INCOTERMS
Incoterms are ICC's standard definitions of trade terms and
are internationally recognized as indispensable evidence of
the buyer's and seller's responsibilities for delivery under a
sales contract.
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EXW |
FCA |
FAS |
FOB |
CFR |
CIF |
CPT |
SERVICES |
Ex Works |
Free Carrier |
Free Alongside Ship |
Free Onboard Vessel |
Cost & Freight |
Cost Insurance & Freight |
Carriage Paid To |
Warehouse Storage | Seller |
Seller | Seller |
Seller | Seller |
Seller | Seller |
Warehouse Labor | Seller |
Seller | Seller |
Seller | Seller |
Seller | Seller |
Export Packing | Seller |
Seller | Seller |
Seller | Seller |
Seller | Seller |
Loading Charges | Buyer |
Seller | Seller |
Seller | Seller |
Seller | Seller |
Inland Freight | Buyer |
Buyer/
Seller*1 | Seller |
Seller | Seller |
Seller | Seller |
Terminal Charges | Buyer |
Buyer |
Seller | Seller |
Seller | Seller |
Seller |
Forwarder's Fees | Buyer |
Buyer |
Buyer |
Buyer |
Seller | Seller |
Seller |
Loading On Vessel | Buyer |
Buyer |
Buyer |
Seller | Seller |
Seller | Seller |
Ocean/Air Freight | Buyer |
Buyer |
Buyer |
Buyer |
Seller | Seller |
Seller |
Charges On Arrival At Destination |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Seller |
Duty, Taxes & Customs Clearance |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Delivery To Destination | Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
*1. There are actually two FCA terms:
FCA
Seller's Premises where the seller is responsible only for
loading the goods and not responsible for inland freight; and
FCA Named Place (International Carrier) where the seller is
responsible for inland freight.
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CIP |
DAF |
DES |
DEQ |
DDU |
DDP
|
SERVICES |
Carriage Insurance Paid To |
Delivered At Frontier |
Delivered Ex Ship |
Delivered Ex Quay Duty Unpaid |
Delivered Duty Unpaid |
Delivered Duty Paid
|
Warehouse Storage | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Warehouse Labor | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Export Packing | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Loading Charges | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Inland Freight | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Terminal Charges | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Forwarder's Fees | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Loading On Vessel | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Ocean/Air Freight | Seller |
Seller | Seller |
Seller | Seller |
Seller
|
Charges On Arrival At Destination | Seller |
Buyer |
Buyer |
Seller | Seller |
Seller
|
Duty, Taxes & Customs Clearance |
Buyer |
Buyer |
Buyer |
Buyer |
Buyer |
Seller
|
Delivery To Destination | Buyer |
Buyer |
Buyer |
Buyer |
Seller | Seller
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What are INCOTERMS?
Incoterms are a set of simple three letter codes which
represent the different ways international shipments may be
organized. They allow sellers and buyers from different
cultures and legal systems to decide at what point the
ownership and paying for freight, insurance and customs costs
transfer from one to the other.
Who decides what INCOTERMS mean?
The International Chamber of Commerce has set up strict
definitions for each incoterm.
Choosing a suitable incoterm allows the buyer and seller to
negotiate a price best suited to their needs and to be
confident that there will be no confusion over who pays the
costs. To ensure that the latest version is being used
shipping contracts should refer to "INCOTERMS 2000".
When should INCOTERMS be used?
It is not compulsory to use incoterms. However when things
go wrong and disputes arise it is much easier to sort out who
is responsible for what if incoterms have been written into
the shipping contract. To be safe, incoterms should be decided
upon in the negotiation phase of any international purchasing
contract.
How do INCOTERMS work?
Each INCOTERM is a three letter acronym related to where
the seller's responsibility ends. They should be written into
the purchasing or shipping contracts. Some incoterms require
the changeover point to be named. As well as buyer and sellers
there are "carriers". They are the people who have a contract
to
transport the goods by land, sea, air or a combination of
modes. A seller will be given a bill of lading, way bill or
carrier's receipt, that document can be used to prove that the
goods have been taken on by the carrier.
There are four groups of INCOTERMS - "E", "F", "C" & "D"
E - group:
used where the seller does not want to arrange transport.
EXW - "Ex-Works" means the
seller's only responsibility is to make the goods available at
the seller's premises, i.e., the works or factory. The seller
is not responsible for loading the goods on the vehicle
provided by the buyer unless otherwise agreed. The buyer bears
the full costs and risk involved in bringing the goods from
there to the desired destination.
"Ex works" represents the minimum obligation of the seller.
F - group:
used where the seller can arrange some transport within
his/her own country.
