What are Incoterms?
Incoterms (International Commercial Terms) are a set of standardized trade terms published by the International Chamber of Commerce (ICC). They define which party (buyer or seller) is responsible for costs, risks, and tasks at each stage of shipping goods internationally.
Incoterms 2020 Overview
Any Mode of Transport
- EXW (Ex Works): Seller makes goods available at their premises
- FCA (Free Carrier): Seller delivers to carrier at named place
- CPT (Carriage Paid To): Seller pays freight to destination
- CIP (Carriage and Insurance Paid): CPT plus seller provides insurance
- DAP (Delivered at Place): Seller delivers ready for unloading
- DPU (Delivered at Place Unloaded): Seller delivers and unloads
- DDP (Delivered Duty Paid): Seller handles everything including duties
Sea and Inland Waterway Only
- FAS (Free Alongside Ship): Seller delivers alongside vessel
- FOB (Free on Board): Seller delivers on board vessel
- CFR (Cost and Freight): Seller pays freight to port
- CIF (Cost, Insurance, Freight): CFR plus seller provides insurance
Why Incoterms Matter
- Clearly define responsibilities
- Reduce disputes between parties
- Affect landed cost calculations
- Determine insurance requirements
- Impact customs documentation
Choosing the Right Incoterm
- Consider level of control desired
- Evaluate logistics capabilities
- Assess risk tolerance
- Factor in total landed cost