Know Your Incoterms

Incoterms are a set of internationally recognized rules which define the responsibilities of sellers and buyers in the export transaction. Help ensure a smooth export transaction and avoid potentially costly mistakes. Use internationally recognized Incoterms® to clarify the tasks, costs and risks for buyers and sellers in these transactions.

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.

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. Of primary importance is that each Incoterms rule clarifies the tasks, costs, and risks to be borne by buyers and sellers in these transactions. Familiarizing yourself with Incoterms will help improve smoother transactions by clearly defining who is responsible for what and each step of the transaction.

The Incoterms® 2020 rules are updated and grouped into two categories reflecting modes of transport. Of the 11 rules, there are seven for ANY mode(s) of transport and four for SEA or LAND or INLAND WATERWAY transport.

The seven Incoterms® 2020 rules for any mode(s) of transport are:

• EXW - Ex Works (insert place of delivery)
• FCA - Free Carrier (insert named place of delivery)
• CPT - Carriage Paid to (insert place of destination)
• CIP - Carriage and Insurance Paid To (insert place of destination)
• DAP - Delivered at Place (insert named place of destination)
• DPU - Delivered at Place Unloaded (insert of place of destination)
• DDP - Delivered Duty Paid (insert place of destination)

The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:

• FAS - Free Alongside Ship (insert name of port of loading)
• FOB - Free on Board (insert named port of loading)
• CFR - Cost and Freight (insert named port of destination)
• CIF - Cost Insurance and Freight (insert named port of destination)

Each Incoterm rule has a statement stipulating which party is responsible for obtaining any export license or other official authorization required for export and for carrying out the customs formalities necessary for the export to proceed. Similarly, each rule has a corresponding statement as to which party is responsible for obtaining any import license or other official authorization required for import and for carrying out the customs formalities required for the import of goods.

Source : trade.gov/know-your-incoterms - International Trade Administration, U.S. Department of Commerce  ·  Level: B1/B2