4 Most Common Alibaba Trade Terms You Need to Know
What are Alibaba trade terms? Trade terms are simply a set of guidelines that help buyers and sellers agree on the conditions for the sale or purchase of goods. These can include things like price, shipping method, delivery time, payment methods and more. Learning what Alibaba trade terms mean is important because it will ensure that your company’s transactions go smoothly with your customers! Read this article to find out more about Alibaba trade terms: What they mean, how they work and which ones you need to know in order to complete successful trades.
Alibaba is the world’s largest eCommerce company and it provides an online marketplace with a variety of different products for retail businesses around the globe.
Make sure to read what is the Cheapest and Safest Way to pay on Alibaba in 2021
What does Incoterm mean?
The Incoterm is an abbreviation for “International Commercial Terms,” which are also referred to as International Trade Terms or FOB terms. These terms are used, when the seller sells a product to the buyer and it leaves their facility, they’re considered in export mode while at this point in time.
Incoterm groups:
Group E – Contains only the EXW incoterm and is the easiest for the seller; he has just the minimum obligation, and the point of delivery is his address – work factory or warehouse. Afterward, responsibility and costs for transport transfers to buyer.
Group F – The seller is responsible for the goods and their transportation to a agreed transport medium (usually a port). Once they reach that location they are the buyers responsibility.
- FOB Free On Board
- FAS Free Alongside Ship
- FCA Free Carrier
C type – the seller is responsible for any additional expenses that arise after the buyer takes on responsibility. For instance, freight charges or cargo insurance.
- CFR Cost and Freight
- CIF Cost, Insurance and Freight
- CPT Carriage Paid To
- CIP Carriage and Insurance Paid To
Group D The seller is responsible for the goods untl they reach the final destination – for example, the buyer’s warehouse.
- DAP Delivered At Place
- DAT Delivered at Terminal
- DDP Delivered Duty Paid
Alibaba trade terms that you should understand before you start your international trading.
In this article we will only cover the most common Alibaba trade terms: FOB, CFR, CIF and EXW. If you are looking for detailed guide with all incoterms included visit: https://seller.alibaba.com/businessblogs/px577140-incoterms-guide
- FOB is an abbreviation for ‘free on board’. This Alibaba trade term means that the seller has delivered to a port or terminal, any charges related to export clearance and loading costs are borne by the buyer.
- CFR stands for cost and freight. It implies price of goods plus transportation costs from factory (exact origin) to destination (exact country). The Alibaba trade term is typically used in countries where the seller has to pay for transportation, but not import clearance.
- CIF stands for cost, insurance and freight. It means that price of goods plus all costs related to export clearance and loading costs are borne by the buyer. This Alibaba trade term is typically used in countries where the seller has to pay for transportation and import clearance.
- EXW alibaba trade term stands for ‘ex work’. It means that the price of goods, but not costs related to export or import clearance are borne by buyer/seller. This Alibaba trade term is typically used when there’s no need for any negotiation.
FOB explained
FOB is the most common trade term for alibaba sellers because it’s easy to understand. FOB just refers to “Free on Board.” It’s a billing term classifying the point when goods can be considered to have been transferred or loaded onto the means of transport, but before they are actually delivered at destination. In practice this means the seller pays all freight charges until the FOB point and then the buyer covers freight costs for further delivery to their desired location. For example:
– If the alibaba trade term is FOB Shenzhen, then this means the seller pays all shipping costs up to and including Shenzhen. The buyer would be responsible for any additional charges incurred in transport from Shenzhen onward (e.g., customs clearances).
A common misconception about alibaba sellers with an FOB alibaba trading terms is that alibaba sellers are responsible for shipping and logistics. This is not always the case, so make sure to read your trade term carefully before committing to any alibaba seller with an FOB alibaba trading terms!
CIF explained
For goods in international trade, Incoterm CIF stands for Cost Insurance Freight (or cost, insurance and freight). This is an agreement between buyer and seller in a sale that includes export.
Seller arranges and pays for transport of goods to the given location. Seller delivers cleared export goods with insurance to named port. Risk transfers from seller to buyer once the goods are on board the vessel for the main carriage, but seller has paid for transport up until then.
For example:
If the alibaba trade term is CIF New York, then this means the seller pays for all shipping costs and insurance up to and including delivery in New York. The buyer would be responsible for any additional charges incurred in transport from destination onward (e.g., customs clearances.
CFR explained
CFR stands for “Cost and Freight,” so sellers who use this trade term should be prepared to pay all shipping costs. CFR alibaba trade terms can come with additional charges such as alibaba’s insurance, customs fees or any other taxes that may incur from the buyers country.
Seller delivers goods to a named port and they are then cleared for export. The seller is considered to bear the risk of loss or damage until goods are loaded on board ship, at which point such risks transfer from the seller to the buyer.
For example:
If the trade term is CFR Sydney, then this means that the seller pays for all shipping costs and freight to get the item from China to Sydney. The seller is responsible for the goods until they are loaded on the ship or plane. After that they are the buyers responsibility.
EXW explained
EXW trade terms are a very alibaba seller-friendly option. EXW just means “Ex Works.” This alibaba trade term means the seller is responsible for delivering goods to a named place, but doesn’t include any responsibilities like insurance or customs clearance.
For example:
If the Alibaba trading terms are EXW Shenzhen, then this would mean that the buyer pays all shipping costs and clearances up until they receive their parcel in Shenzhen. The seller is only responsible for delivering the parcel to Shenzhen.
Conclusion
Alibaba trade terms are the set of guidelines that help buyers and sellers agree on conditions for the sale or purchase of goods. These can include things like price, shipping method, delivery time, payment methods and more. Learning what Alibaba trade terms mean is important because it will ensure your company’s transactions go smoothly with customers! We hope you’ll take a few minutes to read through our helpful guide so you know which type of contract you should be using when negotiating trades with clients in China.
