please avoid questions with personal or sensitive information. And the webinar -- I had this question already several times actually before even the start of the webinar, but yes, this will not be recorded and the presentation will not be shared later on.

That's true. That's true. So thank you very much, Steve. Yes, I always like when people participate in my training. So please do ask questions. We have only booked 1.5 hour for the Incoterms topic, which for those of you who work with Incoterms, you can see how is she going to cover that. So I will try to do my best to cover all the Incoterms in 1.5 hour, but you will see that it's a lot of information to share. So I'll try to do my best to stick to the designated time. We always finish on time. So I'm not planning to break the rule for today. And we are going to consolidate all your questions and everything that we actually see on the Q&A and on the chatbox. And I will respond to all the questions after the webinar, and Steve will share the answers with you via the e-mail so that you actually have it all in writing and all the questions and all the answers will be shared with everybody on the webinar because it doesn't mean that if one person asks that the other person is actually not interested in knowing the answer. And of course, we are organizing the webinar for our customers. So in order to keep the confidentiality and the sensitivity of all our customer information, if you just feel that you prefer to reach out after the webinar or just shoot us a question, please you are free to write to us any time to our expeditors.com e-mail address. And one thing that we also do in terms of personal identifiable information is that we never record our webinar. So whatever is actually being done during the webinar, whatever is being said during the webinar is not being recorded, okay? So team, I know that Steve has already mentioned it. My name is Zuzana Vavrincova. I currently work as a training manager for Europe. And in terms of my trajectory at Expeditors, I'm currently based and operate from Madrid, Spain. But if you take a look at my last name, obviously, you will say that, that girl is not Spanish. I've started working for Expeditors back in 2008 in our office in Prague. And ever since I have dedicated my energy, efforts and interest into training. So it's also nice to be here and present to you the Incoterms. I remember I first came into contact with Incoterms when I started working for logistics because I came to logistics from a production assembly company operating in the Czech Republic, one of the highest or biggest technological and electronics company. And I think that ever since it actually becomes a passion. So you can see that today, we are going to be talking about Incoterms 2020. And for some of you who are new to the Incoterms, you could actually say, okay, but we are already here in 2024, and she's going to be talking about Incoterms 2020. So what's wrong? And there is actually nothing wrong with Incoterms 2020 because it's the very last valid edition that International Chamber of Commerce has released. If we talk about Incoterms and what it is, you can see that Incoterms is nothing new. It's actually quite an old event that started to appear around 1930s. So next decade, it's going to celebrate 100 years of its existence. And except for the first years, when it was updated irregularly in '53, '67, '76, you can see that starting 1980s, it has actually taken a very, very regular cadence of updates and Incoterms are updated every decade. So that's why Incoterms 2020 because until something crucial happens, the Incoterms that we will be talking about today and the addition that we will be looking into in detail today will be valid until 31st of December 2029 before the version 2030 becomes effective. So -- when talking about Incoterms, I usually say that I like to clarify right away in the beginning what Incoterms are and what Incoterms are not. For us who are sitting here in logistics companies, we sometimes are exposed to questions from our customers, and we can find out that not always, it's completely clear. So currently, in the version that we have 2020, we have 11 Incoterms and Incoterms can be divided in different groups depending how we actually take a look at it. But the split or the diversification that I have decided to use today is actually based on how we can use them. So there are several Incoterms or 7 Incoterms that can be used for all modes of transportation, meaning that you can use them for air, for road and for ocean and also for rail. There are 4 exclusively governed by the inland and sea waterways. And the reason why I'm kind of putting a special emphasis on it is that it's very frequent that we receive a request from the customer saying, I want to do FOB for air, which is the first striking momentum because FOB for air does not exist officially based on the International Chamber of Commerce. So 7 Incoterms that can be used for all modes of transport and 4 that can only be used for sea and inland waterways. So what do Incoterms define? They define 3 things, only 3 things. So they define who is obliged to contract transportation. So who is the one who is contracting the main carriage, who is contracting the truck who is going to come to the company and pick it up, who is going to arrange the transportation for a truck, who is going to come to the destination to the container yard or airport in destination and take it to the final customer. So that Incoterms define who is obliged to contract transport. The second part, what Incoterms do define is who is paying for it. So not always, it is that the person who needs to contract transport is also paying for it. So Incoterms define who is paying and Incoterms define who is responsible when something happens to the product. So if my container, if my pallet or if something happens to my product, who is actually carrying the responsibility for the indemnization or for reimbursement or for contracting insurance. So Incoterms do define these 3 things. What Incoterms do not define, they do not replace the terms of payment. So Incoterms, based upon an Incoterms, you will never be able to define if your customer or if your shipper or manufacturer, whatever we call the party is actually going to pay you the invoice. Incoterms do not define the payment terms. The payment terms, where do they have to be? They have to be in the contract of sale. So that's where you need to negotiate how quickly or late the customer or the party is actually responsible to pay you, if it's 30 days, 60 days, 90 days, et cetera. So that needs to be the part of the contract. Obviously, Incoterms do not replace the contract of sale. So the contract of sale needs to be a part. And I usually say that Incoterms should be an inseparable part or very important part of your contract of sale. So when you're signing a contract with your customer, with your shipper, with your manufacturer, ensure that you discuss the Incoterm. Why do I say that? Do Incoterms have impact on price? Let me just take a look at the chatbox. Do Incoterms have an impact on the price? What do you think? Yes, no. Yes, Kamal, obviously, Incoterms have a very important -- play a very important part in the pricing as well, sure. Because imagine, if Steve is in