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International Trade Basics for B2B Buyers
Guide · Reading time about 8 minutes
Once goods cross a border, three things decide what happens to them: the delivery term the parties agreed, the tariff code the goods are classified under, and the documents that travel with them. Get those three right and customs is routine; get one wrong and a shipment can sit in a port for weeks.
Incoterms 2020: who pays, and where risk passes
The Incoterms rules are published by the International Chamber of Commerce and are the standard shorthand for allocating cost and risk in a sale of goods. The current edition, Incoterms 2020, contains eleven rules. Seven work with any mode of transport; four are for sea and inland waterway carriage only. A rule is only complete when it names a place — FCA Shenzhen means something, FCA alone does not.
| Rule | Mode | In short |
|---|---|---|
| EXW | Any | Buyer collects at the seller's premises and carries everything from there |
| FCA | Any | Seller hands goods to the buyer's carrier at a named place |
| CPT | Any | Seller pays carriage to the destination; risk passes at handover to the first carrier |
| CIP | Any | As CPT, plus insurance — at all-risks level under Incoterms 2020 |
| DAP | Any | Seller delivers at the destination, ready for unloading; buyer clears import |
| DPU | Any | As DAP, but the seller also unloads |
| DDP | Any | Seller delivers cleared for import, duties paid — the maximum seller obligation |
| FAS | Sea | Seller places goods alongside the vessel |
| FOB | Sea | Risk passes once the goods are on board |
| CFR | Sea | Seller pays freight to the destination port; risk still passes on board |
| CIF | Sea | As CFR, plus insurance — minimum cover unless the parties agree more |
Two details cause most of the arguments. First, the cost line and the risk line are not the same line: under CPT, CIP, CFR and CIF the seller pays carriage to a distant place but risk has already passed to the buyer much earlier. Second, the insurance level differs — Incoterms 2020 raised CIP to all-risks cover while leaving CIF at minimum cover, so a buyer relying on CIF is usually underinsured unless more was agreed. FOB is also routinely misused for containerised cargo, where FCA fits the actual handover far better.
Classification: the HS code decides the duty
Every traded good is classified under the Harmonized System, maintained by the World Customs Organization. The first six digits are internationally harmonized, and countries extend them for their own tariff and statistical purposes: the European Union uses an eight-digit Combined Nomenclature and a ten-digit TARIC code, the United States a ten-digit HTS number.
The code, not the product name on the invoice, determines the duty rate, whether an import licence is needed, and whether the goods fall under a quota or a trade-defence measure. Classification is the supplier's opinion until customs disagrees, so a buyer who imports regularly is well advised to confirm the code independently — most customs administrations offer a binding tariff ruling for exactly this purpose.
Origin is not the same as shipment
Where goods were made and where they were shipped from are separate questions, and duty depends on the first. Preferential origin under a free-trade agreement can reduce or remove duty, but only when the goods genuinely meet the agreement's origin rules and the claim is evidenced — historically by a movement certificate such as EUR.1, and increasingly by a statement on origin made by a registered exporter on the invoice itself.
The documents that travel with the goods
- Commercial invoice — the basis for the customs value; it must match what is actually in the box.
- Packing list — cartons, weights, dimensions, marks.
- Bill of lading or air waybill — the transport contract. An original bill of lading is a document of title: whoever holds it controls release of the cargo, which is why it is central to letter-of-credit trade.
- Certificate of origin or statement on origin — evidence for the duty treatment claimed.
- Product compliance evidence — declarations of conformity, test reports and safety data sheets where the destination market requires them.
- EORI number — the identifier an importer needs to make a customs declaration in the European Union.
Getting paid, and paying safely
| Method | Who carries the risk |
|---|---|
| Advance payment | Entirely the buyer |
| Open account | Entirely the seller |
| Documentary collection | Shared; banks pass documents against payment or acceptance but guarantee nothing |
| Letter of credit | Largely neutralised; the issuing bank pays against compliant documents, under the ICC's UCP 600 rules |
A letter of credit is the most protective instrument and the most unforgiving one: banks deal in documents, not in goods, so a discrepancy as small as a misspelled consignee name can delay payment even though the shipment itself is perfect. In practice most established relationships settle on a split — a deposit on order and the balance against a copy of the bill of lading — which spreads the exposure without the cost of a credit.
Choosing a transport mode
Sea freight moves most B2B volume: a full container load when the goods fill one, a consolidated less-than-container load when they do not, at the cost of extra handling and a slower, less predictable schedule. Air freight is priced on chargeable weight, which takes volume into account, and earns its premium mainly for high-value, urgent or perishable cargo. Rail between Asia and Europe and road within a continent sit between the two on both speed and price.
This page is general information published by Line Markt LLC while its platform is in preparation. It is not legal, customs or tax advice; rates, codes and rules change, and the position for a specific shipment should be confirmed with a customs broker or the competent authority.