Guide to Common Incoterms
The most common area of confusion we get when people contact us is over the use of incoterms. Using incoterms when dealing with shipping goods is always the best way forward. It ensures that all the parties involved know exactly who is paying which shipping charges. There are many incoterms below we have listed four most common used terms
Consignee is the person/company the goods are being shipped to. Most of the time this will be the buyer.
Ex-Works where the consignee pays for all the shipping costs from the shipper/suppliers door to their door. We do not recommend this choice for first time shippers of LCL (part cargo) moving from countries in Asia including India as you can end up with serious issues getting the correct export paperwork. Also this term can be a little confusing as sometimes the manufacturer/shipper will load and secure the cargo at no extra costs and other times they will expect to be paid for doing that or the buyer to provide someone to do it. It pays to clarify exactly this point. See also the term FOM at the bottom
FOB Port Name
FOB stands for Free On Board and applies to a port or airport, for example FOB Ningbo, China or FOB Houston, Texas. This is one of the most common incoterms used and the one we particularly recommend if you are buying from Asia. It means the shipper/supplier pays for getting the goods on board the vessel/aircraft/truck and any costs up to this point is paid by them.
C&F Some Port
C&F stands for Cost and Freight. Here the manufacturer/supplier pays to get the goods all the way to the named seaport or airport as agreed with the buyer. The buyer is then responsible for all the local charges. These include customs brokerage, handling charges, taxes,duties and deliveries.
CIF Some Port
CIF is Cost, Insurance and Freight. Exactly the same as C&F but only here the manufacturer/supplier pays for the goods to be insured to the named seaport or airport.
Other used incoterms
The following three incoterms are less commonly used but still valid.
DDU Named Place
Delivered Duty Unpaid a named place. Here the supplier/shipper pays for all the charges and assumes the risk to get the cargo all the way to the door of the consignee. The only charged remaining for the consignee is to pay the duty and vat for the shipment.
DDP Name Place
Delivered Duty Paid a name place. The same as DDU only the supplier/shipper pays the local duties/gst/vat payable on the goods. The shipper assumes all the risks of getting the shipment to the consignee.
Free on Motor is where the manufacturer/supplier pays for the goods to be loaded and secured on a motor. This can be a truck or rail wagon. Can used both at the loading and unloading ends of a shipment.
Project Cargo and Break-bulk
Project Cargo and Break-bulk can be shipped under a whole range of incoterms and it is essential you understand what you are being quoted or are quoting out. It is quite possible for you to end up taking charges of several thousand dollars because you did not correctly understand the incoterms being used. Feel free to contact us to discuss any shipment terms BEFORE you agree the shipment.