Brussels and I'm here in Madrid, and we agree that I want to get his bicycle. He's going to ship me his bicycle. And I'll say, okay, so I want your bicycle. And Steve will tell me, okay, my bicycle is worth EUR 2,000. So obviously, if Steve will need to ship me his bicycle to Madrid, the fact who is going to pay the transport, the insurance or who is going to carry the risk is going to impact the price of the bicycle logically because Steve will say, Zuzana, if you want my bike and I need to send it to you, it's going to cost me money. So I'm not going to sell you my bike for 2,000, but I'm going to send it to you for 2,200, right? And Zuzana, if you want your insurance, you are also going to pay me for insurance because I still want to get to the 2,000 net for my bicycle. So Incoterms do have a very important role in terms of the pricing. So with that said, Incoterms do not replace a contract of carriage. No, no, no, no. So for every single carriage, you are -- and not even maybe we are perceiving it, but every time we are shipping something, it's like when we are flying on holiday, yes. So if I'm flying on my holiday, I obviously need my flight ticket, else, they will not let me board. And the same it is for the freight. So regardless how many contracts of sales we have, how many times we have discussed the Incoterms, I also need my flight ticket. So all the freight that we are shipping, every time we are boarding something, it needs their flight ticket. In logistics terminology, well, they will need a bill of lading, they will need airway bill, they will need CMR. In U.S., they say we need a truck bill. In terms of brokerage, we always need the commercial invoice or the Expeditors' invoice. So that's -- these contracts are also standing apart from the Incoterms. But I say it's crucially important that also these contracts like invoices, like bills of lading contain the Incoterms. Why am I saying it? Obviously, I will never forget the situation when I was working in that production company before. And I went to see our warehouse manager and production manager saying, hey, guys, we need to pay some of the invoices ASAP. I need to process it. I'm responsible for that. And they were telling me, Zuzana, but it just says DDP. And at that time, I was young chicken, and I didn't know it's like, okay, DDP. I'll say, well, DDP, if it stands alone, it equals nothing, but literally nothing. DDP standing alone without anything added to it says nothing, right? So we are not going to pay. Okay. So now I know why. Now I know why. So when we are using Incoterms, we also need to use them properly, and they should be used properly on all these contracts of carriages in these contracts of sales and in these terms of payments because if they are not defined properly, they equal 0. The more questionable part in terms of Incoterms is actually the transfer of title. What is it the transfer of title. If we go back to the bicycle that Steve has in Brussels, and we will agree that Steve will ship it to me via air, at the moment, when the bicycle is over the territory of France, and it's going to be over Paris, the question is, who is the owner of the bicycle? Steve doesn't have it. I don't have it physically. So it's over the territory of France and the question is, who is the owner? Whose bike is it? So again, the thing is that Incoterms do not define the transfer of title. So it's very important to discuss that as a seller and buyer or customers and include this part in the contract of sale because Incoterms do not define when I actually become the owner of the product. So we are having a lot of things to cover today. But before we dive into the content, I just want to show you something important. And I would actually recommend this booklet to everybody who works in logistics. It's like A5 format book. It can be purchased either in specialized book shops or you can also buy it in Amazon. It's officially released by International Chamber of Commerce, and it costs around EUR 45 to EUR 50 depending. The version that I have is English, Spanish. So they are also having them split in the middle. And you can see the original version in English, translated to different world languages. So I know there is French. I know there is English one. I know there is German one. I've also seen one Czech one, if we have someone Czech speaking. So obviously, it has been translated into different world languages. And it's EUR 50 investment valid for 10 years. I think it's money well spent because there are moments when I get doubts and I actually don't know. And I said, well, that's questionable. This is the first thing that I usually grab into my hand. So that as a recommendation. So Tim, I have promised Incoterms, and I'm getting there. So obviously, Incoterms 2020, they replaced the version 2010. But again, one question for the chatbox. Does it mean that if we now have the Incoterms 2020 that we cannot use the 2010 anymore? How does it work? Can we use 2010 or we cannot use 2010? Well, it really depends how you actually approach it. So on standard, the version 2010 is archived. But if the customer will say, you know what, I really like the CIP under Incoterms 2010, you can still go ahead and use it, right? International Chamber of Commerce, does these updates obviously, because products are changing, market is evolving, technology is advancing. And they are always recommending the best possible thing. But if you say, you know what, I really like the Incoterm that is no longer existing, but it existed in the version 2000 or it existed in the version 2010. And we are happy as Hippo using it, you can use it. But correct, [ Gemma, ] as you say, we need to mention that we are actually using it under the version Incoterms 2010, right? So it's crucially important that you state the Incoterm version, else it could be misunderstood. So now specifically in between the version 2010 and 2020, there are a lot of, let's say, peculiar differences. And why do I say peculiar? Because we have always had CIP and CIF. You tell me, Zuzana, that's not new. And I say, no, no, you're right. These Incoterms have existed and they continue existing. But these Incoterms went through a change, not from outside because CIP still looks CIP and CIF looks CIF. But from inside, it's like transplantation. They have changed them from inside. So the CIP and CIF 2010 is no longer the same as CIP and CIF 2020. And the major difference is actually very costly because the insurance that was changed or the thing that was changed is insurance. If I go back to the example with Steve's bicycle, if I will say, "Hey, Steve, you need to purchase premium insurance, " and Steve will say another EUR 100 on the top, okay. So the price of the bicycle is not going to be EUR 2,200, but it's going to be EUR 2,300. But if I say CIP 2010, Steve will know, oh, that's not all inclusive insurance, it's only the basic insurance. So instead of paying EUR 300 for insurance, Steve will buy the cheapest insurance in the market that will cost him EUR 50, and he will be able to sell me the bicycle for EUR 2,050. So these are the changes that have happened to the insurance because International Chamber of Commerce started playing with insurance cargo clauses. So you can still use the older versions, but you really need to state the