Trade Terms - The first step to know import

As an international sales, we should know the trade terms very well, and if customers are newbie, we should explain it to him/her. Anyway, it is also neccessary for the buyers to know some basic knowledge of trade terms.

As per my experience in custom plastic injection molding industry, the most commonly used trade terms are as below(there are 13 trade terms totally):

1, FOB This is the NO. 1 FOB means Freight On Board or Free On Board. If terms of delivery of a transaction is on FOB means, the cost of movement of goods on board of Airlines or on board of ship is borne by the seller. Rest of all expenses to arrive the goods at buyer's premise has to be met by the buyer.

2, CIF – Cost, Insurance and Freight. In this case, the price also includes sea freight charges and insurance to deliver the goods to YOUR nearest port. But only to the port – from that point onwards, you take the shipment into your hands.

3, CNF – Cost & Freight (or Cost, no Insurance, Freight). Similar to CIF only this time insurance is not included.

For NO.1, 2 and 3: When the goods arrive, you’ll have to organise customs clearance and delivery to your home/office/warehouse. Keep in mind that there will be other costs involved, such as:

Customs clearance fee Value Added Tax Import Duty Port security charge Fuel surcharge Docking charge Warehouse storage fee Etc.

You can ask the manufacturer to estimate the packing details(how many pcs per carton, carton size, gross weight per carton, how many cartons totally) before you make a decision. Then you can consult the above costs from a forwarder.

For FOB, CNF and CIF, once the cargo pass the edge of the harbor of loading port, the supplier is no longer liable, but they should be responsible for the basic quality. Not liable should be they can not guarantee if the cargo can arrive safely, or they will be stolen? or disappear for something wrong? or some disasters happen that no one can control or expect... CIF vs. FOB, the only difference is the Insurance and Freight should be bough by the seller for the cargo, and then the cargo is insured. The insurance is not very high. You can ask the seller to quote based on CIF if you want the cargo be safer. Almost 99% of the cargos are safe, but... so it is up to you. For the freigt of CIF, it is only the ocean freight, not including other charges like doc/ISF, Customs clearance fee, etc, as mentioned above.

Somebody would ask: so many parties involved (you, the supplier, the forwarder, etc), it must be quite complex to determine who is liable for the goods at what point?

Yes, so many parties involved, but if it is goods quality problem, find the reason, if not because of wheather or something that can not be controlled, find the supplier; if lost some cartons, find the forwarder; if Customs clearance too late, and if becuase supplier send documents too late for no reason, find the supplier; if supplier send documents or do telex release too late, but because you paid too late, it is your own fault. _ if Customs broker delays the Customs clearance for no reason, find the Customs broker.

4, EXW (Ex-Works) – also sometimes referred to as the Ex-Factory price. This basically means the cost of the product and nothing else! No shipping costs or export fees in China are included in this price, never mind local port and custom fees or delivery to your door.

If your products can be just shipped by courier, ask for EXW price, which not including charges at loading port in China.

Author: Vicky Liu --- Sales Manager of Respon Moulding Co., Ltd.