Simplified Guide to Incoterms: Unraveling International Terms of Trade

If you are an entrepreneur, manager, or professional involved in importing and exporting, it is critical to understand Incoterms. These international trade terms play a crucial role in defining responsibilities, risks, and costs in global trade transactions. In this comprehensive guide we will dive into the Incoterms, exploring their importance and how they can facilitate your import and export operations.

What are the Incoterms?

Incoterms, or International Commercial Terms, are various rules established by the International Chamber of Commerce (ICC) for drafting contracts in international business transactions. These rules standardize the procedures related to transportation, insurance, customs clearance, and the distribution of costs between buyers and sellers. Understanding Incoterms is essential to ensure clear agreements, minimize conflicts, and optimize efficiency in negotiations.

Incoterms are applied by including a specific term in an international sales contract. When buyers and sellers agree to use the Incoterms, they select a term that suits their needs and include it in the sales contract.

In addition to being included in the contract, the Incoterms are also used in shipping documentation such as commercial invoices, and insurance contracts, and transport documents such as bills of lading or waybills. This ensures that all parties involved in the transportation and delivery of the goods are aware of the agreed terms and conditions.

Division of Incoterms:

Incoterms are grouped into two main categories: multimodal, applicable to different modes of transport, and maritime, specific to shipping. Each term has a specific acronym and a detailed description of the responsibilities of each party.

Multimodal Transportation:

• EXW – Ex Works: The seller makes the goods available at the place of production or storage, and the buyer assumes all the costs and risks of transportation.
• FCA – Free Carrier: The seller delivers the goods to the carrier nominated by the buyer at a named place. The buyer bears the costs and risks from that point.
• CPT – Carriage Paid To: The seller delivers the goods to the carrier, bearing the transport costs to the named place at the destination. The buyer bears the risks from that point onwards.
• CIP – Carriage and Insurance Paid To: Similar to CPT, but the seller is also responsible for contracting transport insurance to cover the risks up to the named place at the destination.
• DAP – Delivered At Place: The seller delivers the goods to an agreed place in the country of destination. The seller bears all costs and risks up to that point, except import costs.
• DPU – Delivered At Place Unloaded: Similar to DAP, but the seller is also responsible for unloading the goods at the named place.
• DDP – Delivered Duty Paid: The seller is responsible for delivering the goods to the place of destination, assuming all the costs and risks, including import costs and taxes.

Ocean Freight

• FAS – Free Alongside Ship: The seller places the goods alongside the ship at the named port of shipment. The buyer bears the costs and risks from that point.
• FOB – Free On Board: The seller is responsible for delivering the goods on board the ship at the named port of shipment. The buyer bears the costs and risks from that point.
• CFR – Cost and Freight: The seller is responsible for the transportation of the goods to the named port of destination. The seller bears the costs of the transport. The buyer assumes the risks from that point.
• CIF – Cost Insurance And Freight: The seller is responsible for the cost, insurance, and freight of the goods until the named port of destination, assuming the risks up to that point.

Mastering the Incoterms is fundamental to speeding up import and export operations, optimizing your efficiency, and ensuring your customers’ satisfaction.

It is important to note that the Incoterms mentioned in this text are based on the 2020 version. These terms are updated on average every 10 years by the International Chamber of Commerce to adapt to new global trade needs and practices.

The ICC (International Chamber of Commerce):

The ICC is a renowned international institution that develops and updates the Incoterms. As a leading organization in global trade, and present in over 130 countries, ICC works closely with experts and industry professionals to keep Incoterms up to date. Thus reflecting modern trade practices and meeting the evolving needs of international business.

Incoterms are fundamental to successful international trade negotiations. These terms are an essential tool to establish clear agreements, define responsibilities and minimize risks in your import and export operations.
At Courovale, we have almost 25 years of international performance, producing and customizing leathers with different types of finishing, for several segments.

When you choose Courovale as your commercial partner, you will have the peace of mind of knowing that you are working with a company committed to following international rules and regulations. Our global reach is backed by a solid understanding of Incoterms and other relevant business practices, offering a safe and reliable trading environment.

Whether you are an experienced entrepreneur or someone who is starting in the world of exports, relying on Courovale will bring significant benefits to your international operations. Trust a company that is prepared to face the challenges of the global market, while remaining updated and committed to excellence and sophistication in every product. Visit our website and learn more about our products!