The International Commercial Terms (Incoterms) are a set of pre-defined commercial terms published by the International Chamber of Commerce (ICC) that are widely used in international commercial transactions.
EXW – Ex Works
This states that the selling party agrees to hand over ownership of the goods at an agreed location. From the moment of handover, the buyer holds all responsibility and risk for the entirety of the shipping process.
FCA – Free Carrier
This term designates that the selling party makes the goods being sold available at either his own premises or at another location. The seller is responsible for clearing the goods for export and pays any associated fees. The buyer must instruct the carrier to provide a Bill of Lading when they load the goods.
FAS – Free Alongside Ship
The seller has sole responsibility for everything until the goods are delivered next to the ship’s loading point. At that point, all costs and risks transfer to the buyer who also has to arrange export and import clearances.
FOB – Free On Board
All costs and risks lie with the seller until the goods are on board the ship. The seller is also responsible for all export clearance processes. Once on board the ship, responsibility for the goods shifts to the buyer.
CFR – Cost And Freight
The same conditions apply as with FOB but the seller must also pay for transportation of the goods to the port of shipment.
CIF – Cost, Insurance, and Freight
In this scenario, the seller has the same obligations as with CFR, but in this case they must also pay for minimum insurance. If the buyer wants more comprehensive insurance on the goods, then they must pay for it themselves.
CPT – Carriage Paid To
The same responsibilities and terms apply with this term as with the FCA, but in this case the seller also pays all delivery costs to a certain location.
CIP – Carriage Insurance Paid To
The seller has the same responsibilities as with CPT but has to pay insurance costs and the insurance must have a high coverage ratio. However, the parties can come to an agreement to apply for more limited coverage.
DAP – Delivered At Place
The seller delivers the goods to an address or location agreed between both parties. The seller covers all costs and risk of loss during the delivery process but those responsibilities pass to the buyer once delivery has been made to that agreed location.
DPU – Delivered at Place Unloaded
The seller covers all costs and risks to bring the goods to an agreed location. There they can be unloaded and moved to other – or similar – modes of transportation. The seller organizes customs and unloading, but the buyer is responsible for customs clearance and any associated rights.
DDP – Delivered Duty Paid
The seller covers all costs and risks of transportation, carries out all export and import processes, and also pays any required import duties. Those responsibilities only end when the goods arrive at the destination address and are ready to be unloaded.