Incoterms

The purpose of Incoterms is to provide a set of international rules for the most commonly used trade terms in international trade.

Incoterms are terms of delivery, not terms of sale. When incorporated into a contract of sale, they are used to determine the division of the risks and costs of shipping between buyer and seller.

Understanding the Incoterm for your international transaction, whether you are the buyer or seller (or just the shipper or consignee in the event there is no sale involved) is important in order to avoid misunderstandings and possible unexpected expenses.

Each Incoterm requires a “named place” at origin or destination (depending on the Incoterm) which should be as specific as possible to protect both buyer and seller. Insurance companies may accept or deny a claim based on the Incoterm and where and when loss or damage occurred – if your named place is unclear, insurance cover that you think is in place may be denied, especially if you are the buyer and the insurance was placed by the seller.

Incoterms for ANY MODE of transportation:

EXW EX-Works: Named place of origin
FCA Free Carrier: Named place of origin
CPT Carriage Paid To: Named place (port or airport) of destination
CIP Carriage and Insurance Paid To: Named place (port or airport) of destination
DAT Delivered At Terminal: Named terminal at port or place of destination
DAP Delivered At Place: Named place of destination
DDP Delivered Duty Paid: Named place of destination

Incoterms for OCEAN FREIGHT only:

FAS Free Alongside Ship: Named port of shipment
FOB Free On Board: Named port of shipment
CFR Cost and Freight: Named port of destination
CIF Cost, Insurance and Freight: Named port of destination

Suggested reading for more information:

Incoterms®2010 ICC Official Rules for the Interpretation of Trade Terms
Incoterms® for Americans® by Frank Reynolds