version properly and clearly. So compared to the older version, we have a new hero added to the portfolio. And the new hero is called the DPU. In logistics, we are normally extremely pleased with this Incoterm, especially for us because we are doing sometimes -- we work with a lot of pharma companies, and they are doing fragile or producing fragile, fragile cargo, hospital equipment or server racking, things that are heavy. They can be oversized or unusual size and unusual shape and may require really specific delivery to the final, final place. So delivered at place, unloaded is brilliant if you really, as a manufacturer, say, I want to responsibilize myself for delivering it to the final place. Maybe it has cost us half a year to produce this unit. And we actually want to ensure that we deliver this unit safe and sound on the very final place. So that's the case when we would be using DPU. On the contrary, DAT has been removed. So delivered at the terminal has been removed. Again, if some of your companies have been happy as a Hippo using it, you can still use DAT under the 2010 Incoterms, okay? So based on the diversification, these are the 7 heroes that can be used for any mode of transportation, meaning that ex works, free carrier, carriage paid to, carriage and insurance paid to, delivered at place, delivered at place unloaded and delivered duty paid can be used for air, ocean, road and rail, perfectly fine. With the difference that free alongside the ship, free on board, cost and freight and cost insurance and freight can only be used for sea and inland waterway. And Kamal, I'm just looking at the chatbox. Incoterms, it's not a law, you're right. It's a recommendation, but Incoterms are not a law. It's not a law, yes, you're right. All right. So a couple of things before we move to the diagram. And I always say that for everybody who wants to understand Incoterms need to understand the shipment flow diagram. Because if you do not understand this, you actually don't know how to understand Incoterms. If I actually take a look at that example with Steve's bicycle. So Steve can be the manufacturer. The bike is in Brussels. And I'm the buyer based in Madrid. What options do I have to get my bicycle? Well, Steve can ship it via air. He can probably put it in [indiscernible] and send it to me via the port -- via Portugal. In Portugal, we can put it on the truck and the truck can deliver it to me to Madrid. Or I also have another option. I can grab my car and I can drive to Brussels and bring me the bicycle. In industrial logistics, I cannot imagine loading a container on my car. But I just want to mention that, that case is also there. So when we think about these airplanes and boats, if we think about where the production companies are, and I ask you, are these production companies located directly at the airport, at the container yard or at the Transcon hub? They are not. These companies can be located in the middle of nowhere, far, far away somewhere where the place is cheap. So if I have my product ready, the first phase is that somebody needs to come to pick it up, which means somebody needs to load it. Somebody needs to prepare the documentation. Somebody needs to clear it for export. And then when my product actually gets to the airport or container yard, sometimes it needs to wait there. It's the same like traveling, right? If you come to the airport, you need to get a taxi to get there. You need to get your ticket, you need to go to check-in. When you go through the security, you need to show your passport because even if we are not clearing ourselves for export, the phase to pass through the customs zone at the airport is always there and the same for freight. And then when I am actually at the airport, well, the airplane might not be leaving right now, but I need to wait there, maybe an hour or two. And the same applies for the freight. So somebody will bring the freight, it's going to stay there with the handling agent, and it needs to stay there a day or at least several hours before it's ready to be loaded on the main transportation. Somebody needs to load it. And the other part is like a mirror. So somebody needs to unload it. It's going to be there at the handling agent before we can actually load it. It needs to be cleared for import. Somebody needs to come for it. so that they can bring it to the facility. So my question here is somebody is going to do something for you free of charge. Are these guys going to load it for you free of charge just for your beautiful smile? Are these people going to prepare all your customs documentation free of charge? No. Everybody in this supply chain wants to get their money for what they do. And that's where the Incoterms actually come into the game. So what do these Incoterms define is who is paying in between all of these milestones. So we start with ex works. And I would say that based on the territories that I know, ex works is the most popular one. Ex works is the most used and most popular -- people love it. People love it. You can see that I'm using 2 different colors, the red one and the blue one. And we are starting with Incoterms with very little red, meaning very little responsibility for the seller and a lot of blue because on the first Incoterms, you will be able to see that there are a lot of responsibilities on the buyer side. So considering all this, when you take a look at ex works, ex works means that seller delivers when they actually place the goods at the disposal of the buyer at the seller's premises. The freight is not cleared for export and not loaded. So ex works means that the seller only needs to locate the pallet or the container in the dock door. And at that moment, they can actually say, I've done all my job. Buyer needs to arrange everything, including export customs clearance, Seller must assist the buyer in obtaining the documentation and info related to export and transit and import clearance, but at the buyer's expense. So where is the problematic part? And I can share with you that when I was speaking with Mr. Schubert, one of the members of the International Chamber of Commerce, he was telling me already in 2009 saying, Zuzana, I don't think that ex works is going to survive. And look, it survived the 2010 version, and it survived the 2020 version. But I can tell you that it's really widely discussed because ex works is an Incoterm that carries a lot of risk. So the first thing where the risk is, who is usually arranging the loading, the seller or the buyer? Correct, Patrick, it's the seller. So in reality, it is the seller who is arranging the loading, but who should be doing the loading based on the Incoterm, Who should be doing the loading based on the Incoterm? Perfect. So here, we have a mismatch between what's actually happening and how the Incoterm is defined. It carries a lot of risk because imagine that you have got some nice Pepito in your warehouse and the Pepito will be loading the pallet to the truck. Obviously, the driver, when you tell the driver, hey, you know what, you need to load it, the driver said, I'm not here to load. I'm here to move the steering wheel. So the driver will definitely negate to load. Normally, the trucks do not carry any forklift or do not carry any pallet jack, obviously. So the truck driver comes