International Chamber of Commerce has characterized the arrangement of commercial terms for international commercial transactions called “Incoterms”.
Incoterms is the registered trademark of ICC.Incoterms® are accepted by trade councils and worldwide lawyers.Incoterms® are used globally by traders involved in export and import. These terms define buyer seller obligations,helps in costing and evaluating the risk involved in transfer of goods.Different countries have different processes and compliance, Incoterms® set standard processes which have same legal interpretations across the globe. Incoterms® 2020 are the latest terms launched on 10th september 2019 by ICC. You can use old adaptations of Incoterms also,but compose it which rendition is been utilized.
Each Incoterm discusses the exporter’s and importer’s responsibility and which party needs to take the corresponding licence, custom clearances and who will bear the cost of it. Each incoterm states exporter’s obligations for delivery of goods and about which party will get the packing done. These terms also give clarity about which party will bear the loss if goods are damaged.
Incoterms® can be categorized into two sets :
A)Any mode/modes of transport
1)EXW – EX WORKS – EXW (named place of delivery)
2)FCA – FREE CARRIER – FCA (named place of delivery)
3)CPT – CARRIAGE PAID TO – CPT (named place of destination)
4)CIP – CARRIAGE AND INSURANCE PAID TO – CIP (named place of destination)
5)DAP – DELIVERED AT PLACE – DAP (named place of destination)
6)DPU- DELIVERED AT PLACE UNLOADED – DPU (named place of destination)
7)DDP – DELIVERED DUTY PAID – DDP (named place of destination)
B)Sea and Inland waterway transport
1)FAS – FREE ALONGSIDE SHIP – (named port of shipment)
2)FOB – FREE ON BOARD (named port of shipment)
3)CFR – COST AND FREIGHT CFR (named port of destination)
4)CIF – COST INSURANCE AND FREIGHT CIF (named port of destination)
Incoterms® cannot be considered as a sale contract. It additionally does not incorporate payment terms. If a seller is not able to fulfill delivery on time or does not deliver the goods at all and if the quality of the product is not as per buyer’s pre-defined criteria, Incoterms® cannot be the reference point