EXW, FOB, CIF…??? 12 points – 11 Terms!
What are they? How they fit in? With 11 terms in the new Incoterms 2020, many a times it is overwhelming to know what the terms stands for. And that is what we precisely like to clarify and elaborate in this illustrated article.
Incoterms 2020 are divided into four categories – E, F, C, D in the order of increasing Seller responsibility. (A&B has been removed from the new Incoterms 2020).
And the 11 Incoterms are grouped among the 4 category as presented below.
- Category E: Departure
- Category F: Main Carriage Unpaid
- Category C: Main Carriage paid
- Category D: Arrival
All the 11 Incoterms are classified based on the cost and obligation of the seller from Departure to Arrival. The incoterm starts with the letter of the group at which your obligation as a seller stops.
Responsibility of the Seller to take accountability of the goods handling increases as you move along the Incoterms from E (Departure) to D (Arrival).
In EXW (Ex works), Seller has the least responsibility and in DDP (Delivery Duty Paid) seller has the most responsibility. If he choses DDP for transport, he has to incur the cost of all the 12 critical point activities.
And one should also note that FAS, FOB, CFR and CIF are used only for sea or inland transport. Only transport via water (ships!) should use these terms. If these terms are utilised in land or air transport, it is not valid and there are chances that the insurances and other responsibilities can get void if there is an issue!
The seller has to select the best point at which he can transfer the risk considering the cost involved and which works best for him/her.
Hence understanding the scope of Incoterms 2020 becomes crucial in International trade and we will look into each other in depth in the upcoming series.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about any specific circumstances.