Incoterms

Definition and Overview

Incoterms are trade term rules established by the International Chamber of Commerce. The condition name and designated place are written in contracts and quotations to clarify the place where fabric is handed over from seller to buyer, who bears freight and insurance costs, and when the risk in transit transfers.

They are not the contract itself that comprehensively defines the sales price, payment method, transfer of ownership, quality warranty, responsibility for delivery delays, and similar matters. In fabric transactions, these conditions must be separately specified in the basic trading agreement or purchase order.

Uses in Fabric Trading

They are used when procuring rolls from overseas weavers, converters, fabric trading companies, and similar suppliers, and shipping them across borders. By aligning the terms at the quotation stage, it becomes easier to compare how much of the quoted price includes international freight, import and export customs clearance costs, insurance premiums, and so on.

For example, EXW is a term based on delivery at the seller's premises, which places a larger burden on the buyer to arrange transport. FOB is a term based on shipment, and CIF is a term in which the seller arranges freight and insurance to the named port; these are mainly used for sea transport.

• Scope of costs included in the fabric price
• The party responsible for export and import customs clearance
• Transfer point for risk of damage, wetting, or loss during transport
• The party arranging the carriage contract and cargo insurance

Key Points to Check and How to View Costs

Confirm not only the term name but also the delivery place or destination in detail. Even with the same FOB or CIF, the domestic transport costs and scope of work borne by each party differ depending on which port is designated and whether delivery is made at the factory or the warehouse.

The total procurement cost of fabric consists of the fabric unit price plus transport costs, insurance premiums, customs-related costs, duties, and domestic delivery costs. Transport costs vary depending on volume, packing dimensions, shipping method, and timing, so do not assume a fixed amount or percentage; check the quotation for each case.

• Version of Incoterms applied and the term name
• Official name of the designated place or port
• Quantity of the roll, packing form, weight, and volume
• Shipping method and desired delivery date
• Insurance coverage and procedures for contact and claims in the event of an accident

Points to Prevent Misunderstandings

If abbreviations such as FOB, CIF, or EXW are used only verbally, differences may arise in understanding the place and cost scope. It is important to confirm the term name, applicable version, designated place, currency, freight breakdown, and other details in the same wording on purchase orders, invoices, shipping documents, and similar documents.

The transfer of risk and who pays the costs do not necessarily occur at the same time. Also, even under terms where the seller arranges transport, the scope of responsibility for quality incidents or delivery delays during transit must be supplemented by individual contracts. Inspection standards, handling of fabric defects, and claim deadlines are also agreed separately.

Frequently Asked Questions