If you are importing goods, or are planning to source products from China, you can hand over the transportation of goods to the freight forwarder and let them handle the freight and customs declaration for you. However, you must understand several common transaction methods of international freight.
Freight Transaction Methods
- FOB (Free On Board)
FOB is a shipment term that refers to a transaction carried out using FOB. In this transaction method, the buyer is responsible for picking up the goods by dispatching a ship. The seller shall load the goods on the ship designated by the buyer at the port of shipment stipulated in the contract and within the stipulated time limit, and notify the buyer in time.
- CIF (Cost, Insurance and Freight)
According to this term, the factors that constitute the price of the goods include the agreed insurance premium and the usual freight from the port of shipment to the agreed destination port. Therefore, the seller has the same obligations as those specified in CFR, but the seller shall also provide cargo insurance for the buyer and pay insurance premiums.
- CFR (Cost and Freight)
CFR refers to the transaction method in which the goods are delivered on board at the port of shipment, and the seller must pay the cost of transporting the goods to the designated destination port.
- EXW (Ex Works)
EXW means that when the seller delivers the goods to the buyer at its location or other designated locations (such as a workshop, factory or warehouse), the delivery is completed, and the seller does not go through the export customs clearance procedures or load the goods by any means of transportation. In this transaction method, the seller generally cannot obtain the export cargo transportation documents, and customs will print “FOB” in the column of the transaction method of the declaration form.
- DDU (Delivered Duty Unpaid)
DDU means that the seller and the buyer make the delivery of goods somewhere in the importing country, in which the seller must bear all the costs and risks of delivering the goods to the designated place, as well as the customs procedures costs and risks. However, it should be noted that customs duties, taxes and other official fees paid for the importation of the goods are not included here. The buyer is responsible for the additional costs and risks arising from the failure to clear the goods in time for the import process.
- DDP (Delivered Duty Paid)
This method of delivery means that the seller shall deliver the goods to the buyer after completing the import clearance procedures at the destination designated by both the seller and the buyer. The seller shall bear all the risks in the process of delivering the goods to the designated destination, shall go through the customs clearance procedures at the destination port, and pay taxes, procedure fees and other expenses.