Incoterms: International Trade and Inland Waterway Transportation
INCOTERMS
GENERAL INFORMATION
International Commercial Terms, known as “Incoterms”, are internationally accepted terms defining the responsibilities of exporters and importers in the arrangement of shipments and the transfer of liability involved in their international sales. Incoterms do not cover ownership or the transfer of title of goods. It is crucial to know which Incoterm is being used at the start of a negotiation/quotation of a sale, as it will affect the costs and responsibilities involved in shipping, insurance and tariffs. Incoterms are reviewed and published by the International Chamber of Commerce, and a list of all 13 Incoterms is included in the following pages of this document.
INCOTERMS AND THE EXPORTER
In any sales transaction, it is important for the seller and buyer to understand the terms of sale and know precisely what is included in the sale price. Exporters should determine the Incoterm that works best for their company and be prepared to quote on those terms. See VEDP Issues FastFact - Responding to Inquiries. For example, relatively inexperienced exporters may use the Incoterm “Ex Works” (abbreviated as ExW), because among the 13 Incoterms, this term carries the least burden. Under ExW, an exporter’s responsibility ends at their facility’s loading dock, which includes making the goods available for pick up and providing any product information needed for filing the Electronic Export Information, or EEI (formerly the SED, or Shipper’s Export Declaration). The importer’s agent (such as their designated freight forwarder) will arrange and pay for the pre-carriage, shipping, insurance and any additional costs from the exporter’s door. A sale based on the Incoterm “CIF”, on the other hand, requires the exporter to arrange and pay for the pre-carriage, shipping, and insurance to a named port. In this case, the sale price (invoice) includes not only the (C)ost of goods, but also (I)nsurance and (F)reight costs that the importing buyer pays
GENERAL INFORMATION
International Commercial Terms, known as “Incoterms”, are internationally accepted terms defining the responsibilities of exporters and importers in the arrangement of shipments and the transfer of liability involved in their international sales. Incoterms do not cover ownership or the transfer of title of goods. It is crucial to know which Incoterm is being used at the start of a negotiation/quotation of a sale, as it will affect the costs and responsibilities involved in shipping, insurance and tariffs. Incoterms are reviewed and published by the International Chamber of Commerce, and a list of all 13 Incoterms is included in the following pages of this document.
INCOTERMS AND THE EXPORTER
In any sales transaction, it is important for the seller and buyer to understand the terms of sale and know precisely what is included in the sale price. Exporters should determine the Incoterm that works best for their company and be prepared to quote on those terms. See VEDP Issues FastFact - Responding to Inquiries. For example, relatively inexperienced exporters may use the Incoterm “Ex Works” (abbreviated as ExW), because among the 13 Incoterms, this term carries the least burden. Under ExW, an exporter’s responsibility ends at their facility’s loading dock, which includes making the goods available for pick up and providing any product information needed for filing the Electronic Export Information, or EEI (formerly the SED, or Shipper’s Export Declaration). The importer’s agent (such as their designated freight forwarder) will arrange and pay for the pre-carriage, shipping, insurance and any additional costs from the exporter’s door. A sale based on the Incoterm “CIF”, on the other hand, requires the exporter to arrange and pay for the pre-carriage, shipping, and insurance to a named port. In this case, the sale price (invoice) includes not only the (C)ost of goods, but also (I)nsurance and (F)reight costs that the importing buyer pays
Cited: Hinkelman, Edward. Dictionary of International Trade. 6th Edition. 2005 International Chamber of Commerce website. “Incoterms 2000”. Accessed May 2009. Shen Zhen Per Do International Logistics website. Last Revised: June 2009 *Information provided by VEDP Fast Facts is intended as advice and guidance only. The information is in no way exhaustive and the VEDP is not a licensed broker, banker, shipper or customs agency. VEDP shall not be liable for any damages or costs of any type arising out of, or in any way connected with the use of, these Fast Facts. 4