Incoterms (International Commercial Terms) are a collection of internationally agreed standards on the rights and obligations of buyers and sellers in import and export. Incoterms are not in themselves a contract, but terms of delivery. They clarify a sales contract for both parties and define who arranges insurance and permits, who arranges transport to where and when the costs and risks are borne by the buyer. Incoterms are developed by the International Chamber of Commerce. A new list has been published in 2020.
The list of Incoterms
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- EXW, Ex Works: the goods are immediately at the buyer’s risk ex works . The buyer is responsible for getting the goods to their destination.
- FCA, Free Carrier: the seller delivers the goods ready for export to a carrier chosen by the buyer.
- CPT, Carriage Paid To: Same as FCA, but seller also pays for delivery charges.
- CIP, Carriage and Insurance Paid To: Same as CPT, but seller also pays for insurance of the goods.
- DPU, Delivered At Place Unloaded: the seller delivers the goods to an agreed place such as a terminal and also arranges customs clearance.
- DAP, Delivered At Place: Same as DPU, but goods are unloaded at buyer’s expense.
- DDP, Delivered Duty Paid: The seller delivers the goods to the buyer’s country and pays all taxes. Until unloading, the seller is responsible.
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The following 4 terms are aimed at sea and inland water transport:
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- FAS, Free Alongside Ship: the seller delivers the goods to the carrier’s ship. The buyer must arrange the export documents.
- FOB, Free On Board: the seller delivers the goods to the ship and also arranges the export documents.
- CFR, Cost And Freight: Same as FOB, but the seller should also pay for the transportation to the destination port.
- CIF, Cost, Insurance and Freight: Same as CFR, but the seller arranges and pays for insurance of the goods in transit.
The convenience of Incoterms
The Incoterms have been developed to remove ambiguities in international transport contracts. You can clearly see from the list of Incoterms that the degree of responsibility for the buyer is increasing. At EXW, the buyer assumes almost all obligations, while at DDP the seller arranges almost all processes. In a negotiation it is therefore important to find a compromise.
The cons of Incoterms and the solution
If you are a small party importing goods from, for example, China, it is likely that you do not have the network and the know-how to get goods to the Netherlands. A large manufacturer in China may have the means to get your goods to the EU, but certainly not fully cleared. And a manufacturer will not want to do the transport for a rock-bottom price, certainly not for a relatively small shipment. This is where the benefit of a customs broker comes into play. A forwarding agent is an intermediary who, by means of techniques (such as groupage), can get goods in the Netherlands that are immediately ready for sale. The forwarder arranges transport, customs clearance and taxes. You get a clear overview of the costs and you are free of all worries. Ademar BV from Rotterdam is adept at this. We have 40 years of experience and built up a network that you as an entrepreneur can benefit from. We can realize profitable imports. Call or email Ademar BV.
