Incoterms

" The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial transactions. "Incoterms" is the registered trademark of the ICC. The Incoterms rules primarily intend to communicate the task, cost and risk associated with the global or international transportation and delivery of goods. The Incoterm is agreed between the buyer and seller which communicates when the seller’s costs and risks are transferred onto the buyer. "

This chart should be used as a guide only, for a full and complete description, you should refer to the
full version of Incoterms published by the International Chamber of Commerce (ICC).

- 1. EXW = EX WORKS

Cost of Goods plus cost of Export packing and marking :

In this term, the seller delivers the goods by keeping it ready in deliverable state at the seller's place or another named place. This named place can be factory/godown or manufacturing unit. In this term seller does not clear the goods for exports nor goods are loaded on vehicle.

- 2. FCA = FREE CARRIER

Cost of Goods plus cost of Getting goods to railway station or truck for transportation to port :

This term refers to seller's responsibility to deliver the goods, cleared for export, to the carrier appointed by the buyer at the named place. In this term, the place of delivery is very important. If the delivery is at seller’s place, then he is responsible for loading. If the delivery occurred at any other place, the seller is not responsible for unloading. This term can be used for all modes of transport as well as multimodal.

- 3. FAS = FREE ALONGSIDE SHIP

Cost of Goods plus cost of Transport to port and getting goods alongside ship :

In this term, when the goods are placed alongside the vessel at the named port of shipment, it will be considered that the seller has completed the delivery. The buyer has to bear all risks of loss or damage to the goods and all costs from this point of time. However, the seller must clear the goods for the purpose of export. This term can be used only for inland waterway transport or shipment by sea. It is not used when it is an air shipment.

- 4. FOB = FREE ON BOARD

Cost of Goods plus cost of Getting goods on board and preparing shipping documents :

This is the most popular term and is widely in use. FOB means that the seller delivers when the goods pass the ship's rail at the named port of shipment. Under this term, the buyer has to bear all costs and risks of loss or damage to the goods from that point. This term requires the seller to clear the goods for exports. This term is used only for sea or inland waterway transport. It is not suitable for shipment by air.

- 5. CFR = COST AND FREIGHT

Cost of Goods plus cost of Freight cost (port to port) :

Earlier this term was popularly known as C&F or CNF. CFR means the seller must pay the cost and the freight necessary for the goods to reach at the named destination. However, the risks of loss or damage to the goods after the time of the delivery is on buyers account. The seller is required to clear the goods for exports. This term can be used only for sea and inland waterway transport.

- 6. CIF = COST INSURANCE AND FREIGHT

Cost of Goods plus cost of Freight and Marine Insurance :

“Cost, Insurance and Freight” means that the seller, delivers when the goods pass the ship’s rail in the port of shipment. The CIF price refers that it covers the cost of the goods, freight necessary to bring the goods to the named port of destination and also marine insurance. Compared to the previous term, CFR the seller contracts for the insurance and pay the insurance premium. It will be essential for the buyer to know that under the CIF term the seller is required to obtain the insurance only on minimum cover. If the buyer wishes to have more protection, then he should make his own insurance arrangement extra or should specify to the seller at the time of contract.

In this term, the seller must clear the goods for exports and the buyer must arrange necessary clearance for import. This term can be used only for sea and inland water transport.

- 7. CPT = CARRIAGE PAID TO

Cost of Goods plus cost of Freight and Carriage :

“Carriage Paid To” means the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This refers to the fact that all the risks and any other cost occurring after the goods have been delivered will be on buyer’s account. This term is used for all modes of transport including multimodal transport.

- 8. CIP = CARRIAGE AND INSURANCE PAID TO

Cost of Goods plus cost of Freight, Carriage and Insurance :

“Carriage and Insurance Paid To” means that the seller delivers the goods to the carrier nominated by him, but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to procure insurance against the buyer's risk of loss or damage to the goods during the carriage.

- 9. DAP = DELIVERD AT PLACE

Cost of Goods plus cost of Freight and Carriage :

“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

- 10. DPU = DELIVERED AT PLACE UNLOADED

Cost of Goods plus cost of Freight and Carriage :

“Delivered At Place Unloaded” means that the seller delivers the goods to the buyer when the goods are unloaded and placed at the disposal of the buyer at a named place of destination. The seller bears all risks involved in bringing the goods to, and unloading them at the named place of destination.

- 11. DDP = DELIVERED DUTY PAID

Cost of Goods plus cost of Payment of duties and transport to customer :

“Delivered Duty Paid" means that the seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable, any duty for import in the country of destination.