Incoterms® Explained
EXW (Ex Works) – This type of term indicates that the seller is responsible for making the goods available at their premises, and the buyer is responsible for collecting them from there. The seller does not have to bear any costs or risks associated with transporting the goods, as this is all the responsibility of the buyer.
FCA (Free Carrier) – This type of term indicates that the seller is responsible for delivering the goods, cleared for export and packaged, to a named location. The buyer has the responsibility of arranging and paying for carriage and insurance from this point onwards.
CPT (Carriage Paid To) – This is used when the seller agrees to pay for all costs associated with the transport of goods up to a specified destination. The risk and costs associated with any further transport from that point onwards is then passed onto the buyer. This type of Incoterm is most often used in cases where the goods are delivered directly to the buyer’s door.
CIP – (Carriage and Insurance Paid To) This requires the seller to pay for all costs associated with the transport of goods up to a specified destination, as well as for any associated insurance costs. The risk and responsibility for any further transport from that point onwards is then passed onto the buyer. This type of Incoterm is most often used when goods are shipped by air or sea.
DAP (Delivered At Place)- This indicates that the seller is responsible for delivering the goods at a named place, cleared for importation, but not unloaded from any form of transport. The buyer then takes on responsibility for unloading costs from this point onwards.
DPU (Delivered at Place) – This requires the seller to deliver goods to a specified destination, but does not require them to assume responsibility for any additional costs such as customs duties or taxes. The buyer then assumes the risk and responsibility for unloading the goods at their end.
DDP (Delivered Duty Paid) – This requires the seller to be responsible for all costs associated with delivering goods to a named destination, including any customs duties or taxes. The buyer is then responsible for unloading the goods at their end.
FAS (Free Alongside Ship) – In this term, the seller must deliver the goods alongside a named vessel at the port of shipment. The buyer is responsible for loading, carriage and insurance costs from this point onwards.
FOB (Free On Board) – In this term, the seller must deliver the goods on board a named vessel at the port of shipment. The buyer then takes over responsibility for loading, carriage and insurance costs from this point onwards.
CFR (Cost and Freight) – This term is similar to CIF in that the seller pays for all costs related to loading, carriage and insurance up until delivery at a named port of destination. However, here it is assumed that the risk passes onto the buyer once shipment has been made.
CIF (Cost, Insurance and Freight) – Here, the seller must deliver the goods to a named port of destination and pay for all associated costs including loading, carriage and insurance up to that point. The buyer then takes on responsibility for unloading the goods at their end.
These are just some of the Incoterms commonly used in international trade, and there are several others that can be employed depending on the particular circumstances surrounding a transaction. By understanding and utilizing the correct Incoterms, businesses can ensure that their international transactions are as smooth and efficient as possible.
To ensure your business remains on the cutting edge, it’s crucial to stay abreast of Incoterms® updates and assess how they may affect you. Taking a proactive stance can help prevent costly problems further down the line – and don’t forget to seek professional legal advice when navigating new changes. You can purchase a copy of the official 2020 Incoterms® book through the International Chamber of Commerce (ICC) website.
សុខុម / Sokhom 