and expects the seller to load it. But the seller will say, you know what, it's not my responsibility. I don't have to do it. That's the first scenario. Believe me, I have seen invoices for waiting because the seller rejected to load the pallet on the truck and the truck drivers were issuing invoices for waiting, and there were so many invoices that in total, it was like EUR 35,000. And it was a clash between the seller and the buyer, like who is paying it. So normally, the seller does it, and it can work 100 years until what I usually say something happens. Imagine that this nice Pepito will say, okay, no problem. We have the pellet jet, we have the forklift, and I'm going to load it for you. Well, we know the Murphy's law. So what will happen if this nice Pepito will drop the pellet and will break the pallet during the loading process. This nice Pepito can say, well, you know what, I'm really sorry, I wanted to help you, but it's not my fault. So the buyer who is 5,000, 10,000 kilometers far away is responsible the freight is broken. It has not even left the warehouse yet, and they are telling the buyer, well, you know what, we are sorry, but it's your responsibility. So it's one extremely gray area in Incoterms, the loading part. So the other huge issue is the export clearance because based on the Incoterm, who is responsible to do the export clearance? Buyer, correct, Melanie. So the buyer is responsible to do the correct -- the export customs clearance. But in fact, if you put it in the reality, say, oh, I have my container in Brazil and you are based in Brussels, how easy it is for you to clear the goods in Brazil if you do not have the customs representation there, extremely difficult, right? So what normally happens is that the seller is doing the customs clearance on behalf of the buyer. I will repeat what I have said. It can work for many years until something happens and the buyer will say, you know what, we are mad, we are angry. We are not going to help you out with it. And then what you have a container in Brazil, you are unable to clear it. The seller will tell you they are not going to provide you the necessary documentation and what are we going to do with ex works. So the other thing that is extremely risky with customs clearance is that we do have some freight that is called so-called dual use. Have you heard about dual use? Dual use means that it can be something that will look innocent, like a chip for a mobile phone. Imagine that you are shipping a container full of chips because you are producing mobile phones or something to hospital equipment or the companies that do medical devices, it all works with chips inside. But if the container of chips would actually get to the hands of the terrorists, they will have the whole container with chips ready to produce terrorist equipment, weapons and it can actually get to very, very dangerous goods. So the potential issues when it comes to the dual use or if the goods actually turn up in the blacklisted country because the shipper will clear it with the idea that it goes to Belgium, but it's not able to know that from Belgium, it goes to Afghanistan. And shipper may not know the final destination since they don't do the customs clearance. And it could be a really huge risk, especially from the compliance perspective. So for those of you who are using ex works and have been happy with it, I would definitely consider to rethink it and say, is it really an Incoterm that is worth the risk? Because if you will say, yes, well, we would like something else, what can you recommend? I would actually recommend you FCA. Why? FCA has been first introduced in the 2010 edition. So now it's an Incoterm with 14 years of existence, and it is actually getting improved and getting better and better and better. So moreover, FCA covers all these gray part from ex works because FCA tells that seller is responsible for loading officially. Seller officially needs to load and the risk transfer after loading. So if something would happen to your freight after -- during loading, it still is the seller's responsibility. And the seller also arranges the export customs clearance. But there is no obligations to clear for transit through a third country or import clearances. All the other costs are actually going to the buyer. Example, what I like about FCA is that we can also say that FCA has got certain variations. We have got a customer that is based close to Madrid. And they are a huge company that has got its own transport department. So it's a huge company that has its own trucks. And they say, Zuzana, all this part of the pre-carriage and they usually ship via ocean, because they ship huge products. So they say, we do not need to contract anybody to do the pre-carriage to take it to Valencia or to Barcelona because we have our own trucks. And I say, that's wonderful. So FCA has got 2 possibilities. First thing is that seller will load it and clear it for export, option 1. FCA option B is that the seller will say, I will load it, I will clear it for export, and I will take it to the named place in the destination. So that's option B. In this case, it's port in Valencia, obviously, because they say, we already have our own trucks. So we are already having costs with maintenance. We have our own drivers. So we are not going to pay for any other company to bring our cargo to Valencia. So that FCA option A, FCA option B. At the moment when the truck gets to Valencia and it stops the engine, then the unloading part at the handling agent and from that point, it actually goes on the buyer side. However, FCA also has some kind of mini option C. But here, I want to say like in Spanish, attention because FCA has got an option called onboard notation. And you remember what did I say to you in the beginning, FCA can be used for all modes of transport, right? I said that. I swear, I did say it, except for this one. Because if you would go for FCA onboard notation, onboard notation is only applicable for sea and inland waterways. And why is it so specific? Because it's a special option for seller and buyer, especially when the business is being done on -- in terms of the letters of credit. What does it say? If the business is being made on the letters of credit, the seller would need to wait until the buyer receives the freight. Based on the logistics convention, the buyer becomes the owner at the moment when the container is loaded because the person and the party who owns the master bill of lading is the owner of the freight or the owner of the container, right? But that means that the seller would have to wait all the way long until the buyer confirms that they actually get the freight. What does it mean? FCA onboard notation is actually an agreement so that buyer will agree with the shipping line that at the moment when the goods is confirmed on board, they can actually provide the required bill of lading to the seller. And the seller will be able to go to the bank. And based on that document, the bank will release the money. This process is relatively new, and there is no guarantee that the carrier will do it. I would say that here, it really depends on the relationship and on the experience of the people that are working for the carrier. So FCA A, FCA B and FCA onboard notation. So let me