Incoterms is an important topic about what every company, every trader, who is interested in Foreign Trade and carries out more or less a trade process with foreign companies, should know or at least have an idea.
Incoterms are organized by the International Chamber of Commerce (ICC), headquartered in Paris, to eliminate the disagreements, and legal disputes arising in international trade and determine international standard delivery methods.
INCOTERMS, which was into effect in 1936, has taken its current form with various regulations in the process. The current version, which came into effect on January 1, 2020, is called INCOTERMS 2020 today and consists of 11 delivery methods.
Let's examine the seller's responsibilities one by one and briefly, starting with the least:
1 - EXW - ExWorks (Commercial Delivery)
In short, in this delivery, which we can define as the seller's responsibilities are only the production and packaging; the seller must keep the products ready in his factory to deliver the products to the buyer on the date specified in the contract. The buyer receives these goods from the factory, prepares the necessary documents for export, completes the customs procedures, and imports the goods to his own country.
In EXW transactions, the seller's risks are minimal. The buyer takes the goods from the warehouse with his carrier and assumes all the costs and risks after that point.
2 - FCA - Free Carrier (Delivery to the carrier at a predetermined location)
The term "delivery to the carrier" means that the seller's obligation will end with the completion of the customs clearance procedures by the seller and the delivery of the goods to the transport agent requested by the buyer at the place and time agreed between the parties.
In this form of delivery, export formalities and domestic shipping costs up to the designated place belong to the seller. The buyer is responsible for post-destination shipping and import formalities in the receiving country. Therefore, the delivery place should be determined by name and address and agreed upon between the parties.
3 - FAS - Free Alongside Ship
In this form of delivery, the seller is obliged to bring the goods to the ship, which is the delivery place specified in the contract. If the goods are at the ship's pier, they are delivered by being brought to the loading place, and if the ship is offshore, they are taken to the side of the ship by barges. This form of delivery can only be used for sea or river transportation.
Damage and costs related to the goods pass to the buyer when the goods are left in the direction of the ship, and the buyer bears all costs from that moment on.
4- FOB - Free On Board (Delivery on Board)
In this form of delivery, the seller loads the goods on the ship determined by the buyer at the specified date and place, after preparing all the necessary documents for export and completing the customs procedures himself. From the moment the goods are on the ship, the responsibility of the seller is considered to have passed to the buyer.
Like FAS, it can only be used in sea or river transport.
5 - CFR - Cost and Freight
In CFR delivery, the seller brings the goods to the port of loading. It does the customs clearance, pays the ship's freight (freight), and loads the goods onto the ship. Although the freight is paid by the seller, all risk and responsibility pass to the buyer once the goods are loaded onto the ship.
This delivery method can only be used in sea and river transportation.
6 - CIF - Cost, Insurance, Freight
In this form of delivery, in addition to the above-mentioned CFR delivery method, the seller must also have insurance. The seller completes the customs procedures for the goods to be exported, brings them to the loading port by taking out insurance that provides a minimum guarantee, and loads them on the ship. In this form of delivery, the seller must also have paid the freight (carriage fee) fee up to the destination port of the goods.
7- CIP - Carriage, and Insurance Paid (Including Insurance, Carriage Paid)
In the form of CIP delivery, the seller loads the goods to be exported on the transport vehicle, having completed the export customs procedures and having taken out insurance that provides a minimum guarantee. In this form of delivery, the seller also pays for the freight to the destination of the goods.
CIP has the same requirements as CIF used in maritime transport. CIP is also used on roads and other modes of transport, including the sea.
8 - CPT - Carriage Paid To
It means that the seller will deliver the goods freight paid to the specified place. After the seller delivers the goods to his carrier in good condition, he performs the customs clearance at the exit and transmits the information and documents related to the loading to the buyer. of the buyer; After receiving this information, the goods must be insured against possible damage. Because all damages and additional costs after the delivery of the goods to the carrier (carrier company) belong to the buyer.
This form of delivery is for the buyer and the seller, to use on the sea route.
9- DDP - Delivered Duty Paid
In this form of delivery, the seller performs both export and import transactions and also pays import-related customs duties.
DDP is the delivery method in which the buyer's responsibility is the least. It can be said that it is the most expensive form of delivery for the seller. Because it is a form of delivery where all costs are covered by the seller, from one factory to the door of the other factory, excluding unloading at the factory.
10 - DPU – Delivered at Place unLoaded
It means that the seller delivers the goods by leaving the goods at the disposal of the buyer as unloaded from the transport vehicle arriving at the specified destination.
11- DAP - Delivered At Place
DAP is to leave the goods at the disposal of the buyer on a transport vehicle that is ready for unloading at the unloading place determined by the buyer and the seller (a port, customs point, airport).
All customs procedures, costs, taxes, duties and charges arising from customs belong to the buyer. The seller undertakes the transportation costs of the goods to the designated place and the risks of terminal-related damage.