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INCOTERMS

International Commercial Terms, known as “INCOTERMS” are internationally accepted and widely used a series of three-letter trade terms published by International Chamber of Commerce (ICC).Incoterms were established in 1936 to avoid misunderstandings or misinterpretations between different countries. Their goal is to clearly communicate the costs, risks and responsibilities related to the transportation of goods. The Incoterms rules are accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade. The terms are updated as changes in international trade occur; amendments were made in 1953, 1967, 1976, 1980, 2000, 2010 and 2020

Incoterms 2020 defines 11 rules, which are broken down into two categories based on method of delivery:


1. RULES FOR ANY MODE OR MODES OF TRANSPORT


EXW – Ex Works (….named place of delivery)
The Seller’s only responsibility is to make the goods available at the Seller’s premises. The Buyer bears full costs and risks of loading and moving the goods from there to destination, including arranging for the export clearance. It is not recommended for international moves.

FCA – Free Carrier (…named place of delivery)
Delivery is made either when goods are (1) loaded on the means of transport provided by the buyer at the seller’s stated location; or (2) when placed at the disposal of the buyer’s carrier, cleared for export by the seller. From either point of delivery, the Buyer bears the costs and risks of moving the goods to destination. The named place/address is required when FCA is used.

CPT – Carriage Paid To (…named place of destination)
The Seller delivers and transfers risk of loss or damage by handing over goods to the carrier chosen by the seller, cleared for export, who pays for moving the goods to the named place of destination. From the time the goods are transfered to the first carrier, the Buyer bears the risks of loss or damage.

CIP – Carriage And Insurance Paid To (…named place of destination)
The Seller delivers and transfers risk of loss or damage by handing over goods to the carrier chosen by the seller, cleared for export, who pays for moving the goods to the named place of destination. From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage. The Seller, however, purchases cargo insurance thru to the named place of destination.

DPU – Delivered At Place, Unloaded (named address/place of destination)
The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the Buyer’s disposal at a place of destination. The Seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination. DPU is the only Incoterms where the Seller must pay for unloading at destination. As seller is responsible for unloading the goods at destination it is highly recommended to be as specific as possible as to the named address/place of destination as all costs thru to unloading are for the selller’s account.

DAP – Delivered At Place (…named address/place of destination)
The Seller delivers when the goods are placed at the Buyer’s disposal on the arriving means of transport ready for unloading at the named place of destination or at the agreed point within that place, if any such point is agreed. The Seller bears all risks involved in bringing the goods to the named place. Delivery & Arrival at destination are the same.

DDP – Delivered Duty Paid (…named address/place of destination)
The Seller delivers the goods to the buyer when the goods are placed at the disposal of the buyer, cleared for import, on the arriving means of transport, ready for unloading, at the named place of destination. The Seller bears all costs and risks of moving the goods to destination, including the payment of Customs duties and taxes. There are limitations to DDP, as Customs formalities in the importing country may not readily allow the seller to be the legal importer of record; DAP or DPU are suggested Incoterms in such cases.


2. RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS - Free Alongside Ship (...named wharf/seaport)
The Seller delivers the goods to the buyer when the goods are cleared for export then placed alongside the ship nominated by the buyer at the named port of shipment. From that point, the Buyer bears all costs and risks of loss or damage.

FOB – Free On Board (…named wharf/seaport of shipment)
The Seller delivers the goods to the buyer on board the vessel nominated by the buyer, cleared for export, at the named wharf/seaport of shipment. From that point, the Buyer bears all costs and risks of loss or damage.

CFR – Cost And Freight (…named port of destination)
The Seller delivers the goods to the buyer on board the vessel, cleared for export to the named port of destination. The Buyer bears all risks of loss or damage once on board. Where more than one mode of transport is to be used, such as when goods are handed over to a carrier at a container terminal, it is highly recommended to use CPT instead.

CIF – Cost Insurance And Freight (…named port of destination)
The Seller delivers the goods to the buyer on board the vessel, cleared for export to the named port of destination. The Buyer bears all risks of loss or damage once on board. The Seller, however, purchases the cargo insurance to the named wharf/seaport of destination. Where more than one mode of transport is to be used, such as when goods are handed over to a carrier at a container terminal, it is highly recommended to use CPT instead.


Arranged by increased level of obligations for the seller

Terms

Description

EXW

EX Works

FCA

Free Carrier

FAS

Free Along Side ship

FOB

Free On Board

CFR

Cost and Freight

CPT

Carriage Paid To

CIF

Cost, Insurance and Freight

CIP

Carriage and Insurance Paid To

DPU

Delivered At Place, Unloaded

DAP

Delivered at Place

DDP

Delivered Duty Paid