Incoterms - International Commercial Terms
The International Chamber of Commerce introduced the latest version of Incoterms® in 2020, which became effective on January 1, 2020. Since their initial publication in 1936, the ICC has periodically revised Incoterms® to align with the evolving global trade landscape. It is crucial for all stakeholders in international trade to have a clear understanding of these changes and their implications for global supply chains.
Incoterms® play a pivotal role in the realm of global trade. While Incoterms® 2010 and Incoterms® 2020 may appear complex, it is essential for both buyers and sellers to comprehend their functioning and respective responsibilities throughout the supply chain. In this article, we will elucidate the updates made to Incoterms® 2020 and provide straightforward explanations.
EXW - Ex Works
Often used when making an initial quotation for the sale of goods without any costs included, EXW means that the seller makes the goods available at their premises or at another named place (works, factory, warehouse, etc). The seller does not need to load the goods on any collecting vehicle or clear the goods for export.
CFR - Cost and Freight
The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
CIF - Cost, Insurance and Freight
The same as CFR with the addition that the seller must also obtain minimum insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
FOB – Free on Board
The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer takes on responsibility for all costs from that moment onwards.
FAS - Free Alongside Ship
The seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer takes on responsibility for all costs from that moment onwards.
DDP - Delivered Duty Paid
The seller is responsible for delivering the goods to the named place in the buyer’s country, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading.
DPU - Delivered at Place Unloaded
This Incoterm requires that the seller delivers the goods, unloaded, at the named place. The seller covers all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and assumes all risk until arrival at the destination place.
DAP - Delivered at Place
The seller is deemed to have delivered when the goods are placed at the disposal of the buyer on the arriving means of transport and ready for unloading at the named place of destination. Under DAP terms, the seller needs to manage all risks involved in bringing the goods in.
CIP - Carriage and Insurance Paid to
Similar to CPT with the exception that the seller is required to obtain minimum insurance for the goods while in transit.
CPT – Carriage Paid To
Under CPT the seller pays for the carriage of goods up to the named place of destination.
FCA - Free Carrier
FCA can have two different meanings, each with varying levels of risk and cost for the buyer and seller. FCA (a) is used when the seller delivers the goods, cleared for export, at a named place which is their own premises. FCA (b) is used when the seller delivers the goods, cleared for export, at a named place that is not their premises. In both instances, the goods can be delivered to a carrier nominated by the buyer, or to another party nominated by the buyer.