Which Incoterm is most suitable for your airfreight export?
29 September 2020
Are you an entrepreneur looking to export your goods outside of the EU? If yes, Incoterms are a must. These international trade agreements set out the obligations and risks of the buyer and seller. It prevents unnecessary problems and costs. What are the most common Incoterms for airfreight export and how do you make the right choice?
EXW – the buyer has sole responsibility
Start-up exporters in particular often choose the EXW Incoterm (Ex Works). This means the buyer assumed full responsibility from the moment the goods are ready to be collected from your factory. The main features of EXW are:
- Costs and risks: the buyer is responsible for all costs and risks for loss or damage of the goods.
- Transport: buyer is responsible for transport from the time of loading at the factory up to unloading at the end destination.
- Customs formalities: the customs formalities related to export and import are arranged by the buyer.*
If you opt for Incoterm EXW, your buyer is responsible for virtually everything. The advantage is that as a seller, you have little to worry about. However, there are entrepreneurs who see this as a disadvantage. As soon as your goods leave the factory, you have lost control or insight – which means you won’t know when and if they safely reach the final recipient. What’s more, EXW is sometimes considered bad customer service as the buyer has to make all arrangements themselves.
*Please note: for the zero-rate VAT, you have to be able to prove to the Dutch Tax & Customs Administration that the goods have left the EU. As such, it is sensible to arrange the export declaration yourself, instead of having the buyer do this. Your forwarder can arrange this for you if you sign a so-called ‘direct representation’.
DAP – the buyer decides
DAP stands for ‘Delivered at Place’. Contrary to EXW, you assume almost all responsibility. This responsibility only transfers to the buyer when the consignment is unloaded at the end destination. Exporters opting for DAP mostly do so because they want to be certain that the goods arrive at the end destination. DAP features:
- Costs and risks: these are the responsibility of the seller up to the agreed delivery address.
- Transport: seller and buyer jointly agree on who is responsible for transport to the end destination (this was put in place on 1 January 2020).
- Customs formalities: the seller arranges the export documentation. The buyer is responsible for the customs formalities in the destination country.
If you export using Incoterm DAP, you select a Dutch airfreight forwarder who will arrange everything on your behalf. This includes the airfreight transport to the destination country, the required customs formalities, and any possible final shipping. Ritra Cargo often arranges Incoterm DAP transports, whereby we work very closely with our agents in the destination country. This means you retain control over your valuable cargo.
DPU (previously DAT) – shared responsibility
The Incoterm DPU (Delivered at Place Unloaded) means you are responsible for the goods up to the moment they are unloaded at the terminal in the destination country. After this, responsibility transfers to the buyer. The main features of DPU are:
- Costs and risks: until the goods are unloaded at the terminal, costs and risks are the seller’s responsibility. After this, responsibility transfers to the buyer.
- Transport: the seller arranges transport up to the terminal in the destination country. The buyer arranges the final shipping.
- Customs formalities: the seller is responsible for the export documentation, the buyer arranges clearance.
In short, Incoterm DPU means the responsibilities are shared between the buyer and the seller. Just as with DAP, your own airfreight forwarder is called upon for airfreight transport to the destination country. This means you retain insight in and control over your consignment up to final shipping.
Responsiblities of buyer (B) and seller (S) according to Incoterms© 2020
This diagram is a simplified overview of the Incoterms. For all the details on the task and risk distribution for Incoterms, please refer to the International Chamber of Commerce (ICC) website.
Clear agreement on Incoterms
Have you agreed an Incoterm with your buyer? Then make sure this is stipulated in the commercial invoice. This is done by specifying the three-letter acronym plus the location of transfer. Some examples of how this might look:
- The buyer collects the goods from you and has full responsibility from there: EXW Alkmaar
- You are responsible for the consignment up to the airport terminal: DPU Dubai Airport
- You are responsible for delivery of the goods to the end destination: DAP + buyer’s address
Do not forget to also list which Incoterms version you are using. Usually, the most recent version applies: the Incoterms© 2020.
If you are not sure which Incoterm is most suitable for your airfreight export, our colleagues can help you with suitable advice. Please contact us for more information.
Door-to-door airfreight transport
Are you looking to export your goods by airfreight? Then get in touch with Ritra Cargo to act as your airfreight forwarder. We have global representation and can arrange your transport from start to finish, including the required customs formalities. You can rest assured that everything is arranged properly.
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