The Ultimate Incoterms Guide
Incoterms are a set of sales terms widely used in international commercial transactions. The current version of incoterms is 2020 & they are arranged in two categories as follows:
Rules for Any Mode of Transport
Rules for Sea and Inland Waterway Transport Only
Incoterms 2020 summary
Any Mode Of Transport
EXW – Ex Works – Seller is responsible for having the goods packed and made available at the seller’s premises. The buyer bears the full risk and costs from there to the destination.
FCA (A) – Free Carrier – Seller is only responsible for delivery to a named place specified by the byer. Risk and cost are transferred to the buyer as soon as the cargo is delivered at the named place.
FCA (B) – Free Carrier (Named Place & Sellers Premises) This version is similar to the standard FCA, but it specifically designates the loading warehouse as the place of delivery.
CPT – Carriage Paid To – Seller arranges the transportation and costs to the named destination. Risk is transferred to the buyer once the cargo is handed over.
CIP – Carriage and Insurance Paid to: Similar to CPT, but the seller also provides insurance against the buyer’s risk of loss or damage to the goods during transportation.
DAP– Delivered at Place – Seller delivers the goods to the consignees premises, not unloaded. The risk transfers to the buyer upon delivery.
DDP – Delivery Duty Paid – Seller delivers goods to the consignees premises. Seller assumes all costs – including import formalities and any calculated duty and VAT applicable upon import.
DPU – Delivered at Place Unloaded – Seller assumes all costs and risks until the goods are unloaded at the consignees premises. The buyer is responsible for import customs formalities.
Sea and Inland Waterway Transport
FAS – Free Alongside Ship – Seller is responsible for delivering goods to the port of loading. Thereafter, risk and cost transfer to the buyer.
FOB – Free On Board – Seller is responsible for goods loaded onboard the vessel. Risk and cost are transferred to the buyer as soon as the vasal leaves the port of loading.
CFR – Cost and Freight – Seller covers freight costs to the port of discharge or place. Risk is transferred as soon as the goods have been loaded on board the vessel.
CIF – Cost, Insurance, and Freight – Seller covers insurance and freight costs to the port of discharge or place. Risk is transferred as soon as the goods have been loaded on board the vessel. Seller is required to obtain insurance cover.
A Brief History of INCOTERMS:
Incoterms were first introduced by the International Chamber of Commerce (ICC) in 1936 and have since undergone several revisions to adapt to the changing needs of global trade.
1936 – The Birth of INCOTERMS: The first set of INCOTERMS was published by the ICC in 1936. The primary objective was to provide a common language and understanding for international trade transactions. The initial version included seven terms, such as FOB (Free on Board), CIF (Cost, Insurance, and Freight), and EXW (Ex Works).
1953 – First Revision: To keep up with the evolving trade practices, the ICC revised the INCOTERMS in 1953. This update saw the number of terms reduced to four, while still ensuring clarity and consistency in international trade contracts.
1967 – Second Revision: The next update came in 1967, further streamlining the terms and updating them to align with the contemporary practices in global commerce.
1976 – Third Revision: The third revision took place in 1976, making important changes to the language and structure of the INCOTERMS to better serve the international trade community.
1980 – Fourth Revision: In 1980, the ICC carried out another revision, introducing the well-known term DAT (Delivered at Terminal) and making other significant updates to the existing terms.
1990 – Fifth Revision: The fifth revision in 1990 aimed to address the emerging challenges in international trade and adapt to the changing global economic landscape.
2000 – Sixth Revision: The sixth revision of INCOTERMS occurred in the year 2000, with a focus on simplifying the rules and ensuring they were compatible with modern trade practices.
2010 – Seventh Revision: The seventh revision came into effect in 2011, and it continued the efforts of the previous revision to make the terms more accessible and user-friendly.
2020 – Eighth and Latest Revision: The most recent update to the INCOTERMS was published by the ICC in 2020. This version includes eleven terms, with the introduction of DPU (Delivered at Place Unloaded) and DDP (Delivered Duty Paid). The 2020 revision ensures the rules remain relevant and useful for contemporary international trade scenarios.
Summary
It is essential for traders and businesses engaged in international commerce to be familiar with the latest version of INCOTERMS to avoid misunderstandings and disputes during the buying and selling process of goods between countries. Each revision reflects the ongoing efforts to harmonize global trade practices and enhance the efficiency and transparency of cross-border transactions. For rules on incoterms direct from the ICC click HERE For code applicable for when no other incoterm code is applicable click HERE
SARR Logistics UK Colchester Essex
SARR Logistics UK in Colchester Essex are fully versed on the latest version of incoterms and can confidently advise you on any questions you may have. Please Contact Us to discuss any questions you may have.
