Incoterms

Background

Incoterms are universally recognized rules. They guide buyers and sellers when formulating and fulfilling a contract for the shipment of goods. The risk transfer point is now stated formally using incoterms.

When shipping overseas the Commercial Invoice documentation will have details of the incoterm that will be used for shipping and where the risk transfer point for trading overseas. 

On the World Options portal the 3 common incoterms used are Ex Works (EXW), Delivered at Place (DAP) & Delivered Duty Paid (DDP)

EXW – Ex Works

Under the EXW term, the seller is responsible for making the goods available at its premises. The parties can also agree on another named place such as factory, office or warehouse. At this point, the buyer gains ownership of the goods. Then, he handles all costs and risk after the products are collected.

DAP – Delivered At Place

The seller delivers the goods to a named place of destination but is not responsible for unloading. His responsibilities include packing, export clearance, carriage expenses and any terminal costs up to the agreed destination port.

DAP means the buyer is responsible for all costs, duties and taxes associated with unloading the goods. He is also responsible for clearing customs to import the products into the named country of destination.

DDP – Delivered Duty Paid

DDP means the seller bears all risks and costs associated with clearing and delivering the goods to the designated place.

The seller is liable for clearing the goods through customs in the buyer’s country. It includes payment of both duties and taxes. Furthermore, he needs to obtain the necessary authorizations and registrations from the authorities. However, the seller is not responsible for unloading.

This term places the maximum obligations on the seller and minimum obligations on the buyer. The buyer bears no risk or responsibility until the goods are at the final agreed place.

Incoterms for Freight imports

For imports, EXW or FOB are your most common incoterms

Please see link for further guidance on incoterms