What are Incoterms?
INCOTERMS are a set of three-letter standard trade terms most commonly used in international contracts for the sale of goods. It is essential that you are aware of your terms of trade prior to shipment.
Incoterms 2020: Rules for Any Mode of Transport
EXW (EX Works)
The seller makes the goods available at their premises. The buyer bears all costs and risks involved in transporting the goods from the seller’s location to the final destination.
FCA (Free Carrier)
The seller hands over the goods, cleared for export, to the carrier selected by the buyer. Responsibility transfers to the buyer once the goods are with the carrier.
CPT (Carriage Paid To)
The seller pays for the transport of the goods to the named destination. Risk transfers to the buyer once the goods are handed over to the first carrier.
CIP (Carriage & Insurance Paid)
Similar to CPT, but the seller also provides insurance for the goods during transit. The seller bears the insurance cost, but risk transfers to the buyer once goods are with the first carrier.
DPU (Delivered at Place Unloaded)
The seller delivers the goods, unloaded, at the named destination. It’s the only Incoterm where the seller is responsible for unloading the goods.
DAP (Delivered at Place)
The seller delivers the goods to the buyer at the named destination, ready for unloading. The seller bears all risks and costs up to this point.
DDP (Delivered Duty Paid)
The seller bears all costs and risks of delivering the goods to the destination, including customs duties, taxes, and other charges. The buyer is only responsible for unloading the goods.
Incoterms 2020: Rules for Sea and Inland Waterway Transport
FOB (Free on Board)
The seller loads the goods on board the vessel chosen by the buyer. The risk transfers to the buyer once the goods pass the ship’s rail.
CFR (Cost & Freight)
The seller covers the cost of transporting the goods to the named port. However, the buyer assumes all risks once the goods are on board the vessel.
CIF (Cost Insurance & Freight)
Similar to CFR, but the seller also provides insurance against the buyer’s risk of loss or damage during transit.