Understanding Incoterms 2024: A Guide for Our Customers
At CIMEXP FZ-LLC, we shipped worldwide and we understand that navigating international trade can be complex. That’s why we’re here to break down the latest Incoterms 2024, ensuring you know exactly what to expect when purchasing your vehicle from us.
What Are Incoterms?
Incoterms, or International Commercial Terms, are a set of predefined international rules established by the International Chamber of Commerce (“ICC”) that are used in international sale contracts that clarify the responsibilities of buyers and sellers in international transactions. They help reduce misunderstandings and make international shipping smoother.
Overview of Incoterms 2024
Incoterms 2024 consists of 11 rules that define the tasks, costs, and risks involved in the delivery of goods for the buyer and for the seller. Not all Incoterms are valid for all types of shipments. While all Incoterms are valid for waterway shipments, some can only be used for waterway transport, and not land or air. Knowing these differences can be crucial, because if you use a waterway only Incoterm and ship using an alternative method, you may find yourself needing to cover additional, unexpected charges.
Below, we’ll highlight the key terms relevant to our car trading business:
1. EXW (Ex Works or Ex Works or Ex-Warehouse)
EXW places minimum responsibility on the seller and maximum responsibility on the buyer. The seller’s only obligation is to make the goods available at their own premises (usually their factory or warehouse), suitably packaged and ready for collection.
2. FCA (Free Carrier)
FCA – Free Carrier: The seller is responsible for delivering the goods, ready for export. Once the load has arrived at the designated destination, the shipment transfers to the buyer, the buyer then must pay the freight charges and fulfill the importing and delivery process. In all cases, the seller is responsible for export clearance; the buyer assumes all risks and costs after the goods have been delivered at the named place.
3. CFR (Cost and Freight)
CFR – Cost and Freight: The seller is responsible for transporting the cargo to the buyer’s port. Once the goods have arrived at the port, the responsibility transfers to the buyer. The buyer then must unload the cargo and import the goods into the destination country, followed by importing and delivering to the final destination.
4. FAS – Free Alongside Ship
The seller must manage the full export process of the cargo until the goods are alongside the ship or other mode of transport. Once alongside the ship, the risk is transferred to the buyer. The buyer is responsible for loading the cargo onto their desired vessel and shipping the goods to their final destination.
5. FOB – Free On Board
The seller must manage the full export process of the cargo, and load the products on the ship. Once the cargo has been safely loaded, the products transfer to the buyer. The buyer must pay for the freight costs that transport the goods to their destination and is responsible for all import costs.
6. CIF – Cost, Insurance & Freight
The seller is responsible for the costs to ship and insure the cargo to the buyers requested port. Once the goods arrive at port, the responsibility of the goods transfers to the buyer. The buyer then must cover the costs to unload, import, and deliver their shipment. CIF requires the seller to purchase freight insurance.The FCA Incoterm states that the seller must deliver the goods, ready for export, to the buyer’s chosen carrier at a specific agreed-upon location listed in the sales contract. This location can be a particular port or a carriers’ hub. In all cases, the seller is responsible for export clearance; the buyer assumes all risks and costs after the goods have been delivered at the named place.
Why Does It Matters to You?
Understanding these terms is essential for making informed decisions and avoiding unexpected costs. Whether you’re importing or exporting vehicles, knowing who is responsible for what can save you time and money.
Conclusion
At CIMEXP FZ-LLC, we aim to provide transparency in every step of your car purchasing journey. If you have any questions about Incoterms or need further assistance, don’t hesitate to reach out!