Inco Terms

 
When negotiating an international sales contract, both parties need to pay as much attention to the terms of sale as to the sales price.  To make it as clear as possible, an international set of trade terms (INCOTERMS) has been adopted by most countries that defines exactly the responsibilities and risks of both the buyer and seller including while the merchandise is in transit.
 
The following chart summarizes the responsibilities of both the buyer and seller for each of the current 13 INCOTERMS.  In addition, a definition for each term is included at the bottom of the page.
 
For a more complete description of each of the INCOTERMS, The IBT Guide to INCOTERMS 2000 book published by International Business Training fully and clearly defines each of the new INCOTERMS that became effective January 1, 2000, and includes a number of case studies that demonstrate the use of the different terms in real-life situations.
 EXWFCAFASFOBCFRCIFCPTCIPDAFDESDEQDDUDDP
SERVICES
Ex WorksFree CarrierFree Alongside ShipFree Onboard VesselCost & FreightCost Insurance & FreightCarriage Paid ToCarriage Insurance Paid ToDelivered At FrontierDelivered Ex ShipDelivered Ex Quay Duty UnpaidDelivered Duty UnpaidDelivered Duty Paid
Warehouse StorageSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Warehouse LaborSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Export PackingSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Loading ChargesBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Inland FreightBuyerBuyer/
Seller*
SellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Terminal ChargesBuyerBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Forwarder’s FeesBuyerBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Loading On VesselBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Ocean/Air FreightBuyerBuyerBuyerBuyerSellerSellerSellerSellerSellerSellerSellerSellerSeller
Charges On  Arrival At DestinationBuyerBuyerBuyerBuyerBuyerBuyerSellerSellerBuyerBuyerSellerSellerSeller
Duty, Taxes & Customs ClearanceBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSeller
Delivery To DestinationBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerBuyerSellerSeller
* There are actually two FCA terms: FCA Seller’s Premises where the seller is responsible only for loading the goods and not responsible for inland freight; and FCA Named Place (International Carrier) where the seller is responsible for inland freight.
 
The 13 INCOTERMS
Origin Terms

EXW – Ex-Works, named place where shipment is available to the buyer, not loaded.
The seller will not contract for any transportation.


International Carriage NOT Paid by Seller

FCA – Free Carrier, unloaded at the seller’s dock OR a named place where shipment is available to the international carrier or agent, not loaded.
This term can be used for any mode of transport.

FAS – Free Alongside Ship, named ocean port of shipment.
Ocean shipments that are NOT containerized.

FOB – Free On Board vessel, named ocean port of shipment.
This term is used for ocean shipments only where it is important that the goods pass the ship’s rail.


International Carriage Paid by the Seller

CFR – Cost and Freight, Named ocean port of destination.
This term is used for ocean shipments that are not containerized.

CIF – Cost, Insurance and Freight, named ocean port of destination.
This term is used for ocean shipments that are not containerized.

CPT – Carriage Paid To, named place or port of destination.
This term is used for air or ocean containerized and roll-on roll-off shipments.

CIP – Carriage and Insurance Paid To, named place or port of destination.
This term is used for air or ocean containerized and roll-on roll-off shipments.


Arrival At Stated Destination

DAF – Delivered At Frontier, named place of destination, by land, not unloaded.
This term is used for any mode of transportation but must be delivered by land.

DES – Delivered Ex-Ship, named port of destination, not unloaded.
This term is used for ocean shipments only.

DEQ – Delivered Ex-Quay, named port of destination, unloaded, not cleared.
This term is used for ocean shipments only.

DDU – Delivered Duty Unpaid, named place of destination, not unloaded, not cleared.
This term is used for any mode of transportation.

DDP – Delivered Duty Paid, named place of destination, not unloaded, cleared.
This term is used for any mode of transportation.

“INCOTERMS 2000” is one in a series of short articles published by International Business Training, a division of InterMart, Inc. These articles are designed to help businesses and individuals succeed in the global marketplace.

For more information about a variety of import and export publications, self-study courses and seminars designed specifically for small and mid-sized companies, visit our web page at www.i-b-t.net.

The laws, regulations, procedures, requirements, methods, interpretations and other information contained in this article are subject to change and therefore the reader should not rely solely on this guide in dealing with the commercial laws of the United States or foreign countries. Errors and omissions, typographical, clerical and otherwise, sometimes occur and it is possible that errors have occurred in respect to anything printed in this article.

(c) 2000 International Business Institute, Inc.
Used with permission by InterMart, Inc., PO Box 22267, Eagan, MN 55122-0267