Incoterms

  What are Incoterms? What does each term mean?

Incoterms (International Commercial Terms) These are maritime and commercial terms covering issues such as the control of goods and financial liabilities, such as the payment of cargo and freight insurance and published by the International Chamber of Commerce (ICC).

There are eleven Incoterms that fall into two main categories organized by the modes of transport.

Group 1. Incoterms that apply to any mode of transport are:

  • EXW: EX Works
  • FCA : Free Carrier
  • CPT : Carriage Paid To
  • CIP  : Carriage and Insurance Paid to
  • DAT: Delivered at Terminal
  • DAP: Delivered at Place
  • DDP: Delivered Duty Paid

Group 2. Incoterms that apply to sea and inland waterway transport only:

  • FAS: Free Alongside Ship
  • FOB: Free On Board
  • CFR: Cost and Freight
  • CIF : Cost, Insurance and Freight

Below is some information about commonly used incoterms:

    Term

Definition

       Risk

           Cost

Include on the Quotation

EXW - Ex Works

Buyer arranges for pick-up of goods at the seller's location - Seller is responsible for packing, labeling, and preparing the goods for shipment on a specified date or time frame

Bayer assumes all risk

Buyer pays all transportation costs

N/A

FCA - Free Carrier

Seller is responsible for costs until the buyer's named freight carrier takes charge

Seller and Bayer

Split

N/A

FAS - Free Alongside Ship (over water only)

Buyer arranges for the ocean transport - Seller is responsible for packing, labeling, preparing the goods for shipment, and delivering the goods to the dock

Seller: until the goods reach the dock - Buyer: from dock to destination

Buyer: all ocean transport costs - Seller is responsible for costs associated with transporting the goods to the dock

Cost of transporting goods to the dock

FOB - Free On Board (over water only)

Seller arranges for ocean transport of the goods, preparing the goods for shipment, and loading the goods onto the vessel - The goods ship ocean freight collect

Buyer: once the items are on board

Seller: wharfage (charges to load the goods onto the ship) and freight forwarder fees

Costs, until on board

CFR - Cost and Freight (over water only)

Seller has the same responsibilities as when shipping FOB, but shipping costs are prepaid by the seller, instead of shipping collect

Seller: until the shipment reaches the overseas dock.

Seller: costs of freight fees up to destination

Add Freight to cost of product

CIF - Cost, Insurance, and Freight (over water only)

Seller has the same responsibilities as when shipping CFR with the addition of   including a marine insurance policy

Seller: until the shipment reaches the overseas dock

Seller: insurance and freight forwarder fees

Insurance, freight, and costs of goods