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Incoterms that should be approached with caution
Incoterms that should be approached with caution
Here, we examine:
- Why EXW (“ex-works”) sometimes is not appropriate for imports
- The four terms designed for port-to-port shipments only and therefore are not suitable for containerized cargo: FAS, FOB, CFR, and CIF
This term is suitable for most kinds of goods carried by road, rail, air, sea, or inland waterway (or any combination of these).
The named place is typically in the country of origin and is usually at or relatively close to the seller’s premises. Risk transfers from the seller to the buyer when the goods are made available to the buyer (i.e., ready for loading onto the carrier’s vehicle).
The buyer arranges and pays for the onward carriage.
It could be argued that EXW (“ex-works”) should sit at the top of the list because it places an even greater burden on the buyer. Many importers avoid using it because it makes them responsible for loading the goods and for export clearance, neither of which may be practical for them to arrange.
This term is not suitable where the main carriage is wholly or partly by road, rail, or air, including warehouse-to-warehouse transportation in containers or trailers, even if there is a sea crossing.
It is only suitable for bulk and break-bulk commodities where the main carriage is purely a port-to-port shipment by sea or inland waterway.
For containerized goods, look at FCA instead.
The named place is the port of departure, and risk transfers from the seller to the buyer when the goods are alongside the vessel and ready for loading at the port of departure.
The buyer arranges and pays for the onward carriage.
This term is not suitable where the main carriage is wholly or partly by road, rail, or air, including warehouse-to-warehouse transportation in containers or trailers, even if there is a sea crossing.
It is only suitable for bulk and break-bulk commodities where the main carriage is purely a port-to-port shipment by sea or inland waterway.
For containerized goods, look at FCA instead.
The named place is the port of departure, and risk transfers from the seller to the buyer when the goods are loaded onto the vessel at the port of departure: the “FOB point.”
The buyer arranges and pays for the onward carriage.
This term is not suitable where the main carriage is wholly or partly by road, rail, or air, including warehouse-to-warehouse transportation in containers or trailers, even if there is a sea crossing.
It is only suitable for bulk and break-bulk commodities where the main carriage is purely a port-to-port shipment by sea or inland waterway.
For containerized goods, look at CPT instead.
The named place is the port of destination, but risk transfers from the seller to the buyer when the goods are loaded onto the vessel at the port of departure: the “FOB point.”
Therefore, the named place is different from the risk transfer point.
The seller arranges and pays for the main carriage up to the destination port.
This term is not suitable where the main carriage is wholly or partly by road, rail, or air, including warehouse-to-warehouse transportation in containers or trailers, even if there is a sea crossing.
It is only suitable for bulk and break-bulk commodities where the main carriage is purely a port-to-port shipment by sea or inland waterway.
For containerized goods, look at CIP instead.
The named place is the port of destination, but risk transfers from the seller to the buyer when the goods are loaded onto the vessel at the point of departure: the “FOB point.”
Therefore, the named place is different from the risk transfer point.
The seller arranges and pays for the main carriage up to the destination point.
The seller also arranges insurance coverage for the benefit of the buyer from the “FOB point” up to at least the destination port.
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