Explained about basic INCOTERMS for beginners! EXW/FOB/CFR/CIF/DAP/DDP.
Summary
TLDRThis video, presented by HPS Trade, a Japanese freight forwarder in Thailand, offers an insightful overview of Incoterms, essential trade terms and conditions that dictate who bears the freight costs and responsibility for cargo during delivery. Focusing on six commonly used Incoterms—EXW, FOB, CFR, CIF, DAP, and DDP—the presenter explains each term's implications for freight costs, insurance, and cargo responsibility, emphasizing the importance of understanding these terms for smooth international trade and the mutual agreement between sellers and buyers. The video also highlights the necessity of cargo insurance in international logistics and provides a clear guide for logistics professionals to make informed decisions.
Takeaways
- 📚 Incoterms are international trade terms and conditions that define responsibilities between buyers and sellers for the delivery of goods.
- 🔢 There are 11 different Incoterms, but the focus should be on understanding the six most commonly used ones: EXW, FOB, CFR, CIF, DAP, and DDP.
- 🚚 EXW (Ex Works) is the simplest term for sellers, where buyers are responsible for all transportation costs and risks from the seller's factory.
- 🚢 FOB (Free On Board) transfers the responsibility of goods from the seller to the buyer once the goods are loaded onto the ship.
- 💸 CFR (Cost and Freight) requires sellers to pay all transportation costs and freight to the port of import, after which importers pay local costs.
- 🛫 CIF (Cost, Insurance, and Freight) is similar to CFR but includes insurance arranged by the seller for the cargo during transit.
- 🚪 DAP (Delivered At Place) is a 'door-to-door' term where the seller pays all costs and bears responsibility until the goods reach a specified location.
- 🏦 DDP (Delivered Duty Paid) is similar to DAP, but the seller also pays for import customs duties and taxes, making it a complete 'door-to-door' service.
- ⚠️ It's crucial for both buyers and sellers to understand and agree on the Incoterms to avoid disputes and ensure smooth international trade.
- 🌐 Incoterms help establish clear rules for cargo delivery, payment, and risk allocation, which are essential for international logistics.
- 💼 Understanding Incoterms is vital for professionals in manufacturing, trading, and forwarding companies to make informed decisions and provide the best service to customers.
Q & A
What is the purpose of INCOTERMS in international trade?
-INCOTERMS are trade terms and conditions that clearly define who pays the freight and who is responsible for the cargo at different steps of the cargo delivery process between sellers and buyers.
How many types of INCOTERMS are there in total?
-There are 11 types of INCOTERMS in total.
Why is it important to understand the basic six INCOTERMS as a beginner?
-As a beginner, focusing on the six most commonly used INCOTERMS helps in building a strong foundation before moving on to the rest, making it easier to understand and remember the more complex terms.
What are the six basic INCOTERMS that are frequently used in trade business?
-The six basic INCOTERMS are EX WORKS (EXW), FOB, CFR, CIF, DAP, and DDP.
What does EX WORKS (EXW) mean for the seller in terms of responsibility and cost?
-In EX WORKS, the seller's responsibility ends once the cargo is loaded onto the buyer's transportation at the factory. The buyer is responsible for all transportation costs and risks from that point.
How does the responsibility of cargo change under FOB terms?
-Under FOB terms, the responsibility for the cargo shifts from the seller to the buyer once the cargo is loaded onto the ship at the port of export.
What does CFR stand for and who pays the freight costs under this term?
-CFR stands for Cost and Freight. The seller pays all freight costs from the factory to the port of import, while the importer pays for costs such as shipping fees and transportation from the port to the final delivery location.
What is the main difference between CFR and CIF?
-The main difference between CFR and CIF is that CIF includes insurance ('I' stands for Insurance), meaning the seller has to arrange insurance for the cargo delivery in addition to paying all freight costs from the factory to the port of import.
What is DAP and how does it differ from DDP in terms of responsibility and cost?
-DAP (Delivered At Place) means the seller pays all costs and takes all responsibility for the cargo until it is delivered to a specific place. The main difference from DDP is that in DAP, import taxes are paid by the importer, whereas in DDP, the seller pays both the import taxes and all transportation costs including taxes.
Why is cargo insurance recommended in international logistics?
-Cargo insurance is recommended because it provides security against unforeseen events such as accidents, fires, or damage during the long voyage. Without insurance, there is no guarantee for the cargo, which can lead to significant financial loss.
How should one approach learning and applying INCOTERMS in their logistics job?
-One should start by understanding the basic six INCOTERMS and then gradually learn the rest. It's also important to consider which terms are advantageous for one's own logistics and to make informed suggestions to customers based on a clear understanding of the terms and conditions.
