In a world where goods are bought, sold and shipped internationally every day, having well-defined terms that all importers and exporters agree on is a necessity. Here is where the International Chamber of Commerce (ICC) comes in with the newest edition of Incoterms®, a series of universally valid three-letter abbreviations defining responsibilities, costs and risks for all parties involved.
Incoterms® alone do not constitute a complete contract, but should always be included in one; unless otherwise specified, it is assumed that the edition being referenced is Incoterms® 2020, which went into effect on January 1st, 2020. Here are some quick definitions.
– EXW – the seller makes the goods available at an established location and is not responsible for loading them onto a vehicle or clearing them through customs.
– FCA – the seller clears the goods through customs and makes them available at an established location.
– CPT – the seller pays for transport of the goods up to an established location.
– CIP – same as above, but the seller is also required to pay for insurance in case of loss or damage during transport.
– DAP – delivery is considered complete when the goods are made available to the buyer on the incoming transport vehicle and ready to be unloaded at their destination. The seller takes all risks connected to the delivery of the goods upon themselves.
– DPU – the goods are delivered and unloaded by the seller, who takes all delivery risks and covers all relevant transport costs.
– DDP – the seller is responsible for delivery of the goods at an established location in the buyer’s country and covers all transport costs including duties and taxes.
– FAS – the seller is responsible for putting the goods alongside the ship indicated by the buyer, such as on a pier or barge. The risk of loss or damage is over when the goods are alongside the ship, and all expenses are up to the buyer from that point forward.
– FOB – the seller gets the goods onto the ship indicated by the buyer. The risk of loss or damage is over when the goods are aboard the ship, and all expenses are up to the buyer from that point onward.
– CFR – the seller delivers the goods onto the ship and is also responsible for the expenses required to get them to the port at their final destination.
– CIF – same as above, but the seller is also responsible for insurance coverage in case of loss or damage of the goods during transport.
Do not hesitate to contact us for more information about the latest edition of Incoterms®: we at Global Shipping will be happy to help you navigate the pros and cons of each.
