Hey this is Samy Obeid.
I’m here to talk to you about business The only thing cooler than doing business is doing international business In which case you’ll have to know incoterms Incoterms are International Commercial Terms set by the International Chamber of Commerce The ICC to clarify who does what and who pays for what what and thus to avoid conflicts between international business partners because you don’t want that drama They work even between people who have no common languages as they are universally applied Vous comprenez ? The ICC updates them from time to time because the world changes and people change just ask all my exes The latest version came out in 2020 and will be called Incoterms 2020 Wow, very creative The last version was Incoterms 2010 so its just like Microsoft Office, if you had to wait for an update every 10 years With an international transfer of goods there are several distinct stages all of which involve costs and risks If you just load the goods onto a truck outside your factory that’s a very different story to bringing them all the way to your client’s warehouse One is a lot more generous Unfortunately business people do not always fully understand what each incoterm means because they haven’t seen my great video and this can lead to some nasty surprises. And I mean nasty Lets start for goods that are shipped by sea because who doesn’t love the ocean? Lets look at the transport process from the beginning There’s the possibility to do nothing just deliver the goods to a truck outside your factory and go back and have a coffee No worries. This is called EXW and on the scale of price it’s the lowest for all the incoterms I remember EXW by EXWife because it’s the lowest on your priorities I can make that joke,
because I’ve never been married Now obviously your client won’t be super happy with this proposition and would prefer that you take responsibility for something. Anything The ‘lightest’ incoterm for you is FAS Free Alongside Ship (FAS) But while you’re beside the ship you might as well put the goods on the ship even if it’s at an added cost so a more common incoterm for you is FOB Free on Board (FOB) which I remember with this God that never gets old! This means you bring the goods to the port from which they will be exported, pass customs which usually doesn’t involve new taxes so not very expensive put the goods ‘on board’ and you’re off the hook Go back, have some more coffee But the goods might be going a long way and the freight costs might be pretty high In addition, organizing the voyage takes time and effort So your client’d probably prefer that you do this Then you’re into CFR – Cost and Freight. And of course the passage by sea is risky Look! I am the captain now! Storms, pirates, shipwrecks! Basically all the Tom Hanks movies Anything could happen so someone needs to insure the goods Then you’re into CIF – Cost Insurance & Freight If it’s a long and risky voyage we’re talking serious money now However, the nice thing about CIF is that even though you pay to and transport the goods the risk passes to the buyer once they are on the ship So, if pirates do steal your merchandise your client still has to pay you and sort out the reimbursement with your insurance company That’s a boss Hello I’d like to file a claim. Yes. Pirates. Once they arrive at the destination port the goods are not going to come off the ship on their own, unless they’re robots so someone has to pay to unload them If you’re willing to do this, then you’re going to be delivering at the terminal – DAT which will change in 2020 to Delivered at Place Unloaded – DPU even if technically it should be DAPU But imported merchandise has to go through customs & can be very expensive Especially in the US these days and not just for Chinese goods if you know what I mean If you’re willing to pay the customs duties then you’re into the most expensive incoterm of all where you pass customs, pay everything and deliver the goods to the customer’s door Delivery Duty Paid – DDP which I remember as dollars dollars paid All the client has to do is unload the goods from the truck And thank you for going through all this effort and expense to get them to them to you that’s pretty nice But of course they don’t just thank you They pay a higher price because you’ve done all this for them And that price is inevitably more than EXW would have been Because, you know, after your ex-wife,
you upgrade. Or at least you try to. Sometimes you fail! Finally, if you’re happy to deliver the goods to your client, but baulk at the import taxes there is a kind of DDP-lite which means you deliver the goods to them but with a bill for the import tariffs attached that they have to pay This is of course cheaper for you and called DAP – Delivered at Place Looking pretty Dapper there huh? The Place being their warehouse. Usually Its just like when your friend invites you over and you say ‘yeah I’ll come over but you’ve got to pay for the Uber You’re not the best friend, but they really really want your company So there you have it. Incoterms are important. They can lead to big increases in costs and you need to agree to them when you agree on the price of the goods with your client And they need to have a place to make sense Like CIF New York or DDP Toulouse I hope you enjoyed the goods of knowledge that I brought to you today EXW World