Incoterms

Incoterms are shipping and delivery rules developed by the International Chamber of Commerce (ICC) to provide specific guidance and clear obligations regarding costs and risks for the purchaser and seller in international trade transactions. These terms provide a series of international rules used to interpret the trade terms most commonly used in foreign trade and define how costs and risks must be shared during transportation. They state the point of delivery and identify where transfer of risk occurs, but do not regard the actual transfer of title.

Incoterms are regularly updated to reflect changes in international trade over the past ten years. The Incoterms given on this page refer to the terms updated to 2020 (ICC publication 723E). Check them often to make sure you don’t miss any updates or details.

The terms are divided into 4 groups

E – Shipping/Starting group
F – Main carriage unpaid group
C – Main carriage paid group
D – Delivery/Arrival

Any mode of transportation

EXW / Ex Works (Named Place of Delivery)

The seller makes the goods available at their premises. The buyer is responsible for all the costs.} Under this trade term, the buyer assumes most of the responsibility and the seller has minimum obligations. The term Ex Works is often used when an initial quote is made for sale of the goods without any costs included. EXW means that the seller has the goods ready for collection at their premises on the date agreed, without any obligation to load the goods onto the vehicle. The buyer pays all the transportation costs and assumes the risks for transportation of the goods to destination.

FCA / Free Carrier (Named Place of Delivery)

The seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or at another named place. The seller is responsible for loading the goods onto the mode of transport arranged by the buyer. In the recent Incoterms 2020, an option has been included for parties to agree to issue an on-board bill of lading to the seller for FCA freight. The seller is responsible for export customs clearance procedures and the risk is transferred on delivery.

This rule can be used regardless of the mode of transport and can also be used when more than one mode of transport is used.

CPT / Carriage Paid to (Named Place of Destination)

The seller pays the costs of transportation necessary to deliver the goods to the carrier or to another place of destination named by the seller, by the agreed date. The risk passes when the goods are delivered to the first carrier. The seller is responsible for export customs clearance procedures.

This rule can be used regardless of the mode of transport and can also be used when more than one mode of transport is used.

CIP / Carriage and insurance paid to (Named Place of Destination)

The seller pays the costs of transportation and insurance necessary to deliver the goods to the carrier or to another place of destination named by the seller, by the agreed date. The risk passes when the goods are delivered to the first carrier. The seller is responsible for export customs clearance procedures.

A higher level of insurance cover for goods shipped CIP is now required to comply with Institute Cargo Clause A.

This rule can be used regardless of the mode of transport and can also be used when more than one mode of transport is used.

DAP / Delivered At Place (Named Place of Destination)

The seller is responsible for delivery of the goods, ready for unloading, at the named place of destination. The seller assumes all the risks of delivering the goods to the name place of destination. The seller is obliged to deliver the goods to a name place of destination, beyond the terminal The seller is responsible for export customs clearance procedures.
This rule can be used regardless of the mode of transport and can also be used when more than one mode of transport is used.

Sea and inland waterway transportation

FAS / Free Alongside Ship (Named Port of Shipment)

The seller delivers when the goods are placed alongside the ship (on a quay or a barge) designated by the buyer in the named port. The seller must clear the goods for export. The transfer of risk passes when the goods are placed alongside the ship at the named port. This rule is to be used only for sea or inland waterway transportation.

FOB / Free on Board (Named Port of Shipment)

The seller must deliver the goods on board the ship designated by the buyer, at the named place and time, or procure the goods already delivered in this manner. The seller bears the costs of loading the goods on board the ship and all customs export clearance duties. The transfer of risk takes place when the goods are on board the ship designated by the buyer at the named port.

This rule is to be used only for sea or inland waterway transportation.

CFR Cost and freight (Named Port of Destination)

The seller delivers when the goods are loaded on board the ship or procures the goods already delivered in this manner The risk of loss of or damage to the goods passes when the goods are on board the ship. The seller must bear the costs of carriage and freight necessary to bring the goods to the named port of destination. There is no obligation to provide insurance under this Incoterm.

This rule is to be used only for sea or inland waterway transportation.

CIF Cost, Insurance and freight (Named Port of Destination)

The seller delivers when the goods are loaded on board the ship or procures the goods already delivered in this manner The risk passes when the goods are on board the ship. The seller must bear the costs of carriage and freight necessary to bring the goods to the named port of destination. The seller must provide minimum insurance in accordance with the provisions of Institute C .

This rule is to be used only for sea or inland waterway transportation.