Understanding Alibaba Incoterms: A Comprehensive Guide to 11 Essential Trade Terms [Jan 2024 Edition]

Let’s explore international trade terms on Alibaba. When you’re shipping goods internationally, it can get quite complicated. There’s a lot for both importers and exporters to think about. Selecting the right trade and international commercial terms on Alibaba is an important decision that requires careful consideration. In the following sections, we’ll dive deeper into this topic to give you a better understanding.

Supply Chain

Logistics Solutions to improve the efficiency and cost effectiveness of your supply chain.

The right forwarding broker should be experienced enough to balance your company’s operations, speed, and shipping cost, and improve the supply chain management.

What makes us different?

Honourocean freight forwarder service is devoted to reducing your travel costs in China. Unlike other Asian countries, China’s manufacturing issues are often caused by frustration and headache. It also takes us some time to take care of your worries when you come in contact with your cargo. We handle the entire administration and regulation of China so there’s no need. The importance of a timely schedule for logistical services is obvious; no delay in delivery is worse. We are sure that our customers will get our goods at our delivery time.

 The international freight forwarding service there has a broad vision and can take over the goods from Chinese ports to the rest of the world.

China freight forwarding service

The most trusted Chinese freight forwarder, proficient in the sea, air, rail.

Shipping forwarder china

Air Shipping

Air freight forwarder

Door to door delivery from china

Additional services for international freight forwarder china

pick up

Pick up and delivery

We will pick up your goods in any city in China.

warehousing

Honourocean provides free warehousing services for any of your goods

cargo insurance

The cargo insurance protects your goods all the way to any city of Ghana

custom clearance

Customs clearance

We will handle all paperwork and other details for you.

Table of Contents

Freight forwarding company

As china freight forwarding companies since 2009.

Honourocean provides international freight forwarding services with the import and export of all kinds of cargo. 

On-Time: We provide reliable, cost-effective logistics services to companies with unique shipping needs. 

If you’re looking for a reliable freight forwarding company in China, Honourocean Shipping is a great option. We are superior shipping agents in china and our cargo usually arrives in three days or less. We’re also capable of handling urgent requests with transit times of just two hours.

Why Honourocean As experienced experts in the international logistics industry, we incorporate your needs, requirements, budget, and goals into determining the best shipping service route and transshipment point.

if you need freight forwarder from china to USA: freight forwarder china to usa

 

Play Video

What exactly are Trade Terms?

Trade Terms, often referred to as Incoterms, are a set of standard terms used in international sales contracts. Developed by the International Chamber of Commerce (ICC), these terms are represented by three-letter acronyms and are essential in communicating various facets of international trade. Among the most widely recognized Incoterms are EXW (Ex Works) and FOB (Free On Board).

Definition of Incoterms Newest

The newest version of Incoterms, known as Incoterms 2020, is an update to the previous 2010 edition. In this latest revision, the number of terms has been reduced from 13 to 11. The International Chamber of Commerce, which holds the copyright for these terms, publishes them to provide standardized guidelines for international trade.

Let’s delve into the key terms as outlined in the latest Incoterms edition.

if select the wrong shipping terms or shipping company often confuses. These acronyms significantly affect your shipping process and define who take responsibility.

you need to do first at this stage is that you must familiarize yourself with shipping incoterms. Incoterms are trade terms that are used internationally for determining where and when the cargo will be deliveried.

Incoterm-Alibaba-Incoterm

Responsibilities Related to Incoterms

  1. Transportation and Freight: Incoterms clarify which party – the seller or the buyer – is responsible for managing and paying for transportation and freight costs.

  2. Delivery Point: They specify the exact point during the shipment process where responsibility and risk transfer from the seller to the buyer. This is known as the delivery point.

  3. Import and Export Regulations: Incoterms determine which party is in charge of handling and complying with the import and export regulations, including the necessary documentation and procedures.

  4. Insurance Coverage: They also outline who bears the responsibility for insurance costs to protect the goods during transportation.

