Are you an exporter or importer? Then you make arrangements with your foreign business partner about the transport of the goods. By agreeing on Incoterms, you know which of the two is responsible for arranging the transport and who pays the transport costs. And who bears the transport risk.

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What are incoterms?

Incoterms are international commercial terms. 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 defining who is responsible for what happens during international transactions/transports. The incoterms were drafted by the International Chamber of Commerce. They are revised every 10 years. The last 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 transport. These rules, which are known and accepted worldwide, from Canada to Zanzibar, specify who is responsible for arranging and paying for transport, insurance, and customs formalities. This prevents confusion about who bears the risks in the event of damage or loss of goods during transit.

The use of an Incoterm is a requirement for every commercial invoice and significantly reduces the risk of potentially costly misunderstandings, leading to smoother transactions and fewer legal disputes. By using Incoterms, communication between trading partners in different countries is also streamlined, which enhances the efficiency of international trade.

The three most frequently used incoterms

EXW – Ex-Works

  • The buyer bears almost all costs and risks during the entire shipping process
  • The seller’s only task 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 collected by the buyer.

DAP – Deliverd At Place

  • The seller bears the costs and risks of transporting the goods to an agreed address
  • The goods are classified as delivered when they have arrived at the agreed address and are ready for unloading
  • The seller arranges 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

  • 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 for unloading, performs export and import operations and pays any duties

Transfer of risk: When the goods are ready to unload at the agreed address.

Other incoterms

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

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

  • The seller is responsible for the costs and risks of delivering the goods to an agreed terminal
  • 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 associated duties

Risk transfer: at the terminal.

  • The seller’s duty 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 transporter takes delivery of the goods.

  • It is the seller’s job to deliver the goods to the buyer’s carrier at the agreed location. Important 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 transporter takes delivery of the goods.

  • Seller bears all costs and risks until goods are delivered alongside ship
  • Buyer assumes risk and arranges export clearance and import clearance

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

  • The seller bears all costs and risks until the goods are delivered on board the ship
  • The seller also arranges export clearance
  • The buyer bears all responsibility once the goods are on board

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

  • The seller bears all costs and risks until the goods are delivered on board the ship
  • The seller also bears the cost of transporting the goods to the port
  • The seller also arranges export clearance
  • The buyer bears all responsibility once the goods are on board

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

  • The seller bears all costs and risks until the goods are delivered on board the ship
  • The seller bears the cost of transporting the goods to the port and insurance costs.
  • The seller is only obliged to pay the minimum possible cover
  • 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 wood 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 to you.
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