Outlines
📚 Introduction to Incoterms for International Trade
This paragraph introduces the concept of Incoterms, which are essential trade terms and conditions used in international shipping. Incoterms help clarify who is responsible for paying freight and handling cargo at various stages of delivery. The speaker emphasizes the importance of understanding Incoterms to avoid disputes and ensure smooth business transactions. Six commonly used Incoterms are highlighted for beginners to focus on: EXW, FOB, CFR, CIF, DAP, and DDP. Each term is briefly described to set the stage for more detailed explanations in subsequent paragraphs.
🚢 Detailed Explanation of Six Key Incoterms
This paragraph provides an in-depth look at the six key Incoterms mentioned earlier. EXW (Ex Works) is described as the simplest term for sellers, where buyers take over all logistics and costs from the factory. FOB (Free On Board) shifts responsibility to buyers once goods are loaded onto the exporting vessel. CFR (Cost and Freight) and CIF (Cost, Insurance, and Freight) are explained, with the key difference being that CIF includes insurance. The paragraph also clarifies that the responsibility shift in CFR and CIF is similar to FOB, occurring when goods are loaded onto the vessel. DAP (Delivered At Place) and DDP (Delivered Duty Paid) are door-to-door terms, with the main difference being who pays import taxes. The paragraph concludes by summarizing the cost and responsibility aspects of each term and encourages viewers to consider the advantages of each Incoterm for their logistics needs.
Mindmap
Keywords
💡Incoterms
💡EXW (Ex Works)
💡FOB (Free On Board)
💡CFR (Cost and Freight)
💡CIF (Cost, Insurance, and Freight)
💡DAP (Delivered at Place)
💡DDP (Delivered Duty Paid)
💡Freight
💡Cargo
💡Insurance
💡Responsibility
Highlights
Incoterms, a set of international commercial terms, is crucial for understanding responsibilities and costs in trade.
There are 11 types of Incoterms, but beginners should focus on the six most commonly used: EXW, FOB, CFR, CIF, DAP, and DDP.
Incoterms clarify who pays for freight and who is responsible for cargo at different stages of delivery.
Understanding Incoterms helps avoid disputes and ensures smoother international trade transactions.
EXW (Ex Works) is the simplest term for sellers, where buyers handle all logistics and costs from the factory.
FOB (Free On Board) transfers cargo responsibility from sellers to buyers once the cargo is loaded onto the ship.
CFR (Cost and Freight) requires sellers to pay all freight costs to the port of import.
CIF (Cost, Insurance, and Freight) is similar to CFR but includes insurance arranged by the seller.
DAP (Delivered At Place) means sellers cover all costs and responsibilities until the cargo reaches a specified location.
DDP (Delivered Duty Paid) is a door-to-door term where sellers pay all costs, including import taxes and duties.
Cargo insurance is strongly recommended for security during international logistics.
Understanding the switching step of cargo responsibility is crucial for avoiding misunderstandings.
Incoterms help manufacturers and trading companies determine the most advantageous terms for their logistics.
Forwarding companies should have a deep understanding of Incoterms to provide the best suggestions to customers.
The video aims to support viewers in their logistic jobs by explaining international logistics knowledge.
The presenter offers to assist with shipments to or from Thailand and encourages viewers to subscribe and engage.
Transcripts
this is presented by hps trade
japanese freight forwarder in thailand
this time let us explain about inca
terms to understand very well
incoterms is the trade term and
condition and it describes three english
letters such as cfr and fob
there are 11 kinds of encoders in total
it is not easy to remember all 11
kinds of inco terms but please do not
worry
as a beginner course let's focus on
remembering six kinds which are used
very often
it's okay to remember the rest of the
others after remembering those basic six
kinds of inco terms
first of all what is inca terms we need
to understand this first
in trade terms and conditions inc terms
is mentioned clearly
who pays the freight in the different
steps of the cargo delivery
and who has the responsible for those
cargos in the different steps of the
cargo delivery
between sellers and buyers please
understand those two points first
as international trades there are
different steps and procedures for the
cargo's delivery
through those steps we decide to mention
in in terms
about the range of the money payment and
the timing of the cargo release
when the cargo trouble happens it will
be difficult to have the good business
deal
as long as both the seller and buyer do
not recognize and follow the clear rule
mutually for avoiding the troubles
sellers and buyers must make deals based
on the international rule
for this time we will explain to you
about six basic inc terms
which are used very often in trade
business
ex works fob cfr cif
dap ddp these six are today's topics
let us explain one by one first of all
it's x works x works is also called ex
works as well
sellers pass the cargos to the buyers at
the factory in exporting place
buyers importers make all payments such
as transportation fee
from the factory to the delivery places
an importing site
the responsibility of the cargo is moved
from the seller to the buyers
as soon as sellers finish to load the
cargo from the factory to the containers
in other words x works as the easiest
trade condition for the sellers
next it's fob fob
is the trade terms and conditions that
the responsibility of the cargos move
