Know your Incoterms: a simple glossary for fashion sellers 

If you want your products to be in the hands of customers in every corner of the globe, it is essential that you understand how to trade between countries in the modern world that we live in today. 

The International Commercial Terms, a.k.a Incoterms, are here to help. Usually a 3 letter abbreviation with very precise definitions, they act as the world’s essential terms of trade for the sale of goods. They help sellers and buyers understand their responsibilities. 

See below the most commonly used Incoterms in the fashion and beauty industry

1. FOB (Free on Board): Widely adopted, FOB places the responsibility on the seller to deliver the goods to the port of shipment and load them onto the vessel. Buyers assume the risks and costs once the goods are on board.

2. EXW (Ex Works): EXW requires the seller to make the goods available at their premises, and the buyer assumes all transportation costs and risks from that point onwards. This term is commonly used when buyers have extensive logistics capabilities.

3. LDP or Landed: Although not an official Incoterm, LPD or “Landed” are often used to describe a seller’s responsibility for delivering goods to a specific location or port, including transportation costs, customs duties, and other charges.

4. DDP (Delivered Duty Paid): DDP places the responsibility on the seller to deliver the goods to the buyer’s designated location, covering all costs, including transportation, customs duties, and taxes. It provides a comprehensive solution for international buyers, as the seller handles all aspects of delivery.

5. CPT (Carriage Paid To): CPT requires the seller to deliver the goods to a carrier or named destination. The seller covers transportation costs to the specified destination but assumes no risk after delivery to the carrier.

6. FCA (Free Carrier): FCA requires the seller to deliver the goods to a carrier or party specified by the buyer at a named place. The risk transfers to the buyer once the goods are delivered to the carrier, giving sellers flexibility in choosing the place of delivery.

Key differences between Incoterms:

Incoterms differ in the point of delivery, risks, and costs assigned to each party. 

– FOB and EXW place more responsibility on the buyer for transportation and associated costs.

– DDP and LDP involve the seller handling all aspects of transportation and associated costs.

– CPT and FCA find a balance between seller and buyer responsibilities, with the risk transferring at different stages.

Conclusion

By now, we’ve all agreed that choosing the right Incoterm is crucial for successful export sales. They help both parties understand their responsibilities. Always remember to consult with experts or legal professionals when in doubt.