INCOTERMS
Rules for Sea and Inland Waterway Transport:
FAS - Free Alongside Ship: Risk passes to buyer, including payment of all transportation
and insurance costs, once delivered alongside the ship (realistically at named port
terminal) by the seller. The export clearance obligation rests with the seller.
FOB - Free On Board: Risk passes to buyer, including payment of all transportation and
insurance costs, once delivered on board the ship by the seller. A step further than FAS.
CFR - Cost and Freight: Seller delivers goods and risk passes to buyer when on board
the vessel. Seller arranges and pays cost and freight to the named destination port. A
step further than FOB.
CIF - Cost, Insurance and Freight: Risk passes to buyer when delivered on board the
ship. Seller arranges and pays cost, freight and insurance to destination port. Adds
insurance costs to CFR.
Rules for Any Mode or Modes of Transportation:
EXW - Ex Works: Seller delivers (without loading) the goods at disposal of buyer at
seller's premises. Long held as the most preferable term for those new-to-export
because it represents the minimum liability to the seller. On these routed transactions,
the buyer has limited obligation to provide export information to the seller.
FCA - Free Carrier: Seller delivers the goods to the carrier and may be responsible for
clearing the goods for export (filing the EEI). More realistic than EXW because it includes
loading at pick-up, which is commonly expected, and sellers are more concerned about
export violations.
CPT - Carriage Paid To: Seller delivers goods to the carrier at an agreed place, shifting
risk to the buyer, but seller must pay cost of carriage to the named place of destination.
CIP - Carriage and Insurance Paid To: Seller delivers goods to the carrier at an agreed
place, shifting risk to the buyer, but seller pays carriage and insurance to the named
place of destination.
DAT - Delivered at Terminal: Seller bears cost, risk and responsibility until goods are
unloaded (delivered) at named quay, warehouse, yard, or terminal at destination.
Demurrage or detention charges may apply to seller. Seller clears goods for export, not
import. DAT replaces DEQ, DES.
DAP - Delivered at Place: Seller bears cost, risk and responsibility for goods until made
available to buyer at named place of destination. Seller clears goods for export, not
import. DAP replaces DAF, DDU.
DDP - Delivered Duty Paid: Seller bears cost, risk and responsibility for cleared goods at
named place of destination at buyers disposal. Buyer is responsible for unloading. Seller
is responsible for import clearance, duties and taxes so buyer is not “importer of record”.
INCOTERMS DO NOT...
Determine ownership or transfer title to the goods, nor evoke payment terms.
Apply to service contracts, nor define contractual rights or obligations (except for
delivery) or breach of contract remedies.
Protect parties from their own risk or loss, nor cover the goods before or after delivery.
Specify details of the transfer, transport, and delivery of the goods. Container loading is
NOT considered packaging, and must be addressed in the sales contract.
Remember, Incoterms are not law and there is NO default Incoterm
