INCO TERMS

INTERNATIONAL SHIPPING TERMS 

Incoterms: What Are They?

The International Chamber of Commerce (ICC) provides a list of Incoterms, or international commercial words, to promote global trade. By outlining the responsibilities of both buyers and sellers, Incoterms, which are widely accepted, avoid misunderstandings in international trade agreements.

11 Terms, 7 for any form of transportation, are summarized in Incoterms® 2020.

Ex-Works or Ex-Warehouse, or EXW

Ex works is when the seller puts the products at the buyer's disposal on the seller's property or at another specified location (e.g., factory, warehouse, works, etc.).

It is not necessary for the seller to load the items onto a collection vehicle. Additionally, if necessary, it does not have to obtain export permission.

Free Carrier, or FCA

At the vendor's location or another specified location, the seller delivers the items to the carrier or another individual designated by the buyer.

Since the risk shifts to the buyer at the designated place of delivery, it is advisable for the parties to be as specific as possible about that point. 2020 Update: Makes it possible to issue a Bill of Lading that includes an onboard note.

Free Alongside Ship, or FAS

When the buyer designates a vessel (such as a barge or quay) at the designated port of shipment, the seller delivers the goods.

When the merchandise are on the ship, there is no longer any chance that they will be lost or damaged.  

Cost and Freight (CFR)

The vendor either procures the products already supplied or delivers them on board the vessel.

Once the products are on board the vessel, the possibility of loss or damage to them is eliminated.

The charges and freight required to deliver the products to the specified port of destination must be agreed upon and paid for by the seller.

Cost, Insurance, and Freight, or CIF

The vendor either procures the products already supplied or delivers them on board the vessel. Once the products are on the ship, the risk of loss or damage to them passes.

The charges and freight required to deliver the products to the specified port of destination must be agreed upon and paid for by the seller.

Additionally, the vendor

CPT, or Carriage Paid To, 

requires the seller to deliver the goods to the carrier or another individual designated by the seller at a predetermined location (if such a location is agreed upon by the parties). 

CIP, or Carriage and Insurance Paid To, 

entails the same obligations as CPT, but also contracts for insurance coverage against the buyer's risk of losing or damaging the goods during the carriage. The buyer should be aware that under CIP, the seller is only required to obtain minimum coverage; if the buyer wants more insurance protection, they will need to specifically agree to

Delivered At Place (DAP)

When the items are handed over to the buyer aboard the approaching vehicle, ready for unloading at the designated destination, the seller has delivered.

All risks associated with transporting the products to the designated location are assumed by the seller.

Delivered At Place Unloaded, or DPU,

 is a substitute for Incoterm® 2010 DAT. The old Incoterm® DAT (Delivered At Terminal) has been replaced by the new Incoterm® DPU rule.

When the items are unloaded and made available to the buyer at the designated location, the vendor has delivered.

All risks associated with transporting the products to and unloading them at the specified destination are assumed by the seller.

Delivered Duty Paid, or DDP

When the items are at the buyer's disposal, approved for import aboard the approaching vehicle, and prepared for unloading at the designated destination, the seller delivers the goods.
All expenses and risks associated with transporting the products to their final location are borne by the seller. The products must be cleared for both import and export, all customs procedures must be completed, and all applicable duties must be paid.
All shipping expenses, including import customs clearance, import tariffs and taxes, and any other fees associated with getting the products to the specified destination, are covered by the seller under DDP.