Incoterms in International Trade

Incoterms Overview

• Incoterms are a set of three-letter trade terms published by the International Chamber of Commerce (ICC)
• They define the responsibilities of buyers and sellers in international trade, specifically regarding the delivery of goods

Incoterms Categories

• E-terms: Ex Works (EXW) - Seller's responsibility ends at the factory gate
• F-terms: Free Carrier (FCA), Free Alongside Ship (FAS), Free On Board (FOB) - Seller's responsibility ends at a specific point
• C-terms: Cost and Freight (CFR), Cost, Insurance, and Freight (CIF), Carriage Paid To (CPT), Carriage and Insurance Paid To (CIP) - Seller's responsibility ends at the port of destination
• D-terms: Delivered At Place (DAP), Delivered At Terminal (DAT), Delivered Duty Paid (DDP) - Seller's responsibility ends at the buyer's door

Key Incoterms

• EXW (Ex Works): Seller's responsibility ends at the factory gate
• FOB (Free On Board): Seller's responsibility ends when the goods are on board the ship
• CIF (Cost, Insurance, and Freight): Seller's responsibility ends at the port of destination, including insurance and freight
• DDP (Delivered Duty Paid): Seller's responsibility ends at the buyer's door, including customs clearance and duties

Incoterms Rules

• Incoterms rules apply to the sale of goods, not services
• Incoterms rules do not cover the transfer of ownership or title
• Incoterms rules do not cover the payment of goods

Benefits of Incoterms

• Clarity on roles and responsibilities in international trade
• Reduces misunderstandings and disputes
• Provides a common language for buyers and sellers worldwide