International trade terms, commonly referred to as Incoterms, are a set of rules established by the International Chamber of Commerce (ICC). These terms define the responsibilities and obligations of buyers and sellers in international trade transactions, including transportation, insurance, and customs duties. Here are some common international trade terms:
- EXW (Ex Works) – The seller makes the goods available at their premises (usually a factory or warehouse). From that point on, the buyer bears all costs and risks of loss or damage.
- FOB (Free On Board) – The seller is responsible for delivering the goods to a specified port of shipment and loading them onto the buyer’s vessel. Once the goods have crossed the ship’s rail, the risk transfers to the buyer.
- CIF (Cost, Insurance, and Freight) – The seller pays for the goods’ transportation and insurance to the designated port of destination. However, the risk transfers to the buyer once the goods have crossed the ship’s rail at the port of shipment.
- CFR (Cost and Freight) – Similar to CIF, but the seller does not cover the insurance cost.
- DAT (Delivered At Terminal) – The seller bears all risks and costs to bring the goods to and unload them at the terminal at the port or place of destination.
- DAP (Delivered At Place) – The seller is responsible for all costs and risks to bring the goods to a specified destination, but not for unloading.
- DDP (Delivered Duty Paid) – The seller bears all costs and risks involved in bringing the goods to the place of destination and is responsible for clearing the goods not only for export but also for import, paying any duty for both export and import.
- FCA (Free Carrier) – The seller hands over the goods, cleared for export, into the disposal of the first carrier at the named place. After that point, the risk transfers to the buyer.
- CPT (Carriage Paid To) – The seller pays for the freight to the specified destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.
- CIP (Carriage and Insurance Paid To) – The seller pays for the freight and insurance to the specified destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.
Please note that Incoterms are updated periodically, with the latest version being Incoterms 2020. When using these terms, it’s important to specify the version to avoid misunderstandings and disputes.