move forward, and we do have here CPT. CPT is the first Incoterm where you can see that there are 2 different places of the transfer of the risk because you can see that the transfer of the risk transfers much earlier in the supply chain than the carriage and the cost. So what does it mean here? The seller needs to contract the carriage and pay for the carriage to the named place in destination, nominated by -- agreed with the buyer. So the seller contracts and pays for the cost. But the risk, if something happens to the container is being transferred usually at the first carrier. So at the moment, when the truck or when the goods is loaded on the first truck and something would happen, it's the buyer who assumes the risk. The CPT does not carry any insurance at all, no insurance at all. So the buyer is not obliged to purchase any insurance on behalf of the buyer. So in these cases, I would definitely recommend the buyer to purchase their own insurance. So in that sense, if I move forward to the CIP, you can tell me, Zuzana, what's the trick here? Because you will tell me the arrows are exactly the same. So yes, the arrows are exactly the same. But here, the trick is that the buyer is obliged by the Incoterm to purchase the insurance on behalf of the buyer and not only some insurance. So here, it's actually the one of the major changes and the differences in between CIP 2010 and CIP 2020 because the buyer is forced by the Incoterms to contract the insurance based on cargo clause A. And some of you could tell me what are all these cargo clauses? We never heard about them. Cargo clauses, it's nothing new, but we never discussed them before because all the Incoterms were following cargo clauses C. Now we need to talk about it because it's no longer the truth. Cargo clause A means premium insurance or, let's say, all inclusive. If you go on holiday and you buy an insurance or all-inclusive insurance, which one is more expensive, obviously, the all-inclusive. And it means that also if the seller is obliged by the Incoterm to contract expensive insurance, it's like the bicycle with Steve. He would sell me -- he would increase the price for the bike if he needs to buy expensive insurance. So in that sense, I would actually say that we need to discuss it. But one thing is that if the buyer and the seller will agree that, hey, we actually really like the CIP, but 2010, you have 2 options. You can either agree, we are not moving to CIP 2020. Imagine that somebody is selling paper carton or coal or something that's very hard to break and say, you know what, we actually do not need premium insurance. You can agree on the CIP that you still want to use Cargo clause C. So that kind of agreement is possible because ICC, International Chamber of Commerce enables the parties, seller and buyer to go down from cargo clause A to cargo clause C. Why I'm saying it? Because vice versa, it's not allowed. So it's not allowed officially that Incoterms would request cargo clause C and the buyer would be pushing the seller to contract Cargo Clause A. No, no, that's not possible, right? So hopping down and requesting less, it's possible. But hopping up and requesting more based on an Incoterms that would not be considered as official request or as a legal request. So now most probably you would be asking me, Zuzana, what are the differences between the cargo clauses? So we have got cargo clause A, B and C. And the B is not being used in the Incoterms. So you can just take a look at cargo clause A. Normally, if you just think about what can happen to your cargo, what can happen to containers. You can see that the major difference in between the cargo clauses A and C, earthquake, volcanic eruption or lightning. I would say that if we take a look at it, it's everything that in logistics is being called Act of God. Anything that is linked to weather is not being insured by cargo clause C, but is insured by cargo clause A. So if your product gets wet, if the truck has incident because there was an icy road, if your container is struck by lightning and it's completely torn apart or if your truck gets an accident because there was a heavy rainstorm or snowstorm. If you have cargo clause A -- insurance cargo clause A, you are covered. If you have cargo clause C, they will say it's excluded out of this insurance. The other difference between Cargo class A and C is the washing overboard. So for the cargo that is actually traveling on the main deck of the cargo and the weights go over. So sometimes it can get wet if you are shipping textile and you will get a container that is wet and smelly, you don't want that because you are not able to sell it. Once I have seen a container that was shipped from Asia to Hamburg and they were shipping walnuts. You don't want to see that. So the walnuts after one month on the sea actually came to Hamburg and the container was ready to explode because all the inside was green, rotten and it was just ready to scrap. The only thing that no insurance would actually cover are the risks of war. So we do not have any insurance for the risk of war. And -- but all the risks of theft or malicious damage or just these cases like it just broke and it dropped and it broke, those are being insured and considered by the Cargo Clause A, but they are not being included in Cargo Clause C. So I will be able to send you these 2 slides separately so that you can actually have them so that you can see what's the difference. So we are moving forward. And the next one is DAP. You can see that DAP is the first one when you can see the increased responsibility on the seller side and decreased responsibility on the buyer side. So less blue, more red and for delivered at place, the seller contracts the carriage, pays for it, no insurance, but the seller is responsible for any damage until the goods actually reaches the named place in destination. And with DAP, who is responsible for unloading, a seller or a buyer? Who is responsible for unloading? Buyer, correct. Correct, guys. Buyer is responsible for unloading. And buyer is also responsible for import custom clearance and all the charges related to it. Seller clears for export customs and any transit charges linked to clearance that are required. So here, we have another trick, and that's the new one. You could tell, okay, Zuzana, where is the difference? So the difference is here that with DAP, you were telling me that the buyer is unloading, and that was true. That's not true in the case in DPU. So imagine that we are shipping a huge magnetic resonance, something that took the company several months to produce. And then the truck comes, stops in front of the hospital. And imagine what, the doctors and nurses are going to come up, pull up their sleeves and they are going to bring the magnetic resonance to the fifth floor emergency room 5 in the hospital. Logically, no. So the delivered at place unloaded means that seller responsibilize themselves for the delivery to the final, final, final place like of the delivery as the emergency room. Many times, sometimes they need to modify the door or they need to bring some special lift because the product is going to go in through the window, et cetera. So there can be some construction enhancements necessary in order to deliver the place -- deliver it to the