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What are the 11 incoterms in 2021?

But first, what Incoterms are & why they’re important

‘Incoterms’ is the short and simple way of saying International Commercial Terms. First published way back in 1936 by the International Chamber of Commerce, they’re a set of 11 terms defining who’s responsible for what during international transactions.

Or more simply, Incoterms spell out all the tasks, risks and costs involved during the transaction of goods from seller to buyer. Because they’re known and accepted worldwide and are a requirement on every single commercial invoice, they greatly reduce the risk of potentially costly misunderstandings.

The 11 Incoterms & their descriptions

1. EXW – Ex-Works or Ex-Warehouse

  • Ex works is when the seller places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.).
  • The seller does not need to load the goods on any collecting vehicle. Nor does it need to clear them for export, where such clearance is applicable.

2. FCA – Free Carrier

  • The seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place.
  • The parties are well advised to specify as explicitly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

3. FAS – Free Alongside Ship

  • The seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.
  • The risk of loss of or damage to the goods passes when the products are alongside the ship.  The buyer bears all costs from that moment onwards.

4. FOB – Free On Board

  • The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.
  • The risk of loss of or damage to the goods passes when the products are on board the vessel.  The buyer bears all costs from that moment onwards.

5. CFR – Cost & Freight

  • The seller delivers the goods on board the vessel or procures the goods already so delivered.
  • The risk of loss of or damage to the goods passes when the products are on board the vessel.
  • The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

6. CIF – Cost, Insurance & Freight

  • The seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the products are on the ship.
  • The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
  • The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
  • The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

7. CPT  – Carriage Paid To

  • The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such site is agreed between parties).
  • The seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

8. CIP – Carriage & Insurance Paid To

  • The seller has the same responsibilities as CPT, but they also contract for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
  • The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

9. DAP – Delivered At Place

  • The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.
  • The seller bears all risks involved in bringing the goods to the named place.

10. DPU – Delivered At Place Unloaded (replaces Incoterm® 2010 DAT)

  • DPU replaces the former Incoterm® DAT (Delivered At Terminal).  The seller delivers when the goods, once unloaded are placed at the disposal of the buyer at a named place of destination.
  • The seller bears all risks involved in bringing the goods to, and unloading them at the named place of destination.

11. DDP – Delivered Duty Paid

  • The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.
  • The seller bears all the costs and risks involved in bringing the goods to the place of destination.  They must clear the products not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

Check out these useful links:   Video   Quick reference chart

What are the most economic Incoterms terms? 

From our experience, FOB & EXW are the most common terms used when you are the buyer. This ensures you have control over a larger portion of the shipment & costs. If you are the seller then EXW,CFR & DAP are the recommended terms. 

Looking for additional advice? Speak to our industry specialised team today! 

If you’re looking for a quote or have a question that you would like assistance from our industry specialised team, please call (07) 3207 9537 today and we’ll be happy to help you any way we can.