In the complex world of global trade, there is much to consider and decide. Before choosing your logistics partner, buyers and sellers must agree on the terms of trade about both the movement and the transfer of ownership of purchased goods. Incoterms® is a globally recognized set of rules designed to help bring order to this multifaceted process.
What are the Incoterms®?
The Incoterms® rules are a set of 11 trade terms devised by the International Chamber of Commerce (ICC). In North America, including the USA and Canada, the following five Incoterms® are the most used:
- Free on Board (FOB): The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment.Read more about FOB.
- Ex-Works (EXW): The buyer receives the cargo directly from the factory and thereafter arranges shipment, insurance, and other related services.
- Free Carrier (FCA): The seller delivers the goods to a carrier or another person nominated by the buyer at the seller's premises or another named place.
- Delivered Duty Paid (DDP): The seller bears all the costs and risks involved in bringing the goods to the place of destination and must clear the goods.Read more about DDP.
- Cost Insurance & Freight (CIF): The seller delivers the goods, cleared for export, onboard the vessel at the port of the shipment.Read more about CIF.
These terms alone are not law, but the commercial contracts in which they are used can be legally binding as they describe the obligations, costs, and transfer of risk between parties.
Who bears the responsibility under each incoterm?
Each incoterm has a different split of responsibilities between buyer and seller. For example, with Ex Works the buyer bears most of the responsibility. Whereas in Delivered Duty Paid the seller has most of the responsibility.
For a simple overview, download the visual guide.
Please visit the ICC website for full overview and insights on the Incoterms®.
Which incoterm is best for my business in the USA and Canada?
The question shippers need to ask themselves is under what circ*mstances would they want full control of a particular aspect of a transaction, and when might it make more sense to cede control to another party? Which incoterm is best for your business depends entirely upon your overall business team's profile, sophistication, and capabilities to manage the complexities of any given transaction.
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.
FAQs
In short, yes, shipping from the US to Canada is considered international. The same goes for when you are shipping from Canada to the US. Though the two countries boast the longest, unprotected border in the world they are still separate countries.
What are Incoterms in Canada? ›
Incoterms® were developed as a set of norms for international deliveries, in order to guarantee the smooth sailing of international trade. They are often used as abbreviations, such as FOB or CIF, and can sometimes lead to misunderstandings amongst business partners.
What Incoterm should I use for international shipping? ›
Most recommended Incoterms for importing
For an international purchase operation, the most advantageous Incoterms for the importer will be DAT (Delivered At Terminal), DAP (Delivered At Place) and DDP (Delivered Duty Paid).
Are Incoterms used in the USA? ›
In North America, including the USA and Canada, the following five Incoterms® are the most used: Free on Board (FOB): The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment.
How to ship items from the USA to Canada? ›
Work with carriers like DHL, UPS, and USPS to have your packages delivered quickly to Canada. All you need to do is log into the Shipito website, select a carrier, fill out the US customs form, and pay to ship your items to Canada. It's that easy.
Is Canada to US considered international? ›
As with any international travel, Canada has entry requirements that include specific documentation for U.S. citizens. The primary document you'll need to cross the border is an acceptable form of identification, such as a passport.
What are the 4 Incoterms? ›
Currently, there are 11 different incoterms. Each type is divided into four groups: E, F, C and D. These categories are determined by the delivery location and who is responsible for covering the cost of each part of the journey. The groups are then split into sub-categories which refer to various scenarios.
What are the 5 Incoterms? ›
C terms – CFR, CIF, CPT, and CIP – Under these Incoterms, the seller pays for and arranges freight, but the risk transfers to the buyer once the goods are loaded. D terms – DAP, DPU, and DDP – Under these three Incoterms, the seller pays the costs and bears the risk to bring the goods to the country of destination.
What are the 11 Incoterms in shipping? ›
Currently, there are 11 Incoterms, each delineating distinct responsibilities and obligations between the buyer and seller. These terms fall into two main categories: those applicable to any mode of transportation (such as EXW, FCA, CPT) and those designed for sea and inland waterway transport (like FOB, CIF, DAT).
How do you decide which Incoterms to use? ›
Tips on Choosing the Right Incoterms for International Sales of Goods Contract
- Whether an Incoterm is More Suitable for Importation or Exportation.
- Mode of Transportation.
- Types of Goods.
- Level of experience of the parties.
- Control Over the Goods, Operations, and Cost.
- Relationship Between the Seller and Buyer.
Best Incoterms for Buyer
- Freight On Board (FOB) In this Incoterm, the buyer just has to hire the shipping services. ...
- Delivered At Place (DAP) This Incoterm is a good pick for buyers because it allows you to buy as cheaply as possible and involves low risk and responsibilities for the buyer. ...
- Ex-Works (EXW)
The Incoterm® rules are the internationally recognized freight terms for international ships and are commonly, but not always, leveraged in domestic shipments. The most important things to consider when determining freight terms are: Costs – Who pays the freight costs for each leg of transit?
Is it mandatory to use Incoterms? ›
While use of Incoterms is not mandatory, they are extremely helpful to ensuring proper, timely payment of goods and services related the shipments. It is up to the buyer and the seller to agree to each party's responsibilities, as well as the cost and risk of a shipment before it takes place.
What is Incoterm FOB in USA? ›
Free on Board, or FOB is an Incoterm, which means the seller is responsible for loading the purchased cargo onto the ship, and all costs associated. The point the goods are safe aboard the vessel, the risk transfers to the buyer, who assumes the responsibility of the remainder of the transport.
Is a wire from US to Canada considered international? ›
This makes wire transfers a popular option for sending large sums of money, for example, when closing on real estate transactions, paying legal fees, or purchasing a vehicle. Since wire transfers remove geographic boundaries, they are also a way to send money internationally.
What is considered an international shipment? ›
International shipping is a means of transport used for conveying goods (mostly) using sea routes rather than roads (road transport) or air channels (air transport). As, in most cases, its goal is to link two countries separated by a sea or ocean, shipping is by definition international.
Is Canada considered international for FedEx? ›
When you choose FedEx International Ground services for shipments to Canada, you will enjoy: Coverage to 100% of Canadian business and residential addresses. Time-definite delivery in 2 to 7 international business days.
Is mail to Canada International? ›
USPS® international mail services go to more than 180 countries, including Great Britain, Canada, Japan, Mexico, and Australia. Global Express Guaranteed®, Priority Mail Express International®, and Priority Mail International® services include international tracking and some insurance.