final place and the seller will say, I know the product best. I know how to manipulate it, and I am in charge of delivering it to the final place. So if you are shipping these kinds of products, delivered at place is a new Incoterm first introduced in the 2020 edition. And we are very happy with it as Expeditors because we do quite a lot of these product cargo logistics. So delivered at place unloaded. The last one from the perspective of the Incoterms that can be used for all mode of transportation is DDP. Obviously, I would say that from the seller's perspective, it's the highest level of obligation. And for the buyer, very popular Incoterm, I would say, but also not without a risk, not without the risk. So the seller must contract the carriage all the way to the buyer and pay any duty due at the destination. If we talk about Amazon model or any kind of online shopping, it's very popular Incoterm because the only thing that I need to do from the position of buyer is be at home, have a big smile ready and be able to open the door because I don't have to do anything, just be at home and wait. So if we think about Amazon, that's very popular. Now this has become a little bit less smooth since Brexit as we need to worry about possible duty or VAT being levied on our orders. But let's go away from the online shopping. And this Incoterm can be very tricky for sellers for several reasons. So seller must arrange customs clearance at the destination, including payment of any duty, similar to ex works, but contrary good ready, right? So this may represent problems at the destination country because sometimes the destination country will require the person clearing the goods to be registered with customs authorities, so-called importer of record. And if the seller doesn't have a presence in the destination country, this precludes them from arranging this. So the seller would like to, but they cannot do it technically. And it may also represent problems relating to possible VAT or its equivalence because if the seller is not registered for VAT in the destination country, they will not be able to reclaim it, whereas the buyer is probably required and can reclaim it locally. So it's really important to clarify that this excludes VAT or its equivalent. The customs seller clears for export and transit and import clearance, pays for that and any duties. But it may also upset the seller and impact the relationship with the seller because we can issue an invoice to our customer for the transport cost as soon as the goods depart. But we may then get additional invoice for the destination customs duty in a few weeks later, and we will be issuing another invoice. So the customer is saying, oh, you are charging me twice, and it's not true. The other additional issue can be with the fluctuation in rates of exchange. So the expected duty cost and the actual duty cost can be very different. So I would say with this one, be careful because if you are not able to clear the goods and you do not have the representation in the destination country, the DDP is not an Incoterm to be used, okay? Okay. I have 28 minutes left. I'm just checking quickly. So I already mentioned insurance. I just want to show you that as we say good things or bad things happen to good people, bad things happen to good cargo as well. So what happened here? Normally, you would say it's very less likely probable that this would happen, but what happened? Yes, you can see that half of the terminal actually, the loading terminal broke and everything that has been underneath has been destroyed. So I think that the only lucky person here was the yacht owner because the yacht was far away from not being destroyed. And with that said, let me transition to actually the last 4 Incoterms that we have for exclusively ocean and sea and inland waterways. So the first one I want to show you and discuss is FAS, free alongside the ship. The first one or the first comment that I want to say here is that this Incoterm is actually not possible and should not be used for containerized freight. So this Incoterm should be used for noncontainerizable freight like huge turbines or oversized cargo or liquids or anything that actually cannot be put into the container and is being located in the container yard until it's being loaded on the vessel. The seller is carrying all the risk until the goods are alongside the ship, meaning ready, located, sleeping and sitting on the floor in the container yard, ready to be loaded on the ship. A few tricky things. If you say, well, we like FAS, and we would like to use FAS, but we have containerized goods. I would say, don't go for FAS, but go for FCA, the second one. FCA with the delivery to the named place in origin. Seller arranges local transport alongside the vessel and export clearance. Buyer is arranging the main carriage, including the loading on board and all the charges after that. Seller clears for export, buyer clears for import and any transit clearance related to customs. I've got here one picture to show you what are some typical examples for FAS. So you can see these huge cubes, pipelines. So this is a typical example, cargo example for FAS. And I have another one for you. Do you know which one is this one? Do you know what's actually loaded on the truck? Is it recognizable? Let me check. Yes, it's a windmill -- wind blade. It's a wind blade traveling to -- from the central of Spain to the port in Valencia. Yes. Great. So the next one is very popular among customers. And I need to say that FOB is probably one of the most misused Incoterms. Most people believe it means that seller pays all the cost until the item is loaded on board, the main carriage and the seller pays everything after that. That is essentially true. But the problem arises with the risk transfer. Seller is required to deliver the goods on board the vessel. And for containerized freight, the vessel does not control when the freight goes on board. So if your freight is going to stock in the container yard for several days or weeks, it's still on the seller side. If the parties are unable to deliver the goods across the ship rail on the actual vessel, then FOB is not valid, and we would recommend FCA again to be used instead of FOB. The seller clears the goods for export and the buyer must arrange all the transport and import clearance, okay? So FOB. One more note. I have seen here many times, I want FOB for air. I have already mentioned it. Based on what you can see here, FOB for air is a nonsense. FOB for air does not exist. For International Chamber of Commerce, FOB for air is a myth. And I don't know how many times a month we actually see I want FOB for air. So FOB for air, the best equivalent FOB for air would be actually FCA, FCA in the named place in origin. The last 2 that I have got here is CFR. Similar to CPT and CIP, you can see for CFR, there are different places where the trends suffer actually or where the responsibility is transferred from the seller to the buyer. So this Incoterm also requires the shipper to deliver the goods on board the vessel. And the risk transfers again when the goods are placed on board the vessel. So for containerized goods, we usually say that instead of CFR, use the CPT. And in terms of CFR, the seller contracts the carriage up to the named