Incoterms, or, International Commercial Terms are a set of 11 standardized rules used in global trade to define the responsibilities of buyers and sellers. They clarify who handles tasks like shipping, insurance, and customs, as well as the exact point where the risk of loss or damage transfers from the seller to the buyer.
Incoterms defines and clarifies the responsibilities of the parties involved in the international Trade. Who is paying for the Costs of freight, insurance, and duties. When does the ownership of the goods, risks and responsibilities pass on to the buyer. Who is responsible for the logistics, documentation, loading, unloading, and customs clearance at the delivery port, destination.
Incoterms are not a full contract. It only serves as a universal, common language language providing much needed clarity to all involved, parties and authorities.
Incoterms, do not talk about the payment terms or methods, payment dates, Transfer of the title, legal ownership of the goods and about the product quality, warranties, or remedies for breach of contract. These need to be included in the export contract, as it is a matter between the trading parties. The contracts are the terms of purchase, which are part of the international transaction and are duly required to be submitted to banks, authorities at appropriate stages for checks and compliance.
For All Transport modes
Transport EXW (Ex Works) Buyer handles almost everything from the seller’s premises.
FCA (Free Carrier) Seller delivers to a carrier at a named place.
CPT (Carriage Paid To) Seller pays for transport to a destination, but risk transfers earlier.
CIP (Carriage & Insurance Paid) Like CPT, but the seller must also provide insurance.
DAP (Delivered At Place) Seller delivers to a named place, but the buyer unloads.
DPU (Delivered At Place Unloaded) Seller delivers and unloads the goods at the destination.
DDP (Delivered Duty Paid) Seller handles everything, including import duties and taxes.
For Sea, Inland Waterway Only
FAS (Free Alongside Ship) Seller delivers goods next to the buyer’s vessel.
FOB (Free On Board) Seller loads goods onto the ship; risk transfers once on board.
CFR (Cost and Freight) Seller pays for sea transport, but risk transfers at loading.
CIF (Cost, Insurance & Freight) Like CFR, but the seller also pays for marine insurance.
