Incoterms 2020

What are Incoterms?

Incoterms are a crucial part of logistics, clearly defining who is responsible for the costs and risks of cargo in international transactions. These rules enable businesses to plan deliveries accurately and ensure efficient communication between partners worldwide, helping maintain the smooth flow of goods in international trade.

Incoterms 2020 are internationally recognized trade rules that clearly outline the duties of buyers and sellers in global transactions. They provide clarity on delivery terms, risks, and costs, which are essential for successful supply chain management. By using Incoterms, businesses can avoid misunderstandings and enhance communication between international partners. Below, you’ll find an overview of the Incoterms 2020 rules and their critical role in the trading process.

EXW (Ex Works)

EXW means the seller makes the goods available at their premises or another named place. The buyer is responsible for all transportation costs and risks from that point onward. This is the simplest and least restrictive obligation for the seller.

FCA (Free Carrier)

The FCA requires the seller to deliver the goods to a specified location, after which the buyer takes responsibility for the subsequent transportation. This term is suitable for all modes of transport and is often used for combined transport.

CPT (Carriage Paid To)

CPT means the seller pays for the transport costs to a designated destination, but the risk transfers to the buyer once the goods are handed over to the carrier. This term helps buyers plan their costs with knowledge of the delivery price.

CIP (Carriage and Insurance Paid To)

CIP is similar to CPT but requires the seller to provide insurance covering the buyer’s risks during transportation. This term offers greater protection to the buyer and is important if there are concerns about goods being damaged in transit.

DAP (Delivered at Place)

DAP states that the seller is responsible for delivering the goods to a specified destination, including all transport costs and risks up to that point. The buyer is only responsible for unloading and import formalities.

DPU (Delivered at Place Unloaded)

DPU is the only Incoterms rule where the seller is responsible for unloading the goods at the destination. This term is used when the seller can control the delivery of goods to the destination.

DDP ( Delivered Duty Paid )

DDP means the seller takes on all costs and risks, including customs duties and taxes, until the goods are delivered to the buyer. This is the most favorable term for the buyer as the seller handles all logistics formalities.

FAS (Free Alongside Ship)

FAS is used in sea transport, specifying that the seller delivers the goods alongside the ship at the port. The buyer is then responsible for loading and all subsequent costs and risks.

FOB (Free On Board)

The FOB means the seller delivers the goods on board the ship, and the buyer assumes risk and costs from that point onward. This term is commonly used in sea transport as it clearly defines the transfer of ownership once the goods are on the ship.

CFR (Cost and Freight)

The CFR is a sea transport term where the seller covers the cost of transportation to the destination port, but the risk transfers to the buyer once the goods are loaded on the ship. This allows the buyer to accurately estimate transportation costs.

CIF (Cost, Insurance and Freight)

CIF is similar to CFR, but the seller must also provide insurance for the goods during transit. This term is popular in sea transport as it provides additional protection for the buyer.

Incoterms serve as a universal language in international trade, providing a clear and consistent understanding of transaction terms regardless of the parties' native languages or legal standards.

Incoterms rules promote efficient and smooth international trade. Horda Logistics invites you to review PDF document to understand each rule and its significance, ensuring your company's logistics are well-organized and effective.

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