Before planning an international transport of goods, it is necessary to clarify this confusion: at what point are the risks and costs transferred to the buyer?
In 1936, the International Chamber of Commerce published for the first time a set of international rules to answer this question: Incoterms (INternational COmmercial TERMS).
By including these standardized and recognized clauses in contracts, buyers and sellers from different countries reduce their own uncertainty and disputes when entering into an international transaction, thus making their respective responsibilities, obligations, risks and costs for the delivery of goods more precise.
Meaning of Incoterms
Cost and risk sharing between the seller and the buyer according to the Incoterm negotiated in the contract.
S : Expenses and risks borne by the seller
B : Costs and risks borne by the buyer
* According to the agreed place
** Minimum Insurance in favor of the buyer
Below, we explain in more detail the 3 most common terms in the world of international trade.
EXW
In this Incoterm, the seller merely places the goods at the disposal of the buyer in his factory or warehouse and is not responsible for internal transport or export formalities. It is the buyer who assumes the risks from then on.
In other words, the export documentation and any customs clearance costs are all paid by the buyer, as well as transportation costs from the buyer's factory or warehouse to the port of departure, international ocean freight, and all other costs in the country of destination. The seller is only responsible for packing and having the cargo ready for the buyer to take.
FOB
Under the terms of this modality, the risks of loss or damage to the goods are transferred to the buyer at the time the goods are shipped and he is responsible for international freight, unloading at the port of destination and customs formalities.
This is the most used and recommended mode for customers importing from China, especially when it comes to container transport (FCL).
VAT ID
In this case, the selling company is in charge of contracting the freight forwarder service, paying the international freight, insurance and all customs formalities until the goods arrive at the port of destination.
In general, it is more advisable to choose FOB over CIF since paying for and taking responsibility for international shipping implies controlling the corresponding times and costs, that is, ensuring to a large extent a shipment free of delays, damage to the goods or surcharges that may be unpleasant surprises, and even paying more competitive prices.
CHINA-LATIN LOGISTICS offers sea and air freight service for both FOB and EXW imports from China to all America and Spain. If you are not sure which is the most beneficial option for you, do not hesitate to contact us, we are here to advise you.
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