What Are Incoterms®?
International shipping terms, including Incoterms, define the responsibilities, costs, and risks of buyers and sellers in global trade, ensuring smooth and efficient transactions.
Incoterms® 2020 Overview
Incoterms® are standardized rules published by the International Chamber of Commerce (ICC) that clarify the responsibilities of buyers and sellers in international trade, including who pays for shipping, insurance, and customs, and when risk transfers from seller to buyer. The latest version, Incoterms 2020, includes 11 rules:
1. EXW – Ex Works
2. FCA – Free Carrier
3. CPT – Carriage Paid To
4. CIP – Carriage and Insurance Paid To
5. DAP – Delivered at Place
6. DPU – Delivered at Place Unloaded
7. DDP – Delivered Duty Paid
1. FAS – Free Alongside Ship
2. FOB – Free On Board
3. CFR – Cost and Freight
How Does Incoterms Work?
Each term specifies who is responsible for transportation, insurance, customs clearance, and other logistical tasks, helping prevent disputes and delays.
Seller Responsibilities: Defines what costs and logistics the seller must handle, such as transportation, export clearance, and insurance (depending on the Incoterm).
Buyer Responsibilities: Outlines when the buyer takes over costs, import duties, customs clearance, and final delivery arrangements.
Risk Transfer: Specifies the exact point in the shipping process where the risk shifts from the seller to the buyer.
