The Incoterms, or International Commercial Terms is a set of rules that outline the responsibilities and risks to be placed on the seller and receiver during an international trade process.
The diagram below will help you understand the responsibility between the seller and the buyer throughout the entire shipping process, from customs clearance and shipping insurance to exporting of courier services. Bear in mind that incoterms also has specific mode of transport that it covers and also Incoterms such as DDU is being replaced by a new term in compliance to INCOTERMS 2010.
Incoterms stated in the invoice is used for Customs Valuation Purposes. For importation into Malaysia, Cost Insurance and Freight (CIF) is being used.
Some customers may not have in depth knowledge of Incoterms or in certain situation the shipment is to be shipped by sea however due to urgency the mode of transportation is change at the last minute. FOB value is referred to by customs as the value agreed between buyer and seller as per item value stated in the invoice. This means that the value of Insurance and Freight has to be added in to determine the Customs Value.
There is a possibility of the above happening if the IATA TACT Rate value is higher than the stated freight value or the shipping cost stated is too low.
IATA TACT Rate is an annual shipping rates extracted from IATA TACT website to determine the shipping value based on the origin and weight of the shipment. This rate is agreed annually between Customs and the Express Companies in Malaysia in reference to the IATA TACT website. The rate table is updated at the back end of our DCE system and may only be shared to customers upon request.