Incoterms 2020 are essential for defining the responsibilities of buyers and sellers in international trade. They clarify who handles shipping, insurance, and customs processes, as well as when the transfer of risk occurs. Below is a brief explanation of all 11 Incoterms:
● EXW (Ex Works): The seller makes the goods available at their premises. The buyer assumes all costs and risks from there.● FCA (Free Carrier): The seller delivers the goods to a carrier or another party designated by the buyer, at an agreed location.● CPT (Carriage Paid To): The seller pays for transportation to the named destination, but risk transfers to the buyer once the goods are handed to the carrier.● CIP (Carriage and Insurance Paid To): Similar to CPT, but the seller also provides insurance for the goods during transit.● DAP (Delivered at Place): The seller delivers the goods ready for unloading at the agreed destination. The buyer handles import duties and unloading.● DPU (Delivered at Place Unloaded): The seller delivers and unloads the goods at the destination. The buyer is responsible for customs clearance and further transportation.● DDP (Delivered Duty Paid): The seller handles all costs and risks, including import duties, until the goods reach the buyer's location.● FAS (Free Alongside Ship): The seller places the goods alongside the ship at the port of departure. The buyer assumes all risks from that point.● FOB (Free On Board): The seller delivers the goods on board the ship. Risk and costs transfer to the buyer once the goods are loaded.● CFR (Cost and Freight): The seller pays for transportation to the port of destination but transfers risk to the buyer once the goods are on board.● CIF (Cost, Insurance, and Freight): Similar to CFR, but the seller also covers insurance until the goods reach the destination port.
Understanding these terms ensures clarity in contracts, reduces disputes, and facilitates smooth international transactions.