Practical Guide to Incoterms 2021

Incoterms are standardized trade rules developed by the International Chamber of Commerce, which clarify the responsibilities, costs, and risk allocation of buyers and sellers in international freight transportation. They are the core tool for avoiding trade disputes and regulating transaction processes. The 2021 version is also adapted to the development needs of digital trade.

Incoterms 2021 covers 11 trade terms, divided into four categories, with the most commonly used being FOB, CIF, DAP, and DDP. FOB (Free On Board) is the responsibility of the seller to load the goods onto the ship, and the risk is transferred to the buyer after the goods are loaded onto the ship; CIF (Cost, Insurance, Freight) is the responsibility of the seller for transportation and insurance, and the risk is transferred after shipment; DAP (Delivery at Destination) The seller is responsible for transporting the goods to the designated destination and is not responsible for customs clearance and taxes; DDP (Delivered Duty Paid) The seller is responsible for the entire process, including customs clearance and taxes.

When choosing trade terms, enterprises need to consider their own strength, logistics capabilities, and risk tolerance. Novice companies can prioritize using DDP terminology and entrust complex processes such as customs clearance and taxes to professional logistics providers to reduce risks; Experienced enterprises can choose FOB, CIF and other terms to independently control the transportation process and reduce costs.

It should be noted that trade terms should be clearly written into the contract to avoid verbal agreements. At the same time, it is necessary to have a clear understanding of the corresponding responsibilities of the terms to avoid disputes caused by misunderstandings and ensure the smooth development of international trade.