Understand how the costs associated with shipping, duties, and taxes will impact the amount paid for an item. It is the responsibility of the individual initiating the order to confirm the Incoterms in the purchase agreement prior to placing an order for equipment.
Incoterms
Incoterms specify which party (i.e., buyer or seller) pays the shipping, insurance, duties/taxes, and other fees related to the importation of a product. There are multiple ways to structure a purchase using different Incoterms. Below is a list of commonly used Incoterms and a description showing who is responsible for various activities.
Note: DDP terms are most beneficial to the buyer and are the most common terms used for express carrier (FedEx/UPS/DHL) shipments.
EXW (Ex Works or Ex-Warehouse)
The seller makes the goods available at their premises, and the buyer is responsible for arranging transportation, paying import taxes and other fees, etc. EXW is most beneficial to the seller, as they relinquish all responsibility for the shipment when it is placed on their loading dock.
FOB (Free On Board)
The seller delivers the goods on board the ship at the named port of shipment, and the buyer is responsible for transportation from that point and all subsequent costs.
CFR (Cost and Freight)
The seller covers the cost of transporting the goods to the port of destination, but the buyer is responsible for transportation, insurance, and all subsequent costs.
DAP (Delivered At Place)
The seller delivers the goods to the listed destination, but the buyer is responsible for unloading and all subsequent costs.
DDP (Delivered Duty Paid)
The seller delivers the goods to the listed destination and is responsible for all costs, including duties, taxes, and other fees.