20/01/2024
What is the term "INCO"?
Incoterms
What are Incoterms?
"Incoterms" is a set of international rules formulated by the International Chamber of Commerce for international trade business transactions, which determines the responsibilities and expenses that buyers and sellers should bear.
This article will continue to talk to you about the topic of "Incoterms" from the following two aspects;
outline
What are the international trade terms?
Detailed explanation of Incoterms fees and responsibilities?
What are the international trade terms?
There are 11 types of Incoterms.
11 of them are further divided into two categories;
One type is applicable to any mode of transportation and is used when the goods are not handed over on board or alongside the ship.
EXW
FCA
CPT
CIP
DAP
DPU
DDP
One type is suitable for maritime transportation and is designed for goods placed on the ship, beside the ship or in the port.
FAS
FOB
CFR
CIF
Ex Works (EXW) is ex-factory
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears "None" costs. The buyer is responsible for "insurance fee + trailer fee or interior decoration fee + customs declaration fee + port miscellaneous fees + ocean freight + customs clearance fee + tariff + delivery fee" (including additional fees that may be incurred).
Ps: The seller bears controllable costs, and the buyer bears all costs.
In terms of division of responsibilities, the seller is only responsible for delivering the goods to the buyer or the buyer's carrier. The buyer's responsibility is the seller's full responsibility after delivering the goods.
Ps: The seller’s responsibility is controllable, but the buyer’s responsibility is heavy.
To sum up, the seller only needs to produce the goods and deliver them to the buyer or the buyer’s carrier in his own factory! All costs and responsibilities are borne by the buyer.
Regarding the EXW trade terms, I don’t know if you are still reporting them to the buyer. If so, I suggest you read the following article;
【Yibing original】Thousands of reimbursements are guaranteed, but don’t reimburse EXW!
Free Carrier (FCA)
Buyer and seller fees and responsibilities;
In this clause, the seller delivers the goods either at its own factory or at other locations, such as the buyer's carrier's warehouse.
If the goods are delivered at the buyer's factory, in terms of transportation, the seller bears "none" costs, and the buyer bears "insurance fee + trailer fee or interior loading fee + customs declaration fee + port miscellaneous fees + sea freight + customs clearance fee + tariff + delivery fee ” (including additional costs that may be incurred).
Ps: The seller’s responsibility is controllable, but the buyer’s responsibility is heavy.
If it is delivered at the buyer's carrier's warehouse, then the seller needs to bear the "inland charges + warehouse charges" for delivery from the factory to the warehouse, and the buyer bears "insurance + customs declaration fees + port miscellaneous fees + sea freight + customs clearance fees + tariffs" + Delivery Charges" (including additional charges that may be incurred)".
Ps: The seller bears controllable costs, and the buyer bears all costs after receiving the goods.
To sum up, the seller only needs to produce the goods and deliver them in his own factory or to the buyer or the buyer's carrier! The buyer bears the greatest cost and responsibility.
Carriage paid To (CPT) means freight is paid to...the designated destination.
Buyer and seller fees and responsibilities;
In this clause, the seller's costs and responsibilities are roughly the same as those in (FCA trade terms). The difference is where the final delivery place is. The final delivery place also determines the costs and responsibilities that the seller needs to pay. Once Responsibility for delivery to the buyer or buyer's carrier then passes.
To sum up, the seller and the buyer agree on the final delivery place of the goods. The seller's freight and responsibility will end at that final delivery place, and the rest belongs to the buyer.
Carriage and Insurance Paid To (CIP) means freight and insurance premiums are paid to the designated destination.
Buyer and seller fees and responsibilities;
In this clause, the seller bears the costs and responsibilities in much the same way as (FCA trade terms). In addition to bearing the freight at the destination, the seller also needs to bear the insurance premium. Final delivery is the responsibility of the buyer at all risk and expense.
To sum up, the seller and the buyer agree on the final delivery place of the goods. The freight + insurance and liability that the seller needs to pay only ends at that final delivery place. The rest belongs to the buyer.
Delivered at Place (DAP) means delivery at destination
Buyer and seller fees and responsibilities;
The meaning of "delivery at destination" is very general. The specific meaning depends on the final delivery location negotiated between the seller and the buyer.