from sellers to buyers
after the cargos are on the board of
exporting side
sellers pay the local transportation fee
in exporting side
buyers pay the ocean freight and
delivery fee in the importing site in
this terms and conditions
the next is cfr cfr is used to call as
cost
and freight but cfr is the correct word
in cfr sellers pay all freight costs
from the factory
at exporting signed to the port in
import side
importers pay the rest of cost such as
shipping fee and transportation fee from
the importing port to the delivery place
before talking about the movement of the
cargo responsibility in cfr
let us explain about cif cif
is the same as cfr sellers pay all
freight costs from the factory
at exporting signed to the port in
import side
the different point between cfr and cif
is an insurance
in cif i stands for insurance
sellers have to arrange the insurance
for the cargo delivery
we are now explaining about the cost and
the cargo responsibility in cfr and cif
in both cfr and cif the delivery cost is
on exporters from the factory
at exporting signed to the port in
import side
however the responsibility of the cargo
and handling the cargos are the same as
fob
those are moved from exporters to
importers once the cargo is loaded on
the board of the vessel
this point makes us to misunderstand so
please be cautious to remember this
point
we talk about the insurance a little in
international logistics
the cargo is handing by the crane
swinging in the vessel
and then it takes long voyage time to be
delivered to the importing side
in the container vessel there are other
containers with dangerous cargos
we have sometimes heard about the story
that the dangerous cargo was on the fire
and the fire burned out the other
containers
unfortunately no one does not guarantee
for the cargos if you don't get the
cargo insurance
we will feel so much secure as we get
the insurance
no one knows what happens in the
international logistics
we strongly recommend to our customers
to get the cargo insurance every time
let us talk back about inca terms the
fifth one is dap
dap is the trade term and condition that
sellers pay all cost and take all
responsibility for the cargo
until it is delivered in the certain
places
in other words this trade terms is
called door-to-door
let's take a look with the dp together
ddp is the same as dap
sellers arrange all logistics from the
factory and exporter side to the
specific delivery places an
importer side seller exporter will take
both delivery cost and cargo
responsibility
until the specific delivery places in
import side
the different point between dap and ddp
is the payment of the import tax
which exporters or importers pay for it
in dap
import custom tax and consumption tax is
paid by the importers
on the other hand in ddp sellers as
exporters pay both
import custom tax and consumption tax
sellers will pay all transportation
costs including taxes
now let's look back about the cost and
responsibility in incoterms
x works is the trade term that importers
will arrange all logistics from picking
up the cargos at the factory and
exporting places to the specific
delivery places in importer side
importers pays all the delivery cost
until the delivery places
and take all responsibility for the
cargo delivery
fob is the trade term that exporters
will arrange to pay the cost and take
the responsibility
until the cargos will be loaded on the
vessel in the exporter side
and then importers will arrange to pay
all costs
including ocean freight and delivery fee
to the importing places
and the importers will take cargo
responsibility as well
in cfr and cif exporters will pay all
cost for the cargos
until the cargo will be delivered in the
port of importing site
importers pay local cost in importing
side until the cargo will be delivered
in the specific places
the attention point is the switching
step of the cargo's responsibility
it is the same as fob that the cargo's
responsibility is moving from sellers to
the buyers
when the cargos are on the board of the
vessel lastly
in dap and ddp exporters take all
delivery cost and cargo responsibility
until the cargos will be delivered in
dap importers pay the taxes
but in ddp exporters pay the taxes
payment of the cost is all listed as
like this
and then the cargo's responsibility is
all listed as like this
how was those about inca terms those six
inca terms are very often to be used
importantly the decision of using inca
terms is based on the agreement between
sellers and buyers in all trade terms
and conditions
if you are working at manufacturing
companies or trading companies
you need to think which trade terms have
the advantages for your own logistics
if you are working at the forwarding
company let's understand those trade
terms and conditions very well
and let's make the best suggestion to
your customers
it's not like that difficult as you
understand those well once
in this channel i explain about
international logistics knowledge for
your better understanding
i hope this video will be a good support
for your logistic job
if you have any shipment from thailand
or to thailand
please feel free to contact me
also i'm very motivated to keep updating
this video
if you subscribe press good or comment
anything
well thank you see you next time
[Music]
you
Ver Más Videos Relacionados
Process of Air Shipment! From Picking up cargo to Delivery.
Incoterms® 2020 Explained for Import Export Global Trade
Incoterms 2020 - TBS open teaching
Lesson 028 - Accounting for Merchandising Operations 2: Transportation
Conocimiento de embarque o Bill of Lading
Module 4: Move It: Transportation and Logistics - ASU's W. P. Carey School
5.0 / 5 (0 votes)