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.

Allocations of costs to buyer/seller according to Incoterms 2010

E Group – Departure

EXW (EX Works)

EX Works EXW named place Incoterms® 2010 — This term may be used for either domestic or international trade.

F Group - Main Carriage Unpaid

FCA – Free Carrier

FCA – Free Carrier (named place of delivery) – Any mode of transport is covered. This is especially designed for transport in containers, as well as the handing over of the goods or placing them at the buyer’s disposal. The place of delivery may be fixed at the place of business of the seller or at any place between the seller and the port. Import and transit clearance are up to the buyer to obtain while export clearance is up to the seller to obtain. This is designed for the seller to place the goods on board or procuring their placement on board the carrier. It allows the seller of a commodity to resell it to someone while the good is in transit. It is already on board and the impossibility of putting it on board as part of the sale is eliminated.

FAS – Free Alongside Ship

FAS – Free Alongside Ship (named port of shipment) – This is only for sea or inland waterway transport, and placing the goods at the buyer’s disposal. It 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

FOB – Free On Board (named port of shipment) – This is also only for sea or inland waterway transport.  It 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 Group - Main Carriage Paid

CFR – Cost and Freight (named port of destination)

CFR – Cost and Freight (named port of destination) – This is only for sea or inland waterway transport. It 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 & Freight (named port of destination)

CIF – Cost, Insurance & Freight (named port of destination) – This is only for sea or inland waterway transport. It 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 (named place of destination)

CPT – Carriage Paid To (named place of destination) – This involves any mode of transport, and the handing of the goods over to the carrier. It 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 (named place of destination)

CIP – Carriage and Insurance Paid to (named place of destination) – Any mode of transport is covered. It 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 Group – Arrival

DAT – Delivered At Terminal (named terminal at port or place of destination)

DAT – Delivered At Terminal (named terminal at port or place of destination) – This term involves any mode of transport, with the goods unloaded and placed at the buyer’s disposal. It means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. 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.

DAP – Delivered At Place (named place of destination)

DAP – Delivered At Place (named place of destination) – This term involves any mode of transport, and the placing of the goods at the buyer’s disposal, ready for unloading. It 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 (named place of destination)

DDP – Delivered Duty Paid (named place of destination) – This allows for any mode of transport, and placing the goods at the buyer’s disposal ready for unloading. It 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. The clearance for export, transit and import are up to the seller.

Previous terms from Incoterms 2000 (DAF, DES, DEQ, DDU) eliminated from Incoterms 2010.