Session 5 - Incoterms

Who makes the Incoterms?

The International Chamber of Commerce

Incoterms

International commercial terms that divide delivery tasks, costs, and risks between the seller and buyer.

Transfer of risk

The point when the buyer becomes responsible for loss of or damage to the goods.

Transfer of costs

The point or allocation determining which delivery expenses the seller and buyer must pay.

Transfer of ownership

The point when the buyer legally becomes the owner of the goods. Incoterms do not determine this.

Retention of ownership clause

A contract clause allowing the seller to keep ownership of the goods until the buyer pays in full.

Multimodal

Usable with any mode of transport or a combination of transport modes.

Maritime Incoterms

Terms used for sea and inland waterway transport: FAS, FOB, CFR, and CIF.

EXW — Ex Works

The seller makes goods available at its premises. The buyer bears risk from that point and handles loading, transport, and export and import clearance.

FCA — Free Carrier

The seller clears goods for export and delivers them to the buyer’s nominated carrier at the agreed place, where risk transfers. The seller loads at its own premises; at another location, goods are ready for unloading.

FAS — Free Alongside Ship

The seller clears goods for export and delivers them alongside the buyer’s ship. The buyer then bears risk and handles loading and main carriage. Maritime transport only.

FOB — Free On Board

The seller clears goods for export and loads them on board the buyer’s ship, where risk transfers. The buyer pays for main carriage. Maritime transport only.

CFR — Cost and Freight

The seller pays freight to the destination port, but risk transfers to the buyer when goods are loaded on board at the departure port. The seller has no obligation to buy insurance. Maritime transport only.

CIF — Cost, Insurance and Freight

The seller pays freight and insurance to the destination port, but risk transfers to the buyer when goods are loaded on board at the departure port. Maritime transport only.

CPT — Carriage Paid To

The seller pays transport to the named destination, but risk transfers to the buyer when goods are handed to the carrier. The seller has no obligation to buy insurance. Usable with any transport mode.

CIP — Carriage and Insurance Paid To

The seller pays transport and insurance to the named destination, but risk transfers to the buyer when goods are handed to the carrier. Usable with any transport mode.

DAP — Delivered at Place

The seller bears costs and risks until goods reach the named destination ready for unloading. The buyer unloads and handles import clearance. Usable with any transport mode.

DPU — Delivered at Place Unloaded

The seller bears costs and risks until goods are unloaded at the named destination. The buyer handles import clearance. Usable with any transport mode.

DDP — Delivered Duty Paid

The seller bears costs and risks to the named destination and handles export and import clearance, including duties and taxes. The buyer unloads. Usable with any transport mode.

E group

The seller has minimum responsibility, making goods available for collection. Includes EXW.

F group

The seller delivers goods at an agreed departure point. The buyer arranges and pays for main carriage and bears its risks. Includes FCA, FAS, and FOB.

C group

The seller pays for main carriage, but risk transfers before the goods reach their destination. Includes CFR, CIF, CPT, and CIP.

D group

The seller bears costs and risks until delivery at the named destination. Includes DAP, DPU, and DDP.

Export clearance

Customs formalities required for goods to leave a country.

Import clearance

Customs formalities required for goods to enter a country.

Main carriage

The principal transport stage between the shipment’s departure and destination areas.

Pre-carriage

Transport before the main carriage.

On-carriage

Transport after the main carriage to the final delivery location.

Commercial invoice

A document supplied by the seller stating the goods sold and their price.

Correct Incoterm reference

The Incoterm code followed by the named place or port and the version, such as FOB Port of Marseille, France, Incoterms 2020.