Those Basic Foreign Trade Terms You Need to Know - Part II
Let’s continue the story of Singer to learn more trade terms
1) DDU (Delivered Duty Unpaid)
As the competition intensified, the Indian pepper market gradually changed from the seller's market to the buyer's market.The former pepper kingdom dominated by Singer collapsed. With the success of Kumar products, the original secret technology was gradually adopted by other factories. There are dozens of the same quality products emerging from the market by lowering the price and improving the service. Paul has more options now. When he came to the Singer factory again, Singer made another concession: As long as you buy my goods, I am responsible for sending the products to your designated location and bear all risks and expenses except customs duties. They signed the DDU clause, also known as the "unpaid duty" price.
2) DDP (Delivered Duty Paid)
The market has completely reversed. Due to the influx of high-quality pepper products, the Indian market has experienced an extreme excess of production capacity. Some factories have experienced slow sales. Singer’s factory barely survives, thanks to he entered the market earlier and has accumulated some resource advantages over the years, but the situation is not as good as before. They need to pay a higher cost to get customer orders. In order to sell the stock quickly, Singer promised Paul that Paul doesn’t have to worry about anything, he is responsible for sending the pepper and bear all the costs of transportation and customs clearance, risks, including tariffs and all costs. This term of maximum buyer benefit is called DDP, also known as “post-tax delivery”.
These two terms of DDU and DDP are extremely risky for the seller, which are not used in large-scale international trade unless there are some special circumstances. These two terms are mostly used for some samples, and a small amount of goods shipped through international express delivery. Our current cross-border e-commerce, the tax-included and non-tax-included trading model between sellers and buyers is actually a reflection of these two trade terms. International trade was basically transported by the sea before. With the development of science and technology, various modes of transportation were used. In order to keep pace with the new ear and adapt to the needs of air transport and multimodal transport, three new trade terms have been invented.
1)FCA (free carrier)
It can be simply understood as the FOB clause in air transportation and multimodal transport. Singer only needs to deliver the goods to the carrier designated by the buyer at the designated place, and handles the customs clearance procedures.
2) CPT (carriage paid to...)
Singer still handed the goods to the designated carrier, but the freight to the destination port was paid by him.
3) CIP (Carriage and Insurance paid）
Freight and insurance are paid by seller which can be understood as air transportation and most of the CIF terms in intermodal transportation. Singer handed over the goods to the carrier and will need to pay the freight and premium for the goods to the port of destination.
However, in daily business, there are still many people who naturally use FOB, CFR and CIF terms for air transportation and other modes of transportation.
In addition to clarifying who is responsible for the cost, the trade term also needs to divide the risks borne by the buyer or the seller. In the terms of FOB, CFR and CIF, although the seller bears the corresponding expenses, the transfer of risks has not changed. This is two concepts. This is how the following set of terms have been formalized.
1) FAS (Free Alongside Ship)
Singer is responsible for delivering the goods to the ship of the port designated by Paul, and bears the risks and expenses before this.
2) DES（Delivered Ex Ship）
Singer is responsible for transporting the goods to the deck of the destination ship agreed with Paul and bears the risks and expenses before this.
3) DEQ (Delivered Ex Quay)
Singer is responsible for transporting the goods to the port of destination agreed with Paul and is responsible for unloading the ship, and bears the risks and expenses before unloading to the port of destination
The last one is exclusive to border trade: DAF (Delivered At Frontier) Land border delivery. This trade term generally applies to trade between the two countries bordering each other. Singer and Pakistani businessmen can use DAF to make deal. Singer is responsible for transporting the goods to the India-Pakistan border confirmed by both parties, and handle the customs clearance These are the 13 trade terms in international trade. In fact, there is no need to memorize them all, just master the most commonly used ones in your business. For trade terms, we need to flexibly choose the most suitable one according to the actual situation of the company and the product, so as to maximize the preservation of both sides’ interests..