Incoterms rules for each foreign trade is the introductory course, the requirements to do to learn the Incoterms rules of interpretation.
Commonly used Incoterms rules: FOB, DDP, DDU, CIF, EXW
FOB
FOB (Free On Board) – The consignor/supplier is responsible for all costs of origin, while the consignee/buyer is responsible for transportation costs from the main leg.
FOB, i.e., the supplier needs to arrange for delivery of the goods to the freight forwarder’s warehouse at the port of origin to pay all origin costs (i.e., pickup and delivery to the port of origin, warehousing, and export customs clearance).
The freight forwarder will then handle the main freight leg, clear import customs and deliver the goods to the destination of your choice.
Here is a more detailed introduction to FOB.
FOB Incoterms rules
DDP
DDP, Delivered Duty Paid…, means that the seller is required to deliver the goods that have not yet been unloaded from the delivery vehicle to the buyer at the destination specified by the buyer, after clearing import and export customs. The seller is responsible for all taxes and risks associated with loading, transportation within the exporting country, export customs clearance, cross-border transportation, import customs clearance, and transportation in the importing country.
DDP is the Incoterm for which the seller has the greatest responsibility.DDP is applicable to any mode of transportation, and DAP should be used if the goods are delivered on board a vessel or at a terminal in the port of destination.
DDP Incoterms rules
DDU
DDU, Delivered Duty Unpaid…, means that the seller puts the goods at the buyer’s disposal at the named destination without going through import formalities and without being responsible for unloading the goods on the means of transportation, i.e., completing the delivery.
Note: If you use DDU terms of transportation, you must use your own freight forwarder, since you have the goods in your own hands. Usually, however, your supplier will not let you use your own freight forwarder if you are shipping DDU.
It is also worth noting that under the terms of DDU, the seller must provide you with the information that the goods to be cleared for import are on a vessel in your country.
DDU = DDP – Import Clearance Duty Charges and Risks.
If you want to know more about Incoterms rules, here is an introduction to DDU and UUP:
CIF
CIF is the Cost-In-Foreign (CIF) price. It means that the seller must pay for the cost, freight including insurance, of transporting the goods to the port of destination.
When CIF is used, the seller is responsible for the freight, insurance and shipping charges for delivery to the buyer’s port of destination.
In this case, the price includes insurance and ocean freight to deliver the goods to your nearest port.However, it only covers your shipment to your port of destination – from there, you assume responsibility for the shipment.
EXW
EXW (EX Works) Delivered Ex Works means that the seller delivers the prepared goods to the buyer at the seller’s workshop, factory, warehouse, etc. The seller is usually not responsible for loading, freight, or customs clearance, and the buyer bears the full cost and risk of transporting the goods from the seller’s location to the destination.
EXW is the international trade term with the biggest responsibility of the buyer.
If you want to know more about Incoterms rules, here is an introduction to EXW:
If you don’t want to just read these text interpretations, you can click on the video below to help you understand more quickly about other Incoterms rules：
International Trade Risk Management
International trade risk management is an important measure to reduce the economic risk of the main body of trade, with the help of a variety of risk control methods to analyze, understand and prevent the risk of international trade is very critical to protect the legitimate economic interests of the main body of trade.
Reduce the main body of trade business risk
Various types of international trade risks, if the trade subject lacks a perfect risk management system, it may suffer significant economic risks in the trade process, thus suffering huge economic losses.
Enhance the competitiveness of trade subjects
The competition between trade subjects in the process of international trade is very fierce, and the risk management ability is an important indicator of the competitive ability of trade subjects.
In the face of the same complex international environment, if the trade subject’s risk management ability is poor, its ability to solve problems in a complex environment is weak, it is easy to risk escalation and evolution process suffered major losses, which leads to the trade subject’s market share is compressed, and in the process of competition with other trade subjects in a passive position.
Incoterms rules
Enhance the stability of trade
International trade involves trade subjects from different countries, if the two sides of the trade want to establish stable trade relations, both sides must have an in-depth understanding of their own trade risks, combined with their respective production and operation characteristics and development goals to establish a development model that meets the interests of both sides.
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