Types of Incoterms

What are Incoterms? We explain the 11 types of Incoterms® 2020 – 2030, internationally recognised rules created by the ICC (International Chamber of Commerce), which define rights and obligations between buyer and seller and establish how costs and risks will be allocated between the different parties in a transaction.

Groups of Incoterms

The grouping of Incoterms 2020 is created according to the means of transport as in Incoterms 2010, however we still find it useful to refer to the distribution in 4 groups E, F, C and D used in previous versions:

Incoterms Rule E: EXW.

From the moment the seller makes the goods available to the buyer at the named place in the country of origin, the buyer is responsible for all costs, risks and insurance, from the loading of the goods at the named place, through all transport and customs formalities, until they reach their destination.

Incoterms Rule F: FAS, FCA, FOB.

The seller is responsible for the costs and risks until the goods, already cleared for export, are loaded onto the means of transport designated by the buyer or once the goods have been placed at the disposal of the buyer’s carrier at the designated place in the country of origin where the goods will start their journey to the country of destination. Once the goods have been loaded onto the means of transport designated by the buyer, it is the buyer who bears the costs and is responsible for the goods, as well as for dealing with import customs in the country of destination.

Incoterms Rule C: CFR, CIF, CIP, CPT.

The seller is responsible for the transport and related costs to the agreed place of delivery and for the risks until the goods, already cleared for export, are loaded onto the means of transport designated by the buyer or after the goods have been placed at the disposal of the buyer’s carrier at the designated place in the country of origin where the goods are to be transported to the country of destination. From this point on, the buyer is fully responsible for the goods, as well as for clearing import customs in the country of destination.

Incoterms Rule D: DAP, DDP, DPU.

The seller is responsible for the costs and risks of transport until delivery of the goods at the named place in the country of destination agreed with the buyer. Delivery can take place with the goods cleared for import (DDP), uncleared on the means of transport to be unloaded (DAP) or uncleared after unloading from the means of transport (DPU). From then on, the buyer is responsible.

In summary, Incoterms are essential for international trade as they provide a clear basis for the allocation of responsibilities and costs between buyers and sellers in international transactions. The appropriate choice of a specific Incoterm depends on several factors, such as the type of goods, the means of transport and the delivery location, and must be agreed between the parties involved in the trade transaction. Alianza Logistics specialises in international logistics management and consultancy, helping its clients to use Incoterms effectively in their global trade operations.

 

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