INCOTERMS is drafted and published by the International Chamber of Commerce (ICC).
Group E – Departure
EXW:(EX WORKS)
The seller/exporter supplies the goods to the buyer in their warehouse and is only responsible for packaging the goods.
Therefore, the buyer/importer bears all costs and responsibilities from the moment the goods pass through the warehouse before loading. Insurance is not mandatory, but if required, the buyer will buy insurance because they bear the risk.
This Incoterm should not be used if the seller delivers the goods anywhere other than his own premises.
Group F – Main unpaid charges
FCA:(FREE CARRIER)
The seller delivers the goods to an agreed place and bears the costs and risks up to the time of delivery at the agreed place, including the costs of export customs clearance. The seller is responsible for inland transportation and export customs clearance unless the designated location is the seller's facility (FCA warehouse), in which case the goods are delivered there and loaded onto a means of transport by the seller. Purchase arranged at buyer's expense.
The buyer bears the costs from loading the goods onto the ship until unloading, including insurance if purchased from outside because they bear the risk when the goods are loaded onto the first means of transport.
What is new to FCA, to Incoterms 2010, is that during shipment, the buyer can request that their carrier issue a Bill of Lading to the seller specifying “on board” as evidence of delivery, thus create favorable conditions for the use of documentary credit. Credit is granted to the seller by means of a bank guarantee even though he is not party to the contract of carriage.
FAS:(FREE ALONGSIDE SHIP)
The seller delivers the goods to the loading dock at the named port and bears the costs until delivery as well as being responsible for export customs formalities.
Buyer is responsible for loading the goods on board, loading, freight and other costs until delivery at destination, including import customs clearance and insurance, if removed as not required . The buyer also bears the risk when the goods are at the loading dock before being loaded onto the vessel.
This Incoterm is only valid for transportation and is often used for special goods with specific loading requirements, not often used for goods stacked on pallets or containers.
FOB:(FREE ON BOARD)
The seller bears the costs until the goods are loaded on board the vessel, at which point the risk is transferred as well as responsibility for export customs clearance and costs at the place of origin. The seller also arranges shipping although the buyer bears the cost.
Buyer is responsible for shipping, unloading, import clearance and delivery costs at destination as well as insurance if they take the goods out. The transfer of risk occurs while the goods are on board the ship.
This Incoterm is used for shipping only. It should not be used for goods in a container because responsibility is transferred when the goods are loaded on board the ship (goods are in direct contact with the ship's deck) and the container is not loaded on arrival. port, therefore, if the goods suffer any damage inside the container, it will be difficult to determine when the damage occurred.
Group C – Primary transportation is paid
CFR:(COST AND FREIGHT)
The seller is responsible for all costs until the goods arrive at the destination port, including export customs clearance, costs at origin, freight and often unloading costs.
The buyer is responsible for import procedures and shipping to destination. They are also at risk from the moment the goods are loaded onto the ship, so, although not required, buyers often purchase insurance.
This Incoterm is used only in shipping.
CIF:(COST, INSURANCE AND FREIGHT)
As with CFR, the seller bears all costs until reaching the destination port, including export customs clearance, costs at origin, freight, and often unloading. However, unlike CFR, the seller must also arrange insurance although the risk is transferred to the buyer once the goods are loaded on board the vessel.
The buyer bears the costs of import and transportation to destination.
New in the 2020 version of the Incoterm is that the seller must arrange insurance in accordance with what is specified in the Institute of Goods Clause (C). In other words, the goods must be insured until they reach the destination port. This Incoterm is used only in shipping. It is widely used because it determines customs value.
CPT:(CARRIAGE PAID TO)
The seller bears the costs until the goods are delivered to an agreed location, meaning they are responsible for all costs at origin, export customs clearance, primary transportation and often at destination.
Buyer is responsible for import procedures and insurance if taking out as it is not required. Risk is transferred to the buyer when the goods are loaded onto the first means of transport arranged by the seller.
This Incoterm is valid for all means of transport.
CIP:(CARRIAGE AND INSURANCE PAID TO)
The seller bears the costs until delivery of the goods at an agreed place at destination, i.e. costs at origin, export customs clearance, freight and also mandatory insurance.
The importer is responsible for import customs clearance and delivery at destination and bears the risk when the goods are loaded onto the first means of transport.
The new feature of this Incoterm compared to Incoterms 2010 again concerns the scope of insurance. In this case, in addition to being mandatory, the insurance must have the same coverage as that specified in Cargo Clause (A), the goods must be insured until delivery to the carrier at destination.
Table D – Arrival
DPU:(DELIVERED AT PLACE UNLOADED)
The seller bears the costs and risks arising at the place of origin, packaging, loading, export procedures, transportation of goods, unloading at the place of destination and delivery at the agreed point.
The buyer is responsible for import customs clearance procedures.
This Incoterm is new and replaces DAT. In fact, it increases the delivery options because DAT states that delivery must take place at the terminal, whereas with new DPU delivery can take place at another agreed location with terminal.
DAP:(DELIVERED AT PLACE)
The seller bears all costs and risks of the operation except for import customs clearance and unloading at destination, i.e. all costs at origin, freight and inland transport.
The buyer is solely responsible for import customs clearance and unloading.
This Incoterm is valid for all means of transport. Insurance is not required but if taken out the seller bears the cost.
DDP:(DELIVERED Duty Paid)
The seller bears all costs and risks from packaging and inspection at their warehouse until delivery at the final destination, including export and import procedures, freight and insurance, if taken out.
The buyer only has to take delivery of the goods and usually unload them, although this can also be done by the seller.
This Incoterm is completely opposite to EXW, the seller bears all costs and risks.
