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Understanding incoterms

Everything you need to know about incoterms for international shipping. What are they, and what you need to get your goods delivered.

Updated this week

Incoterms (international commercial terms) are a series of 11 internationally recognised, universal terms that define and clarify the obligations between buyers and sellers, and is published by the International Chamber of Commerce (ICC).

Incoterms clarify the responsibilities of buyers and sellers in international trade contracts. They are used to avoid confusion. Incoterms are separated by modes of transport, including any mode of transport and sea or inland waterway transport. Some important points are that incoterms are not a substitute for a complete contract, and the 2020 version updated some security cost responsibilities.

❝First published by ICC in 1936, Incoterms® rules are a set of eleven three-letter trade terms, reflecting business-to-business practice in contracts for the sale and purchase of goods.❞

📚 Read more from the International Chamber of Commerce

This article explains the most common incoterms. For information on how to manage your incoterm settings, see the Incoterm settings article.


Shipping DAP/DDU or DDP

There are 11 different incoterms, each of which applies to a different mode of transport and set of responsibilities. Incoterms supported by Shippit are:

Incoterm

Full name

Description

DDU

Delivered Duty Unpaid

Receiver pays duties and taxes upon arrival

DDP

Delivered Duty Paid

Sender pays all duties and taxes before delivery

EXW

Ex Works

Buyer is responsible for all transport and customs from seller’s premises

FCA

Free Carrier

Seller delivers goods to a carrier or another person nominated by the buyer

CPT

Carriage Paid To

Seller pays carriage to the named destination, risk transfers to buyer upon handing to carrier

CFR

Cost and Freight

Seller pays costs and freight to destination port, risk transfers at shipment

CIP

Carriage and Insurance Paid To

Seller pays carriage and insurance to destination, risk transfers to buyer upon handing to carrier

CIF

Cost, Insurance and Freight

Seller pays costs, insurance, and freight to destination port, risk transfers at shipment

DAF

Delivered At Frontier

Seller delivers goods to a named border point before customs border

DAT

Delivered At Terminal

Seller delivers goods unloaded at a named terminal

DAP

Delivered At Place

Seller delivers goods ready for unloading at the named place, buyer pays duties and taxes

DPU

Delivered at Place Unloaded

Seller delivers goods unloaded at the named place

DES

Delivered Ex Ship

Seller delivers goods on board the ship at the destination port

DEQ

Delivered Ex Quay

Seller delivers goods on the quay at the destination port

FAS

Free Alongside Ship

Seller delivers goods alongside the vessel at the port of shipment

FOB

Free On Board

Seller delivers goods on board the vessel at the port of shipment


Common incoterms

The most common incoterms used for retail international shipping are:

Delivered at place, or delivered duty unpaid (DAP/DDU)

The seller delivers the goods to the buyer's designated place at the destination. The buyer is responsible for all costs and risks associated with transporting the goods to the destination, including customs clearance fees, duty fees, and taxes when the import arrives.

Delivered duty unpaid (DDU) was officially replaced by delivered at place (DAP) in the Incoterms 2010 revision that went into effect on 1 January, 2011. Shippit supports carriers that use the older terminology, so you might see both terms used interchangeably, depending on what carrier you are using.

When you ship DAP/DDU, the price your customer sees at the checkout is not the final price that they need to pay. This has the potential to cause confusion, and so it is important that you communicate to your customers that additional fees and charges could be applied as their order moves through the network.

For more information about shipping DDP or DAP/DDU with Shippit, see the Shipping DDP and DDU article.

Delivered duty paid (DDP)

The seller delivers the goods to the buyer's designated place at the destination, pays all customs duties and taxes, and is responsible for all costs and risks associated with transporting the goods to the destination, including unloading the goods from the carrier.

When you ship DDP, the price your customer sees at the checkout is the final price that they are charged, including all fees, duties, and taxes. This means they see a higher shipping price, but that they are not surprised by additional fees later on.

💡NOTE: If you are shipping goods internationally with Australia Post, your account defaults to DAP/DDU. You can change this to DDP by adding the appropriate AGPL product codes. For more information, see the get to know Australia Post article.

For more information about shipping DDP or DAP/DDU with Shippit, see the Shipping DDP and DDU article.

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