Too many times I see people and companies
using "shipping" terms that are not accurate and cause a waste of
time due to the need of exchange of clarification emails. Moreover, if ever
worse-come-to-worse, these terms can cause unwanted liabilities for one of the
parties. One of the reasons for these confusions is that during the years the
amount of terms have grown and changed. Today there are terms that are used
just for air freight, ocean freight, or for both.
Therefore, I decided to put here a short
list of the most common and useful terms and their meaning. I made the list in
a logical way, so the terms are starting from the point where the buyer has the
most responsibility and develops to the one where the buyer has the least
responsibility.
Ex. Works: This means that the Buyer is buying the
goods at the Seller warehouse (office). From thereon, it is the Buyers
responsibility to get the goods to wherever they need to go.
FOB: The Seller will get the goods on the boat or to the air
terminal. From thereon it is the Buyers responsibility to get the goods to wherever
they need to get to. This responsibility includes the freight cost.
CIF: In this case the seller will get the goods to the marine
or air terminal at the destination, but all other responsibility is with the
buyer, i.e. duty, customs, in-land freight, etc.
DDU or DAP: Here the Seller take responsibility to
deliver the goods to the Buyer. HOWEVER, all customs and duty fees are
responsibility of the Buyer and the seller doesn't carry the burden of their
costs.
DDP: This is what many people know as
"door-to-door". Here the Seller takes all responsibility to deliver
the goods to the Buyer at the Buyer's designated location.
This list is a simpler version of the
Incoterms and is to give you a basic understanding of these terms. You can download a very easy to use chart HERE.
