All you need to know about incoterms

“Incoterms” is an abbreviation for “International Commercial Terms”, a series of three-letter trade terms relating to common contractual sales practices applied to international commercial law and published by the International Chamber of Commerce (ICC). Incoterms clarify responsibilities between buyers and sellers of goods by defining the terms and conditions of international sales transactions, helping both parties understand their responsibilities with respect to costs, risks and logistics from the time a product leaves the company to its arrival at its destination.

Below is a brief explanation of each incoterm.

Rules applying to all transport methods

EXW: Ex Works (place of delivery) – The seller makes the goods available at their location, and the buyer is responsible for all transportation costs and risks of ensuring that the goods arrive at their final destination.

FCA: Free Carrier (named place of delivery) – The seller delivers the goods, cleared for export, to a specified place (including the seller’s premises). The goods can also be delivered to a carrier or to another party specified by the buyer.

CPT: Carriage Paid to (place of destination) – The seller pays for delivery of the goods to the specified destination. However, the goods are considered delivered once they’ve been handed over to the first or main carrier, and the risk transfers to the buyer at that point.

CIP: Carrier and Insurance Paid to (place of destination) –Similar to CPT, except the seller is required to obtain insurance for the goods in transit.

DPU: Delivered At Place Unloaded (place of destination) – The seller delivers the goods, unloaded, to the specified destination. The seller covers all transportation costs (export fees, shipment, unloading at the destination port and port charges) and assumes all risk until arrival at the destination.

DAP: Delivered At Place (place of destination) – Goods are considered delivered by the seller when they’re ready for unloading at the specified destination. The risk passes from seller to buyer upon unloading.

DDP: Delivered Duty Paid (place of destination) – The seller is responsible for delivering the goods to the specified place in the buyer’s country and pays all costs for bringing the goods to the destination, including duties and taxes.

Rules applying to sea and inland waterway transport:

FAS: Free Alongside Ship (port of shipment) – The seller places goods alongside the ship at the specified port, and the risk of loss or damage to the goods transfers to the buyer at that point. The buyer bears all costs thereafter.

FOB: Free on Board (port of shipment) – The seller delivers the goods, cleared for export, to be loaded on the ship at the specified port. Once the goods are loaded, the risks and costs transfer to the buyer.

CFR: Cost and Freight (port of destination) – The seller pays the cost and freight for transporting the goods to the specified port. The risk transfers to the buyer when the goods are placed on the ship.

CIF: Cost, Insurance and Freight (port of destination) – Similar to CFR, except the seller must also procure and pay for insurance.

As an importer/exporter of goods, incoterms can help you navigate the complexities of international trade. We hope you’ve found this information helpful. Collecting debts from foreign countries is another challenge for importers/exporters. Algeria Collection Services EURL can assist you with debt collection from customers located in Algeria. We offer international debt collection services for clients seeking a local partner to collect debts while preserving customer relationships. Our physical and legal presence in the same country as the debtor is one of our major assets, and we’re proud of our 70% success rate.

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