Using Incoterms® transport conditions

What are Incoterms®?

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Incoterms® are international standardised agreements between seller and buyer about the transport of goods. For example, the Incoterms® arrange who is liable for damages or loss of the goods in transit. The International Chamber of Commerce (ICC) has drawn up the Incoterms®. They revise them every 10 years. The latest version dates from 2020.

Why use Incoterms®?

With Incoterms® you make clear agreements with your business partner. This way you prevent financial damage, such as an insurance claim (in Dutch) or a profit margin that is too low.

What can you arrange with Incoterms®?

Who provides the transport and until where.
Who arranges the transport insurance.
Who is responsible for any import and export documents.
Who pays the transport costs and additional costs, such as for loading, unloading and packaging.
When the risk of loss or damage to goods passes from the seller to the buyer.

What can you not arrange with Incoterms®?

Price agreements and payment conditions.
Warranties or settlement in the event of non-performance.
When ownership of the goods passes from the seller to the buyer.

All ICC Incoterms® 2020 at a glance

ICC Incoterms® 2020 has 11 terms of delivery (Incoterm® rules). 4 of these are specifically intended for transport over water. The other 7 apply to all types of transport (multimodal transport).

When using Incoterms®, the seller and buyer may agree on different locations. For example, buyer and seller may agree on a location close to the point of arrival in the destination country. Or a location in the centre of the destination country. In the last case, the seller has to arrange the after transport to the central location in the destination country. We have included 2 options for some of the Incoterms® to explain the difference.

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All types of transport

EXW (Ex Works)

Especially suitable for intra-EU trade. The seller places the goods at the agreed location, for example their own business premises.More info Incoterms EXW

FCA-A (Free Carrier - A)

Suitable for full containers. The seller places the goods at the agreed location, for example, their business premises. And loads goods onto the buyer's means of transport.More info Incoterms FCA-A

FCA-B (Free Carrier - B)

Suitable for groupage shipments. The seller delivers the goods to the agreed location, for example, a groupage warehouse.More info Incoterms FCA-B

CPT (Carriage Paid To) Switzerland, option: port of Basel

Suitable for container transport. The seller pays for transport to the agreed location after entering the destination country. For example, a border crossing or (air) port. Transfer of costs and risk: at different times.More info Incoterms CPT

CPT (Carriage Paid To) Switzerland, option: Zürich, address buyer

Suitable for container transport. The seller pays for additional transport to the agreed location inside the destination country. For example, the buyer's company. Transfer of costs and risk: at different times.More info Incoterms CPT

CIP (Carriage and Insurance Paid To) Switzerland, option: port of Basel

Suitable for container transport. The seller arranges transport insurance. And pays for transport to the agreed location after entry into the destination country, such as a border crossing or airport. Transfer of costs and risk: at different times.More info Incoterms CIP

CIP (Carriage and Insurance Paid To) Switzerland, option: Zürich, address buyer

Suitable for container transport. The seller arranges transport insurance. And pays for additional transport to the agreed location in the destination country, such as the buyer's company. Transfer of costs and risk: at different times.More info Incoterms CIP

DAP (Delivered at Place) option Basel, Germany-Switzerland border

The seller bears costs and risks until the agreed location after arrival in the destination country. For example, a border crossing or (air) port.More info Incoterms DAP

DAP (Delivered at Place) option Zürich, address buyer Switzerland

The seller bears costs and risks until the agreed location in the destination country beyond the port or border crossing. For example, the buyer's company.More info Incoterms DAP

DPU (Delivered at Place Unloaded) option Basel, Germany-Switzerland border

The seller bears costs and risks until the agreed location after arrival in the destination country. For example, a border crossing or (air) port. The seller unloads the goods.More info Incoterms DPU

DPU (Delivered at Place Unloaded) option Zürich, address buyer Switzerland

The seller bears costs and risks until the agreed location further away in the destination country. For example, the buyer's company. The seller unloads the goods.More info Incoterms DPU

DDP (Delivered Duty Paid) option Basel, Germany-Switzerland border

The seller bears the costs and risks up to the agreed location after arrival in the destination country. For example, a border crossing or (air) port. And arranges the import.More info Incoterms DDP

DDP (Delivered Duty Paid) option Zürich, address buyer Switzerland

The seller bears the costs and risks until the agreed location further into the destination country. For example, the buyer's company. And arranges the import.More info Incoterms DDP

Transport by water

FAS (Free Alongside Ship)

Suitable for transport by ship of bulk and general cargo. The seller delivers the goods alongside the departing ship at the agreed port of departure. So, on a barge or the quay.More info Incoterms FAS

FOB (Free on Board)

Suitable for ship transport of bulk and general cargo. The seller delivers goods on board a ship at the agreed port of departure.More info Incoterms FOB

CFR (Cost and Freight)

Suitable for ship transport of bulk and general cargo. The seller pays the transport to the port of destination. Transfer of costs and risk: at different times.More info Incoterms CFR

CIF (Cost Insurance and Freight)

Suitable for barge transport of bulk and general cargo. The seller pays the transport to the port of destination and takes out transport insurance. Transfer of costs and risk: at different times.More info Incoterms CIF

How do I choose an Incoterms® agreement?

Which Incoterms® agreement you need depends on the type of transport and the wishes of you and your business customer, such as:

Is the transport only by water or also by land, air, or rail?
Do you want to provide extra service or minimise your obligations?
Do you have the network and knowledge to arrange transport and customs formalities in other countries?

How to use Incoterms®

Use an Incoterm® that suits the transport. Some Incoterms® are only intended for transport by water.
Preferably use the latest version of the ICC Incoterms®, the Incoterms® 2020.
Record the agreed Incoterms® in a purchase contract and/or your general terms and conditions. Make sure your customer knows the conditions.

This article is a co-production with the HAN University of Applied Sciences.