If the delivery place is at the buyer's factory, the costs and responsibilities borne by the buyer can refer to the "EXW or FCA" trade terms, and the rest is the buyer's.
If the place of delivery is at the port of export, the costs and responsibilities borne by the buyer can refer to the "FOB" trade terms, and the rest is the buyer's.
If the delivery place is at the warehouse at the buyer's address, the costs and responsibilities borne by the buyer can refer to the "DDP" trade terms, and the rest is the buyer's.
Delivered at Place Unloaded (DDU) means delivery at the port of destination with no duty paid.
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears the cost of "trailer fee or interior loading fee + customs declaration fee + port miscellaneous fee + insurance fee + ocean freight + customs clearance fee + delivery fee" (including additional possible costs). Buyer bears "duties".
Ps: In this clause, except for customs duties, all costs and responsibilities are borne by the seller.
In total, the seller bears the most expenses and the greatest responsibility.
Delivered Duty Paid (DDP) means delivery after duty paid at destination
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears the cost of "trailer fee or interior loading fee + customs declaration fee + port miscellaneous fee + insurance fee + ocean freight + customs clearance fee + delivery fee" (including additional possible costs). Buyer assumes "None".
Ps: In this clause, all costs and responsibilities are borne by the seller.
In total, the seller bears the most expenses and the greatest responsibility.
Free Alongside Ship (FAS)
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears the cost of "trailer fee or interior loading fee + customs declaration fee + port miscellaneous fees" from the factory to the port where the ship is located designated by the buyer. The buyer is responsible for "insurance + sea freight + customs clearance fee + tariff + delivery fee" (including additional possible costs).
Ps: The seller bears less costs, but there may be additional costs, and the buyer bears more costs.
In terms of division of responsibilities, the seller's responsibility is completed when the goods are delivered to the port where the buyer's designated ship is located, and the buyer is responsible for the remaining responsibilities.
Ps: The seller’s responsibility is controllable, but the buyer’s responsibility is heavy.
To sum up, the seller's responsibility and expenses for delivering the goods to the port where the buyer's designated ship is located are considered completed, and the remaining responsibilities and expenses are transferred to the buyer.
Free on Board (FOB) means delivery on board
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears the cost of "trailer fee or interior loading fee + customs declaration fee + port miscellaneous fees". The buyer is responsible for "insurance + sea freight + customs clearance fee + tariff + delivery fee" (including additional possible costs).
Ps: Sellers bear less costs, but there may also be additional costs. Buyers bear more costs. According to the current market, there is still some increase in sea freight.
In terms of division of responsibilities, the seller is responsible for delivering the goods to the buyer or the ship ordered by the buyer's carrier. Buyer's responsibility means that after the seller delivers the goods to the ship, the rest is the buyer's responsibility.
Ps: The seller’s responsibility is controllable, but the buyer’s responsibility is heavy.
What it boils down to is that the seller delivers the goods on board and the responsibility and costs are transferred to the buyer.
Cost and Freight (CFR) is cost + freight
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears the cost of "trailer fee or interior loading fee + customs declaration fee + port miscellaneous fees + sea freight". The buyer is responsible for "insurance + customs clearance fee + tariff + delivery fee" (including additional possible costs).
Ps: From the perspective of costs and responsibilities, the seller and buyer should be evenly matched. The costs of both parties may incur additional costs.
To sum up, the seller delivers the goods to the port agreed with the buyer, that is, the responsibility and costs are transferred to the buyer.
Cost, Insurance and Freight (CIF) is cost + insurance + freight
Buyer and seller fees and responsibilities;
In terms of transportation, the seller bears the cost of "trailer fee or interior loading fee + customs declaration fee + port miscellaneous fees + sea freight + insurance premium". The buyer is responsible for the "customs clearance fee + tariff + delivery fee" (including additional possible fees).
Ps: In this clause, CIF is the same as CFR, except that the insurance premium is transferred to the seller.
To sum up, the seller delivers the goods to the port agreed with the buyer and then buys insurance, that is, the responsibility and expenses are transferred to the buyer.
