For those involved in international freight transactions, the following explanations of international standard trade definitions are useful in outlining risks and responsibilities between buyers and sellers.
Incoterms for any Mode or Modes of Transport:
EXW – Ex Works
The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination. The seller’s obligation is to make the goods available at his premises (works, factory, and warehouse). This term represents minimum obligation for the seller.
FCA – Free Carrier
The seller’s obligation is to hand over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point. If no precise point is indicated by the buyer, the seller may choose within the place or range stipulated where the carrier shall take the goods into his charge. When the seller’s assistance is required in making the contract with the carrier the seller may act at the buyers risk and expense.
CPT – Carriage Paid To
The seller pays the freight for the carriage of goods to the named destination. The risk of loss or damage to the goods occurring after the delivery has been made to the carrier is transferred from the seller to the buyer.
CIP – Carriage and Insurance Paid
The seller has the same obligations as under CPT but has the responsibility of obtaining insurance against the buyer’s risk of loss or damage of goods during the carriage. The seller is required to clear the goods for export however is only required to obtain insurance on minimum coverage. This term requires the seller to clear the goods for export.
DAT – Delivered At Terminal
Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes quay, warehouse, container yard or road, rail or air terminal. Both parties should agree the terminal and if possible a point within the terminal at which point the risks will transfer from the seller to the buyer of the goods. If it is intended that the seller is to bear all the costs and responsibilities from the terminal to another point, DAP or DDP may apply.
DAP – Delivered At Place
Seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer. If the seller is responsible for clearing the goods, paying duties etc., consideration should be given to using the DDP term
DDP – Delivered Duty Paid
The seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes duties, taxes and customs formalities.
Incoterms for Sea and Inland Waterway Transport Only:
FAS – Free Alongside Ship
The seller has fulfilled his obligation when goods have been placed alongside the vessel at the port of shipment. The buyer is responsible for all costs and risks of loss or damage to the goods from that moment. The buyer is also required to clear the goods for export
FOB – Free On Board
Once the goods have passed over the ship’s rail at the port of export the buyer is responsible for all costs and risks of loss or damage to the goods from that point. The seller is required to clear the goods for export.
CFR – Cost and Freight
The seller must pay the costs and freight required in bringing the goods to the named port of destination. The risk of loss or damage is transferred from seller to buyer when the goods pass over the ship’s rail in the port of shipment. The seller is required to clear the goods for export.
CIF – Cost, Insurance and Freight
The seller has the same obligations as under CFR however he is also required to provide insurance against the buyer’s risk of loss or damage to the goods during transit. The seller is required to clear the goods for export.