WHAT DOES INCOTERMS MEAN AND WHAT ARE THEY USED FOR?

The International Commercial Terms, in short, called Incoterms, are a set of rules circulated by the International Chamber of Commerce (ICC). The Incoterms rules primary purpose is to define the responsibilities, expenses, and risks linked with the international transit and delivery of goods between the seller and the buyer. They remove ambiguity and are recognized worldwide by the governments, legal authorizations, and traders in global business.

DIFFERENCE BETWEEN INCOTERMS 2010 AND NEW INCOTERMS 2020

The new Incoterms 2020 are the ninth version introduced by the ICC. They define 11 incoterms rules, same number as Incoterms 2010, and bring some slight changes regarding insurance, cost structures, security and transport types.
The former Incoterms 2010 rule “DAT” (Delivered at Terminal) becomes now “DPU” (Delivered at Place Unloaded). There is also a variation in “CIF” (Cost, Insurance, and Freight) and “CIP” (Carriage and Insurance Paid to) rules, now giving the parties a choice to increase insurance coverage.

HOW TO CHOOSE THE RIGHT INCOTERM FOR YOUR SHIPMENT

The 11 Incoterms 2020 rules can be divided into 2 groups according to the mode of transportation:

  • Any Mode of Transport / Multimodal: EXW, FCA, CPT, CIP, DPU, DAP, and DDP
  • Sea and Inland Waterways Transport only: FAS, FOB, CFR, and CIF

In addition to selecting the right incoterm according to your mode of transportation and type of good (containerized or bulk); other important factors can become challenging at the moment of choosing the appropriate shipping term: Cost, accountabilities, customs clearance, duties, additional insurance, transfer of risks, etc.

Selecting the Incoterm that befits your cargo requirements can be complex, especially if you are a first time importer or exporter and therefore would require expert hands like us.
Discover our overview of the incoterms 2020 rules and contact us today to get all the assistance you need for your next shipment.

  •  
  • EXW
  • FCA
  • CPT
  • CIP
  • FAS
  • FOB
  • CFR
  • CIF
  • DPU
  • DAP
  • DDP
 
  • Seller
  • Loading
  • Pre Carriage
  • Customs
  • Terminal
  • Loading
  • Transport
  • Discharge
  • Terminal
  • Customs
  • On Carriage
  • Unloading
  • Buyer
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance
Seller risk
Seller cost
Seller insurance

EX WORKS

Mode of Transportation: Any mode / Multimodal

The seller is only accountable for making the goods available at its premises (warehouse, factory, plant, etc.) or any other specific location agreed with the buyer. The buyer is in charge of loading the goods, clearing them if customs clearance is required, and making all the arrangement to the final destination.
The Ex Works term is frequently put into practice when asking for an initial quotation, without any delivery costs. While seller’s risks are minimal, the importer or buyer is bearing all costs and risks involved, and pays the insurance.

FREE CARRIER

Mode of Transportation: Any mode / Multimodal

Seller delivers goods, cleared for export (if required) to the Buyer, in the country of Seller. Named place can be either Seller’s premises or another named place in the Seller’s country. Recommended for Full Container load (FCL) & Less Than a Container Load (LCL)/Consolidation. Appropriate when Seller wants to only handle logistics in Seller’s Country.

CARRIAGE PAID TO

Mode of Transportation: Any mode / Multimodal

Seller delivers the goods to the carrier or another place of Seller’s choice and pays cost of carriage of the goods to named place of destination in the Buyer’s country.

CARRIAGE AND INSURANCE PAID TO

Mode of Transportation: Any mode / Multimodal

Seller delivers the goods to the carrier or another person of Seller’s choice and pays cost of carriage and insurance of the goods to named place of destination in the Buyer’s country. Can be used for any mode of transport.

FREE ALONGSIDE SHIP

Mode of Transportation: Sea & Inland Waterway only

Seller places goods alongside the vessel, quay or barge, nominated by Buyer, at agreed port of shipment.  Not advisable for container shipments (because containers goods are handed over to carrier at a terminal but not alongside the vessel).

FREE ON BOARD

Mode of Transportation: Sea & Inland Waterway only

Seller delivers on board the vessel chosen by Buyer at an agreed port of shipment. Not advisable for container shipments (because with containers goods are handed over to carrier before being loaded).

COST AND FREIGHT

Mode of Transportation: Sea & Inland Waterway only

Seller delivers goods on board the vessel or procures the goods already so delivered. Seller arranges freight to port of destination. To be used only for sea and inland waterway transport.

COST, INSURANCE AND FREIGHT

Mode of Transportation: Sea & Inland Waterway only

Seller delivers the goods on board the vessel or procures the goods already so delivered. Seller arranges freight to port of destination and marine Insurance. To be used only for sea and inland waterway transport.

DELIVERED NAMED PLACE UNLOADED

Mode of Transportation: Any mode / Multimodal

Seller delivers and unloads the goods at agreed destination, place, quay, warehouse, container yard or road, rail or air cargo terminal. Import Clearance is Buyer’s responsibility.

DELIVERED AT PLACE

Mode of Transportation: Any mode / Multimodal

Seller delivers at an agreed place still loaded but ready for unloading at an agreed place of destination in Buyer’s country. Import clearance is Buyer’s responsibility. 

DELIVERED DUTY PAID

Mode of Transportation: Any mode / Multimodal

Seller delivers at an agreed place still loaded but ready for unloading at an agreed place of destination. Seller has to bear all the costs and risks involved in bringing the goods including duties and taxes for import in country of destination.

Incoterm/Cost
Packaging
Loading from warehouse
Export customs clearance
Pre-carriage
Origin port fees
Handling at departure (OTHC)
Main transportation
Transportation insurance
Handling arrival (DTHC)
Destination port fees
Post carriage
Import customs clearance
Unloading into warehouse
EXW
S
S
B
B
B
B
B
B
B
B
B
B
B
FCA
S
S
S
B
B
B
B
B
B
B
B
B
B
CPT
S
S
S
S
B
B
B
B
B
B
B
B
B
CIP
S
S
S
S
B
B
B
S
B
B
B
B
B
FAS
S
S
S
S
S
B
B
B
B
B
B
B
B
FOB
S
S
S
S
S
S
B
B
B
B
B
B
B
CFR
S
S
S
S
S
S
S
B
B
B
B
B
B
CIF
S
S
S
S
S
S
S
S
B
B
B
B
B
DPU
S
S
S
S
S
S
S
B
S
B
B
B
B
DAP
S
S
S
S
S
S
S
B
S
S
S
B
B
DDP
S
S
S
S
S
S
S
B
S
S
S
S
B
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