Trade terms, also known as price terms or delivery conditions, are specialized expressions used in international trade to clearly define the allocation of risks, responsibilities, and costs between buyers and sellers during the process of goods transfer. Their core is governed by the International Commercial Terms (Incoterms) formulated by the International Chamber of Commerce (ICC), with common terms including FOB, CIF, EXW, DDP, etc. Usage scenarios cover contract signing, quotation calculation, transportation arrangements, and insurance handling. Precautions: Different terms have different provisions regarding the point of risk transfer, cost bearing (such as freight, insurance, tariffs), and place of delivery. For example, under FOB, the buyer is responsible for freight and insurance, while under CIF, the seller must pay freight and insurance to the designated port of destination. The difference lies in the fact that under EXW, the seller has the least responsibility, while under DDP, the seller has the greatest responsibility. Practitioners need to choose appropriate terms based on the actual transaction and clearly specify the version in the contract (such as Incoterms 2020) to avoid disputes caused by differences in understanding.
📝 Examples
1. This transaction adopts the CIF term. The seller is responsible for chartering a vessel and booking shipping space, and paying freight and insurance premiums to the Port of Hamburg. The buyer bears the risk after the goods pass the ship's rail. (Note: Under CIF, the seller must arrange transportation and insurance, and the risk transfers at the port of shipment.)
2. If quoted under the EXW term, the buyer must pick up the goods from the seller's factory and bear all export customs clearance and transportation costs. The seller only needs to have the goods ready at the designated location. (Note: EXW is the term with the minimum obligation for the seller, while the buyer bears most of the obligations.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner