What is Cross Trade?
Cross Trade, also known as Triangular Trade, Third Party Shipments, or Foreign-to-Foreign Shipments, is a transaction involving three parties in three different countries.
It refers to cargo that is transported by either road, rail, air or sea from an origin to a destination country. This is where the seller of the goods is not the manufacturer or exporter – like in drop shipping – but where up to three different countries may be involved. It’s mainly when the seller is not in the same country as where the goods originate from.
An example would be a Greek company that decides to ship products from Brazil to Spain.
What are the Benefits of Cross Trade?
Although it might sound complicated, there are many benefits to cross trade:
- Lower Supply Chain Costs
Cross trade eliminates bringing the goods to the seller’s country or location and all associated costs with it such as freight, duties, and taxes.
- Shorter Transit Time
Cross trade can cut down the time of travel, allowing greater cost savings
- Supply Chain Efficiency
Cross trade decentralizes the supply chain by placing production and stock closer to the final destination.
Consider the Following for Your Cross Trade Shipments
Incoterms are essential in international contracts. They tell the parties involved what to do with respect to the carriage of the goods from the seller to the buyer, in addition to explaining the division of costs and risks between the parties.
- Commercial and Shipping Documents:
International shipping transactions require proper commercial documents for customs clearance. These include a Commercial Invoice and other documents such as Certificates of Origin and Health Certificates.
- Trade Agreements
Remember to check the trade agreement between the origin and destination country to find out if you need any specific documents.
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