Delivery terms not found in Incoterms

Delivery terms not found in Incoterms

In the world of global trade, clarity in shipping and delivery terms is of paramount importance. While Incoterms are the gold standard for this purpose, businesses often come across other terms in their dealings. In this blog post, we’ll explore ten such delivery terms not found in Incoterms and suggest the most closely aligned Incoterm alternatives for each. An abbreviation for delivery terms is ToD, meaning Terms of Delivery.

10 Delivery terms not found in Incoterms and Their Best Incoterm Alternatives

FOB Factory (or FOB Origin)

  • Description: The seller delivers the goods to the buyer’s carrier at the seller’s location or another named place.
  • Incoterm Alternative: FCA (Free Carrier) – Under FCA, the seller hands over the goods, cleared for export, at their own premises or another named place to the buyer or their designated carrier.

Destination Charges Collect

  • Description: All charges occurring at the destination (like unloading, import duties, and local delivery) are paid by the buyer.
  • Incoterm Alternative: CPT (Carriage Paid To) – The seller pays for transporting the goods to the destination, but the buyer bears all costs from there, including import duties.

Collect On Delivery (COD)

  • Description: The buyer pays for goods upon delivery.
  • Incoterm Alternative: DAP (Delivered At Place) – The seller delivers the goods at a named destination but doesn’t cover import duties. Payment mechanisms like COD can be negotiated separately.

Free On Board (Domestic Use)

  • Description: Similar to the international FOB term but used domestically, indicating the point at which sellers have fulfilled their responsibilities.
  • Incoterm Alternative: FCA – The domestic usage of Free Carrier can mimic the responsibilities split of a domestic FOB term.

Free Store Door Delivery

  • Description: The seller delivers the goods to the buyer’s store door without charging extra.
  • Incoterm Alternative: DDP (Delivered Duty Paid) – The seller assumes all responsibility and costs until the goods reach the buyer’s named place, inclusive of duties.

Store Door Pickup

  • Description: The buyer collects the goods from the seller’s store.
  • Incoterm Alternative: EXW (Ex Works) – The buyer picks up the goods from the seller’s premises, assuming all responsibilities and costs from that point onward.

Return Freight Guaranteed

  • Description: If goods are returned, the seller guarantees to cover the return freight costs.
  • Incoterm Alternative: DAP – While the Incoterm doesn’t inherently guarantee return freight, DAP allows sellers to cover delivery to a destination. Return arrangements can be added in supplementary agreements.

Prepaid and Charge

  • Description: Some freight charges are prepaid by the seller, while others are charged to the buyer.
  • Incoterm Alternative: CIP (Carriage and Insurance Paid To) – The seller pays for carriage and insurance to a named destination, but the buyer is responsible for unloading and further costs. Separate agreements can detail which specific charges fall on each party.

End of Month (EOM)

  • Description: Payment or certain delivery actions are due at the end of the month.
  • Incoterm Alternative: None directly correlates with payment terms, but DAP or CPT can be used for delivery, with EOM conditions specified separately in the sales contract.

Cash In Advance

  • Description: Payment is required before goods are dispatched or services rendered.
  • Incoterm Alternative: EXW – While EXW denotes the terms of delivery, cash in advance can be stipulated as the payment term.

Please also read blogpost about Why Buyers Typically Avoid Ex Works.

While Incoterms are comprehensive in defining the responsibilities of buyers and sellers, there are various other terms businesses might encounter. It’s essential to understand both and seek the most fitting Incoterm equivalent when needed. Remember, clarity in terms can prevent costly misunderstandings and ensure smooth business transactions.

Explaining INCOTERMS

International trade, with its vast web of transactions spanning across borders, necessitates a uniform set of guidelines to clarify the roles and responsibilities of sellers and buyers. This is where Incoterms, or “International Commercial Terms,” come into play. Published by the International Chamber of Commerce (ICC), these predefined commercial terms are the cornerstone of international trade, offering a universal interpretation and application of common contractual sales practices.

Origin of Incoterms

The genesis of Incoterms can be traced back to the early 20th century. The complexities of international trade during this era were heightened by a lack of standardized shipping practices. This inconsistency often led to disputes and misunderstandings between parties involved in cross-border transactions. Recognizing the need for a standard, the ICC, founded in 1919, took the initiative to formulate a set of international rules.

By 1936, the first version of Incoterms was introduced. This was a groundbreaking step, providing businesses and legal professionals with a concrete foundation to base their contracts upon, ensuring both clarity and security in global trade transactions.

Evolution Over the Years

Since its inception, Incoterms have undergone several revisions to address the evolving dynamics of international trade and logistics:

1936 – First Edition: This initial version laid the groundwork, setting the precedent for future adaptations.

1953 – Second Edition: Changes were introduced to cater to new carriage techniques and practices that had emerged in the post-war era.

1967 – Third Edition: This revision saw the addition of terms catering to non-maritime transport, as trade was no longer dominated solely by sea transport.

1976 – Fourth Edition: As container traffic became more prevalent, terms were adjusted to better reflect containerized goods’ handling and transportation.

1980 – Fifth Edition: Further nuances in transportation and logistics were addressed, with a focus on multimodal transport.

1990 – Sixth Edition: As technology progressed and electronic data interchange (EDI) emerged, this version included provisions relevant to electronic documentation.

2000 – Seventh Edition: The turn of the century saw a significant overhaul. Some terms were eliminated, and others were introduced, offering a more streamlined set for modern trade practices.

2010 – Eighth Edition: A decade into the 21st century, the Incoterms underwent another revision, focusing on simplification and clarification. The number of terms was reduced, and guidance notes were added for each term, providing users with more context.

2020 – Ninth Edition (Incoterms 2020): The most recent revision aims to further clarify obligations, costs, and risks involved in the delivery of goods from the seller to the buyer. New provisions were introduced considering security-related requirements and the growing importance of transportation insurance.

Each iteration of Incoterms has been a testament to the ICC’s commitment to ensuring that the terms remain relevant and cater to the continuously evolving landscape of global trade. By doing so, they’ve fostered an environment where sellers and buyers, regardless of their location, can conduct business with a shared understanding of their mutual obligations.

Here are two webpages that provide information on Incoterms 2020, sorted from general to more in-depth information:

Conclusion – Delivery terms not found in Incoterms 2020:

Incoterms have firmly established themselves as the backbone of international trade, providing a universal language for traders worldwide. Through its various editions, the ICC has ensured that these terms resonate with the current practices and challenges of the trade environment. As global commerce continues to change and evolve, so too will Incoterms, ever adapting to meet the needs of the international trading community.

Note: Illustration created with DALL-E on October 19, 2023.

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