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Incoterms 2020

The Incoterms rules are the world’s essential terms of trade for the sale of goods. Whether you are filing a purchase order, packaging and labelling a shipment for freight transport, or preparing a certificate of origin at a port, the Incoterms rules are there to guide you. They provide specific guidance to individuals participating in the import and export of global trade on a daily basis.

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EXW – Ex Works:

This term represents the seller’s minimum obligation, as the seller only has to make the goods available at its location. The seller does not load the goods on the collecting vehicle and does not clear the goods for export. The buyer bears all the costs for transportation, cargo insurance, export and import duties, as well as the risks of bringing the goods to their final destination. The buyer also carries out all customs formalities.

FCA – Free Carrier:

The seller delivers the goods to the carrier and clears the goods for export. Once the goods have been delivered to the carrier, the buyer takes over all the costs and risks. The buyer is responsible for procuring and paying for cargo insurance and all import formalities.

FAS – Free Alongside Ship:

The seller delivers the goods alongside the vessel at the named port of shipment and is required to clear the goods for export. The risk of loss of or damage to the goods passes to the buyer when the goods are alongside the vessel. The buyer bears all costs from that moment forward, including loading the cargo on bard the vessel, and is responsible for procuring the cargo insurance and carrying out all import formalities. This term can only be used for ocean and inland waterway transportation.

FOB – Free On Board:

The seller delivers the goods to the vessel nominated by the buyer, loads the goods on board the ship, and clears the goods for export. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onward, including cargo insurance. The buyer is responsible for all import formalities. This term can only be used for ocean and inland waterway transportation.

CFR – Cost and Freight:

The seller arranges transportation and pays for the goods to be delivered to the final port of destination. The seller is responsible for clearing the goods for export. The buyer is responsible for procuring and paying for the cargo insurance. The buyer is responsible for all import formalities. This term can only be used for ocean and inland waterway transportation.

CIF – Cost, Insurance and Freight:

The seller clears the goods for export and covers the costs of insurance (to at least the port of destination) and main carriage while in transit to the port of destination named in the sales contract. The risk of loss of or damage to the goods passes to the buyer when the goods are loaded on board the vessel. The buyer is responsible for on carriage costs, all import formalities, and unloading costs. This term can only be used for ocean and inland waterway transportation.

CPT – Carriage Paid To:

The seller clears the goods for export and pays for pre-carriage and main carriage to named place of destination. The seller may pay on carriage costs, if noted in the contract. The buyer is responsible for procuring cargo insurance and handling all import formalities.  This term has 2 critical points because risk passes and costs are transferred at different places: 1) risk passes once the goods have been delivered to the nominated carrier at the agreed place of shipment at origin, and 2) the named place of destination to which the seller must contract the carriage.

CIP – Carriage and Insurance Paid:

The seller clears the goods for export and pays pre-carriage and main carriage to the named place of destination. The seller may pay on carriage costs, if noted in the contact. The risk passes to the buyer when the goods are loaded on the first truck. The buyer is responsible for all import formalities.

DAP – Delivered At Place:

The seller pays for carriage to the named place of destination and assumes all risks until the goods are ready for unloading by the buyer. The buyer is responsible for all costs related to import clearance. Unloading is the responsibility of the buyer.

DPU – Delivered at Place Unloaded:

DPU replaces the DAT term. The seller clears the goods for export and pays for pre-carriage, main carriage and on carriage costs. The buyer is responsible for all import clearance formalities. DPU is the only Incoterm explicitly tasking the seller with unloading.

DDP – Delivered Duty Paid:

The seller is responsible for delivering the goods to the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods for export and import and to carry out all customs formalities, including the payment of all duties, taxes and customs fees.

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