The Incoterms rules or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC). They are widely used in International commercial transactions or procurement processes. A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide.
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EXW - Ex WorksThe seller delivers the goods to the buyer: by placing the goods at the disposal of the buyer at a named place (could be a factory or a warehouse). That named place may or may be not the seller's premises. By placing the goods, the seller has fulfilled its obligation. The seller does not need to load the goods on a collecting vehicle, nor does it need to clear the goods for export. Risk transfers from seller to buyer when the goods are placed (not loaded) at the buyer's disposal.
2. FCA - Free CarrierThe sellers delivers the goods to the buyer in one or other of two ways:
3. CPT - Carriage Paid ToThe seller delivers the goods, and transfer the risk, to the buyer: by handling them over to the carrier contracted by the seller. Or by procuring the goods so delivered. The seller may do so by giving the carrier physical possession of the goods in the manner and at the place appropriate to the means of transport used. Risk transfers from seller to buyer when the goods are delivered to the buyer by handing them over to the carrier.
4. CIP - Carriage and Insurance Paid ToThe seller delivers the goods, and transfers the risk, to the buyer: by handling them over to the carrier as contracted by the seller or by procuring the goods so delivered. The seller may do so by giving the seller physical possession of the goods in the manner and at the place appropriate to the means of transport used. The only difference with CPT: the seller must also contract for insurance cover against the buyer's risk of loss or damage of the goods from the point of delivery to at least the point of destination. Risk transfers from seller to buyer when the goods are delivered to the buyer by handling them over to the carrier.
5. DAP - Delivered at PlaceThe seller delivers the goods (and transfers risk to the buyer) 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 or at the agreed point within that place, if any such point is agreed. The seller bears all risk involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterm rule, therefore, delivery and arrival at destination are the same. Risk transfers from seller to buyer when goods are transferred to the point of delivery/ destination.
6. DPU – Delivered at Place UnloadedThe seller delivers the goods (and transfers the risk) to the buyer when the goods once unloaded from the arriving means of transport are placed at the disposal of the buyer at a named place of destination or at the agreed point within that place, if any such point is agreed.The seller bears all risk involved in bringing the goods to and unloading them at the named place of destination. In this Incoterm rule, therefore, the delivery and arrival at destination are the same. DPU is the only Incoterm that rule that enquires the seller to unload goods at destination. Risk transfers from seller to buyer when goods are transferred and unloaded to the point of delivery/ destination.
7. DDP – Delivered Duty PaidThe seller delivers the goods to the buyer: when the goods are placed at the disposal of the buyer cleared for import on the arriving means of transport ready for unloading at the named place of destination or at the agreed point within that place, if any such point is agreed. The seller bears all risk involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterm rule, therefore, delivery and arrival at destination are the same. Risk transfers from seller to buyer when goods are transferred and unloaded to the point of delivery/ destination (including costs for customs clearance).
8. FAS – Free Alongside ShipThe seller delivers the goods to the buyer when the goods are placed alongside the ship (e.g on a quay or a barge) nominated by the buyer at the named port of shipment or when the seller procures goods already so delivered. Risk transfers from seller when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
9. FOB – Free on BoardThe seller delivers the goods to the buyer on board of the vessel nominated by the buyer at the named port of the shipment or procures the goods already so delivered. Risk transfers from seller to buyer when the goods are on board of the vessel and the buyer bears all costs from that moment onwards.
10. CFR - Cost and FreightThe seller delivers the goods to the buyer on board of the vessel or procures the goods already so delivered. Risk transfers from seller to buyer when the goods are delivered on board of the vessel and the port agreed as the destination of the goods.
11. CIF – Cost Insurance and FreightThe seller delivers the goods to the buyer: on board of the vessel or procures the goods already so delivered. The difference with CFR: The seller must also contact for insurance against the buyer's risk or loss of or damage to the goods from the port of shipment to at least the port of destination. Risk transfers from seller to buyer when the goods are delivered on board of the vessel and the port agreed as the destination of the goods. However, the seller must contract for the carriage of the goods from delivery to the agreed destination.
