Incoterms 2020: complete guide for importers and exporters
To have absolute and total control not only over international shipments but also over the responsibilities of each party in the buying and selling of goods, it is key to choose the correct Incoterm. The Incoterms 2020 rules, published by the International Chamber of Commerce (ICC), precisely define who assumes the costs and risks at each phase of transport, avoiding misunderstandings and unexpected costs.
With this guide, you will be able to identify the ideal Incoterm for your international operations.
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What do Incoterms define?
Transfer of risks
The exact point at which the risk of loss or damage to the goods passes from the seller to the buyer.
Distribution of costs
Who pays for transport, insurance, customs, permits, and other fees.
Place of delivery
The physical point where the seller fulfills their obligation to deliver the goods.
Incoterms 2020: Groups and Responsibilities
The 11 Incoterms are divided into two groups according to the mode of transport.
Group 1: Multimodal Incoterms
EXWEx Works
The least responsibility for the seller. Goods are delivered at their warehouse or factory. The buyer assumes all costs and risks from that point.
FCAFree Carrier
The seller delivers the goods to your carrier at an agreed place (e.g., carrier's warehouse). It is a very flexible and secure option for the buyer.
CPTCarriage Paid To
The seller pays for transport to the destination, but the risk transfers to you (the buyer) at the time of delivery to the first carrier.
CIPCarriage and Insurance Paid To
Similar to CPT, but the seller also takes out insurance in your favour with maximum coverage ("all risks"). The risk also transfers to the first carrier.
DPUDelivered at Place Unloaded
The seller assumes all costs and risks until the goods are delivered and unloaded at the agreed destination (e.g., a terminal or warehouse).
DAPDelivered at Place
The seller delivers the goods at the agreed destination, but without unloading them. You (the buyer) are responsible for unloading.
DDPDelivered Duty Paid
The maximum responsibility for the seller. They handle absolutely everything: transport, insurance, import customs clearance, and delivery to your final destination.
Group 2: Maritime and Inland Waterway Incoterms
FASFree Alongside Ship
The seller delivers the goods alongside the vessel at the loading port. From that moment, you assume all costs and risks.
FOBFree on Board
The seller delivers the goods on board the vessel. It is one of the most commonly used Incoterms. The risk passes to you as soon as the cargo crosses the ship's rail.
CFRCost and Freight
The seller pays the maritime freight to the destination port, but the risk transfers to you at the origin port, once the goods are on board the vessel.
CIFCost, Insurance and Freight
Similar to CFR, but the seller also takes out minimum insurance in your favour. The risk transfers at the origin port, on board the vessel.
Frequently Asked Questions
01.What do Incoterms 2020 regulate?
Incoterms define the portion of the sale assumed by each party regarding transport (shipper/consignee) and risk assumption for insurance.
02.Which Incoterm is safest for the seller?
The Shipper (Seller) is fully covered under EXW as the buyer assumes 100% of the responsibility for transport and insurance.
03.Who pays the freight in a CIF Incoterm?
Under CIF, the main carriage freight is assumed by the shipper/exporter up to the agreed point.
04.Can Incoterms be used for domestic transport?
Yes, nowadays clients also use them for domestic transport.
Don't know which Incoterm to choose?
The choice of the correct Incoterm depends on your experience, the type of cargo, and the trust with your supplier. A poorly chosen Incoterm can generate unforeseen costs in customs, transport, or insurance, and may also not cover specific situations.
Don't leave your logistics to chance! Our team will help you find the best option for your import and export operations, ensuring your supply chain is efficient and secure.
