The Ultimate Guide to International Shipping Terms

Table of Contents

What are International Shipping Terms (INCOTERMS)?
- The Importance of Understanding International Shipping Terms
Rules Solely for Sea & Inland Waterway
Rules for Any Mode of Transport

What are International Shipping Terms (INCOTERMS)?

The world of shipping can be quite complex, with a multitude of terms and abbreviations that can seem overwhelming, especially for customers. However, these terms serve an important purpose in international shipping. They help ensure that everyone involved in the shipping process, not just the containers, in different countries can understand and identify various aspects of a shipment.

To make things easier, the International Chamber of Commerce has compiled a set of internationally recognized guidelines known as Incoterms Rules. These rules were first published in 2010 and were revised and updated in 2020. They provide clarity regarding the meanings, expectations, and responsibilities between buyers and sellers in the global shipping and transportation industry.

The Importance of Understanding International Shipping Terms

Shipping goods worldwide involves much more than simply moving an item from one place to another. It entails navigating through various processes and regulations to ensure that the items reach their destination safely.

It's vital to be familiar with shipping terminology, as these terms are essential for everyone participating in the shipping process. Having a good grasp of these key terms helps prevent misunderstandings and reduces mistakes in the supply chain.

Rules Solely for Sea & Inland Waterway

1. FOB (Free On Board)

FOB term is all about sea transport. It means that the seller is responsible for getting the goods onto the buyer's chosen ship at the specified port. The moment those goods are on board, the risk shifts from the seller to the buyer. It's a bit like passing the baton in a relay race.

2. FAS (Free Alongside Ship)

With FAS, the seller's job is to deliver the cargo to the buyer when it's right there next to the ship, ready to be loaded. At this point, the buyer takes on the risk. They have to organize the main transportation and cover insurance from this point onward.

3. CFR (Cost and Freight)

In a CFR deal, the seller is on the hook for paying the freight to get the cargo delivered, but the risk, interestingly, falls on the buyer. Just like FOB, the risk transition happens when the goods cross the ship's railing. So, it's a bit like saying, "I'll handle the delivery cost, but you handle the risk part."

4. CIF (Cost Insurance and Freight)

CIF is similar to CFR but with an insurance twist. The seller not only takes care of the freight cost but also covers insurance up to the named destination port. Since the seller is looking out for the buyer during the journey, they might opt for basic insurance, which means the buyer might want to consider additional coverage. It's like bundling your goods with a safety net.

Rules for Any Mode of Transport

1. DAP (Delivered At Place)

When a deal is on DAP terms, the seller is in charge until the cargo reaches its final destination. The seller covers all expenses, including export fees, shipping, insurance, and destination port charges. However, the buyer is responsible for import fees and unloading.

2. DAT (Delivered At Terminal)

In a DAT agreement, the seller's responsibility ends once the goods are offloaded at the agreed destination point. The seller takes care of export fees, shipping, insurance, and port charges at the destination. Import fees and unloading are the buyer's responsibility.

3. EXW (Ex Works)

With EXW, the seller has the least responsibility. They only need to make the goods available on their own premises. Once the goods are there, all risks and responsibilities fall on the buyer. The buyer pays for insurance, export from the seller's premises, import to the destination and arranges transportation. EXW is often used for initial pricing but less commonly for final transactions.

4. DDP (Delivered Duty Paid)

DDP is quite the opposite of EXW. Here, the seller has the most responsibility. They are responsible for delivering the goods to the buyer's premises or another agreed-upon location. The seller handles the cargo, pays for export and import duties, arranges transportation, and covers insurance costs.

5. FCA (Free Carrier)

In an FCA arrangement, the seller is responsible for fees up to the delivery point, whether that's their own premises or somewhere else as agreed. The buyer covers export and import costs and handles all transportation.

6. CPT (Carriage Paid To)

Under CPT, the seller arranges and pays for the shipment to be taken to the agreed place, passing the risk to the buyer at that point. The buyer also takes on insurance responsibilities from this stage, and the risk is with the buyer when the seller organizes the main carriage.

7. CIP (Carriage & Insurance Paid To)

CIP includes the responsibilities of CPT, but in this case, the seller also pays for insurance up to the destination point. The seller secures insurance to protect the buyer's interests and takes care of the primary carrier's fees to move the shipment to the destination.

Tebadul: Your Global Trade Partner

Navigating international trade can be complex, with numerous terms and parties involved. Tebadul, your trusted global trade partner, simplifies this journey for you. We specialize in making international trade smooth, easy, and seamless.

Don't let the complexity overwhelm you. Contact us for a free consultation today, and discover how we can help you effortlessly expand your business into new markets.