Understanding Incoterms 2020
Incoterms are international rules established by the International Chamber of Commerce (ICC) that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts for domestic and international trade.
EXW (Ex Works)
Risk transfers to buyer when goods are made available at seller's premises. Minimal obligation for the seller.
FCA (Free Carrier)
Risk transfers when goods are delivered to carrier at named place. Seller handles export clearance.
CPT (Carriage Paid To)
Risk transfers when goods are taken in charge by the carrier. Seller pays for carriage.
CIP (Carriage & Insurance Paid)
Similar to CPT but seller must also arrange and pay for insurance.
DAT (Delivered At Terminal)
Risk transfers after unloading at named terminal. Seller handles import clearance.
DAP (Delivered At Place)
Risk transfers at destination before unloading. Seller handles transport and export.
DDP (Delivered Duty Paid)
Maximum obligation for seller. Includes all costs and risks until delivered at destination.
Important Considerations
Documentation Requirements
- Commercial Invoice
- Packing List
- Transport Documents
- Insurance Certificates
- Export/Import Licenses
Risk Management Tips
- Choose appropriate Incoterms based on transport mode
- Consider insurance coverage requirements
- Verify customs clearance responsibilities
- Document all agreements clearly