Incoterms -  International Commercial Terms

Incoterms are denoted by three letters, which are abbreviations of the English names of international rules. Each term consists of three letters and uniquely defines a specific rule. Incoterms are divided into four main categories, which determine the level of responsibility of the seller and the buyer in the process of transportation and delivery of goods.   

Category "E" - Departure 

There's only one Incoterm: EXW (Ex Works - at the place of production). Under EXW, the seller's responsibility ends when they make the goods available at their premises, and the buyer takes on all transportation and costs thereafter.

Category "F" - the main charge is unpaid: Incoterms are included in this category, in which the seller undertakes to deliver the goods to the vehicle at the port, but the responsibility for risk and costs is transferred to the buyer from the moment the goods are loaded into the vehicle and container.

Incoterms of this group include:

FCA (Free Carrier),  

FAS (Free Alongside Ship)

FOB (Free On Board)

Сategory "C" - Main Carriage Paid

The seller is responsible for delivering the goods to a particular destination. However, the risk of loss and additional costs are transferred to the buyer once the goods are loaded onto the vehicle.

Some of the Incoterms in this category include:

CFR (Cost and Freight), 

CIF (Cost, Insurance, and Freight), 

CPT (Carriage Paid To) CIP (Carriage and Insurance Paid To), 

Category "D" – Arrival  

The seller is responsible for delivering the goods to the specified destination, covering customs duties and taxes. The risk of loss and additional costs remains with the seller until the goods are delivered.

Some of the Incoterms in this category include:

DAP (Delivered at Place),

DPU (Delivered at Place Unloaded) 

DDP (Delivered Duty Paid)

Incoterms 2020 includes 11 terms:

1. EXW (Ex Works): The seller delivers the goods at their premises. The buyer bears all expenses and risks from the seller's location to the final destination.

2. FCA (Free Carrier): The seller delivers the goods to a carrier chosen by the buyer. The buyer assumes responsibility and costs from that point.

3. CPT (Carriage Paid To): The seller arranges and pays for the delivery of goods to a place agreed upon with the buyer. Risk transfers from the seller to the buyer upon delivery to the carrier.

4. CIP (Carriage and Insurance Paid To): Similar to CPT, but includes insurance payment for loss or damage during transportation.

5. DAP (Delivered at Place): The seller delivers the goods to an agreed-upon place, paying all expenses until that point. Risk transfers from the seller to the buyer upon delivery.

6. DPU (Delivered at Place Unloaded): The seller is responsible for unloading goods at a specified place. Risk and expenses shift to the buyer after unloading.

7. DDP (Delivered Duty Paid): The seller assumes all responsibilities, expenses, and risks, including customs duties, to deliver the goods to the destination.

8. FAS (Free alongside Ship): The seller delivers the goods alongside the ship at the agreed-upon port of shipment. The buyer assumes all expenses and risks from that point.

9. FOB (Free on Board): The seller delivers the goods on board the vessel at the agreed-upon port of shipment. Risk transfers from the seller to the buyer when the goods are on board.

10. CFR (Cost and Freight): The seller delivers the goods on board the vessel at the port of shipment, covering the cost of transport to the destination port. Risk transfers from the seller to the buyer when the goods cross the ship's rail.

11. CIF (Cost, Insurance, and Freight): Similar to CFR, but the seller also pays for insurance against loss or damage during transportation.  

For sea transport, Incoterms 2020 includes the following conditions:

1. FAS (Free alongside Ship) - Seller delivers goods alongside a vessel at a named port, buyer takes responsibility from that point.

2. FOB (Free on Board) - Seller delivers goods on board a vessel at a named port; buyer assumes risk and costs after loading.

3. CFR (Cost and Freight) - Seller handles cost and freight to deliver goods to a named port, risk transfers upon loading.

4. CIF (Cost, Insurance, and Freight) - Seller manages cost, insurance, and freight to deliver goods to a named port, risk transfers upon loading.