Logistics Incoterms


Incoterms 2020


The Incoterms® rules are the world’s essential terms of trade for the sale of goods. Whether you are filing a purchase order, packaging and labelling a shipment for freight transport, or preparing a certificate of origin at a port, the Incoterms® rules are there to guide you. The Incoterms® rules provide specific guidance to individuals participating in the import and export of global trade on a daily basis.
EXW Ex Works
EXW terms is the most simple from a seller’s point of view. The seller’s only requirement is to make the goods available for pickup to the buyer, either at the seller’s location or another specified location. As such, the buyer assumes all the costs and risks of transporting the goods.
FCA Free Carrier
FCA terms, the seller delivers the goods to the buyer at an agreed-upon location (this can also be the seller’s location). The seller then delivers the merchandise to a carrier or potentially to a third party nominated by the buyer. The buyer covers the costs and risks of unloading the goods and loading them into its carrier(s) until arrival.
FAS Free Alongside Ship
FAS terms, the seller must bring the merchandise alongside the buyer’s vessel in the determined port. The seller is still responsible for clearing the merchandise for export. Both parties can negotiate for the buyer to clear for exportation if they want to. Additionally, this term use is for the non-containerized transports only.
FOB Free on Board
FOB Terms, the seller bears all responsibilities until the goods are on board the vessel. Unless the goods are “appropriated to the contract,” the seller only transfers part of the risks. He must deliver the goods on board a ship designated by the buyer and organize export clearance. In counterpart, the buyer is responsible for the cost of marine freight transportation, bill of lading fees, insurance, unloading, and transportation cost from the arrival port to destination. Most often used for all means of transport, some common law countries attach FOB to any land transportation and, as such, extend the meaning of vessel.
CFR Cost and Freight
CFR terms, the seller covers the cost of the carriage of the goods to the destination port. The seller is then responsible for the origin costs (such as export clearance, or first carrier) and freight charges. However, it is the buyer who is responsible for the delivery to the final destination and insurance. Parties should use CFR for non-containerized marine shipping only, as otherwise its multipurpose pendent CPT is better.
CIF Cost, Insurance and Freight
CIF terms is very similar to CFR, with the addition of the seller’s obligation to pursue insurance for the merchandise while transiting between both ports. Once again, the seller must insure the merchandise to 110% of the contract value, following the same close as CIP. Moreover, the seller must turn over the necessary documents for the obtention of the goods. The handover must include, but is not limited to, the invoice, the insurance policy, and the bill of lading (simplified to cost, insurance, and freight).
CPT Carriage Paid to
CPT terms, The seller covers the costs of merchandise carriage up to the named place of destination. However, once the seller hands over the merchandise to the first carrier, we consider the goods delivered. As such, the risks transfer to the buyers at the place of shipment. The seller covers all costs up until then (including export clearance) and the costs of freight. The parties can decide this to be until either the final destination or port of destination.
CIP Carrier and Insurance Paid to
CIP terms, The seller must insure the merchandise to 110% of the contract value under the Institute Cargo Clauses (A) of the Institute of London Underwriters or any similar set of clauses. This Incoterm is similar to the previous one with the addition of insurance costs.
DAP Delivered at Place
DAP terms is similar to DPU, only this time, the goods are delivered once they are at the buyer’s disposal at the final destination, ready for unloading. The risks then transfer to the buyer from the point of destination, at which point the destination port charges and clearance are taken care of by the buyer, in contrast with DPU.
DPU Delivered at Place Unloaded
DPU terms, the seller covers all costs and risks until arrival at the destination port or terminal. These also include unloading the goods upon arrival. The destination can be a port, airport, or inland freight interchange. All the fees after unloading (such as Import duty, taxes, customs, and on-carriage) are to the buyer’s expense.
DDP Delivered Duty Paid
DDP terms, the seller has maximum obligations. The seller must deliver the goods at the place of destination in the importing country. As such, all costs and risks are the seller’s responsibility, including import duties and taxes. However, the seller is not responsible for unloading the goods.