When choosing a price term, the seller mainly considers the scope of the cargo damage risk, the burden of responsibility, and the mode of transportation.
1) From the perspective of cargo damage risk
In the process of transporting goods from the seller’s warehouse to the buyer’s warehouse, there is a possibility of cargo loss due to various natural disasters or accidents. Therefore, both the buyer and the seller should pay great attention to analyzing in which cases the cargo damage will be borne by themselves. From the perspective of cargo damage risk, the three commonly used price terms are the same. The seller is responsible for safely delivering the goods to the ship at the port of shipment. If the goods are lost thereafter, it has nothing to do with the seller, even if the seller bears the international freight from the port of shipment to the port of destination when using the CFR term, and the seller bears the international freight and international freight insurance when using the CIF term. When using the DAT, DAP, and DDP terms, the seller must bear the cargo damage risk until the goods are transported to the designated place in the importing country, and must also bear the international freight and insurance premiums.
2) From the perspective of liability burden
Different responsibilities in transportation and insurance directly lead to different costs borne by the seller, but as can be seen from Table 6.2, no matter what costs the seller bears, the seller will include the costs in the price when quoting. From this perspective, different trade terms have no effect on the seller’s profits. There are two main factors that affect the seller’s interests: first, international freight prices sometimes fluctuate greatly, and a sudden increase in freight will eat up the seller’s profits. From this perspective, it is more advantageous for the seller to use FOB; second, when the seller arranges transportation by himself, he can choose a freight forwarder and shipping company that he trusts, and the subsequent operations will be smoother. From this perspective, it is more advantageous for the seller to use CFR or CIF. From the perspective of responsibility and cost, EXW is the trade term with the least seller responsibility, and DDP is the trade term with the greatest seller responsibility.
3) From the perspective of international transportation mode
According to INCOTERMS2010, some terms are only applicable to water transportation. Therefore, if the goods are transported by air and the seller does not want to bear the freight, the FCA term can be used instead of the FOB term. For the seller’s responsibility, the two terms are basically the same, but the applicable modes of transportation are different. The seller’s responsibilities under CPT and CFR terms are also basically the same, and the seller’s responsibilities under CIP and CIF terms are also basically the same, the difference is that the applicable modes of transportation are different.