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Home > Incoterms What are Incoterms? When buying or selling in international markets it is critical that all parties to the transaction know and understand the terms of sale. For example, a seller may think that he has quoted a price to a buyer exclusive of the freight costs. If the buyer thought that the price included the freight charges then a costly misunderstanding has occurred. For this reason the International Chamber of Commerce has developed a set of trade terms that are used worldwide. They come under the general heading of Incoterms, which is defined by the "Guide to Incoterms 2000", published by the International Chamber of Commerce, Paris, France. E Term: The seller makes the goods available to the buyer at the seller's own premises. EXW - EX WORKS (...named place)
"Ex Works" (EXW) means the seller fulfills the obligation to deliver when he or she has made the goods available at his premises or another named place (i.e., works, factory, warehouse, etc.) to the buyer. In particular, the seller is not responsible for loading the goods in the vehicle provided by the buyer or for clearing the goods for export. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller's premises. If the parties wish the seller to be responsible for the loading of the goods on departure and its risks and costs, this should be made clear by adding explicit wording to this effect in the contract of sale. This term should not be used when the buyer cannot carry out the export formalities directly or indirectly. In such circumstances, the FCA term should be used, provided the seller agrees that he will load at his cost and risk. Return to top. F Terms: The seller is called upon to deliver the goods to a carrier appointed by the buyer. FCA - FREE CARRIER (...named place)
"Free Carrier" (FCA). This term has been designed to meet the requirements of modern transport, particularly such "multi-modal" transport as container or "roll on - roll off" traffic trailers and ferries. It is based on the same main principle as FOB except that the seller fulfills his obligations when he delivers the goods into the custody of the carrier at the named point. If no precise point can be mentioned at the time of the contract of sale, the parties should refer to the place or range where the carrier should take the goods into his charge. The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship's rail. A "Received for Shipment" Bill of Lading is acceptable in lieu of an "On Board" Bill of Lading. This allows exporters to receive shipping documents more quickly and to get paid in a more timely manner. "Carrier" means any person by whom or in whose name a contract of carriage by road, rail, air, sea or a combination of modes has been made. When the seller has to furnish a bill of lading, waybill or carrier's receipt, he duly fulfills this obligation by presenting such a document issued by a person so defined. Return to top. FAS - FREE ALONGSIDE SHIP (...named port of shipment)
"Free Alongside Ship" (FAS). This means that the seller fulfills his obligation to deliver when the goods have been placed alongside the vessel at the named port of shipment. The buyer has to bear all costs and risks of loss or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export. Return to top. FOB - FREE ON BOARD (...named port of shipment)
"Free On Board" (FOB). This means that the seller fulfills his obligation when the goods are placed on board a ship by the seller at a port of shipment named in the sales contract. The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods pass the ship's rail. All costs from that point forward, including freight and insurance, are for the buyer's account. This term requires the seller to arrange export clearance. This term can be used only for sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship's rail, the FCA term should be used. Return to top. C Terms: The seller must contract for carriage, but without assuming the risk of loss or damage to the goods. CFR - COST AND FREIGHT (...named port of destination)
"Cost And Freight" (CFR). The seller must pay the costs and freight necessary to bring the goods t the named destination, but the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. The CFR term requires the seller to clear the goods for export. This term should only be used for sea and inland waterway transportation. If the parties do not intend to deliver the goods across the ship's rail, the CPT term should be used. Return to top. CIF - COST, INSURANCE AND FREIGHT (...named port of
destination) "Cost, Insurance and Freight" (CIF). This means that the seller delivers when the goods pass the ship's rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss or damage, as well as additional costs due to events occurring after the time of delivery are transferred from the seller to the buyer. In CIF the seller also has to procure marine insurance against the buyer's risk of loss or damage to the goods during the carriage. Consequently, the seller contracts for insurance and pays the premium. The buyer should note that under the CIF term the seller is required to obtain insurance only on minimum cover. The CIF term requires the seller to clear the good for export. This term should be used only for sea and inland waterway transport. If the parties do not intend to deliver the merchandise across the ship's rail, the CIP term should be used. Return to top. CPT - CARRIAGE PAID TO (...named place of destination)
