Incoterms refers to a series of commercial terms that are published and periodically updated by the International Chamber of Commerce. The rules define a series of three-letter trade terms that help personnel to communicate tasks, costs, and ideas between different people involved in the transportation and delivery of various types of products.
Those who plan to work with any concerns regarding individual Chinese manufacturing should familiarize themselves with these terms. The terms are in English, but they’re widely used in the People’s Republic of China, as well as in Hong Kong and Taiwan.
China manufacturing organizations will most commonly use Incoterms that specify the location and delivery information for specific goods. DDP means Delivered Duty Paid, and it’s probably the most common term used.
The DDP term names the place of destination, and specifies that the seller is responsible for bringing the goods to the named place. This term always places the obligations on the seller/shipper rather than the buyer.
Anyone dealing with China manufacturing facilities should also be familiar with the concept of FOB shipping. Free on Board specifications mean that the seller has to pay for the delivery of goods over to the vessel that will carry them. These include loading costs. FOB shipping terms could be specified for a port in China, or in the United States.
Cost, Insurance & Freight (CIF) terms require that the seller pays for the carriage of the goods to some foreign port that the buyer names. They’ll also be responsible for obtaining an insurance policy that will cover the goods while they’re in transit to the port that the term named.
There are numerous other Incoterms that personnel who work with China manufacturing organizations will come across; however, the terms listed above are by far the most common. Take a moment to become more familiar with these terms. They’ll be useful when attempting to import something from China. Working with ITI, we help you navigate the barriers in manufacturing overseas. Give us a call today to find out how we can help.