00:09If you work in international trade, or if you want to start
a business importing or exporting goods,
00:15you need to have a deep understanding of Incoterms.
00:18This is short for International Trade terms.
00:20They are basically delivery terms used in international
trade, so both the buyer and the seller are on the same page
00:26when it comes to what obligations they each have in regards
to shipping the goods to their final destination.
00:31In this tutorial we’ll be covering the most recent version,
00:33Incoterms 2020, which haven’t really changed much from the
previous versions.
00:38So let’s get started:
00:40Shipping goods from one country to another includes several
processes:
00:44First the goods would be picked up from the supplier’s
location, and then trucked to a sea port,
00:48airport cargo terminal, or a rail terminal, depending on the
agreed delivery method.
00:53Before being able to leave the country of origin, the goods
need to clear customs,
00:56then travel by air, sea or land to their destination
country, after which they will have to be unloaded,
01:02clear customs, and then trucked to their final destination.
01:05Incoterms covers exactly who will bear the costs and the
risks of each process.
01:10There are several Incoterms, but we’ll be focusing on the
ones that matter and are most commonly used.
01:15FOB, CIF, and CFR are some of the most commonly used terms
for sea shipping,
01:20although many times they are incorrectly used for other
modes of transport.
01:24But let’s start with the simplest term, which is EX-Works,
abbreviated as EXW.
01:29This means that the supplier provides no delivery
whatsoever,
01:33so the buyer is responsible for picking up the goods from
the supplier’s location
01:37and organizing transportation to the final destination.
01:40So on a contract or invoice,
01:42this term would be written as EXW and the city or location
where the goods will be available for pickup.
01:47Next there’s FOB, one of the terms most commonly used for
shipping by sea.
01:52FOB stands for Free on Board,
01:54and it basically means that the risk is transferred
01:56to the buyer when the goods are loaded on board the vessel
at the agreed port of loading.
02:02This means the supplier supports all the risks and costs of
trucking the goods to the loading port,
02:06clearing customs, and all the local port charges associated
with loading the goods on the vessel.
02:11The buyer is responsible for all the remaining costs to the
final destination,
02:15like ocean freight, destination port charges, customs
clearance and transport to the final destination.
02:21The same as all other Incoterms,
02:23this would be written on a contract or invoice as FOB and
the port of shipment.
02:27For example FOB Shenzhen, or FOB Shanghai.
02:32CFR and CIF are similar terms.
02:35CFR means Cost and Freight,
02:37and CIF means Cost, Insurance and Freight.
02:40In both cases, the seller pays the carriage of the goods to
the named port of destination,
02:45the only difference is under CIF the seller has to obtain
insurance for the goods while in transit.
02:50In both cases the risk is transferred to the buyer
02:53after the goods have been delivered on board the ship.
02:55The buyer is responsible for all the local charges at the
port of destination,
02:59like unloading goods off the ship, local port charges,
customs clearance and transport to the final destination.
03:06We are about done with the most commonly used terms for sea
shipping, so now let’s see 2 of the most commonly used
03:10terms for any type of transport method: DDU and DDP.
03:15Let’s talk about DDP first, which is Delivery Duty Paid.
03:19The seller is responsible for all the risks and costs until
the goods have reached the specified place of arrival,
03:24 ready to be unloaded.
03:25So the seller handles all the delivery and import
formalities and duties to the final destination.
03:31This is also many times called door to door delivery.
03:34DDU is an older term from Incoterms 2000, but it is so
popular that is still being used today.
03:40It means Delivery Duty Unpaid and similar to DDP,
03:43it means the seller is responsible for all risks and costs
03:46to the place of arrival, except import formalities and
duties.
03:50Since a lot of traders still prefer using this older term in
trade documents,
03:54it's mandatory when using DDU shipping to mention “as per
Incoterms 2000” in the documents.
04:00In Incoterms 2020 the closest term to DDU is DAP, which
stands for Delivered at Place.
04:07The same as DDU, the seller is responsible for all the risks
till the goods have reached the destination,
04:11ready to be unloaded, except any import formalities and
duties.
04:16One way or another, delivery terms will affect either
product costs or shipping costs;
04:20so when negotiating either with customers or suppliers, it
is important to know what delivery terms to choose.
04:25So we’ll be focusing on that in our next video.
04:28Till next time, please remember to like this video,
04:30and if you’re new to this channel please subscribe to catch
the next video.
04:33Thanks for watching and see you next time!
