What Are Incoterms?
Incoterms, established by the International Chamber of Commerce (ICC) in 1936, are standardized trade terms that define the responsibilities of buyers and sellers in international transactions. They ensure clarity in global trade by specifying who is responsible for costs, risks, and documentation at various stages of shipping.
Key Elements of Incoterms
Incoterms clarify:
- Costs – Who covers expenses at each stage of the shipment?
- Control – Who owns the goods at a given point in transit?
- Liability – Who is responsible for damages or losses?
Categories of Incoterms
- E-Terms: Seller’s responsibility ends once goods are ready for departure.
- F-Terms: Buyer arranges and pays for shipping.
- C-Terms: Seller covers freight costs but not final delivery.
- D-Terms: Seller’s responsibility extends until goods reach the destination.
Incoterms 2020 Updates
- The term DAT (Delivered at Terminal) was replaced by DPU (Delivered at Place Unloaded).
- Insurance coverage under CIP now requires a higher level of protection (Institute Cargo Clauses A).
- Clearer definition of "Delivery" as the point where risk transfers from seller to buyer.
Legal and Financial Impact
- Incoterms are widely recognized by governments and legal authorities.
- They can influence customs duty calculations in different countries.
- Proper selection of Incoterms ensures cost control, risk management, and smooth logistics operations.
| Incoterm | Seller’s Responsibility | Buyer’s Responsibility | Mode of Transport |
|---|---|---|---|
| EXW (Ex Works) | Goods available at seller’s premises | All costs and risks from seller’s premises | Any |
| FCA (Free Carrier) | Delivers goods to carrier named by buyer | Arranges main transport & assumes risk after pickup | Any |
| FAS (Free Alongside Ship) | Delivers goods alongside the ship | Arranges main transport & assumes risk after loading | Sea/Inland Waterway |
| FOB (Free On Board) | Loads goods onto the ship | Arranges sea transport & assumes risk after loading | Sea/Inland Waterway |
| CPT (Carriage Paid To) | Covers transport to destination | Assumes risk after delivery to carrier | Any |
| CIP (Carriage & Insurance Paid To) | Covers transport & minimum insurance | Assumes risk after delivery to carrier | Any |
| CFR (Cost & Freight) | Covers sea freight to destination | Assumes risk after goods reach destination port | Sea/Inland Waterway |
| CIF (Cost, Insurance & Freight) | Covers sea freight & insurance | Assumes risk after goods reach destination port | Sea/Inland Waterway |
| DAP (Delivered at Place) | Delivers goods to buyer’s place | Takes care of import clearance & final delivery | Any |
| DPU (Delivered at Place Unloaded) | Unloads goods at buyer’s place | Handles customs clearance & final transportation | Any |
| DDP (Delivered Duty Paid) | Delivers goods & pays duties/taxes | Only responsible for receiving the goods | Any |
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Understanding and choosing the right Incoterms ensures smoother, more cost-effective international trade operations. Angkut Logistics provides expert guidance and support to manage your freight solutions seamlessly.
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