INCOTERMS

Incoterms help facilitate trade by providing universal rules, guidelines, and definitions that allow buyers and sellers to better understand the language they need to conduct business.

FAQ

What is the best incoterm for a buyer?

The best Incoterm depends on the situation and the purposes of the buyer. For example, if the buyer is a trading company, they should choose FOB as an Incoterm. However, if the buyer is a manufacturer, they should choose CIF. It depends on the seller what they want, but most of the time, the sellers want FOB.

Free on Board (FOB) is where the goods are loaded onto the ship which is the buyer’s responsibility. Once the goods reach the destination and are cleared by Customs, the buyer takes ownership of the goods. The Free Carrier (FCA) is where goods are handed to the buyer on receiving the goods at the buyer’s expense. The goods are then left at a named place. The goods can be delivered by any means, usually by freight. The goods are handed over to the buyer and the seller has no further obligations. The seller can ask the buyer to arrange for customs clearance. The buyer pays the costs and assumes all risk.

Incoterms are a way to describe different shipping terms. This can be confusing to buyers, especially if they are not familiar with the shipping industry. Below are the five most common Incoterms: FAS Free Alongside Ship FOB Free on Board CFR Cost and Freight FCA Free Carrier DAT Delivered at Terminal DAP Delivered at Place

Which incoterm is the best in export business?

A lot of people confuse between the terms ‘FOB’ and ‘CIF’. FOB refers to Free on Board a point of loading and CIF refers to Cost, Insurance, and Freight, which is the point of destination. CIF means that the seller is responsible for the shipping costs, insurance, and any required import formalities. Under CIF shipping, the seller will load the goods onto the ship, but the buyer is responsible for everything that happens to the goods while they are on the ship.

Best Incoterms for Exports. By far the most common incoterm used by exporters is FOB, which stands for “free on board.” FOB means that the seller delivers the goods on board the vessel, on his account, and at his risk, and the buyer pays for the cost of freight, insurance, marine and inland transit, and duty, if any. If the seller is using his own container, the seller probably will be using FOB. If the seller hands the container to a carrier for transport, the seller then should use FCO or CFR. CFR is the other common option for exporters, standing for “cost and freight.” In this case, the seller pays the freight and the costs of insurance and other transportation-related expenses, but the seller is responsible for the risk of loss or damage.