Incoterms on TradeKey.com - Part 1

To stop frauds and scams in business international chamber of commerce have published some sales terms to be used in international commercial transactions. Hence, even if you are trading on TradeKey, you must follow these guidelines in order to save yourself from frauds. TradeKey.com have their fraud protection process but it is better to follow the guidlines set by international body.

At a stage in shipping process, the legal ownership of products passes from the supplier to buyer. This actually happens in a highly technical manner, which affects which party pays for the shipping, for the insurance, and when risk of damages passes from the supplier to buyer.

When the supplier typically sets the terms of ownership, then they are negotiable. Though, while discussing them with the supplier, buyer should be specific and clear as even the small misunderstandings may lead to big arguments afterwards on the point that who would bear the cost and the risk.

While discussing these things about shipping, you will come across Incoterms. They are a total of 13 terms that describe different ways of the risk and ownership transfer from supplier to buyer.

Ex Works (EXW): Supplier’s risks and obligations end if buyer takes the possession of the products at the premises of the supplier, without stipulations for export or shipping.

Free Carrier (FCA): Supplier’s risks and obligations end if the supplier delivers the products to the shiiping carrier of the buyer, cleared for export.

Free Alongside Ship (FSA): Supplier’s risks and obligations end if the supplier places the products at the site of shipping vessels at the port of exit, which is cleared of export.

Free on Board (FOB): Supplier’s risks and obligations end if the supplier places the products past the rail of shipping vessel, which is cleared for export.

Cost and Freight (CFR): Liability and ownership changes if the supplier places the products past the rail of shipping vessel that is cleared for export.

Cost, Insurance, and Freight (CIF): Supplier’s risks and obligations end if the supplier places the products past the rail of shipping vessel, which is cleared for export. But the supplier is then obligated to buy only the minimal marine insurance.

Carriage Paid To (CPT): Supplier’s risks and obligations continue until the product is delivered to the buyer. The buyer assumes the risks only after taking possession of the products.

There are some other terms also that are discussed in the next part of this article.