Incoterms Groups

Incoterms are categorized into four distinct groups, each reflecting a different level of responsibility and cost assumed by the seller and buyer:

  1. Type E (EXW – Ex Works): This group places minimal responsibility and cost on the seller. The buyer assumes most of the responsibilities, including picking up the goods from the seller’s premises and managing all subsequent transportation and risks.

  2. Type F (FOB – Free On Board, FCA – Free Carrier, FAS – Free Alongside Ship): Here, the seller is responsible for delivering the goods to a specified location (usually a port) chosen by the buyer. Once the goods are delivered to this point, the buyer takes over all responsibilities and risks.

  3. Type C (CFR – Cost and Freight, CIF – Cost, Insurance, and Freight, CPT – Carriage Paid To, CIP – Carriage and Insurance Paid To): In these terms, the seller covers all costs and responsibilities up to the port of destination. However, the risk transfers to the buyer as soon as the goods are loaded onto the carrier.

  4. Type D (DDP – Delivered Duty Paid, DAP – Delivered At Place): This group puts the maximum responsibility for costs and risks on the seller. The seller must deliver the goods to a location agreed upon with the buyer, handling all costs and risks involved in getting the goods to this destination.

contact us

What are trade terms? Why is choosing the correct trade terms so important?

Trading terms refer to the rules for transactions between a party. This document covers the financial and legal arrangements that govern the relationships between a company and a supplier & client. Trade Terms essentially refer to obligations between the buyers and sellers in international trade. Trade terms define the duties and rights of the other parties to the agreement and often outline how to make payments. The best trade terms can help avoid costly mistakes and keep businesses running smoothly.

Incoterms Application

When applying Incoterms to international shipments, it’s important to recognize that not every term is suitable for every type of transportation. The mode of transport you choose—whether it’s maritime, air, road, or rail—influences which Incoterm is most appropriate for your shipment.

Here are the Incoterms that are versatile enough to be applied to any mode of transportation:

  1. EXW (Ex Works): The buyer assumes most of the responsibility, collecting the goods from the seller’s premises.

  2. FCA (Free Carrier): The seller delivers the goods to a pre-agreed location, after which the buyer takes over the responsibility.

  3. CPT (Carriage Paid To): The seller pays for transporting the goods to a specified destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.

  4. CIP (Carriage and Insurance Paid To): Similar to CPT, but with the added requirement that the seller must also provide insurance for the goods during transit.

  5. DAT (Delivered at Terminal): The seller delivers and unloads the goods at a terminal at the destination port or place.

  6. DAP (Delivered at Place): The seller delivers the goods to a specified place, ready for unloading at the destination.

  7. DDP (Delivered Duty Paid): The seller assumes all the risks and costs, including duty, until the goods are delivered to the buyer’s specified location.

Choosing the right Incoterm depends on the specific details of the shipment, including the nature of the goods, the agreed-upon responsibilities between buyer and seller, and the logistics of the transportation method used.

air freight to zimbabwe

Incoterms that are only suitable for sea and inland waterway transport:

  • FAS (Free Alongside Ship)

  • FOB (Free on Board)

  • CFR (Cost and Freight)

  • CIF (Cost, Insurance, and Freight)

sea freight

Alibaba Trade Terms Example

 A typical quote from a supplier usually contains three key pieces of information: the minimum order quantity (MOQ), the trade terms, and the cost per unit. In these quotes, Incoterms, often referred to as shipping terms, are mentioned at the end as a three-letter abbreviation.

To understand this better, let’s examine an example quote: “Thanks, Mark, kindly see below 1000-1.75/pc, 2000-1.65/pc, 10000-1.5/pc, EXW.”

Here, the term “EXW” refers to “Ex-Works,” a specific Incoterm used on Alibaba. This term clarifies the shipping terms and outlines the responsibilities of the parties involved up to the point where the goods are collected by the buyer. A common question is whether Alibaba’s prices include shipping fees. The answer is no, they typically don’t. It’s important to understand which trade terms include the shipping fee in their pricing.

