An OL Introduction to the Incoterms® & What your company needs to know.
What are Incoterms®?
Incoterms® is an acronym that stands for “International commercial terms.” Developed and trademarked by the International Chamber of Commerce, Incoterm’s outline to buyers and sellers when their responsibility for costs associated with shipping begins and ends throughout the supply chain.
As these rules are accepted worldwide, it is vital to understand what you and your company are responsible for when handling international shipments.
What taxes/duties must each stakeholder cover?
Who arranges permissions, documentation and is responsible for the insurance?
Which part of the transportation process is overseen by each stakeholder?
When the risk transfers from seller to buyer.
The OL USA Incoterms® Table
What happened to Incoterms® 2019?
Incoterms® Definitions by Category
Incoterms® fall into two categories: rules for any mode of transportation or rules for sea and inland waterway transportation
Applies to Any Mode of Transportation
EXW or Ex-Works:
The seller’s sole responsibility is making the goods available to the buyer for pickup at the place of origin or at a designated location. Upon pickup, the buyer assumes all costs and accountability for the rest of the shipping process.
DAP or Delivered at Place:
The seller bears all costs and risks involved in the export and delivery processes. Once the seller delivers the goods at the port of destination, the buyer must unload, clear import customs, and deliver the goods to their final destination.
DDP or Delivered Duty Paid:
The seller fulfills all capacities in the shipping process. The buyer simply receives the goods at the agreed upon final delivery location.
Applies to Sea & Inland Waterway Transportation
FOB or Free on Board:
The seller clears the goods for export and delivers them on board the vessel at the port of shipment. The buyer then assumes all risks and costs including the carriage charges.
CFR or Cost & Freight:
The seller clears the goods for export and is responsible for the freight costs to the port of destination. However, the buyer assumes risk once the goods are delivered onboard the vessel at the port of export.
CIF or Cost Insurance & Freight:
The seller clears the goods for export and is responsible for the freight costs to the port of destination. The seller must also provide insurance to cover the goods in transit. The seller maintains responsibility during the cargo’s journey but all accountability transfers to the buyer upon delivery at the port of destination.