What are Incoterms?
INCOTERMS (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international and domestic transactions, clarifying who is responsible for transportation, insurance, customs clearance, and other logistics.
These three-letter trade terms are most commonly used in international sales contracts. It is essential for parties to understand their Incoterms before shipment to ensure clear responsibilities and avoid disputes.
EXW (EX Works)
Seller responsible for making the goods available at the seller’s premises. Buyer bears the full risk from there to destination.
FCA (Free Carrier)
Seller responsible for delivery to the custody of carrier, identified by the buyer. Risk is transferred when loading has taken place.
CPT (Carriage Paid To)
Seller delivers goods to the carrier at agreed place of delivery and pays transport to the named destination. Risk is transferred at place of delivery.
Whereas seller pays for transport to the destination.
CIP (Carriage & Insurance Paid)
Seller delivers goods to the carrier at agreed place of delivery and pays for transport and insurance to named destination. Risk is transferred at the place of delivery. Whereas seller pays for transport and insurance to the destination.
DAT (Delivered at Terminal)
Seller delivers goods unloaded at a specified place inside agreed terminal. Risk is transferred as soon as goods have been unloaded.
DAP (Delivered at Place)
Seller delivers goods to disposal of buyer on arriving means of transport, at agreed place. Seller assumes risk until goods are made ready for unloading for the arriving means of transport.
DDP (Delivered Duty Paid)
Seller responsible for bringing goods to the destination, paying any duty and making the goods available to buyer. Risk transfers as soon as buyer has access to goods ready for unloading at agreed destination.
FAS (Free Alongside Ship)
Seller is responsible for delivery of goods at quay alongside the ship. From this point onwards, risk lies with buyer.
FOB (Free on Board)
Seller is responsible for delivery of goods loaded on board the ship. Risk is transferred as soon as goods have been set down inside ship.
CFR (Cost & Freight)
Seller covers cost of freight, duty unpaid, to named port of destination. Risk is transferred as soon as the goods have been set down inside ship.
CIF (Cost Insurance & Freight)
Seller covers cost of insurance and freight, duty unpaid, to named port of destination. Risk is transferred as soon as the goods have been set down inside ship.