Basic Trade Terms Alibaba Incoterms

Below we list out some of the most Alibaba Shipping Terms:

 

  1. EXW- Ex-Works

EXW Price on Alibaba is the most common term provided by suppliers. In this particular term, the supplier gives the item’s unit price for the buyer to pick up at the industry; therefore, it exempts the supplier from any responsibilities over the product once it leaves the factory.

At this point, it is the buyer’s responsibility for all forms of insurance or customs incurred. Unless you request to purchase on different terms, most factories will provide the EXW on request. It is the lowest price you will get the product for since it is less the other expenses involved.

 

 

  1. FOB- Free on Board

Unlike EXW, Alibaba trade terms fob takes the supplier’s responsibility further up to the point where the supplier takes the item to the nearest port and clears them for export. The buyer can choose to work with freight forwarders who handle customs clearance and are mostly stationed at or near the port or pick the item by themselves. Third-party inspectors can assess the goods at the port once the seller presents them. Once goods leave a country, the responsibility shifts to the buyer.

 

  1. FCA- Free Carrier

Further to EXW, the free carrier term dictates that a seller is responsible for clearing goods and taking them to the port or other destination that a buyer specifies. The buyer arranges for the carrier and for offloading the goods at the port. The responsibility of loading the goods is the supplier’s until they reach the port, where offloading is the buyer’s responsibility.

For clarity purposes and to avoid confusing FCA with FOB, the buyer should confirm each term’s extent with their supplier.

 

  1. CPT- Carriage paid to

Under this term, the seller pays for goods that are being shipped to the import port that the buyer chooses. The cost from the import to the export port is the supplier’s responsibility. The supplier also covers freight costs as well as export clearance costs. The buyer, though, is the party responsible for the insurance cost and unloading costs of the goods at the export port.

 

  1. CIP- Carriage and Insurance paid to

This term is similar to the CPT only difference because the supplier covers insurance costs for goods in transit. CIP applies to all modes of transport, unlike CIF, which only covers sea transport. CIP and CIF are the two terms that define risk and insurance separately.

Once at the import port and unloaded, the goods’ insurance is no longer the supplier’s responsibility, but the risk is.

 

  1. DPU – Delivery Place Unloaded

Under this term, the supplier is responsible for the risk and cost associated with the goods until they are unloaded at the import port—the responsibility from that point shifts to the buyer. The buyer clears custom fees as well as import fees.

 

  1. DAP – Delivery at Place

In this term, all risks associated with the goods until they are delivered to the buyer’s destination are assumed by the seller/supplier. The seller can choose to pay a third party to cater for the shipment. The buyer’s responsibility, in this case, is to pay for goods clearance and the customs fees as well as the costs of unloading goods at their destination.

 

  1. DDP – Delivery Duty Paid

Under this term, the buyer is only responsible for the costs incurred to unload the goods at their final destination. The seller assumes risks as well as insurances associated with the goods until they reach the buyer. It is the term in which the buyer has very minimal responsibility.

Most people will be tempted to ask why not adopt the DPP terms for all purchases. It the seller is responsible and all dependent on the buyer. The method means the buyer pays more to the seller since they assume zero risks, but this doesn’t mean it is more reliable. It also implies that the buyer fully trusts and depends on the shipping company.

I would suggest comparing the quoted prices for DPP from the supplier with a FOB price from the freight forwarders.

It is important to note that CIF, CFR, FAS, and FOB apply to both inland waterways and ocean-based shipments. The terms mentioned above apply to all transportation forms, including road, rail, or sea freight and air cargo transportation.

 

  1. FAS- Free Alongside Ship

In this case, the seller covers costs and assumes risks for the goods until they reach the port and also clears goods for export. The buyer covers the costs from this point, including the costs involved loading the ship. The difference from the FOB is that the buyer is responsible for the costs of loading the ship.

 

  1. CFR- Cost and Freight

The buyer is responsible for the transportation process of goods after loading at the export port and delivery to their final destination. The seller’s responsibility extends from shipping up to when the goods reach the import port. This is similar to CPT except that CFR is restricted to water transport.

