Sea Freight-Less Container Load
Trucking service Singapore to Malaysia
Trucking: Thailand to Malaysia
Buy on Behalf
Incoterms, short for International Commercial Terms, are a set of 11 standardized codes created by the International Chamber of Commerce (ICC) to facilitate international trade. These terms are used to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods in international trade transactions. Incoterms define the responsibilities of buyers and sellers for the delivery of goods under sales contracts, including who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities.
The main purpose of Incoterms is to provide a universally recognized set of rules to clarify the most important aspects of international freight transactions, thereby reducing misunderstandings among traders from different countries. The terms are periodically updated to reflect changes in the global trade environment, with the latest version being Incoterms 2020, which came into effect on January 1, 2020.
Each Incoterm specifies the division of costs and risks between the buyer and seller by detailing when the seller’s responsibility ends and the buyer’s begins. They are categorized into rules for any mode of transport (such as EXW, FCA, CPT, CIP, DAP, DPU, and DDP) and rules for sea and inland waterway transport only (such as FAS, FOB, CFR, and CIF). These terms are essential for traders to agree upon to ensure a clear understanding and smooth execution of international trade deals.
Below is a table summarizing the key responsibilities of the seller and buyer under each of the Incoterms 2020:
| Incoterm | Full Name | Seller’s Responsibilities | Buyer’s Responsibilities |
|---|---|---|---|
| EXW | Ex Works | Provide goods at their premises or another named place. Seller has minimal responsibility. | Arrange and pay for all transportation costs, duties, and risks from the seller’s premises to the destination. |
| FCA | Free Carrier | Deliver goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. | Assume all costs and risks of the goods once they have been handed over to the first carrier. |
| CPT | Carriage Paid To | Pay for the carriage of the goods up to the named place of destination. | Bear the risk, and any additional costs occurring after the goods have been delivered to the carrier. |
| CIP | Carriage and Insurance Paid To | Pay for the carriage and insurance to the named place of destination, though risk passes when the goods are handed over to the carrier. | Bear the risk, and any additional costs occurring after the goods have been delivered to the carrier, except for the insurance. |
| DAP | Delivered At Place | Deliver goods to the named place of destination, ready for unloading at the buyer’s disposal. Seller bears all risks and costs until delivery. | Pay for unloading cost, duties, taxes, and any additional costs after the goods are delivered to the named place of destination. |
| DPU | Delivered at Place Unloaded | Deliver goods, and unload them at disposal of the buyer at the named place of destination. Seller bears all costs and risks involved in bringing goods to, and unloading them at, destination. | Pay for any additional costs after unloading and assume risks once the goods have been unloaded. |
| DDP | Delivered Duty Paid | Bear all costs and risks involved in bringing the goods to the place of destination, including duties, taxes, and other charges. | Pay for any additional costs and risks after the goods are made available at the named place of destination. |
| FAS | Free Alongside Ship | Deliver goods alongside the vessel on the quay or in lighters at the named port of shipment. Seller bears all risks and costs until goods are placed alongside the ship. | Pay for all costs and bear all risks of loss or damage from that moment forward, including loading onto the vessel and onwards. |
| FOB | Free On Board | Deliver the goods on board the vessel nominated by the buyer at the named port of shipment. | Bear all costs and risks of loss or damage once the goods have been loaded onto the vessel. |
| CFR | Cost and Freight | Pay the costs and freight necessary to bring the goods to the named port of destination. | Bear the risk of loss or damage to the goods once they have been loaded onto the vessel at the port of shipment. |
| CIF | Cost, Insurance, and Freight | Pay the costs, freight, and insurance necessary to bring the goods to the named port of destination. However, risk passes once the goods are loaded onto the vessel. | Bear the risk, but the seller purchases insurance for the goods during the carriage. Buyer should note that under CIF the seller is only required to obtain insurance on minimum cover. |
This table provides an overview of the division of responsibilities between the seller and buyer under each Incoterm. It’s important for parties involved in international trade to agree on an Incoterm that clearly outlines their respective obligations to ensure a smooth transaction.
