Incoterms

Incoterms (International Commercial Terms) are internationally recognized rules that regulate the responsibilities and obligations of buyers and sellers in international trade. They are laid down by the International Chamber of Commerce (ICC) and define who is responsible for transportation, insurance, customs duties and risks during transport.

The Incoterms are particularly important to avoid misunderstandings between business partners in different countries, as they clarify who bears which costs and at what point the risk for the goods is transferred from the seller to the buyer.

Most important aspects of the Incoterms:

1. Responsibility for transport: You determine who organizes and pays for the transport – the seller or the buyer.
2. Transfer of risk: You define the point at which the seller transfers responsibility for damage or loss to the goods.
3. Allocation of costs: Incoterms determine which costs are to be borne by the seller and which by the buyer (transportation, insurance, customs duties, etc.).

The most important Incoterms (version 2020):

The Incoterms are divided into two main groups: those for all types of transport and those specifically for sea and inland waterway transport.

Incoterms for all types of transportation:

1. EXW (Ex Works): The seller makes the goods available at his own location. The buyer assumes all costs and risks ex works.
2. FCA (Free Carrier): The seller delivers the goods to a carrier designated by the buyer or to another location. The buyer bears the responsibility from the time of delivery to the carrier.
3. CPT (Carriage Paid To): The seller pays for transportation to the named destination, the buyer assumes the risk once the goods have been handed over to the first carrier.
4. CIP (Carriage and Insurance Paid To): Like CPT, but the seller must also take out transportation insurance.
5. DAP (Delivered At Place): The seller bears all costs and risks until arrival at destination. The buyer is responsible for unloading and any import duties.
6. DPU (Delivered at Place Unloaded): The seller bears all costs and risks and must unload the goods at the destination. The buyer only bears the import duties.
7. DDP (Delivered Duty Paid): The seller bears all costs and risks up to delivery, including duties, taxes and other import costs.

Incoterms especially for sea and inland waterway transport:

1. FAS (Free Alongside Ship): The seller makes the goods available on the quay or alongside the buyer’s ship. The buyer bears the risk and costs from this point onwards.
2. FOB (Free On Board): The seller bears the costs and risks until the goods are loaded on board the ship. From then on, the buyer is responsible.
3. CFR (Cost and Freight): The seller pays the freight costs to the port of destination, but the buyer bears the risk from the moment the goods are on board the ship.
4. CIF (Cost, Insurance and Freight): Like CFR, but the seller must take out transportation insurance up to the port of destination.

Advantages of the Incoterms:

• Simplification of trade: They create clarity about the responsibilities of the parties.
• Standardized terms: Incoterms reduce misunderstandings in international trade by being applied in the same way worldwide.
• Flexibility: They cover different types of transportation and trade relations, which makes them applicable in many situations.

Overall, the Incoterms help to make international trade contracts more efficient and transparent.