Incoterms® is a set of rules drafted and established by the International Chamber of Commerce that is used for international trade. It was firstly introduced in 1936 which aimed to facilitate different commercial and judicial standards that varies from one country to another and have been used by enterprises from around the world.
Below are the 3 letters code used for the latest Incoterms 2020:
| E | EXW | Ex Works | EXW or Ex works is a shipping arrangement in which a seller makes a product available at a specific location, but the buyer has to pay the transport costs. |
| F | FCA | Free Carrier | FCA or Free Carrier is when a seller is responsible for the delivery of goods to a specific destination. The destination is typically a named airport, terminal, or other location where the carrier operates. It might even be the seller’s business location. |
| FAS | Free Alongside Ship | FAS or Free Alongside Ship is used indicates that the seller must arrange for the goods purchased to be delivered next to a particular vessel in a particular port in order to be ready for transfer to a waiting ship. | |
| FOB | Free on Board | Free On Board (FOB) is a shipment term used to indicate whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping. “FOB shipping point” or “FOB origin” means the buyer is at risk and takes ownership of goods once the seller ships the product. | |
| C | CFR | Cost and Freight | CFR or Cost and Freight, is a legal term used in foreign trade contracts. In a contract specifying that a sale is cost and freight, the seller is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. With a cost and freight sale, the seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used strictly for cargo transported by sea or inland waterways. |
| CIF | Cost, Insurance & Freight | (CIF) is an expense paid by a seller to cover the costs, insurance, and freight of a buyer’s order while it is in transit. The goods are exported to a port named in the sales contract. Until the goods are fully loaded onto a transport ship, the seller bears the costs of any loss or damage to the product. Further, if the product requires additional customs duties, export paperwork, or inspections or rerouting, the seller must cover these expenses. Once the freight loads, the buyer becomes responsible for all other costs. CIF is similar but not the same as carriage and insurance paid to (CIP). | |
| CPT | Carriage Paid To | CPT is an international trade term which means that the seller delivers the goods at their expense to a carrier or another person nominated by the seller. The seller assumes all risks, including loss, until the goods are in the care of the nominated party. The carrier could be the person or entity responsible for the carriage (by sea transport, rail, road, etc.) of the goods or the person or entity enlisted to procure the performance of the carriage. The CPT price might include Terminal Handling Charges (THC) in their freight rates | |
| CIP | Carriage and Insurance Paid To | (CIP) is when a seller pays freight and insurance to deliver goods to a seller-appointed party at an agreed-upon location. The risk of damage or loss to the goods being transported transfers from the seller to the buyer as soon as the goods are delivered to the carrier or appointed person. It is comparable, but different to Cost, Insurance, and Freight (CIF). | |
| D | DPU | Delivered at Place Unloaded | In Incoterms 2010, this rule was referred to as Delivered At Terminal There are no restrictions on the named place – for example it can be a transport hub, a warehouse or the buyer’s depot. The seller is responsible for arranging carriage and for delivering the goods, unloaded from the arriving conveyance, at the named place. Risk transfers from seller to buyer when the goods have been unloaded. This is the only rule that requires the seller to unload the goods in order to complete delivery. The buyer is responsible for import clearance and any applicable local taxes or import duties |
| DAP | Delivered at Place | Delivered-at-place (DAP) is an international trade term used to describe a deal in which a seller agrees to pay all costs and suffer any potential losses of moving goods sold to a specific location. In delivered-at-place agreements, the buyer is responsible for paying import duties and any applicable taxes, including clearance and local taxes, once the shipment has arrived at the specified destination. | |
| DDP | Delivered Duty Paid | Delivered duty paid (DDP) is a delivery agreement whereby the seller assumes all of the responsibility, risk, and costs associated with transporting goods until the buyer receives or transfers them at the destination port. This agreement includes paying for shipping costs, export and import duties, insurance, and any other expenses incurred during shipping to an agreed-upon location in the buyer’s country. |
source: https://www.investopedia.com/
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