21 October 2019

What are incoterms?

Incoterms comes from the words International Commercial Terms, that is, terms of international trade. It is a series of standards or commercial standards that define the responsibilities, risks and costs of the international merchandise purchase contract. It is important to determine the exact moment in which the risk of loss or deterioration of merchandise goes from the seller to the buyer, in order to speed up the information throughout the logistics chain.

Incoterms are defined by the International Chamber of Commerce. This body has been responsible for preparing and updating these terms since 1936 (last revised in 2010), in accordance with the changes that international trade is experiencing.

Group E: Departure
EXW - Ex Works
(En fàbrica o lloc convingut)

It must be followed by the specific place of delivery and is what most obliges the buyer, who must take charge of loading the goods and transport, customs clearance and other procedures. The seller must supply the goods packed and labeled, with the corresponding invoice.

Group F: Main carriage unpaid
FCA - Free Carrier
This incoterm accuses the seller of delivering the merchandise somewhere to agree on the country of origin, such as premises of a freight forwarder or railway station, taking care of the costs up to this point.

FAS - Free Alongside Ship
This incoterm is charged by the buyer of the delivery of the cargo at the port of the sea port, next to the ship. Until then, all expenses and risks are borne by the buyer. The seller takes over the customs cost of origin.

FOB - Free On Board
The merchandise is delivered on board the ship, already stowed, in the port of origin. As of that moment, the risks of loss or damage to the buyer are transferred. This is one of the most used Incoterms and is used when the load is stored in pallets, drums or boxes.

Group C: Main carriage paid
CFR - Cost and Freight
This incoterm must be followed by the destination port and responsible for the seller to take care of the costs, risks and losses to the port of destination. After the goods are loaded at the port of destination, the responsibility becomes the buyer.

CPT - Carriage Paid To
It is used both in marine, river, land and air transport and for multimodal transport. Transport costs are assumed by the seller until the merchandise is delivered to the passenger in the country of origin. The buyer assumes the customs costs.

CIF - Cost, Insurance and Freight
The seller hires insurance to the destination port, but the risk from the port of origin is assumed by the buyer. It is only used when the transport is carried out by sea or river.

CIP - Carriage and Insurance Paid
Indicated in multimodal transport, after this incoterm, the point of delivery of the goods must be indicated. The risk is assumed by the buyer since the merchandise is delivered to the freight forwarder in the country of origin, although it is the seller who must hire the insurance.

Group D: Arrival
DAT - Delivered At Terminal
In this case, the seller takes full risk and expenses until the load has been received at the agreed terminal or port. Once the merchandise is received, the customs and risk costs are assumed by the buyer.

DAP - Delivered At Place
This incoterm applies to any type of transport. The merchandise comes under the responsibility of the buyer in an agreed place, beyond the customs. In this way, the seller takes care of the costs and risks until the load is delivered at this agreed point.

DDP - Named destination Place
This incoterm is the one that most responsibility assumes the seller, who must take care of all the expenses until giving the product to the agreed place. The only thing the buyer has to do is provide a place and date of delivery, as well as facilitate any process.