When dealing with aluminium profiles in international trade, understanding Incoterms® 2020 is essential to clearly define the responsibilities, risks, and costs between buyers and sellers during shipment. Incorrect use of Incoterms can lead to delayed deliveries, disputes over damage or customs clearance, and unexpected expenses. This guide outlines the most relevant Incoterms for the aluminium profile industry and offers practical insight into choosing the right terms for your trade agreements.
What Are Incoterms® 2020?
Definition and Purpose
Incoterms®, short for International Commercial Terms, are a set of internationally recognized rules published by the International Chamber of Commerce (ICC). They provide clarity and consistency by defining the tasks, costs, and risks involved in the delivery of goods from sellers to buyers in international contracts. They are not laws but are legally binding when referenced correctly in contracts.
Key Updates in the 2020 Version
The 2020 update introduced a few important changes over the 2010 version. Notably, the term DAT (Delivered At Terminal) was replaced by DPU (Delivered at Place Unloaded). Also, CIF and CIP now require different levels of insurance coverage—the seller must provide a higher level of insurance under CIP than under CIF. The language was also clarified to reduce misinterpretation in practical applications.
Most Relevant Incoterms for Aluminium Profiles
In the aluminum profile industry, shipping is typically handled via sea or multimodal transport due to the product’s size, weight, and export destinations. The following Incoterms are the most commonly used.
EXW (Ex Works)
EXW places the minimum responsibility on the seller. The buyer is responsible for all transportation, loading, export procedures, and insurance starting from the seller’s facility. It is suitable when buyers prefer to control every stage of logistics, often with their own freight agents or consolidators.
FOB (Free On Board)
FOB is common for sea freight. The seller is responsible for clearing the goods for export and loading them onto the vessel at the port of origin. Risk and cost transfer to the buyer once the goods are onboard. This term is favored when buyers have experience handling ocean shipments.
CIF (Cost, Insurance, and Freight)
CIF requires the seller to cover the cost, insurance, and freight to the destination port. However, the risk transfers to the buyer once the goods are loaded onto the ship. It offers a balanced approach where the seller manages logistics, but the buyer assumes responsibility after loading.
DAP (Delivered At Place)
With DAP, the seller handles all transportation and delivery costs up to a specified location in the buyer’s country, excluding unloading and import duties. This Incoterm provides a convenient option for buyers with limited logistics infrastructure.
DDP (Delivered Duty Paid)
DDP assigns maximum responsibility to the seller, including customs clearance and payment of import taxes and duties. This is ideal for buyers who want a turnkey logistics solution without managing compliance or customs paperwork.
Key Considerations When Selecting an Incoterm
Mode of Transport Compatibility
Some Incoterms are restricted to sea or inland waterway transport (e.g., FOB, CIF), while others (e.g., EXW, DDP) can be applied across all transportation modes. Aluminum profile exporters must align term selection with the chosen mode to avoid contractual mismatches and logistical inefficiencies.
Allocation of Costs and Risks
Each Incoterm divides responsibility for cost and risk differently. While EXW places nearly all risk on the buyer, DDP does the opposite. Negotiating a fair balance based on the buyer’s logistics capability and risk appetite is crucial for building long-term trade relationships.
Insurance Requirements
Only certain Incoterms require the seller to provide insurance—CIF and CIP being the most notable. Under CIF, minimum insurance is sufficient unless otherwise agreed. In high-value aluminum profile shipments, buyers often request expanded coverage regardless of the chosen term.
Export/Import Formalities
Exporters must understand who is responsible for customs declarations, taxes, and import clearance. Under DDP, the seller must manage all formalities, which may involve working with brokers in the buyer’s country. Under EXW, the buyer bears full responsibility. Misunderstanding these obligations can result in costly delays or legal complications.
Sample Incoterms Comparison Table
The following table summarizes key responsibilities under major Incoterms® 2020 rules relevant to aluminum profile shipments. Always include the named place and version in your contracts, such as “FOB Shanghai Incoterms® 2020.”
Incoterm | Seller’s Responsibilities | Buyer’s Responsibilities |
EXW | Makes goods available at factory | Handles all transport, export/import clearance |
FOB | Loads goods on vessel, handles export clearance | Arranges sea freight, insurance, import duties |
CIF | Covers sea freight and insurance to destination port | Assumes risk once loaded, handles import clearance |
DAP | Delivers to named location in buyer’s country | Unloads goods and clears customs |
DDP | Delivers and pays all duties/taxes | Receives goods ready for unloading |
Common Mistakes to Avoid in Aluminium Profile Trade
Misapplying Incoterms can lead to costly disputes. Avoid using FOB for air freight, as it’s designed only for sea transport. Always specify the exact location in the term—for example, ‘FOB Guangzhou Port’ rather than just ‘FOB’. Remember that CIF includes only minimum insurance by default; buyers seeking full coverage should clarify terms upfront. Also, under DDP, sellers must research local tax regulations to avoid delays or fines.
Frequently Asked Questions (FAQ)
Which Incoterm is best for small-volume aluminum profile orders?
EXW or DAP is often preferred. EXW allows buyers to control transport, while DAP reduces logistics work on the buyer’s side.
Does CIF mean the seller covers damage during shipping?
Not entirely. CIF includes basic insurance, usually under Clause C. Buyers seeking broader coverage should request expanded terms.
What’s the difference between DAP and DDP for aluminum shipments?
Both include delivery to the buyer’s country, but only DDP includes import duties and taxes. DDP is more comprehensive.
Can I change the Incoterm after confirming the order?
Only with mutual written agreement. Changing terms affects cost, risk, and customs procedures, so changes should be documented clearly.
Who handles port charges under FOB?
The buyer is responsible for port charges at the destination, while the seller handles charges up to the loading of goods on the vessel.
Conclusion and Best Practices
Choosing the right Incoterm is essential for managing risk, cost, and delivery responsibilities in the aluminum profile trade. Each term offers different levels of seller/buyer involvement. Be sure to specify the Incoterm, location, and version in every contract to prevent confusion. Consulting experienced freight forwarders or legal advisors can reduce exposure and optimize trade outcomes.
Note: Most aluminum profiles fall under HS Code 7604 or 7608, depending on the shape and use. Accurate classification is vital for tariff calculation, customs clearance, and trade compliance. Always verify HS codes with a licensed broker or local authority before export.
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- Top 10 Aluminum Profile Supplier In China
- Aluminum Profile Customs Code Guide
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- Application of aluminum extrusion in different industries
- How to Choose an Aluminum Extrusion Supplier
Reference Sources
- AIncoterms® 2020 – ICC：The Incoterms® 2020 app features essential information and insights regarding the commercial trade terms from a trusted source, in one, easy-to-access location.
