Incoterms Guide
Clear explanation of buyer and seller shipping responsibilities, costs, and risk transfers.
International Commercial Terms Breakdown
Incoterms are standard trade rules published by the International Chamber of Commerce (ICC). They define who pays for freight, insurance, port charges, and customs duties on international shipments.
1. What Are Incoterms and Why Do They Matter?
When buying goods from suppliers in China or elsewhere, your sales contract specifies an Incoterm. This 3-letter code sets the boundary between your costs and the supplier’s obligations.
Incoterms clarify three main things:
- Cost Allocation: Who pays for local transport, export filing, ocean or air freight, customs duties, and final delivery.
- Risk Transfer: The exact spot where damage risk shifts from the seller to the buyer.
- Customs Duties: Who files export paperwork and destination import clearance.
2. Breakdown of Key Incoterms Used in Global Trade
Here is how the most common shipping terms work in practice:
1. DDP (Delivered Duty Paid)
Speedline handles the entire shipment. We collect goods from the factory, arrange air or ocean freight, clear customs in Pakistan, pay all duties and taxes, and deliver directly to your address.
2. FOB (Free On Board)
Your supplier pays local Chinese port fees and handles export clearance. Once the cargo is loaded onto the vessel, Speedline takes over ocean freight, Pakistan customs, and final delivery.
3. EXW (Ex Works)
The supplier makes goods ready at their factory gate. You or Speedline arrange pickup in China, export paperwork, shipping, customs clearance, and local delivery.
4. CIF (Cost, Insurance & Freight)
The supplier pays ocean freight and basic insurance to Karachi Port. You cover port unloading charges, customs duties, and local transport to your facility.
5. CFR / CNF (Cost & Freight)
Similar to CIF, but the supplier does not buy marine insurance. You purchase insurance separately and handle destination port clearance.
6. DAP (Delivered At Place)
The seller delivers cargo to your door, but you pay import duties, taxes, and customs fees.
3. Incoterms Responsibility & Risk Comparison Matrix
| Incoterm | Origin Trucking | Export Clearance | Ocean / Air Freight | Marine Insurance | Import Clearance | Door Delivery |
|---|---|---|---|---|---|---|
| EXW | Buyer | Buyer | Buyer | Buyer | Buyer | Buyer |
| FOB | Seller | Seller | Buyer | Buyer | Buyer | Buyer |
| CFR | Seller | Seller | Seller | Buyer | Buyer | Buyer |
| CIF | Seller | Seller | Seller | Seller | Buyer | Buyer |
| DAP | Seller | Seller | Seller | Seller | Buyer | Seller |
| DDP | Speedline | Speedline | Speedline | Speedline | Speedline | Speedline |
4. Why Importers Choose Speedline's DDP Service
Working under FOB or EXW terms requires managing multiple separate suppliers, port handlers, and clearance agents. Speedline simplifies this with DDP shipping:
- One Rate: Single price per CBM or Kg covering shipping, customs clearance, duties, and door delivery.
- Customs Handling: We file Goods Declarations (GD) and manage customs processing directly.
- Carrier Network: Freight bookings with carriers including COSCO, Maersk, CMA CGM, PIA, and Emirates SkyCargo.
- Tracking: Regular updates from factory pickup to final delivery.
5. How to Select the Right Incoterm for Your Business
Which term to choose depends on your experience and shipment type:
- New Importers: DDP is simplest because it covers all duties, taxes, and transport in one price.
- Regular Volume Buyers: FOB works well if your supplier covers Chinese port fees while Speedline handles freight and clearance.
- High-Value Equipment: Ensure CIF or DDP is selected with full marine cargo insurance coverage.
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Frequently Asked Questions — Incoterms & Trade Rules
Incoterms (International Commercial Terms) are universal trade rules published by the International Chamber of Commerce (ICC) defining cost, risk, and shipping responsibilities between buyers and sellers in international trade.
Under FOB (Free on Board), the seller pays origin China port charges and loading. Under DDP (Delivered Duty Paid), Speedline handles the entire process—origin pickup, freight, customs clearance, duty payment, and door delivery.
Under EXW (Ex Works), the buyer/importer assumes total responsibility for factory pickup inside China, export customs clearance, international transit, and destination import clearance.