The ICC’s world-renowned Incoterms rules facilitate trillions of dollars in global trade each year.
What are the Incoterms rules?
Incoterms are the basic terms and rules of global trade for the sale of goods. Placing a purchase order, packaging and labeling a shipment for shipping or obtaining a certificate of origin at a port, Incoterms rules are there to guide you. The Incoterms rules provide specific guidance for those involved in the import and export of global trade on a daily basis.
Who publishes the Incoterms rules?
Since its founding in 1919, the ICC has been committed to facilitating international trade.
Different legal practices and interpretations among traders around the world necessitated a common set of rules and guidelines. To respond to the needs, the ICC published the first Incoterms rules in 1936. The organization has maintained and developed them ever since.
The World Trade Organization is proud to announce the publication of Incoterms® 2020, as the ICC celebrates its centenary in 2019. The latest version of Incoterms rules helps prepare businesses for the next century of global trade.
Why are Incoterms rules used in international trade?
Although there are other international trade clauses around the world, such as the US Harmonized Tariff Program, Incoterms rules are universally available. Similarly, the Incoterms rules do not cover commercial terms developed for international purposes, such as the US “less than truckload” (LTL) rule. Unlike national trade policies, Incoterms rules are universal and provide the right program for business.
What does Incoterms mean?
“Incoterms” stands for International Trade Terms. “Incoterms®” is a trademark of the International Chamber of Commerce, registered in several countries.
Incoterm has abbreviations for terms such as FOB (“Delivery on Board”), DAP (“Delivery at Place”), EXW (“Ex Works”), CIP (“Carriage and Insurance Paid to”), all of which have There are many. Detailed definitions for selling goods worldwide. One of the factors of choosing the best transport company is that the transport company has sufficient knowledge and mastery of these rules.
These terms have universal meaning for buyers and sellers around the world. For example, for importers and exporters worldwide, FCA is the seller’s obligation to deliver the goods to a carrier provided by the buyer at the seller’s premises or another named location.
When were the ICC Incoterms® rules last updated?
The ICC last updated the Incoterms rules in 2019. While Incoterms® 2020 is the most recent version of the terms of trade, Incoterms® 2010 is still in force today and can be accessed under the authoritative sources for trade.
An overview of Incoterms® 2020 for 11 terms for each type of transport of goods
EXW – Ex-Works or Ex-Warehouse
Ex works is the time when the seller provides the goods to the buyer at the seller’s location or at another named location (i.e. office, factory, warehouse, etc.).
The seller does not need to load the cargo in any collection vehicle. There is also no need to clear them for export.
FCA – Free Carrier
The seller delivers the goods at the seller’s place or another place to the carrier or another person nominated by the buyer.
The parties are advised to specify the point of delivery as clearly as possible in the designated place of delivery.
FAS – Free Alongside Ship
The seller delivers the shipment when the goods are alongside the vessel (eg, on a dock or barge) nominated by the buyer at the specified shipping port.
The risk of lost or damaged goods is eliminated when the products are alongside the ship. The buyer bears all the costs from that moment on.
FOB – Free on Board
The seller delivers the goods on the vessel nominated by the buyer, at the specified port of shipment, or procures the goods that have already been delivered.
The risk of loss or damage to the goods is eliminated when the products are on the ship. The buyer bears all the costs from that moment on.
CFR – Cost and Freight
The seller delivers the goods on board or procures the goods that have already been delivered.
The risk of loss or damage to the goods is eliminated when the products are on the ship.
The seller must make a contract to deliver the goods to the specified port of destination and pay the costs and freight.
CIF – Cost, Insurance and Freight
The seller delivers the goods on board or procures the goods that have already been delivered. The risk of lost or damaged goods is eliminated when the products are on the ship.
The seller must make a contract to deliver the goods to the specified port of destination and pay the costs and freight.
The seller also contracts for insurance coverage against the risk of the goods being lost or damaged during shipment by the buyer.
The buyer should note that under CIF, the seller is required to obtain an insurance policy with minimum coverage only. If the buyer wants to have more insurance protection, he must either explicitly agree with the seller or accept his additional insurance obligations.
CPT – Carriage Paid To
The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if the parties agree).
The seller must pay the contract and necessary transportation costs to deliver the goods to the designated destination.
CIP – Carriage and Insurance Paid To
The seller has the same responsibilities as the CPT, but they also contract for insurance cover against the risk of the goods being lost or damaged in transit by the buyer.
The buyer should note that under the CIP, the seller is required to obtain insurance, with only minimum coverage. If the buyer wants to have more insurance protection, he must either expressly agree with the seller or undertake his own additional insurance arrangements.
DAP – delivered at place
The seller delivers the shipment when the goods are ready to be unloaded in the incoming transport vehicle at the specified destination.
The seller bears all the risks of bringing the goods to the mentioned place.
DPU – Delivery at location without loading (replaces Incoterm® 2010 DAT)
DPU replaces the former Incoterm® DAT (Delivery at Terminal). The seller delivers when the goods, after unloading, are available to the buyer at a specified destination.
The seller bears all the risks related to bringing the goods and unloading them at the specified destination.
DDP – Delivered Duty Paid – delivery of the goods at the designated place at the destination with clearance and payment of customs fees and duties
The seller delivers the goods when the goods are at the disposal of the buyer and are cleared for importation in the inbound means of transport and are ready to be unloaded at the designated place of destination.
The seller assumes all the costs and risks of delivering the goods to their destination. They have to clear products not only for export but also for import, pay any duties and clear customs for both export and import.
Apart from the importance of the quality of transportation services of an international transportation company, the knowledge and experience of this company should be evaluated. Getting to know the rules of Incoterm and recommending the best methods for transporting goods to customers is one of the main duties of any shipping company. With full knowledge of these laws, the Blue Ocean Support Company offers the best solutions for transporting goods at domestic and foreign borders to customers.
