Understanding shipping incoterms 2022 is important for anyone involved in international trade. With the release of the latest version, it’s important to stay up-to-date with the changes to ensure compliance and avoid any misunderstandings or disputes. In this article from Moer Sourcing, we’ll take a closer look at the five most commonly used shipping incoterms 2022 and what you need to know to navigate them successfully.
What is Shipping Incoterms?
Shipping Incoterms are a set of rules established by the ICC to define who is responsible for the associated risks, costs, shipping, insurance, and tariffs in a contract between buyers and sellers. It helps to reduce the confusions that may cause between buyers and sellers. Under different incoterms, the costs and responsibilities borne by buyers and sellers are different. Let’s take a look at the five most commonly used shipping incoterms.
5 Most Commonly Used Shipping Incoterms 2022
- EXW = Ex Works / Ex-Warehouse
Ex-works / Ex-factory price: to deliver goods at the shipper’s factory or warehouse, sellers do not need to pay for any freight, and buyers pay the total cost.
Under EXW incoterm, Buyers are responsible for everything, from goods picking up to the final destination, sellers only need to make goods ready.
Place of Delivery: China Factory / Warehouse
Freight charge: undertaken by Buyers
Export Procedures in Port of Departure: undertaken by Buyers
Import procedures in Destination Port: undertaken by Buyers
- DDP = Delivered Duty Paid
DDP Price = all Local Charges at the port of departure + the Customs clearance fees + Tariffs at the port of destination shall be paid by Sellers.
Contrary to EXW, under this incoterm, the seller will handle all costs of delivering the goods to the Buyer’s destination and warehouse, including payment of the Customs duties involved. This may be your most expensive option, but it involves the least logistics and coordination.
- FOB = Free on Board
FOB stands for ” Free on Board” Sellers deliver goods to the designated port or warehouse and pay all the Local fees. At the same time, Buyers are at risk once Goods are shipped.
Who pays for the freight?
If the shipping terms include ” FOB Origin, Freight Collect,” the buyer is responsible for both the goods being shipped and the freight charges. While if the shipment is under “FOB Origin, Freight Prepaid,” the buyer is responsible for the goods being shipped, but the Seller pays the freight.
Place of Delivery: Port of Departure
Freight charge: undertaken by buyer
Export Procedures in Port of Departure: undertaken by Seller
Import procedures in Destination Port: undertaken by buyer
- CNF = Cost, and Freight
CNF stands for ” Cost and Freight.”
Under CNF Incoterm, sellers will transport goods to the port, load them on the ship, and pay all the local fees, declaration fees, other charges, and sea freight charges. After the ship arrives at the destination port, buyers will need to pay all the costs, including the cost of unloading the goods from the ship and Customs clearance fees, etc.
Place of Delivery: Port of Departure
Freight charge: undertaken by Seller
Export Procedures in Port of Departure: undertaken by Seller
Import procedures in Destination Port: undertaken by Buyer
- CIF = Cost + Freight + Insurance
CIF terms are almost the same as CNF terms; the only difference is that CIF has an additional insurance premium. Under this incoterm, the shipper bears the insurance premium.
After the ship arrives at the destination port, buyers shall bear all the costs of the destination port, including the cost of unloading the goods from the ship and customs clearance at the destination port.
Place of Delivery: Port of Shipment
Freight: undertaken by Sellers
Insurance: undertaken by Sellers
Export procedures: undertaken by Sellers
Import procedures: undertaken by Buyers
How do buyers and sellers agree on Which Incoterm to use
Unless the buyer has a special request, sellers will generally prefer the INCOTERMS they use that are best for themselves and their customers. Buyers can have their preferences, and through thorough communication with sellers, they two can get an agreement on an ideal incoterm.
For INCOTERMS to be valid, the terms should be listed on purchase orders, proforma & commercial invoices, or contracts. Since these are contractual terms, buyers and sellers should agree on their agreement and not rely on verbal communication to determine the responsibilities of each party on shipment. Of course, INCOTERMS can also be changed during the order process.
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Conclusion
Understanding Shipping Incoterms 2022 is important for wholesalers who want to engage in international trade. The updated Incoterms rules provide clarity and consistency in global shipping practices, reducing the risk of misunderstandings and disputes between buyers and sellers.
As a sourcing company, Moer Sourcing can help you navigate the complexities of shipping Incoterms and handle your sourcing and shipping needs. With our expertise and experience, we can ensure that our clients receive their products on time and in good condition, while also saving them money and hassle.
If you’re a wholesaler looking for a reliable partner for your sourcing and shipping business, turn to Moer Sourcing for assistance. We’re committed to providing excellent service and building long-term relationships with our clients. Contact us today to learn more about our services and how we can help your business grow.
