Incoterms are a collective of international commercial terms published by the international chamber of commerce. These terms are widely used in international commercial transactions, to clarify the rights, risks and obligations of both parties concerning the transportation of goods. Through the use of Incoterms, misunderstandings concerning obligations from both parties can be eliminated. Incoterms determine where the goods will be delivered, which party is responsible for the transportation and who bares the risks involved up to a certain point in the transport route. These are only a few examples of the aspects which are covered by the Incoterms. There are a number of Incoterms which apply to all types of transportation and some terms are specified for one type of transportation. Below are listed all currently active Incoterms.
General Incoterms
The following Incoterms are not specifically designed for one type of transportation.
EXW (Ex Works): The seller makes the goods available at a location of the seller, such as a warehouse or factory. The buyer is responsible for transportations, clearance and insurance. The loading of the goods must also be arranged by the buyer.
FCA (Free carrier): The seller is responsible for the clearance and must hand over the goods to a transporter, assigned by the buyer.
CPT (Carriage Paid to): The seller pays the carrying cost to the destination, but the risks are transferred to the buyer upon loading the goods on to the carrier.
CIP (Carriage and Insurance): The seller pays the carrying and insurance costs to the destination, but the risks are transferred to the buyer upon loading the goods on to the first carrier.
DAT (Delivered at Terminal): The seller pays all transportation costs to the destination except for clearance. Risks are transferred upon unloading at the destination.
DAP (Delivered at Place): The seller pays all transportation costs to the destination, which in this case does not necessarily mean a terminal but the goods can also remain on the carrier. Upon arrival the risks are transferred to the buyer.
DDP (Delivery Duty Paid): The seller pays for transportation costs as well as clearance and duties to a specified location. When the goods are cleared for import, the risks are transferred.
Maritime Incoterms
The following Incoterms are designed specifically for maritime transportation
FAS (Free Alongside Ship): The seller must deliver the goods alongside a ship, designated by the buyer. Upon delivering the goods alongside the ship, the risks and costs are transferred. The seller must arrange the clearance of goods.
FOB (Free On Board): The seller must arrange for the goods to be loaded onto a ship, designated by the buyer. When the goods are loaded, the risks and costs will be transferred.
CFR (Cost And Freight): The seller must pay the costs for delivering the goods to its destination. The risk however is transferred upon loading the goods on the ship and insurance is not included.
CIF (Cost, Insurance And Freight): This is similar to CFR except insurance here is included and must be paid by the seller.
