What are Incoterms?

If your company is involved in import and export activities, understanding Incoterms is crucial for ensuring smooth international transactions.

Incoterms, short for International Commercial Terms, are standardized rules that regulate various aspects of international trade. These terms are crucial as they clearly define the allocation of risks, costs, and responsibilities between the buyer and the seller in a sales contract.

It's important to note that Incoterms are not mandatory rules but rather guidelines to facilitate a better understanding between the buyer and the seller.

Types of Maritime Incoterms

FAS - Free Alongside Ship

This term means the seller's responsibility ends when the goods are placed alongside the ship (e.g., on a quay or barge) specified by the buyer at the designated port of shipment. The risk of loss or damage transfers to the buyer once the goods are alongside the ship, and from this point, the buyer assumes all costs. Since Incoterms 2000, the responsibility for customs clearance has shifted from the buyer to the seller.

FOB – Free On Board

This term indicates that the seller’s responsibility ends when the goods are loaded onto the ship nominated by the buyer at the designated port of shipment. The risk of loss or damage transfers to the buyer once the goods are on board. The seller must handle all export formalities.

CFR – Cost and Freight

This term signifies that the seller’s responsibility ends when the goods are delivered on board the ship or purchased already on board. The risk transfers once the goods are on the ship. The seller must arrange and pay for the transport to the named port of destination. The CPT term is used for road, rail, or air transport.

CIF – Cost, Insurance, and Freight

This term means the seller delivers the goods on board the ship or buys the goods already on board. The risk transfers once the goods are on the ship. The seller must arrange and pay for the transport to the named port of destination and must also provide insurance against the buyer’s risk of loss or damage during transit. The seller is required to obtain minimum insurance coverage; if the buyer needs additional coverage, it must be expressly agreed with the seller or arranged separately by the buyer.

It is important to note that CIF requires the seller to prepare the goods for export, but the seller has no obligation to clear the goods for import, pay any import duties, or handle any customs duties.

Note on Maritime Transport

When discussing maritime transport, this includes all forms of water transport (maritime or inland, usually fluvial).

?? For more information, leave your comments and follow us. ??

#ImportExport #SupplyChain #asianbusiness #steel #business #sourcing #sourcingsolutions #InternationalTrade #CargoShipments #MaritimeIndustry #BusinessStrategy #InternationalTrade #ExportImport #GlobalBusiness #Logistics #China #TradeTerms