Incoterms : Shipping Guide Every Trader Must Know

As a trader or a person working in trade, you’re definitely familiar with Incoterms. Since these terms are defined based on the procedure of purchase and transportation, we all have an understanding. But is this enough?

If you are engaged with foreign sale or purchase, you need to dive deep into the understanding of Incoterms. Incoterms are important in sales contract as they determine the responsibility and liability of shipment. How far the seller is responsible for the shipment and When and Where this responsibility is transferred to the buyer.

The major factors you have to be cautious of in each term are Cost and Risk. When we talk the liability, we are talking about the risk and cost. The place at which the liability is transferred is the point from there onward the buyer is responsible for any cost and risk of the shipment.

When we choose an Incoterms, we choose below items:

• How far along the shipment process we accept the Risk and Cost associated with the shipment?
• When and Where the Risk of the shipment will be transferred to the buyer?
• When and Where the buyer must accept the Cost of the shipment?

The main and frequently used terms are FOB(Free On Board) and EXW(Ex Work). But there are some other terms that might be useful. We will completely explain them in next posts under this category. In the rest of this post we have a few important notes you might find helpful.

Incoterms do not talk about:

• Payment term and ownership of the goods
• Contractual obligations and breach of contract
• Details of packing, stuffing, lashing and transporting of the goods
• …

You have to consider above and other important matters in your sale contract.

Incoterms List:

For Any Mode or Modes of Transport:

• EXW: Ex Work
• FCA: Free Carrier
• CPT: Carriage Paid To
• CIP: Carriage and Insurance Paid To
• DAT: Delivered at Terminal
• DAP: Delivered at Place
• DDP: Delivered Duty Paid

For Sea and Inland Waterway Transport:

• FAS: Free Alongside Ship
• FOB: Free On Board
• CFR: Cost and Freight
• CIF: Cost, Insurance and Freight

For any special question about the Incoterms please contact us or use our live chat at the right bottom of Shipup main pages. In order to find information about the publisher of Incoterms visit ICC(International Chamber of Commerce) website.