Incoterms 2020

What are Incoterms?

Incoterms, or International Commercial Terms, constitute a standardized set of rules used in international trade to define responsibilities and obligations between sellers and buyers during various stages of a goods delivery. By using Incoterms, it is clearly established who bears the responsibility for costs, risks, and formalities at different points in the supply chain. These rules facilitate communication and minimize confusion and uncertainty among business partners, thus promoting smooth and efficient international trade transactions. Incoterms are updated approximately every ten years to reflect changes and developments in the global trade environment. The most recent major update took place in 2020. This update was necessary to adapt the rules to the latest trends in international trade, including technological advancements and changes in practices.

In the table below, you'll find concise information about the seller's and buyer's responsibilities for each delivery term. Read more details about these delivery terms further down in the article.

Term	Seller	Buyer
DAP	Covering all costs and risks, excluding customs duties and taxes, for the entire transportation.	Bears costs and risks associated with customs duties and taxes.
EXW	-	Bears all costs and risks, including customs duties and taxes.
DDP	Bears all costs and risks, including customs duties and taxes, for the entire transportation.	-
DPU	Bears costs and risks up to agreed unloading point. Obtains insurance until goods are unloaded.	Bears costs and risks after unloading.
FCA	Bears costs and risks up to agreed handover location. Obtains insurance up to the agreed handover place.	Bears costs and risks after the delivery of the goods.
CPT	Bears costs and risks up to agreed handover location. Obtains insurance up to the agreed handover place.	Bears costs and risks after the delivery of the goods.
CIP	Bears costs and risks up to agreed handover location. Obtains insurance up to the agreed handover place.	Bears costs and risks after the delivery of the goods.

DAP - Delivered At Place
Incoterm DAP, which stands for 'Delivered at Place,' means that the seller is responsible for delivering the goods to an agreed-upon location within the destination country. The buyer assumes the risk and costs of import duties, taxes, and other expenses upon arrival. The seller covers transportation costs and risks up to the delivery location.

For Incoterm DAP (Delivered at Place), an example could be when a Swedish company sells high-tech machinery to a Norwegian buyer with DAP Oslo. In this case, it is the seller's responsibility to deliver the machinery to a specified location in Oslo, Norway. The buyer assumes responsibility and costs for import duties, taxes, and further transportation within Norway after the delivery.

EXW - Ex Works
Incoterm EXW (Ex Works) means that the seller makes the goods available to the buyer at their own facility or another agreed-upon location. The seller bears minimal responsibility and costs for making the goods available, while the buyer takes care of all transportation, risk, and costs from the specified location onwards.

An example of when EXW can be used is when a Swedish manufacturer sells furniture to a Danish buyer with EXW Gothenburg, where the seller makes the furniture available at their facility in Gothenburg. The buyer takes over all responsibility and costs for transportation and risks from Gothenburg to Denmark.

DPU - Delivered At Place Unloaded
Incoterm DPU, or 'Delivered at Place Unloaded,' means that the seller is responsible for delivering the goods to an agreed-upon location within the destination country and also unloading them from the transport vehicle. The buyer then takes over the risk and costs for further handling, including import duties and taxes. The seller bears the costs and risks up to the unloading place.

Regarding Incoterm DPU (Delivered at Place Unloaded), a scenario could be when a Swedish supplier sells food products to a Danish buyer with DPU Copenhagen. In this case, the seller's responsibility is to deliver the goods to a specified location in Copenhagen, Denmark, and unload them from the transport vehicle. The buyer then assumes the costs and risks for further handling and distribution within Denmark.

DDP - Delivered Duty Paid
Incoterm DDP, or 'Delivered Duty Paid,' means that the seller is responsible for delivering the goods to an agreed-upon location within the destination country and covers all costs, including customs duties, taxes, and other fees required for the goods to be delivered to the specified place. The buyer takes over only when the goods are ready for unloading.

For Incoterm DDP (Delivered Duty Paid), an example could be when a Swedish artist sells their paintings to a French buyer with DDP Paris. In this case, it is the seller's responsibility to deliver the paintings to a specified location in Paris, France, and include all costs such as customs duties and taxes in the price. The buyer receives the paintings without having to worry about additional costs or risks upon import.

Please note that there are instances where the recipient may still be responsible for payments, such as local requirements or demands.

FCA - Free Carrier

Incoterm FCA, or 'Free Carrier,' means that the seller is responsible for delivering the goods to a specified location, typically the seller's warehouse or transport vehicle. At the specified location, the risk and responsibility for further transportation and costs transfer to the buyer. The seller covers the costs and responsibility up to the point where the goods are handed over to the carrier.

Under Incoterm FCA (Free Carrier), a scenario could be when a Swedish manufacturer sells electronic components to a German buyer with FCA Stockholm. In this case, the seller is responsible for delivering the components to an agreed-upon location, such as the warehouse in Stockholm. The buyer then assumes the risk and costs for further transportation from Stockholm to Germany.

CPT - Carriage Paid To
Incoterm CPT, or 'Carriage Paid To,' means that the seller is responsible for delivering the goods to a specified destination within the destination country or to a designated location where the goods are to be handed over to the carrier. The seller covers the cost of transportation to the specified destination, while the buyer takes over the risk and responsibility for further transportation and costs after the handover to the carrier.

Under Incoterm CPT (Carriage Paid To), an example could be when a Swedish clothing retailer sells clothes to a British buyer with CPT London. In this case, the seller is responsible for delivering the clothes to a specified destination, such as a store in London. The seller covers the transportation costs to London, and once the clothes are handed over to the carrier, the buyer takes over the responsibility and costs for further transportation within the United Kingdom.

CIP - Carriage And Insurance Paid To
Incoterm CIP, or 'Carriage and Insurance Paid To,' means that the seller is responsible for delivering the goods to a specified destination within the destination country or to a designated location where the goods are to be handed over to the carrier. The seller covers the cost of transportation to the specified destination and also includes insurance coverage for the goods during transit. Once the goods are handed over to the carrier, the risk and responsibility transfer to the buyer.

Under Incoterm CIP (Carriage and Insurance Paid To), a scenario could be when a Swedish manufacturer sells medical instruments to a Norwegian buyer with CIP Oslo. In this case, the seller is responsible for delivering the instruments to a specified location in Oslo and includes transportation insurance. Once the instruments are handed over to the carrier, the risk and responsibility transfer to the buyer, who then assumes the costs and risks for further transportation within Norway.

Lack of knowledge about delivery terms can lead to delayed deliveries and additional costs.

If you're uncertain, we recommend contacting our customer service, which is available through chat, phone: 010-20 706 66, and email: kundservice@shiplink.se.

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We reserve the right to correct any errors in this article.

Updated on: 01/09/2023