Incoterms (international commercial terms) are generally accepted definitions of the obligations of both the seller and the buyer, with regards to international trade. Although they don’t provide the detailed contract obligations, these terms are generally accepted by businesses and governments across the world and act as a way to create understanding in the global business, especially with regard to delivery of products. Incoterms are usually coded as three-letter codes which define how a transaction is to be handled and the obligations of the buyer and the seller. However, as Seyoum (145) says, they are rules and not laws and therefore hardly enforceable by government.
EXW – Ex Works (named place of delivery)
This term leaves the buyer to carry out most of the responsibilities in the business transaction and the seller only has to provide the goods. It means that the seller will only provide the goods and the buyer will take care of the goods in terms of transport, insurance etc, from the point of purchase until they reach his destination.
CPT – Carriage Paid To (named place of destination)
In this term of trade in the international business, the seller takes a little more responsibility in the transaction and is expected to provide for transport of the goods from his premise to the point of export. However, from this point, the buyer takes over the responsibility of the goods in terms of shipment transport, insurance of the goods as well as paying duties both at the port of export and at the port of import.
CIP – Carriage and Insurance Paid to (named place of destination)
In this arrangement, the responsibility of the seller increases a notch higher and he is expected to take care of the transport as well as the insurance of the goods. However, the seller is relieved from the responsibility of the goods as soon as the goods are taken over by the first carrier.
DAP – Delivered at Place (named place of destination)
The seller arranges for the transport of the goods to the point of destination, but unlike in the DAT terms, the seller is not responsible for unloading.
Works CitedSeyoum, Belay. Export-Import Theory, Practices, and Procedures. London, NY: Routledge, 2012.
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