Incoterms

INCOTERMS

Incoterms are most frequently listed by category. Below are the 13 international Incoterms adopted by the International Chamber of Commerce:

Group E (Departure):

1) EXW - Ex Works (...named place): Ex works means that the seller (exporter) delivers when he places the goods at the disposal of the buyer (importer) at the seller's premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle.

This term thus represents the minimum obligation for the seller (exporter), and the buyer (importer) has to bear all costs and risks involved in taking the goods from the seller's premises. However, if the parties wish the seller (exporter) to be responsible for the loading of the goods on departure and to bear the risks and all the costs of such loading, this should be made clear by adding explicit wording to this effect in the contract of sale.

Group F (Main carriage unpaid):

2) FCA - Free Carrier (...named place): Free Carrier means that the seller (exporter) delivers the goods, cleared for export, to the carrier nominated by the buyer (importer) at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller's premises, the seller (exporter) is responsible for loading. If delivery occurs at any other place, the seller (exporter) is not responsible for unloading.

This term may be used irrespective of the mode of transport, including multimodal transport.

A Carrier means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes.

If the buyer (importer) nominates a person other than a carrier to receive the goods, the seller (exporter) is deemed to have fulfilled his obligation to deliver the goods when they are delivered to that person.

3) FAS - Free Alongside Ship (...named port of shipment): Free Alongside Ship means that the seller (exporter) delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer (importer) has to bear all costs and risks of loss of or damage to the goods from that moment.

The FAS term requires the seller (exporter) to clear the goods for export. However, if the parties wish the buyer (importer) to clear the goods for export, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term can be used only for sea or inland waterway transport.

4) FOB - Free On Board (...named port of shipment): Free on Board means that the seller (exporter) delivers when the goods pass the ship's rail at the named port of shipment. This means that the buyer (importer) has to bear all costs and risks of loss of or damage to the goods from that point.

The FOB term requires the seller (exporter) to clear the goods for export. If the parties do not intend to deliver the goods across the ship's rail, the FCA term should be used.

This term can be used only for sea or inland waterway transport.

Group C (Main carriage paid):

5) CFR - Cost & Freight (...named port of destination): Cost and Freight means that the seller (exporter) delivers when the goods pass the ship's rail in the port of shipment. The seller (exporter) must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller (exporter) to the buyer (importer).

The CFR term requires the seller (exporter) to clear the goods for export. If the parties do not intend to deliver the goods across the ship's rail, the CPT term should be used.

This term can be used only for sea and inland waterway transport.

6) CIF - Cost, Insurance & Freight (...named port of destination): Cost, Insurance and Freight means that the seller (exporter) delivers when the goods pass the ship's rail in the port of shipment. The seller (exporter) must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller (exporter) to the buyer (importer).

However, in CIF the seller (exporter) also has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage.

Consequently, the seller (exporter) contracts for insurance and pays the insurance premium. The buyer (importer) should note that under the CIF term the seller (exporter) is required to obtain insurance only on minimum cover. Should the buyer (importer) wish to have the protection of greater cover, he would either need to agree as much expressly with the seller (exporter) or to make his own extra insurance arrangements.

The CIF term requires the seller (exporter) to clear the goods for export. If the parties do not intend to deliver the goods across the ship's rail, the CIP term should be used.

This term can be used only for sea and inland waterway transport.

7) CPT - Carriage Paid To (...named place of destination): "Carriage paid to..." means that the seller (exporter) delivers the goods to the carrier nominated by him but the seller (exporter) must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer (importer) bears all risks and any other costs occurring after the goods have been so delivered.

Carrier means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. The CPT term requires the seller (exporter) to clear the goods for export.

This term may be used irrespective of the mode of transport including multimodal transport

8) CIP - Carriage and Insurance Paid To (...named place of destination): "Carriage and Insurance paid to..." means that the seller (exporter)

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