Incoterms
GLOBAL INCOTERMS GUIDE
Understanding the exact distribution of risks, costs, and responsibilities is critical for seamless international trade. The 11 standard Incoterms are divided into four primary categories, identified by their first letter:
- E-Terms (Departure): Maximum buyer responsibility. The buyer arranges and controls all transport-related logistics from the origin.
- F-Terms (Main Carriage Unpaid): The seller handles pre-carriage and export customs; the buyer manages and pays for the main international transport.
- C-Terms (Main Carriage Paid): The seller arranges and pays for the main transport, but the risk transfers to the buyer before the main voyage begins.
- D-Terms (Arrival): Maximum seller responsibility. The seller bears all risks and costs required to safely deliver the cargo to the final destination.
I. Rules for Any Mode of Transport (Multimodal)
- EXW (Ex Works): The buyer assumes total responsibility for the shipment. The seller simply makes the goods available at their facility. The buyer must handle loading, export customs, and all subsequent transit risks and costs.
- FCA (Free Carrier): The seller clears the cargo for export and delivers it to a designated carrier or terminal. If the handover occurs at the seller's facility, the seller is responsible for physically loading the truck.
- CPT (Carriage Paid To): The seller pays the freight charges to transport the goods to the agreed destination. However, the risk of loss or damage transfers to the buyer the moment the goods are handed over to the first carrier at the origin.
- CIP (Carriage and Insurance Paid To): Identical to CPT, with the added legal obligation that the seller must purchase and provide insurance coverage against the buyer's risk of loss or damage during transit.
- DAP (Delivered at Place): The seller covers all costs and risks to deliver the goods to a specified destination, ready for unloading. The buyer is solely responsible for handling import customs clearance, duties, and taxes.
- DPU (Delivered at Place Unloaded): The seller bears all risks and costs to deliver and physically unload the goods at the named destination terminal or facility. The buyer is only responsible for import clearance.
- DDP (Delivered Duty Paid): The seller assumes maximum liability, handling the entire supply chain from origin to final destination. This includes export clearance, main carriage, and all import duties, taxes, and customs formalities.
II. Rules for Sea and Inland Waterway Transport
- FAS (Free Alongside Ship): The seller clears the goods for export and places them directly alongside the designated vessel at the port of departure. The buyer assumes all costs and risks from that point forward, including loading the cargo onto the ship.
- FOB (Free On Board): The seller is responsible for all costs and risks up to the moment the cargo is safely loaded on board the vessel. Once on board, the buyer assumes full responsibility for the ocean voyage and import processes.
- CFR (Cost and Freight): The seller pays the ocean freight costs required to bring the goods to the destination port. However, the risk transfers to the buyer as soon as the goods are loaded on board the vessel at the origin port. (Previously known as CNF or C&F).
- CIF (Cost, Insurance, and Freight): Similar to CFR, but the seller is also obligated to arrange and pay for marine insurance covering the goods during the ocean transit to the destination port.
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