Do I absolutely have to use FOB or CIF?
In the export business, you must always agree in a contract with your customers where the products will be delivered and what insurance coverage will be provided during transportation.Trade Regulations (Conditions)It is one of the
The rules are not set by law or treaty, so there are no penalties for failure to use them.
However, if we create trade conditions on our own, they may be interpreted differently in each country, which may cause problems.
To ensure that the seller's and buyer's perceptions are the same.INCOTERMSThe usual practice is to use internationally uniform trade rules called
Incoterms were established by the International Chamber of Commerce (ICC) and have been revised over time.
What trade rules are there in Incoterms?
The trade rules contained in Incoterms can be broadly divided into four categories.
Type E
The seller delivers the goods to the buyer at its premises.
EXW (Ex Works) only
type F (blood, influenza, hepatitis, etc.)
The seller delivers the goods to the carrier arranged by the buyer.
FCA ,FAS ,FOB
type C (blood, influenza, hepatitis, etc.)
The seller is responsible for freight and insurance costs to the destination country.
However, the burden of risk is transferred from the seller to the buyer at the place of export.
CFR, CIF, CPT, CIP
Type D
The Seller bears the cost and risk of transporting the goods to the Buyer's designated location.
DAT, DAP, DDP
Classification by mode of transport
1. trade rules for any means of transport: EXW, FCA, CPT, CIP, DAT, DAP, DDP
2. trade rules for ocean or inland waterway transportation only: FAS, FOB, CFR, CIF
Which trade rules should I choose?
From the seller's point of view.
The cost and risk burden increases in the order of Type E ➡ Type F ➡ Type C ➡ Type D.
The risk burden and cost burden is the least of all.Ex Works (factory delivered)The condition is called
The next least burdensome is.
FCA (Free Carrier, Carrier Delivery Conditions).
CIF (Freight Inclusive Forwarding) and DDP (Duty Duty Paid Forwarding) require a certain level of trade knowledge, so we recommend that first-time buyers deal with Ex-Works or FCA.