LOGISTICS INFORMATIONIncoterms

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Incoterms 2020

Incoterms are rules used in trade activities between countries.

Incoterms is a rule used in trade activities between countries and refers to the ICC
(International Chamber of Commerce) unifying the terms of international trade contracts (transaction terms)
to prevent trade disputes that may arise from laws and customs of different countries when trading between different parties.

Incoterms has been revised every 10 years since its creation in 1936, and the latest revised version,
Incoterms 2020, took effect on January 1, 2020

EXW EX WORKS: EXW incoterm signifies that the buyer must pick up goods from the seller’s location. In addition, the buyer is responsible for any transportation charges and risks. It is the sellers’ duty to make the goods available at their given place. As a result, the buyer bears all costs and risks from the seller’s location to the buyer’s location. In this case, the vendor assumes no duty other than delivery to its location. We might claim that this is the most beneficial transaction term for the seller.

FCA FREE CARRIER: Free Carrier (FCA) incoterm means the seller is responsible for delivering goods to the first carrier. All risks and costs are then transferred to the buyer. To put it another way, this is the next step up from Ex-Works when the seller is responsible for conveying the items to the carrier’s site. In other words, it is the seller’s obligation to deliver the goods to the very first transporter.

FAS FREE ALONGSIDE SHIP: According to the Free Along Side (FAS) incoterm, the seller is responsible for transporting the goods alongside the ship and to the port specified by the customer in the contract. In other words, the seller is still responsible for delivering products to the shipping business along with the ship. From there, the risk is transferred from the supplier to the buyer.

FOB FREE ON BOARD: With FOB incoterms, the seller must go one step farther than FAS and verify that the products are loaded onto the ship that the customer specifies/names in the contract. When the products are on board the ship, the seller’s risk is over.

CFR COST AND FREIGHT: According to the Cost and Freight incoterm, the seller is responsible for all charges and freight associated with transporting the merchandise to the target port. In this instance, the risk is only passed to the other party when the products are handed to the ship. Till then, the seller is responsible for all preparations and expenditures, including transportation to the destination port.

CIF COST, INSURANCE AND FREIGHT: The main difference between CIF and CFR is that the seller is also responsible for purchasing and paying for insurance on the products provided in CIF, therefore, it’s necessary to master different incoterms since they are highly valued and it helps a lot if you put focus on the importance of incoterms. In the case of CIF, the sellers are responsible for all costs (including freight and insurance) until the shipment arrives at the destination port. At the same time, once it is delivered to the shipping company at the designated port, the risk is also transferred.

CPT CARRIAGE PAID TO: In Carriage Paid To (CPT) incoterm, the seller’s role is limited to arranging for the transportation of products to a certain location. The seller is not required to insure the products. The risk, on the other hand, is transferred when the goods are handed over to the carriage.

CIP CARRIER AND INSURANCE PAID TO: According to the CIP incoterms, the seller is responsible for the items’ carriage and insurance until they arrive at the target port or another delivery place specified in the contract. The risk goes to the other party when the seller sends over the products to the first carrier, even though the cost stays in the seller’s account.

DPU DELIVERED AT PLACE UNLOADED: The seller delivers and unloads the goods at a named place. The buyer is responsible for clearing the goods for import and carrying them to their final destination.

DAP DELIVERED AT PLACE: This incoterm is the opposite of Ex-Works, in which the buyer was responsible for everything. In a DAP incoterms agreement, the seller assumes all responsibility for delivering the products to the buyer’s location. This entails delivering products to the transporter or into his vehicle, with the agreement to unload or deliver the goods at the buyer’s location. Alternatively, we might state that the items are delivered to the buyer’s factory/warehouse or another site. Obviously, the seller bears all end-to-end expenses and risks until the product reaches the consumer.

DDP DELIVERED DUTY PAID: The seller’s responsibility goes outside his own country in this case. And he is responsible for all expenses and hazards until the goods arrive at their designated location in the buyer’s country. In other words, the seller guarantees delivery of the products to the buyer’s country’s destination. After then, the buyer’s obligations begin.