INCOTERMS is a set of rules introduced by the International Chamber of Commerce (ICC) to standardise the terms used in international trade. Incoterms rules are used in international and domestic contracts worldwide to define the responsibilities of buyers and sellers regarding costs and risks, cargo insurance and regulatory compliance.
INCOTERMS has been revised in 1963, 1967, 1976, 1980, 1990, 2000 and 2010 in response to changes in international trade practice over time. The current version in force is INCOTERMS 2020, which took effect on 1 January 2020.
Ex Works
Ex Works (EXW) means that the seller delivers the goods to the buyer when it places them at the buyer's disposal at a named place (such as a factory or warehouse), which may or may not be the seller's premises. For delivery to occur, the seller does not need to load the goods onto any collecting vehicle, nor does it need to clear the goods for export where such clearance is applicable.
Free Carrier
Free Carrier (FCA) means that the seller delivers the goods to the buyer in one of two ways. In the first option, when the named place is the seller's premises, the goods are delivered when they are loaded onto the means of transport arranged by the buyer. In the second option, when the named place is another address, the goods are delivered when, having been loaded onto the seller's means of transport, they reach the named other place and are ready for unloading from the seller's means of transport and at the disposal of the carrier or another person nominated by the buyer.
Whichever of the two options is chosen as the place of delivery, that place determines where and when risk and costs transfer to the buyer.
Carriage Paid To
Carriage Paid To (CPT) means that the seller delivers the goods to the buyer, and transfers the risk, by handing them over to the carrier or by procuring goods already 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. Once the goods have been delivered to the buyer in this way, the seller does not guarantee that the goods will reach the place of destination in sound condition, in the stated quantity or indeed at all. This is because risk transfers from seller to buyer when the goods are handed over to the carrier; the seller must nevertheless contract for the carriage of the goods from delivery to the agreed destination.
Carriage and Insurance Paid To
Carriage and Insurance Paid To (CIP) means that the seller delivers the goods to the buyer, and transfers the risk, by handing them over to the carrier or by procuring goods already 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. Once the goods have been delivered to the buyer in this way, the seller does not guarantee that the goods will reach the place of destination in sound condition, in the stated quantity or indeed at all. This is because risk transfers from seller to buyer when the goods are handed over to the carrier; the seller must nevertheless contract for the carriage of the goods from delivery to the agreed destination.
Delivered at Place
Delivered at Place (DAP) means that the 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 such a point has been agreed. The seller bears all risks involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterms rule, delivery and arrival at destination are the same.
Delivered at Place Unloaded
Delivered at Place Unloaded (DPU) means that the seller delivers the goods, and transfers risk, to the buyer when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at the named place of destination or at the agreed point within that place, if such a point has been agreed. The seller bears all risks involved in bringing the goods to and unloading them at the named place of destination. In this Incoterms rule, delivery and arrival at destination are the same. DPU is the only Incoterms rule that requires the seller to unload the goods at destination. The seller should therefore ensure that it is in a position to organise unloading at the named place. Should the parties not wish the seller to bear the risk and cost of unloading, DPU should be avoided and DAP used instead.
Delivered Duty Paid
Delivered Duty Paid (DDP) means that the 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 such a point has been agreed. The seller bears all risks involved in bringing the goods to the named place of destination or to the agreed point within that place. In this Incoterms rule, delivery and arrival at destination are the same.
Rules for Sea and Inland Waterway Transport
Free Alongside Ship
Free Alongside Ship (FAS) means that the 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. The risk of loss of or damage to the goods transfers when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
Free On Board
Free On Board (FOB) means that the seller delivers the goods to the buyer on board the vessel nominated by the buyer at the named port of shipment, or procures goods already so delivered. The risk of loss of or damage to the goods transfers when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
Cost and Freight
Cost and Freight (CFR) means that the seller delivers the goods to the buyer on board the vessel or procures goods already so delivered. The risk of loss of or damage to the goods transfers to the buyer once the goods are on board the vessel, so that the seller is deemed to have performed its obligation to deliver the goods whether or not the goods actually arrive at their destination in sound condition, in the stated quantity or at all. Under CFR, the seller has no obligation to purchase insurance cover for the buyer; the buyer is advised to obtain some cover for itself.
Cost, Insurance and Freight
Cost, Insurance and Freight (CIF) means that the seller delivers the goods to the buyer on board the vessel or procures goods already so delivered. The risk of loss of or damage to the goods transfers to the buyer once the goods are on board the vessel, so that the seller is deemed to have performed its obligation to deliver the goods whether or not the goods actually arrive at their destination in sound condition, in the stated quantity or at all.
