Incoterms

What are Incoterms?

Incoterms are internationally accepted commercial terms defining the respective roles of the buyer and seller in a framework defined by the International Chamber of Commerce (ICC).

Incoterms are delivery terms (not to be confused with payment terms) and can be part of an export-import contract. The delivery term agrees between both parties who is responsible for cost of delivery, from least responsibility, Ex Works to the most responsible DDP (Delivered Duty Paid). Whilst Incoterms is not legal it is advsible to show incoterms and delivery term in any contract between buyer and seller, as this maybe called upon if any contractual dispute arises at a later date between buyer and seller.

Incoterms are standard trade definitions used throughout the world with the aim to help traders in different countries adhere to a common set of rules.

Brief Guide to terms:

EXW – Ex Works Title and risk pass to buyer including payment of all transportation and insurance cost from the seller’s door. Used for any mode of transportation.

FCA – Free Carrier Title and risk pass to buyer including transportation and insurance cost when the seller delivers goods cleared for export to the carrier.Seller is obligated to load the goods on the Buyer’s collecting vehicle; it is the Buyer’s obligation to recieve the Seller’s arriving vehicle unloaded.

FAS – Free Alongside Ship Title and risk pass to buyer including payment of all transportation and insurance cost once delivered alongside ship by the seller. Used for sea or inland waterway transportation. The export clearance obligation rests with the seller.

FOB – Free On Board and risk pass to buyer including payment of all transportation and insurance cost once delivered on board the ship by the seller. Used for sea or inland waterway transportation.

CFR – Cost and Freight Title, risk and insurance cost pass to buyer when delivered on board the ship by seller who pays the transportation cost to the destination port. Used for sea or inland waterway transportation.

CIF – Cost, Insurance and Freight Title and risk pass to buyer when delivered on board the ship by seller who pays transportation and insurance cost to destination port. Used for sea or inland waterway transportation.

CPT – Carriage Paid To Title, risk and insurance cost pass to buyer when delivered to carrier by seller who pays transportation cost to destination. Used for any mode of transportation.

CIP – Carriage and Insurance Paid To Title and risk pass to buyer when delivered to carrier by seller who pays transportation and insurance cost to destination. Used for any mode of transportation.

DAF – Delivered at Frontier Title, risk and responsibility for import clearance pass to buyer when delivered to named border point by seller. Used for any mode of transportation.

DES – Delivered Ex Ship Title, risk, responsibility for vessel discharge and import clearance pass to buyer when seller delivers goods on board the ship to destination port. Used for sea or inland waterway transportation.

DEQ – Delivered Ex Quay (Duty Paid) Title and risk pass to buyer when delivered on board the ship at the destination point by the seller who delivers goods on dock at destination point cleared for import. Used for sea or inland waterway transportation. 

Delivered Duty Unpaid – Title, risk and responsibility of import clearance pass to buyer when seller delivers goods to named destination point. Used for any mode of transportation. Buyer is obligated for import clearance.

DDU – Delivered Duty Unpaid Seller fulfills his obligation when goods have been made available at the named place in the country of importation

DDP – Delivered Duty Paid Title and risk pass to buyer when seller delivers goods to named destination point cleared for import. Used for any mode of transportation.

Further Information on Incoterms

The International Chamber of Commerce have a website dedicated to explaining Incoterms.

Please visit www.iccwbo.org/index_incoterms.asp for further information.