The seven Incoterms 2020 rules for any mode(s) of transport:
EXW - Ex Works (insert place of delivery)
The buyer assumes all risk and cost when collecting the goods from the seller. The seller is only responsible for having the goods present to the buyer’s discretion. This means that it is not under the seller’s responsibility to act as a shipper.
FCA - Free Carrier (Insert named place of delivery)
The seller is responsible for making their goods available to the buyer, loading the goods, and delivering the goods to the port while meeting security requirements for export clearance.
CPT - Carriage Paid to (insert place of destination)
Once the goods are cleared for export by the seller and delivered to the carrier, the risk transfers to the buyer. Although the seller bears transportation costs, it is not obliged to acquire insurance costs.
CIP - Carriage and Insurance Paid To (insert place of destination)
Similar to CPT, the seller is responsible for clearing the goods for export and delivering them to its arranged carrier where the risk will be transferred to the buyer. However, the seller bears the transportations costs and insurance costs
DAP - Delivered at Place (insert named place of destination)
The seller clears the goods for export, delivers them, and is responsible for the risks and costs associated with said actions. The buyer covers all costs and risks connected to unloading the goods as well as clearing them for import into the agreed upon destination.
DPU - Delivered at Place Unloaded (insert of place of destination)
This term tasks the seller with unloading the goods and is commonly used for consolidated containers with numerous consignees. The seller is responsible for clearing the goods for export as well as assuming the risks linked to delivering and unloading the goods at the named destination. Afterwards, the buyer is the bearer for all risks and costs including those associated with clearing for import.
DDP - Delivered Duty Paid (Insert place of destination).
The seller is responsible for all risks and costs correlated with delivering the goods to the agreed-upon destination ready for unloading and cleared for import. The seller is not responsible for unloading.
The Four Incoterms 2020 rules for Sea and Inland Waterway Transport:
FAS- Free Alongside Ship (name port of shipment)
The seller clears the goods for export and delivers them when the goods are placed alongside the vessel. The risks and costs are then covered by the buyer from that point forward.
FOB- Free on Board
The seller clears the goods for export and delivers them when the goods are on board the vessel appointed by the buyer. When the goods are on the vessel, the buyer assumes all risk and costs.
CFR- Cost and Freight
The goods are delivered on the vessel by the seller. The seller covers the cost of freight to the agreed-upon destination. Once delivered on board, the buyer bears all risks.
CIF- Cost, Insurance and Freight
This term is similar to CFR however, the seller must also acquire insurance coverage (minimum level of insurance) against the buyer’s risks to the named destination. Once at the port of destination, the buyer is responsible for unloading and clearing the goods for import.
Final Thoughts
Incoterms, while seemingly confusing at first, can clarify any misunderstandings and confusions that may be found in contracts. Although optional, these terms are crucial to conducting International trade and are designed to protect all parties involved by reducing the risk of complications and establishing a global language that has been simplifying international trade since 1921.
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References:
“Incoterms® 2020 - ICC - International Chamber of Commerce.” ICC, iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/.