Incoterms
Incoterms 2020 Rules & Responsibility Quick Reference Guide
What are Incoterms?
Incoterms, short for International Commercial Terms, are a set of international trade rules established by the International Chamber of Commerce (ICC). These terms define the responsibilities and obligations of buyers and sellers in international trade transactions regarding the delivery of goods. Incoterms are widely used to standardize and clarify trade terms to ensure smooth transactions and avoid misunderstandings.
Incoterms are revised periodically to reflect changes in international trade practices and technology. As of my last knowledge update in September 2021, the most recent version is Incoterms 2020.
Here are some key Incoterms and what they entail:
EXW (Ex Works):
The seller’s responsibility is to make the goods available for pick-up at their premises or another named place (factory, warehouse, etc.). The buyer bears all costs and risks associated with transportation.
CPT (Carriage Paid To):
The seller arranges and pays for the transportation of the goods to the named destination. Once the goods are handed over to the carrier, the risk transfers to the buyer.
DAP (Delivered at Place):
The seller is responsible for all costs associated with transporting the goods to a named destination, excluding import duties and taxes. The risk transfers to the buyer when the goods are ready for unloading.
DDP (Delivered Duty Paid):
The seller is responsible for delivering the goods to a named place in the buyer’s country, fully cleared for import, and paying all applicable taxes and duties. The risk transfers to the buyer upon delivery.
FOB (Free On Board):
The seller delivers the goods, cleared for export, on board the vessel at the named port. The buyer is responsible for all subsequent costs and risks.
CIF (Cost, Insurance, and Freight):
Similar to CFR, but the seller also arranges insurance coverage for the goods during transportation. The risk transfers to the buyer once the goods are on board the vessel.
FCA (Free Carrier):
The seller delivers the goods, cleared for export, to the carrier or another person nominated by the buyer at a named place (such as a terminal or warehouse). The buyer is responsible for the main transportation cost, risk, and unloading.
CIP (Carriage and Insurance Paid To):
Similar to CPT, but the seller also arranges insurance coverage for the goods during transportation. The risk transfers to the buyer when the goods are handed over to the carrier.
DPU (Delivered at Place Unloaded):
The seller is responsible for delivering the goods, unloaded from the arriving means of transport, at a named place. The risk transfers from the seller to the buyer upon unloading.
FAS (Free Alongside Ship):
The seller delivers the goods, cleared for export, alongside the vessel at the named port. The buyer is responsible for all subsequent costs and risks.
CFR (Cost and Freight):
The seller arranges and pays for transportation to the named port of destination. The risk transfers to the buyer once the goods are on board the vessel.
Incoterms help ensure clarity and consistency in international trade transactions by defining the responsibilities and obligations of both parties, thereby minimizing potential disputes and ensuring a smooth flow of goods between countries. It’s important for businesses engaged in international trade to understand and use the appropriate Incoterms based on their specific trade agreements and requirements.
Our clients love us
