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INCOTERMS is a program implemented by the International Chamber of Commerce (ICC) to standardize the terms used in international trade. Incoterms rules are used in international and local contracts all over the world to indicate responsibilities between buyers and sellers regarding costs and risks, cargo insurance responsibilities and regulatory compliance.
INCOTERMS was revised in 1963, 1967, 1976, 1980, 1990, 2000, 2010, depending on the changes in international trade practices over time. The most current version valid today is INCOTERMS 2020, which was put into practice on January 1, 2020.
EXW-Ex Works
Ex Works (EXW) means that the seller delivers the goods to the buyer if the seller makes the goods available to the buyer (such as a factory or warehouse) and that delivery location may or may not be the property of the seller. For delivery to occur, the seller is not required to load the goods onto any shipping vehicle or clear the goods for export where this type of customs clearance is applicable.
FCA – Free Delivery to Carrier
Free Carrier (FCA) means that the seller delivers the goods to the buyer in one of two ways. In the first option, when the specified place is the property of the seller, the goods are delivered when loaded onto transport vehicles organized by the buyer. In the second option, when the specified place is another address, the goods are delivered when they arrive at the other specified address after being loaded onto transport vehicles organized by the seller and are ready for delivery from that seller’s transport vehicles and the carrier or another person appointed by the buyer.
Whichever of the two options is chosen as the delivery location; This location determines where and when risk and costs are transferred to the buyer.
CPT-Delivered with Transportation Fee Paid
Delivery Prepaid (CPT) means that the seller delivers the goods to the buyer – transferring the risk – by delivering them to the carrier or supplying the goods so delivered. The seller can do this by ensuring that the carrier has physical possession of the goods in a manner and location appropriate to the means of transport used. Once the goods have been delivered to the buyer in this way, the seller does not guarantee that the goods will arrive at their destination intact, in the specified quantity or in fact. This is because the risk from the seller to the buyer is transferred to the carrier when the goods are delivered to the buyer; However, the seller must contract for the carriage of the goods from delivery to the agreed destination.
CIP-Carriage Fee and Insurance Paid Delivery
Delivery Cost and Insurance Paid (CIP) means that the seller delivers the goods to the buyer by delivering them to the carrier or so delivered, delivering the goods to the buyer and transferring the risk. The seller must physically handle the goods in a manner and place appropriate to the means of transport used by the carrier. He can do this by making sure he has it. Once the goods have been delivered to the buyer in this way, the seller does not guarantee that the goods will arrive at their destination intact, in the specified quantity or in fact. This is because the risk transfers from the seller to the buyer when the goods are delivered to the buyer; however, the seller must contract for the carriage of the goods from delivery to the agreed destination.
DAP-Delivery at Specified Location
Delivery at Stated Place (DAP) means that the seller delivers the goods to the buyer and transfers the risk when the goods are deposited with the buyer on transport ready for unloading at or at the named destination. the agreed point at that place, if such a point has been agreed upon. The seller assumes all risks associated with bringing the goods to the named destination or agreed point at that place. In this Incoterms rule, delivery and arrival at destination are the same.
DPU-Delivery with Unloaded Goods at the Specified Place
Delivery Unloaded at a Stated Place (DPU) means goods removed from incoming transport vehicles to the specified destination or, if such a point is agreed, at the agreed point at that place. The seller assumes all risks associated with the delivery and unloading of the goods to the named destination. In this Incoterms rule, delivery and arrival at destination are the same. DPU is the only Incoterms rule that requires the seller to unload the goods at the destination. Therefore, the seller must ensure that he is in position to arrange unloading at the specified location. If the parties wish the seller not to bear the risk and cost of unloading, the DPU rule should be avoided and DAP should be used instead.
DDP-Delivered with Customs Duties Paid
Delivery Duty Paid (DDP) means that when the goods are placed at the buyer’s disposal, cleared for import, on the incoming transport vehicle, ready for unloading, at the named destination or the seller delivers the goods to the buyer. If such a point is agreed upon, at the point agreed upon at that place. The seller assumes all risks associated with bringing the goods to the named destination or agreed point at that place. In this Incoterms rule, delivery and arrival at destination are the same.
Rules Applicable for Sea Transportation
FAS-Free Delivery by Ship
Free Delivery by Ship (FAS) means that the seller delivers the goods when the goods are placed alongside the ship (for example on a dock or on a barge) or the seller supplies the goods at the appointed port of shipment by the buyer. The risk of loss or damage to the goods while they are on board the ship and the buyer bears all costs from then on.
FOB-Free Delivery to Ship
Free on Board (FOB) means that the seller delivers to the buyer the goods on board the specified ship at the port of shipment specified by the buyer or supplies the goods already delivered. When the goods are loaded onto the ship; All risks of loss or damage are borne by the buyer from then on.
CFR-Delivery Including Costs and Freight
Delivery inclusive of freight (CFR) means that the seller delivers the goods to the buyer on board or supplies the goods already delivered. The risk of loss or damage to the goods while they are on board is transferred to the buyer as the seller fulfills his obligation to deliver the goods regardless of whether the specified quantity or all of the goods actually arrive intact at the destination. In CFR, the seller has no obligation to the buyer to purchase insurance coverage; The buyer is advised to obtain some collateral for himself.
CIF-Delivery Including Costs, Insurance and Freight
Delivery Including Costs, Insurance and Freight (CIF) means that the seller delivers the goods to the buyer on board or supplies the goods already delivered. Risk of loss or damage to goods while they are on board; the seller fulfills his obligation to deliver the goods regardless of whether the specified quantity or all of the goods actually arrive at their destination intact; is transferred to the buyer.
