Meaning and Application of INCOterms
Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant
When negotiating an international purchase and sales contract, both parties need to pay careful attention to the terms of sale. INCOterms, an international set of trade terms has been adopted by many countries and defines exactly the responsibilities and risks of both the buyer and seller including while the merchandise is in transit.
The first following chart summarizes the responsibilities of both the buyer (B) and seller (S) for each of the specified INCOTERMS.
The second following second chart provides detailed information on the meaning and application of each term.
|
|
EXW |
FCA |
FAS |
FOB |
CFR |
CIF |
CPT |
CIP |
DAF |
DES |
DEQ |
DDU |
DDF |
|
Warehouse Storage |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Warehouse Labor |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Export Packing |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Loading Charges |
B |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Inland Freight |
B |
B/S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Terminal Charges |
B |
B |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Forwarder’s Fees |
B |
B |
B |
B |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Loading On Vessel |
B |
B |
B |
S |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Ocean/Air Freight |
B |
B |
B |
B |
S |
S |
S |
S |
S |
S |
S |
S |
S |
|
Charges On Arrival at Destination |
B |
B |
B |
B |
B |
B |
S |
S |
B |
B |
S |
S |
S |
|
Duty, Taxes & Customs Clearance |
B |
B |
B |
B |
B |
B |
B |
B |
B |
B |
B |
B |
S |
|
Delivery To Destination |
B |
B |
B |
B |
B |
B |
B |
B |
B |
B |
B |
S |
S |
The 13 INCOTERMS |
||
Origin Terms |
EXW –Ex-Works |
Named place where shipment is available to the buyer, not loaded. The seller will not contract for any transportation |
|
|
||
International Carriage NOT Paid by Seller |
FCA –Free Carrier |
Unloaded at the seller’s dock OR a named place where shipment is available to the international carrier or agent, not loaded. This term can be used for any mode of transport |
FAS –Free Alongside Ship |
Named ocean port of shipment, ocean shipments that are NOT containerized |
|
FOB – Free On Board vessel |
Named ocean port of shipment, this term is used for ocean shipments only where it is important that the goods pass the ship’s rail |
|
|
|
||
International Carriage Paid by the Seller |
CFR –Cost and Freight |
Named ocean port of destination, this term is used for ocean shipments that are not containerized. |
CIF – Cost, Insurance and Freight |
Named ocean port of destination, this term is used for ocean shipments that are not containerized |
|
CPT – Carriage Paid To |
Named place or port of destination, this term is used for air or ocean containerized and roll-on roll-off shipments | |
CIP Carriage and Insurance Paid To – |
Named place or port of destination, this term is used for air or ocean containerized and roll-on roll-off shipments |
|
|
|
||
Arrival At Stated Destination |
DAF – Delivered At Frontier |
Named place of destination, by land, not unloaded, this term is used for any mode of transportation but must be delivered by land |
DES – Delivered Ex-Ship |
Named port of destination, not unloaded, this term is used for ocean shipments only |
|
DEQ – Delivered Ex-Quay |
Named port of destination, unloaded, not cleared, this term is used for ocean shipments only |
|
DDU – Delivered Duty Unpaid |
Named place of destination, not unloaded, not cleared, this term is used for any mode of transportation | |
DDP – Delivered Duty Paid |
Named place of destination, not unloaded, cleared, this term is used for any mode of transportation | |
For more information on fortign trade, see also Foreign Trade, An Overview and Foregn Trade, Caveat Emptor.