Incoterms (INternational COmmercial TERMS)
Abbreviations of terms employed in export and import contracts that delineate the transfer of goods’ responsibility and payment obligations. These abbreviations serve to elucidate the terms of sale, allocate risks and responsibilities, regulate costs, facilitate document compilation, and operate on a globally uniform principle.

Incoterms |
Responsibility |
Notes |
|
Seller |
Buyer |
||
EXW - Ex Works |
Packs and makes the shipment available at specified place for transporting - either their factory or depot. |
Takes the goods onto a vehicle, and oversees all export procedures for shipment and transport to desired destination including insurance. |
Operational difficulties in cross-border transactions. The seller cannot wash their hands off and need to be involved in the export process to facilitate smooth logistics. |
FCA - Free Carrier |
Export clearance is the sole risk attributed to the seller. Seller loads the goods on to truck or other transport vehicle if the seller's premise is the named place. |
After goods have been delivered to destination, all risks and costs are to be borne by the seller. |
Once the supplier has cleared goods to be "accepted" for
shipment, the buyer assumes all risk henceforth from the
pre-decided location where shipment changes hands. |
FAS - Free Alongside Ship (Restricted to Sea or Waterway) |
Supplier is in charge of delivering all the goods, clears it for export and gets it alongside a vessel at an agreed upon port after which the risk transfers to the buyer. |
Loading all components and bears all costs which follow. |
This is best suited only for shipments which are
transported by sea or inland waterways. Suppliers are
usually restricted to use this rule when they have direct
access to the vessel for loading. |
FOB - Free On Board |
Supplier is in charge of delivering all the goods, clears it for export and gets it loaded into the vessel at the port upon which the risk is transferred to the buyer. |
All risks and costs after loading the shipment rests with the buyer. |
Suited only when goods are transported by sea or inland waterways. Suppliers are usually restricted to use this rule when they have direct access to the vessel. Similar to FAS, bulk cargo or non-container based goods are ideally suited. |
CFR - Cost and Freight |
Supplier is supposed to completely oversee the transport of goods from the warehouse to the destination port, "including the costs" along with delivering the goods, clearing it for export and loading it to the vessel. |
Once on-board, the buyer assumes all the risk (and costs) - before the main carriage takes place. |
Supplier would not be required to cover the shipment with marine insurance against loss or damage. |
CIF - Cost, Insurance & Freight |
Responsibilities are the same as that of CFR except that here, the seller is also responsible for the cost of insuring the shipment. |
Once on-board, the buyer assumes all the risk (and costs) - before the main carriage takes place. |
Since this term requires minimal cover, many commercial roadblocks may arise. This would have to be addressed specifically in order to ensure clarity. The responsibility transfers to the customer once the shipment is loaded to the vessel. |
CPT - Carriage Paid To... |
Takes complete responsibility of cost and risk involved in ensuring the components are shipped to the destination. |
The seller takes complete responsibility of cost and risk involved in ensuring the components are shipped to the destination. |
Terminal Handling Charges (THC) is payable to the terminal operator. To be on the safer side, the buyer should be aware of whether or not THC is included by the carrier as part of the freight charges. If not, then the buyer would have to shell out money to compensate for THC. |
CIP - Carriage and Insurance Paid to... |
The responsibilities and risks are the same as that of CPT except for the insurance being taken care of by the seller. |
The seller is entitled to buy a Clause (A) level of cover to insure the shipment. Earlier, the buyer needed to be alert to address the level of cover in the agreement so as to avoid later confusions but this is resolved in the latest version. |
|
DPU - Delivered at Place Unloaded (formerly DAT) |
Seller assumes full risk and cost for arranging transportation and delivery from the point where the components or parts have been shipped, until unloading safely at the agreed place. |
The buyer takes over once the goods have been unloaded safely and then it's their personal responsibility to transport the goods back to the warehouse. |
The delivery port needs to be specifically addressed or else there are chances of the goods being deported at a different destination. This rule is apt when it comes to containerised shipments as the seller would be in charge for most of the logistics and can be used for multiple modes of transport. |
DAP - Delivery At Place |
The seller is in charge of ensuring the successful transport of goods from the supplier warehouse to the destination port. |
A major difference from DAT is that the buyer has to unload the goods and take responsibility thereafter. |
All import duties, clearances and taxes are to be borne by the buyer as unloading is the buyer's risk. This rule stands good involving all modes of transport. |
DDP - Delivery Duty Paid |
Responsibilities are the similar to that of DAP but also include the local clearance, taxes and duties. |
After the clearance of goods, the buyer can then take over and ensure the safe transfer of all the components back to the factory or warehouse. |
After the clearance of goods, the buyer can then take over and ensure the safe transfer of all the components back to the factory or warehouse. |