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International trade terms: Incoterm

Time:2018-01-06 Views:5913

Incoterms is a series terms for international trade. It defines the responsibility of the goods and cost to the buyer and seller. Then it’s clear, by which terms who pays for what items. So it’s fair and clear for foreign sales.
Please check the pictures of the terms as below:

In fact, the most popular terms are EXW, FOB, FCA, CIF and DDP. We will analyze the difference to each.
EXW: goods handed over to buyer at the factory. So buyer will pay for all shipping cost.
FOB: EXW+ Origin port charges. Origin port charges includes transportation from factory to the costal port, and the customs application related charges.
FCA: EXW+ transportation to coastal warehouse. It doesn’t include the port related charge. For LCL, no standard charge list for port charges.
CIF: FOB+ sea freight + insurance fee.  Sea freight means from the origin port to destination port.  Buyer will pay for the destination port related charges, for FCL, there is standard charge list.
DDP: CIF+ to door charges. Seller send the goods to buyer’s door place. Including the destination port charges, customs clearance, duty, and transportation from port to door.

In a word. If it’s CIF for LCL shipment, we need to make clear of the destination charge, for it’s messed for LCL(not full container) shipment. Many other fees are there, so have to make clear before shipment.  For FCL(full container), it’s simple because there is standard charge list. That is to say, for FCL shipment, all terms are simple. For LCL shipment, best terms is EXW, FCA, DDP.

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