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  • Anusuya Manikandan

Incoterms - International Commercial Terms (Incoterms 2020)-A brief Guide

Updated: Nov 11, 2021

Freight incoterms are the standard contract terms used in import/export of goods, which defines the responsibility and liability for shipment of the goods.

Trades happen between different countries, different modes and with different companies whose business/trade policies may be different. This may create a fear among the clients (seller and buyer) on what are their responsibilities and liabilities in moving the goods. Incoterms are legal terms and written in legal perspective to avoid confusion among traders. However incoterms are often misunderstood. Incoterms applies to air and sea freight. In this FOB, FAS, CFR, and CIF apply to sea freight only.

What Incoterms don’t cover?

Incoterms will not cover the property rights, possible force majeure situations and breach of contract. These terms should be added in the sales purchase agreement/contract.

How to write incoterms in Contract

When the incoterm is written in the sales contract, the named place should immediately follow the three letter incoterm abbreviation, e.g. “FOB Haldia Port” (Source).

Responsibility Matrix (Source: Oceanair)

Applicability for Container and Bulk/Break Bulk

Ex Works, FCA and FOB, CPT, CIP and all D terms can be used for Container Freight. FAS, CFR and CIF can be used for break bulk and bulk shipping.

Will incoterms apply for all countries?

The three exceptions likely to affect shipments are: the US is the only country that requires a Customs Bond, importing into the UK requires a Deferment Account, and exporting from India includes a withholding tax. (Source)

More readings:

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