International Commercial Terms
Incoterms (“International Commercial Terms”) are an internationally recognized codification whose purpose is to harmonize the terms of commercial transactions. Incoterms are terms that codify the rights, duties and responsibilities of importers and exporters (who does what?) with respect to :
- transport and type of transport,
- Distribution of costs and related risks (Incoterms define the place and time of risk transfer).
- in charge of the completion of import-export formalities. The Incoterms define which documents must be provided by the parties.
- In the end, Incoterms allow the parties to agree quickly and unambiguously on the terms of the transaction. Incoterms are thus of a contractual nature.
Since their creation in 1936, the Incoterms have had several versions. The most recent version is called “ICC 2020” or “Incoterms 2020”. The previous version was called “Incoterms 2010 ».
The “Incoterms 2020” version includes 11 international trade terms, 4 of which relate solely to maritime and river transport:
each term is coded by three letters, for example EXW for ExWorks,
in common use, the three-letter terms must be completed with the exact place where the Incoterm applies (agreed place of destination). For example FCA Marseille + freight forwarder’s address.
The 4 Incoterms Usable Only For Sea And River Transport.
These Incoterms are valid only if the point of departure and the point of arrival are sea ports.
FAS: Free Alongside Ship
Transfer of risk on the quay of the port of departure: the exporter deposits the goods along the ship. The buyer takes care of the loading on the ship and the further transport, including import customs clearance.
FOB: Free On Board
Transfer of risk once the goods have been loaded on the vessel by the seller. The buyer takes care of the rest of the transport, including import customs clearance.
CFR: Cost and Freight
Transfer of risk once the goods are loaded in the ship. It is therefore the same FOB, but the seller bears the transport costs to the port of arrival, except for the insurance for the transport. The seller does not take care of the unloading of the vessel upon arrival. Unloading costs may or may not be included in the contract.
CIF: Cost, Insurance and Freight
Same as CFR, but the seller also supports the insurance for the transport on the boat.
The 7 Incoterms Usable For All Types Of Transport Mode.
EXW: Ex Works (ex works)
Transfer of risk on leaving the factory, unloaded, not cleared through export or import customs. The seller must make his goods available at the exit of his factory, at a date defined in advance. The buyer bears all transport, customs and risk costs to the final destination.
FCA: Free Carrier
Transfer of risk, loading and export clearance at the carrier or freight forwarder designated by the buyer (in any place in the country of origin). Export formalities and costs are the responsibility of the seller. The buyer pays for transport to its premises, carries out import formalities and pays the related duties and taxes.
CPT: Carriage Paid To (postage paid to)
Delivery to the first carrier abroad, costs paid by the seller, without transport insurance. The seller organizes the transport and bears the transport costs to the foreign destination point, including unloading. The transfer of risk is established at this point. In other words, the seller organizes the transport, but at the buyer’s risk (the insurance costs are borne by the buyer).
CIP: Carriage and Insurance Paid to (postage paid to, insurance included)
Same for CPT, but the seller takes care of the transport insurance.
DPU: Delivered At Place Unloaded
Replaces the old DAT: Delivered At Terminal. The destination location can now be any place and not just the terminal.
Goods (unloaded) delivered at the agreed place of destination in the foreign country. The buyer bears the import customs clearance and the costs of post-delivery.
The seller organizes and pays for the transportation and unloading of the goods at the point of destination. The transfer of risk takes place at this point. The buyer carries out the import formalities and pays the duties.
DAP: Delivered At Place
Goods (not unloaded) made available by the seller in the foreign country at the agreed place. The buyer bears the unloading and import customs clearance.
DDP: Delivered Duty Paid
Goods delivered to final destination, not unloaded. Import customs clearance and taxes at the expense of the seller.
The goods are therefore delivered to the place of destination, ready to be unloaded. The seller normally also bears the costs of unloading.
The seller carries out export and import customs clearance and pays all duties and taxes.
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