IncoTerm

EX WORKS

• In Ex Works, the seller/exporter/manufacturers merely make the goods available to the buyer at the seller's "named place" of business. This trade term places the greatest responsibility on the buyer and minimum obligation on the seller.
  The seller does not clear the goods for export and does not load the goods onto a truck or other transport vehicle at the named place of departure.
  The parties to the transaction, however, may stipulate that the seller be responsible for the costs and risks of loading the goods onto a transport vehicle. Such a stipulation is a variant and must be made within the contract of sale. A better solution in this situation is to use the FCA (Free Carrier) term: For example: FCA Supplier's Facility Hong Kong.
  If the buyer cannot handle export formalities the Ex Works term should not be used. In such a case Free Carrier (FCA) is recommended.
  The Ex Works term is often used when making an initial quotation for the sale of goods. It represents the cost of the goods without any other costs included.
  Normal payment terms for Ex Work transactions are generally cash in advance and open account.
  Incoterm Category
  EXW is the only 'E' Incoterms. The 'E' Incoterm is where the seller/exporter/makes the goods available to the buyer/importer at the seller/exporter's premises/factory/warehouse (the 'named place').
  

FCA, Free Carrier (...named place)

• In Free Carrier, the seller/exporter/manufacturer clears the goods for export and delivers them to the carrier specified by the buyer at the named place. If the named place is the seller's place of business, the seller is responsible for loading the goods onto the transport vehicle. If the named place is any other location, such as the loading dock of the carrier, the seller is not responsible for unloading. The Free Carrier term may be used for any mode of transport, including multimodal. The 'named place' in Free Carrier and all 'F' terms is domestic to the seller. 'Carrier' has a specific and somewhat expanded meaning. A carrier can be a shipping line, an airline, a trucking firm, or a railway. The carrier can also be an individual or firm who undertakes to procure carriage by any of the above methods of transport including multimodal. Therefore, a person, such as a freight forwarder, can act as a 'carrier' under this term. In such a case, the buyer names the carrier or the individual who is to receive the goods.
  The Free Carrier term is often used when making an initial quotation for the sale of goods. Usual payment terms for Free Carrier transactions are cash in advance and open account. Note that a carrier is a firm that itself transports goods or passengers for hire, rather than simply arranging for such transport. In the FCA term, however, the carrier can be any person who by contract 'undertakes to perform or procure' such services. With the FCA term, the buyer nominates the 'carrier' and the seller need only accept the nomination for the term to work. To do so, define (name) the carrier in the sales contract.
  Incoterm Category
  FCA is an 'F' Incoterm where the seller/exporter delivers the goods export cleared to a carrier named by the buyer, but does not bear risk or costs once the goods have been handed over.
  

FAS, Free Alongside Ship (...named port of shipment)




• In Free Alongside Ship, the seller/exporter/manufacturer clears the goods for export and then places them alongside the vessel at the 'named port of shipment.' [The seller's clearing the goods for export is new to Incoterms 2000]. The parties to the transaction, however, may stipulate in their contract of sale that the buyer, instead of the seller clear the goods for export. The standard FAS term, however, requires that the seller clear the goods for export. The Free Alongside Ship term is used only for ocean or inland waterway transport. The 'named place' in Free Alongside Ship and all 'F' terms is domestic to the seller. The Free Alongside Ship term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore. Usual payment terms for Free Carrier transactions are cash in advance and open account, but letters of credit are also used.
  Incoterm Category
  FAS is an 'F' Incoterm where the seller/exporter delivers the goods alongside a ship, and does not bear risk or costs once the goods have been handed over.
  

FOB, Free On Board (...named port of shipment)

• In Free On Board, the seller/exporter/manufacturer clears the goods for export and is responsible for the cost and risks of delivering the goods past the ship's rail at the named port of shipment. The Free On Board term is used only for ocean or inland waterway transport. The 'named place' in Free On Board and all 'F' terms is domestic to the seller. Normal payment terms for FOB transactions include cash in advance, open account, and letters of credit. The Free On Board term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore where passing the ship's rail is important. The Free On Board term is very commonly misused in situations where a shipment is simply handed over to a carrier without being loaded onboard an ocean or inland waterway vessel. If the seller and buyer do not intend to have the goods pass the ship's rail, the FCA term should be used instead. The key document in FOB transactions is the 'On Board Bill of Lading'. Sellers and buyers often confuse the Free On Board term with Free Carrier. Free On Board (FOB) does not mean loading the goods onto a truck at the seller's place of business. Free On Board is used only in reference to delivering the goods past a ship's rail in ocean or inland waterway transport. Free Carrier, on the other hand, is applicable to all modes of transport.
  Incoterm Category
  FOB is an 'F' Incoterm where the seller/exporter is responsible for delivering the goods, export cleared, on board a ship, but does not bear risk or costs afterwards.
  

