What are Incoterms?
INCOTERMS (International Commercial Terms) is a set of international rules created by the International Chamber of Commerce (ICC) that define the obligations of buyers and sellers in international transactions. They are used to precisely determine who bears the costs, risks, and responsibility for the transport and insurance of goods at various points of their journey. The latest version, INCOTERMS 2020, came into effect on January 1, 2020.
EXW (Ex Works)
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The seller makes the goods available at their premises or another specified location.
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The buyer bears all costs and risks associated with loading, transport, and customs clearance.
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Minimum obligations for the seller.
FCA (Free Carrier)
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The seller delivers the goods to the carrier nominated by the buyer at the agreed place.
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Risk transfers to the buyer when the goods are delivered to the carrier.
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The seller is responsible for export clearance.
FAS (Free Alongside Ship) – sea transport only
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The seller delivers the goods alongside the vessel nominated by the buyer at the port of shipment.
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Risk transfers to the buyer at this point.
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The seller is responsible for export clearance.
FOB (Free On Board) – sea transport only
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The seller delivers the goods on board the vessel nominated by the buyer at the port of shipment.
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Risk transfers to the buyer when the goods are on board the vessel.
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The seller is responsible for export clearance.
CPT (Carriage Paid To)
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The seller arranges and pays for the carriage of goods to the agreed destination.
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Risk transfers to the buyer when the goods are handed over to the first carrier.
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The seller is responsible for export clearance.
CIP (Carriage and Insurance Paid To)
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Similar to CPT, the seller arranges and pays for the carriage to the agreed destination.
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Additionally, the seller pays for insurance for the goods in favor of the buyer (minimum cover).
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Risk transfers to the buyer when the goods are handed over to the first carrier.
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The seller is responsible for export clearance.
CFR (Cost and Freight) – sea transport only
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The seller arranges and pays for the carriage to the named port of destination.
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Risk transfers to the buyer when the goods are on board the vessel at the port of shipment.
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The seller is responsible for export clearance.
CIF (Cost, Insurance and Freight) – sea transport only
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Similar to CFR, the seller arranges and pays for the carriage to the named port of destination.
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Additionally, the seller pays for insurance for the goods in favor of the buyer (minimum cover).
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Risk transfers to the buyer when the goods are on board the vessel at the port of shipment.
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The seller is responsible for export clearance.
DAP (Delivered at Place)
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The seller delivers the goods to the named place of destination, ready for unloading.
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Risk transfers to the buyer when the goods are delivered to that place.
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The buyer is responsible for unloading, import clearance, and customs duties.
DPU (Delivered at Place Unloaded) – New in INCOTERMS 2020
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The seller delivers the goods to the named place of destination and bears the costs and risks of unloading.
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Risk transfers to the buyer after the goods are unloaded.
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The buyer is responsible for import clearance and customs duties.
DDP (Delivered Duty Paid)
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The seller bears all costs and risks associated with delivering the goods to the named place of destination, including customs duties and import taxes.
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Maximum obligations for the seller.