Incoterms are used for defining the responsibilities of the customers and sellers

Incoterms are used for the preparation of international freight forwarding of goods and cargo by the freight forwarders Europe for commercial purposes. These rules are defined by the International Chamber of Commerce. It is essential to know all these terms as well as the basic conditions in order to formulate the contractual agreement, the terms and conditions of selling and buying properly.

These terms allow for precise definition of the responsibilities of both parties involved in a commercial deal, as well as the ownership of the goods in different geographical regions.

  

All parties involved in the commercial deal, the shipment and insurance need to be familiar with the terms

Not only the buyer and seller need to be familiar with the Incoterms, but also the insurance companies, the international freight forwarders and those in charge of the goods, their international sales, delivery and for providing them. These terms define the finalized price offers for export or import, as well as the financial responsibilities of the international freight forwarders network for the delivery of goods.

Here are the most commonly used basic Incoterms for all kinds of shipments:

CIF

An abbreviation for “Cost, Insurance, Freight” which means that the carrier is responsible for the payment of the costs for the goods and insurance in advance. The sum includes the invoice price for the cargo as well as customs fees and other service fees. The calculation of the price is done by the forwarders throughout Еurope via well-established methods for calculating the sum.

EX

Other variations of the term include ex factory; ex door; ex dock. When the terms begins with “EX” this means that the price is formed for the specified point where the forwarding begins. This can be the factory of the seller or a dock. By applying this condition, the seller agrees to hand over the ownership of the goods at the specified point in the incoterm.

Incoterms for sea and water transport

CFR

This means “Cost and Freight”. The seller is responsible for covering the cost of the forwarding and later receives a refund of the sum from the customer. This means that the cost of the products, the shipment, and insurance of the goods is incurred to the buyer from the moment when they are delivered on board of the buyer’s vessel. The seller pays all costs for the forwarding of the goods to the end destination.

FOB

This means “Free on Board”. In this case, the buyer bears the responsibility for preparing the documentation as well as for payment for picking up the goods from the seller and for delivering them to an international logistics company from the network of freight forwarders.

FAS

This term means that the seller is responsible for delivering the goods to the vessel to get ready for loading. The seller bears all costs for that.

Modifying the Incoterms in accordance with the electronic data exchange

The use of electronic data exchange is commonly used for the international freight forwarding, which is why the international Incoterms conditions are modified in accordance with this type of exchange. Now there are terms and conditions such as CPT (payment of the carrier to the specified destination), CIP (payment of forwarding and insurance), DAF (delivery to a specific border) and others.

The customers can discuss the ways in which the freight forwarding price will be affected under the different terms with the freight forwarders.