The most commonly known trade terms regarding the international commerce is Incoterm. These terms have become an important part of the daily language of trade. Incoterms are published by the ICC and it includes details like the time and place of delivery and who has to pay the costs of freight and insurance.
Antonia Klatt
Last Updated on 27 February 2022
What are Incoterms?
The Incoterms don’t replace a bill of sale, they are rather an addition to it. By using Incoterm, both exporters and importers can agree about the conditions of importing goods and which parts of this process must be carried out from whom.
Incoterms© is an acronym standing for international commercial terms. Incoterms® is a trademark of International Chamber of Commerce, registered in several countries.
It is rather an agreement about general aspects of the selling/buying process so all little details do not have to be discussed every time a legal transaction is realized.
It makes the agreements with your suppliers much easier, using 3 letters which can describe complex conditions which can often be misunderstood or misleading or it would at least make some discussions necessary consequently the whole process is much more time-consuming.
There is a huge number of different Incoterms, all consisting of 3 letters. Which of these terms are important for your business really depends but here you can find the ICC’s homepage with these terms.
ICC’s last Incoterms rule updates
The ICC’s last update on the Incoterms© rules was in 2010. It’s still in effect today and you can take a deeper look into it on the website of the ICC.
Incoterm examples for any modes of transport*
EXW Ex Works
“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e.,works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
FCA Free Carrier
“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
CPT Carriage Paid To
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
CIP Carriage Insurance Paid
“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
DAT Delivered At Terminal
“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
DAP Delivered At Place
“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
DDP Delivered Duty Paid
“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at 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 not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
*Source: https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-rules-2010/
