Are you an exporter or importer? Then you make arrangements with your (foreign) business partner(s) about the transport of the goods. By agreeing on incoterms, you know which of the two parties is responsible for arranging the transport and who pays the transport costs. And who bears the transportation risk. The agreed incoterm makes it clear to both parties which rules are being followed.

What are incoterms?

An incoterm is an agreement that establishes terms for international trade. Incoterms describe all the tasks, risks and costs involved in the transaction of goods from seller to buyer.

First published in 1936, these terms are a set of 11 rules that define who is responsible for what happens during international transactions/transports. The incoterms were drafted by the International Chamber of Comerce. They are revised every 10 years. The latest set dates from 2020.

Why are incoterms important?

Incoterms are important because they provide clear and uniform agreements on the responsibilities of both the seller and the buyer during international shipments. Known and accepted worldwide, from Canada to Zanzibar, these rules specify who is responsible for arranging and paying for transportation, insurance, and customs formalities. This avoids confusion about who bears the risks in the event of damage or loss of goods in transit.

The use of an incoterm is a requirement for every commercial invoice and ensures that the risk of potentially costly misunderstandings is significantly reduced, leading to smoother transactions and fewer legal disputes. Using incoterms also streamlines communication between trading partners in different countries, increasing the efficiency of international trade.

Which incoterm is most common?

EXW – Ex-Works

  • The buyer bears almost all costs and risks during the entire shipping process.
  • The seller’s only job is to ensure that the buyer has access to the goods.
  • If the seller has access, the goods become his responsibility (including loading the goods).

Transfer of Risk: At the warehouse or at the place where the goods are picked up by the buyer.

DAP – Delivered At Place (postage paid on site)

  • The seller bears the costs and risks of transporting the goods to an agreed address.
  • Goods are classified as delivered when they have arrived at the agreed address and are ready for unloading.
  • The seller arranges the customs formalities. The buyer arranges customs clearance and any duties involved.

Risk transfer: When the goods are ready to unload at the agreed address.

DDP – Delivered Duty Paid (Delivered Duty Paid)

  • The seller bears almost all responsibility during the entire shipping process (all costs and risks of transporting the goods to the agreed address).
  • The seller also makes sure the goods are ready to unload, performs export and import operations and pays any duties.

Risk transfer: When the goods are ready to unload at the agreed address.

Other incoterms

  • Same seller responsibilities as CPT with the difference: the seller also pays for the insurance of the goods.
  • The seller is only required to pay the minimum coverage possible.
  • If the buyer wants more comprehensive insurance, he must arrange it himself.

Transfer of Risk: When the buyer’s carrier takes delivery of the goods.

  • The seller is responsible for the cost and risk of delivering the goods to an agreed-upon terminal.
  • The seller must unload the goods from the arriving means of transportation.
  • This terminal can be an airport, warehouse, road or container depot.
  • The seller arranges customs clearance and unloads the goods at the terminal.
  • The buyer arranges customs clearance and any duties associated with it.

Risk transfer: at the terminal.

  • The seller’s job is to deliver the goods to the buyer’s carrier at the agreed location.
  • The seller is also required to clear the goods for export.

Transfer of Risk: When the buyer’s carrier takes delivery of the goods.

  • The seller’s job is to deliver the goods to the buyer’s carrier at the agreed location. Of note, though: the seller pays the delivery costs!
  • The seller is also required to clear the goods for export.

Transfer of Risk: When the buyer’s carrier takes delivery of the goods.

  • The seller shall bear all costs and risks until the goods are delivered alongside the vessel.
  • The buyer assumes the risk and takes care of export clearance and import clearance.

Transfer of Risk: When the goods have been delivered alongside the vessel.

  • The seller shall bear all costs and risks until the goods are delivered aboard the vessel.
  • The seller also arranges export clearance.
  • The buyer bears all responsibility from the moment the goods are on board.

Transfer of Risk: When the goods have been delivered to the ship.

  • The seller shall bear all costs and risks until the goods are delivered aboard the vessel.
  • The seller also bears the cost of transporting the goods to the port.
  • The seller also arranges export clearance.
  • The buyer bears all responsibility from the moment the goods are on board.

Transfer of Risk: When the goods have been delivered to the ship.

  • The seller shall bear all costs and risks until the goods are delivered aboard the vessel.
  • The seller bears the cost of transporting the goods to the port and insurance costs.
  • The seller is only required to pay the minimum coverage possible.
  • If the buyer wants more comprehensive insurance, he must arrange it himself.
  • The seller also arranges export clearance.

Transfer of Risk: When the goods have been delivered to the ship.

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Can't see the forest for the trees?

Not to worry, Widem Logistics has more than 40 years of experience in import and export. We know the incoterms like no other and will assist you in word and deed. We are happy to talk with you.
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