Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce. Understanding these terms is essential for international commodity trading.
Most Common Incoterms in Sugar Trading
FOB – Free On Board
The seller delivers goods on board the vessel at the named port of shipment. From this point, risk and cost transfer to the buyer.
Best for: Buyers with experience in international shipping and established freight relationships.
CIF – Cost, Insurance, and Freight
The seller pays for carriage and insurance to the named destination port. Risk transfers when goods are loaded on the vessel.
Best for: Buyers who prefer a turnkey solution with shipping handled by the seller.
CFR – Cost and Freight
Similar to CIF but without insurance arranged by the seller. The buyer is responsible for insurance coverage.
EXW – Ex Works
The seller makes goods available at their premises. The buyer bears all costs and risks from this point.
Key Considerations
- Risk Transfer Point: When does responsibility shift from seller to buyer?
- Cost Allocation: Which party pays for freight, insurance, and handling?
- Documentation: Who is responsible for export/import formalities?
- Insurance: Is coverage included, and to what extent?
Choosing the Right Incoterm
The choice of Incoterm depends on:
- Your experience with international shipping
- Cost considerations
- Control preferences over the shipping process
- Relationship with freight forwarders
At The World Merchants, we work with clients to select the most appropriate Incoterms for each transaction, ensuring clarity and mutual understanding.