What are Incoterms?
INCOTERMS are a set of three-letter standard trade terms most commonly used in international contracts for the sale of goods. It is essential that you are aware of your terms of trade prior to shipment.
EXW (EX Works)
The seller makes the goods available at their premises, or at another named place. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used while making an initial quotation for the sale of goods without any costs included.
FCA (Free Carrier)
The seller delivers the goods, cleared for export, at a named place. The goods can be delivered to a carrier nominated by the buyer, or to another party nominated by the buyer.
CPT (Carriage Paid To)
The seller pays for the carriage of the goods up to the named place of destination. However, the goods are considered to be delivered when the goods have been handed over to the first or main carrier, so that the risk transfers to buyer upon handing goods over to that carrier at the place of shipment in the country of export.
CIP (Carriage & Insurance Paid)
This term is broadly similar to the above CPT term, with the exception that the seller is required to obtain insurance for the goods while in transit.
DAT (Delivered at Terminal)
This Incoterm requires that the seller delivers the goods, unloaded, at the named terminal. The seller covers all the costs of transport and assumes all risk until arrival at the destination port or terminal.
DAP (Delivered at Place)
The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Under DAP terms, the risk passes from seller to buyer from the point of destination mentioned in the contract of delivery.
DDP (Delivered Duty Paid)
Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading.
FAS (Free Alongside Ship)
The seller delivers when the goods are placed alongside the buyer’s vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export.
FOB (Free on Board)
Under FOB terms the seller bears all costs and risks up to the point the goods are loaded on board the vessel. On the other hand, the buyer pays cost of marine freight transportation, bill of lading fees, insurance, unloading and transportation cost from the arrival port to destination.
CFR (Cost & Freight)
The seller pays for the carriage of the goods up to the named port of destination. Risk transfers to buyer when the goods have been loaded on board the ship in the country of export. The Shipper is responsible for origin costs including export clearance and freight costs for carriage to named port. The shipper is not responsible for delivery to the final destination from the port or for buying insurance.
CIF (Cost Insurance & Freight)
This term is broadly similar to the above CFR term, with the exception that the seller is required to obtain insurance for the goods while in transit to the named port of destination.