An agreement known as Incoterms® between the buyer and the seller specifies who will handle the payment and handling of the products.
Incoterms® are terms of sale that specify who is in charge of making arrangements for the payment and delivery of the items from the time they leave the seller’s door until they get to the buyer’s intended destination.
The name “Incoterms®” is short for “International Commercial Terms,” which are periodically updated and are defined by the International Chamber of Commerce.
An agreement known as Incoterms® exists between the buyer and the seller. Before the shipping is started, the buyer and the seller must ultimately come to an understanding over who will bear what costs and risks.
Incoterms Involve 2 Main Categories:
Those suited for any mode of transport, and those tailored specifically for sea transport. Here’s a look at some common ones:
Incoterms For Any Mode of Transport:
EXW (Ex Works): Seller minimally ensures goods are available at their place. Buyer bears costs and risks.
FCA (Free Carrier): Seller hands goods to a carrier chosen by the buyer, useful for various transport modes.
CPT (Carriage Paid To): Seller transports goods to a named destination, risk shifts to buyer.
CIP (Carriage and Insurance Paid To): Like CPT, but with insurance against transit risk.
Incoterms For Sea and Waterway Transport:
FAS (Free Alongside Ship): Seller positions goods by the vessel at the named port, risk moves to buyer then.
FOB (Free on Board): Seller oversees goods and costs till loading onto vessel; risk shifts to buyer after.
CFR (Cost and Freight): Seller covers costs and freight to destination port; risk moves to buyer after loading.
CIF (Cost, Insurance, and Freight): Similar to CFR, plus insurance against transit risk.
