INCOTERMS

What are Incoterms®?

Incoterms® are a collection of global sales conditions used as a global language for all types of international transactions and transportations. They are officially approved by countries, governments and judicial authorities all around the world. Incoterms® describe who’s responsible for the goods during the different stages of the transport chain, when the risk transfers from seller to buyer and who’s responsible for the different associated costs.

The importance of Incoterms® in international trade

Incoterms® are used due to it being an internationally approved regulatory framework giving little to no space for misinterpretation regarding responsibility, risk and costs in the transport chain. Using Incoterms® means both the seller and buyer can avoid unnecessary and expensive misunderstandings.

Group 1 - All transport

EXW – Ex Works (Place of Delivery)

Risk transfer: When the goods are made available to the buyer at the specified location (not loaded on vehicle).

The costs: The buyer is responsible for all costs.

Responsibility: The buyer is responsible for everything.

FCA – Free carrier (Place of Delivery)

Risk transfer: The seller's obligations ends when the goods are placed at the place agreed.

Costs: The seller is responsible for the costs up to the agreed loading place including loading of the first means of transport.

Responsibility: The buyer is responsible for the transport agreements, export licenses and customs formalities.

New for Incoterms® 2020: The carrier can receive instructions from the buyer to issue an on-board Bill of Lading, which the seller must present to the buyer.

CPT – Carriage Paid to (Place of Destination)

Risk transfer: When the goods have been handed over to the carrier (appointed by the seller).

Costs: The seller is responsible for the costs until the goods have arrived at the specified location at the destination (the goods have not been unloaded).

Responsibility: The seller is responsible for export licenses and customs formalities, transport agreements and loading.

CIP – Carriage and Insurance paid to (Place of Destination)

Risk transfer: When the goods have been handed over to the carrier (appointed by the seller).

Costs: The seller is responsible for the costs (including insurance for the buyer's risk) until the goods have arrived at the specified destination (the goods have not been unloaded).

Responsibility: The seller is responsible for export licenses and customs formalities, transport and insurance agreements and loading.

New for Incoterms® 2020: The buyer may claim insurance according to Institute Cargo Clauses B or A, as well as war and/or strike insurance, but can then account for the difference between the cost of a C insurance.

DAP – Delivered at place (Place of Destination)

Risk transfer: The seller is responsible for the risks until the goods have been delivered to the specified location at the destination, ready to be unloaded.

Costs: The seller is responsible for the costs up to delivery at the specified destination (the goods not unloaded).

Responsibility: The seller is responsible for export licenses and customs formalities, transport agreements and loading.

DPU (previously DAT) – Delivery at place unloaded (Place of Destination)

Risk transfer: The risk goes from seller to buyer when the goods have been delivered to the specified arrival point at the destination, ready to be unloaded.

Costs: The seller is responsible for costs up to the agreed arrival place (the goods unloaded).

Responsibility: Seller handles export licenses and customs formalities transport agreement and loading/unloading.

New for Incoterms® 2020: DPU is former DAT with specified arrival terminal. The update to DPU is mainly to clarify that the place of delivery under DAT does not only include a terminal but can be any place.

DDP – Delivery Duty Paid (Place of Destination)

Risk transfer: The seller is responsible for the risk until the goods have reached the specified place of arrival, ready to be unloaded.

Costs: The seller is responsible for the costs up to the agreed location (the goods not unloaded).

Responsibility: The seller handles export licenses and customs formalities, import formalities and duties, transport agreements and loading.

Group 2 - Sea freight only

FAS – Free alongside ship (Free Alongside ship)

Risk transfer: The risk is transferred from seller to buyer when the goods are delivered at a quay (alongside ship) in the named port.

Costs: The buyer is responsible for the costs of the agreed location, unloaded and placed on quay ready to be loaded on board ship.

Responsibility: The buyer is responsible for export licenses and customs formalities, transport agreements and loading.

FOB – Free on Board (Port of Shipment)

Risk transfer: The risk is transferred to the buyer when the goods are loaded on board the vessel in the agreed port of loading.

Costs: The seller is responsible for costs until the goods are loaded on board the ship.

Responsibility: The seller exports the goods.

CFR - Cost and Freight (Port of Destination)

Risk transfer: The risk is transferred from seller to buyer when the seller delivers the goods on board the ship.

Costs: The seller is responsible for the costs until the goods have arrived at the specified destination port. If the unloading cost is included in the shipping cost, the seller shall be responsible for this.

Responsibility: The seller is responsible for export licenses and customs formalities, transport agreements and loading.

CIF – Cost, insurance and freight (Port of Destination)

Risk transfer: The buyer carries the risk from the time the goods have been loaded on board the vessel at the agreed port of loading.

Costs: The seller is responsible for the costs until the goods have reached the specified destination port. If the unloading cost is included in the shipping cost, the seller shall be responsible for this.

Responsibility: The seller is responsible for export licenses and customs formalities, transport and insurance agreements and loading.

Incoterms® 2020 - International Chamber of Commerce (ICC)

All the information on the Onilog-Logistics.com website originates from ICC - the global regulatory framework for trade. If you’re looking for more detailed information about Incoterms® 2020, please visit ICC:s website. On their website you can partake in courses and training led by ICC certified Incoterms® 2020 instructors and buy the latest publications of the Incoterms.