In a previous post we introduced what Incoterms are. Today it is time to talk about which Incoterms are most used to import from China and what they involve.
Without a doubt, the two main Incoterms are CIF and FOB. However, others such as EXW, CFR or DDP are also used with some frequency.
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| How far the seller's responsibility extends under each Incoterm. |
As we explained in another post, FOB (free on board) means that the seller loads the goods on the ship and from that moment on the goods are the buyer's responsibility. It is the most used Incoterm, but if used, it is advisable to hire a company to manage the second part of the transport.
It is useful if you have experience as an importer since it allows greater control over the logistics and therefore saves costs.
CIF (cost, insurance and freight) makes things easier for the buyer. The seller bears all costs, including main transport and insurance, until the goods reach the destination port. Keep in mind that the price will be somewhat higher than if we hired FOB and managed the rest of the operation ourselves.
It is by far the best option if we work with a company that manages the transport for us efficiently, since it is an Incoterm that makes life easier.
EXW (ex works) basically means that we take care of the transport. This is typical when a supplier in China does not want to take on anything beyond production. They will leave the goods at the factory door and the rest is our responsibility. In this case, there is no choice but to hire a trustworthy import company that can handle everything, especially the procedures in the country of origin.
CFR (cost and freight) is exactly the same as CIF but the seller does not cover insurance, so paying for it could be avoided. This saves a cost, but is highly inadvisable. If there were any problem we would be unprotected.
DDP (delivered duty paid) is used so that the seller delivers the goods wherever we want in the country of destination. It is very easy to work this way, especially for beginners, but it is extremely expensive. A professional importer would never use this Incoterm.
We hope it has served as an introduction. Feel free to expand all the information on wikipedia to find all the details about each Incoterm.
If you would like to import from China, please do not hesitate to contact us with no obligation.