Incoterms

Incoterms(International Commercial Terms) is a set of international rules, rights and obligations for the buyer and seller in international transportation. These have been established by the International Chamber of Commerce (ICC).

These rules were created to make international transport easier and clearer. If you are doing business with a foreign country and you agree on an Incoterm, both parties know where you stand. Incoterms are revised every 10 years and in the latest version from 2020 there are 11 different Incoterms laid down.

What does it mean when you agree on an Incoterm?

If you agree on an Incoterm with a trading partner, it is immediately clear which of the two parties is responsible for the transport and for the documents for customs. In addition, it is clear who does bear risk. So it is actually a standard set of agreements about the transport of goods.

The Incoterms 2020

As mentioned, there are 11 applicable Incoterms. We briefly explain them below and further details at the bottom of the page.

1. EXW - Ex Works. The seller bears no responsibility for transportation. He only has to prepare the goods for transport. The buyer is responsible for all transportation.

2. FCA - Free Carrier. The seller still has very little responsibility for transportation. The seller must hand over the goods to the carrier at an agreed location, such as his business premises or a transshipment point. The buyer is responsible for all transportation and bears all costs and risks of loss or damage to the goods from the time the goods are handed over.

3. FAS - Free Alongside Ship. The seller's responsibility is to take the goods to the agreed port of shipment and place them alongside the agreed vessel there. The seller is responsible and bears the costs up to that point. After that, the costs and risks are for the buyer. Thus, the buyer is also responsible for loading.

4. FOB - Free On Board. The seller's responsibility ends when the goods are aboard the agreed vessel at the agreed port of shipment. After this, the buyer bears all costs and risks.

5. CPT - Carriage Paid To. The risks and costs are transferred from the seller to the buyer as soon as the goods are handed over to the buyer's carrier at an agreed place. This agreed place can be anywhere. It is usually when a change in mode of transportation is made. For example, when a container is loaded from a truck onto a cargo ship.

6. CIP - Carriage and Insurance Paid To. CIP is very similar to CPT. Here, too, a place is agreed upon where the goods are transferred (and with it the cost and risk) from the seller to the buyer. The only difference is that the seller is required to provide cargo insurance for its portion of the transport.

7. CFR - Cost and Freight. The seller's responsibility ends when he has put the goods on board the agreed vessel. From then on, the responsibility and risks lie with the buyer.

8. CIF - Cost Insurance and Freight. CIF is very similar to CFR. Here too, the seller must get the goods aboard the agreed-upon vessel and be responsible for those costs and risk. The only difference is that the seller is required to provide cargo insurance for its portion of the transportation.

9. DAP - Delivered at Place. Here it is the seller's responsibility to deliver the goods to the destination. This could be, for example, the company that ordered the goods or another destination in the country of arrival.

10. DPU - Delivered at Place Unloaded. DPU is almost the same as DAP, only here the seller also bears the responsibility of unloading. Thus, the seller is responsible for the costs and risks until the goods are unloaded at the agreed location.

11. DDP - Delivered Duty Paid. With DDP, the seller bears most of the responsibility and is practically responsible for the entire transport. In addition to being responsible for the risks and costs of transportation, the seller is also responsible for customs clearance, import duties (such as import duties and import VAT).