 

  1. CIF – Cost Insurance and Freight

This is the last but not the least term. It is similar to the CFR, except that the goods’ insurance up to the destination port is the seller’s responsibility. The seller also clears the customs duty paid delivery itself. The buyer’s responsibility is to pay for the duty. This term is also similar to the CIP, except the CIF is restricted for water-based shipments.

What are the Best Trade Terms on Alibaba?

Customers often ask us what international trade term options should they choose or what is the best trade terms on Alibaba. Our typical answer is, “Most buyers choose FOB, so this may be what you want.” But this is a bit short.

Let us understand in more detail how to choose the best Alibaba trade terms option that meets your needs from the list of the 2020 International Trade Term Interpretation General Rules.

To have a deeper understanding of the general principles of interpretation of major Alibaba trade terms, we have prepared the following flow chart:

If you know exactly what you are doing, you can certainly define your own Alibaba trade incoterms. The General Principles of Interpretation of International Trade Terms in 2020 are just terms “pre-packaged” to simplify people’s lives, but in fact there are countless variants of them.

 

The biggest factor is the import experience level. You do not need to be strictly restricted by any international trade term.

 

Please know that the general rules for interpreting Alibaba trade terms listed on this page are all pre-packaged transport terms. They are advisory and not mandatory. If you are buying a large number of goods, these terms should not limit your creativity.

 

Below is an example.

Customers want to receive the goods in their own warehouses and let the seller pay import taxes and duties, but the customers want to control the transportation (because they know they are more efficient than the supplier in terms of transportation). So they want DDU, which should be similar to FOB except for transportation.

It is not complicated to write these into the contract. professional logistics agent can help you see the opportunities and ensure that your contract contains all the essential terms.

If you buy in small quantities from Chinese or Indian suppliers, they may not accept customized shipping conditions. But if you represent a certain size of your business, they will usually listen to you and show a certain degree of flexibility.

 

shipping cost from china to zimbabwe

Exploring Shipping Options from Alibaba: Self-Management vs. Hiring an Agent

When shipping from Alibaba, you have four primary methods to consider, each with its unique advantages and challenges.

  1. Letting the Supplier Handle Shipping: This approach is popular among new importers. Simply instruct your supplier to ship the cargo as CIF (Cost, Insurance, and Freight) to your port of destination or DAP (Delivered at Place) to your facility. It’s straightforward, but you might pay more than necessary.

  2. Managing Shipping Internally for Full Control: If you value complete control, handling shipping in-house is an option. However, this requires a dedicated, professional team and is often not feasible for small and medium-sized businesses due to the significant time and resource investment.

  3. Work with a freight forwarder in your country.

This is perhaps the most convenient option for some of the importers.

So what happens is this: small and medium companies try to work with a freight forwarder of the right size. But most of the forwarders don’t always have their own office in China. They usually work with local agents and add their margin on top of that agent’s fee.Though it may be the most convenient way, this is not a cheap option, and not so efficient.

 

4. Work with a freight forwarder based in China

More and more importers have chosen this option.

The advantage is speed. The forwarder can keep close touch with your supplier, and keep you informed of everything. When trouble happens, your local partner will solve that asap.

 

Incoterms on Alibaba Conclusion

The transition from the Alibaba Incoterms 2010 to the 2020 edition marks a less dramatic change than previous updates, like the shift from the 2000 version. However, the introduction of the DPP (Delivery Duty Paid) term in Incoterms 2020 is a noteworthy addition. Gaining a solid understanding of the updated Trade Terms in Alibaba’s Incoterms 2020 is crucial for effectively integrating them into your manufacturing and shipping strategies.

The main purpose of these terms is to provide clarity and protection for both sellers and buyers, outlining their respective responsibilities to facilitate smoother business transactions. If you find yourself needing guidance or have specific questions, resources like the China Sourcing Kit can be invaluable. They offer support and advice to help navigate these terms with confidence.

Ask Chinese freight