U3 Incoterms 2024

Importance of INCOTERMS

Group D: Direct delivery at the point of arrival.

Group C: Indirect delivery with payment of the main transportation.

Group F. Indirect delivery without payment of the main transportation.

Group E. Direct delivery at departure.

What are the INCOTERMS?

Through this infographic, you will have information to identify the responsibility and risk involved in the process of international trade transactions, regulated by the International Commercial Terms (INCOTERMS)."

INCOTERMS 2024

The INCOTERMS provide a clear and standardized framework for international transactions, improving efficiency by minimizing risks, optimizing costs, and facilitating logistics management. This contributes to a smoother and more predictable business environment for all parties involved.

What are the INCOTERMS?

EXW: Ex WorksGroup of Incoterms that can be used with any mode of transportation or with a combination of them (multimodal).Ex Works: The buyer bears the bulk of the expenses.The exporter delivers the goods at their premises or another location they designate.The buyer (importer) assumes all responsibility from collecting the goods to transporting them to the destination country.

Group E Direct delivery at departure.

FOB: Free On Board

FAS: Free Alongside

FCA: Free Carrier

Group FIndirect delivery without payment of the main transportation.

CIP: Carriage and Insurance Pait to

CPT: Carriage Paid To

CIF: Cost, Insurance and Freight

CFR: Cos and Freiht

Group C:Indirect delivery with payment of the main transportation.

DDP: Delivered Duty Paid

DPU: Delivered At Place Unloaded

DAP: Delivered At Place

Group D: Direct delivery at the point of arrival.

Conclusion

• Importers and exporters must be familiar with the INCOTERMS to consider which one is most suitable depending on the negotiation to be conducted.
• They aid in fostering good understanding between the seller (exporter) and the buyer (importer).
• They prevent unexpected costs and unnecessary situations.
• They are valid worldwide and ensure timely payment for services, goods, and duties.
• They protect all parties involved in the negotiation.

They facilitate negotiations between the importer and the exporter, provide security in transactions, and eliminate misunderstandings.

Importance of INCOTERMS

CIP: Carriage and Insurance Pait to

Not recommended for containerized cargo. Designed for bulk and breakbulk cargo. It is used in all modes of transport.

The seller (Exporter) delivers the goods at the agreed place in the destination country, assuming the costs of the main transportation, export clearance, and insurance. The risk ends for the exporter until the export process. The insurance must be minimum coverage in favor of the buyer at 110% of the value against all risks, Clause A of the London Insurance Institute. The buyer (Importer) assumes the risk at the moment of delivery of the goods to the first carrier within the country of origin.

FOB: Free On Board

Term that applies to shipments made by sea or river.

This term is the most used. The seller (exporter) delivers the goods onto the vessel, having assumed costs, clearances, and risks up to that point. This transfers costs and risks to the buyer up to the final destination point.

CIF: Cost, Insurance and Freight

Commonly used in international trade, it applies exclusively to maritime transport.

Cost, Insurance, and Freight (CIF) The seller (Exporter) is responsible for paying the main transportation and insurance to the destination port, assuming the costs of export clearance. The risk during the journey is borne by the buyer. The insurance must provide minimum coverage in favor of the buyer at 110% of the value at all risks, Clause C of the Institute of London Underwriters.

CPT: Carriage Paid To

It represents an agreement between the seller and the buyer regarding the responsibility and costs associated with the transportation of goods.

The seller (Exporter) assumes the cost of the main transportation, export, and import customs clearance, but the risks are transferred to the buyer from loading on board. The buyer (Importer) assumes responsibility once the goods have been delivered at the designated destination.

Cost and Freight (CFR)

This incoterm only applies to maritime transport.

The seller (Exporter) is responsible for delivering the goods onto the vessel, contracting and paying for the main transportation, including export procedures. However, the risk during the journey is borne by the buyer, as well as the import costs. The buyer (Importer) is responsible for the main transportation and assumes responsibility for the security and compliance of the shipment until it reaches the final destination.

DDP: Delivered Duty Paid

Recommended for containerized cargo

The seller (Exporter) delivers the goods at any agreed-upon place within the destination country, including customs. The seller bears all costs and risks until before unloading. The buyer (Importer) is only responsible for unloading the merchandise, including clearance/import payments. The agreed place of delivery is usually the warehouse chosen by the buyer.

DPU: Delivered At Place Unloaded

Recommended for containerized cargo.

Delivered at Place Unloaded The seller (Exporter) delivers the goods, unloaded, at any agreed place with the buyer, assuming the transportation and insurance of the goods. The import procedures at the destination are the responsibility of the buyer. Delivered Duty Paid. The buyer (Importer) pays for the unloading. The buyer is responsible for all charges after unloading, except (in theory) any charges caused by delay, including terminal storage charges, which are generally the seller's responsibility.

DAP: Delivered At Place

It is flexible and can be used regardless of the mode of transportation selected, whether by air, sea, road, or rail.

Delivered at Place The seller (exporter) takes responsibility for coordinating the entire shipment, from packing and transportation to the destination, ensuring it arrives at the location specified by the buyer. After this point, the risk and costs are borne by the buyer. It is worth mentioning that import customs clearance, duties, and taxes remain the responsibility of the buyer under this agreement. This allows for a smooth and convenient experience for buyers while also requiring them to manage the necessary regulatory and customs requirements associated with international shipments.

FCA: Free Carrier

Group of Incoterms that refers to Free Carrier, Place of Delivery, a combination of transport (multimodal).

If picked up at a location outside the seller's premises, the seller is not responsible for unloading.The seller (Exporter) is responsible for delivering the goods at the designated place within the country of origin. They also bear the costs, risks, and export clearance expenses. The buyer (Importer) may request the carrier to issue the Bill of Lading (B/L) to be delivered to the seller, enabling the seller to present it to the bank.

FAS: Free Alongside

Term used exclusively when the goods are transported by ship (inland waterways or sea).

FAS is advisable for the transportation of bulk, breakbulk, or oversized and heavy cargo. The seller (Exporter) is responsible for delivering the goods at the port of origin (loading dock), handling export formalities. The buyer (Importer) arranges maritime transport at the designated port of shipment, which is typically in the seller's country.