What are INCOTERMS?
The International Chamber of Commerce (ICC) published a set of pre-defined commercial terminology known as the Incoterms or International Commercial Terms in relation to international commercial law. The responsibility of exporters and importers in the planning of shipments and the transfer of liabilities involved at different stages of the transaction is defined by Incoterms. They are frequently used in international business transactions or procurement procedures, and trade councils, courts, and international lawyers support their use.
These three-letter terms lay down a globally recognized set of rules to clearly communicate the tasks, costs, and risks involved with international transportation and delivery of goods.
The top 8 incoterms you should know as proposed by Gline logistics today are as follows;
1. EXW (Ex Works)
2. FCA (Free Carrier)
3. FOB (Free on Board)
4. CFR (Cost and freight)
5. CIF (Cost Insurance and Freight)
6. DAP (Delivery At Place)
7. DDP (Delivery Duty Paid)
8. DAT (Delivery At Terminal)
- EXW (Ex Works)
EXW means that the buyer takes all the risks of bringing the goods to their final destination. The seller may decide not to load the goods and clear them for export. - FCA (Free Carrier)
Here, the seller clears goods for export and delivers them to a designated named place chosen by the buyer. The goods may be delivered to a carrier chosen by the buyer.
3. FOB
Under FOB terms sellers bear all costs and risks to the point the goods are loaded onto the vessel. The seller is also responsible for export clearance. But the buyer pays for the cost of marine or air freight transportation, bill of lading fees, insurance, unloading, and transport cost to the destination.
4. CFR (Cost and freight)
Here the seller pays for the carriage of the goods up to the port of destination. Risks transfer to buyers when goods are onboarded. Here it is the seller that is responsible for the cost of customs clearance, insurance, and freight cost. The buyer may ask the seller also to buy the insurance and pay for it.
5. CIF (Cost Insurance and Freight)
The only difference with the CFR is that seller pays for insurance.
6. DAP (Deliver At Place)
Here the seller conveys goods to a place designated by the buyer. Risk is transferred to the buyer when goods are delivered to the assigned destination
7. DDP (Delivery Duty Paid) This is best described as doorstep delivery. Here the seller delivers the goods to the buyer’s location in the buyer’s country.
8. DAT (Deliver At Terminal) here the seller delivers goods to the designated terminal. Risks transfer to the seller once goods arrive location agreed.EXW has been dealt with in quick detail (click on the link). The others will be dealt with, in similar manners in subsequent posts. keep tuned. Perhaps, within the week, the details for the rest will be linked to this post.
This is a summary of the Incoterms and their importance in international trade. Details of each will be published in subsequent (Watch out for them!). You can click on each above to learn more about each incoterm. As mentioned, EXW, FCA, FOB, CFR, CIF, DAP, DDP, and DAT are the most commonly used Incoterms in international transactions.
Understanding the responsibilities and risks associated with each Incoterm can help both buyers and sellers avoid misunderstandings and disputes during the shipment and delivery of goods.
It is important to note that the use of Incoterms does not replace the need for a contract between the parties involved in the transaction. The Incoterm only specifies the responsibilities related to the transportation and delivery of goods, and a contract should outline other important details such as payment terms, product specifications, and applicable laws and regulations.
Also, it is recommended to keep up-to-date with the latest version of the Incoterms published by the ICC as they are periodically updated to reflect changes in the global trade environment. The most recent version of the Incoterms is Incoterms 2020.
Remember, G-line will give you the best service you need to get your business going on its logistics needs. Don’t forget to get in touch with our aproko support on WhatsApp or send us an email at findcare@g-linelogistics.com for quick responses.