place or port of destination, but the risk has passed on to the buyer at the point of loading on the main carriage in the origin. So there is no insurance included in CFR. So therefore, I would actually recommend the buyer to contract their own insurance. Would you guess what are the actually most dangerous moments in the movement of the shipment. What are the most dangerous moments when something can happen to your freight? Correct, Alba, loading and unloading and main carriage especially for ocean, especially for ocean. So there are thousands and thousands of containers that actually every year end up on the bottom of the Pacific and Atlantic oceans. Something I have heard, it's about 8,000 containers a year that gets lost during the transportation just because the -- the sea can get super wild. The waves can get really wild. If you want to see what it actually looks like, go on YouTube, put shipping line on an open sea during a thunderstorm, and you will see some super interesting videos of what it actually looks like. So it's not the sea in the Mediterranean when you go for holiday. There are sometimes waves 10, 15 meters high and the containers fall into the sea like the pieces of LEGO. So it's very important that especially for ocean, you secure your cargo. And with that said, I have the last one for you, which is actually the same as CFR, but with insurance included. Here, I would repeat myself saying everything with actually CFR with the fact that with CIF, the seller is obliged to purchase insurance on behalf of the buyer, but only based on cargo clause C. So here, we are talking with CIF, the minimum insurance, the minimum insurance that does not cover the act of God, does not cover the malicious damage, does not cover the wash overboard. So again, if you would like to be sure that, first of all, that you want to use CIF, I would recommend to purchase additional insurance or go for CFR and purchase your own insurance. Before we wrap up and go, I just want to highlight one important thing. Sometimes customers come and say, "Hey Zuzana, there is some insurance that is already included in the international terms and conditions." And I currently do not have any document here. I do not have here any bill of lading or airway bill. But if you do have a bill of lading or airway bill on your desk in front of you, first of all, I think it was Paragraph 4 that actually says that anything that is linked to insurance is based on chargeable weight. So I think it was Paragraph 4 or 8. The second thing, if somebody will be telling you, and I've come across it because sometimes people say, well, we have heard from your competitors that there are some international logistics terms and conditions and insurance is included. Please, I am not saying that it's not true, but there is a huge but, and you should know the but. For ocean, it's Paragraph 22 and 23 on the bill of lading, if I remember well. You will need to take the loop because it's on the front part of the bill of lading, and it's usually the tiny letters that nobody reads until something happens. And the Paragraph 22 is called limitations of liability. And the limitations of liability will tell you, we are going to pay you the maximum USD 500 per customary shipping unit or a per customary freight unit depending if you are shipping or using COGSA, Hague or Hague-Visby convention for moving your freight. If something will happen, the maximum amount is $500 per customary shipping unit. If you are sitting at your desk and you know that this container is full of LCD screens of the value of EUR 400,000, if somebody will tell you, we pay you $500, you will just go to your nearest grocery store to buy a packet of handkerchief because you will be crying and crying and crying, right? The other thing is that Paragraph 23 on the bill of lading is saying that there are limitations of liability. And the limitations of liability will say that if something will happen without the actual conduct of the conductor of the shipping line or something happened based on the act of God, they are not going to give you any $500. So you will not even have money to buy the handkerchief. So if somebody is telling you that there is insurance included, be careful what they are telling you, right? Because if it's malicious damage, if it's wash overboard, if it's theft, nobody will give you even the $500. And I think that we all agree that $500 is a funny amount considering many times the amount that is actually loaded inside the container. So do not let yourself trick. I'm also telling people here when we are training them for insurance, it's not about pushing insurance. Expeditors is not an insurance company. But I always tell our agents, please tell your customers what is at risk and then let the customer decide because there is nothing more sad for me saying or having unhappy customers saying, I wish I have bought insurance if you would have told me, I would really prefer that we actually tell the customer, hey, your value is X, Y, Z. The insurance will cost A, B, C and then let the customer decide rather than customer saying, why didn't you tell me? Or why didn't you advise me? Why didn't you recommend me? So for air, we are already talking about $500 per customary shipping unit. For air, if you are taking a look at the airway bill, on the airway bill, it's normally the first paragraph just right under the title of the airway bill. And currently, it's 21 SDR per kilo. Have you heard what it is SDR? SDR, I'm sure that you have heard about Bitcoin. And I'm normally saying that SDR is like a grandfather of Bitcoin. It's artificial currency. And if you go to your country's National Bank, Czech National Bank, Spanish National Bank, Belgium National Bank and you go and find the exchange rates for today, there will be one exchange rate that is called SDR. Thank you, Pablo. It's special drawing right, special drawing right, is the average of the 5 world's strongest currencies, and it protects the seller and the buyer from huge fluctuation in between the exchange rates because if you are only running business in dollars and then something happens. Donald Trump will win elections or Donald Trump will lose elections. It can have a huge impact on the business, and it can have an impact on the exchange rate. So if you do not want to lose trousers on the exchange rate, the SDR is the average of British pound, European Union euro, Australian dollar, Japanese yen, Chinese [ drachma ] and Canadian dollar so that if one currency suddenly goes up or down, there are still the other currencies to average it. So the difference would be like a smaller variation, but not going upside down, right, so that you would be really suffering from the exchange rate. So what is what I would really like you to take away from this session. Currently, the applicable version is 2020. We can still use 2010 or older one if we actually state properly the version. Choose the Incoterm that is valid and that is used correctly. So no FOB for air. And funny enough, recently, I have also seen ex works loading included. And I said, do not invent your own Incoterms because ex works loaded does not exist. I know what you want, but it doesn't exist. Be explicitly precise on the place of loading. So I am normally recommending that FCA Madrid 2020 is