INCOTERMS (International Commercial Terms)

International commercial terms or Incoterms are a series of sales terms that are used by businesses throughout the world. Incoterms are used to make international trade easier. They are used to divide transaction costs and responsibilities between buyer and seller. Incoterms were introduced in 1936 and they have been updated six times to reflect the developments in international trade. The latest revisions are sometimes referred to as Incoterms 2000. There are thirteen Incoterms that are used by businesses and are used in four different areas.

EXW

Ex Works (… named place)

The seller is responsible to make the goods available to the buyer at the seller’s own premises. The buyer bears all costs and risk in delivering the goods from the seller’s premise to the named place of destination.

FCA

Free Carrier (… named place)

The seller has to fulfill the obligations to deliver the goods and clear them for export to the carrier named place where the risk of loss and damage is also transferred from seller to buyer.

FAS

Free Alongside Ship (…named port
of shipment)

The seller has to fulfill the obligations to deliver the goods alongside the vessel on the quay at the named port of shipment, where the buyer bears all costs and risk from that time.

FOB

Free On Board (…named port of shipment

The seller has to fulfill the obligations to deliver the goods on board the vessel at the named port of shipment and clear the goods for export. The buyer bears all costs and risks when the goods are passed over the ship’s rail.

CFR

Cost and Freight (…named port of destination)

The seller has to pay for the costs and freight necessary to deliver the goods to the named port of destination. But the buyer bears the risk of loss and damage when the goods are passed over the ship’s rail in the port of shipment. Insurance and import clearance is the buyer's responsibility.

CIF

Cost, Insurance and Freight
(…named port of destination)

The seller has to pay for the costs and freight necessary to deliver the goods to the named port of destination. The seller has to procure transport insurance against the risk of loss or damage to the goods. The seller must contract with the insurer and pay the insurance premium. The buyer bears the risk of loss and damage when the goods are passed over the ship’s rail in the port of shipmen, and pay for the import clearance.

CPT

Carriage Paid To (…named place of destination)

The seller has to fulfill the obligations to pay for freight to deliver the goods to the named place of destination and clear them for import. The risk of loss or damage to the goods and any cost increases is transferred from the seller to the buyer when the goods are delivered to the custody of the final carrier, but not at the ship's rail. The buyer pays for import clearance.

CIP

Carriage and Insurance Paid To (…named place of destination)

The seller has to fulfill the obligations to pay for freight to deliver the goods to the named place of destination and clear them for import. The risk of loss or damage to the goods and any cost increases is transferred from the seller to the buyer when the goods are delivered to the custody of the final carrier, but not at the ship's rail.

The seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage. The seller contracts with the insurer and pays the insurance premium.

DAF

Delivered At Frontier (…named place)

The seller has to fulfill the obligations to deliver the goods to the named place of frontier before the customs border of the adjoining country. The term is primarily used when goods are carried by rail or truck. The seller bears the full cost and risk in delivering the goods up to the named place and the buyer has to arrange and pay for the goods to clear customs.

DES

Delivered Ex Ship (…named port of destination)

The seller has to fulfill the obligations to make the goods available to the buyer on board the ship at the named port of destination The seller bears the full cost and risk involved in delivering the goods there while the buyer bears the cost of unloading the goods and any customs duties.

DEQ

Delivered Ex Quay (… named port of destination)

The seller has to fulfill the obligations to make the goods available to the buyer on the quay at the named port of destination and clear for import. The seller bears the full cost and risks in delivering the goods to that point including unloading. It can be stated with "ex quay duty paid" in which the seller has to pay the duty; Or "ex quay duty on buyer's account" in which the duty also is paid by the seller, but the buyer must reimburse the seller.

DDU

Delivered Duty Unpaid (…named place of destination)

The seller has to fulfill the obligations and bear all costs and risk in delivering the goods to the named place of destination. The seller has no obligation for import clearance.

DDP

Delivered Duty Paid((…named place of destination)

The seller has to pay the costs involved in shipping the goods as well as the costs and risks of carrying out customs formalities. The seller pays the duty and the buyer has to pay any additional costs caused by its failure to clear the goods for import in time. DDP should not be used if the seller is unable to obtain an import license.