International trade is conducted using various forms of delivery (Incoterms). These forms of delivery determine the responsibilities for the delivery of goods, cost and risk-bearing between buyer and seller. Below you will find an extensive article on international forms of delivery:
Created and regularly updated by the International Chamber of Commerce (ICC), Incoterms are standard trade terms that clarify the responsibilities for delivery of goods, cost and risk-bearing between buyers and sellers. These terms are widely used in global trade and are specified in trade contracts.
Most Common International Delivery Methods
- EXW (Ex Works): The seller delivers the goods to the buyer at his own place of business. Loading and transportation are the sole responsibility of the buyer.
- FCA (Free Carrier – Delivery to Carrier): The seller delivers the goods to the carrier at the place designated by the buyer, after they have been cleared for export. From this point on, the risk and cost pass to the buyer.
- CPT (Carriage Paid To): The seller covers the costs of transporting the goods to the designated destination. However, the risk of transportation of the goods passes to the buyer from the moment of delivery to the carrier.
- CIP (Carriage and Insurance Paid To): The seller covers the costs of transportation and insurance up to the destination of the goods. The risk passes to the buyer as soon as the goods are delivered to the carrier.
- DAT (Delivered at Terminal): The seller delivers the goods to the designated terminal at the destination and assumes all costs and risks until import customs clearance.
- DAP (Delivered at Place): The seller delivers the goods at the place designated by the buyer, un-cleared for import. All costs and risks up to the point of delivery are borne by the seller.
- DDP (Delivered Duty Paid): The seller delivers the goods to the place specified by the buyer, including customs duties. This form of delivery is the term that imposes the most obligations on the seller.
- FAS (Free Alongside Ship): The seller delivers the goods alongside the ship at the designated port of departure. From this point on, all risks and costs related to the loading and transportation of the goods pass to the buyer.
- FOB (Free On Board): The seller loads the goods onto the ship at the port of departure. From the moment the goods are loaded on board, the risks and costs pass to the buyer.
- CFR (Cost and Freight): The seller covers the freight and costs from the port of departure to the port of destination. However, the risk of the goods passes to the buyer from the moment they are loaded on the ship.
- CIF (Cost, Insurance and Freight): The seller bears the costs of transportation, insurance and freight up to the port of destination. The risk of transportation of the goods passes to the buyer as soon as they are loaded onto the ship.
- FRC (Free Carrier at Named Place): This term is a variation of FCA, where the seller delivers the goods to the carrier at a named place. Here, the seller also assumes the responsibility of loading the goods to the carrier.
- DES (Delivered Ex Ship): The seller delivers the goods to the buyer on board the ship at the port of destination with import customs unresolved. This term means that all risks and costs during transportation are borne by the seller, but customs clearance is the responsibility of the buyer.
- DEQ (Delivered Ex Quay): The goods are delivered at the quay at the port of destination. In this term, the seller covers all the costs of the goods up to the quay, including customs clearance.
- DDU (Delivered Duty Unpaid): The seller delivers the goods at the place designated by the buyer, duty unpaid. Customs duties, import taxes and other charges are paid by the buyer.
- DPU (Delivered at Place Unloaded): This is a new term that replaced DDP with the 2020 Incoterms revision. The seller delivers the goods unloaded at the designated place of destination. Here, the seller assumes all costs and risks up to the destination, but customs clearance is done by the buyer.
Current Versions of International Delivery Methods
Incoterms are regularly updated to adapt to changes in global trade practices. The latest version is Incoterms 2020, published in 2020. This update includes some important changes from the previous versions (Incoterms 2010).
Selection of International Delivery Methods
The choice of international modes of delivery depends on factors such as the nature of the trade, the type of goods being transported, the mode of transport (sea, air, road or rail), the level of trust and experience between buyer and seller. Each mode of delivery offers advantages and disadvantages for specific situations and needs.
Considerations in the Use of Incoterms
- Clarity in Contracts: In all uses of Incoterms, it is important to clearly specify the form of delivery in contracts.
- Use of Current Versions: It is recommended to use the latest version of Incoterms published by the International Chamber of Commerce. This ensures that both parties are protected according to current standards.
- Consideration of Special Circumstances: Each mode of delivery may be particularly suited to particular modes of transport (sea, land, air, rail) or types of goods. The parties need to choose the mode of delivery that best suits their needs.
The correct use of Incoterms in international trade ensures healthy and smooth commercial relations between buyers and sellers. These terms play an important role in preventing disputes between the parties and help to conduct business transactions with clarity.
