Understanding Incoterms 2020: A Trading Company Reference Guide
A comprehensive reference guide to Incoterms 2020, explaining the eleven delivery terms that govern risk transfer in international trade contracts.
Incoterms (International Commercial Terms) are standardised trade terms published by the International Chamber of Commerce that define the responsibilities of buyers and sellers in international trade transactions. The 2020 revision, which remains current, contains eleven terms divided into two groups based on mode of transport. TERMS FOR ALL MODES OF TRANSPORT: EXW (Ex Works) — seller's minimum obligation; FCA (Free Carrier) — seller delivers to named carrier; CPT (Carriage Paid To) — seller arranges and pays freight; CIP (Carriage and Insurance Paid To) — adds insurance obligation; DAP (Delivered at Place) — seller delivers to destination; DPU (Delivered at Place Unloaded) — seller unloads at destination; DDP (Delivered Duty Paid) — seller's maximum obligation. TERMS FOR SEA AND INLAND WATERWAY ONLY: FAS (Free Alongside Ship), FOB (Free On Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight). The most important practical distinction for trading companies is the point at which risk transfers from seller to buyer, which determines who bears responsibility for loss or damage during transit and who must arrange insurance.
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