What are Incoterms?
The Incoterms or International Commercial Terms are a series of pre-defined commercial terms that help regulate international commerce operations such as transport, security conditions and delivery of merchandise.
Incoterms define the importer's and exporter's responsibility in regards to cost, risk and management.
EXW (EX WORKS/EN FÁBRICA)
In this agreement, the exporter's responsibility ends when the cargo is prepared for transport, and the importer takes over by taking on all costs and risks derived from the transportation of the merchandise from its origin point to its final destination.
FCA (FREE CARRIER/TRANSPORTADOR LIBRE)
In this agreement, the exporter takes on all the costs and risks until the cargo is handed over to a transporter paid for by the importer. This agreement can be used with all forms of transport.
CPT (CARRIAGE PAID TO / TRANSPORTE PAGADO HASTA PAÍS DE DESTINO)
The risks and cost of this agreement are transferred to the importer in different locations, due to the delivery location being different than the designated destination. This agreement can be used with all forms of transport.
CIP (CARRIAGE & INSURANCE PAID / TRANSPORTES Y SEGUROS PAGOS HASTA LUGAR DESTINO)
This has the same obligations as the CPT agreement, but the importer must also take on the responsibility of insurance against risks, loss and damages sustained by the merchandise during its transportation.
DPU (DELIVERED AT PLACE UNLOADED / ENTREGADO EN LUGAR DESCARGADO)
In this agreement, the seller or exporter is in charge of managing logistics, cost and risk, until the merchandise arrives to its destination. This term can be used in all forms of transport.
DAP (DELIVERED AT PLACE / ENTREGA EN EL LUGAR)
Risk and cost get transferred from seller to buyer in the same delivery location.
DDP (DELIVERED DUTY PAID)
In this agreement the exporter is responsible of all obligations, risks and costs, including the cost of tariffs, fees and other expenses. These responsibilities get transferred to the buyer only when the merchandise has been delivered to its designated location in the destination country. This agreement can be used in all forms of transport.
FAS (FREE ALONGSIDE SHIP / LIBRE AL COSTADO DEL BUQUE)
This incoterm is only applicable on ocean freight and its generally used for cargo and merchandise that has special requirements of transportation. In this agreement, the seller delivers the cargo in the port of origin and takes on all expenses until the cargo has been delivered at its destination.
FOB (FREE ON BOARD / LIBRE A BORDO)
This agreement requires that the seller dispatch the merchandise for export, but the importer is responsible for hiring international transport. This incoterm is only applicable on ocean freight.
CFR (COST & FREIGHT / COSTO Y TRANSPORTE)
This agreement requires that the seller take on all responsibility prior to international shipment. The seller is responsible for hiring international transport and dispatching merchandise for export. This incoterm is only applicable on ocean freight.
CIF (COST INSURANCE & FREIGHT / COSTO, SEGURO Y TRANSPORTE)
In this agreement the seller has the same obligations as in the CFR agreement, but in addition to he must hire marine insurance for loss and damages of goods during transporting.
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