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:
|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.
|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.
|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.
|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.
|CAF or 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. Under CFR, the seller does not have to procure marine insurance against the risk of loss or damage to the cargo during transit.
|Carriage Paid To
|CPT or Carriage Paid To 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.
|Carriage and Insurance Paid to
|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).
|Delivered at frontier (DAF) requires a seller to deliver goods to a border location. The seller is usually responsible for all costs of transporting the goods to the drop-off point for the buyer. The party picking up the goods will usually be importing them and traveling across customs.
|Delivered ex-ship (DES) was a trade term that required a seller to deliver goods to a buyer at an agreed port of arrival. The seller met its obligation upon delivery of uncleared goods in a designated port. It assumed the full cost and risk involved in getting the goods to that point, at which time it was available to the buyer and the buyer assumed all ensuing costs and risks.
|DEQ or “delivered ex quay” was a contract specification where the seller had to deliver the goods to the wharf at the destination port. The term is now obsolete, and has been replaced with DAT, or “delivered at the terminal.”
|Delivered Duty Unpaid (DDU) is an old international trade term indicating that the seller is responsible for the safe delivery of goods to a named destination, paying all transportation expenses and assuming all risks during transport. Once the goods arrive at the agreed-upon location, the buyer becomes responsible for paying import duties, as well as further transport costs.
|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.