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INCOTERMS : Simplified International Shipping Terms

Incoterms is an abbreviation used to refer to the full term International Commercial Terms. accepted from all over the world This is considered a legal requirement that applies to invoices. This reduces the risk of misinterpretation tendencies that may occur during shipping.

Incoterms were invented and first used in 1957. Founded in 1936 by the International Chamber of Commerce (ICC).

Why are INCOTERMS important?

International shipping can take days or weeks before the goods arrive at their destination. Although international transport is more modern and safer than before. But there is still a chance that a large number of goods will not reach their destination or arrive in such a way that the goods are damaged.

when these events occur It is essential to know that it is the responsibility of the seller or the buyer, therefore INCOTERMS were born as a means of defining the responsibilities, obligations and obligations between the buyer and the seller for transportation. product

Responsibilities and obligations can be divided into the following types:

1. Point of delivery
2. Transportation Costs
3. Export and import formalities
4. Insurance costs

INCOTERMS currently consists of 11 terms that you should know:

EXW – Ex Works (… the named place)

The seller has the product ready for delivery to the buyer.

Buyer is responsible for all costs of shipping from origin including outgoing formalities + freight charges – until the buyer’s warehouse.

Insurance = Buyer

FCA – Free Carrier (… the named point of departure)

The seller prepares the goods and performs the customs clearance.

The buyer is responsible for the delivery of the car from the seller + freight cost – until the buyer’s own warehouse.

Insurance = Seller (to deliver the product to the buyer), Buyer (from the pickup location to buyer’s factory)

FAS – Free Alongside Ship (… the named port of origin)

The seller prepares the goods and performs the export formalities. Ship to the port of departure

The buyer is responsible for the cost of the port of origin. (OTHC,B/L,SEAL, etc..) + Freight – until the buyer’s own warehouse

Insurance = Seller (from origin factory to origin port) ,Buyer (from origin port to buyer’s factory)

FOB – Free On Board (… the named port of origin)

The seller prepares the goods and performs the export formalities. Ship into port and load onto ship. (Pay the cost of the port of origin OTHC,B/L,SEAL, etc..)

The buyer is responsible for the freight – until the buyer’s own warehouse.

Insurance = Seller (from the origin factory until loading the container onto the ship), Buyer (after loading the container on the ship to the buyer’s factory)

CFR – Cost and Freight (… the named port of destination)

The seller prepares the goods and proceeds with the departure formalities + freight + fees incurred at the port of departure until the container is loaded onto the ship.

The buyer is responsible from the ship to the destination and the container – to the buyer’s own warehouse.

Insurance = Seller (from the origin factory until loading the container onto the ship), Buyer (after loading the container on the ship to the buyer’s factory)

CIF – Cost, Insurance & Freight (… the named port of destination)

**Same as CFR, different insurance, the seller is responsible until the buyer’s factory**

The seller prepares the goods and proceeds with the departure formalities + freight, including all expenses incurred at the port of departure until the container is loaded onto the ship.

The buyer is responsible from the ship to the destination and the container – to the buyer’s own warehouse.

Insurance = Seller (from origin factory to the destination port)

CPT – Carriage Paid To (… the named place of destination)

**Same as CFR for sea freight, but CPT is used for all other modes of transport. such as by air**

The seller prepares the goods and proceeds with the departure formalities + fret + including any expenses incurred. at the place of delivery

Buyer is responsible from vehicle to destination and cargo being unloaded – up to buyer’s own warehouse.

Insurance = Seller (from origin factory to vehicle loading) ,Buyer (after loading vehicle to buyer’s factory)

CIP – Carriage and Insurance Paid To (… the named place of destination)

**Similar to CIF used for sea freight, but CIP is used for all other modes of transport. such as by air**

The seller prepares the goods and proceeds with the departure formalities + fret + including any expenses incurred. at the place of delivery

Buyer is responsible from vehicle to destination and cargo being unloaded – up to buyer’s own warehouse.

Insurance = Seller (from origin factory to the destination port)

DAT – Delivered At Terminal (…Delivered At Terminal)

It is a new term instead of DEQ (Delivered Ex Quay). From the basics, the DAT term can be used for any mode of transport as well as for both modes of transport. for the delivery of the product assumed that the seller has delivered the goods When loading and unloading goods from a loaded vehicle to the place provided by the buyer at the loading and unloading building. in a specified port or destination

DAP – Delivered At Place (… Delivered At Place)

Instead of DAF (Delivered At Frontier), DES (Delivery Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivered Duty Unpaid).

The seller prepares the goods and completes the export formalities + freight charges including all expenses incurred at the port of origin + destination and arranges the transport to the buyer’s factory door.

The buyer is responsible for the import tax.

Insurance = Seller (from origin factory to buyer’s factory)

DDP – Delivered Duty Paid (Door to Door) (… the named point of destination)

**Like DAP, the difference is that the seller is responsible for import duties for the buyer as well**

The seller prepares the goods and completes the export formalities + freight charges including all expenses incurred at the port of origin + destination and arranges the transport to the buyer’s factory door.

The buyer is responsible for the import tax.

Insurance = Seller (from origin factory to buyer’s factory)

Importers or exporters should properly understand INCOTERMS or international delivery requirements. Because of the need to plan the risks and burdens of transportation operations so that imports and exports can go smoothly without any subsequent problems.