CFR Cost and Freight (...named port of destination)




• In Cost and Freight, the seller/exporter/manufacturer clears the goods for export and is responsible for delivering the goods past the ship's rail at the port of shipment (not destination). The seller is also responsible for paying for the costs associated with transport of the goods to the named port of destination. However, once the goods pass the ship's rail at the port of shipment, the buyer assumes responsibility for risk of loss or damage as well as any additional transport costs. The Cost and Freight term is used only for ocean or inland waterway transport. The 'named port of destination' in Cost and Freight and all 'C' terms is domestic to the buyer. Normal payment terms for Cost and Freight transactions include cash in advance, open account, and letters of credit.
  The Cost and Freight term is commonly used the sale of a) bulk commodity cargo such as oil, grains, liquid chemicals, and ore, b) oversize and overweight cargo that will not fit into an ocean freight container, or c) cargo that exceeds the weight limitations of ocean containers. The term is sometimes used for LCL (less than container load) cargo and for the shipment of goods by rail in boxcars to the ocean carrier.
  Incoterm Category
  CFR is a 'C' Incoterm where the seller is responsible for contracting and paying for carriage of the goods, but not responsible for additional costs or risk of loss or damage to the goods once they have been delivered past the ship's rail at origin. C terms evidence 'shipment' (as opposed to 'arrival') contracts.
  

CIF Cost, Insurance and Freight (...named port of destination)




• In Cost, Insurance and Freight, the seller/exporter/manufacturer clears the goods for export and is responsible for delivering the goods past the ship's rail at the port of shipment (not destination). The seller is responsible for paying for the costs associated with transport of the goods to the named port of destination. However, once the goods pass the ship's rail at the port of shipment, the buyer assumes responsibility for risk of loss or damage as well as any additional transport costs. The seller is also responsible for procuring and paying for minimum cover marine insurance on behalf of the buyer against the buyer's risk of loss for the shipment. The Cost, Insurance and Freight term is used only for ocean or inland waterway transport. The 'named port of destination' in Cost, Insurance and Freight and all 'C' terms is domestic to the buyer. Normal payment terms for Cost, Insurance and Freight transactions include cash in advance, open account, and letters of credit. The Cost and Freight term is commonly used the sale of bulk commodity cargo such as oil, grains, liquid chemicals, and ore.
  Incoterm Category
  CIF is a 'C' Incoterm where the seller is responsible for contracting and paying for carriage and minimum cover insurance of the goods, but not responsible for additional costs or risk of loss or damage to the goods once they have been shipped. C terms evidence 'shipment' (as opposed to 'arrival') contracts.

CPT Carriage Paid To (...named place of destination)




• In Carriage Paid To, the seller/exporter/manufacturer clears the goods for export, delivers them to the carrier, and is responsible for paying for carriage to the named place of destination. However, once the seller delivers the goods to the first carrier (if more than one carrier is used), the buyer becomes responsible for all additional costs.
  In Incoterms 2000 the seller is also responsible for the costs of unloading, customs clearance, duties, and other costs if such costs are included in the cost of carriage such as in small package courier delivery. The seller is not responsible for procuring and paying for insurance cover. The CPT term is valid for any form of transport including multimodal. The 'named place of destination' in CPT and all 'C' terms is domestic to the buyer, but is not necessary the final delivery point. The Carriage Paid To term is often used in sales where the shipment is by air freight, containerized ocean freight, courier shipments of small parcels, and in 'ro-ro' (roll-on, roll-off) shipments of motor vehicles. A 'carrier' can be a shipping line, airline, trucking firm, railway or also an individual or firm who undertakes to procure carriage by any of the above methods of transport including multimodal. Therefore, a person, such as a freight forwarder, can act as a 'carrier' under this term. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier.
  Incoterm Category
  CPT is a 'C' Incoterm where the seller is responsible for contracting and paying for carriage of the goods, but not responsible for additional costs or risk of loss or damage to the goods once they have been shipped. C terms evidence 'shipment' (as opposed to 'arrival') contracts.
  

