Incoterms, short for International Commercial Terms, are standardized trade terms used in international commerce to define the rights and responsibilities of buyers and sellers in a transaction. These terms specify various aspects of the sale, including the delivery of goods, the transfer of risk, and the allocation of costs between the parties involved. Incoterms are published by the International Chamber of Commerce (ICC) and are periodically updated to reflect changes in international trade practices.
Here is a list of common Incoterms:
- EXW – Ex Works: The seller makes the goods available at their premises, and the buyer is responsible for all costs and risks from that point onward.
- FCA – Free Carrier: The seller delivers the goods to a named carrier or another person or firm at a named place, usually their own premises. The risk transfers to the buyer once the goods are handed over to the carrier.
- FAS – Free Alongside Ship: The seller is responsible for delivering the goods alongside the vessel at the named port. The buyer takes responsibility once the goods are placed alongside the ship.
- FOB – Free On Board: The seller delivers the goods on board the vessel at the named port—risk transfers to the buyer once the goods are on the ship.
- CIF – Cost, Insurance, and Freight: The seller delivers the goods on board the vessel, covers the cost of insurance and freight and bears the risk until the goods reach the destination port.
- CIP – Carriage and Insurance Paid To: Similar to CIF but applies to any mode of transportation. The seller is responsible for delivery, insurance, and transportation costs to the named destination.
- DAT – Delivered at Terminal: The seller delivers the goods, unloaded, at a named terminal at the destination. The risk transfers once the goods are placed at the terminal.
- DAP – Delivered at Place: The seller delivers the goods at a named place at the destination, but the goods are not unloaded. The risk transfers upon delivery.
- DDP – Delivered Duty Paid: The seller is responsible for delivering the goods to the buyer, including import duties and taxes. The buyer takes possession with all responsibilities fulfilled.
- DDU – Delivered Duty Unpaid: The seller is responsible for delivering the goods to the buyer but not for paying import duties or taxes. The buyer assumes these obligations.
These Incoterms help clarify the responsibilities and costs associated with international trade transactions, making it easier for parties to negotiate and ensuring a smoother global commerce process. It’s important to note that these terms may change with new editions, so checking the latest Incoterms edition for the most up-to-date information and definitions is advisable.
