Trade terms

When we sell goods to our customers, the terms of trade define the responsibilities for shipping costs, insurance, and the distribution of risk during transportation. This article provides an overview of the current trade terms we use. Please refer to it when purchasing goods from us.

1. Incoterms of Trade

Incoterms (International Commercial Terms) are internationally recognized rules established by the International Chamber of Commerce (ICC). They define the responsibilities and cost obligations of both parties in a trade transaction. The latest version, Incoterms 2020, consists of 11 rules. Below, we explain four common Incoterms that we frequently use in our transactions.

2. Common Types of Incoterms

• EXW (Ex-Works): The seller fulfills their delivery obligation by making the goods available at their premises or another agreed location. All subsequent costs and risks, including export customs clearance, are borne by the buyer.

• FOB (Free on Board): The seller's responsibility ends once the goods reach the buyer's designated port. From that point on, all costs and risks are transferred to the buyer. The seller is responsible for export customs clearance.
• CIF (Cost, Insurance, and Freight): Used primarily for sea or waterway transport, the seller covers the costs, insurance, and freight to the buyer's destination port. The buyer assumes responsibility for all costs and risks once the shipment arrives at the port.

• DAP (Delivery at Place): The seller covers all costs and risks of delivering goods to a specified location. However, the buyer is responsible for import duties, taxes, and any customs clearance charges once the goods reach their destination.

We discuss these trade terms with our customers during the quotation and negotiation process to determine shipping costs and risk allocation. Familiarity with these terms will help ensure smooth negotiations when purchasing goods from us.