What is INCOTERMS?
INCOTERMS is a set of standard rules that clearly state the rights and obligations of both the seller and the buyer in international trade, and contain certain rules and regulations.
The terms INCOTERMS are expressed in an abbreviated form with three letters each. Place or city of delivery is added to the end of the term. In this way, the term indicates what kind of transportation and what kind of transportation costs of the commodity subject to trade and by whom the insurance will be covered, where it will be delivered, how the damage will be transmitted.
Today, INCOTERMS 2020 is in effect and includes 11 terms.
Rules for All Transport Modes
1. EXW (Ex Works) - Delivery at Workplace
Delivery at the workplace is when the seller delivers the goods to the buyer at the seller's workplace or in another designated place (such as factory, warehouse, workplace).
The seller will prepare the goods in accordance with the terms of the contract, keep the goods ready for the buyer's order at the place specified in the agreement on the specified date or time and inform the buyer of this situation.
The buyer is obliged to pay the cost of the goods in accordance with the terms of the contract. From the moment the buyer receives the goods from the seller's workplace, all costs and risks related to the goods belong to the buyer.
2. FCA- Free Carrier
Free Delivery to Carrier means that the seller delivers the goods to the carrier or another person appointed by the buyer.
In this delivery method, the delivery process is deemed to have been completed when the seller completes the customs procedures of the goods and transfers them to the surveillance of the first carrier at the specified date and place. From this moment on, all costs and risks related to the goods belong to the buyer, and the freight fee will be borne by the buyer like all other expenses.
3. CPT (Carriage Period To) - Delivery with Transportation Fee Paid
It is the rule that the seller will deliver the goods to a carrier or other person he chooses at the designated place and the seller has to make the necessary transportation contract and pay transportation costs to bring the goods to the specified destination.
When the CPT rule is used, the seller fulfills his delivery obligation when the goods are delivered to the relevant carrier, not when the goods arrive at their destination.
4. CIP ( Carriage and Insured Paid To) - Transport Fee and Insurance Paid Delivery
This rule is that the seller will deliver the goods to a carrier or other person of his choice at the designated location and the seller must make the contract of carriage where the goods must be brought to the specified destination and pay the transportation costs.
When the CIP rule is used, the seller fulfills his delivery obligation when the goods are delivered to the relevant carrier, not when the goods arrive at their destination.
The seller will insure the goods sent at his own expense. The seller must provide proof of this.
The buyer will pay the cost of the goods in accordance with the terms of the contract and will unload the goods without delay by paying the unloading costs and port fees.
5. DAP - Delivered at Place
It is the leaving of the goods to the buyer's disposal on the transport vehicle which is ready for unloading at the unloading place determined by the buyer and the seller. All customs procedures and expenses belong to the buyer. The cost of transportation of the goods to the designated location and the risks of terminal-related damage are the responsibility of the seller.
6. DPU -Delivery at Place Unloaded
It is the rule that the seller delivers the goods by leaving the goods at the disposal of the buyer, unloaded from the incoming transport vehicle at the designated destination.
The seller is obliged to deliver the goods at the agreed date, at the designated place, by unloading them from the incoming transport vehicle and leaving it at the buyer's disposal.
The buyer is obliged to pay the cost of goods and customs taxes in accordance with the terms of the contract. From the moment the goods are delivered, all costs related to the goods are the responsibility of the buyer.
7. DDP (Delivered Duty Paid) - Delivery with Customs Duties Paid
This rule indicates that the seller delivers the goods to the buyer's disposal, as customs cleared for import and ready to be unloaded on the transport vehicle arriving at the designated destination. Unless otherwise explicitly agreed in the sales contract, VAT and all other taxes payable on imports belong to the seller.
Delivery Methods Covering Only Sea and Inland Waterway
1. FAS (Free Alongside Ship) - Cost-Free Delivery Along The Ship
It is the delivery of the seller's goods by leaving them alongside the ship ed by the buyer at the designated loading port.
2. FOB ( Free On Board) - Free Delivery On Board
It is the rule that regulates the seller's delivery of the goods at the designated loading port, on the ship ed by the buyer or by providing the goods delivered in this way.
The seller fulfills the delivery obligation by loading the goods to the ship provided by the buyer at the specified date and place. Any damages, losses and expenses that may occur after the goods are on board the ship are the responsibility of the buyer.
3. CFR (Cost and Freigh) - Delivery Costs and Freight
This rule regulated that the seller delivers the goods on board or supplies goods that have already been delivered in this way.
The seller is obliged to bring the goods to the port where they will be loaded, undertaking all costs and risks. The seller will perform the loading by making the customs procedures and paying the freight fee. From this moment on, all costs and risks related to the goods other than freight are the responsibility of the buyer.
4. CIF (Cost, Insurance and Freight) - Delivery Costi Insurance and Freight
This rule regulated that the seller delivers the goods on board or supplies goods that have already been delivered in this way.
The seller is obliged to take the insurance premium, freight and loading costs and risks, to bring the goods to the port where they will be loaded and to agree with the shipping agency. By paying the insurance premium, the seller is obliged to take out the narrowest comprehensive sea shipping insurance suitable for the type of goods loaded. After the goods are loaded on board, the costs and risks other than freight and insurance premium belong to the buyer.