The International Chamber of Commerce (ICC)

The International Chamber of Commerce (ICC) published a set of 11 rules known as the Incoterms® that outline the obligations of buyers and sellers for the sale of products in cross-border transactions. Each Incoterms rule's clarification of the responsibilities, expenses, and risks that buyers and sellers must assume in these deals is of utmost importance. Understanding Incoterms helps companies to enhance smoother transactions by defining precisely who is in charge of what at each stage of the transaction.

The updated Incoterms® 2020 rules are divided into two groups to account for different modes of transportation. Seven of the 11 principles apply to ALL modes of transportation, and four are specific to SEA, LAND, or INLAND WATERWAY transportation.

In addition to weight and dimensions, legal limitations apply to the mode of transportation, the routes, and the hours of the day during which oversized cargo may be transported. Those who have a special permit for extraordinary road transport for the use of state roadways of all categories are permitted to transport products that are oversize. Oversized cargo must be handled carefully and transported using specialist tools.

The Incoterms® 2020 rules are:

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.

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.

FAS – Free Alongside Ship (Sea and Inland Waterway Transport)

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.

FOB – Free On Board (Sea and Inland Waterway Transport)

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.

CFR – Cost and Freight (Sea and Inland Waterway Transport)

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.

CIF – Cost, Insurance and Freight (Sea and Inland Waterway Transport)

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.

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.

CIP – Carriage And 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.

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.

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.

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.