Incoterms are internationally recognised 3-letter terms
applied to export goods.
They make it clear what a buyer and seller’s responsibilities are.
It’s really important to get familiar with them
so you’re clear about what you’re signing up for.
They cover elements of a contract such as where the goods will be delivered
who will arrange transport, or who will handle and pay for insurance.
There are 11 incoterms in total.
7 cover all forms of transport
and 4 are for ocean freight.
So let’s look at some commonly used ones.
Ex Works (EXW)
This applies to all forms of transport
and basically means the buyer arranges and pays for it.
Delivered at Place Unloaded (DPU)
This applies to all forms of transport and means that the seller will arrange
the shipment and delivery of goods to the buyer
including how the goods are unloaded.
But the customs clearance will be completed by the buyer.
Finally, let’s look at cost and freight (CFR)
This applies to ocean freight and means the seller will have to pay the costs
and freight to bring the goods to the overseas destination.
The buyer will then pay the onward costs and associated risk from there.
There are pros and cons to each incoterm
including pros like being in control of the transport process
to ensure a high level of care is taken.
to cons, like having to deal with customs checks and paperwork.
And there are
costs and risks associated with each one.