What are Incoterms?
The word Incoterm stands for International Commercial Term. These clauses include a set of predefined rules published by the International Chamber of Commerce that establish contract clauses for international trade agreements. Incoterms play a major role for international sales contracts.
In this article you will find out what is determined by Incoterms.
What do Incoterms specify?
- Who bears the costs and responsibility for the individual components of international transport?
- Where does the transfer of risk take place?
- Who is responsible for the goods and when?
- Where does the seller deliver to?
- Who covers the insurance?
- Who pays for the insurance?
- Who takes care of customs clearance / export declaration?
- Who has to create or provide which document?
How can Incoterms be classified?
- Clauses for each shipping method (EXW, FCA, CPT, CIP, DAP, DPU, DDP)
- Clauses for sea and inland waterway transport (FAS, FOB, CFR, CIF)
- Group E clauses: pick-up clauses
- Group F clauses: Shipment clauses (seller bears costs and risk for main transport)
- Group C clauses: Shipment clauses (buyer bears costs and risk for main transport)
- Group D clauses: Arrival clauses
An overview of the most important Incoterms
To make it easier for you to understand, we have prepared the four most important Incoterms for you. Just ask yourself the question: Are you a buyer or seller?
For buyers, the Incoterms FCA and EXW are of particular interest. Sellers should take a closer look at the Incoterms DAP and DDP.
Incoterms for buyers
FCA – Free Carrier / Freight Carrier: The seller shall deliver the goods to the freight forwarder or other designated person at the seller’s location or another designated location.
EXW – Ex Works / Ex factory: The transport is completely organized by the buyer. The seller does not need to load the goods, nor is he responsible for customs clearance of the goods.
Incoterms for sellers
DAP – Delivered At Place: The seller bears the costs and risks of transporting the goods to an agreed address. As soon as the goods arrive and are released for unloading, the possible risks are transferred to the buyer.
DDP – Delivered Duty Paid: The seller bears the full costs as well as the risks and must make the goods cleared for import available to the buyer at the agreed destination unloaded.
Incoterms 2020: Obligations of the seller and buyer
| Cargoboard | Packaging | Loading fees | Transport to the export location |
| EXW | Seller | Buyer | Buyer |
| FCA | Seller | Seller | Seller |
| CPT | Seller | Seller | Seller |
| CIP | Seller | Seller | Seller |
| DAP | Seller | Seller | Seller |
| DPU | Seller | Seller | Seller |
| DDP | Seller | Seller | Seller |
| FAS | Seller | Seller | Seller |
| FOB | Seller | Seller | Seller |
| CFR | Seller | Seller | Seller |
| CIF | Seller | Seller | Seller |
| Cargoboard | Export duties, taxes and customs clearance |
Terminal costs Place of origin |
Loading for transport |
| EXW | Buyer | Buyer | Buyer |
| FCA | Seller | Buyer | Buyer |
| CPT | Seller | Seller | Seller |
| CIP | Seller | Seller | Seller |
| DAP | Seller | Seller | Seller |
| DPU | Seller | Seller | Seller |
| DDP | Seller | Seller | Seller |
| FAS | Seller | Seller | Seller |
| FOB | Seller | Seller | Seller |
| CFR | Seller | Seller | Seller |
| CIF | Seller | Seller | Seller |
| Cargoboard | Transport costs |
Insurance |
Terminal costs destination |
| EXW | Buyer | Individual | Buyer |
| FCA | Buyer | Individual | Buyer |
| CPT | Seller | Individual | Seller |
| CIP | Seller | Seller | Seller |
| DAP | Seller | Individual | Seller |
| DPU | Seller | Individual | Seller |
| DDP | Seller | Individual | Seller |
| FAS | Buyer | Individual | Buyer |
| FOB | Buyer | Individual | Buyer |
| CFR | Seller | Individual | Buyer |
| CIF | Seller | Seller | Buyer |
| Cargoboard | Transport to the destination | Import duties, taxes and customs clearance |
| EXW | Buyer | Buyer |
| FCA | Buyer | Buyer |
| CPT | Buyer | Buyer |
| CIP | Buyer | Buyer |
| DAP | Buyer | Buyer |
| DPU | Buyer | Buyer |
| DDP | Seller | Seller |
| FAS | Buyer | Buyer |
| FOB | Buyer | Buyer |
| CFR | Buyer | Buyer |
| CIF | Buyer | Buyer |
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