Understanding the Core Trade Language of Global B2B Procurement — From Quotation, Transportation to Delivery
In today's global business environment, international trade connects suppliers, buyers, logistics providers, financial institutions, customs authorities, and end customers.
For companies purchasing B2B products such as industrial equipment, renewable energy products, machinery, and electronic components from overseas suppliers, understanding international trade terms is essential for reducing procurement risks and improving communication efficiency.
International trade terminology not only defines the responsibilities and obligations of different parties, such as:
• Who is responsible for transportation?
• Who pays the related costs?
• When does the delivery obligation and risk transfer occur?
• How should payment be made?
• Who handles customs clearance?
These terms also have a direct impact on supply chain efficiency and total procurement costs.This article provides a systematic overview of the most commonly used international trade terms, including:
• International shipping and trade terms
• Product pricing and quotation terms
• International payment methods
• Customs and trade documentation
• Supply chain and quality management terms
• Product certification and compliance requirements
The goal is to help global buyers better understand international supply chain cooperation and communicate more efficiently with suppliers.
1 International Shipping and Trade Terms
International transportation is a critical part of cross-border trade.Different shipping terms determine:
• Which responsibilities belong to the supplier
• Which costs are covered by the buyer
• When risks are transferred between the seller and buyer
The most commonly used international trade rules are Incoterms(International Commercial Terms). Incoterms are internationally recognized trade rules established by the International Chamber of Commerce (ICC).
They define the responsibilities and obligations of buyers and sellers in international transactions. Incoterms mainly cover:
• Transportation responsibilities
• Cost allocation• Risk transfer
• Customs clearance responsibilities
1.1 EXW (Ex Works)
Ex Works means that the seller delivers the goods at their own factory or warehouse.
Under EXW terms, the seller only needs to prepare the goods at their production facility or warehouse. After the goods are made available, all further processes and responsibilities are transferred to the buyer.
Seller's responsibilities:
• Product manufacturing
• Product packaging
• Making the goods available at the agreed location (factory or warehouse)
Buyer's responsibilities:
• Picking up the goods from the seller's location
• Export customs clearance
• International transportation
• Import customs clearance
• Final delivery to the destination
Suitable scenarios:
• Buyers with strong international import experience
• Companies that have their own logistics resources in the supplier's country or destination market
• Professional procurement companies that can manage the entire supply chain process independently
1.2 FOB (Free On Board)
Free On Board means that the seller is responsible for delivering the goods to the export port and completing the loading process onto the vessel.
Under FOB terms, the seller's responsibility ends once the goods are loaded on board the vessel at the designated port of shipment. After that point, the buyer assumes the transportation costs and risks.
Seller's responsibilities:
• Product manufacturing
• Product packaging
• Domestic transportation from the factory to the export port
• Export customs clearance
• Delivery of goods at the port of shipment and loading onto the vessel
Buyer's responsibilities:
• International ocean freight
• Marine insurance (if required)
• Import customs clearance
• Import duties and taxes
• Transportation from the destination port to the final delivery location
Suitable scenarios: FOB is one of the most commonly used international trade terms, especially for:
• Industrial equipment
• Machinery
• Energy products
• Electronic components
• Large-volume B2B transactions
It is suitable for buyers who have their own international logistics arrangements or prefer to control the main transportation process after the goods leave the export port.
Additional note: According to the Incoterms® 2020 rules, FOB is only applicable to sea transport and inland waterway transport. It is not suitable for air freight, railway transportation, or multimodal transportation.
1.3 CIF (Cost, Insurance and Freight)
Cost, Insurance and Freight (CIF) means that the seller is responsible for arranging transportation of the goods to the agreed destination port, including the cost of freight and basic marine insurance. Example:
CIF Hamburg USD 60,000
This means the supplier is responsible for delivering the goods to Hamburg Port, Germany, including the cost of international transportation and insurance.
Seller's responsibilities:
• Product manufacturing
• Product packaging
• Domestic transportation from the factory to the export port
• Export customs clearance
• International ocean freight
• Basic marine insurance coverage until the goods arrive at the destination port
Buyer's responsibilities:
• Import customs clearance
• Import duties and taxes
• Local transportation from the destination port to the final delivery address
Suitable scenarios:
• Buyers who have limited experience with international logistics
• Customers who prefer suppliers to arrange international transportation
• Importers who want a relatively simple purchasing process while handling import procedures themselves
Additional note: According to Incoterms® 2020, CIF is only applicable to sea transport and inland waterway transport. The seller is only required to provide minimum insurance coverage unless otherwise agreed between the buyer and seller.
1.4 DDP (Delivered Duty Paid)
Delivered Duty Paid (DDP) means that the seller takes the maximum level of responsibility in the international trade process and delivers the goods to the buyer's designated location after completing all required procedures, including import clearance and payment of import duties and taxes.Under DDP terms, the seller is responsible for almost the entire supply chain process.
Seller's responsibilities:
• Product manufacturing
• Product packaging
• Domestic transportation from the factory to the export port
• Export customs clearance
• International transportation
• Import customs clearance
• Payment of import duties, VAT, and other applicable taxes
• Final delivery to the buyer's designated location
Buyer's responsibilities:The buyer does not need to handle import procedures. They only need to receive and inspect the goods at the agreed delivery location.
Suitable scenarios:
• First-time importers
• Small businesses without professional import teams
• Buyers who prefer a simple purchasing process without handling customs clearance and logistics procedures
Additional note: According to Incoterms® 2020, DDP places the highest level of responsibility on the seller. The seller must be capable of handling import procedures and tax obligations in the buyer's country, which may create compliance challenges in some markets. Therefore, DDP is usually recommended when the seller has reliable local logistics partners or sufficient experience in the destination market.
1.5 DAP (Delivered At Place)
Delivered At Place (DAP) means that the seller delivers the goods to an agreed destination specified by both the buyer and seller in the buyer's country.
Under DAP terms, the seller is responsible for arranging transportation and bears the costs and risks until the goods arrive at the agreed delivery location. However, the seller is not responsible for import customs clearance, import duties, VAT, or other taxes in the buyer's country.
Seller's responsibilities:
• Product manufacturing
• Product packaging
• Domestic transportation from the factory to the export point· Export customs clearance· International transportation
• Transportation costs and risks until the goods arrive at the agreed destination
Buyer's responsibilities:
• Completing import customs clearance before receiving the goods
• Paying all import duties, VAT, and applicable taxes
• Handling any local compliance requirements
Suitable scenarios:
• Buyers with import capabilities who want suppliers to handle international transportation
• Long-term business partners who have already established trust
• Customers who do not want to use DDP but still expect suppliers to provide comprehensive logistics support
Additional note: Compared with DDP, DAP transfers more responsibility for import procedures and taxes to the buyer. Therefore, DAP is commonly preferred by professional B2B buyers, distributors, and companies with their own import systems.