WHAT ARE INCOTERMS?
INCOTERMS are a set of three-letter standard trade terms most commonly used in international contracts for the sale of goods. It is essential that you are aware of your terms of trade prior to shipment.
EXW (EX WORKS)
Ex-works terms make the seller responsible to place the goods at the disposal of the buyer at the seller’s facilities or any other named place.
FCA (FREE CARRIER)
If the place of delivery is at the seller premises, the seller must load the goods. If delivery takes place in a different place, the seller is not responsible for unloading.
CPT (CARRIAGE PAID TO)
In CPT the seller clears the goods for export and delivers to the carrier nominated by the seller at the agreed place of shipment at the origin. At this point, the risk is transferred to the buyer.
CIP (CARRIAGE & INSURANCE PAID)
Under CIP terms, the seller clears the goods for export and is responsible for delivering the goods to the carrier nominated by the seller. The seller must pay the cost of carriage, but the seller risk ends at the place of shipment.
DPU (DELIVERY AT PLACE UNLOADED)
In DPU, Delivery at Place, the seller is responsible for moving the goods from origin until their delivery at the disposal place agreed unloaded at destination.
DAP (DELIVERED AT PLACE)
In DAP, Delivery at Place, the sellers is responsible for moving the goods from origin until their delivery at the disposal place agreed with the buyer ready for unloading at destination.
DDP (DELIVERED DUTY PAID)
Under DDP the seller is responsible for all costs associated until the seller delivers the goods to the buyer, cleared for import at the named place of destination. In DDP the seller does not pay for unloading the goods.
FAS (FREE ALONGSIDE SHIP)
In FAS the seller clears the goods for export and delivers them alongside side the vessel nominated by the buyer at port of origin. This means that the seller is responsible for all costs and risks to the goods up to point of delivery.
FOB (FREE ON BOARD)
By using FOB the seller must clear the goods for export and delivers when the goods pass the ship’s rail at the agreed port. This term is only used for water transportation either sea or inland water.
CFR (COST & FREIGHT)
In CFR the seller delivers when the goods are on board and cleared for export. The seller pays for freight to transport the goods until the final port of destination. However, the risk transfer occurs when goods are on board.
CIF (COST INSURANCE & FREIGHT)
In CIF terms, the seller clears the goods at origin places the cargo on board and pays for insurance until the port of discharge at the minimum coverage. Even though the seller pays for insurance during the main carriage, the risk is transferred to the buyer at the time the goods are on board. The term is used for ocean and inland waterway transportation only.