Last Updated: April 4th, 2022/Categories: Sales/5.2 min read/
Incoterms-exw-fca-fas-fob-cfr-cif-cpt-cip-dpu-dap-ddp

What are Incoterms?

Short for “International Commercial Terms,” the Incoterms are a set of globally recognized trade rules organized into 11 abbreviated terms. First published in Paris in 1936, by the International Chamber of Commerce (ICC), the Incoterms rules provide:

  • Uniform interpretation of common contract clauses primarily found in export and import transactions
  • Illustration of the timing and division of costs and risks between buyers and sellers
  • Instructions to carriers, forwarders, customs brokers, banks, and other financial institutions involved in shipping goods

The Incoterms rules are not mandatory. They are not laws enacted by governments, but rather, guidelines agreed to by parties to a contract. Ultimately, it’s up to the buyer and the seller to agree to each party’s responsibilities, as well as the cost and risk of a shipment before it takes place.

E terms

  • EXW – Ex Works (Place of Delivery, Usually Seller’s Premises)
    “Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (Example: works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.

F terms

  • FCA – Free Carrier (Place of Delivery)
    “Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

  • FAS – Free Alongside Ship (Port of Shipment)
    “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

  • FOB – Free On-Board (Port of Shipment)
    “Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

C terms

  • CFR – Cost and Freight (Port of Destination)
    “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

  • CIF – Cost, Insurance and Freight (Port of Destination)
    “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
    ‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”

  • CPT – Carriage Paid To (Place of Destination)
    “Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

  • CIP – Carriage and Insurance Paid To (Place of Destination)
    “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
    ‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”

D terms

  • DDU – Delivered Duty Unpaid (DDU) is an old international trade term indicating that the seller is responsible for the safe delivery of goods to a named destination, paying all transportation expenses, and assuming all risks during transport. Once the goods arrive at the agreed-upon location, the buyer becomes responsible for paying import duties, as well as further transport costs.

  • DAP – Delivered At Place (Place of Destination)
    “Delivered at Place” means that 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. The seller bears all risks involved in bringing the goods to the named place.

  • DDP – Delivered Duty Paid (Place of Destination)
    “Delivered Duty Paid” means that the seller delivers the goods 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 the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.