What are the Trade Terms Commonly Used when Import or Export Cars

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To carry out the export and import trade of automobile vehicles, the use of trade terms is indispensable, which can more conveniently indicate the composition of the transaction price and delivery conditions and delineate responsibilities, risks, costs and other issues. The following are five commonly used trade terms.

EXW (Ex Works)

This clause means that in case of delivery from the seller’s factory, the seller completes the transfer of all liability and risk when delivering the vehicle to the buyer. The buyer is responsible for arranging its transportation and insurance and assumes the risk of transportation from the factory to the destination. In the automobile industry, EXW terms are usually used to export some small, lightweight auto parts or complete automobiles.

FOB (Free On Board)

This term means that the risk is transferred to the buyer after the seller loads the automobile onto the vessel designated by the buyer at the port of shipment and completes the export customs clearance procedures. The buyer needs to arrange its means of transportation and insurance and bear the risk of the vehicle from the port of shipment to the destination. In the automobile industry, FOB terms are usually used for exporting oversized or heavy automobile parts or complete automobiles that need to be transported by sea.

cargo port picture

CFR (Cost and Freight)

This term means that the seller loads the car onto the vessel at the port of shipment and bears the cost and risk of transporting the vehicle to the destination. The buyer must arrange his means of transportation and insurance and take the risk of transportation from the port of shipment to the destination. In the automotive industry, CFR terms are usually used to export complete automobiles that need to be transported by sea.

CIF (Cost, Insurance and Freight)

This term means that the seller loads the car onto the vessel at the port of shipment and bears the cost, insurance and risk of transporting the vehicle to the destination. The buyer needs to arrange his means of transportation and take the risk of transportation from the port of shipment to the destination. In the automotive industry, CIF terms are usually used to export large or heavy automotive parts or complete automobiles that need to be transported by sea.

cargo port picture-2

DDP (Delivered Duty Paid)

This term means that the seller completes the transfer of all responsibilities and risks when the car is delivered to the buyer at the destination, including import customs clearance and payment of duties. The buyer must arrange its means of transportation and insurance and bear the risk of the vehicle from the destination to the final destination. In the automotive industry, DDP terms are usually used to export oversized or heavy automotive parts or complete automotive cars that need to be transported by road.

These trade terms are widely used in the import and export trade of the automobile industry, and the selection of appropriate trade terms according to different needs and circumstances can effectively reduce transaction risks and costs.

cargo ship-1

Others

In addition to the above five trade terms, there are FCA (Free Carrier), CPT (Carriage and Insurance Paid to), DAT (Delivered At Terminal), DAP (Delivered At Place) and FAS (Free Alongside Ship).

The specific application of these trade terms is affected by international regulations, trade practices and commercial negotiations. Therefore, in actual operation, they need to be flexibly applied and adjusted according to specific situations.

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25-04-2024
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