Incoterms

updated 21.09.2024

Incoterm Options:

When trading internationally, it’s essential to choose the right Incoterm that defines the responsibilities and risks between the buyer and seller. Below is a brief explanation of each Incoterm to help you make the right choice:

EXW (Ex Works)

  • Seller: Makes goods available at their premises (factory, warehouse, etc.).
  • Buyer: Responsible for all transportation, export duties, and risks from the seller’s location onward.
  • Common Use: Ideal when the buyer wants complete control over the shipping process. It offers minimal responsibility to the seller but requires the buyer to manage every stage of the shipment, including export and import documentation.

FCA (Free Carrier) (THIS IS THE DEFAULT OPTION)

  • Seller: Delivers goods to the buyer’s chosen carrier at a named place and handles export formalities.
  • Buyer: Takes on transportation costs and risks once the goods are handed over to the carrier.
  • Common Use: Often used in containerized shipping. The seller manages local delivery and export paperwork, while the buyer handles the transport and import logistics.

CPT (Carriage Paid To)

  • Seller: Pays for transportation to a specified destination.
  • Buyer: Takes on risk and responsibility for the goods once handed over to the carrier.
  • Common Use: Useful when the seller arranges transport but the buyer is comfortable with assuming the risk during the transit phase.

CIP (Carriage and Insurance Paid To)

  • Seller: Similar to CPT, but also includes insurance for the goods during transit.
  • Buyer: Assumes risk after the carrier takes possession but benefits from the seller-arranged insurance coverage.
  • Common Use: Appropriate when buyers want to ensure that the seller has arranged for adequate insurance during transit.

DAP (Delivered at Place)

  • Seller: Handles all transport and risk until the goods reach the buyer’s premises.
  • Buyer: Responsible for unloading and any customs duties upon arrival.
  • Common Use: Ideal for buyers who prefer the seller to handle all logistics until the goods are ready to be unloaded.

DPU (Delivered at Place Unloaded)

  • Seller: Responsible for delivering and unloading goods at the buyer’s location.
  • Buyer: Assumes risk and costs after unloading, including customs and duties.
  • Common Use: Beneficial for buyers who want the seller to manage all logistics up to and including the unloading at the final destination.

DDP (Delivered Duty Paid)

  • Seller: Handles everything – transportation, export, and import duties – until the goods arrive at the buyer’s location.
  • Buyer: Only responsible for receiving the goods.
  • Common Use: Offers the most convenience to the buyer, as the seller takes on all risks and responsibilities. However, it requires the seller to be familiar with the import regulations of the buyer’s country.

FAS (Free Alongside Ship)

  • Seller: Delivers goods alongside the vessel at the agreed port.
  • Buyer: Responsible for loading and all subsequent risks and costs.
  • Common Use: Typically used for bulk commodities, like raw materials, where the buyer manages the shipping process from the port.

FOB (Free On Board)

  • Seller: Loads goods onto the vessel and manages export formalities.
  • Buyer: Takes responsibility and risk once the goods are on board.
  • Common Use: Popular in maritime trade, especially when the buyer controls the sea freight.

CFR (Cost and Freight)

  • Seller: Pays for transport to the destination port but transfers the risk to the buyer once the goods are loaded onto the vessel.
  • Buyer: Takes on risk after loading and handles the rest of the logistics upon arrival.
  • Common Use: Appropriate for buyers who prefer the seller to handle transport costs up to the port of arrival but want to manage the insurance and handling from there.

CIF (Cost, Insurance, and Freight)

  • Seller: Covers transport and insurance to the destination port.
  • Buyer: Responsible for goods from the point they’re loaded on the ship but benefits from insurance during the sea voyage.
  • Common Use: Provides more protection than CFR as the seller arranges insurance, offering peace of mind for buyers.

Any:

  • Flexible: You are open to using any Incoterm that best fits the deal.