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 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.
Is shipping from US to Canada considered international? ›
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 Incoterms are used in the US? ›
The 11 Incoterms, as defined in the 2020 Incoterms rules, are:
- EXW – Ex Works.
- FCA – Free Carrier.
- FAS – Free Alongside Ship (only for sea and inland waterway transport)
- FOB – Free on Board (only for sea and inland waterway transport)
- CFR – Cost and Freight (only for sea and inland waterway transport)
What Incoterms should I use? For webshops that sell internationally, DAP (Delivered At Place) is the most commonly used Incoterm. DAP simply means that you as a seller pay the shipping costs, arrange the insurance and prepare export documents. The recipient pays any import and customs costs.
What shipping does Canada use? ›
Businesses and individuals have various options, from traditional postal services like Canada Post to private courier companies like FedEx and UPS.
What is the best shipping method to Canada? ›
USPS, UPS, FedEx and DHL are all great options for shipping to Canada.
How to ship from the USA to Canada? ›
Priority Mail International® service is a reliable and affordable way to ship to more than 190 countries, including Canada and Australia. Use free Flat Rate Boxes and Envelopes to pay one price, regardless of box weight, up to 70 lbs. Postage rates vary based on destination. Prices start at $26.90.
Is Canada considered international for the US? ›
Yes, Mexico and Canada are considered international travel.
Can you ship US Standard to Canada? ›
UPS Shipping to Canada
Along with FedEx's International Ground service, UPS Standard Delivery is a good choice for mailing parcels greater than 3 lbs in weight, as they offer fast service and can guarantee delivery dates in many cases.
What are the 11 Incoterms in shipping? ›
Incoterm Categories
CPT (Carriage Paid To) : Place. CIP (Carriage and Insurance Paid To): Place. DAP (Delivered at Place): Place. DPU (Delivered at Place Unloaded): Place.
Most used INCOTERMS in trade
- Ex Works (EXW): Ex-Works refers to a trade condition where sellers hand over the goods to buyers at their factory or exporting location. ...
- Free On Board (FOB): ...
- Cost & Freight (CFR): ...
- Cost Insurance & Freight (CIF): ...
- Delivered At Place (DAP): ...
- Delivered Duty Paid (DDP):
The Incoterms more favorable to buyers are DAT, DAP, and DDP. With these “D terms,” the buyer is responsible for nothing until the goods arrive in the buyer's country. For small businesses, FCA might represent an attractive compromise.
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.
Some factors to consider when deciding on the best international shipping service include: delivery speed, shipping restrictions, weekend delivery, insurance, tracking, and more. DHL, FedEx, DB Schenker, and UPS are some of the most popular shipping services when sending items overseas.
What are the 6 major Incoterms? ›
Full details of all the INCOTERMS and their definitions are available from the International Chamber of Commerce.
- EXW - Ex Works. ...
- FCA - Free Carrier. ...
- CPT Carriage Paid To. ...
- CIP - Carriage and Insurance Paid. ...
- DAT - Delivered at Terminal. ...
- DAP - Delivered At Place. ...
- DDP - Delivered Duty Paid.
FedEx Ground services deliver packages within Canada and to the US via International Ground service. UPS Standard is an economical ground delivery service that ships packages within Canada and to the US.
What carrier does Canada use? ›
Approximately 90% of Canadian mobile phone users subscribe to one of the four largest national telecommunication companies (Rogers Wireless, Bell Mobility, Freedom Mobile and Telus Mobility) or one of their subsidiary brands.
Do I need a commercial invoice to ship from US to Canada? ›
Trade compliance: Shipping any package larger than a 16 oz. envelope from the U.S. to Canada requires accompanying documentation, most commonly either a Commercial Invoice (CI) or Canada Customs Invoice (CCI).
Does Canada use DHL? ›
All DHL Locations in Canada
Find your local DHL Express ServicePoint in Canada, for easy, convenient ways to send or collect a shipment.
