Customs Terms of Trade

Learning the Language of Incoterms® Rules and Trade Terms

“Incoterms” is a trademark of the International Chamber of Commerce. Incoterms® rules and trade terms are recognized and accepted as the standard for international trading and are regularly updated as commercial conditions change.

What you need to know

  • Incoterms® rules serve to standardize the process of shipping and receiving merchandise. In addition, they determine the cost allocation of international commercial transactions and establish agreed responsibilities for exporters and importers.
  • The main objective of Incoterms® rules is to define criteria for the distribution of expenses and the assignment of risk between parties involved in international transactions.
  • Familiarity with Incoterms® rules will ensure you purchase goods from manufacturers abroad in accordance with applicable regulations, documentation and procedures.
Incoterms® 2020 rules are classified into two categories according to the mode of transport.
Incoterms® 2020 rules are classified into two categories according to the mode of transport.
  • The Incoterms® Chart of Responsibility provides an overview of the exporter’s and importer’s obligations within each category.
  • Use of Incoterms® trade terms is not a legal requirement, however using them is always recommended to simplify transactions, reduce misunderstandings with those you do business with.
  • You can read more about global Incoterms® rules and trade terms by visiting the International Chamber of Commerce website, which includes an FAQ and an explanation of Incoterms® rules.

Ex Works

The seller's only obligation is to make the goods available at its premises or at another named place (works, factory, warehouse, etc.). The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination. This term represents the minimum obligation for the seller.

Free Carrier
The seller’s obligation is to hand over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point. The parties are advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
Carriage Paid To
The seller pays the freight for the delivery of goods to the carrier or to another person nominated by the seller at the named destination. Once delivered, the risk of loss or damage to the goods is transferred from the seller to the buyer. This term requires the seller to clear the goods for export.
Carriage and Insurance Paid To
The seller has the same obligations as under CPT but has the responsibility of obtaining insurance against the buyer’s risk of loss or damage to goods during carriage. Insurance only needs to be obtained at minimum coverage and the seller is required to clear the goods for export.
Delivered at Place Unloaded
The seller delivers the goods and transfers risk to the buyer when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named place of destination or at the agreed point within that place, if any such point is agreed. The seller bears all risks involved in bringing the goods to and unloading them at the named place of destination. In this Incoterms rule, therefore, the delivery and arrival at destination are the same. DPU is the only Incoterms rule that requires the seller to unload goods at destination. The seller should therefore ensure that it is in a position to organize unloading at the named place. Should the parties intend the seller not to bear the risk and cost of unloading, the DPU rule should be avoided and DAP should be used instead.
Delivered at Place
The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller is required to clear the goods for export and the importer is responsible for effecting customs clearance, and paying any customs duties.
Delivered Duty Paid
The seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes all export and import duties, taxes and customs formalities.
There are four terms in this category:
  • FAS (Free Alongside Ship)
  • FOB (Free on Board)
  • CFR (Cost and Freight)
  • CIF (Cost, Insurance, Freight)
These terms are listed for your information only as they are not needed when sending shipments with DHL Express.
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