Incoterms

Incoterms, short for International Commercial Terms, are a set of standardized trade terms published by the International Chamber of Commerce (ICC), defining the responsibilities and obligations of buyers and sellers in international transactions. They provide a common language for parties involved in shipping and transporting goods, helping avoid misunderstandings and disputes.

Significantly, incoterms specify the delivery point of the goods, transfer of risk, and the division of costs between the buyer and the seller.

In ocean shipping, various incoterms are utilized, each representing distinct agreements between the buyer and seller.

Types of Incoterms

1. EXW (Ex Works)
   • The seller makes the goods available at their premises.
   • The buyer bears all costs and risks from the seller's location to the final destination.
2. FCA (Free Carrier)
   • The seller delivers the goods, cleared for export, to the carrier nominated by the buyer.
   • The risk transfers to the buyer once the goods are delivered to the carrier.
3. CPT (Carriage Paid To)
   • The seller pays for the carriage of the goods to the named destination.
   • The risk transfers to the buyer upon delivery to the carrier.
4. CIP (Carriage and Insurance Paid To)
   • Similar to CPT, but the seller also provides insurance against the buyer's risk.
   • The risk transfers to the buyer upon delivery to the carrier.
5. DAP (Delivered at Place)
   • The seller is responsible for the delivery of the goods to the named place, ready for unloading.
   • The buyer bears all risks and costs beyond the point of destination.
6. DPU (Delivered at Place Unloaded)
   • The seller delivers the goods, unloaded, at the named place.
   • The buyer is responsible for unloading and all associated costs and risks.
7. DDP (Delivered Duty Paid)
   • The seller is responsible for delivering the goods to the named destination, cleared for import.
   • The buyer assumes all costs and risks, including duties and taxes.
8. FAS (Free Alongside Ship)
   • The seller delivers the goods alongside the vessel at the named port.
   • The buyer is responsible for loading and all subsequent costs and risks.
9. FOB (Free On Board)
   • The seller is responsible for delivering the goods on board the vessel at the named port.
   • The risk transfers to the buyer once the goods are on board.
10. CFR (Cost and Freight)
    • The seller pays for the carriage of the goods to the named port.
    • The risk transfers to the buyer upon delivery to the carrier.
11. CIF (Cost, Insurance, and Freight)
    • Similar to CFR, but the seller also provides insurance against the buyer's risk.
    • The risk transfers to the buyer upon delivery to the carrier.

Here's a table for understanding the transfer of responsibilities between buyers and sellers under each incoterm:

These incoterms help streamline international trade transactions by clearly defining the responsibilities and liabilities of both buyers and sellers at various stages of the shipping process.