The International Commercial Terms (Incoterms) are standardized rules that regulate various aspects of international trade.
Currently, there are 11 Incoterms, divided into the categories E, F, C, and D. Below is a brief explanation of each category.
Category E (EX)
It represents the departure or obligation of the buyer. When this acronym appears, it means that the importer is responsible for picking up the goods at the manufacturer's address.
• EXW (Ex Works) – Multimodal
The seller must make the goods available at the agreed place and time. After that, the buyer must arrange for the transportation of the goods and assume all transport risks.
Category F (FREE)
The exporter is not responsible for the main freight and international insurance; these are the responsibility of the importer.
• FCA (Free Carrier) – Multimodal
The seller makes the goods available at the place of origin or arranges for their transportation to the destination designated by the importer. In this case, the seller is also responsible for customs clearance.
• FAS (Free Alongside Ship) - Maritime
It can only be used for maritime transport or inland waterway transport when the parties intend to deliver the goods.
• FOB (Free on Board) - Maritime
The seller's obligations cease when the goods are shipped on board the vessel at the port of loading. From that point forward, the buyer assumes responsibility for any losses or damages.
Category C (CARRIAGE)
The exporter pays for the transportation. They contract and pay for the international freight, but the importer assumes responsibility for the risks during transportation.
• CPT (Carriage Paid To) - Multimodal
The seller arranges and pays for transportation from the origin to the destination. They are responsible for all customs clearance procedures, both in the country of origin and in the country of destination.
• CIP (Carriage and Insurance Paid To) - Multimodal
The principal transportation and freight charges shall be borne by the seller from the time the goods are delivered.
• CFR (Cost and Freight) - Maritime
The seller shall remain responsible for the goods until they cross the ship's rail, after which all responsibilities shall pass entirely to the buyer.
• CIF (Cost Insurance and Freight) – Maritime
The seller shall bear all transportation and insurance costs up to the port of destination.
Category D (Delivery)
The exporter assumes all risks until delivery of the goods.
• DAP (Delivered at Place) - Multimodal
The seller fulfills its obligations when the goods are placed at the disposal of the buyer at a place other than a terminal, ready for unloading.
• DPU (Delivered at Place Unloaded) - Multimodal
The seller shall be deemed to have fulfilled its obligation to deliver when the goods, unloaded from the incoming means of transport, have been placed at the disposal of the buyer at the specified port or destination, at the specified terminal.
• DDP (Delivered Duty Paid) – Multimodal
The seller shall bear all risks and responsibilities for transportation from the origin to the buyer's specified destination.
Incoterms are essential tools for international trade. By establishing clear rules regarding costs, risks, and responsibilities, they facilitate negotiations, reduce operational costs, and minimize the risk of disputes between parties.
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