Freight incoterms (International Commercial Terms)

 Freight incoterms (International Commercial Terms) are the standard contract terms used in sales contracts with importing/exporting to define responsibility and liability for shipment of the goods. In plain English – how far along the process will the supplier ensure that the goods are moved, and at what point does the buyer take over the shipment process.

There are currently 11 Incoterms in use. Some apply to all modes of transport while some are specific to a particular mode. These are the 11 rules briefly explained:

▪️EXW (Ex-works): This means that the seller makes the goods available at a specified location, usually the seller’s factory. The buyer is responsible for onward transportation of the goods and bears the cost for the same.
▪️DAP (Delivered At Place): The seller is responsible for delivering the goods to a designated place.
▪️FOB (Free on Board): The seller completes delivery when he loads the goods on a ship specified by the buyer at a named port. Hence, the seller is “free” of responsibility once the goods are “on board” the ship. Any liability for damage or loss thereafter passes to the buyer. This rule applies to goods transported by sea or inland waterway.
▪️FCA (Free Carrier): The seller delivers the goods to a carrier or an agent nominated by the buyer at the seller’s premises or another specified location.
▪️FAS (Free Alongside Ship): The seller delivers the goods alongside the ship (on a barge or quay, for example). The buyer must load the goods on the ship. This rule applies only to sea transport.
▪️CFR (Cost and Freight): The seller delivers the goods on a ship at the designated port and pays for cost and freight to bring the goods to the port.
▪️CIF (Cost, Insurance and Freight): The seller delivers the goods on the ship at the named port and pays for cost, freight and insurance to transport the goods to the port.
▪️CPT (Carriage Paid To): The seller delivers the goods to a named place and pays for carriage to that place.
▪️CIP (Carriage and Insurance Paid To): The seller delivers the goods to a named place, pays for both carriage and insurance of the goods to that place.
▪️DPU (Delivered At Place Unloaded): The seller delivers the goods at a designated place and unloads them, bearing the risks and costs of both. This is the only rule that requires the seller to unload the goods to complete delivery. The buyer takes care of any import clearance charges, taxes and duties.
▪️DDP (Delivered Duty Paid): The seller bears the maximum responsibility here as he arranges for carriage and delivery of goods at a named place, and pays for import clearance as well as any duties and taxes that might apply.