2. FCA - Free CarrierThe sellers delivers the goods to the buyer in one or other of two ways:
- First: when the named place is the seller's premises, the goods are delivered: when the goods are loaded on the means of transport arranged by the buyer.
- Second: when the named place is another place the goods are delivered: when having been loaded on the seller's means of transport they reached the named other place and are ready for unloading from that sellers means of transport and at the disposal of the carrier or of another person nominated by the buyer.
3. CPT - Carriage Paid ToThe seller delivers the goods, and transfer the risk, to the buyer: by handling them over to the carrier contracted by the seller. Or by procuring the goods so delivered. The seller may do so by giving the carrier physical possession of the goods in the manner and at the place appropriate to the means of transport used. Risk transfers from seller to buyer when the goods are delivered to the buyer by handing them over to the carrier.
4. CIP - Carriage and Insurance Paid ToThe seller delivers the goods, and transfers the risk, to the buyer: by handling them over to the carrier as contracted by the seller or by procuring the goods so delivered. The seller may do so by giving the seller physical possession of the goods in the manner and at the place appropriate to the means of transport used. The only difference with CPT: the seller must also contract for insurance cover against the buyer's risk of loss or damage of the goods from the point of delivery to at least the point of destination. Risk transfers from seller to buyer when the goods are delivered to the buyer by handling them over to the carrier.
5. DAP - Delivered at PlaceThe seller delivers the goods (and transfers risk to the buyer) 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 or at the agreed point within that place, if any such point is agreed. The seller bears all risk involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterm rule, therefore, delivery and arrival at destination are the same. Risk transfers from seller to buyer when goods are transferred to the point of delivery/ destination.
6. DPU – Delivered at Place UnloadedThe seller delivers the goods (and transfers the risk) to the buyer when the goods once unloaded from the arriving means of transport are placed at the disposal of the buyer at a named place of destination or at the agreed point within that place, if any such point is agreed.The seller bears all risk involved in bringing the goods to and unloading them at the named place of destination. In this Incoterm rule, therefore, the delivery and arrival at destination are the same. DPU is the only Incoterm that rule that enquires the seller to unload goods at destination. Risk transfers from seller to buyer when goods are transferred and unloaded to the point of delivery/ destination.
7. DDP – Delivered Duty PaidThe seller delivers the goods to the buyer: when the goods are placed at the disposal of the buyer cleared for import on the arriving means of transport ready for unloading at the named place of destination or at the agreed point within that place, if any such point is agreed. The seller bears all risk involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterm rule, therefore, delivery and arrival at destination are the same. Risk transfers from seller to buyer when goods are transferred and unloaded to the point of delivery/ destination (including costs for customs clearance).
8. FAS – Free Alongside ShipThe seller delivers the goods to the buyer when the goods are placed alongside the ship (e.g on a quay or a barge) nominated by the buyer at the named port of shipment or when the seller procures goods already so delivered. Risk transfers from seller when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
9. FOB – Free on BoardThe seller delivers the goods to the buyer on board of the vessel nominated by the buyer at the named port of the shipment or procures the goods already so delivered. Risk transfers from seller to buyer when the goods are on board of the vessel and the buyer bears all costs from that moment onwards.
10. CFR - Cost and FreightThe seller delivers the goods to the buyer on board of the vessel or procures the goods already so delivered. Risk transfers from seller to buyer when the goods are delivered on board of the vessel and the port agreed as the destination of the goods.
11. CIF – Cost Insurance and FreightThe seller delivers the goods to the buyer: on board of the vessel or procures the goods already so delivered. The difference with CFR: The seller must also contact for insurance against the buyer's risk or loss of or damage to the goods from the port of shipment to at least the port of destination. Risk transfers from seller to buyer when the goods are delivered on board of the vessel and the port agreed as the destination of the goods. However, the seller must contract for the carriage of the goods from delivery to the agreed destination.