Ocean Freight Incoterms
Neele-Vat provides comprehensive support to clients by offering expert guidance and assistance with navigating the complexities of Incoterms in the context of their international trade operations.
Incoterms, or International Commercial Terms, are standardized rules that outline the responsibilities and obligations of buyers and sellers in global trade. They are particularly important in ocean freight, as they determine how costs, risks, and responsibilities are allocated between parties. Incoterms provide guidelines for delivery, insurance, customs clearance, and other critical aspects of shipping. Well-known Incoterms in ocean freight include FOB, CIF, and EXW. By establishing a shared understanding of rights and obligations, these terms enhance clarity and facilitate smoother international trade.
EXW or FOB?
Many buyers seek advice from us regarding choosing EXW for maximum control of the goods. In general EXW is a good choice, but it depends on the circumstances. The difference between the two is that the seller handles local trucking to the port and prepares customs documents. Picking up shipments anywhere in the world is not a problem for us. With our network of agents, we always have a solution. Feel free to contact us for further inquiries.
Different types
EXW / FOB / CIF / DAP are four common trade terms, also known as incoterms, used when purchasing goods from outside of Europe. These terms determine the responsibility and cost allocation for transportation.
- When using EXW (Ex Works), you are responsible for arranging and paying for transportation from the factory or manufacturer.
- Under FOB (Free on Board), the supplier handles the transportation of goods to the port in the country of origin, and you take over from there.
- CIF (Cost, Insurance, and Freight) or C&F (Cost and Freight) terms include the supplier’s responsibility for transporting the goods to the port in the Netherlands, along with maritime insurance.
- Lastly, DAP (Delivered at Place) or DDU (Delivered Duty Unpaid) terms involve the supplier delivering the goods all the way to your address, excluding tariffs and taxes.
These incoterms can be divided into two categories. EXW and FOB allow you, as the buyer, to use your own agent for transportation. On the other hand, the other terms require the seller to use their agent, and you won’t be able to determine the transportation cost in advance.
To ensure clarity and compliance with European regulations, the incoterm should be clearly stated on the proforma invoice or quotation provided by the seller. If it’s missing, you should request the vendor to include it in the paperwork.
When comparing prices from different vendors, it’s important to ensure that they are based on the same incoterm. For instance, if vendor A quotes EXW $8 and vendor B quotes FOB $8.5, it doesn’t necessarily mean that vendor B’s price is less competitive than vendor A’s.
Most vendors initially provide CIF prices but are usually open to offering different prices based on different incoterms.
