What are Incoterms®?

Romain Fayolle
Posted on
April 20, 2022

What are Incoterms®?

Incoterms® are a set of international rules that define the responsibilities of buyers and sellers for the delivery of goods. They are used to determine which party is responsible for the costs, the risks, the insurance and the custom formalities associated with the transport of goods.

Incoterms® are an acronym for 'International Commercial Terms’. They were developed by the International Chamber of Commerce (ICC) and are the standard international trade terms.

Incoterms® are important in cross-border supply chains, as they define the responsibilities of the buyer and seller during the transport of goods. 

They can help to avoid misunderstandings and disputes between parties and can provide clarity on who is responsible for various aspects of the supply chain. 

In some cases, Incoterms® may also have an impact on the cost of goods, as different terms may require different levels of insurance or other fees.

11 Incoterms®

There are 11 Incoterms® in total, divided into two categories.

Notes:

EXW (Ex Works) – the buyer covers the costs from seller’s door to final destination.

FCA (Free Carrier) – the buyer specifies the point of delivery in the contract of sales or carriage.

CPT (Carriage Paid To) – the transfer of risk and cost from seller to buyer occur at different points.

CIP (Carriage and Insurance Paid to) – the transfer of risk and cost from seller to buyer occur at different points, and the seller secure all-risk insurance coverage.

DAP (Delivered At Place) – the precise unloading spot at the named place of destination should be specified.

DPU (Delivered at Place Unloaded) – the precise point of destination to unload and deliver goods should be specified.

DDP (Delivered Duty Paid) – the seller is responsible for the costs and the risks until the goods are unloaded.

FAS (Free Alongside Ship) – the seller pays the expenses until freight is on the vessel, then the buyer takes over.

FOB (Free On Board) – the seller pays the costs up to main carriage, then the buyer takes over.

CFR (Cost and Freight) – the risk and cost transfer from seller to buyer is done at different points.

CIF (Cost Insurance and Freight) – the seller secures insurance for the buyer, but only for minimum coverage.

Why Incoterms® are important for Holocene?

Holocene is easing international trade for shippers. It enables the software users to turn their trade lane SOPs into actionable trade lane business rules per country of origin, country of destination, Incoterms® and eventually HS codes. The patent-pending technology then ensures shipping documents are correct prior to shipping using this knowledge.

Hence, Incoterms® are a fundamental element for Holocene and its users. Contact Holocene for more information about Incoterms®.

Romain Fayolle

Co Founder & Managing Director

Strong with 8 years of experience in different international industries, Romain wants to connect Logistics & Supply Chain leaders and professionals with the game-changing technology