Shipping Incoterms

A Comprehensive Guide to Incoterms

1. What are Incoterms?

Incoterms, or International Commercial Terms, are a set of industry standards used to regulate international trade. They define the responsibilities and obligations of sellers and buyers, mainly in the logistics and shipping phase of a transaction. Incoterms provide a legal framework for commercial transactions and procurement processes, specifying aspects such as delivery, transportation costs, export/import formalities, and insurance costs.

2. History of Incoterms

The first set of Incoterms was published by the International Chamber of Commerce in 1936. Since then, they have been updated several times, with the most recent version being Incoterms 2020, which was published on September 10, 2019.

3. Incoterms 2020

Incoterms 2020 consists of 11 separate rules with specific revisions, including the formal definition of the delivery point in the transaction, the listing of import and export requirements, and the replacement of DAT with DPU.

4. Importance of Incoterms

Incoterms are crucial in international trade as they provide a standardized set of rules and definitions that facilitate clear communication and understanding between buyers and sellers. They help prevent misunderstandings and disputes, ensuring a smoother transaction for all parties involved

5. Types of Incoterms

5.1. EXW (Ex Works)

The seller makes the goods available at their premises or another named place (e.g. factory, warehouse). The buyer is responsible for loading the goods, transporting them to their destination, and handling all customs procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are made available to the buyer.

5.2. FCA (Free Carrier)

The seller delivers the goods to the carrier or another named place (e.g. terminal, warehouse) at the agreed point. The buyer is responsible for unloading the goods and handling all customs procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are delivered to the carrier.

5.3. FAS (Free Alongside Ship)

The seller delivers the goods alongside the ship at the named port of shipment. The buyer is responsible for loading the goods onto the ship, handling all customs procedures, and paying all costs associated with the shipment. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are delivered alongside the ship.

5.4. FOB (Free On Board)

The seller delivers the goods on board the ship at the named port of shipment. The buyer is responsible for handling all customs procedures and paying all costs associated with the shipment from that point onwards. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are on board the ship.

5.5. CFR (Cost and Freight)

The seller pays for the transport of the goods to the named port of destination, but the buyer is responsible for handling all customs procedures and paying all costs associated with the shipment from that point onwards. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are on board the ship.

5.6. CIF (Cost, Insurance, and Freight)

The seller pays for the transport of the goods to the named port of destination, handles all customs procedures, and pays for insurance to cover the goods during transportation. The buyer is responsible for paying all costs associated with the shipment from that point onwards. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are on board the ship.

5.7. CPT (Carriage Paid To)

The seller pays for the transport of the goods to the named place of destination. The buyer is responsible for unloading the goods and handling all customs procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are delivered to the carrier.

5.8. CIP (Carriage and Insurance Paid To)

The seller pays for the transport of the goods to the named place of destination and also for insurance to cover the goods during transportation. The buyer is responsible for unloading the goods and handling all customs procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are delivered to the carrier.

5.9. DAP (Delivered at Place)

The seller delivers the goods to the named place of destination and handles all customs procedures. The buyer is responsible for unloading the goods and any additional costs or procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are made available to the buyer at the named place of destination.

5.10. DPU (Delivered at Place Unloaded)

The seller delivers the goods to the named place of destination, unloads them, and handles all customs procedures. The buyer is responsible for any additional costs or procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are unloaded at the named place of destination.

5.11. DDP (Delivered Duty Paid)

The seller delivers the goods to the named place of destination, handles all customs procedures, and pays all duties and taxes. The buyer is responsible for unloading the goods and any additional costs or procedures. The risk of loss or damage to the goods passes from the seller to the buyer when the goods are made available to the buyer at the named place of destination.

Table of Contents

Stay updated on the latest news and insights

Want all the latest Volta news and insights delivered directly to your inbox? Subscribe to our newsletter and stay updated on the latest developments.
Incoterms