Incoterms (International Commercial Terms) define the division of costs and duties between a seller and a buyer. They also apply in the case of ocean transport. Getting familiar with at least a few of the popular solutions can help us choose the most optimal option for us.
A term with the least amount of responsibility on the seller’s side. They only need to make the packed products and documentation available in a pre-arranged location. Then the buyer bears all the costs and responsibilities. For this reason, EXW is most often used by already experienced importers.
Just like in EXW, the buyer has the freedom of choice when it comes to freight forwarding agency. The seller is responsible for the cargo until the moment it is loaded on the vessel. That means they also deal with customs clearance at the port of origin. It is a highly recommended rule as it allows flexibility. Overall, FOB is usually slightly cheaper than EXW.
A term applied in all means of transport and intermodal transport. The seller needs to deliver the goods to a place that both sides agreed upon and pay the duties.
The seller additionally bears the cost of sea freight until the vessel arrives at the port of destination. The buyer does not choose a freight forwarder; however, as soon as the goods are loaded aboard the ship, they bear the responsibility and insurance costs.
CFR, but the seller takes the insurance costs until the vessel arrives in the destination port. A prevalent method, yet it does not allow for transport that uses more than one mode of transportation (then CIP is used.)
Remaining Incoterms include CPT, CIP, DPU, DAP, DDP, and FAS.