Question 1

What are Incoterms 2020?

Accepted Answer

Incoterms 2020 are 11 international trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international trade. They specify who pays for freight, insurance, and customs duties - and where the risk transfers from seller to buyer. The 2020 edition replaced Incoterms 2010 with updated terms including a new DPU term and enhanced LCL/FCA terms.

Question 2

Which Incoterm is most commonly used by Indian exporters?

Accepted Answer

FOB (Free On Board) is the most commonly used Incoterm by Indian exporters. Under FOB, the Indian exporter is responsible for getting the goods to the named port of loading and loading them onto the vessel. Once loaded, all risk and cost transfers to the buyer. CIF (Cost, Insurance, Freight) is the second most common, where the Indian exporter also arranges and pays for ocean freight and insurance to the destination port.

Question 3

What is the difference between FOB and CIF in Indian exports?

Accepted Answer

Under FOB, the Indian exporter's responsibility ends when goods are loaded onto the vessel at the Indian port. The buyer arranges and pays for ocean freight and insurance. Under CIF, the Indian exporter arranges and pays for ocean freight + insurance to the named destination port - but risk still transfers when the goods are loaded at the origin port. CIF gives the exporter more control over freight costs but also more responsibility.

Question 4

What does EXW mean for Indian exporters?

Accepted Answer

EXW (Ex Works) means the buyer takes responsibility from the seller's premises (factory or warehouse). The buyer arranges all transport - inland haulage, customs export clearance, ocean freight, import customs, and final delivery. For Indian exporters, EXW is rarely advisable because it puts Indian export customs clearance responsibility on the foreign buyer, which is impractical.

Question 5

What is DDP and why is it risky for Indian exporters?

Accepted Answer

DDP (Delivered Duty Paid) means the seller is responsible for everything - all freight, insurance, and import customs duties and taxes at the destination. For Indian exporters, DDP is risky because you take on the import duties of a foreign country without full knowledge of that country's import regulations, duty rates, and customs procedures. It also makes you the importer of record in the destination country, which has legal and tax implications.

Term	Full Name	Mode	Risk Transfers	Buyer Pays
EXW	Ex Works	Any mode	At seller's premises	Everything
FCA	Free Carrier	Any mode	Named place (after customs export)	Freight from named place
FAS	Free Alongside Ship	Sea only	Alongside vessel at origin port	Loading + ocean freight
FOB	Free On Board	Sea only	On board vessel at origin port	Ocean freight + insurance
CFR	Cost & Freight	Sea only	On board vessel (but seller pays freight)	Insurance + destination
CIF	Cost, Insurance & Freight	Sea only	On board vessel (seller pays freight+ins)	Destination handling
CPT	Carriage Paid To	Any mode	Named destination	Import customs + final delivery
CIP	Carriage & Insurance Paid	Any mode	Named destination	Import customs + final delivery
DAP	Delivered At Place	Any mode	Named destination (import not cleared)	Import duties only
DPU	Delivered at Place Unloaded	Any mode	After unloading at destination	Import duties only
DDP	Delivered Duty Paid	Any mode	Seller bears full responsibility	Nothing

Incoterms 2020 - Complete Guide for Indian Exporters & Importers

All 11 Incoterms 2020 at a Glance

Incoterms 2020 - FAQ