The International Chamber of Commerce (ICC) was formed in 1919, and one of its first projects was to begin to formulate a comprehensive way to communicate rules for trade goods for export among the many nations of the world.
Between 1936 and 1990, the research and investigation covered all of the different modes of transportation, how countries controlled and regulated freight, and how it affected the efficient movement of goods.
In 1990, the first set of rules and regulations for International Trade called Incoterms was published by the International Chamber of Commerce, ICC, which stands for International Commercial Terms. There are 11 trade terms in the list, and they range from the methods of transportation the least responsibility for the shipper, Ex Works, to the method where the shipper has total responsibility, DDP Incoterms. Trading partners have to decide which method works best for them.
It is important to note that the Incoterm system is not necessarily the complete sales contract between shipping partners. This system of methods and responsibilities is a guide that works to facilitate transactions between international shippers and buyers. It is always best to make sure that all contract language protects the costs and risks of both the buyer and the seller.
The Eleven Incoterms
EXW: Ex Works (Named place of Delivery)
With this version of Incoterm 2010, the buyer accepts all responsibility for the delivery of the goods. The buyer is responsible for loading the cargo, arranging for the correct transportation, paying all taxes and fees, and receiving and unloading the goods. The seller has no responsibility other than having the shipment ready to go at the time agreed on.
FCA Free Carrier (Named Place of Delivery)
With the rules of this Incoterm, the seller is responsible for getting the goods that have been cleared for export to a place designated by the buyer. The buyer accepts all responsibility from that point on.
Incoterms Dealing with Sea Shipments
Four Incoterms that deal specifically with shipping by ship, and the range of responsibilities getting the cargo to the port, on the ship, off the ship, and to the buyer. These are FAS (Free Alongside Ship), CFR (Cost and Freight; named port of destination), CIF (Cost, Insurance, and Freight; named port of destination), and FOB (Free on Board; named port of shipment).
The Incoterm system is set up to indicate the transition of responsibility from the buyer to the seller, and each of these outlines a different degree of accountability for the complete cargo as the shipping partnership evolves. Asiana USA has a great deal of experience with shipments by sea. We can be a valuable resource is you are using this mode of transportation.
The Final Five
Once the cargo has crossed the ocean or sea, the next five remaining Incoterms covers who is responsible for picking up the cargo at the pier, loading it onto a train or truck, transporting it to a particular destination, and finally unloading it.
Other than the continued progression of the seller picking up more of the responsibility, there is also the factor of insurance for the goods. Up to this level of accountability, the buyer was generally responsible for insuring the goods.
Throughout these five final levels, the seller assumes the insurance costs, and of course, passes these costs onto the buyer. These Incoterms include CPT (Carriage Paid To), CIT (Carriage and Insurance Paid To), DAT (Delivered at Terminal), DAP (Delivered at Place), and DDP (Delivered Duty Paid).
The DDP Incoterm is the most involved for the seller and holds the most responsibility for the entire transaction. Buyers who don’t want to worry about how the goods they purchased get from point A to point B find this Incoterm to be best for them.
The Asiana USA International Shipping Company can assist your company with a highly qualified staff who has the knowledge and experience to ship your goods anywhere in the world in a timely and efficient manner using the updated incoterms 2020. Call us today at 855-500-1808, for a free consultation and estimate.