Incoterms are published by the International Chamber of Commerce (ICC). They include a set of official commercial terms that are globally accepted, and are meant to make shipping contracts easier. They aid in clarifying who holds the risk, responsibility, and costs in a particular transaction. Incoterms are reviewed every decade, to ensure that they are relevant to the current market situation. At the moment, Incoterms 2020 have to be followed by people.
Anyone engaging in international trade for the first time must try to learn incoterms meaning and implications competently. Here are some of the prime ones:
● EXW or Ex Works: The duty of the seller is to provide goods and services at a place specified by the buyer according to this Incoterm. The buyer shall be responsible for the goods from that place.
● FOB or Free on Board: It is the seller’s responsibility to deliver the goods onto the ship sent by the buyer. Costs related to onward transport, insurance, other transport expenses, unloading charges, and bill of lading fees are paid by the buyer.
● FCA or Free Carrier: According to the FCA incoterms meaning, the seller is wholly liable for delivering goods that are cleared by the export to a buyer at a particular place.
● FAS or Free alongside Ship: This Incoterm implies the fact that a shipment has to be done only through a vessel, and not by air or land. The costs and risks associated with the goods till it reaches the delivery point have to be borne by the seller.
● CFR or Cost and Freight: This is an ocean shipment Incoterm as per which the vendor has to carry the risk of the goods till a specific destination port.
● CIF or Cost, Insurance and Freight: This water shipment Incoterm implies that the sellers must insure the goods to their destination port at 110% of the total value.
● CPT or Carriage Paid To: According to this Incoterm, the vendor or the seller shall pay for goods carried to a specified destination. The risk shall pass onto the buyer just after the goods are handed to the relevant carrier person.
● CIP or Carriage and Insurance Paid to: This Incoterm is quite similar to CPT. However; here the sellers have to buy the goods in the shipment for 110% of the contract value.
Knowing the above-mentioned Incoterms is crucial for anyone engaging in international trade to avoid any confusion and miscommunication in the process.
