3 {{ upvoteCount | shortNum }}
3 {{ upvoteCount | shortNum }}

INCOTERMS What every newbie should know about importing

by Importexport
2 replies
  • ECOMMERCE
    • |
I have attached a Word doc with a list of the shipping terms used universally by exporters and importers.

Many newbies will find it scary trying to work out what they all mean. There are some basic explanations beside each term so at least you will know what they mean, although in practice you may find it not so easy.

Once Warriors read the list, they are welcome to post a request for further explanation of any of the terms. I will reply as quickly as possible. Please don't PM me about it as my mail box tends to get overloaded already.

Just to show you how important a knowledge of these can be, here is some of the information I posted today in the thread: Question on listed FOB pricing

"From my long experience in dealing with China, I know that many Chinese businesses use FOB incorrectly. They will often quote FOB when they really mean Ex Works (EXW). If they mean EXW, the buyer will be responsible for all costs of picking up from the factory and shipment to seaport or airport.

Those costs can include a pick up fee, road transport, tolls, documentation fees, export Customs declaration, insurance from factory to port, and possibly others depending on location of the factory and port of shipment."

Don't let the apparent complexity of importing put you off joining the ranks of those who make huge profits out of direct importing. Once you learn the basics it is easy.
#importing #incoterms #newbie
  • Profile picture of the author OnlineStoreHelp
    Thanks for sharing with the forum. While Incoterms can be useful I find them to be quite useless without discussing the risk aspects of those terms. I think many would find it much more useful to hear your experience insuring your shipments from the factory to your door. If I can remember from my cargo days...

    No Insurance - Standard Marine terms will cover you for $2/kg (please correct me if I am wrong).
    Shipper Provided Insurance - Tends to be quite expensive and you have to make sure it covers a fully load price, not just a wholesale price.
    Cargo/Stock Through Put Policy - You buy the insurance. I have never bought a small policy, all my stock through put policies had a 50,000 deductible so hard for me to speak on.

    Even in these cases, the standard Incoterms can be quite vague. For example, FOB, when is a cargo container technically on board? When it crosses the deck rail? Fully clears the deck rail? Ex works? Does the truck have to leave the loading dock or is it considered ex works the moment the pallet crosses into the container?

    And don't assume once it is in the US that it is safe. It is not uncommon for a truck driver to leave the port en route and have to use the bathroom and, low and behold, he left the keys in the truck and someone stole it..

    All of these are things that are heavily negotiated by large companies when they import, I am just unsure of how that effects the smaller importer. Does the freight forwarder have responsibility until it hits the warehouse?
    Signature
    Learn how to set up a powerful, functional yet easy to use e-commerce website at cartprep.com.

    Not sure what ecommerce solution to use? Watch my video walk through of popular shopping carts.
    {{ DiscussionBoard.errors[9214713].message }}
    • Profile picture of the author Importexport
      I appreciate your comments and agree that INCOTERMS on their own can be very confusing and open to some interpretation. I hope the apparent complexity does not make newbies think twice about direct importing.

      I teach how to simplify the whole procedure, and there is no need for anyone to learn all the rules and regulations. I started this thread primarily to draw attention to the fact that terms quoted by suppliers have specific meanings, and that sometimes the supplier may use the wrong term.

      I have seen too many newbies place orders FOB and believe that it includes freight to their address!

      Here are some observations from my experience, and I think they will cover most if not all of the issues you raised:
      • If using sea freight it is essential to have full cover, and as you rightly point out, it must cover the fully loaded price. To be on the safe side I always took out cover for invoice value + 10%. If cover is below the full value, an averaging clause applies, just as it does in ordinary household insurance. With sea freight there are other clauses that can also cause financial loss to the importer if full value is not insured. These are: General Averaging (which is distinct from Averaging) and Coinsurance.
      • The Cargo/Stock Through Put Policy you refer to is officially known as Open Cargo or Shipper's Interest insurance. It always covers the full value, but importers need to consult an insurance specialist about such a policy. I would recommend this type of policy if you are making frequent shipments.
      • FOB. According to the International Chamber of Commerce, the body that compiles INCOTERMS, this term only relates to sea shipments and they define it as meaning that the Seller delivers the goods on board the ship and clears the goods for export. From that point, the Buyer bears all costs and risks of loss or damage.
      • EXW. (Ex Works) must be explained by the Seller in writing, so that the Buyer knows where liability passes from one to the other. I would never accept a quote for EXW. There are too many variable charges that can be incurred particularly if the factory is inland, and the port of shipment is Hong Kong.
      • MISUSE OF TERMS. A large number of businesses in China (probably most) incorrectly quote FOB, when in fact they mean EXW. For this reason I would never accept an FOB quote unless it was for a shipment by sea. The reason I would accept an FOB quote for a sea shipment is that the larger order value would certainly warrant using the services of a freight forwarder.
      • FREIGHT FORWARDERS have no responsibility for loss or damage to the shipment. It is common to get them to include insurance cover, and that cover ends at the point of delivery specified in the freight contract. My preference would always be to specify delivery into my warehouse. It is then covered by any arranged insurance until landed on the warehouse floor.
      Small importers need to remember that buying overseas is very different than buying locally. There are risks involved unless you know what you are doing or if you don't know yourself, you have the guidance of someone who does know the ropes.
      Signature
      Use emotions and perceptions to build a great brand. Ask me about my book LabelsThatExploit. For safe sourcing and easy importing from 41 countries globally, see https://provenglobalsourcing.com
      {{ DiscussionBoard.errors[9215499].message }}

Trending Topics