Incoterms (short for International Commercial Terms) are a set of standardized trade terms used globally in international and domestic contracts for the sale of goods. Published by the International Chamber of Commerce (ICC), they clearly define the responsibilities, costs, and risks involved in the transportation and delivery of goods between buyers and sellers.
The first seven Incoterms can be applied to any mode of transport (or a combination of modes):
EXW (Ex Works): Seller makes goods available at their premises; buyer covers all transport costs.
FCA (Free Carrier): Seller hands over goods, cleared for export, to the carrier chosen by the buyer at a specified location.
CPT (Carriage Paid To): Seller pays for transport to the named destination. Risk and costs transfer to buyers when goods are handed over to the first carrier.
CIP (Carriage and Insurance Paid To): Same as CPT, but the seller also pays for insurance.
DAP (Delivered At Place): Seller covers all transport costs until the goods are delivered to the named destination. Unloading is the buyer’s responsibility.
DPU (Delivered At Place Unloaded): Seller pays and is responsible for transport and unloading at a specified destination.
DDP (Delivered Duty Paid): Seller covers all costs, including import duty. Risk transfers when goods are delivered to the buyer's premises.
The following Incoterms are applicable only for sea or inland waterway transport:
FAS (Free Alongside Ship): Seller delivers goods alongside the vessel at a specified port. Buyer covers loading and transport.
FOB (Free On Board): Seller loads goods onto the vessel; risk transfers to the buyer once loaded.
CFR (Cost and Freight): Seller pays for transport to the destination port. Risk transfers once goods are on board.
CIF (Cost, Insurance and Freight): Same as CFR, but the seller also pays for insurance.
These terms reduce uncertainties and misunderstandings in international trade by providing a common framework for defining responsibilities in the shipping process.