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Do you speak Inco?

Posted: 9. March 2018-Likes: 1-Comments: 0-Categories: Ikke kategoriseret

Do you speak Inco?

INCO Terms, or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce and consist of 13 three letter trade terms. But do you know what they mean and how to use them? If not, then check out our INCO Terms guide below!

Incoterms are typically used in sales contracts to clearly define the roles between seller and buyer in an international transaction involving transportation and delivery of goods, for example:

  • Who takes care of insurance of the goods, licenses, permissions and all other formalities?
  • Who arranges transport and who is liable for the delivered goods?
  • When does the cost and risk change from seller/sender to buyer/receiver?

The terms do not themselves constitute a contract or determine anything, but they work as a common “language” in international sales contracts and are accepted by governments and legal authorities and thus reduces any uncertainties arising from interpretations and definitions in different countries.

When making international sales contracts and delivering products across borders it is important to be aware of the meaning of these terms in order to know e.g. who is liable for the delivered goods with regards to customs clearance etc., what the duties of the buyer and seller is, as there is a certain financial expenses in this connection and lastly, to determine when responsibility for the goods passes from seller to buyer. If used strategically, the terms can also be the final leverage to close a deal.

Read more: Use Incoterms to your advantage

 

Some terms are only valid for sea transport, whereas others cover only ground and some cover both. Here is a quick INCO Terms guide to them all:

Incoterms 2010

Source: Emadtrans Logistics Inc.

Here is our short INCO-vocabulary:

EXW – ExWorks, the buyer must carry out all tasks in relation to export and import clearance as well as carriage and insurance.

FCA – Free Carrier, the seller delivers the goods, cleared for export to the buyers chosen carrier and are liable for costs until the goods are delivered at the carrier.

FAS – Free Alongside Ship, the seller has delivered the goods when they are placed alongside the vessel in the named port of shipment and have to clear the goods for export. The buyer is liable for all costs beyond that point. Only valid for sea transport.

FOB – Free On Board, the seller delivers when the goods pass the ship’s rail at the named port of shipment. From that point, the buyer is liable for costs and risks, but the seller must clear the goods for export. Only valid for sea transport.

CFR – Cost and Freight, the seller delivers when the goods pass the ship’s rail at the named port of shipment. Seller must pay the costs & freight necessary to bring the goods to the named port of destination, BUT the risk of loss or damage, as well as any additional costs due to events occurring after the time of delivery are transferred from seller to buyer. Seller must clear goods for export. Only valid for sea transport.

CIF – Cost, Insurance, Freight, the goods are delivered by the seller when they pass the ship’s rail in the port of shipment. Seller is liable for costs in connection with fright to port. Risk of loss and damage are the same as CFR. Seller also must procure marine insurance against buyer’s risk of loss/damage during the carriage. Seller must clear the goods for export. Only valid for sea transport.

CIP – Carriage and Insurance Paid, same as CPT except the seller also has to procure insurance against the buyer’s risk of loss or damage to the goods during carriage. Valid for any type of transport.

CPT – Carriage Paid To, the seller chooses carriers and is liable for the goods and all costs until delivered at the named destination. This term may be used irrespective of the mode of transport (including multimodal).

DDP – Delivered Duty Paid, seller bears all risks and costs until the goods are delivered, including import/duty clearance, taxes and other fees.

DAT – Delivered at Terminal, seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal.

DAP – Delivered at Place, Seller pays for carriage to the named destination, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer.

Text by: Consignor, news@consignor.com

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