INCOTERMS
EXW - Ex Works (Place Of Delivery)
The seller fulfils its obligations by having the goods available for the buyer to pick up at its premises or another named place (i.e. factory, warehouse, etc.) on a date agreed upon by both parties or within an agreed-upon timeframe. The seller needs to provide the buyer the information they need to take delivery of the goods at that time. With Ex Works, the buyer bears all risk and costs starting when the goods are made available to the buyer at the seller’s location or other named place until the products are delivered to its location. Seller has no obligation to load the goods or clear them for export.
FCA - Free Carrier (Named Place Of Delivery)
The seller is responsible for either making the goods available at its own premises or at a named place. In either case, the seller is responsible for loading the goods on the buyer's transport and is responsible for delivery to the port and export clearance including security requirements. Risk transfers once the goods are loaded on the buyer’s transport. This term has changed the most in the Incoterms 2020 rules. Previously, problems occurred with this term when the seller was responsible for loading the goods on a truck or some other transport hired by the buyer and not directly on the international carrier. If the seller and buyer had agreed on using a letter of credit as the payment method for this transaction, banks often require the seller to present a bill of lading with an on-board notation before they can get paid.
CPT - Carriage Paid To (Place Of Destination)
Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment. Seller is responsible for the international transportation costs associated with delivering goods to the named foreign place of destination. The transfer of risk, on the other hand, transfers from the seller to the buyer as soon as the goods are delivered to the international carrier. That means the buyer assumes the risk of loading the goods on the carrier and during the international transport of the goods.
CIP - Carriage And Insurance Paid To (Place Of Destination)
Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment, at which point risk transfers to the buyer. Seller is responsible for the transportation costs associated with delivering goods and procuring insurance coverage to the named place. The amount of insurance that the seller must purchase has increased under Incoterms 2020 rules for CIP. The seller must purchase a broader level of insurance coverage than under the old Incoterms 2010 CIP rule. It must be at least 110% of the value of the goods and transportation expenses as detailed in Clause A of the Institute Cargo Clauses.
DAP - Delivered At Place (Named Place Of Destination)
Seller clears the goods for export and bears all risks and costs associated with delivering the goods to the named foreign destination not unloaded. DAP means the buyer is responsible for all costs and risks associated with unloading the goods and clearing customs to import the goods into the named country of destination. The named place under this term can be a port, the buyer's location or any named place that is agreed upon. In that regard, DAP provides a lot of flexibility to both parties.
DPU - Delivered At Place Unloaded (Of Place Of Destination)
Previously named Delivered at Terminal (DAT), this Incoterm has been renamed Delivered at Place Unloaded (DPU) because the buyer and/or seller may want the delivery of goods to occur somewhere other than a terminal. This term is often used for consolidated containers with multiple consignees. DPU is very similar to DAP except that the seller must pay for unloading the goods. Like DAP, the seller clears the goods for export and bears all risks and costs associated with delivering the goods to the named place, which can be a port or other named location in the foreign destination. Buyer is responsible for all costs and risks from this point forward including clearing the goods for import at the named country of destination.
DDP - Delivered Duty Paid (Place Of Destination)
DDP Incoterms 2020 means the seller bears all risks and costs associated with delivering the goods to the named place of destination ready for unloading and cleared for import. DDP is a risky term for the seller, because they may not be fully aware of the import clearance procedures in the country of import or how to find a competent local customs broker. The seller must also deal in a foreign currency, which means they are responsible for the currency exchange and its associated risks. In addition, not all countries allow for non-resident importers, which means the seller must determine how to establish an importer of record.
FAS - Free Alongside Ship (Name Of Port Of Loading)
Seller clears the goods for export and delivers them when they are placed alongside the vessel at the named port of shipment. Buyer assumes all risks/costs for goods from this point forward. This is not a commonly used term except for goods that may be difficult to load.
FOB - Free On Board (Named Port Of Loading)
Seller clears the goods for export and delivers them when they are on board the vessel at the named port of shipment. Buyer assumes all risks and costs for goods from this moment forward. This term is also not commonly used except, perhaps, by U.S. companies that misuse the term because they confuse it with the domestic term FOB.
CFR - Cost And Freight (Named Port Of Destination)
Seller clears the goods for export and delivers them when they are on board the vessel at the port of shipment. Seller bears the cost of freight to the named port of destination. Buyer assumes all risks for the goods from the time the goods have been delivered on board the vessel at the port of shipment. This term sounds a lot like the Incoterm CPT, but it can only be used for sea and inland waterway transport, and the buyer only assumes risk once the goods are loaded on the vessel.
CIF - Cost Insurance And Freight (Named Port Of Destination)
Seller clears the goods for export and delivers them when they are on board the vessel at the port of shipment. Seller bears the cost of freight and insurance to the named port of destination. The seller is required to purchase the minimum level of insurance under Clause C of the Institute Cargo Clauses. This requirement is unchanged from Incoterms 2010. Buyer is responsible for all costs associated with unloading the goods at the named port of destination and clearing goods for import. Risk passes from seller to buyer once the goods are on board the vessel at the port of shipment.