When purchasing in China, you have to deal with import- export industry and its vocabulary.
This articles is trying to explain you those words and codes you will have to deal with:
EXW: Exworks, it means the goods are sold “from the factory”, you will have to pay transportation and taxes from there.
FOB: Free on Board. The supplier is in charge of the goods until shipped on the boat. From there, the rest of the cost are yours (sea freight, customs clearance at destination etc.). Most of the Chinese suppliers sell with this incoterms.
CIF: Cost, freight, insurance. The supplier is responsible of the goods until they have reached the port of destination. You then have to pay customers clearance and road transportation to your warehouse. Working in CIF with your supplier is a good solution if your goods are complicated to ship, due to theirs sizes or because they are classified as dangerous for example.
CFR: Cost and Freight. This is almost like CIF, you are buying the good with sea freight included, but the insurance is not included.
DDP: Delivered Duty Paid. The suppliers is in charge of all cost and transportation, until your goods reach their final destination. This is an ideal solution if you are not familiar with importexport: you are buying the products “delivered to your door”.
BL: Bill of Lading. It is a transportation contract, giving the nature and the weight of the goods. It is also the document that transfers the property of the goods from the supplier to the buyer during transportation. This documents is needed to unload the goods once they reach the port of destination.
PL: Packing list. It gives the details of the goods and their packaging. it is used to check that the goods shipped fit what have been bought, and to make sure nothing has been lost during transportation. this document is needed for the reception of the goods.
PI: Proforma Invoice. it is a quote more than an invoice. By issuing and signing the PI, the supplier and buyer commit to work together according to the terms specified (price, quantity, production lead-time etc.)
CI: Commercial Invoice. It is the legal invoice for international trade. The CI is needed to clear the customs.
LCL: less than a container load. For orders smaller than 1 full container quantity, you can share a container with different importers, which whom you share the sea freight.
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