CIP Carriage and Insurance Paid To (...named place of destination)




• In Carriage and Insurance Paid To, the seller/exporter clears the goods for export, delivers them to the carrier, and is responsible for paying for carriage and insurance to the named place of destination. However, once the goods are delivered to the carrier, the buyer is responsible for all additional costs. In Incoterms 2000 the seller is also responsible for the costs of unloading, customs clearance, duties, and other costs if such costs are included in the cost of carriage such as in small package courier delivery.
  The seller is responsible for procuring and paying for minimum insurance cover.
  The CIP term is valid for any form of transport including multimodal.
  The 'named place of destination' in CIP and all 'C' terms is domestic to the buyer, but is not necessarily the final delivery point. The Carriage and Insurance Paid To term is often used in sales where the shipment is by air freight, containerized ocean freight, courier shipments of small parcels, and in 'ro-ro' (roll-on, roll-off) shipments of motor vehicles. A 'carrier' can be a shipping line, airline, trucking firm, railway or also an individual or firm who undertakes to procure carriage by any of the above methods of transport including multimodal. Therefore, a person, such as a freight forwarder, can act as a 'carrier' under this term. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier.
  Incoterm Category
  CIP is a 'C' Incoterm where the seller is responsible for contracting and paying for carriage and insurance of the goods, but not responsible for additional costs or risk of loss or damage to the goods once they have been shipped. C terms evidence 'shipment' (as opposed to 'arrival') contracts.
  

DAF Delivered At Frontier (...named place)




• In Delivered At Frontier, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer at the named point and place at the frontier, not unloaded, and not cleared for import. Naming the precise place and time of availability at the frontier is very important as the buyer must take arrangements to unload and secure the goods in a timely manner. For example the Port of Rotterdam is so large that the buyer will wish to specify a precise place within the port. Frontier can mean any frontier including the frontier of export. The DAF term is valid for any mode of shipment, so long as the final shipment to the named place at the frontier is by land.
  The seller is not responsible for procuring and paying for insurance cover.
  Incoterm Category
  DAF is a 'D' Incoterm where the seller is responsible for all costs associates with delivering the goods to the named point and place of destinations. 'D' terms evidence 'arrival' (as opposed to 'shipment') contracts.

DES Delivered Ex Ship (...named port of destination)

• In Delivered Ex Ship, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer on board the ship at the named port of destination, not cleared for import. The seller is thus responsible for all costs of getting the goods to the named port of destination prior to unloading.
  The DES term is used only for shipments of goods by ocean or inland waterway or by multimodal transport where the final delivery is made on a vessel at the named port of destination. All forms of payments are used in DES transactions.
  Incoterm Category
  DES is a 'D' Incoterm where the seller is responsible for all costs associated with delivering the goods to the named port of destination. 'D' terms evidence 'arrival' (as opposed to 'shipment') contracts.
  

DEQ Delivered Ex Quay (...named port of destination)




• In Delivered Ex Quay, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer on the quay (wharf) at the named port of destination, not cleared for import. The buyer, therefore, assumes all responsibilities for import clearance, duties, and other costs upon import as well as transport to the final destination. This is new for Incoterms 2000. The DEQ term is used only for shipments of goods arriving at the port of destination by ocean or by inland waterway. All forms of payment are used in DEQ transactions.
  Incoterm Category
  DEQ is a 'D' Incoterm where the seller is responsible for all costs associated with delivering the goods to the quay (wharf) at the named port of destination. 'D' terms evidence 'arrival' (as opposed to 'shipment') contracts.
  

DDU Delivered Duty Unpaid (...named place of destination)




• In Delivered Duty Unpaid, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer at the named place of destination, not cleared for import and not unloaded from the arriving means of transport. The seller, therefore, assumes all responsibilities for delivering the goods to the named place of destination, but the buyer assumes all responsibilities for import clearance, duties, administrative costs, and any other costs upon import as well as transport to the final destination. The DDU term can be used for any mode of transport.
  However, if the seller and buyer desire that delivery should take place on board a sea vessel in the port of destination, the DES term is recommended. If the buyer and seller desire that delivery should take place in the port of destination, on a quay (wharf), the DEQ term is recommended. All forms of payment are used in DDU transactions.
  Incoterm Category
  DDU is a 'D' Incoterm where the seller is responsible for all costs associated with delivering the goods to the named place of destination. 'D' terms evidence 'arrival' (as opposed to 'shipment') contracts.
  

DDP Delivered Duty Paid (...named place of destination)




• In Delivered Duty Paid, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer at the named place of destination, cleared for import, but not unloaded from the transport vehicle.
  The seller, therefore, assumes all responsibilities for delivering the goods to the named place of destination, including all responsibilities for import clearance, duties, and other costs payable upon import. If the parties' desire that the seller NOT be obligated to pay for VAT (value-added tax), explicit wording to that effect should be added to the contract of sale. The DDP term can be used for any mode of transport.
  All forms of payment are used in DDP transactions.
  The DDP term is typically used when the named place of destination is the buyer's place of business, or alternatively, the place of business of the buyer's client.
  Incoterm Category
  DDP is a 'D' Incoterm where the seller is responsible for all costs associated with delivering the goods to the named place of destination. 'D' terms evidence 'arrival' (as opposed to 'shipment') contracts.