Incoterms, which stand for “International Commercial Terms,” are regulated by the International Chamber of Commerce (ICC) and are used to determine the risks, responsibilities, and costs of transportation between the seller and the buyer. Incoterms 2020 is the latest version of these terms, which brings important changes. Here we will review each of the 2020 Incoterms.
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EXW (Ex Works—delivery at the factory)
EXW means delivery of goods at the seller’s place. In this case, the buyer is responsible for all costs and risks from the factory door onward.
FCA (Free Carrier—delivery to the carrier): Incoterms 2020
FCA means that the seller delivers the goods to the carrier designated by the buyer. Responsibility and risk from the moment of delivery to the carrier are the responsibility of the buyer.
CPT (Carriage Paid To): Incoterms 2020
CPT In Incoterms 2020, the seller pays the cost of transporting the goods to the final destination, but the risk is transferred to the buyer from the moment of delivery to the first carrier.
CIP (Carriage and Insurance Paid To)
CIP is similar to CPT, except that the seller must pay for the insurance of the goods to the final destination in addition to the shipping cost.
DAP (Delivered at Place): Incoterms 2020
In DAP, the seller is responsible for delivering the goods to the place designated by the buyer. All costs and risks are borne by the seller until the moment of delivery.
DPU (Delivered at Place Unloaded)
DPU in Incoterms 2020 means that the seller is responsible for delivering the goods to the destination and unloading them. This term replaced DAT in the previous version.
DDP (Delivered Duty Paid)
In DDP, the seller is responsible for all costs, including duties and customs duties, until the final delivery. This term places the greatest responsibility on the shoulders of the seller.
FAS (Free Alongside Ship)
FAS in Incoterms 2020 means that the seller delivers the goods alongside the ship at the port of loading. From that moment on, the risk and costs are borne by the buyer.
FOB (Free on Board)
FOB means that the seller is responsible for delivering the goods on board the ship. After loading, all risks and costs are borne by the buyer.
CFR (Cost and Freight): Incoterms 2020
In CFR, the seller pays the cost of transportation to the port of destination, but the risk is borne by the buyer from the moment of loading.
CIF (Cost, Insurance and Freight)
CIF in Incoterms 2020 is similar to CFR, except that the seller must also pay for the insurance of the goods.
Conclusion
Incoterms 2020 is an important tool in international trade that helps improve international trade processes by defining risks, responsibilities, and costs. By knowing and using these terms correctly, you can achieve better returns in international transactions by reducing risks.
