Incoterms, or international commercial terms, are a standardized set of rules that govern the rights and responsibilities of buyers and sellers in international transactions. These rules define key aspects of the transaction, such as who is responsible for shipping, insurance, and customs clearance, and at what point the risk of loss or damage to the goods passes from the seller to the buyer. We as freight forwarders try working closely with you to determine the appropriate incoterm for each transaction you step into, in this way we would have minimized risks and ensured that your goods are delivered on time and in good condition. 

Guide to Incoterms

Exworks (EXW)

Let’s begin with the most common type of Incoterm, EXW OR Ex Works. Under the EXW incoterm, the seller's obligation under EXW is limited to making the goods available at a specified location, and the buyer is responsible for arranging and paying for all aspects of the transportation, including shipping, insurance, customs clearance, and any other fees or charges incurred during the transport of the goods. Buyers who are new to international trade or who lack the necessary resources, the risks and costs associated with the transportation process can quickly add up, making other incoterms, such as FOB (Free on Board) or CIF (Cost, Insurance, and Freight), more appropriate.

Free on Board (FOB)

FOB is commonly used for goods transported by sea or inland waterway. Under FOB, the seller is responsible for delivering the goods to a specified port of shipment and loading them onto the shipping vessel. Once the goods are loaded onto the vessel, the risk of loss or damage to the goods passes from the seller to the buyer. This means that the buyer is responsible for arranging and paying for the transportation of the goods from the port of shipment to the final destination, as well as for any associated costs and risks, such as insurance and customs clearance.

Cost, insurance, and freight (CIF)

CIF is commonly used for goods transported by sea, and it can be an attractive option for buyers who want to minimize their risk and simplify the process of importing goods. It's important to note that under CIF, the seller is only responsible for obtaining marine insurance, which may not cover all risks associated with the transportation of the goods. As a result, buyers may want to consider purchasing additional insurance to ensure that their goods are adequately protected.

Deliver at Place (DAP) and Delivery at Frontier (DAF)

When it comes to DAP, the seller is responsible for delivering the goods to a specified place, such as the buyer's warehouse or factory. The buyer is responsible for unloading the goods and for any costs and risks associated with the transportation of the goods from that point to the final destination. DAF on the other hand is suitable for road freight. Here,  the seller is responsible for delivering the goods to a specified border crossing, such as a customs checkpoint or border post, and for clearing the goods for export.

On a final note…

 

Knowing about Incoterms is certainly a crucial factor in addressing the suitable  navigation for your business. However, the importance of freight forwarders in helping businesses navigate the complexities of international trade cannot be overstated. By working with a reputable freight forwarder, businesses can ensure that their goods are transported safely and efficiently, and that all necessary customs and insurance requirements are met. Request your quote now and let our journey begin!