Incoterms

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. Incoterms® rules are a set of standards
used in international and domestic contracts for the delivery of goods. They are recognized by
UNCITRAL as the global standard for the interpretation of the most common terms in foreign
trade helping to avoid costly misunderstandings by clarifying the tasks, costs and risks involved
in the delivery of goods from sellers to buyers.
EXW- Ex Works
EXW is the most basic shipping intercom term that a supplier can provide. The seller makes the
item available for pick up at the factory and is not responsible for the product once it leaves the
factory doors. Instead, the buyer is responsible for transporting it from the factory and covering all
export and import clearances and insurance costs.
FOB - Free on Board
FOB means that the seller ships the goods to the nearest port, and the seller is responsible for
everything after that. The seller will drop this off at the port of shipment, and the buyer will either
pick it up themselves or, more commonly, work with a freight forwarder to ship it for them. The
seller is the one to clear the goods for export, and the buyer is responsible for the goods from the
port onwards. So, it’s vital when getting FOB quotes to ensure you get the port’s name where they
drop the goods off.
FCA - Free Carrier
FCA is just one step up from EXW, in which the seller clears the goods for export and delivers the
goods to the port of export. Next, the buyer has to unload the goods in the port and is responsible
for them once they reach the port. Next, the buyer arranges the carrier. The most significant
difference between EXW and EXW is that the seller must load the goods on the buyer’s carrier.
We should note that this is often confusing for FOB, and if you think there is confusion, feel free
to ask your supplier to elaborate and give details.
CPT - Carriage paid to
The seller pays for the goods shipped to the buyer’s import port. Once the goods arrive at the port,
the risk is transferred to the buyer. The buyer is responsible for unloading the vessel and arranging
further transportation. Even though the seller is responsible for the Export port’s cost, the buyer
assumes the risk and insurance cost once the goods are unloaded at the Export port. The seller is
responsible for export clearance and freight costs.
CIP - Carriage and Insurance paid to
It is effectively the same as CPT, except that the seller is required to obtain insurance for the goods
during transit. CIP also covers all modes of transportation, while CIF is specifically for sea freight.
We should note that CIP and CIF are the only ways risk and insurance differ. Once the goods are
unloaded at the export port, the seller assumes the insurance cost but not the risk until the goods
are unloaded at the import port.
DAT - Delivered at Terminal
The seller delivers the goods (unloaded) to the import port, and the buyer is responsible for the
cost and risk of the goods from that point on. The seller takes on all risks or costs associated with
the goods until they reach the import port. The buyer pays all imports and Customs.
DAP - Delivered at Place
The seller delivers the goods to the buyer’s final destination. The seller assumes all risks with the
shipping and either loads or pays a third party to load the goods for shipment. The buyer is only
responsible for paying the customs fee and clearing the goods for clearance. The buyer also pays
to unload the goods at the final destination.
DDP - Delivered Duty Paid
In these terms, the seller pays for and is responsible for everything. The seller pays all costs and
assumes all risks to the final destination. The buyer is only responsible for unloading the goods
once they arrive at the final destination chosen by the buyer.
FAS - Free Alongside Ship
The seller is responsible for delivering all goods to the vessel’s side at the named export port. The
seller pays for and assumes all risks until the goods are placed in the port and the seller clears the
goods for export. The buyer then takes on all costs and risks from that point on, including loading
the ship. This has one less step than FOB, in which it bears the cost and risk of loading the ship.
CFR - Cost and Freight
The seller is responsible for bearing the shipping cost until the named import port; however, the
risk is given to the buyer once the goods are loaded onto the ship at the export port and the final
delivery of goods from the destination port. We should note that this is effectively the same as CPT
above, except that CFR is specifically for water-based transport.
CIF - Cost Insurance and Freight
It is similar to the one above, except that the buyer will require the seller to take on the risk or
obtain insurance on the goods until the destination port. The seller bears all shipping costs and
assumes the risk of the goods until the destination port. The seller is also responsible for clearing
customs, but the buyer is responsible for paying the duty. Again, this is effectively the same as CIP,
except CIF is specifically for water.

Incoterms

Uploaded by

Copyright:

Available Formats

Incoterms

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Incoterms

Uploaded by

Copyright:

Available Formats

Incoterms® rules are a set of eleven three-letter trade terms, reflecting business-to-business

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.