Incoterms (International Commercial Terms)
Incoterms are terms of trade created by the International Chamber of Commerce (ICC) related to all foreign trading contracts. They outlay the responsibilities of the trade between the buyer and the seller.
Following is a list of the most common Incoterms with a summary of the seller/buyer obligations.
Change Freight Forwarding is able to recommend, which method would be best to use, according to your particular needs.
EX Works may be the easiest method for the seller to administer and may minimize any possible risk.
Put simply, Ex works means the seller delivers the goods after the cargo has been delivered to his premises.
- Seller obligations:
- - The seller fulfills all obligations to deliver the goods after the goods have been made available at his premises. This might be a warehouse or factory, for example.
- Buyer obligations:
- - The buyer is responsible for all charges (such as, customs duties, clearance and taxes, port of charges, freight charges, insurance, unloading, inland freight after reaching the destination port and all other costs and risks within the buyer’s country, etc.)
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This an Incoterm for marine transport only.
Free on Board means, cost and risk are divided at the ship's rail.
This means that once the goods pass the ship's rail, the responsibility becomes the buyer's.
If the goods, for example, were damaged before passing the ship's rail, the responsibility would be the seller's.
- Seller obligations:
- - The seller clears the cargo for export.
- - The seller is responsible for loading the cargo, onto the buyer’s nominated ship.
- - The seller is responsible for delivering the cargo to the destination port.
- - The seller is responsible for all costs and risks before the cargo passes the ship’s rail.
- Buyer obligations:
- - The buyer is responsible for all costs and risks after the cargo passes the ship’s rail (such as, customs duties and taxes, customs clearance in the buyer’s country, freight charges, insurance, offloading and port charges, other costs after the cargo has been offloaded, etc.)
This is another Incoterm for marine transport only.
In CFR, the seller is responsible for delivering the cargo.
- Seller obligations:
- - The seller is responsible for any costs and freight necessary to deliver the cargo to the chosen destination port. (This also includes costs for delivery to the port of origin.)
- Buyer obligations:
- - The buyer is responsible for insurance.
- - The buyer’s responsible for customs clearance, customs duties and taxes, and inland freight in the buyer’s country.
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This method is the same as CFR, except the seller pays for insurance.
This Incoterm is for marine transport only.
- Seller obligations:
- - The seller is responsible for insurance.
- - The seller is responsible for any costs and freight necessary to deliver the cargo to the chosen destination port. (This also includes costs for delivery to the port of origin.)
- Buyer obligations:
- - The buyer’s responsible for customs clearance, customs duties and taxes, and inland freight in the buyer’s country.
Under this term, the seller delivers the cargo to an agreed and named destination place under a contract of sale.
- Seller obligations:
- - All costs are the responsibility of the seller, until the cargo reaches the place of destination.
- Buyer obligations:
- - Customs duties in the buyer’s country.
- - All costs and risks after the cargo reaches the place of destination (eg. unloading, inland freight, etc).
- - The seller is able to bear these costs and risks, if this has been agreed upon and set out within the contract of sale.
This term is the same as DDU however the seller pays the customs duty. It’s similar to a door-to-door service, because the seller takes care of everything until the cargo is received by the buyer.
- Seller obligations:
- - All costs are the responsibility of the seller, until the cargo reaches the place of destination.
- - Customs duties in the buyer’s country.
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