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Incoterms Explained: what are incoterms and How to choose incoterm? FOB, EXW, DDP【complete guide】 - YouTube
Channel: unknown
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hi everyone today i'm going to give you
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a detailed explanation
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about inco terms for import export
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global trade
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hope this can be helpful for those of
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you who want to study the encode terms
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so first what are encode terms
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shipping goods across borders can be
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tricky
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there are so many factors to consider
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for both importers and exporters
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and this is why inco terms were created
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in international commerce include terms
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are a set of three-letter abbreviated
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three terms
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established by the international chamber
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of commerce
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the icc to communicate different aspects
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of cross-border trade
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there are 11 main income terms in use
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incoterm's primary function is to set
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the responsibilities of a seller
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and the buyer in a shipping agreement
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for both alibaba.com seller and buyer
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it is important to familiarize yourself
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with the details of each incoterm so you
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can choose the one that makes the most
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sense for your next shipment
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okay next you want to understand the
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responsibilities connected to encode
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terms
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basically encode terms define the
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following rules of the shipment process
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first shipping and freight costs
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include terms dictate which party will
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be responsible for the cost of shipping
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and freight
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second the point of delivery
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encode terms indicate the point at which
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the responsibilities are transferred
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from the seller to the buyer
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which is called the delivery point
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third import and export regulations
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include terms dictate which party
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organizes the procedures
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used in the importation and exportation
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and the last one is insurance cover
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equal terms outline who is responsible
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for the cost of insurance
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then let's talk about different income
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terms groups
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include terms can be sorted into four
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different groups
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the first group is e-type which
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includes exw meaning
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the seller bears little cost and
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responsibility
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the second group is f-type including
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fob fca and fas
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for this type the seller is responsible
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for transporting the goods to the
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buyer's predefined
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transport medium and then the buyer
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assumes
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all responsibilities from that point
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onwards
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the third group is a c type including
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cfr
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cif cpt and cip
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here the seller bears all costs and
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responsibility
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to the destination port then the risks
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are transferred to the buyers
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once the goods are loaded on the means
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of transport
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and the last group is d type including
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ddp
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and dap and here the seller bears
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maximum responsibility
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for cost and risks
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you can see as you move from e to d type
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the bios risk and responsibility
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decreases
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while the seller's risk and
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responsibility
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and control increases okay
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next we're going to explain which encode
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terms can be applied to which mode of
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transport
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you need to know that not all encode
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terms are suitable for
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all kinds of international shipments
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depending on your mode of transport such
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as
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maritime air road rail
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etc you may have to choose one over
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another
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please say the tables below for which
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encode terms can be applied
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to which mode of transportation for your
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reference
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okay now we're gonna talk about some of
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the most important and popular
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in code terms since from
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responsibilities in international
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shipping to customers clearance
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due to its payment and insurance there
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are many factors to consider when
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choosing income terms
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below we list out some of the most
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important
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and most commonly used encode terms and
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we will help you to understand
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each of them the first one
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x works the exw
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xworks places a minimal burden on the
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seller
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the buyer must arrange and pay for all
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transportation
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and is also responsible for container
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seller does not need to load the goods
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on any collecting vehicle
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nor does it need to clear the goods for
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export
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the second one free onboard
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fob here the seller is responsible for
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all the costs and responsibilities
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and clearing the goods for export until
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the goods have crossed the ship rail
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at the original port and then the buyer
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assumes
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all costs responsibilities and risks
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after that point
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the third one cost and freight
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the cfr with cfr
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seller arranges the transport of goods
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to the named port
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the seller delivers goods cleared for
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export
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loaded on board the vessel then the
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risks are transferred to the buyer
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once the goods are loaded on board the
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first one
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cost insurance and freight the cif
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this incode term is the same as cost and
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freight
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the cfr just with the added
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responsibility
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that the seller also pays for the
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insurance
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and the next one is carriage paid 2
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the cpt with cpt
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the seller delivers goods to a carrier
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and has full responsibility to cover the
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cost of the carriage of goods to the
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destination
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all risks and costs transfer to the
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buyer
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after delivery of the goods
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and the sixth one is carriage and
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insurance paid to
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the cip as with cpt
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the seller is responsible for delivering
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the goods to a carrier
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and also paying the cost of transport
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here the seller is also responsible for
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ensuring the goods
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next one delivered at place
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the dap here
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the seller is responsible for delivering
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the goods
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ready for unloading from the arriving
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means of transport
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at the named place the buyer is
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responsible
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for import clearance and any applicable
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local taxes and import duties
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and the last one is deliver duty paid
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the ddp here the seller assumes
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all cost responsibility and risk
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until goods are delivered to the buyer
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that means the seller also pays for
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import clearance duties
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insurance and any other expenses related
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so as you can see there are varying
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levels of risk
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for the buyer and the seller reference
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the graphic below to learn more about
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the obligations of the buyer and seller
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under different income terms alright so
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the last point i gonna talk about
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is how to choose the right incoterm
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choosing the inco term
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that best suits your international
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shipment can be challenging
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as it's a process into which you need to
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put much
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thought so how should you decide
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which is right for you the biggest
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factor is the experience level
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fob is the most popular in code term and
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is often agreeable to both the buyer and
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seller
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as a partnership fob often makes the
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most
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sense to have the seller be responsible
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for the goods
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when they are on his or her home soil
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and then the buyer takes over for the
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overseas transit
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seller's risks end once the cargo gets
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on the boat
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and the buyer still has control over all
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expenses and the coordination
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of the cargo delivery to their final
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destination
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if you are more experienced importer and
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want to have
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absolute control over the shipping
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process
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and associated cost and feel comfortable
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to take on more risk and responsibility
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to get it
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you may want to choose exw while exw
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places a minimum obligation on the
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seller
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ddp represents the maximum obligation
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it is the only rule that requires the
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seller
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to be responsible for import clearance
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and payment of duties
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and taxes therefore
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the seller may also need to acquire an
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import license
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an experienced seller can benefit from
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this system
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as they would have total control over
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costs
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including factors to maximize their
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profit
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however importers or buyers who have
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more experience
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are more likely to avoid the shipping
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agreement
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we don't generally recommend ddp for
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ocean shipping
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however it is more common and makes more
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sense for air express
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or parcel shipping we will introduce
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more potential risk about using ddp
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shipping from china in
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another video since some gdp might have
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some illegal things involved
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which will be harmful to your business
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and we will talk more about this
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knowledge
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in the video next time okay
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that's all we have for today if you have
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any comments or concerns
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please feel free to contact us or leave
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your comment below
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and if you like our video don't forget
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to click the subscribe
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so you won't miss our next video thank
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you again and hope all of you have a
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nice day
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