Incoterms are a set of pre-defined international rules published by the International Chamber of Commerce which determine the contractual clauses to be used in international commercial sales contracts. When looking for container shipping rates, you must keep Incoterms in mind as the Incoterm you choose may affect your overall shipping costs.
Who is responsible for price (who pays each part of the international transport)
When risk is exchanged between the seller and the buyer during the transport of the goods (who is responsible at any given time)
The delivery location (provided to the seller)
Who hires and pays for the transportation required
Who hires and pays for the insurance used
The handling and cost of each necessary document
The latest version of Incoterms, Incoterms 2010, was published on January 1st 2011 and defines 11 different Incoterms, down from the 13 in Incoterms 2000.
In the current version, Incoterms are divided into four groups (E, F, C and D), depending on the delivery location of the goods and the responsibility for payment at different stages of the international transport.
Condition: The buyer is responsible for collecting the goods at the seller’s warehouse and bears all associated risk and cost.
Condition: The seller is responsible for bringing the goods to the buyer’s predefined transport medium; the buyer then accepts cost and risk responsibility from that point onwards.
FCA Incoterm (Free Carrier, any means of transport)
FOB Incoterm (Free on Board, exclusive to shipping)
Condition: The seller bears all costs to the destination port (including international transport) however, risk transfer will be made once the goods are loaded on the means of transport.
CPT Incoterm (Carriage Paid to, any means of transport)
CIP Incoterm (Carriage and Insurance Paid to, any means of transport)
CFR Incoterm (Cost and Freight, exclusive to shipping)
CIF Incoterm (Cost, Insurance and Freight, exclusive to shipping)
Condition: The seller bears all risks and costs necessary to bring the goods to the destination country.
DAT Incoterm (Delivered at Terminal)
DAP Incoterm (Delivered at Place)
DDP Incoterm (Delivered Duty Paid)
If you’re still confused over which Incoterm to choose, we recommend giving our article on how to choose a safe and competitive Incoterm a read to find out which Incoterm is right for you.