INCOTERMS explained

INCOTERMS (International Commercial Terms) are a series of standardized terms used in international trade to clearly communicate the responsibilities of buyers and sellers. They are published by the International Chamber of Commerce (ICC) and are updated every ten years to reflect changes in the international trade environment. The most recent version, INCOTERMS 2020, was published in September 2019.

There are eleven INCOTERMS in total, each of them outlines the specific responsibilities of buyers and sellers in relation to the transportation of goods. They are grouped into four categories:

1.???E terms (Ex Works) - These terms outline the minimum obligations of the seller, who is responsible for making the goods available at their own premises or another named place. The buyer is responsible for all other costs and risks associated with transporting the goods to the final destination.

2.???F terms (Free Carrier) - These terms outline the obligations of the seller, who is responsible for delivering the goods to a carrier or another named place. The buyer is responsible for all other costs and risks associated with transporting the goods to the final destination.

3.???C terms (Cost and Freight) - These terms outline the obligations of the seller, who is responsible for delivering the goods to a port of export and paying the cost of transporting the goods to the named port of destination. The buyer is responsible for all other costs and risks associated with transporting the goods from the port of destination to their final destination.

4.???D terms (Delivered at Terminal) - These terms outline the obligations of the seller, who is responsible for delivering the goods to a named terminal at the port of destination. The buyer is responsible for all other costs and risks associated with transporting the goods from the terminal to their final destination.

The most commonly used INCOTERMS are:

·????????FOB (Free on Board) - This term is commonly used in sea and inland waterway transport. The seller is responsible for delivering the goods on board of a pre-defined ship in a pre-defined port, while the buyer is responsible for paying the cost of freight and insurance to the port of destination and then to final destination. The seller must carry out all export formalities and the buyer must carry on all import formalities.

·????????CIF (Cost, Insurance, and Freight) - This term is similar to FOB, but the seller is also responsible for purchasing insurance for the goods.

·????????EXW (Ex Works) - This term is often used when the buyer is responsible for arranging and paying for transportation.

·????????DAP (Delivered at Place) - This term is similar to DAT (Delivered at Terminal), but the seller is responsible for delivering the goods to a named place rather than a terminal.

It's important to note that INCOTERMS are not intended to replace or supersede any legal terms that may be included in a sales contract. They are simply a set of guidelines to help buyers and sellers clearly understand their respective responsibilities in the transportation of goods. It's always a good idea to consult with a legal or trade expert if you have any questions or concerns about using INCOTERMS in your international trade agreements.

Last but not least: if you are still using EXW (Ex Works) term for your exports it might be that you are misusing the INCOTERMS, wanna know more? Contact us at: info @ smartloc . link and we will make a free assessment and suggest you the most appropriate INCOTERMS!