International Commercial Terms (INCOTERM)

Incoterms 2020, which is the 9th version of the Incoterms, was released on September 2019 and it is effective since 1 January 2020. How would you like to take a closer look at these terms?

Incoterms or International Commercial Terms are the set of predefined commercial rules published by International Chamber of Commerce (ICC) in 1936. Incoterms later updated multiple times in 1953, 1967, 1976, 1980, 1990, 2000 and latest, in 2019 as Incoterms 2020.

Rules of any mode of transport

1) EXW – Ex Works

2) FCA – Free Carrier

3) CPT – Carriage Paid To

4) CIP – Carriage and Insurance Paid to

5) DPU – Delivered At Place Unloaded

6) DAP – Delivered At Place

7) DDP – Delivered Duty Paid

Rules for sea and inland waterway transport

1) FAS – Free Alongside Ship

2) FOB – Free on Board

3) CFR – Cost and Freight

4) CIF – Cost, Insurance & Freight

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Rules for any mode of transport

EXW – Ex Works

- Seller makes the goods available at their premises, or at another named place

- Maximum obligation on the buyer while minimum obligation on the seller

- EXW means that the buyer incurs the risks of bringing the goods to their final destination

FCA – Free Carrier

- The seller delivers the goods, cleared for export, at a named place

- The goods can be delivered to a carrier nominated by the buyer, or to another party nominated by the buyer

- If delivery occurs at the seller's premises, the seller is responsible for loading the goods on to the buyer's carrier

- if delivery occurs at any other place, the seller is deemed to have delivered the goods once their transport has arrived at the named place; the buyer is responsible for both unloading the goods and loading them onto their own carrier

CPT – Carriage Paid To

- The seller pays for the carriage of the goods up to the named place of destination.

- The seller is responsible for origin costs including export clearance and freight costs for carriage to the named place of destination

CIP – Carriage and Insurance Paid to

- CIP requires the seller to insure the goods for 110% of the contract value under Institute Cargo Clauses (A) of the Institute of London Underwriters

DPU – Delivered At Place Unloaded

- This Incoterm requires that the seller delivers the goods, unloaded, at the named place of destination

- 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 port or terminal

DAP – Delivered At Place

- The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination

- After arrival of the goods in the country of destination, the customs clearance in the importing country needs to be completed by the buyer, e.g. import permit, documents required by customs, etc., including all customs duties and taxes

DDP – Delivered Duty Paid

- Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes

- The seller is not responsible for unloading

Rules for sea and inland waterway transport

FAS – Free Alongside Ship

- The seller delivers when the goods are placed alongside the buyer's vessel at the named port of shipment

- The buyer has to bear all costs and risks of loss of or damage to the goods from that moment

- The FAS term requires the seller to clear the goods for export

FOB – Free on Board

- The seller bears all costs and risks up to the point the goods are loaded on board the vessel

- FOB contract requires a seller to deliver goods on board a vessel that is to be designated by the buyer in a manner customary at the particular port. The seller must also arrange for export clearance

- The buyer pays cost of marine freight transportation, bill of lading fees, insurance, unloading and transportation cost from the arrival port to destination

CFR – Cost and Freight

- The seller pays for the carriage of the goods up to the named port of destination

- Risk transfers to buyer when the goods have been loaded on board the ship in the country of Export

- The seller is responsible for origin costs including export clearance and freight costs for carriage to the named port

CIF – Cost, Insurance & Freight

- CIF is broadly similar to the term CFR, with the exception that the seller is required to obtain insurance for the goods while in transit

- CIF requires the seller to insure the goods for 110% of the contract value under Institute Cargo Clauses (A) of the Institute of London Underwriters

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Risks to seller/buyer table

Rules for any modes of transport

Incoterm 2020	Seller	Carrier	O. Port	Ship	D. Port	Terminal	Named Place	Unloading at destination
EXW	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
FCA	Seller	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
CPT	Seller	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer	Buyer
CIP	Seller	Buyer	Insurance	Insurance	Insurance	Insurance	Insurance	Buyer
DPU	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Buyer
DAP	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Buyer
DDP	Seller	Seller	Seller	Seller	Seller	Seller	Seller	Seller

Rules for sea and inland waterway transport

Incoterm 2020	Seller	Carrier	Port	Loading at Port	Onboard	Unloading at Port	Port
FOB	Seller	Seller	Seller	Seller	Buyer	Buyer	Buyer
FAS	Seller	Seller	Seller	Buyer	Buyer	Buyer	Buyer
CFR	Seller	Seller	Seller	Seller	Buyer	Buyer	Buyer
CIF	Seller	Seller	Seller	Seller	Buyer	Buyer	Buyer