Incoterms are a series of international sales terms by the International Chamber of Commerce (ICC). It is widely used in international commercial transactions to define the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold in international transactions. 

With Incoterms, it allows trading across the globe to be straightforward and effortless. Overall, this will minimise international trade conflict and misunderstanding and disputes, also overcome uncertainty and diversities of interpretation.

Incoterms

Incoterms

Incoterms are mainly used to determine who (Buyer/ Seller) is responsible for:

  • Contract for carriage
  • Payment for freight
  • Arranging and paying the premiums for marine cargo insurance
  • Bearing the risk or loss to the goods while in transit.

There are 11 Incoterms to choose from during a transaction and the terms more commonly used are:

EXW – Ex Works (named place)

  • Seller makes the goods available at his premises.
  • Buyer is responsible for all charges

FOB – Free on Board (named loading port)

  • Seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship’s rail.
  • Maritime transport only.

FOB does not include the transportation of the goods – Certain clients would want to arrange using their own forwarder.

CIF – Cost, Insurance and Freight (named destination port)

  • Seller must pay the costs and freight to bring the goods to the port of destination.- Risk is transferred to the buyer once the goods have crossed the ship’s rail.
  • Seller must also pay for insurance for the buyer.
  • Maritime transport only

DDP – Delivered Duty Paid (named destination place)

  • Seller delivers the goods to the buyer to the named place of destination in the contract of sale.
  • Seller pays for all transportation costs and bears all risk until the goods have been delivered and pay the duty.
  • Seller may also need to pay Value Added Tax or Sales tax for the buyer.
  • Buyer is responsible for costs & risks after the named place of destination

Prices of goods vary due to the different terms used in the transaction- DDP pricing is higher than FOB prices due to the transportation included etc.

DDU – Delivered Duty Unpaid (named destination place)

  • Seller delivers the goods to the buyer to the named place of destination in the contract of sale.
  • Seller does not need to pay Import duties and taxes.
  • The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination.

Update: DDU – Direct Duty Unpaid is no longer used under Incoterms 2010.

The other Incoterms are:

  • FCA  – Free Carrier(…named place)
  • FAS  – Free Alongside Ship(…named port of shipment)
  • CFR  – Cost and Freight(…named of port of destination)  
  • CPT – Carriage Paid To (…named place of destination)
  • CIP – Carriage & Insurance Paid To (…named place of destination)
  • DAT – Delivered At Terminal(…named terminal at port or place of destination)  
  • DAP – Delivered At Place (…named place of destination)

ODM always states the Incoterms when sending quotations to clients, informing them the term they are paying for when an order is placed.

 

How ODM can help

ODM has been in the promotional product industry for over 15 years and is well-experienced in producing and delivering high-quality custom promotional merchandise. We have a committed team of merchandisers that will ensure effective logistics snd shipping management with proper planning management of the key supply chain stages. Therefore, making sure that the consignment is delivered to you efficiently. Should you have any queries, do not hesitate to contact us.

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