Who has not already lost 50% of its hair mass trying to understand how the Incoterms work? (As a reminder lying is wrong …)
Incoterms or the definition of a real headache. Picture of me there a few years back.
Because we love to help people and make this world a better place. Yes, just that! Here is a post, a summary of Incoterms, just for you ladies and gentlemen. Ready?
Definition of Incoterms in 4 points :
1 / Incoterms define the responsibilities and obligations of a seller and a buyer for goods leaving the factory arriving to the customer”s place. This is a brief breakdown of transport costs.
2 / Incoterms determine where is the risk’s transfer = place of delivery of the goods by the seller. This place defines who bears the risk in case of transportation problem.
3 / Incoterms define the obligations for the seller upon delivery, in terms of time.
4 / Incoterms also show what the seller or the buyer must provide in terms of documents and information. Extremely important especially for the safety of property.
Summary of Incoterms – The following ” ” for the 4 most important –
- Incoterms used for all modes of transport
EXW: Ex Works, The seller makes the goods available at the factory. The buyer is responsible for uploading. This term places the maximum obligation on the buyer and minimum obligations on the seller. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination.
FCA: Free Carrier, The seller delivers goods, cleared for export, to the buyer-designated carrier at a named location. The seller must load goods onto the buyer”s carrier.
CPT: Carriage Paid To, The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier at place of shipment in the country of export.
CIP: Carriage and Insurance Paid to, same CPT with insurance transported goods purchased by the seller on behalf of the buyer.
DAT Delivered At Terminal, goods delivered on the quay in a sea, river, air, road or rail designated terminal.
DAP: Delivered At Place, goods not unloaded, made available to the buyer in the importing country to a place specified in the contract.
DDP: Delivered Duty Paid, goods not unloaded, delivered to final destination, customs clearance and import duties paid by the seller and the buyer only supports unloading. The seller”s obligation to deliver the goods to the buyers including clearance. The buyer then has to take possession of the goods.
These rules are also used for shipping and / or river in bulk and / or conventional.
- Incoterms used for modes of transportation by river and / or sea
FAS: Free Alongside Ship The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export.
FOB: Free On Board, The seller”s obligation is to make the goods on the ship at the port of shipment. The buyer must handle insurance, international transportation, customs clearance of the goods.
CFR: Cost and Freight, Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel.
CIF: Cost, Insurance and Freight loaded on the boat costs to port of destination, with the assurance transported goods purchased by the seller on behalf of the buyer. The seller is obliged to deliver the goods at the port of destination. Thus, all the work in terms of packaging, transportation, insurance, international logistics will be taken by the seller. The purchaser only has to clear the goods.
The table WHO PAYS WHAT
Breathe, it’s over! I hope this made it sompler and clearer, your hair is still on your head and you look at the world of trading as a world full of possibilities and opportunities.
In a future post, I”ll explain the importance of the HS code & how to use it.
Stay tuned folks!
Your one and only NOMAD POWER TEAM