Incoterms

What are Incoterms?

Incoterms help facilitate International Trade by Clarifying who is responsible for transportation and insurance costs. They provide standardised and agreed reference points regarding transfer of ownership, transfer of risk, insurance, mode of transport and cross-border taxes between a Buyer and a Seller in a Sales/Shipping Contract.

Incoterms have three stages in a Transport Journey:

• Pre-Carriage
• Main Carriage
• Onward Carriage

The 7 that relates to All Modes of Transport; including Carriage by Road are:

• EXW - EXW-Works
• FCA - Free Carrier
• CPT - Carriage Paid To (Named Place)
• CIP - Carriage Paid & Insurance to (Named Place)
• DAP - Delivered at (Name Place)
• DPU - Delivered at (Named Place) Unloaded
• DDP - Delivery Duty Paid

What do Incoterms cover?

Incoterms are normally recorded on a Contract of Sale but to necessitate International Transport, they should also be stated on all Commercial Invoices pertaining to all Consignments.

In some agreements, contractual parties have added cavets to Incoterms to assist in the movement of goods through borders.

• Transfer of Risk
• Separation of Costs
• Payment resolution
• Mode of Transport
• Insurance
• Dispute of Payment
• Delivery Points
• Customs Duties

Arbitration (Only if specified in Sales Contract)

What does my business need to do to meet the imminent changes to EU/UK Trade?

• Peruse current Incoterms and check with your Suppliers and Clients for understanding
• Revisit older agreements to ensure they are still in your business’ best interests
• Ensure all shipping documentation will have the correct Incoterms® entered

• Calculate the costs associated with Incoterms
• Assess the risks involved in the Incoterms
• Minimise your exposure to both
• Know the capabilities of Incoterms

Remember Incoterms are not a complete Contract of Sales, but a very important part of it.