While dealing with shipments, and exporters, you will go through a lot of International Commercial Terms. You should be familiar with these terms in order to keep your import process smooth. Let’s discuss some commonly used Incoterms in China.
This is generally the term most used if you are importing from China.
In this type of shipment, the seller delivers the products purchased at the port and loads them onto the specific vessel. The seller is also responsible for export customs clearance. The seller’s delivery is complete when the goods cross the ship’s rail. At this point, the responsibility is transferred to the buyer, and from now on, it is the buyer’s responsibility to get the goods to their destination. This is one of the most commonly used shipping processes during international trade.
Pros
Lower risks: As a buyer, you fully control paying, contracting, and managing shipments. You can also select trusted logistics partners like SSS to ensure everything is under control.
Cost Savings: Get more power to reduce or negotiate your cost of insurance prices, taxes, fees, and tariffs.
Cons
The sellers sometimes get a certain kickback for using a specific freight supplier and may not be willing to work with another consignee.
It is basically a shipping arrangement in which the seller is responsible for manufacturing the products and handing them over to the buyer. Now, it is the buyer’s responsibility to take it to the designated place and bear all the costs, including transportation, booking, customs declaration, and inspection. The delivery is completed when the buyer picks up the goods from the seller at the named place, such as a warehouse or factory. Normally, buyers will avoid such a type of shipment as it involves all the risk and transportation costs.
Pros
The responsibilities will be minimal for the seller.
The sellers in China usually can quote you a lower price than using other Incoterms.
Cons
The buyers should have an excellent logistic partner to handle the transportation. Otherwise, the risks may be very high. The risks could be “Customs house broker problems in Chinese ports”, or “Inland Transportation from the factory to port”, or “difficulty in loading containers”, etc.
Under CIF, the buyer takes over ownership of the goods only at the destination port.
In this type of shipment, the seller, alongside cost and freight, takes on the insurance as well. The risk is still transferred to the buyer after onboarding the products.
Pros
The responsibilities will be minimal for buyers.
Cons
Out of control for the shipments and risk for delay may take place.
High arrival cost. It would be best if you had an extra logistics partner to deal with goods upon arrivals, such as destination Customs Clearance, port-to-warehouse management, and import taxes.
This is quite similar to the FOB, but the seller is also responsible for paying for the costs and freight for bringing the products to the destination port.
The CFR or Cost and Freight is an Incoterm exclusive to ocean freight. The difference between CFR and CIF then is insurance is mandatory to be provided by sellers under CIF. With CFR, however, insurance is optional.
Pros
As a buyer, you do not need to bother about arranging transportation. The seller handles everything.
As a seller, you need to pay for the freight before the payment is received from the buyer. Attention to cash flow is suggested.
As a buyer, it will be cost-saving if you can acquire better or more affordable insurance.
Cons
Your seller might ass transportation costs to their selling price. So, your purchasing price may increase.
For sellers, their responsibility for cargo loss and damage will cease once the goods as on board. So, the arrangements for minimizing the risk for the buyers are suggested to be aligned in the contract.
Out of control for the shipments and risk for delay may take place for the buyers.
This is the most preferred way of shipment during international trade, but very few exporters agree on it. In this, the seller is responsible for all the fees and risks involved in the whole process until the goods are delivered to the destination. After the delivery, risks and fees are transferred to the buyer. The buyer only needs to unload the goods at the final destination.
