Incoterms cheat sheet

Incoterms rules

International commercial transactions often face uncertainties and discrepancies between different countries’ regulations. To reduce these uncertainties, the International Chamber of Commerce created the Incoterms, a set of 11 rules that outline the rights and obligations of both the buyer and the seller in a contract of sale in terms of the delivery of goods. These rules do not replace the sales contract but help to clarify the responsibilities of each party.

It is essential to understand that Incoterms rules do not cover the transfer of ownership, payment, or pricing of goods but merely regulate the division of responsibilities and costs for goods transportation, loading and unloading, customs clearance, taxes and fees payment, and insurance coverage. As a registered trademark of the International Chamber of Commerce, the Incoterms are recognized worldwide and have become an essential element of international commercial transactions.

If you are looking for assistance with shipping and logistics services and are unsure about the Incoterms rules, please feel free to contact us for a quote. Our team of experienced professionals is here to help you navigate the complex world of logistics and ensure that your goods are delivered efficiently and reliably.

EXW - Ex Works named place.

The EXW Incoterms 2020 rule places the minimum obligations on the seller, and all risks and costs associated with the transportation of the goods from the seller’s premises to the destination are borne by the buyer. This term is suitable for any mode of transportation, including multimodal transport. The seller is not liable for loading the goods onto the buyer’s vehicle, nor for the customs clearance or payment of customs duties. The buyer bears all the risks and costs of loss or damage to the goods from the moment of delivery by the seller until the end of the transportation to the destination.

FCA - Free carrier named place

The FCA Incoterms 2020 rule refers to the delivery of the goods by the seller at the agreed place to the carrier indicated by the buyer. The seller is responsible for loading the goods and performing the export customs procedures for exporting goods with payment of export duties and other fees. However, the seller is not responsible for the import customs formalities, paying the import customs duties, or carrying out other import customs procedures. The main difference between FCA and EXW is the obligation to load the goods and perform the export customs clearance.

FAS - Free alongside ship named port of shipment

The FAS Incoterms 2020 rule applies to the carriage of goods by sea or inland waterway, where the seller places the goods next to the vessel provided by the buyer at the named port of shipment. The seller is responsible for placing the goods next to the vessel and performing the export customs procedures, while the buyer is responsible for loading the goods, paying for the freight of the vessel, unloading at the port of arrival, completing the import customs clearance, and delivering the goods to their destination. A critical aspect of FAS delivery is that the ship must be present in the port and be close by when placing the goods at the quay.

FOB - Free on board named port of shipment

The FOB Incoterms 2020 rule requires the seller to place the goods on board the vessel provided by the buyer and perform the export customs procedures. The buyer is responsible for chartering the ship, paying the freight, unloading at the port of arrival, completing the import customs clearance, and delivering the goods to their destination. If the parties intend to impose on the buyer the obligations to load the goods on board the vessel, it is advisable to use the FAS rule. The seller’s primary responsibility is to transport the cargo to the named port of shipment and load it onto a ship chartered by the buyer.

CFR - Cost and Freight named port of destination

The CFR Incoterms 2020 rule requires the seller to place the goods on board the vessel and pay the costs and freight necessary to deliver the goods to the specified port of destination and perform the export customs procedures. The seller is not obliged to comply with customs formalities for the import of goods, pay import customs duties, or carry out other import customs procedures. The buyer is responsible for unloading at the port of arrival, completing the import customs clearance, and delivering the goods to their final destination.

CIF – Cost, Insurance and Freight paid to (Port of Destination)

Under CIF incoterm 2020, the seller is responsible for clearing and placing the goods on board, and paying for minimum insurance coverage until the port of discharge. However, the risk transfers to the buyer once the goods are on board. This incoterm applies only to ocean and inland waterway transportation. The seller must also arrange international freight transportation, provide documentation to the buyer, and clear export customs. The term is commonly used for bulk cargo, oil, and oversized goods, and the buyer is responsible for unloading costs. If the cargo does not fit into a container, use CIT.

CIP – Carriage and Insurance paid to (Place of Destination)

Under CIP terms, the seller is responsible for delivering the goods to the carrier and paying for the cost of carriage and minimum insurance until the named place of destination. The seller’s risk ends at the place of shipment, and the buyer has the option to contract additional insurance. This term can be used for any mode of transportation. The seller arranges export clearance, and delivery happens at the origin with the first carrier, with the seller paying for freight until the final destination. In the case of claims, the buyer can claim directly with the insurance company. The buyer is responsible for customs clearance, and additional inland and terminal handling charges will apply if the place at the destination is different from the port. Discussions may arise between buyer and seller in case of delays caused at origin that lead to additional expenses.

CPT – Carriage paid to (Place of Destination)

In CPT, the seller clears the goods for export and delivers to the carrier nominated by the seller at the agreed place of shipment. The risk is transferred to the buyer at this point, and the seller is responsible for contracting and paying for the main carriage until the named place of destination. This term can be used for any mode of transportation, and the unloading at the named place of destination is typically under the seller’s account unless otherwise agreed. Unlike CIP, the seller does not pay for insurance. The buyer arranges insurance for their own risk. The seller arranges export clearance and can be used for any mode of transportation. The buyer is responsible for customs clearance, and any delays caused at origin are typically a point of discussion between buyer and seller. This term is popular for Ro-Ro and airfreight shipments, and if there is more than one mode of transportation, the risk is transferred when the goods are delivered to the first carrier.

DAP – Delivery at (Place of Destination)

Under DAP terms, the seller is responsible for delivering the goods to the agreed-upon place of destination, ready for unloading. The seller bears the risk until the goods are delivered to the named place and should obtain a contract of carriage that matches the contract of sale until the agreed delivery point. The buyer is responsible for import customs clearance, duties, and taxes. This term can be used for any mode of transportation, and the seller is not required to unload the goods. It is important for the seller and buyer to agree on the place of delivery as clearly as possible.

DPU – Delivery at Place Unloaded (Place of Destination)

In DPU, the seller is responsible for arranging the delivery of the goods to the named place of destination, which could be a port, warehouse, or any other location agreed upon by the buyer and seller. The seller is also responsible for unloading the goods at the named place, which could be at a terminal, warehouse, or any other location agreed upon by the buyer and seller. The seller bears the risk until the goods are unloaded at the named place. The buyer is responsible for customs clearance, import duties, and taxes. This term can be used for any mode of transportation.

DDP – Delivery Duty Paid (Place of Destination)

DDP, or Delivered Duty Paid, is an incoterm in which the seller is responsible for all costs associated with delivering the goods to the buyer at the named place of destination, cleared for import. The seller does not pay for unloading the goods, and it is important to specify the exact destination. This term can be used for any mode of transportation, assuming the seller is capable of clearing customs at the destination.

In practical terms, DDP represents the maximum risk for the seller, who must pay all duties, taxes, VAT, and other charges at the destination. It does not require any party for insurance and can be used for any mode of transportation. This incoterm is usually applicable for items like courier, where the full supply chain cost is under control and with minimum cost variance. The seller must have a clear understanding of the process and expenses involved in delivering the goods to the final destination.