Incoterms are international commercial terms set by the International Chamber of Commerce. These terms specify the roles and responsibilities between a buyer and a seller in an international trade transaction.

Lack of misunderstanding or disputes is impeded as it clearly explains who shall bear the responsibility while shipping a merchandise either through transport, insurance, or customs clearance of the goods.

Incoterms are Revised every 10 years, The latest revision for Incoterms was 1 January 2020.

There are 11 Incoterms, which are further divided into two categories:

For Any Mode of Transport

1. EXW (Ex Works):
   • Seller’s Responsibility: Makes goods available at their premises (factory, warehouse, etc.).
   • Buyer’s Responsibility: Takes care of all costs and risks involved in transporting the goods from the seller’s location to the final destination.
2. FCA (Free Carrier):
   • Seller’s Responsibility: Delivers the goods to a carrier or another person nominated by the buyer at the seller’s premises or another named place.
   • Buyer’s Responsibility: Takes over from the point of delivery, handling all subsequent transportation and costs.
3. CPT (Carriage Paid To):
   • Seller’s Responsibility: Pays for the carriage of the goods to the named place of destination.
   • Buyer’s Responsibility: Assumes risk once the goods are handed over to the first carrier.
4. CIP (Carriage and Insurance Paid To):
   • Seller’s Responsibility: Pays for carriage and insurance to the named place of destination.
   • Buyer’s Responsibility: Assumes risk once the goods are handed over to the first carrier, but benefits from insurance coverage arranged by the seller.
5. DAP (Delivered at Place):
   • Seller’s Responsibility: Delivers the goods to a named place, ready for unloading.
   • Buyer’s Responsibility: Takes care of unloading and any further transportation.
6. DPU (Delivered at Place Unloaded):
   • Seller’s Responsibility: Delivers and unloads the goods at the named place.
   • Buyer’s Responsibility: Takes over from the point of unloading.
7. DDP (Delivered Duty Paid):
   • Seller’s Responsibility: Delivers the goods to the named place, paying all costs including duties, taxes, and customs clearance.
   • Buyer’s Responsibility: Simply receives the goods at the named place.

For Sea and Inland Waterway Transport

1. FAS (Free Alongside Ship):
   • Seller’s Responsibility: Places the goods alongside the vessel at the named port of shipment.
   • Buyer’s Responsibility: Takes care of loading, transportation, and all subsequent costs.
2. FOB (Free on Board):
   • Seller’s Responsibility: Loads the goods on board the vessel at the named port of shipment.
   • Buyer’s Responsibility: Takes over from the point the goods are on board, handling all subsequent costs and risks.
3. CFR (Cost and Freight):
   • Seller’s Responsibility: Pays for the cost and freight to bring the goods to the named port of destination.
   • Buyer’s Responsibility: Assumes risk once the goods are on board the vessel.
4. CIF (Cost, Insurance, and Freight):
   • Seller’s Responsibility: Pays for cost, insurance, and freight to bring the goods to the named port of destination.
   • Buyer’s Responsibility: Assumes risk once the goods are on board the vessel, but benefits from insurance coverage arranged by the seller.

These terms help streamline international trade by clearly defining the responsibilities of each party, reducing the risk of disputes.