What are Incoterms and what are they for?

In the international market there are a series of rules accepted by most companies. These rules are called Incoterms, and in today’s post we are going to explain what they are and what Incoterms are for.

What are Incoterms

Incoterms are rules issued by the International Chamber of Commerce, which define the responsibilities of sellers and buyers during international transactions. They clarify who bears costs, risks and where the goods are delivered.

The last update by the International Chamber of Commerce was made on 1 January 2020, giving rise to the Incoterms 2020.

What Incoterms are for

Incoterms are optional and interpret the usual practice of international transactions.

There are currently 11 Incoterms, which can be divided into two blocks: the rules for any mode of transport and the rules for maritime transport.

Rules for any mode of transport

• EXW (Ex Works). The seller simply leaves the goods ready for collection at the seller’s premises, together with the relevant commercial documentation.
• FCA (Free Carrier). The seller must deliver the goods to the place designated by contract and is responsible for managing the export formalities.
• CPT (Carriage paid to). The seller must prepare the goods, provide the relevant documentation, notify the buyer of the delivery of the goods to the carrier, carry out the export clearance and assume the cost of transport until delivery at the agreed place.
• CIP (Carriage and insurance paid yo). The seller must prepare the goods, provide the relevant documentation, notify the buyer of the delivery of the goods to the carrier, carry out the export clearance, assume the cost of transport to the named destination and take out cargo insurance.
• DAP (Delivery at place). The seller makes the goods available to the buyer on the means of transport, without unloading, at the agreed place. The seller assumes the costs and risks of transport to the agreed place.  He must present the relevant documentation and it is the buyer who carries out the import clearance.
• DPU (Delivery at place unloaded). The seller makes the goods available to the buyer at the agreed place and unloads them. He assumes all costs and risks until unloading. He must present the relevant documentation and it will be the buyer who carries out the import clearance.
• DDP (Delivery duty paid). The seller must place the goods at the buyer’s disposal at the agreed place, covering all costs, including unloading and customs procedures and costs, and assuming all risks. 

Rules for maritime transport

• FAS (Free alongside ship). The seller must leave the goods alongside the ship and is responsible for all costs and risks until the goods are delivered there. In addition, he is responsible for arranging and paying for export clearance.
• FOB (Free on board). The seller must load the goods on board the vessel designated by the buyer. He assumes risk and responsibility for the goods up to that point. In addition, he is responsible for the management and payment of the export clearance.
• CFR (Cost and freight). The seller is responsible for delivering the goods to the port indicated by the buyer, as well as booking and paying for the transport to that place. He is also responsible for the handling and payment of the export clearance. However, the buyer assumes the risk from the moment of shipment.
• CIF (Cost, insurance and freight). The seller manages and contracts the transport, is responsible for the management and cost of the clearance of origin and additionally manages and pays for the insurance of the goods. The buyer assumes the risk from the moment of shipment.  

From ScrapAd, a platform scrap metal trading and other recyclable materials, we hope that this post in which we tell you what Incoterms 2020 are for has helped you. Contact us if you need help to buy scrap metal, sell scrap metal or any other material.