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Incoterms

Incoterms were created by the international chamber of commerce 1936. They have been updated as trade has evolved, to keep pace with international trade.

Their main purpose is to clearly define buyers and sellers responsibilities in an international contract of sale. As a result, risk of any legal complications or forgotten requirements are vastly reduced.

There are 11 Incoterms that allocate buyers and sellers responsibilities differently:

EXW Ex-Works, named place of delivery.

The Seller’s only responsibility is to make the goods available at the Seller’s premises. The Buyer bears full costs and risks of moving the goods from there to destination.

FCA Free Carrier, named place

The Seller delivers the goods, cleared for export, to the carrier selected by the Buyer. The Seller loads the goods if the carrier pickup is at the Seller’s premises. From that point, the Buyer bears the costs and risks of moving the goods to destination.

CPT Carriage Paid To, named place or port of destination.

The Seller pays for moving the goods to destination. From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage.

CIP Carriage and Insurance Paid To, named place or port of destination.

The Seller pays for moving the goods to destination. From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage. The Seller, however, purchases the cargo insurance.

DDP Delivered Duty Paid, named place of destination, not unloaded, cleared.

The Seller delivers the goods -cleared for import – to the Buyer at destination. The Seller bears all costs and risks of moving the goods to destination, including the payment of Customs duties and taxes.

DAT – DELIVERED AT TERMINAL (… named terminal at port or place of destination)

The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the Buyer’s disposal at a named terminal at the named port or place of destination. “Terminal” includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The Seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

DAP – DELIVERED AT PLACE (… named place of destination)

The Seller delivers when the goods are placed at the Buyer’s disposal on the arriving means of transport ready for unloading at the names place of destination. The Seller bears all risks involved in bringing the goods to the named place.

FAS Free Alongside Ship, named ocean port of shipment

The Seller delivers the goods to the origin port. From that point, the Buyer bears all costs and risks of loss or damage.

FOB Free On Board vessel, named ocean port of shipment.

The Seller delivers the goods on board the ship and clears the goods for export. From that point, the Buyer bears all costs and risks of loss or damage.

CFR Cost and Freight, Named ocean port of destination.

The Seller clears the goods for export and pays the costs of moving the goods to destination. The Buyer bears all risks of loss or damage.

CIF Cost, Insurance and Freight, named ocean port of destination.

The Seller clears the goods for export and pays the costs of moving the goods to the port of destination. The Buyer bears all risks of loss or damage. The Seller, however, purchases the cargo insurance.

It is essential that you are aware of your terms of trade prior to shipment.

Allocations of costs buyer/seller according to Incoterms 2010

Incoterm 2010 Export customs declaration Carriage to port of export Unloading of truck in port of export Loading on vessel/airplane in port of export Carriage (Sea/Air) to port of import Insurance Unloading in port of import Loading on truck in port of import Carriage to place of destination Import customs clearance Import duties and taxes
EXW Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FCA Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FAS Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer
FOB Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer Buyer
CPT Seller Seller Seller Seller Seller Buyer Seller Buyer/Seller Seller Buyer Buyer
CFR(CNF) Seller Seller Seller Seller Seller Buyer Buyer/Seller Buyer Buyer Buyer Buyer
CIF Seller Seller Seller Seller Seller Seller Buyer/Seller Buyer Buyer Buyer Buyer
CIP Seller Seller Seller Seller Seller Seller Seller Buyer/Seller Seller Buyer Buyer
DAT Seller Seller Seller Seller Seller Seller/Buyer Seller Buyer Buyer Buyer Buyer
DAP Seller Seller Seller Seller Seller Seller/Buyer Seller Seller Seller Buyer Buyer
DDP Seller Seller Seller Seller Seller Seller/Buyer Seller Seller Seller Seller Seller