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Incoterms or international commerce terms is a series of international sales terms
that is widely used throughout the world. Incoterms 2000 provides a set of international
rules, published by the International Chamber of Commerce (ICC) effective 1 January
2000, for the interpretation of the most commonly used trade terms.It divides transaction
costs and responsibilities between buyer and seller, reflects state of the art transportation
practices and closely corresponds to the U.N. Convention on Contracts for the International
Sale of Goods. Incoterms deal with the questions related to the delivery of the
products from the seller to the buyer. This includes the carriage of products, export
and import clearance responsibilities, who pays for what, and who has risk for the
condition of the products at different locations within the transport process.
E -TERMS
Ex works (EXW)
It means that the seller has the goods ready for collection at his premises (factory,
warehouse, plant) on the date agreed upon. The buyer pays all transportation costs
and also bears the risks for bringing the goods to their final destination.
F -TERMS
Free carrier (FCA)
It can be used for all modes of transportation including multimodal transport. The
seller delivers the goods into the custody of the first carrier, and this is where
the passing of risk occurs. The buyer pays for the transportation.
Free Alongside Ship (FAS)
It means that the seller pays for transportation of the goods to the port of shipment.
The buyer pays loading costs, freight, insurance, unloading costs and transportation
from the port of destination to his factory. The passing of risk occurs when the
goods have been delivered to the quay at the port of shipment.
Free on Board (FOB)
It is similar to FAS, but the seller also pays for the loading costs.The goods are
placed on board the ship by the seller at a port of shipment named in the sales
agreement. The risk of loss of or damage to the goods is transferred to the buyer
when the goods pass the ship's rail (i.e., off the dock and placed on the ship).
C -TERMS
Cost and Freight (CFR)
It means that the seller pays for transportation to the port of shipment, loading
and freight. The buyer pays for the insurance and transportation of the goods from
the port of destination to his factory. The passing of risk occurs when the goods
pass the ship's rail at the port of shipment.
Cost, Insurance and Freight (CIF)
It is a common term in a sales contract that may be encountered in international
trading when ocean transport is used. When a price is quoted CIF, it means that
the selling price includes the cost of the goods, the freight or transport costs
and also the cost of marine insurance.CIF is identical in most particulars with
Cost and Freight (CFR), and the same comments apply, including its applicability
only to conventional maritime transport. In addition to the CFR responsibilities,
the seller under CIF must obtain in transferable form a marine insurance policy
to cover the risks of transit with insurers of repute. The policy must cover the
CIF price plus 10 per cent and where possible be in the currency of the contract.
Note that only very basic cover is required equivalent to the Institute "C" clauses,
and buyers should normally insist on an "all-risk" type of policy such as that under
the Institute "A" clauses. The seller's responsibility for the goods ends when the
goods have been delivered to the marine carrier or have been delivered on board
the shipping vessel, depending upon the terms of the contract.This term is only
appropriate for conventional maritime transport, not ro/ro or international container
movements.
Carriage Paid To (CPT)
It can be used for all modes of transport including multimodal transport. The seller
pays for the freight to the named point of destination. The buyer pays for the insurance.
The passing of risk occurs when the goods have been delivered into the custody of
the first carrier.
Carriage and Insurance Paid to (CIP)
It can be used for all modes of transport including multimodal transport. The passing
of risk occurs when the goods have been delivered into the custody of the carrier.
It is the same as CPT except that the seller also pays for the insurance.
D - TERMS
Delivered At Frontier (DAF)
It can be used when the goods are transported by rail and road. The seller pays
for transportation to the named place of delivery at the frontier. The buyer arranges
for customs clearance and pays for transportation from the frontier to his factory.
The passing of risk occurs at the frontier.
Delivered Ex Ship (DES)
It means that the seller has to pay for the same as in CIF, but the passing of risk
does not occur until the ship has arrived at the port of destination, but before
the goods have been unloaded.
Delivered Ex Quay (DEQ)
It means the same as DES, but the passing of risk does not occur until the goods
have been unloaded at the port of destination.
Delivered Duty Unpaid (DDU)
It means that the seller pays for all transportation costs and bears all risk until
the goods have been delivered, but does not pay for the duty.
Delivered Duty Paid (DDP)
It means that the seller pays for all transportation costs and bears all risk until
the goods have been delivered and pays the duty.
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