Click here for the Inco Terms responsibility matrix

Incoterms, or "international commercial terms," are terms of trade. They are commonly used to ease domestic and international trade by helping traders to understand one another.

Here is a simple explanation of the most commonly used terms:

EXW – Ex Works (named place)

Seller
• Export packaging and placing goods at the named place for collection.
• Provide all documents: ie commercial invoice and packing list.

Buyer
• Responsible for export customs clearance, all freight, origin and destination charges from the seller’s door to the door at destination.
• Bear all risks and costs from the time the goods are delivered at the named place.
• Insurance: buyer’s care.

FCA – Free Carrier (named place of delivery)

Seller
• Responsible for delivering the goods to the named place.
• Arrange export customs clearance.

Buyer
• Arrange carriage from the named place, international freight, and delivery to the destination.
• Bear all risks and costs from the time the goods are handed over by the seller at the named place of delivery.
• Insurance: buyer’s care.

FAS – Free Alongside Ship (named port of shipment) SEA FRIGHT ONLY

(Similar to FOB, except that seller places the goods alongside the vessel)

Seller
• Responsible for export customs clearance and delivering goods alongside the vessel nominated by the buyer at the named port of shipment.

Buyer
• Responsible for all freight and destination charges from the named port to the door at destination.
• Bear all risks and costs from the time the goods are delivered alongside the vessel.
• Insurance: buyer’s care.

FOB – Free on Board (named port of shipment) SEA FREIGHT ONLY

Seller
• Arrange export customs clearance and delivery of goods on board a vessel nominated by the buyer at the named port of shipment.

Buyer
• Responsible for all ocean freight and destination charges from the named port to the door at destination.
• Bear all risks and costs from the time the goods are on board the vessel.
• Insurance: buyer’s care.

CFR – Cost and Freight (named port of destination) SEA FREIGHT ONLY

Seller
• Responsible for export customs clearance and all freight charges to the destination port.

Buyer
• Responsible for import clearance and destination charges.
• Bear all risks from the time the goods are on board the vessel.
• Insurance: buyer’s care.

CIF – Cost Insurance and Freight (named port of destination) SEA FREIGHT ONLY

(Similar to CFR, except insurance is seller’s care)

Seller
• Responsible for export customs clearance and all freight charges to the destination port.
• Must contract insurance cover from the port of shipment to at least the port of destination.*
• Risks transfer to the buyer when the goods are on board the vessel.

Buyer
• Responsible for import clearance and destination charges.
• Bear all risks from when the goods are on board the vessel.

CPT – Carriage Paid To (named place of destination)

Seller
• Responsible for export customs clearance and all freight charges to the destination port.
• Risks transfer to the buyer when goods received by the carrier contracted by the seller.

Buyer
• Responsible for import clearance and destination charges.
• Bears all risks when the goods are handed over to the carrier contracted by the seller.
• Insurance: buyer’s care.

CIP – Carriage and Insurance Paid To (named place of destination)

(Similar to CPT, except insurance is seller’s care)

Seller
• Responsible for export customs clearance and all freight charges to the destination port.
• Must contract insurance cover from the point of delivery to the place of destination. *
• Transfers the risks to the buyer by handing goods over to the carrier contracted by the seller.

Buyer
• Responsible for import clearance and destination charges.
• Bears all risks when the goods are handed over to the carrier contracted by the seller.

DAP – Delivered at Place (named place of destination)

Seller
• Responsible for all charges and transport of the goods to the named place of destination, including export customs clearance.
• Bears all risks involved in bringing the goods to the named place of destination.

Buyer
• Arrange to unload goods at the named place of destination.
• Responsible for import customs clearance and import duty and taxes where applicable.
• Insurance: buyer’s care.

DPU – Delivered at Place Unloaded (named place of destination)

(Similar to DAP, except seller pays to unload the goods at the named place of destination)

Buyer
• Responsible for import customs clearance and import duty and taxes where applicable.
• Insurance: buyer’s care.

DDP – Delivered Duty Paid (named place of destination)

Seller
• Responsible for all charges and transport of the goods to the named place of destination, including export and import customs clearance, duty and taxes at destination. (Seller to confirm with buyer if GST / VAT is for buyers account as an input credit.)
• Bears all risks involved in bringing the goods to the named place of destination.

Buyer
• Arrange to unload goods at the named place of destination.
• Insurance: buyer’s care.

*Insurance: note regarding seller’s obligation

CIF: Minimum cover: cargo clauses (C) CIF + 10%

CIP: Minimum cover: cargo clauses (A) CIP + 10%

For CIF and CIP contracts the buyer is advised to ensure that the seller’s insurance policy clauses, value and geographic scope meet their requirements.

For all other Incoterms the insurance policy is the buyer’s responsibility and cost. Cargo insurance is a vital component of comprehensive transport risk management. Be certain every shipment is covered.

Choosing the right terms

Each option has its own benefits and risks for both the buyer and the seller.

For further information on Incoterms contact your local Burnard International representative.

Disclaimer

This summery of responsibilities is a guide only. Buyer and sellers are encouraged to read Incoterms® 2020 and incorporate its terms in their contracts.

INCO Terms get updated periodically.

For further information on INCO Terms contact your local Burnard International representative.

INCO Terms