Incoterms (short for International Commercial Terms) are globally recognized trade guidelines used in both domestic and international contracts for buying and selling goods. Created by the International Chamber of Commerce (ICC), these terms outline the duties, costs, and risks shared between sellers and buyers during the transport and delivery process.
Incoterms applicable to all transport methods or combinations:
EXW (Ex Works): The seller prepares goods at their location, and the buyer assumes all transportation expenses.
FCA (Free Carrier): Goods are handed over by the seller, cleared for export, to a carrier chosen by the buyer at a specific location.
CPT (Carriage Paid To): The seller covers transport to the named destination; responsibility and risk pass to the buyer when handed to the first carrier.
CIP (Carriage and Insurance Paid To): Similar to CPT, but the seller also includes insurance.
DAP (Delivered At Place): The seller pays for transport until the goods reach the destination; unloading is the buyer’s responsibility.
DPU (Delivered At Place Unloaded): Transport and unloading costs are borne by the seller to the agreed destination.
DDP (Delivered Duty Paid): All expenses, including import duties, are covered by the seller; risk shifts to the buyer when goods arrive at their premises.
Incoterms specific to sea or inland waterway transport:
FAS (Free Alongside Ship): Goods are delivered by the seller next to the vessel at the departure port, with the buyer covering loading and transport.
FOB (Free On Board): The seller loads goods onto the ship; responsibility transfers to the buyer once loading is complete.
CFR (Cost and Freight): The seller handles transport fees to the destination port; risk moves to the buyer once goods are on board.
CIF (Cost, Insurance, and Freight): Like CFR, but the seller also provides insurance coverage.
These terms serve as a universal framework, ensuring clear allocation of responsibilities in the shipping process and reducing potential conflicts in global trade.
