5 Most Commonly Used Incoterms in Import and Export

inco terms in tradeIncoterms means international Commercial Terms. The International Chambers of Commerce (ICC) publishes these terms and periodically updates them. These terms cover and define the responsibilities of the buyers and sellers to cover the transportation and other related charges. In addition, they also define the transfer of ownership at certain stage.

There are many incoterms and it is recommended that you familiarize yourself with them. You may not need all of them practically. However, a few of them are necessary to be understood. Knowledge and understanding of these mostly commonly used incoterms will help you understand the terms of sale and clear any confusion regarding the shipment and other related charges.

Read this guide Guide on Importing from China

FOB  (Free On Board )

This means that the goods remain in the possession of the seller. The seller is responsible to bear all costs until the goods are loaded to the ship on the port of the seller. Once the goods are loaded on to the ship, the sellers is no more responsible for any costs and liability of charges. The ownership of the goods at this stages transfers from the seller to the consignee.  If you are importing from China, this is the most common type of contract generally accepted by the suppliers i.e. exporters or sellers.

EXW (Ex Works)

EXW means Ex works. The seller makes the goods available at their place of work such as factory or warehouse. It is the buyer responsibility to arrange for the transportation of the goods from the seller’s place to the port and then onward shipment.

CFR  ( Cost and Freight)

This means that the seller is responsible for transporting the goods until the destination port. The seller bears all the charges of shipment until the goods arrive at the importer’s port. However, the seller is not responsible for any loss or damage, which occurs in transit.

CIF (Cost, Insurance and Freight)

This is similar to CFR. The difference is that the seller agrees to purchase insurance to cover for any loss or damage during transit.

DDP (Delivered Duty Paid)

This means that the seller is responsible for all the charges i.e. shipment, customs clearance, import duty and other taxes.

I am KK an eBay and Amazon expert, teacher and internet marketer. I offer advice on e-commerce, content marketing and guest posting.

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