Understanding Incoterms for Global Trade

What Are Incoterms and When Are They Used?

Incoterms are defined and developed by the International Chamber of Commerce (ICC), with the aim of establishing a standardized language that can be used by buyers and sellers involved in international business.

Key Incoterms Explained

EXW - Ex Works

The seller's only responsibility is to make the goods available to the buyer at the seller's premises (factory, warehouse, etc.). The buyer bears all costs and risks from that point.

FCA - Free Carrier

The seller must deliver the goods, cleared for export, to the carrier or another person nominated by the buyer at the named place. The seller loads the goods if delivery occurs at the seller's premises.

FAS - Free Alongside Ship

The seller is responsible for placing the goods alongside the ship (e.g., on the quay or in lighters) at the named port of shipment. This term is used for sea or inland waterway transport.

FOB - Free on Board

The seller is responsible for placing the goods on board the vessel nominated by the buyer at the named port of shipment. Risk transfers to the buyer when the goods are on board.

CFR - Cost and Freight

The seller clears the goods for export and pays the costs and freight to bring the goods to the named port of destination. Risk transfers to the buyer when the goods are on board the vessel.

CIF - Cost, Insurance and Freight

Similar to CFR, but the seller also procures marine insurance against the buyer's risk of loss or damage to the goods during carriage. The seller pays costs and freight to the named port of destination.

CPT - Carriage Paid To

Equivalent to CFR, but used for any mode of transport. The seller pays for carriage to the named place of destination. Risk transfers to the buyer when the goods are delivered to the first carrier.

CIP - Carriage and Insurance Paid To

Equivalent to CIF, but used for any mode of transport. The seller pays for carriage and insurance to the named place of destination. Risk transfers to the buyer when the goods are delivered to the first carrier.

DAF - Delivered at Frontier

The seller fulfills their obligation when the goods, cleared for export, are made available to the buyer at the named point and place at the frontier, but before the customs border of the adjoining country. (Note: This term was removed in Incoterms 2010 and replaced by DAP).

DES - Delivered Ex Ship

Used for sea or inland waterway transport. The seller delivers when the goods are made available to the buyer on board the ship at the named port of destination, uncleared for import. (Note: This term was removed in Incoterms 2010 and replaced by DAP).

DEQ - Delivered Ex Quay

Used for sea or inland waterway transport. The seller delivers when the goods are made available to the buyer on the quay (dock) at the named port of destination, uncleared for import. (Note: This term was removed in Incoterms 2010 and replaced by DPU).

DDU - Delivered Duty Unpaid

The seller is responsible for delivering the goods to the named place of destination. The seller bears all costs and risks involved in bringing the goods to the destination, except for duties, taxes, and other official charges payable upon import, as well as the costs and risks of carrying out customs formalities. (Note: This term was removed in Incoterms 2010 and replaced by DAP).

DDP - Delivered Duty Paid

The seller is responsible for delivering the goods to the named place of destination, cleared for import, and ready for unloading. The seller bears all costs and risks, including duties, taxes, and other charges of importing the goods. This term places the maximum obligation on the seller.