Incoterms

EXW

The exporter makes the goods available at his/her premises. The importer is responsible for uploading. This term places the maximum obligation on the importer and minimum obligations on the exporter. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a exporter has the goods ready for collection at his premises (works, factory, warehouse, plant) on the date agreed upon. The importer pays all transportation costs and also bears the risks for bringing the goods to their final destination. The exporter does not load the goods on collecting vehicles and doesn’t clear them for export. If the exporter does load the goods, he does so at importers risk and cost. If parties wish exporter to be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale.

FCA – Free Carrier

Under the shipping terms for the FCA Incoterms (short for “Free Carrier”), the seller is responsible for export clearance and delivery of goods to the carrier at the named place of delivery. Unless otherwise agreed upon, the seller is only responsible for loading the goods if the seller’s place of business is the named place of delivery. A carrier is any person or company who undertakes the carriage, such as a shipping line, airline, trucking company, railway or freight forwarder.

FAS – Free Alongside Ship

In the Incoterms rules for FAS (short for “Free Alongside Ship”), the seller clears goods for export and places them alongside the vessel at the named port of departure. The named port of departure location can be a loading dock or a barge, but not a container terminal. The buyer is responsible for loading the freight onto the vessel, as well as handling local carriage, discharge, import formalities and duties and onward carriage to the final destination. FAS only applies to ocean or inland waterway transport. It is popular with bulk cargo, such as oil or grain. For containerized shipments delivered only to a terminal, use FCA instead.

FOB – Free On Board

Under the terms of FOB (short for “Free on Board”), the seller clears the goods for export and ensures they are delivered to and loaded onto the vessel for transport at the named port of departure. The buyer takes over risk and costs, including import clearance and duties, as soon as the goods are loaded onto the transport vessel at the port of departure. FOB only applies to ocean or inland waterway transport. As such, the named place is always a port. It does not apply if the main carriage is via air, ground or rail.

CPT – Carriage Paid to

In a CPT transaction, the seller must clear the goods for export and deliver them to a carrier or appointed person at a mutually agreed-upon (between the seller and buyer) destination. Also, the seller pays the freight charges to transport the goods to the specified destination. The risk of damage or loss to the goods is transferred from the seller to the buyer as soon as the goods have been delivered to the carrier. The seller is responsible only for arranging freight to the destination and not for insuring the shipment of the goods during transport.

The responsibility for freight costs also includes export fees or taxes required by the country of origin. However, the risk is transferred from the seller to the buyer as soon as the goods are delivered to the first carrier, even if multiple means of transportation (land, then air, for example) are employed.

So if a truck carrying a shipment to the airport encounters an accident in which the goods are damaged, the seller is not responsible for damages if the buyer has not insured the products because the goods had already been transferred to the first carrier: the truck.

CFR – Cost and Freight

Cost and freight (CFR) is a legal term used in foreign trade contracts. In a contract specifying that a sale is cost and freight, the seller is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. With a cost and freight sale, the seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used strictly for cargo transported by sea or inland waterways.

CIF – Cost, Insurance and Freight

Under CIF (short for “Cost, Insurance and Freight”), the seller delivers the goods, cleared for export, onboard the vessel at the port of shipment, pays for the transport of the goods to the port of destination, and also obtains and pays for minimum insurance coverage on the goods through their journey to the named port of destination. The buyer assumes all risk once the goods are on board the vessel for the main carriage; however, they don’t take on any costs until the freight arrives at the named port of destination. CIF applies to ocean or inland waterway transport only. It is commonly used for bulk cargo, oversized or overweight shipments.

CIP – Carriage and Insurance Paid to

In Carriage and Insurance Paid To (CIP), the seller assumes all risk until the goods are delivered to the first carrier at the place of shipment—not the place of destination. Once the goods are delivered to the first carrier, the buyer is responsible for all risks. However, the seller is responsible for the cost of carriage as well as all-risk insurance coverage until the freight reaches the named place of destination. A carrier is any person or company who undertakes the carriage of goods, such as a shipping line, airline, trucking company, railway or freight forwarder. In multimodal shipments, the place of shipment is the first carrier used.

DAP – Delivered at Place

The buyer/consignee takes responsibility for costs and risks when the goods are placed at buyer’s disposal ready for unloading at the named place of destination and is responsible for any import clearance formalities. Because of this, the contract of sale should very clearly specify not just the named port/place of destination, but the actual precise point at or within the named port/place of destination where delivery will occur (i.e. “Delivered at place, Terminal XX, port of Erie, Pa). In 2010, DAP essentially replaced the Incoterms® 2000 rule “Delivery Duty Unpaid (DDU)”. You may still hear DDU used informally to refer to DAP agreements.

DPU – Delivered at Place Unloaded

Delivered at Place Unloaded (DPU) (formerly referred to as DAT for “Delivered at Terminal”) requires the seller to deliver the goods at the disposal of the buyer after they’ve been unloaded from the arriving means of transport. DPU is the only Incoterms rule that requires the seller to unload goods at the place of destination. DPU can apply to any—and more than one—mode of transport. The buyer and seller should specify and agree upon a named place of destination. DPU requires the seller to clear goods for export, where applicable, without any obligation to clear the goods for import, pay import duty or carry out import customs formalities.

DDP – Delivered Duty Paid

Under the Delivered Duty Paid (DDP) Incoterm rules, the seller assumes all responsibilities and costs for delivering the goods to the named place of destination. The seller must pay both export and import formalities, fees, duties and taxes. The seller is not obligated to insure the goods for pre-carriage or main carriage. The buyer is free of any risk or cost until the goods are unloaded from the vehicle at the named place of destination, usually the buyer’s place of business. DDP is the only Incoterms rule that places responsibility for import clearance and payment of taxes and/or import duty on the seller. These last requirements can be problematic for the seller. In countries with complex or bureaucratic import clearance procedures a seller with local knowledge may prefer to take on these responsibilities.