International trade involves the exchange of goods and services between countries. In this process, different parties, such as the buyers and sellers, use international trade terms to communicate about the shipment of goods. The use of these terms helps to avoid misunderstandings and disputes that could arise during the transportation of goods. This article will focus on the international trade terms that are commonly used in maritime transportation.
Incoterms
The International Commercial Terms, commonly known as Incoterms, are a set of rules that define the responsibilities of buyers and sellers in international trade. These rules were developed by the International Chamber of Commerce (ICC) to standardize the terms used in international trade. There are 11 Incoterms, and they are divided into two categories: those that can be used for any mode of transportation and those that are specific to maritime transportation.
Incoterms for Any Mode of Transportation
The following Incoterms can be used for any mode of transportation:
1: EXW (Ex Works) This term means that the seller makes the goods available at their premises. The buyer is responsible for all transportation costs and risks.
2: FCA (Free Carrier) The seller is responsible for delivering the goods to a carrier nominated by the buyer. The buyer is responsible for all transportation costs and risks from that point.
3: CPT (Carriage Paid To) The seller is responsible for delivering the goods to a carrier nominated by them. The seller pays for the transportation to the named place of destination. The buyer is responsible for all risks from that point.
4: CIP (Carriage and Insurance Paid To) This term is similar to CPT, but the seller also has to provide insurance for the goods.
5: DAP (Delivered At Place) The seller is responsible for delivering the goods to a named place of destination. The buyer is responsible for all risks from that point.
6: DDP (Delivered Duty Paid) The seller is responsible for delivering the goods to a named place of destination and paying all customs duties and taxes.
Incoterms for Maritime Transportation Only
The following Incoterms are specific to maritime transportation:
1: FAS (Free Alongside Ship) The seller is responsible for delivering the goods to a port. The buyer is responsible for loading the goods onto the ship and for all transportation costs and risks from that point.
2: FOB (Free On Board) The seller is responsible for delivering the goods to a port and loading them onto the ship. The buyer is responsible for all transportation costs and risks from that point.
3: CFR (Cost and Freight) The seller is responsible for delivering the goods to a port and paying for the transportation to the named port of destination. The buyer is responsible for all risks from that point.
4: CIF (Cost, Insurance and Freight) This term is similar to CFR, but the seller also has to provide insurance for the goods.
Conclusion
In conclusion, using international trade terms is vital for international trade, especially in maritime transportation. The use of these terms helps to avoid misunderstandings and disputes that could arise during the transportation of goods. The Incoterms provide a standardized framework for the obligations and responsibilities of buyers and sellers. Therefore, it is essential for parties involved in international trade to understand and use these terms appropriately.