What are Incoterms?
What are Incoterms?
If you are learning about logistics. The first thing to understand is that there are 11 types of Incoterms, with 3 letter English abbreviations such as CFR,EXW. To memorize all 11 INCOTERMS, it can be difficult for a beginner.
But if you want to learn all 11 INCOTERMS, we recommend that. should be able to understand only the first 6 INCOMTERMS accurately. Once you understand it well, you will be able to apply the knowledge gained from this foundation to the remaining 5 INCOTERMS for sure.
INCOTERMS are trade agreements between buyers and sellers. which will have the following conditions
1. Who is responsible for the pay the freight in each delivery process
2. Who is responsible if the product is damaged in each delivery process?
Or in other words, Incoterms are terms of international export of goods and it is very important to know that. Which part is the responsibility of the seller or the buyer? Incoterms arise as a way to define the responsibilities, duties and obligations between the buyer and the seller in the delivery of the goods.
Section 6 INCOTERMS mentioned above We would like to explain it more easily as follows.
1. EXW/EX Works (Shipments Handling at factories)
EXW is an agreement or trade agreement that the seller’s product. have sold products to buyers to pick up themselves or simply called products in front of the factory
The buyer bears the risk of loss or damage upon receipt of the product. and the buyer pays all the costs associated with the product starting from the time the product has been delivered
which on the seller’s side It is considered the easiest to trade agreement. due to all responsibility will fall on the buyer’s side and the seller does not have to bear the burden of responsibility If the product is damaged during transportation
2. FOB/Free On Board (Shipments handling on board of vessel)
FOB shipping is where the seller delivers the goods by placing the goods on the buyer’s vessel at the point of origin, but the buyer assumes all risks of the goods upon receipt of the goods at the port of origin. On the Buyer side, all costs related to the Goods must be paid from the time the Goods are delivered. and must be a person who has passed the border/inbound clearance The seller is a person who has passed the exit formalities.
3. C & F/Cost & Freight (Shipments including Ocean Fright)
The terms of C&F, also known as CFR, mean that the buyer pays all costs and assumes all risks of the goods. and when the goods are delivered to the port of destination and the purchaser himself is the one who has passed the border and import formalities.
4. CIF/Cost, Insurance & Freight (Shipments including Ocean Freight and Insurance)
The CIF condition is that the buyer must do insurance contract under C&F terms
5. DDU/Delivered Duty Unpaid (Shipments handling at Door Delivery Places without customs fee)
The DDU condition is that the seller pays all costs and bears all risks. until the product reaches the customer’s hand according to the specified destination on the buyer’s side There is a burden of paying duties and import taxes.
Taxes and duties in each shipment Usually there are different costs. Therefore, before starting a business Should be examined as thoroughly as possible.
1. Application Form of Alcohol License
– Liquor sales license request form
6. DDP/Delivered Duty Paid (Shipments handling at Door Delivery Places including customs fee)
DDP conditions that the buyer will like in particular. Because the seller will be responsible for the expenses, whether it is freight, boarding a car, loading a plane. including product insurance and customs fees Everything, the buyer is not responsible for anything.
The seller’s side shall pay all costs and risks incurred in connection with the Goods and the delivery of the Goods until the Goods reach the place of delivery as specified in the contract.
In conclusion, the six basic conditions are widely used in freight operators This allows each transaction to be agreed upon between the seller and the buyer. If you are planning to import products from abroad We recommend that you choose FOB or C&F or CIF terms of delivery when exporting goods. We recommend choosing a C&F or CIF shipping terms and costs that will incur within that country. will depend on the shipping agent.
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