When exporting goods to the United States and Canada, Incoterms are commonly used to determine the responsibilities between the seller and the buyer in transporting and delivering goods. Here are some common Incoterms you may encounter when engaging in the export market to the United States and Canada:
FOB (Free On Board)
FOB Shipping Point (FOB Origin): The buyer is responsible for and bears the cost of transportation from the point of origin (usually the seller's factory) to the export port. The buyer also takes responsibility from the moment the goods are loaded onto the vessel.
FOB Destination: The seller is responsible for and bears the cost of transportation from the point of origin to the export port until the goods reach the destination.
CIF (Cost, Insurance, and Freight):
The seller is responsible for and bears the cost of transporting the goods to the port of destination. The seller must also pay for insurance coverage until the goods reach their destination.
FCA (Free Carrier)
This describes a scenario where the seller delivers goods that have been cleared for export to the buyer either at the seller's premises or at another agreed-upon location. The seller concludes their responsibility upon handing over the goods to the carrier hired by the buyer. All risks associated with the goods are transferred from the seller to the buyer upon delivery.
EXW (Ex Works):
The seller is only responsible for delivering the goods to the place of origin. All costs and responsibilities for transportation, insurance, and other related expenses are borne by the buyer.
DDP (Delivered Duty Paid):
This refers to the Incoterm provision where the seller is obligated to pay all transportation costs and assume all risks until the goods are delivered to the buyer. Additionally, the seller must settle all applicable taxes, such as import duties, before the goods are handed over to the buyer.
Which Incoterm to Use When Exporting to the United States and Canada
The question that the shipper needs to ask themselves is under what circumstances they want full control over a specific aspect of a transaction and when it might be a reasonable choice to delegate control to another party. The most suitable Incoterm for your business depends entirely on the overall profile of your business team, their sophistication, and their ability to handle the complexities of any specific transaction.
