There are many different types of shipping terms used worldwide, but here we will only list the most common ones used by retailers and explain the main differences.
Ex works simply means that the supplier will only prepare the goods for you to collect from their facility and start the shipping process on your own. This could be done through a freight forwarder that you commission to go and pick up the goods from the agreed upon place (usually the supplier’s warehouse).
You and your forwarder will be responsible for clearing the goods for export and from this point the supplier carries no liabilities over the goods.
You will cover all the costs of clearance, insurance and freight.
FOB (Free on Board)
Free on Board (FOB) means that the supplier will deliver the goods on the ship at the shipping port after clearing them for export. From this point onward all the risks and costs transfer to the buyer.
You can also use a freight forwarder from this point to deliver the goods all the way to your warehouse.
CIF (Cost, Insurance & Freight)
In CIF the supplier is responsible for all the costs & liabilities of transferring the goods until they reach the port of destination. From that point the buyer confirms receiving the shipment and only needs to handle the costs of customs clearance and duties at the destination port.
Why It Matters To Understand The Types of Shipping Terms
When you negotiate the price of each product with your supplier you should assume that the shipping price is already factored in the proposed price they are offering you.
Once you get quotes for prices from different suppliers, you want to compare the shipping terms they have included in order to be able to asses which price is a better deal for you.
Knowing the types of shipping terms will also serve as a negotiation point in itself. For example if the supplier doesn’t want to reduce the price further, you can offer to accept this price on the condition that the type of shipping term used will be CIF.
It should also be noted that in some cases choosing to go with CIF shipping term, even at higher price, might be more beneficial for you. You might find that you are not able to secure low shipping quotes from freight forwarders on your own, while the supplier is having better deals with shipping companies because of the volume he ships out regularly.
On the other hand, you might have good relationships with forwarders and can secure better prices than what the supplier is offering. In this case FOB might be more beneficial for you.
The key is to do the math and see how the total cost will be in both cases at the end and compare.
Understanding the different types of shipping terms will help the buyer or category manager know the real costs associated with sourcing products. Using this knowledge in negotiation every time will allow him to save a lot on the total costs of goods sold, and improve his overall margins.
There are about a dozen of these shipping terms. Basically, Incoterms indicate three things. (1) Who arranges for transport and the carrier.(2) Who pays for transport.(3) Where/when does title (ownership) of goods transfer from seller to buyer.
Incoterms, widely-used terms of sale, are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
According to the U.S. Commercial Service, “The most common Incoterms are EXW (Ex Works); FOB (Free On Board); CIF (Cost, Insurance, and Freight); CPT (Carriage Paid To); DDU (Delivered Duty Unpaid); and DDP (Delivered Duty Paid).”1 This causes concern as the term DDU was replaced in the latest revision of these ...
There are 11 Incoterms in total, and they are divided into two categories: Incoterms for Any Mode of Transport: These include EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), and DDP (Delivered Duty Paid).
Ground Shipping. Considered the most common method, ground shipping is a reliable and cost-effective option to move packages and goods within a country or region through several carriers such as FedEx, UPS, and USPS. ...
There are three main modes of transportation to consider for your freight shipping logistics: ground – including full truckload (FTL) and less-than-truckload (LTL) – air and ocean.
Some common examples of Incoterms rules for any mode of transportation include Delivered Duty Paid (DDP), Delivered at Place (DAP), and Ex Works (EXW). The seven Incoterms for any mode of transport are: EXW: Ex Works. FCA: Free Carrier.
Free on Board (FOB) is a shipment term that defines the point in the supply chain when a buyer or seller assumes responsibility for the goods being transported. FOB terms like FOB Origin and FOB Destination help define ownership, risk, and transportation costs for both buyers and sellers.
FOB origin, or FOB shipping, means the buyer takes responsibility at the point of origin of the freight. FOB destination means that the buyer only takes responsibility for freight once it reaches its destination, and the seller is liable for any damage.
The UPS®, FOB®, CIF®, and DDP® terms are the most commonly used Incoterms on the Amazon Marketplace; these terms specify where goods will be shipped from (UPS), where payment will be received (FOB), what type of shipment receipts should be issued (CIF), and what the terms of delivery are (DDP).
Free On Board (FOB) This Incoterm states that the seller delivers the goods to a ship the buyer chooses and pays for the goods to get loaded onboard. ...
However, it is possible to say that the cheapest Incoterms are often the FOB, EXW and DAP. In FOB, the seller leaves the goods cleared for export on board a selected vessel.
Free on Board (FOB) is a term used to indicate when the ownership of goods transfers from buyer to seller and who is liable for goods damaged or destroyed during shipping. "FOB Origin" means the buyer assumes all risk once the seller ships the product.
The first is the size: Smaller items are shipped while larger items are delivered. The second difference is the date on which each takes place. Shipping dates usually refer to when an item leaves the warehouse while the delivery date specifies when it should reach the customer.
The main difference between CIF and CFR shipping terms is insurance. On both CFR and CIF shipping terms, the risk of the cargo transfers from seller to buyer once the goods are loaded on the selected vessel at the port of origin, but under CIF, the seller must purchase insurance for the cargo.
FOB is a shipping term that stands for “free on board.” If a shipment is designated FOB (the seller's location), then as soon as the shipment of goods leaves the seller's warehouse, the seller records the sale as complete.
Introduction: My name is Nathanael Baumbach, I am a fantastic, nice, victorious, brave, healthy, cute, glorious person who loves writing and wants to share my knowledge and understanding with you.
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