Incoterms is an acronym for 'international commercial terms'. They define the basic rules of trade and are accepted worldwide.
The information on this page was sourced from abcofprocurement.com.
EXW – Ex Works
The seller only needs to have the goods ready for pickup. It is the buyer’s job to load them onto the vehicle and take care of the rest of the transport. Once the goods are out of the seller’s premises, they are no longer the seller's concern.
FCA – Free Carrier
For international transport, the seller delivers the goods to the port (for sea transport) or the cargo terminal (in case of air freight), and does the export clearance. From there it is the buyer’s job to take care of international transport and import the goods into the destination country.
For domestic transport, the seller only needs to load the goods on the buyer’s vehicle. The buyer needs to organise transport.
CPT – Carriage Paid to
The seller arranges transport and takes care of the paperwork needed for export. But the risk of loss, theft or damage is with the buyer during the transportation. While in domestic transport this may not be an issue, it may not be the best choice for shipping.
CIP – Carriage and Insurance Paid To
The significant difference between CPT and CIP is that the seller now bears also insurance costs for the cargo until the final destination of the goods.
DAP – Delivered at Place
If this Incoterm is agreed upon, the responsibilities of the buyer are to pay for the customs clearance and duties in the country of import. Furthermore, the buyer needs to arrange to unload goods at the point of destination. Everything else is done by the seller.
DPU – Delivered at Place Unloaded
The seller is responsible for the unloading of the goods at the place specified by the buyer. The one thing the buyer needs to do is to pay for the customs fees and taxes. The logistics of the goods movement is completely run by the seller.
DDP – Delivered Duty Paid
The seller takes care of everything. Import/export documentation and fees, transportation, unloading. The buyer has no obligations whatsoever until the goods are on his premises. In some countries it is not legally possible for the seller to become the importer, so check it out before signing the contract.
FAS – Free Alongside Ship
The seller should clear the export documentation and deliver the goods to the port, ready to be loaded onto the ship. From there the buyer takes over. The buyer will hire the shipment, arrange to load and import the goods. This term is used mostly for non-containerised shipments, like sand, oil etc.
FOB – Free on Board
The seller must assure the goods are loaded onto the ship nominated by the buyer. So, besides the export clearance, the seller bears the risk of damage while the goods are in the port. Once the goods are safely stored on the ship, the buyer is the one responsible for all risk.
CFR – Cost and Freight
The seller takes care of sea transport. Once the ship reaches the final destination, it becomes the responsibility of the buyer. The buyer needs to arrange to unload at the port, pay customs fees and arrange documents and transport to the final destination.
CIF – Cost Insurance and Freight
This is quite similar to CFR. The main difference is that the seller must arrange insurance for the goods to cover all risks until the final port of destination.