Klaus Burkart

Klaus Burkart

Trained Forwarding Merchant and studied Transport and Logistics Management in Germany, Co-Founder of Cargodian.

Glossary: Incoterms®

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Incoterms® or International Commerce Terms are like a dictionary for global trade. Developed in 1936 by the International Chamber of Commerce, Incoterms® are a set of rules that are universally recognised by all entities registered with the ICC. Incoterms® have proven beneficial to global trade by simplifying basic trade actions and clarifying the obligations and liabilities of buyers and sellers.

Whether you’re filing a purchase order or packaging a freight shipment, business entities involved in global trade have to follow Incoterms. Since the first year of use of Incoterms, the International Chamber of Commerce has constantly been updating its rules. The most recent one was published in 2020.

Some of the most commonly used Incoterms® are

  • Delivered At Terminal (DAT):
    Used to declare that the seller will assume total responsibility and bear all costs until the goods arrive and are unloaded at the cargo terminal. The buyer has to organise and pay for transport to the final destination.
  • Ex Works (EXW):
    This means that the buyer must arrange all transport export documentation, cover all freight charges, and fulfill the importation and delivery process. Once the goods are collected from the seller’s property, the risk is transferred to the buyer.
  • Free Alongside Ship (FAS):
    Used to declare that the transfer of risk and responsibility of the shipment will happen at a designated ship for more effortless transfer of super-heavy, oversized cargo. Under FAS, the buyer has to take responsibility for the transfer and customs clearing.

A very interesting thing to note while using Incoterms® is that delivery doesn’t necessarily mean dropping the shipment. On the contrary, delivery is considered done when the risk and responsibility of the safety of the shipment is handed over to another party – broker, forwarder or seller.

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