We are looking for new colleagues! View our vacancies here!

Everything You Need to Know about Incoterms 2020

What are Incoterms?

Incoterms, short for International Commercial Terms, are standardized trade terms used globally. These terms define the responsibilities of buyers and sellers in international transactions. They provide clarity on who is responsible for transportation, insurance, and various formalities required for the transport of goods. Incoterms play a crucial role in reducing misunderstandings and disputes in international trade.

Why are Incoterms important?

Incoterms are essential for any business involved in international trade. They offer clarity on the obligations of both parties and help avoid legal disputes. By using Incoterms, companies can operate more efficiently and manage risks better.

An overview of Incoterms 2020

Incoterms are updated every 10 years by the International Chamber of Commerce (ICC) to reflect changes in international trade. The most recent version, Incoterms 2020, came into effect in January 2020 and is currently applied worldwide. This version provides a modern and accurate framework for international trade practices.

The 11 Incoterms 2020

Incoterms 2020 include eleven terms, divided into two categories based on the mode of transport:

For any mode of transport:

  1. EXW (Ex Works): The seller delivers the goods on their premises, after which the buyer bears all further costs and risks.
  2. FCA (Free Carrier): The seller delivers the goods to the carrier at an agreed location.
  3. CPT (Carriage Paid To): The seller pays for transport to the agreed destination.
  4. CIP (Carriage and Insurance Paid To): The seller pays for transport and insurance to the agreed destination.
  5. DAP (Delivered At Place): The seller delivers the goods to the agreed place, ready for unloading.
  6. DPU (Delivered at Place Unloaded): The seller delivers the goods to the agreed place and is responsible for unloading.
  7. DDP (Delivered Duty Paid): The seller bears all costs and risks, including import duties, to the buyer's destination.

Exclusively for sea and inland waterway transport:

  1. FAS (Free Alongside Ship): The seller delivers the goods alongside the ship at the port of shipment.
  2. FOB (Free On Board): The seller delivers the goods on board the ship at the port of shipment.
  3. CFR (Cost and Freight): The seller pays for the costs and freight to the port of destination.
  4. CIF (Cost, Insurance and Freight): The seller pays for the costs, freight, and insurance to the port of destination.

How to choose the right Incoterm?

Choosing the right Incoterm depends on various factors, including the type of goods, the mode of transport, the countries involved, and the preferences of the buyer and seller. It is important to carefully consider which Incoterm best fits the specific needs and circumstances of your trade transaction.

Incoterms 2020 provides a standardized framework that helps streamline international trade transactions. By choosing the right Incoterm, companies can bring clarity and efficiency to their trade practices, contributing to success in the global market.

Are you making customs declarations but unsure which Incoterms to choose? At Gateway, we are happy to discuss your customs questions with you. Gateway offers advanced customs software solutions that make your international trade simpler and more efficient.

More articles that may be of interest to you

Gateway your leading partner in customs software Gateway your leading partner in customs software
What can we help you with?

© 2024 Gateway