Origin | Any Mode or Modes of Transport | Export Customs | Terminal Handling Origin | Sea and Inland Waterway Only | Terminal Handling Destination | Import Customs | Any Mode or Modes of Transport | Destination |
Types of Transport | Any Mode or Modes of Transport | Sea and Inland Waterway Only | Any Mode or Modes of Transport | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
INCO Terms 2020 | EXW | FCA | FAS | FOB | CFR | CIF | CPT | CIP | DAP | DPU | DDP |
Ex Works (Place) | Free Carrier (Place) | Free Alongside Ship (Port) | Free On Board (Port) | Cost & Freight (Port) | Cost, Insurance & Freight (Port) | Carriage Paid To (Place) | Carriage & Insurance Paid To (Place) | Delivered At Place (Place) | Delivered At Place Unloaded (Place) | Delivered Duty Paid (Place) | |
Transfer of Risk | At Buyer's Disposal | On Buyer's Transport | Alongside Ship | On Board Vessel | On Board Vessel | On Board Vessel | At Carrier | At Carrier | At Named Place | At Named Place Unloaded | At Named Place |
Responsibilities & Chanrges | |||||||||||
Export Packaging | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Loading Charges | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Delivery to Port / Place | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Export Duty, Taxes & Customs Clearance | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Origin Terminal Handling Charges | BUYER | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Loading on Carriage | BUYER | BUYER | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Freight Charges | BUYER | BUYER | BUYER | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER | SELLER |
Insurance | Negotiable | Negotiable | Negotiable | Negotiable | Negotiable | SELLER | Negotiable | SELLER | Negotiable | Negotiable | Negotiable |
Destination Terminal Handling Charges | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | SELLER | SELLER | SELLER | SELLER | SELLER |
Delivery to Destination | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | SELLER | SELLER | SELLER |
Unloading at Destination | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | SELLER | BUYER |
Import Duty, Taxes & Customs Clearance | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | BUYER | SELLER |
1). What are Incoterms?
2). Advantages of Using Incoterms?
3). What’s Not Included in Incoterms I Need to Be Aware of as a Buyer?
4). Incoterms Explanation
5). Where Can I Learn More About the Incoterm 2020 Rules?
6). Understanding Incoterms Responsibilities
International Commercial Trade Terms, or Incoterms, are used by buyers and sellers to communicate responsibilities in international trade. These terms, updated every 10 years by the International Chamber of Commerce (ICC), are followed globally.
When purchasing internationally, sellers often use a three-letter Incoterm abbreviation from the 11 available. These terms specify tasks, costs, risks, and logistics for goods transfer, whether by sea, air, or land freight.
Point of Delivery - were goods transfer from seller to buyer.
Responsible party for transportation costs - Covering Freight Costs (Freight Prepaid or Freight Collect).
Export and Import Requirements - Specifying who covers costs and manages cargo export/import.
Responsible party for Freight Insurance - Indicating who pays for Freight Insurance.
Here's a simple breakdown of each Incoterm:
EXW (Ex Works) : Goods handed over at seller's premises.
FCA (Free Carrier) : Seller delivers goods to a named place.
CPT (Carriage Paid To) : Seller pays for freight to the named destination.
CIP (Carriage and Insurance Paid To) : covers freight and insurance to the named destination.
DAT (Delivered at Terminal) : Seller delivers goods to a named terminal.
DAP (Delivered at Place) : Seller delivers goods to a named destination.
DDP (Delivered Duty Paid) : Seller covers all costs and risks until goods reach the buyer.
FAS (Free Alongside Ship) : Seller delivers goods alongside the ship at a named port.
FOB (Free on Board) : Seller delivers goods on board the vessel at a named port.
CFR (Cost and Freight) : Seller pays for freight to the named port of destination.
CIF (Cost, Insurance, and Freight) : Seller covers freight, insurance to the named port of destination.
By understanding these Incoterms, International traders can ensure clarity in their agreements and smooth transactions.
EXW – Ex Works or Ex-Warehouse:
FCA - Free Carrier :
FAS - Free Alongside Ship :
FOB - Free On Board :
CFR - Cost and Freight :
CIF - Cost, Insurance & Freight :
CPT - Carriage Paid To :
CIP - Carriage & Insurance Paid :
DAP - Delivered at Place :
DPU - Delivered at Place Unloaded :
DDP - Delivered Duty Paid :
The International Chamber of Commerce updates Incoterms every ten years.
Companies like Guided Imports stay current with ICC’s terms, and you can learn more on the ICC website or download their guide.
PDF Incoterms Chart :
Guided Imports aims for seamless international logistics, providing resources to inform shippers.
They offer "The Complete Shipper’s Guide to Incoterms and Their Meaning" to improve understanding of these terms in international trade.
The free guide includes an easy-to-follow Incoterms chart, explaining each term, how it works in buying/selling, and what to watch for.
Download the guide for a clear explanation and chart of each International Commercial Trade Term.
Not all Incoterms apply to all shipment types; some are only for waterway transport, not land or air.
Using a waterway-only Incoterm for alternative methods may result in unexpected charges.
Incoterms Valid for All Shipment Methods :
EXW - Ex Works or Ex-Warehouse
FCA - Free Carrier
CPT - Carriage Paid To
CIP - Carriage and Insurance Paid To
DAP - Delivered At Place
DPU - Delivered At Place Unloaded
DDP - Delivered Duty Paid
Incoterms for Sea and Inland Waterway Transport :
FAS - Free Alongside Ship
FOB - Free on Board
CFR - Cost and Freight
CIF - Cost, Insurance, Freight
Difference Between 'Freight Collect' and 'Freight Prepaid':
'Freight Collect': Buyer collects and pays all freight charges.
Incoterms associated with 'Freight Collect':
EXW – Ex Works or Ex-Warehouse
FCA – Free Carrier
FAS – Free Alongside Ship
FOB – Free on Board
'Freight Prepaid': Seller pays freight charges.
The remaining seven Incoterms consist of 'Freight Prepaid'.
Insurance Requirements for CIF and CIP Incoterms:
CIF (Cost, Insurance & Freight) requires an insurance policy with a minimum cover of the Institute Cargo Clause (C).
CIP (Carriage & Insurance Paid To) requires an insurance policy with a minimum cover of the Institute Cargo Clause (A).
Agreement on Incoterms Between Buyer and Seller:
Sellers often have preferred Incoterms unless a buyer specifies otherwise.
Communication between buyer and seller helps agree on the most suitable Incoterm.
To be contractually valid, Incoterms should be listed in the purchase agreement, sales invoice, or sales contract.
Clear written agreement is crucial, and verbal communication is not sufficient for defining responsibilities in international shipments.
Selecting Incoterms:
No special documentation is needed for selecting an Incoterm; it should be listed with the product price in the agreement.
Incoterms can change during an order process, such as a switch from sea shipping due to delays. In such cases, communication between buyer and seller is essential for any changes in Incoterms, just like any other changesin the purchase agreement.
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