Incoterms

INTERNATIONAL TRADE TERMS

Incoterms, internationally acknowledged conventions, aim to standardize commercial transaction terms. They delineate the responsibilities of importers and exporters regarding:

Loading
Transportation mode
Delivery
Allocation of costs and risks (specifying the time and place of risk transfer)
Insurance
Completion of import-export formalities

Ultimately, Incoterms facilitate swift and unambiguous agreement on transaction terms, holding contractual significance.

Since their inception in 1936, Incoterms have undergone iterations, with the latest being "ICC 2020" or "Incoterms 2020," succeeding the previous version, "Incoterms 2010."

The "Incoterms 2020" version encompasses 11 trade terms, including 4 exclusively for maritime and river transport, each identified by a three-letter code, such as EXW for ExWorks. In practical usage, these codes are supplemented with specific locations where the Incoterms apply.

The 4 Incoterms Solely Applicable to Sea and River Transport: These terms apply exclusively when both departure and arrival points are seaports.

FAS: Free Alongside Ship
- Risk transfer occurs at the departure port's quay, where the exporter places goods alongside the vessel. The buyer is responsible for loading onto the ship and subsequent transport, including import customs clearance.
FOB: Free On Board
- Risk transfers upon goods loading onto the vessel by the seller. The buyer assumes responsibility for further transportation, including import customs clearance.
CFR: Cost and Freight
- Risk transfers upon goods loading onto the vessel. Similar to FOB, but the seller covers transport costs to the destination port, excluding transport insurance. Unloading at arrival may or may not be included in the contract.
CIF: Cost, Insurance, and Freight
- Similar to CFR, with the addition of the seller providing insurance for transport on the vessel.

The 7 Incoterms Applicable to All Transport Modes:

EXW: Ex Works
- Risk transfers upon goods leaving the factory, unloaded and not cleared through customs. The seller must make goods available at the factory exit on a predetermined date, with the buyer bearing all transport, customs, and risk costs to the final destination.
FCA: Free Carrier
- Risk and loading transfer to the carrier or freight forwarder designated by the buyer within the country of origin. Export formalities and costs are seller's responsibility. Buyer covers transport to its premises, import formalities, and related duties and taxes.
CPT: Carriage Paid To
- Delivery to the first carrier abroad with costs borne by the seller, excluding transport insurance. Seller arranges transportation and covers costs to the foreign destination, including unloading, with risk transfer at this point.
CIP: Carriage and Insurance Paid to
- Similar to CPT, but the seller also provides transport insurance.
DPU: Delivered At Place Unloaded
- Replaces DAT (Delivered At Terminal), with the destination now being any agreed place, not just a terminal. Goods (unloaded) are delivered at the destination with the buyer handling import customs clearance and post-delivery costs.
DAP: Delivered At Place
- Goods (not unloaded) provided by the seller at the foreign destination, with the buyer responsible for unloading and import customs clearance.
DDP: Delivered Duty Paid
- Goods delivered to the final destination (not unloaded), with import customs clearance and taxes covered by the seller. Seller bears the unloading costs, and the goods are ready for unloading at the destination. Seller handles both export and import customs clearance and pays all duties and taxes.