Incoterms, or International Commercial Terms, are standardized trade terms used in global contracts to define the responsibilities of buyers and sellers in international transactions. Established by the International Chamber of Commerce (ICC), these terms are crucial for facilitating smooth and clear trade agreements.
Incoterms Overview: A Brief Guide.
- EXW (Ex Works): Seller makes goods available at their premises; buyer assumes all risks and costs from there.
- FCA (Free Carrier): Seller delivers goods to a carrier nominated by the buyer at a named place, cleared for export.
- CPT (Carriage Paid To): Seller pays for transportation to a named destination; buyer assumes risk from delivery to carrier.
- CIP (Carriage and Insurance Paid To): Seller covers transportation and insurance to a named destination; risk shifts to buyer upon delivery to carrier.
- DAP (Delivered at Place): Seller delivers goods to a named destination, ready for unloading; buyer handles import duties and unloading.
- DPU (Delivered at Place Unloaded): Seller delivers and unloads goods at a named destination; buyer is responsible for import duties.
- DDP (Delivered Duty Paid): Seller covers all costs, including transportation, insurance, and import duties to the destination; buyer receives goods.
- FAS (Free Alongside Ship): Seller delivers goods alongside the ship at the port of shipment; buyer takes over from there.
- FOB (Free on Board): Seller covers costs and risks up to the point goods are loaded onto the ship; buyer assumes risk from that point.
- CFR (Cost and Freight): Seller pays for cost and freight to the destination port; buyer assumes risk from the point goods are loaded.
- CIF (Cost, Insurance, and Freight): Seller covers cost, insurance, and freight to the destination port; risk transfers once goods are loaded.
- DAF (Delivered at Frontier) – Deprecated: Seller delivers goods to the frontier of the destination country; buyer assumes responsibility from there.
- DES (Delivered Ex Ship) – Deprecated: Seller delivers goods on board the ship at the destination port; buyer assumes responsibility once on board.
- DEQ (Delivered Ex Quay) – Deprecated: Seller delivers goods at the quay (dock) at the destination port; buyer handles import duties and unloading.
- DDU (Delivered Duty Unpaid) – Deprecated: Seller delivers goods to a named destination without clearing for import; buyer is responsible for import duties and costs.
Understanding and correctly applying Incoterms is essential for exporters to ensure smooth transactions, avoid misunderstandings, and maintain positive international business relationships.