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International commerce terms

1. Overview of Freight Incoterms

  • Freight Incoterms (International Commercial Terms) are standardized terms used in sales contracts for importing and exporting goods.
  • They define the responsibility and liability for goods throughout the shipment process.
  • Incoterms specify when responsibility for the goods transfers from the supplier to the buyer and who bears the costs associated with the goods and their transport.

2. Differences Between Incoterms® 2010 and Incoterms® 2020

  • Main Updates in 2020:
    • Introduction of the new DPU term (Delivered at Place Unloaded) replacing DAT (Delivered at Terminal).
    • Clarifications and updates to better reflect modern trade practices and technology.

3. Some Key Incoterms

  • EXW (Ex Works): Seller makes goods available at their premises; the buyer assumes responsibility for transportation and all costs after pickup.
  • FCA (Free Carrier): Seller delivers goods to a named place (usually a terminal or warehouse), and risk transfers to the buyer once goods are handed over to the carrier.
  • CPT (Carriage Paid To): Seller covers transport costs to a named destination, with risk transferring to the buyer upon delivery.
  • CIP (Carriage And Insurance Paid To): Similar to CPT, but the seller also provides insurance for the goods during transit.
  • DAP (Delivered At Place): Seller arranges the entire shipment to a named place, with risk transferring to the buyer upon delivery.
  • DPU (Delivered At Place Unloaded): Seller delivers and unloads the goods at a named place; risk transfers to the buyer after unloading.
  • DDP (Delivered Duty Paid): Seller is responsible for the entire shipment, including customs clearance and fees, delivering directly to the buyer’s premises.
  • FAS (Free Alongside Ship): Seller delivers goods alongside a ship at the port; risk transfers to the buyer once goods are alongside the ship.
  • FOB (Free On Board): Seller loads goods onto a vessel at the port; risk transfers to the buyer once the goods are on board.
  • CFR (Cost And Freight): Seller covers costs to transport goods to the destination port, but risk transfers to the buyer once goods are on board at the origin port.
  • CIF (Cost, Insurance, and Freight): Similar to CFR, but the seller also provides insurance for the goods during transit to the destination port.

4. 2020 Incoterms Rules for Any Mode of Transport

  • The following Incoterms can be used for both ocean and air shipping:
    • EXW – Ex Works
    • FCA – Free Carrier
    • CPT – Carriage Paid To
    • CIP – Carriage and Insurance Paid To
    • DAP – Delivered At Place
    • DPU – Delivered At Place Unloaded
    • DDP – Delivered Duty Paid

5. 2020 Incoterms for Sea and Inland Waterway Transport

  • The following Incoterms are specific to sea and inland waterway shipments:
    • FAS – Free Alongside Ship
    • FOB – Free On Board
    • CFR – Cost and Freight
    • CIF – Cost, Insurance, and Freight

6. 2010 Incoterms

  • The International Chamber of Commerce (ICC) updates Incoterms every ten years or so.
  • The 2010 Incoterms were largely similar to the 2020 version, with some changes and clarifications made in 2020 to better reflect modern trade practices and technology.
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