nice, but it's not specific enough. Because if the truck will have an incident anywhere in the territory of Madrid, but it will not come to my warehouse, we will then have a clash between seller and the buyer because the buyer will say, oh, but it has not come to my facility and the seller will say, but it was in Madrid, what do you want? Do not -- if you can remove all these possible clashes in between the seller and the buyer, and I say the best is if you have the specific address, write the specific address. I live in Madrid. If you go for Spain for holiday, you know that the most popular Spanish grocery shop, Mercadona, we have 3 in our neighborhood. If I say Mercadona, Madrid Coronales, they still have 3 options where to go. So if they will bring the pallet with bananas to Mercadona 1, but I will be expecting these bananas in Mercadona # 2, I will probably have a bunch of customers who will remain without bananas or more. I will need to arrange some additional transport that will take the pallet from Mercadona 1 to Mercadona 2. Obviously, I will need to pay for this additional invoice. I will -- somebody will need to load it. Somebody will need to unload it, something increased risk. So please state the place in origin or place in destination or port as clearly as possible. So final game till the end for those of you who actually survived with me till the end. So I'll show you a series of pictures, and you just let me know, I'll be watching the chatbox. So tell me, a ship runs around from China to Los Angeles and the buyer and the seller has agreed on free alongside the ship. Who is responsible for any damage that occurs? Is it the seller or the buyer who is responsible? Perfect. It's the buyer the buyer, wonderful. The next one, here, you can see a picture of what it looks like when the ship goes through actually the stormy weather. So the freight began to fall off the vessel and was damaged at the port of destination. Who is responsible if the CIF terms were agreed upon. CIF. It was too quick. CIF. Is it the seller or the buyer? Wonderful, Melanie. We are talking about the risk. So the seller needs to deliver it there, but the risk is transferred in origin. So if something happens in the port of destination, it's the buyer's responsibility because the buyer is responsible for the risk. Great. This one, it was the first Incoterm where we started. So while loading and unloading the goods at sellers' premises, there was an accident. The agreed terms were ex works, who is responsible for the damages? Excellent. Excellent. I know that it's ridiculous. I know that it's ridiculous. It depends -- it happens in origin, but everything that is linked to loading under ex works is buyer's responsibility. So it's the buyer. Well done. The next one, we are using the Incoterm DPU delivered at place unloaded. Remember, this is the one I told you, hospital equipment. Goods were delivered to Frankfurt by air and the truck crashed on the way to the delivery address. If delivered at place unloaded was used, what were the terms? Who is responsible for the damage? Is it the seller or the buyer? Excellent. Excellent. It's the seller. Seller was supposed to deliver to the final place and it was not delivered. So obviously, seller. Here, this case, a very interesting case. On the way to the JCP warehouse, the delivery truck crashed. If we were following the delivered at place, who would be responsible for the damage? Is it the seller or the buyer? Perfect. Perfect. It's the seller. Here, do you know what happened? We actually had to do a very profound investigation and what happened here because nobody understood why the truck got on fire. And the carrier, the truck owner, they actually wanted to save money for maintenance for the wheels, for the tires. And they have purchased -- you know the trucks, they are usually having 2 tires. The tires are going in pairs. So what they did is that they bought slightly different size, and it happened that the trucks -- the tires started to move in a slightly different frequency. What does it do to the rubber? The rubber started warming up. And actually, everything got on fire. Everything got on fire. So the next one -- my question here is who is actually the responsible party because this container was sucked into a jet engine on the shipment that was headed to London and the agreed term was DDP. Who is responsible? Seller is the correct answer. Who is the biggest loser? Who is the biggest loser here? Correct. I think that Delta is the one who was crying most. The next one, there was an explosion on the way to Norfolk Vancouver from Lisbon. The agreed terms were FOB, who is responsible. The ship was already sailing. Is it the seller or the buyer? Correct. The fire is the correct answer. These cases are usually extremely ridiculous because people normally don't think even how difficult is to put down a fire on the boat. It's a paradox because you have water all around the ship, but getting the water quickly on board is not easy. And there was an investigation. We have had some customers freight on this ship as well. And this happened due to some incorrectly declared goods in the container. So something that was not supposed to go on the main deck, something that was not supposed to be exposed to the rain and to the sunshine and it just got on fire. And Kathleen says, be afraid of fire, not of water. Yes, true. Good point. So, the next picture, a plane crashed up in Dublin -- London from Dallas, damaging the freight inside. The agreed terms were CPT, who is responsible? CPT was, again, wonderful Melanie, the Incoterm where the responsibility is being transferred at different places. And at the moment when the plane -- when the goods is loaded on the main transport, the responsibility is on the buyer side. Correct, the buyer. The risk is for buyer. You're right, Patrick. The seller pays for it but the buyer is having -- carrying the risk. And the last picture, and I'm just right on time. So this was an issue for the MCA about things in the Indian Ocean on the way to Jeddah and the agreed terms were FCA. So who is actually responsibility? Is it the buyer or the seller? FCA, it was one of the first -- it was the second Incoterm that we spoke after ex works, where there was still a lot of buyer responsibility and limited amount of seller responsibility. So correct. Correct. Correct. So in this case, at the moment when the freight is either loaded on the first transport on the pre-carriage or when it comes to the named place in destination, the responsibility is on the buyer side. So team, thank you very much. It was my pleasure. I think I have seen some questions. I have not even had time to read them, but I will because Steve is going to extract the questions from the chatbox for me, and I will respond within the next -- within the week from today, I promise. What we are able to share with you is that we are going to share with you this handout so that you can actually have it at hand somewhere in the drawer. And Steve, I think that's all for me. So the final word is on your side. Thank you very much.

Thank you, everyone, for joining. So as I said, I will take a note of all the questions. Follow-up mail will come, a little survey as well, so to get your feedback. And thank you. Thank you, everyone, for joining.