"Carriage Paid To" (CPT). This term means that the seller delivers the goods to the carrier nominated by him, but the seller must also pay the cost of carriage to bring the goods to the named destination. Like CFR, "Freight or Carriage Paid To ...", the buyer bears all risks and any other costs occurring after the goods have been so delivered. "Carrier" is defined as any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of methods. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. This CPT term requires the seller to clear the goods for export. Return to top. CIP - CARRIAGE AND INSURANCE PAID TO (...named place
of destination) "Carriage and Insurance Paid to" (CIP). This term is the same as "Carriage Paid To..." but with the addition that the seller has to procure insurance against the risk of loss of or damage to the goods during the carriage. The seller contracts with the insurer and pays the insurance premium. CIF is used for goods carried by sea, while CIP is used irrespective of the mode of transport. This term allows the exporter the greatest control over all aspects of shipment. Return to top. D Terms: The seller has to bear all costs and risks needed to bring the goods to the country of destination. DAF - DELIVERED AT FRONTIER (...named place)
"Delivered At Frontier" (DAF). This term is used typically when goods are being moved overland, and delivery of the goods will take place at the frontier of an adjoining country. It means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country. The frontier must be clearly named. For example, goods being shipped from the U.S. to Mexico might have Laredo, Texas, named as the frontier. The shipper has the responsibility of delivering the goods to Laredo, while the buyer has the responsibility to bring the goods across the border into Mexico and clear Mexican customs. This term may be used irrespective of the mode of transport when goods are t be delivered at a land frontier. When delivery is to take place in the port of destination, on board a vessel or on the wharf, the DES or DEQ terms should be used. Return to top. DES - DELIVERED EX SHIP (...named port of destination)
"Delivered Ex Ship" (DES).
This term means that the seller delivers when the goods are placed at the
disposal of the buyer on board the ship, not cleared for import at the named
port of destination. The seller must bear all the costs and risks
involved in bringing the goods to the named port destination before
discharging. If the parties wish the seller to bear the costs and risks
of discharging the goods, then the DEQ terms should be used. This term
can be used only when the goods are to be delivered by sea or inland waterway
or multimodal transport on a vessel in the port of destination.
Return to top. "Delivered Ex Quay" (DEQ). This term means that the seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay at the named port of destination. The seller bears costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay. The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. This term can be used only when the goods are to be delivered by sea or inland waterway or multimodal transport on discharging from a vessel onto the quay at the port of destination. If the parties wish to include in the seller's obligations the risks and costs of the handling of the goods from the quay to another place (warehouse, terminal, transport station) in or outside the port, the DDU or DDP terms should be used. DDU - DELIVERED DUTY UNPAID (...named placeof
destination) "Delivered Duty Unpaid" (DDU). This term means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the full cost and risk involved in bringing the goods thereto other than, where applicable, any "duty" (which includes the responsibility for the risks of the carrying out of customs formalities, and payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Such "duty" has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time. This term may be used irrespective of the mode of transportation, but when delivery is to take place in the port of destination on board the vessel or on the quay, the DES or DEQ terms should be used. Return to top. DDP - DELIVERED DUTY PAID (...named place of
destination) "Delivered Duty Paid" (DDP). This term means that the seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller must bear all costs and risks involved in bringing the goods thereto including, where applicable, any "duty" (which includes the responsibility for and the risk of carrying out of customs formalities, customs duties, taxes and other charges) for import in the country of destination. While the term "EXW" signifies the seller's minimum obligation, the "DDP" term represents the maximum obligation. If the parties wish the buyer to bear all risks and costs of the import, the DDU term must be used. The DDP term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or on the quay, the DES or DEQ terms should be used. Return to top.
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Ship, Air, Rail & Truck OK.