Understanding Incoterms: FOB, EXW, CFR, FCA, CIF Simplified
Navigating Incoterms can be complex. Here’s a straightforward breakdown to make things clearer.
EXW (Ex Works)
EXW means the seller has minimal responsibility. Once they sell the goods, the buyer handles all shipping details. This includes arranging pickup from the factory and managing shipping to the destination, including customs clearance if necessary. While EXW gives the buyer control over shipping, it’s often pricier as logistics aren’t included in the goods’ price. Always confirm the pickup location to accurately calculate shipping costs.
FCA (Free Carrier)
FCA is similar to EXW, but the seller also handles export clearance and costs. They’ll secure an export license and complete customs formalities. Remember, it’s only FCA if the seller completes the customs clearance.
FOB (Free On Board)
With FOB, the seller’s job is to get the goods to the container ship and load them. They cover all costs up to this point. Once the goods are on board, the buyer takes over, including securing cargo space and paying for onward shipping.
CIF (Cost, Insurance, and Freight)
CIF is like FOB, but the seller also covers sea freight and insurance up to the destination port. The buyer’s financial responsibilities kick in when the ship docks, covering unloading, customs, and delivery within the export country.