When handling re-export trade business, there are doubts about how to fill in the country of origin. Goods procured from Country A are processed in Country B and then transshipped to Country C, making it unclear whether to declare Country A or Country B, and there's concern about the impact of trade terms. The best answer points out that the determination of the country of origin follows the 'substantial transformation' principle: if only simple processing occurred without substantial change, Country A should be declared; if substantial transformation occurred, Country B should be declared. Trade terms do not directly affect this determination.
Which Incoterms are suitable for re-export trade? Which one is the best?
Resolved
Our company plans to engage in re-export trade, but we are not very familiar with Incoterms. We would like to ask everyone, which Incoterms are generally used in re-export trade? Is there any Incoterm particularly suitable for re-export trade that can maximize risk reduction and profit increase? We hope experienced friends can help answer this, thank you!
Trade Expert Insights Answers
Kevin HuangYears of service：3Customer Rating：5.0
E-Commerce Export AdvisorStart a Chat
In re-export trade, commonly used Incoterms include FCA (Free Carrier), CPT (Carriage Paid To), and CIP (Carriage and Insurance Paid To). FCA offers high flexibility; the seller completes the delivery obligation by simply handing over the goods to the buyer's nominated carrier at the named place, making it suitable for all modes of transport. Under CPT, the seller must pay the cost of carriage necessary to bring the goods to the named destination, and the risk transfers when the goods are delivered to the carrier. Under CIP, in addition to the obligations under CPT, the seller also needs to arrange cargo insurance.
If risk reduction is desired, CIP is relatively better because the seller is responsible for insurance; if goods are damaged or lost during transit, claims can be made through insurance. However, the specific choice should consider a combination of factors such as the mode of transport, cargo characteristics, and transportation risks. For instance, if goods require multimodal transport, FCA might be more suitable; if the transportation distance is long and risks are high, CIP offers clear advantages.
David ChenYears of service：10Customer Rating：5.0
Trade Compliance AdvisorStart a Chat
FOB (Free On Board) can also be considered for re-export trade. It clarifies that the risk transfers from the seller to the buyer when the goods pass the ship's rail at the port of shipment. However, it is only applicable to sea and inland waterway transport, and it is not very convenient if the cargo transportation involves multiple modes.
Olivia LiuYears of service：6Customer Rating：5.0
Foreign Exchange Risk ManagerStart a Chat
CFR (Cost and Freight) is also an Incoterm usable in re-export trade. The seller is responsible for costs and freight, and risk transfers when the goods pass the ship's rail at the port of shipment. However, it does not include insurance, which the buyer needs to purchase independently. It can be chosen by companies with strong risk control capabilities.
Sophia WangYears of service：6Customer Rating：5.0
International Logistics CoordinatorStart a Chat
EXW (Ex Works) also has applications in re-export trade. The seller completes delivery when the goods are placed at the disposal of the buyer at the seller's premises or another named place. However, this places high demands on the buyer, who is responsible for subsequent transport, customs clearance, and a series of other matters.
Emma ZhaoYears of service：3Customer Rating：5.0
Export Documentation SpecialistStart a Chat
The choice of Incoterms should be based on actual circumstances. For example, if goods are high-value and easily damaged, CIP can better protect interests; if they are regular goods with a simple transportation route, FOB or CFR can also be considered.
Daniel KimYears of service：4Customer Rating：5.0
Commodity Inspection and Quarantine ConsultantStart a Chat
If there are many transshipment points during transportation, FCA can reduce the seller's responsibility because the seller completes the delivery obligation when the goods are handed over to the carrier, and thereafter the risk is borne by the buyer.
Richard WuYears of service：8Customer Rating：5.0
Global Trade Operations ExpertStart a Chat
When the seller is familiar with transportation and insurance matters, Incoterms like CIP and CPT, where the seller assumes more responsibility, can better control the process and also help increase profits.
Michael ZhangYears of service：10Customer Rating：5.0
Customs Clearance SpecialistStart a Chat
For re-export trade, the negotiation power of both trading parties also matters. If the buyer is strong, they might prefer to choose EXW; if the seller is strong, they will prefer Incoterms like CIP.
Anthony LuoYears of service：10Customer Rating：5.0
Trade Compliance ExpertStart a Chat
From the perspective of transportation costs, if sea freight costs are low and stable, choosing Incoterms like FOB, CFR, CIF, which are suitable for sea transport, can help control costs.
Robert TanYears of service：5Customer Rating：5.0
International Market Development AdvisorStart a Chat
It is also necessary to pay attention to the policies and regulations of the trade destination. Some regions have different regulations or requirements for specific Incoterms, which will affect the choice of Incoterms.