Incoterms helps to reduce complexities and disputes in international trade. It consists of 11 rules each of which describes a different level of responsibility for delivery. These rules specify the stage at which the responsibility for a cargo passes from the seller to the buyer. The Incoterms rules specify the payer of such costs as customs tax, etc. They protect the parties’ respective rights in case of a dispute.

Delivery Terms for all Transportation Modes

EXW (Ex Works) – (named place of origin)
The seller delivers the goods at its facility or elsewhere to the buyer. The seller is not responsible for clearing the goods or loading them in a truck. The buyer assumes all risks and costs after the goods are loaded in a vehicle at the place of loading notified by the seller. The seller is not responsible for loading the goods in the buyer’s vehicle or clearing the goods through the customs unless the sales agreement requires otherwise.

FCA (Free Carrier) – (named port of departure)
This rule may be used for all kinds of transportation mode. The seller carries the goods to the terminal selected by the buyer (or carrier) and is responsible for clearing the goods through the customs too.  If the place of loading is the seller’s facility, the seller will be responsible for loading the goods in a truck, but not be responsible for unloading the cargo. In general the goods are cleared through the customs by the Seller. If the port of loading is different from the seller’s facility, the delivery rule will be the port of loading, not the seller’s facility.

DPU (Delivered at Place Unloaded) – (named port of destination or arrival terminal)
The seller unloads the cargo from the incoming vehicle and delivers it to the buyer at the port of destination or arrival terminal agreed upon by the parties to fulfill its obligation to deliver.  The seller undertakes the risks and costs of delivering the goods to the port of destination and unloading them there, and fulfills the import or transit customs formalities if necessary. Import customs formalities and taxes will be fulfilled and paid by the buyer.

DAP (Delivered at Place) – (named place of destination)
Seller delivers the goods to the buyer at the place of destination agreed upon by the parties in the vehicle ready to unload, so that it fulfills its obligation to deliver the goods.  The seller assumes all risks and costs of delivering the goods at the place of destination and fulfills the export or transit customs formalities if necessary. The buyer assumes the risks and costs of unloading the goods and fulfills the import or transit customs formalities if necessary.

CPT (Carriage Paid To) – (named place of destination)
This rule may be used for all kinds of transportation mode.  The seller signs an agreement with the carrier to carry the goods to the relevant place of destination, pays the relevant costs and fulfills the export customs formalities. All risks, responsibilities and additional costs of the goods pass from the seller to the buyer when the goods are delivered to the carrier.  The seller is considered to have fulfilled its obligation to deliver when it has delivered the goods to the carrier, not when the goods have arrived at the place of destination.

CIP (Carriage and Insurance Paid To) – (named place of destination)

This rule may be used for all kinds of transportation mode.  The seller pays the freight and insurance premium until the goods arrive at the place of destination agreed upon, and the risk passes to the carrier when the goods are delivered. The seller is considered to have fulfilled its obligation to deliver when it has delivered the goods to the carrier, not when the goods have arrived at the place of destination.

DDP (Delivered, Duty Paid) – (named place of destination)
The seller delivers the goods to the carrier agreed upon by the parties and located in the buyer’s country, fulfills the import customs formalities and pays the import taxes (including official charges and licenses) to fulfill its obligation to deliver the goods.  Unloading is performed by the buyer. In general DDP is applied in such a way that the seller pays the import taxes and the buyer pays the VAT.  In this case the value of the goods at the place of destination is the value excluding VAT.

Maritime Delivery Terms

FAS (Free Alongside Ship) – (named port of departure)
This rule is used for sea shipments only.  The seller carries the goods to the port of departure agreed upon by the parties and is also responsible for fulfilling the export customs formalities.

FOB (Free On Board) – (named port of departure)
FOB is used for sea shipments only. The seller’s obligation is fulfilled when the goods are loaded on board the relevant ship. The seller is is also responsible for fulfilling the export customs formalities for the country where the port of departure is located.

CFR (Cost and Freight) – (named port of arrival)
CFR is used for sea shipments only. The seller is obliged to pay the costs until the goods are delivered to the port of arrival, but the risks and responsibility of the goods do not pass to the buyer until the goods are loaded in the relevant ship. The price excludes the insurance premium. The seller is considered to have fulfilled its obligation to deliver when it has delivered the goods to the carrier, not when the goods have arrived at the port of arrival. The former name of this rule was CNF or C&F.

CIF (Cost, Insurance and Freight) – (named port of arrival)
CIF is used for sea shipments only. The seller fulfills its obligations when the goods are unloaded at the port of arrival.  The seller is obliged to fulfill the export customs formalities, arrange the goods to be carried to the port of arrival, and sign an insurance agreement in favor of the buyer. The seller is considered to have fulfilled its obligation to deliver when it has delivered the goods to the carrier, not when the goods have arrived at the port of arrival.