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Incoterms

The Incoterms® rules, from the International Chamber of Commerce (ICC), are 11 guidelines clarifying the responsibilities of sellers and buyers in international transactions. Each Incoterms rule precisely defines the responsibilities, expenses and risks of buyers and sellers involved. Incoterms are grouped into two categories: rules for any mode of transport and rules for sea and inland waterways transport. 

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RULES FOR ANY MODE OF TRANSPORT 

EXW – Ex Works  

  • The buyer, or importer is responsible for all costs, duties, insurance and risk associated with the shipments. 
  • The seller, or exporter is to make the cargo available to the buyer at the seller’s premises 
  • Risk transfers from seller to buyer once the seller has made the goods available and ready for shipment 

Details: Seller is only responsible for making the goods available at the seller’s premises. The buyer bears the full risk from there to the destination. 

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FCA  – Free Carrier   

  • The seller, or exporter is responsible for loading the goods into the first vehicle of the transporter who will collect the goods and is required to complete all origin customs formalities. 
  • The buyer, or importer arranges transport and is responsible for import declarations and insurance, but not for loading on first transport and export declaration. 
  • Risk transfers to the buyer once the cargo has been loaded on first transport mode. 

Details: Seller is responsible for delivery to the custody of the carrier, which is provided by the buyer. Risk is transferred as soon as loading has taken place. 

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CPT  – Carriage Paid to  

  • The seller, or exporter is responsible for all costs up to the port of destination including all local costs at origin and the export declaration, but does not have transport risk.  
  • The buyer, or importer: all costs up to the port/airport specified in the Incoterm have been paid, including local costs of that port/airport.  
  • Risk transfers when Seller hands goods to the carrier.  

Details: Seller delivers the goods to the carrier at an agreed place of delivery and pays for transport to the named destination. Risk is transferred at the place of delivery, whereas the seller pays for transport to the destination. 

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CIP –  Carriage and Insurance Paid To  

  • The seller, or exporter is responsible for all costs up to the port of destination including all local costs at origin, the export declaration and transport insurance , but does not have transport risk.  
  • The buyer, or importer: all costs up to the port/airport specified in the Incoterm have been paid, including local costs of that port/airport and transport insurance. 
  • Risk transfers when Seller hands goods to the carrier.  

Details: Seller delivers the goods to the carrier at an agreed place of delivery and pays for transport to the named destination. Risk is transferred at the place of delivery, whereas the seller pays for transport to the destination and insurance. 

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DAP – Delivered at Place  

  • The seller, or exporter is responsible for delivery to the location stated after the Incoterm, including any insurance if any this has been agreed. The import declaration and the costs of import duties and taxes are for the importer/buyer 
  • The buyer, or importer is responsible for unloading at the location stated after the Incoterm and import custom formalities.  
  • Risk transfers when the seller delivers the goods at the buyer’s disposal 

Details: Seller delivers the goods to the disposal of the buyer on the agreed place. Seller bears the risk until the goods are made ready for unloading. 

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DPU – Delivered at Place Unloaded  

  • The seller, or exporter is responsible for delivery to the location stated after the Incoterm, including the unloading. The import declaration and the costs of import duties and taxes are for the importer/buyer 
  • The Buyer, or importer is responsible for the import declaration and the costs of import duties and taxes. 
  • Risk Transfers when the seller unloads the goods from arriving transportation at importer disposal at the named place of destination. 

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DDP – Delivered Duty Paid  

  • The seller, or exporter is responsible for delivery to the location stated after the Incoterm and pays for transport. The seller is also responsible for destination customs formalities, duties and taxes. 
  • The buyer, or importer is responsible for unloading the arriving transport. The buyer does not have to arrange anything and only needs to sign for receipt.   
  • Risk transfers when seller places the goods, cleared for import, at buyer’s disposal on arriving transport at the named place. 

Details: Seller is responsible for bringing the goods to the destination, paying any duty, and making the goods available to the buyer. Risk is transferred as soon as the buyer has access to the goods ready for unloading at the agreed destination. 

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RULES FOR SEA AND INLAND WATERWAY TRANSPORT 

FAS – Free Alongside Ship   

  • Seller, or exporter is responsible for transporting the goods from their premises, completes origin customs formalities, and ensures the goods are safely delivered alongside the international mode of transport. 
  • Buyer, or importer is fully responsible and bears all cost after cargo has been places  alongside the vessel for export transportation. ‍ 
  • Risk Transfers once the seller has delivered goods to the named port alongside the vessel. 

Details: Seller is responsible for delivery of the goods at the quay alongside the ship. From this point onwards, risk lies with the buyer 

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FOB – Free on Board 

  • Seller, or exporter is responsible for transporting the goods from their premises onto the international mode of transport, including export customs formalities. 
  • Buyer, or importer is responsible for transport from the port of departure. You are also responsible for insurance and import declaration in the country of destination. 
  • Risk Transfers once the goods are loaded on the international mode of transport. 

Details: Seller is responsible for delivery of the goods loaded on board the ship. Risk is transferred as soon as the goods have been set down inside the ship. 

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CFR – Cost and Freight   

  • The seller, or exporter is responsible for all origin customs formalities and is also required to cover the international freight charges to the destination port. 
  • The buyer, or importer is responsible for import formalities and unloading at the  destination port. 
  • Risk transfers when the seller hands goods to transport or carrier at loading port, without bearing ocean transport risk.  

Details: Seller covers the cost of freight, to the named port of destination. Risk is transferred as soon as the goods have been set down inside the ship at the port of load. 

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CIF –  Cost Insurance and Freight  

  • The seller, or exporter is responsible for all origin customs formalities, ocean freight charges and insurance up to the destination port.  
  • The buyer, or importer is responsible for import formalities and unloading at the  destination port. 

Risk transfers when seller hands goods over to carrier and set down inside the ship, without bearing transport risk 

Details: important to note two things in particular for the CIF term: 

Firstly, should the goods be damaged in transit, the buyer is required to file the insurance claim, not the seller. 

Secondly, for a shipment to qualify for the CIF term, the cargo must be partially moved by ocean freight. 

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