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Understanding International Commercial Terms is crucial for any import or export operation. This guide clearly defines all 11 standardized rules published by the International Chamber of Commerce (ICC) detailing costs, risks, and responsibilities.
Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities, costs, and risks between sellers and buyers in international trade contracts. First published in 1936, Incoterms are the most fundamental reference document in global trade. The current version, Incoterms 2020, came into effect on January 1, 2020 and defines 11 delivery terms. These rules apply worldwide across all transport modes. Brosan Logistics provides professional consulting on proper Incoterms 2020 application.
Maximum buyer responsibility. The seller simply makes the goods available at their premises. The buyer handles loading, export clearance, and all associated carriage risks.
The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. Risk transfers upon delivery.
The seller pays the freight for the carriage of the goods to the named destination. Risk transfers to the buyer as soon as goods are handed to the first carrier.
Similar to CPT, but the seller is also obliged to procure comprehensive 'all risks' insurance coverage for the goods until the destination.
The seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the destination.
The seller delivers the goods—and transfers risk—to the buyer when the goods, once unloaded, are placed at the disposal of the buyer at a named destination.
Maximum seller responsibility. The seller bears all costs and risks involved in bringing the goods to the destination, including import clearance, duties, and taxes.
The seller delivers when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment.
The seller delivers the goods on board the vessel nominated by the buyer. The buyer bears all costs and risks from that point forward.
The seller must pay the costs and freight to bring the goods to the named port of destination, but the risk transfers once the goods are loaded on board.
Similar to CFR, with the addition that the seller must obtain minimum insurance cover against the buyer's risk of loss or damage during carriage.
Incoterms were first published by the ICC in 1936 to resolve trade interpretation disputes. Updated in 1953, 1967, 1976, 1980, 1990, 2000, 2010, and 2020, each revision reflects evolving trade practices and technology. Incoterms 2020 introduced electronic document equivalence, clarified security obligations, and upgraded CIP insurance to ICC Clause A.
Incoterms 2020 classifies 11 terms into two categories. Any Transport Mode (7 terms): EXW, FCA, CPT, CIP, DAP, DPU, DDP. Sea and Inland Waterway Only (4 terms): FAS, FOB, CFR, CIF. The ICC recommends FCA over FOB and CIP over CIF for container shipments.
The most critical element: determining where costs and risks transfer. Under EXW, both transfer at seller's premises. Under DDP, both transfer at buyer's address. Under CPT/CIP, cost and risk transfer at different points — critical for insurance planning.
EXW: seller makes goods available at premises. FCA: seller completes export clearance, delivers to carrier; ICC's most recommended term. CPT: seller pays freight but risk transfers at carrier handover. CIP: insured CPT with ICC Clause A requirement. DAP: seller bears all costs/risks to destination; unloading by buyer. DPU: like DAP but seller unloads. DDP: seller handles everything including import clearance.
FAS: seller delivers alongside ship. FOB: seller loads onto vessel; most common in sea trade. CFR: seller pays freight, risk at ship's rail. CIF: insured CFR with ICC Clause C minimum. ICC recommends FCA/CIP over FOB/CIF for containers.
Consider: logistics capability, cost control preferences, risk management, transport mode, and payment method (L/C requirements). Strong buyer logistics: FCA/EXW. Seller freight advantage: CPT/CIP. Full service: DAP/DDP.
Using EXW for international trade (ICC advises against). Unclear delivery points. Confusing CPT/CIP cost and risk transfer. Using FOB/CIF for containers. Neglecting insurance under CPT/FCA. Brosan Logistics guides clients to avoid these errors.
Brosan Logistics offers comprehensive services under all Incoterms 2020 terms: free consulting, export/import clearance, international freight, cargo insurance (ICC Clause A/B/C), warehousing, and door-to-door delivery across Turkey, Europe, Asia, and worldwide.
| Term | Seller Export | Seller Freight | Seller Insurance | Seller Import | Risk Transfer |
|---|---|---|---|---|---|
| EXW | No | No | No | No | Seller's premises |
| FCA | Yes | No | No | No | Carrier handover |
| CPT | Yes | Yes | No | No | Carrier handover |
| CIP | Yes | Yes | Yes (ICC A) | No | Carrier handover |
| DAP | Yes | Yes | No | No | Destination |
| DPU | Yes | Yes | No | No | After unloading |
| DDP | Yes | Yes | No | Yes | Buyer's address |
| FAS | Yes | No | No | No | Alongside ship |
| FOB | Yes | No | No | No | Ship's rail |
| CFR | Yes | Yes | No | No | Ship's rail |
| CIF | Yes | Yes | Yes (ICC C) | No | Ship's rail |
Incoterms 2020 are 11 standardized delivery terms published by the ICC that define cost, risk, and responsibility allocation between sellers and buyers.
11 terms: 7 for any transport mode (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and 4 for sea only (FAS, FOB, CFR, CIF).
Key changes: DAT renamed to DPU, CIP insurance upgraded to ICC Clause A, FCA B/L option added, electronic documents equated with paper.
FOB (sea), FCA (all modes), and EXW are most common. ICC recommends FCA for international trade.
No. Incoterms only define cost and risk allocation in sales contracts. Transport contracts are separate.
Based on logistics capability, cost control, risk management, and transport mode. Brosan Logistics offers free consulting.
Not legally required, but become binding when included in trade contracts.
ICC recommends FCA over FOB and CIP over CIF for container shipments.