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International Trade Terms for Basic Knowledge of Foreign Trade
Dec 01,2023
1. Incoterms, abbreviated“Incoterms”：
Trade Terms(Trade Terms), also known as Price Terms (Price Terms), is a special term used to express the composition of the transaction price and the terms of delivery, to determine the risk, liability, cost division and other issues of the buyer and seller.
At present, the international common is 《Incoterms 2000 (Incoterms 2000) includes four groups of 13 trade terms.
"Incoterms are: EXW (factory delivery), FCA (cargo carrier), FAS (delivery on the side of the ship at the port of shipment), FOB (delivery on board the ship at the port of shipment), CFR (cost plus freight), CIF (cost, insurance plus freight), etc."
The EXW trade term is an abbreviation of EX Works(… named place), that is, "factory delivery (… designated place)". It means that the seller delivers the ready goods to the buyer at its location (e. g. workshop, factory or warehouse) in order to fulfill its obligation to deliver. According to this trade term, the seller is neither responsible for loading the goods on the buyer's means of transport, nor is it responsible for the customs clearance of the goods for export. Unless otherwise agreed, the buyer shall bear all costs and risks of receiving the goods from the seller's location. The EXW term applies to all modes of transport.
EXW factory delivery price, the seller's fee is 0, all costs borne by the buyer.
FOB (acronym for Free On Board), also known as "FOB", is one of the trade terms commonly used in international trade. In transactions conducted on an FOB basis, the buyer is responsible for sending a ship to pick up the goods, and the seller shall load the goods onto the vessel designated by the buyer at the port of shipment and within the period specified in the contract, and notify the buyer in a timely manner. The risk passes from the seller to the buyer when the goods are loaded on board the named vessel at the port of shipment.
1. FOB cost = domestic transportation cost freight forwarding fee
CFR in trade terms is an English shorthand, the full name is Cost and Freight, the Chinese translation of "cost plus freight" means delivery on board the ship at the port of shipment, the buyer is responsible for the product to the designated port of destination in the process of transportation related costs. However, when the product risk will be transferred at the time of delivery.
2, CFR-domestic transportation costs freight forwarding fees.
CIF trade terms are abbreviations for Cost,Insurance and Freight (... named port of destination), I .e. cost, insurance plus freight (... specify the port of destination). According to the International Chamber of Commerce's Incoterms 2000, CIF trade terms can only be applied to maritime and inland shipping. Deal in CIF trade terms means that the seller must deliver the goods to the ship to the designated port of destination on the date or period specified in the contract, bear all the costs of the goods crossing the ship's rail and the risk of loss or damage to the goods, be responsible for chartering the ship, pay the normal freight from the port of shipment to the port of destination, and be responsible for handling freight insurance and paying insurance premiums.
3, CIF-domestic transportation costs Freight forwarding fees Freight insurance premiums.
DAP(delivered at place) is an international trade term, I .e. destination delivery, which means that after the seller has delivered the goods to the buyer's designated destination by means of transport, the goods loaded on the means of transport (without unloading) are placed at the buyer's disposal, I .e. delivery is completed.
Deliveries not taxed(DDU, Delivered Duty Unpaid --- named port of destination), a trade term in which the seller is responsible for chartering a means of transport, delivering the cleared goods to the designated destination within the specified time, delivering them on the means of transport and bearing the costs and risks prior to delivery.
2. the relationship between the seven common trade terms:
1, FOB (FOB)-FOB domestic price to the port of shipment.
FREE ON BOARD-Free on board (designated port of shipment), the exporter delivers the goods to the ship at the port of shipment designated by the importer during the shipment period specified in the contract.
2、CNF (CFR) = Cost Freight = FOB Freight (海运费)
Cost plus freight (designated port of destination), the exporter will deliver the goods at the port of shipment to the ship destined for the port of destination during the shipment period specified in the contract.
3、CIF = Cost Insurance Freight = CNF Insurance (保险费)
CostInsurance freight (designated port of destination), the exporter shall deliver the goods to the ship destined for the port of destination at the port of shipment during the shipment period specified in the contract and bear the cost of insurance.
4. EXW (EX-WORK ex-factory price)
Factory Delivery(designated place), under this price clause, and the exporter's liability is minimal.
5、FCA (Free Carrier)
delivery carrier(designated place), the exporter must hand over the goods to the supervision of the carrier designated by the importer at the designated place within the delivery period specified in the contract.
6Delivered Duty Unpaid
Deliveries not taxed(specify destination)
7、DDP (Delivered Duty Paid) = DDU Duty (税费)
Delivery after duty paid by the importing country(designated destination), the exporter is most responsible under this price clause.
8, the difference between common trade terms:
The expression and characteristics of 3. trade terms:
1、EXW Shenzhen, China
1) The quantity is uncertain, which is generally provided for customer reference. 2) The quantity is small, and it is impossible to provide commodity inspection, export and customs clearance (not cost-effective). Express delivery, air transportation, etc.
2、FOB Shenzhen, China （国家）
Usually the customer's freight forwarder.
3、CNF（CFR） L.A., USA （国家）
4、CIF Victoria, Australia （国家）
Usually our freight forwarder.
4, EXW, FCA, FOB risk difference.
1）EXW
Seller: the terms of the international trade transaction with the least liability.
2)FCA has more responsibilities than EXW
A) Delivery to the designated place (designated freight forwarding warehouse), the seller and related transportation. B) For export clearance procedures, the cost shall be borne by the seller.
3) FOB has more responsibilities than FCA
All things and expenses before the goods cross the ship's rail shall be borne by the seller.
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