Incoterms

The Incoterms (International Commercial Terms) are an international standard on the rights and obligations of the buyer and seller in the international transport of goods, developed and published by the International Chamber of Commerce (ICC), the world business organization. The Incoterms are updated every 10 years.

Since 2011 buyer and seller can choose from the 11 Incoterms (also shown above).

EXW, Ex Works
FCA, Free Carrier
CPT, Carriage Paid To
CIP, Carriage and Insurance Paid To
DAT, Delivered At Terminal
DAP, Delivered At Place
DDP, Delivered Duty Paid

Only for Sea freight

FAS, Free Alongside Ship
FOB, Free On Board
CFR, Cost and Freight
CIF, Cost, Insurance and Freight

Air Freight Import - FCA

Besides the Ex Works incoterm, Airfreight Import officially only knows the FCA, the Free carrier incoterm. It knows the variant FCA Airport Destination (eg Amsterdam Schiphol) and FCA Final Destination (Delivered at the door). FCA means that the local costs in the origin are charged to the buyer. Note: The clearance costs (export documentation) belong to the seller at FCA.

Air Freight Import - FOB-Air

More and more usual at air freight import is the unofficial incoterm FOB-Air. This is accepted by the Seller, Buyer and Tax Authorities (Customs) in the Netherlands, Belgium and Germany and is equal to the FOB Shipping. FOB Air: Pre-carriage + local charges origin taxed to seller; Airfreight costs, local costs destination, customs clearance and door delivery are arranged and paid by the Buyer. (Import duties and VAT are additionally taxed after customs clearance.)

Explanation incoterms

Ex Works

The factory delivers the goods by giving it to the buyer in their storage, factory or workshop. This is the incoterm with the least responsibility for the factory. The factory only takes care of the goods with the invoice and the (minimum) packaging. The buyer is responsible from the collection point to the desired destination.

FCA Free Carrier

The factory takes care of all the documents required in the country of origin. Think of: customs formalities, invoice, export license. The factory also takes care of the goods, packaging and the costs of delivering the goods to the transport company.

CPT Carriage Paid To

The seller is responsible for arranging carriage to the named place, but not for insuring the goods to the named place. However delivery of the goods takes place, and risk transfers from seller to buyer, at the point where the goods are taken in charge by a carrier. Terminal Handling Charges (THC) are charges made by the terminal operator. These charges may or may not be included by the carrier in their freight rates – the buyer should enquire whether the CPT price includes THC, so as to avoid surprises. The buyer may wish to arrange insurance cover for the main carriage, starting from the point where the goods are taken in charge by the carrier – NB this will not be the place referred to in the Incoterms rule, but will be specified elsewhere within the commercial agreement

CIP Carriage and Insurance Paid To

The factory has the same obligations as with CPT. The additional obligation is that the factory must provide a freight insurance for the risks during transport.

DAT Delivered at Terminal

Can be used for any transport mode, or where there is more than one transport mode. The seller is responsible for arranging carriage and for delivering the goods, unloaded from the arriving conveyance, at the named place. Risk transfers from seller to buyer when the goods have been unloaded. ‘Terminal’ can be any place – a quay, container yard, warehouse or transport hub. The buyer is responsible for import clearance and any applicable local taxes or import duties.

DAP Delivered At Place

Can be used for any transport mode, or where there is more than one transport mode. The seller is responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving conveyance, at the named place (An important difference from Delivered At Terminal DAT, where the seller is responsible for unloading). Risk transfers from seller to buyer when the goods are available for unloading; so unloading is at the buyer’s risk. The buyer is responsible for import clearance and any applicable local taxes or import duties. This rule can often be used to replace the Incoterms 2000 rules Delivered At Frontier (DAF), Delivered Ex Ship (DES) and Delivered Duty Unpaid (DDU)

DDP Delivered Duty Paid

Can be used for any transport mode, or where there is more than one transport mode. The seller is responsible for arranging carriage and delivering the goods at the named place, cleared for import and all applicable taxes and duties paid (e.g. VAT, GST). Risk transfers from seller to buyer when the goods are made available to the buyer, ready for unloading from the arriving conveyance. This rule places the maximum obligation on the seller, and is the only rule that requires the seller to take responsibility for import clearance and payment of taxes and/or import duty. These last requirements can be highly problematical for the seller. In some countries, import clearance procedures are complex and bureaucratic, and so best left to the buyer who has local knowledge.

FAS Free Alongside Ship

Use of this rule is restricted to goods transported by sea or inland waterway. In practice it should be used for situations where the seller has direct access to the vessel for loading, e.g. bulk cargos or non-containerised goods. For containerised goods, consider “Free Carrier FCA” instead. Seller delivers goods, cleared for export, alongside the vessel at a named port, at which point risk transfers to the buyer. The buyer is responsible for loading the goods and all costs thereafter.

FOB Free on Board

This term is most often used. The factory handles the goods with invoice, packaging, export license and customs formalities. The factory runs for all costs until the goods are in the plane. From here the buyer takes over all risks and costs. From INCOterms 2010: Goods are only "on board" when the goods have been loaded and lashed according the rules and the captain has signed for receipt.

CFR (CNF) Cost and Freight

The factory is responsible for the costs and transport up to the destination port. However, the buyer is responsible for the risks from the moment the goods pass the ship's rail at the shipping port. This term can only be used for maritime transport and inland shipping traffic.

CIF Cost, Insurance and Freight

This means that the factory has the same obligations as with CFR. However, there is also an extra obligation; the factory has to pay the insurance for sea freight. This term can only be used for maritime transport and inland shipping traffic.