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Inco Terms

The 3 most common Incoterms

EXW

EXW – Ex-Works

  • Buyer assumes almost all costs and risk throughout the shipping process
  • Seller ’s only job is making sure the buyer can access the goods
  • Once the buyer has access, it’s all down to them (including loading the goods)
Risk transfers from seller to buyer:

At the seller’s warehouse, offices or wherever the goods are being collected from.

DAP

DAP – Delivered At Place

  • Seller covers the costs and risk of transporting goods to an agreed address
  • Goods are classed as delivered when they’re at the address and ready to be unloaded
  • Export and import responsibilities are the same as DAT
Risk transfers from seller to buyer:

When goods are ready for unloading at the agreed address

DDP

DDP – Delivered Duty Paid

  • Seller takes almost all responsibility throughout the shipping process
  • They cover all costs and risk of transporting goods to the agreed address
  • Seller also makes sure goods are ready for unloading, fulfils export and import responsibilities and pays any duties
Risk transfers from seller to buyer:

When goods are ready for unloading at the agreed address.

The other Incoterms

CIP

CIP – Carriage And Insurance Paid To

  • Buyer assumes almost all costs and risk throughout the shipping process
  • Seller ’s only job is making sure the buyer can access the goods
  • Once the buyer has access, it’s all down to them (including loading the goods)
Risk transfers from seller to buyer:

At the seller’s warehouse, offices or wherever the goods are being collected from.

DAT

DAT – Delivered At Terminal

  • Seller is responsible for the costs and risk of delivering the goods to an agreed terminal
  • The terminal could be an airport, warehouse, road or container yard
  • Seller organises customs clearance and unloads the goods at the terminal
  • Buyer sorts import clearance and any related duties
Risk transfers from seller to buyer:

At the terminal.

FCA

FCA – Free Carrier

  • It’s the seller’s job to get the goods to the buyer’s carrier at an agreed location
  • Seller is also required to clear goods for export
Risk transfers from seller to buyer:

When the buyer’s carrier receives the goods.

CPT

CPT – Carriage Paid To

  • Same seller responsibilities as FCA with one difference: the seller covers delivery costs
  • As with FCA, it’s the seller’s responsibility to clear goods for export
Risk transfers from seller to buyer:

When the buyer’s carrier receives the goods.EXW – Ex-Works.

FAS

FAS – Free Alongside Ship

  • Seller assumes all costs and risk until goods have been delivered next to the ship
  • Buyer then takes over risk and takes care of export and import clearance
Risk transfers from seller to buyer:

When goods have been delivered next to the ship.

FOB

FOB – Free On Board

  • Seller assumes all costs and risk until goods have been delivered on board the ship
  • They also sort out export clearance
  • Buyer assumes all responsibilities as soon as the goods are on board
Risk transfers from seller to buyer:

When goods have been delivered onto the ship.

CFR

CFR – Cost And Freight

  • Seller has the same responsibilities as FOB but must also pay the cost of bringing the goods to the port
  • As with FIB, the buyer assumes all responsibilities as soon as the goods are on board
    • Risk transfers from seller to buyer:

    When goods are on the ship.

CIF

CIF – Cost, Insurance And Freight

  • Seller has the same obligations as CFR but must also cover insurance costs
  • As with CIF, they’re only required to purchase the minimum cover
  • If the buyer requires more comprehensive insurance, they have to pay for it themselves
    • Risk transfers from seller to buyer:

    When the goods are on the ship.

Incoterms Explained Pictorally

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