Have you heard the phrase “FOB” or “CIF” in a discussion with suppliers or clients? When it comes to international trade, understanding the terms of delivery is crucial for both buyers and sellers. The International Chamber of Commerce (ICC) developed a standardized set of terms known as Incoterms, which are widely used in contracts for the sale of goods around the world. The latest version of Incoterms was released in 2020, and it includes 11 different terms that specify the responsibilities of the buyer and seller in a transaction. In this article, we’ll take a closer look at each of the latest Incoterms and their definitions to help you navigate the complex world of international logistics.
1. EXW – Ex Works: The seller is responsible for making the goods available at their premises. The buyer is responsible for all transport and shipping costs, and assumes all risks once the goods are in their possession.
2. FCA – Free Carrier: The seller is responsible for delivering the goods to a carrier or forwarder specified by the buyer. The buyer assumes all risks and costs associated with transport from the carrier’s point of origin.
3. CPT – Carriage Paid To: The seller is responsible for arranging and paying for transport to the destination specified by the buyer. The buyer assumes all risks and costs once the goods are delivered to the carrier.
4. CIP – Carriage and Insurance Paid To: The seller is responsible for arranging and paying for transport and insurance to the destination specified by the buyer. The buyer assumes all risks and costs once the goods are delivered to the carrier.
5. DAP – Delivered at Place: The seller is responsible for delivering the goods to the location specified by the buyer. The buyer assumes all risks and costs once the goods are delivered.
6. DPU – Delivered at Place Unloaded: The seller is responsible for delivering the goods to the location specified by the buyer and unloading them. The buyer assumes all risks and costs once the goods are unloaded.
7. DDP – Delivered Duty Paid: The seller is responsible for delivering the goods to the location specified by the buyer and paying all import duties and taxes. The buyer assumes all risks and costs once the goods are delivered.
8. FAS – Free Alongside Ship: The seller is responsible for delivering the goods to a specific port or dock and loading them onto the ship. The buyer assumes all risks and costs once the goods are loaded.
9. FOB – Free on Board: The seller is responsible for delivering the goods to the port or dock and loading them onto the ship. The buyer assumes all risks and costs once the goods are loaded.
10. CFR – Cost and Freight: The seller is responsible for delivering the goods to the port or dock and paying for the freight to the destination specified by the buyer. The buyer assumes all risks and costs once the goods are loaded.
11. CIF – Cost, Insurance and Freight: The seller is responsible for delivering the goods to the port or dock, paying for the freight and insuring the goods to the destination specified by the buyer. The buyer assumes all risks and costs once the goods are loaded.
It’s important to note that the Incoterms apply only to the relationship between the buyer and seller, and do not affect any contracts between the buyer and carrier or other third parties. Additionally, the Incoterms should be clearly stated in the contract between the buyer and seller to avoid any confusion or disputes.
