INCOTERMS help ensure clarity and understanding between buyers and sellers regarding their respective obligations and liabilities. The current set of INCOTERMS is known as the “Incoterms 2020” and consists of 11 different terms, grouped into two categories:
- Terms for Any Mode of Transport:
- EXW (Ex Works): The seller makes the goods available at their premises, and the buyer is responsible for all transportation and costs from that point onward.
- FCA (Free Carrier): The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at a specified location.
- CPT (Carriage Paid To): The seller delivers the goods to the carrier or another person nominated by the seller at a specified location, and they bear the transportation costs to the agreed-upon destination.
- CIP (Carriage and Insurance Paid To): Similar to CPT but with the additional responsibility of the seller to provide insurance coverage against the buyer’s risk of loss or damage during transportation.
- DAP (Delivered at Place): The seller delivers the goods to the buyer at the named place of destination, not unloaded.
- DPU (Delivered at Place Unloaded): Similar to DAP, but the seller is responsible for unloading the goods at the destination.
- DDP (Delivered Duty Paid): The seller is responsible for delivering the goods to the buyer, cleared for import, and bearing all costs and risks associated with transportation, including duties and taxes.
- Terms for Sea and Inland Waterway Transport:
- FAS (Free Alongside Ship): The seller delivers the goods alongside the vessel nominated by the buyer at a specified port of shipment.
- FOB (Free on Board): The seller delivers the goods on board the vessel nominated by the buyer at a specified port of shipment.
- CFR (Cost and Freight): The seller delivers the goods on board the vessel or procures the goods already so delivered. They also arrange for the main carriage by sea, but the buyer assumes the risk of loss or damage during transit.
- CIF (Cost, Insurance, and Freight): Similar to CFR, but with the additional responsibility of the seller to provide insurance coverage against the buyer’s risk of loss or damage during transportation.