Incoterms

International Commercial Terms, often referred to as Incoterms, are standard trade terms which are internationally recognised between a buyer and seller. The purpose of Incoterms are to be used typically for the delivery of goods and to make clear the responsibilities of the buyer and seller at each stage of the shipping process. By using Incoterms it can alleviate any risk of misunderstanding between the buyer and seller.

We would always recommend that you consider the country you are purchasing the goods from, before deciding on the Incoterms to be used. The reason for this being that some countries stipulate the Incoterms to be used and this can be as standard practice. You should always consider the mode of transport being used to deliver the goods, as some Incoterms can be used for sea freight transport only.

Ex-Works

Ex-Works (EXW) means that the seller reduces the risk, by making the goods available at their warehouse. The buyer is then responsible for the loading of the goods and paying the transport, customs clearance and insurance.

Free On Board (FOB)

Free On Board, often referred to as FOB – means that the seller of the goods must be responsible for the arragement and payment of delivering the goods to the freight forwarder or carrier. The risk to the seller will end, once the goods are successfully delivered to the nominated freight agent or transport company. The buyer then takes responsibility of paying the main freight or transport charges from warehouse to the buyer’s premises.

Cost & Freight (CFR) Cost, Insurance & Freight (CIF)

Both CFR and COF Incoterms mean that the seller is responsible for arranging and paying the main freight or transport to the named port of destination. The only difference in the Incoterms being the insurance part, whereby the party that takes responsibility of the insurance of the goods does so once the goods have been successfully delivered/received at the named port/warehouse. When Incoterm CFR is used, the buyer arranges insurance of the goods, whereby under CIF Incoterm the seller arranges the insurance.

If you are unsure as to which Incoterms you should be using for your freight shipment, please feel free to contact us for more information.