IncoTerms 2020

IncoTerms 2020

What Are Incoterms®?

Incoterms® are standard terms used in international trade to define the responsibilities of sellers and buyers. These rules, recognized worldwide, specify who handles costs, risks, and logistics during the sale of goods.

Each Incoterm® clarifies when risk and costs transfer from the seller to the buyer. There are 11 Incoterms® in the 2020 update, divided into two categories:

For Any Mode of Transport:

  1. EXW (Ex-Works): Seller makes goods available at their premises; buyer handles all transportation and risks.
  2. FCA (Free Carrier): Seller delivers goods to a carrier or nominated place; risk transfers to buyer at this point.
  3. CPT (Carriage Paid To): Seller pays for transportation to the destination; risk transfers to buyer upon delivery to the carrier.
  4. CIP (Carriage and Insurance Paid To): Seller pays for transport and insurance to the destination; risk transfers at the carrier.
  5. DAP (Delivered At Place): Seller delivers goods ready for unloading at the destination; bears all risks until this point.
  6. DPU (Delivered at Place Unloaded): Seller delivers and unloads goods at the destination; bears all risks.
  7. DDP (Delivered Duty Paid): Seller covers all costs, including import duties and transportation, until the goods are unloaded at the destination.

For Sea and Inland Waterway Transport:

  1. FAS (Free Alongside Ship): Seller places goods alongside the ship; risk transfers to the buyer here.
  2. FOB (Free On Board): Seller loads goods onto the ship; buyer assumes risk and costs from this point.
  3. CFR (Cost and Freight): Seller covers transport costs to the destination port; risk transfers when goods are on board.
  4. CIF (Cost, Insurance and Freight): Seller pays for transport and insurance; risk transfers when goods are on board.

Understanding Incoterms® is crucial for smooth international transactions, as they define each party’s obligations and minimize disputes.