What you need to know for international shipping:
What are Incoterms?
If your company trades on an international basis, or either ships or receives shipments from an overseas market, then you should be aware of
The International Commerce Terms (Incoterms) are standardized terms used in international trade.
Incoterms are rules of trade that essentially dictate the exact delivery terms between two parties.
These terms would include where and how the goods should be delivered, who pays for what – local charges, export charges, loading charges, … -, who is responsible for insurance, and who handles specific procedures such as unloading.
E terms (EXW): The seller makes available its goods at their premises in order for the buyer to collect. This is the minimum obligation for the seller.
F terms (FCA, FOB, FAS): The seller delivers the goods to a carrier appointed by the buyer. The seller will arrange and pay for delivery of goods to the carrier, but the buyer pays for everything after that.
C terms (CFR, CIF, CPT, CIP): The seller has to contract for carriage, but does not assume the risk of loss or damage after the shipment.
D terms (DAT, DAP, DDP): The seller bears all risk involved in bringing the goods to the buyer.
Is FOB valid for air transport?
Of the three terms contained within the F group two are intended for use only when the goods are carried by sea (but not containerized freight) or inland waterway transport, the other one FCA(Free Carrier … named place) is intended for use by any mode of transport.
If the shipper air freights a consignment of goods which have been ordered as “Free on Board Shanghai airport” the risk which should pass from the seller to the buyer when the goods cross the ships’ rail remains with the seller as there is no ships rail point for the passage of risk from one party to the other.