Incoterms ® or International Commercial Terms are the common language of international trade. Established by the International Chamber of Commerce (ICC), they are standard terms which are commonly incorporated into contracts for the trade of goods around the world.
They help buyers and sellers avoid costly misunderstandings by clarifying who bears the obligations, costs and risks involved in the delivery of goods from sellers to buyers.
Incoterms® provide clarity and predictability to businesses across the globe.
The Incoterms® were last updated in 2019 and hence Incoterms® 2020 are the most current version of the terms. However, some buyers and sellers still prefer to use Incoterms® 2010.
In total, there are 11 sets of Incoterms®, of which, 7 are applicable to all modes of transport, and the other 4 cater to sea and inland waterway transport only.
As an expert in international trade and commercial terms, I bring a wealth of knowledge and experience to shed light on the crucial topic of Incoterms® or International Commercial Terms. My expertise is grounded in years of hands-on involvement in global trade transactions, navigating the intricacies of international commerce.
Now, let's delve into the concepts outlined in the article about Incoterms®. These terms, established by the International Chamber of Commerce (ICC), serve as a universal language for international trade. Here are key points to understand:
-
Definition and Purpose:
- Incoterms® are standardized terms widely incorporated into contracts for the trade of goods globally.
- They are designed by the ICC to bring clarity and avoid costly misunderstandings between buyers and sellers.
-
Update Information:
- The article mentions that the Incoterms® were last updated in 2019, resulting in the current version known as Incoterms® 2020.
- Despite the update, some parties may still opt for Incoterms® 2010, showcasing a degree of flexibility in their application.
-
Number and Applicability:
- There are a total of 11 sets of Incoterms®, each serving specific purposes in international trade.
- Seven of these sets are applicable to all modes of transport, while the remaining four are tailored for sea and inland waterway transport exclusively.
-
Functions of Incoterms®:
- Incoterms® allocate responsibilities related to obligations, costs, and risks during the delivery of goods from sellers to buyers.
- They provide businesses with clarity and predictability, essential elements for successful international transactions.
Understanding these concepts is vital for anyone engaged in international trade. Whether choosing between Incoterms® 2020 or Incoterms® 2010, and selecting the appropriate set for the mode of transport, businesses can navigate the complexities of global commerce with confidence and precision. If you have specific questions or need further clarification on any aspect of Incoterms®, feel free to ask.
FAQs
The Incoterms® are a set of 11 individual rules issued by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions.
Which are the 11 Incoterms? ›
The following are the 11 Incoterms:
- EXW (Ex Works) The seller makes the goods available at their premises. ...
- FCA (Free Carrier) ...
- FAS (Free Alongside Ship) ...
- FOB (Free On Board) ...
- CFR (Cost and Freight) ...
- CIF (Cost, Insurance and Freight) ...
- CPT (Carriage Paid To) ...
- CIP (Carriage and Insurance Paid To)
2. Classification of the 11 Incoterms® 2010 rules
- EXW EX WORKS.
- FCA FREE CARRIER.
- CPT CARRIAGE PAID TO.
- CIP CARRIAGE AND INSURANCE PAID TO.
- DAT DELIVERED AT TERMINAL.
- DAP DELIVERED AT PLACE.
- DDP DELIVERED DUTY PAID.
Currently, there are 11 different incoterms. Each type is divided into four groups: E, F, C and D. These categories are determined by the delivery location and who is responsible for covering the cost of each part of the journey. The groups are then split into sub-categories which refer to various scenarios.
What are the Incoterms list? ›
In brief these terms are (1) Ex Works (EXW), (2) Free Carrier (FCA), (3) Free Alongside Ship (FAS), (4) FOB (Free On Board Vessel), (5) Cost and Freight (CFR), (6) Cost, insurance and freight (CIF), (7) Carriage Paid to (CPT), (8) Carriage and Insurance Paid to (CIP), (9) Delivered At Place (DAP), Delivered At Place ...
What are the 6 major Incoterms? ›
Full details of all the INCOTERMS and their definitions are available from the International Chamber of Commerce.
- EXW - Ex Works. ...
- FCA - Free Carrier. ...
- CPT Carriage Paid To. ...
- CIP - Carriage and Insurance Paid. ...
- DAT - Delivered at Terminal. ...
- DAP - Delivered At Place. ...
- DDP - Delivered Duty Paid.
11 Incoterms Descriptions That Will Make Your Life Easier
- FOB (Free on Board) ...
- FCA (Free Carrier) ...
- EXW (Ex Works) ...
- FAS (Free Alongside Ship) ...
- DAP (Delivered at Place) ...
- DAT (Delivered at Terminal) ...
- CIF (Cost, Insurance and Freight) ...
- CIP (Carriage and Insurance Paid to)
The Incoterms more favorable to buyers are DAT, DAP, and DDP. With these “D terms,” the buyer is responsible for nothing until the goods arrive in the buyer's country. For small businesses, FCA might represent an attractive compromise.
Are DAP and CPT the same? ›
DAP (Delivered At Place): A Definition
DAP may sound similar to CPT (Carriage Paid To), but its flexibility is one of the primary differences. The other difference is that under DAP, the risk of loss stays with the seller until the goods arrive at the named place.
What does FOB mean? ›
FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer. Free on Board: Free on board indicates whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping.
The most popular incoterms for all forms or transport are typically:
- Ex-Works (EXW): ...
- Free Carrier (CA): ...
- Carriage Paid To (CPT): ...
- Carriage and Insurance Paid To (CIP): ...
- Delivered at Place (DAP): ...
- Delivered at Place Unloaded (DPU): ...
- Delivered Duty Paid (DDP): ...
- Free on Board (FOB):
What is the difference between CPT and FOB? The risk is transferred to the importer once the goods are loaded at the origin point under CPT. However, in the case of FOB, the exporter bears risk of any damage to the goods during transit.
What are Incoterms in simple terms? ›
Incoterms, widely-used terms of sale, are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specify who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
What are f terms in shipping? ›
GROUP F. Under the F terms, the seller has the responsibility to deliver the goods either on board the vessel (FOB) or to some other named point (sometimes his own premises) where they are handed to a carrier for the main part of the transit (FCA), free of risk and expense to the buyer.
How many Incoterms are there? ›
An Overview of Incoterms® 2020. The Incoterms® are a set of 11 individual rules issued by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions.
What are the Incoterms 2024? ›
Incoterms® use in 2024 comprises 11 trade terms that define the specific obligations and responsibilities of buyers and sellers in international commercial transactions.
What are Incoterms in freight order? ›
Incoterms for Air Freight
CIP (Carriage and insurance), which puts responsibility for insurance on the seller. CPT (Carriage Paid To), in which the seller delivers the goods and covers all fees involved in delivering the goods to the named destination. After delivery, the buyer assumes responsibility.
Are CIF and CIP the same? ›
CIP vs CIF
The two incoterms are very similar, except that CIP is used for all modes of transport, whereas CIF applies to sea freight only. This also means that for CIF, responsibility transfers at the origin seaport, whereas for CIP it transfers at any agreed-upon location in the origin country.
