International Commercial Terms (INCOTERMS) form the foundation for your agreement with your seller or buyer when trading. This is because the INCOTERM indicates where the responsibility and risk pass from the seller to buyer in transit. These rules are recognised by courts worldwide, and the International Chamber of Commerce. 

It is important to note that not all INCOTERMS are suitable for every transportation method due to the differences in physical processes. Your chosen INCOTERM will also determine whether you will need more than the commercial invoice value when calculating Duty and VAT. 

The following terms begin with the EXW INCOTERM, which places the responsibility for transit entirely on the buyer, and end with the DDP INCOTERM, which puts the entire process on the shipper.

EXW INCOTERM

The EXW (Ex Works) INCOTERM means that the responsibility for transit is entirely with the buyer. The goods are made available for collection at premises nominated by the seller.

The buyer is responsible for loading the goods onto the vehicle, the freight to the destination, and any customs clearances in transit.

The EXW INCOTERM is suitable for any mode of transportation.

F Level INCOTERMS

The F level INCOTERMS mean that the goods are delivered by the seller to a carrier, or place of collection, nominated by the buyer. It is important to be specific about the place of delivery as this is when the transfer of responsibility will pass from the seller to the buyer.

The 3 F level INCOTERMS have different terms around the transfer of liability and so it is important to choose the correct one for your mode of transport.

FCA INCOTERM

The FCA (Free Carrier) INCOTERM means that the goods are delivered to the carrier by the shipper, at a place nominated by the buyer. Risk transfers to the buyer once the delivery has been made.

The FCA INCOTERM is suitable for any mode of transport.

FAS INCOTERM

The FAS (Free Alongside Ship) INCOTERM means that the goods will be delivered to a place alongside the vessel, nominated by the buyer. The transfer of risk to the buyer happens once the goods are delivered, meaning that the buyer is liable for any issues that arise during transport from the place of delivery to the vessel and during loading.

The FAS INCOTERM is only suitable for sea and inland waterway transport.

FOB INCOTERM

The FOB (Free On Board) INCOTERM means that the goods are delivered on board a vessel that is nominated by the buyer. The liability for loss transfers to the buyer once the goods are onboard, meaning that any issues during loading are the responsibility of the seller.

The FOB INCOTERM is only suitable for sea and inland waterway transport.

C Level INCOTERMS

The C level INCOTERMS mean that the goods are delivered to a named place, and that the seller is responsible for the costs of carriage until this point. The carrier is also nominated by the seller.

The responsibility of costs and the liability do not pass over at the same point in transit for all the C level INCOTERMS, so it is important to understand which terms will have the higher risk to you.

CPT INCOTERM

The CPT (Carriage Paid To) INCOTERM means that the goods are delivered to the carrier nominated by the seller at an agreed place. The seller is responsible for contracting and paying the cost of carriage until the named place.

The CPT INCOTERM is suitable for any means of transport.

CIP INCOTERM

The CIP (Cost Insurance Freight) INCOTERM means that the goods are delivered to the carrier nominated by the seller at an agreed place. The seller is responsible for contracting and paying the cost of carriage, as well as providing minimal insurance cover against loss or damage of the goods, until the named place.

The CPT INCOTERM is suitable for any means of transport.

CFR INCOTERM

The CFR (Cost and Freight) INCOTERM means that the seller delivers the goods onboard a vessel and pays for the freight to a named port of destination. The risk of loss or damage transfers to the buyer once the goods are onboard the vessel, meaning that the buyer should contract insurance from the port of loading.

The CFR INCOTERM is only suitable for sea and inland waterway transport.

CIF INCOTERM

The CIF (Cost, Insurance, and Freight) INCOTERM means that the seller delivers the goods onboard a vessel and pays for the freight, and insurance, to a named port of destination. The risk of loss or damage transfers to the buyer once the goods arrive at the port of destination.

The CIF INCOTERM is only suitable for sea and inland waterway transport.

D Level INCOTERMS

The D level INCOTERMS mean that the goods are delivered to the destination, and the seller is responsible for the contracting and costs of carriage.

There are still differences in liability and carriage terms between the D level INCOTERMS, so it is important to choose the correct term for your needs.

The D level INCOTERMS are suitable for all modes of transport.

DAP INCOTERM

The DAP (Delivered At Place) INCOTERM means that the seller delivers the goods to the buyer, ready for unloading. The buyer is responsible for unloading the goods.

Import customs clearance remains the responsibility of the buyer with the DAP INCOTERM.

DPU INCOTERM

The DPU (Delivered at Place Unloaded) INCOTERM means that the seller delivers the goods to the buyer and is responsible for arranging the unloading at the buyers premises.

Import customs clearance remains the responsibility of the buyer with the DPU INCOTERM.

DDP INCOTERM

The DAP (Delivered At Place) INCOTERM means that the seller delivers the goods to the buyer, ready for unloading. The buyer is responsible for unloading the goods.

Import customs clearance and payment of Duty and VAT are the responsibility of the seller with the DDP INCOTERM.

Need more help with understanding INCOTERMS?

Our team would be happy to help you choose the right INCOTERMS for your shipments. Please contact us for more information.