As a logistics company, we understand that international trade can be complex and confusing, especially when it comes to the terms and conditions that govern the delivery of goods. That’s why we want to provide our customers with a comprehensive guide on incoterms, or “International Commercial Terms,” and how they effect the logistics industry.
Incoterms, created by the International Chamber of Comerce (ICC), are a set of standard terms and definitions that clearly define the responsibilities of both the buyer and the seler when it comes to the delivery of goods and the transfer of risk. By understanding and agreeing on the appropriate incoterm for a transaction, confusion and misunderstandings can be avoided.
There are 11 incoterms in total, each with it’s own set of responsibilities and obligations for both parties. Some of the most commonly used incoterms in the logistics industry include:
- EXW (Ex Works): The seller makes the goods available at their premises. The buyer bears all costs and risks involved in taking the goods from there to the destination. This incoterm is best suited for transactions where the buyer is responsible for the entire logistics process, including transportation, customs clearance, and insurance.
- FCA (Free Carrier): The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the place the seller has agreed to. This incoterm is best suited for transactions where the buyer is responsible for the transportation of the goods from the point of delivery.
- FOB (Free on Board): The seller is responsible for loading the goods onto the shipping vessel, but the buyer is responsible for all costs and risks associated with the transportation of the goods from the point of origin to the final destination. This incoterm is best suited for transactions where the buyer is responsible for the transportation of the goods from the port of shipment.
- CIF (Cost, Insurance, and Freight): The seller is responsible for the cost of the goods, the freight charges, and the insurance. The buyer is responsible for the cost of unloading the goods at the port of destination. This incoterm is best suited for transactions where the seller is responsible for the cost of the goods and the freight, but the buyer is responsible for customs clearance and unloading.
- DDP (Delivered Duty Paid): The seller is responsible for the cost of the goods, the freight charges, and the insurance. They are also responsible for the cost of unloading the goods at the port of destination and paying any import duties. This incoterm is best suited for transactions where the seller is responsible for the entire logistics process, including transportation, customs clearance, and insurance.
It’s important to note that Incoterms only define the obligations of the seller and the buyer regarding transport, insurance, and delivery of the goods, but do not cover commercial terms such as price, payment, or warranty.
Recent updates to the incoterms include the removal of the term “Delivered at Frontier” (DAF) and “Delivered Ex Ship” (DES), and the addition of “Delivered at Place Unloaded” (DPU) as replacement for “Delivered Duty Unpaid” (DDU) and “Delivered Ex Quay” (DEQ).
At AMCO Logistics, we have extensive experience working with incoterms and can help guide you through the process of international trade. Our team of experts can assist in determining the appropriate incoterm for your specific needs and ensure compliance with all relevant regulations. We pride ourselves on providing efficient and cost-effective logistics solutions, and our knowledge of incoterms is just one way we can help our customers navigate the complexities of international trade. Contact us today to learn more about how we can assist you with your logistics needs.