Inco Terms

1)EXW (‘Ex Works’)

a) Carriage to be arranged by the buyer.
b) Risk transfer from the seller to the buyer when the goods are at the disposal of the purchaser.
c) Cost of assignment from the vendor to the buyer when the goods are at the disposal of the buyer.


2)FCA (‘Free Carrier’)

a) Carriage has to arranged by the buyer or either by the seller on the behalf or the buyer.
b) Risk transfer from the vendor to the buyer when the goods have been delivered to the carrier at the named place.
c) Cost transfer from the seller to the buyer when the goods have been delivered to the carrier at the named place.


3)FAS free alongside ship

a) Carriage to be arranged by the buyer.
b) Risk transfer from the seller to the buyer when the goods have been placed alongside the ship.
c) Cost transfer from the vendor to the buyer when the goods have been placed alongside the ship.


4)FOB free on board

a) Carriage to be arranged by the purchaser.
b) Risk transfer from the seller to the buyer when the goods pass the ship’s rail.
c) Cost transfer from the vendor to the buyer when the goods have been placed alongside the ship.


5)CFR cost and freight

a) Carriage and insurance have to be arranged by the seller.
b) Risk transfer from the vendor to the buyer when the goods pass the ship’s rail.
c) Cost transfer at the port of destination buyer, paying such fees as are not for the sellers account under the carriage contract.


6)CIF (COST insurance and freight)

a) Carriage and insurance have to be arranged by the seller.
b) Risk transfer from the seller to the buyer when the goods pass the ship’s rail.
c) Cost transfer at the port of destination buyer, paying such costs as are not for the sellers account under the carriage contract.


7)CPT – Carriage Paid to (duty paid)

a) Risk transfer from the seller to the buyer when the goods pass the ship’s rail.
b) Cost transfer at the port of destination buyer , paying such costs as are not for the sellers account under the carriage contract.


8) CIP Carriage and Insurance paid to

a) Carriage and insurance have to be arranged by the seller.
b) Risk transfer from the seller to the buyer when the goods pass the ship’s rail.
c) Cost transfer at the port of destination buyer, paying such costs as are not for the sellers account under the carriage contract.


9) DAF (Delivered at Frontier)

a) Carriage to be arranged by the seller.
b) Risk transfer from the seller to the buyer when the goods have been de;covered at the frontier.
c) Cost transfer from the seller to the buyer when the goods have been delivered at the frontier.


10) DES (Delivered ex-ship)

a) Carriage to be arranged by the seller.
b) Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on the board of the ship.
c) Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on the board of the ship.


11) DEQ (Delivered EX quay)

a) Carriage to be arranged by the seller.
b) Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on the board of the ship.
c) Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on board of the ship.

12) DDU (delivered duty unpaid)

a) Carriage to be arranged by the seller.
b) Risk transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on the board of the ship.
c) Cost transfer from the seller to the buyer when the goods are placed at the disposal of the buyer on the board of the ship. Incoterms Explained Pictorally


Incoterms Explained Pictorally



Incoterms for any mode of transportation:

  • EXW Ex Works
  • FCA Free Carrier
  • CIP Cost, Insurance and Freight
  • DAT Delivered At Terminal
  • DAP Delivered At Place
  • DDP Delivered Duty Paid

Incoterms for sea and inland waterway transport:

  • FAS Free Alongside Ship
  • FOB Free On Board
  • CFR Cost and Freight
  • CIF Cost, Insurance and Freight

Within this article, we will focus on the terms most commonly used for ocean transportation of containerized cargo.


Ex-Works or EXW

In this arrangement, the buyer is in control. They are responsible for arranging everything after picking up the goods from the seller’s location. Documentation, export licenses, and local charges at origin are all paid by the buyer, as well as transportation costs for the truck to move from origin to the port, the ocean freight, and all other charges at destination. The seller is only responsible for packing and having the cargo ready at the agreed location.


Free On-Board or FOB

The seller is responsible to deliver the cargo at POL, clear customs, and load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!) The buyer is responsible for any other cost until the delivery at destination. FOB is the most misused incoterm, since it was never intended for combined inland and ocean transportation in containers (see Incoterms 2010, ICC publication 715), but only inland waterway and maritime transport. The correct rule should be FCA.


Cost and Freight or CFR

The seller is responsible for all costs, including the freight up until the cargo reaches the port of destination. The risk, however, is transferred to the buyer, once the cargo is loaded onto the vessel (this rule is new!) The only cost not covered by the seller up until POD is maritime insurance, which is the only difference with our next incoterm rule, CIF.


Cost, Insurance and Freight or CIF

As already mentioned, this is exactly the same as CFR, but maritime insurance is also covered by the buyer.


INCOTERMS WERE CREATED SO THAT THERE ARE NO MISUNDERSTANDINGS BETWEEN TRADERS ALL THE WORLD.

They are a universal language for global commerce that every party in the chain of transport needs to speak. The buyer, the seller, the customs officer, the customs broker, the freight forwarder, the carrier’s employees, the warehouse manager, and even the trucker in many cases – just to name the most common ones.