Incoterms 2020: Defining Seller and Buyer Responsibilities

Key Incoterms and Responsibility Definitions

ExW – Ex Works

The delivery takes place at the seller’s premises. This term represents the minimum obligation for the seller.

• Delivery Location: Seller’s premises.
• Seller's Risk/Cost: The seller will not assume any type of risk.
• Buyer's Risk/Cost: Transport, freight, taxes, and insurance belong entirely to the buyer.
• Governing Law: Laws of the place of the seller’s premises are followed.
• Example: ExW Madrid

FCA – Free Carrier

The seller delivers the goods, prepared for export, to the buyer’s nominated carrier at the specified place. This Incoterm requires specifying the exact location where the delivery will take place.

• Delivery Point: Specified place where the goods are handed to the carrier.
• Cost Responsibility: The costs of transport will be covered by the buyer.
• Example: If transporting by railway, FCA Atocha.

FAS – Free Alongside Ship

The seller places the goods alongside the ship at the specified port of shipment.

• Seller's Responsibility: The seller is responsible until the goods are placed alongside the ship.
• Buyer's Responsibility: After that moment, the buyer is responsible and pays for the rest of the transport.
• Example: FAS Algeciras 4.

FOB – Free On Board

Delivery occurs when the goods are loaded onto the specified vessel at the port of shipment.

• Seller's Responsibility: The seller loads the goods onto the specified ship.
• Risk and Cost Transfer: The buyer and the seller share costs and risks; transfer occurs when the goods are on board the vessel.

CPT – Carriage Paid To

As the seller, you will pay the transport costs required to bring the goods to the specified destination.

• Cost Responsibility: Seller pays for transport up to the destination.
• Risk Transfer: Responsibility (risk) transfers to the buyer when the goods are handed over to the first carrier, thus relinquishing the seller's liability for damage or loss during the main carriage.
• Example: CPT Colombo.

CFR – Cost and Freight

The seller must pay the costs and freight necessary to bring the goods to the named port of destination.

• Cost Responsibility: Seller pays freight to the destination port.
• Risk Transfer: Therefore, the buyer will be responsible and will assume risk as soon as the goods are on board the vessel.
• Example: CFR Houston.

CIP – Carriage and Insurance Paid To

This term is the same as CPT, but the seller must also procure minimum insurance coverage against the buyer’s risk of loss or damage during carriage.

• Seller Pays: Transport and insurance to the specified destination.
• Risk Transfer: Risk transfers to the buyer upon delivery to the first carrier.

CIF – Cost, Insurance and Freight

This term is the same as CFR, but the seller must also procure minimum insurance coverage against the buyer’s risk of loss or damage during carriage.

• Seller Pays: Cost, insurance, and freight to the destination port.
• Risk Transfer: Risk transfers to the buyer when the goods are on board the vessel.

DAT – Delivered at Terminal (DPU in Incoterms 2020)

The seller will pay for transport. Delivery is completed, and risk transfers, once the goods have been unloaded at the named terminal.

• Seller Pays: Transport costs.
• Buyer Pays: The cost of the goods purchased.
• Risk Transfer: Responsibility and risk are assumed by the buyer once the goods are unloaded at the decided terminal.
• Example: DAT HK 1 (referring to the first terminal in the Hong Kong port area).

DAP – Delivered at Place

This is the next step after DAT, where delivery occurs at a named place (often within a city, not necessarily a port terminal).

• Seller's Responsibility: The seller will pay the whole transport and assume responsibility for the products until they are ready to be unloaded by the buyer at the named destination.
• Risk Transfer: Risk transfers to the buyer when the goods are ready for unloading.

DDP – Delivered Duty Paid

This term represents the maximum obligation for the seller.

• Seller's Responsibility: The seller delivers the products directly to the buyer’s door, covering all costs and risks, including import duties and taxes.