FCA - Free Carrier, This term has
been designed to meet the requirements of multi-modal
transport, such as container or roll-on, roll-off traffic by
trailers and ferries. The seller fulfils his/her obligations
when the goods are delivered to the custody of the carrier at
a named point. If no precise point can be named at the time of
the contract of sale, the parties should refer to the place
where the carrier should take the goods into its charge. The
risk of loss or damage to the goods is transferred from seller
to buyer at that time. FAS - Free
Alongside Ship, requires the seller to deliver the goods
alongside the ship on the quay. From that point on, the
buyer bears all costs and risks of loss and damage to the
goods. F.A.S. requires the buyer to clear the goods for
export and pay the cost of loading the goods.
FOB - Free On Board vessel, named
ocean port of shipment.
The goods are placed on board the ship by the seller at a
port of shipment named in the sales agreement. The risk of
loss of or damage to the goods is transferred to the buyer
when the goods pass the ship's rail (i.e., off the dock and
placed on the ship).
The seller pays the cost of loading the goods.
C - group:
used where the seller can arrange and pay for most of the
freight charges up to the foreign country.
CFR - (or C&F) Cost and Freight,
Named ocean port of destination,
requires the seller to pay the costs and freight necessary to
bring the goods to the named destination, but the risk of loss
or damage to the goods, as well as any cost increases, are
transferred from the seller to the buyer when the goods pass
the ship's rail in the port of shipment. Insurance is the
buyer's responsibility. CIF - Cost,
Insurance and Freight, named ocean port of destination.
This is CFR with the additional requirement that the seller
procure transport insurance against the risk of loss or
damage to goods. The seller must contract with the insurer
and pay the insurance premium. Insurance is generally
important in international shipping because transport
companies have restricted liability for loss or damage.
CPT - freight/Carriage Paid To,
named place or port of destination.
This term means the seller pays the freight for the carriage
of the goods to the named destination. The risk of loss or
damage to the goods and any cost increases transfers from
the seller to the buyer when the goods have been delivered
to the custody of the final carrier, and not at the ship's
rail. Accordingly, "freight/carriage paid to" can be used
for all modes of transportation, including container or
roll-on roll-off traffic by trailers and ferries. When the
seller is required to furnish a bill of lading, way bill, or
carrier receipt, the seller duly fulfils its obligation by
presenting such a document issued by the person contracted
with for carriage to the main destination.
CIP - Carriage and Insurance Paid To,
named place or port of destination.
This term (also abbreviated CIP) is the same as
"freight/carriage paid to" but with the additional
requirement that the seller has to procure transport
insurance against the risk of loss or damage to the goods
during the carriage. The seller contracts with the insurer
and pays the insurance premium.
D - group:
used where the seller can pay for most of the delivery charges
to the destination country.
DAF - Delivered At Frontier, named
place of destination, by land, not unloaded.
This term means that the seller's obligations are fulfilled
when the goods have arrived at the frontier but before the
customs border of the country named in the sales contract. The
term is primarily used when goods are carried by rail or
truck. The seller bears the full cost and risk in delivering
the goods up to this point, but the buyer must arrange and pay
for the goods to clear customs. DES
- Delivered Ex-Ship, named port of destination, not
unloaded.
This term means the seller makes the goods available to the
buyer on board the ship at the destination named in the
sales contract. The seller bears the full cost and risk
involved in bringing the goods there. The cost of unloading
the goods and any customs duties must be paid by the buyer.
DEQ - Delivered Ex-Quay, named port
of destination, unloaded, not cleared.
This term means the seller has agreed to make the goods
available to the buyer on the quay or the wharf at the
destination named in the sales contract. The seller bears
the full cost and risks in delivering the goods to that
point including unloading. There are two variations of ex
quay contracts: "ex quay duty paid" and "ex quay duty on
buyer's account." In the first, the duty is paid by the
seller. In the second, the duty also is paid by the seller,
but the buyer must reimburse the seller.
DDU - Delivered Duty Unpaid, named place of
destination, not unloaded, not cleared.
This term Delivered duty paid or Under these terms, the
seller fulfils his obligation to deliver when the goods have
been available to the buyer uncleared for import at the
point or place of the named destination. The seller bears
all costs and risks involved in bringing the goods to the
point or place of named destination. There is no obligation
for import clearance. DDP -
Delivered Duty Paid, named place of destination, not
unloaded, cleared.
This term represents the seller's maximum obligation. The
term "DDP." is generally followed by words indicating the
buyer's premises. It notes that the seller bears all risks
and all costs until the goods are delivered. This term can
be used irrespective of the mode of transport. If the
parties wish to make clear that the seller is not
responsible for certain costs, additional word should be
added (for example, "delivered duty paid exclusive of VAT
and/or taxes").
NB: This page has been set out as a guide only. Full
details are in the above mentioned publication available from
your local Chambers of Commerce.
Source: International Chamber of Commerce Publication
"INCOTERMS 2000" No.560.
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