FACULTAD DE CIENCIAS SOCIALES Y HUMANÍSTICAS.

MACROECONOMÍA I

Título:
INCOTERMS

Estudiante:
• Alejandro Moreno Salas.

Paralelo:
3.

Profesora:
Yoong Párraga Cristina.
 ¿What are the incoterms and what we use it for?
Incoterms, short for international commerce terms, are the rules in the game of
the international trade. They were created in 1936 by the international chamber of
commerce (ICC) to provide clarity and uniformity in global trade. The principal purpose
of Incoterms is to define the rights and obligations that the seller and the buyer have in
the international trade by assigning the costs, risks, and responsibilities between them at
different stages of the transportation process. They determine who carry the expenses
related to the delivery of goods, including transportation, insurance, customs duties, and
any other costs associated with international trade. The last update of these terms is the
Incoterms 2020, and we will still use this version until 2030.

Currently we have 11 incoterms which are located into two categories:

Multimodal:

EXW (Ex Works): The seller is accountable for packing the goods available at
their premises, and the buyer is responsible for the entire transportation process.

FCA (Free Carrier): The seller delivers the goods to a carrier, designated by the
buyer at a specific location in the seller’s country. Then the buyer bears the risk, from
the agreed named place of delivery to the destination.

CPT (Carriage Paid To): The seller bears the cost of the carriage to the named
place of destination in the buyer’s country then the buyer bears all additional costs after
the cargo reaches the named place of destination agreed with the seller who does not
have to contract or pay for insurance, so once goods are handed over to the first carrier,
the risk is transferred to the buyer.

CIP (Carriage and Insurance Paid To): Is like CPT, but the difference is that
the seller is obligated to contract extensive insurance coverage until the cargo arrives at
the named place of destination in the buyer’s country.

DAP (Delivered at Place): The seller is responsible for packing, loading, and
clearing the goods for export. He also bears the costs and risks for the transportation to
the agreed place of destination (quay, warehouse, factory, container yard or road) in the
buyer’s country, excluding the unloading. Then all the risks, costs and insurance are
transferred to the buyer.
DPU (Delivered at Place Unloaded): The seller is responsible for delivering the
goods to the buyer´s country, including unloading at the specified place. Then the buyer
bears all additional costs, and is responsible for imports clearance, duties, and taxes.

DDP (Delivered Duty Paid): The seller bears all risks and costs associated with
delivering the goods to the buyer´s country, including customs duties and taxes. Then,
the risks and costs transfers from the seller to the buyer.

Sea and Inland Waterways Transport only:

FAS (Free Alongside Ship): The seller is responsible for delivering the goods
alongside a named vessel at a specified port. The buyer assumes responsibility from that
point onward.

FOB (Free on Board): The seller carries and loads the freight onto the vessel
chosen by the buyer. The buyer assumes responsibility once the goods have been loaded
onto the vessel.

CFR (Cost and Freight): The seller bears all the risks until the loading of the
goods onto the vessel, even though he carries with all export costs & freight charges
(including main transport).

CIF (Cost, Insurance, and Freight): Like CFR, but the seller is obligated to
contract a minimum marine insurance coverage to the named port of destination in the
buyer’s country.

Here we have a graphic that shows the responsibility of both the seller and the
buyer in each incoterm.
 Figure 1
Incoterms 2020

(Professional Shipping & Logistic Ltd, 2020)

Bibliography
Professional Shipping & Logistic Ltd. (2020). Retrieved from
https://www.professionalshippingng.com/incoterms/