International Commercial Terms (Incoterms) is a universally recognised set of definitions of international trade terms. They are the heart of world trade.
ICC introduced Incoterms in 1936. Since then lawyers and trade practitioners have updated them six times to keep pace with the development of international trade. Most contracts made after January 1st, 2000 will refer to the latest edition of Incoterms: Incoterms 2000. As the guardian and originator of Incoterms, ICC has a responsibility to consult regularly all parties interested in trade to keep Incoterms relevant, efficient and up to date.
There are in all 13 main terms and several secondary terms which are all recognised by courts and other authorities. It is invaluable and a cost-saving tool. Incoterms deal with questions related to the delivery of goods from the seller to the buyer. This includes the transportation of products, export and import clearance responsibilities, who pays for what and who has risk for the condition of the products at different locations within the transport process. The exporter and the importer need not undergo a lengthy negotiation about the conditions of each transaction.
Under Incoterms 2000, the international commercial terms are grouped into E, F, C and D, and designated by the first letter of the term as follows:
Group E: Departure
EXW- Ex Works (+ the named place)/ EX Factory
Ex means from. Works means factory, mill or warehouse, which is seller’s premises. EXW applies to goods available only at seller’s premises. Buyer is responsible for loading the goods on truck or container at the seller’s premises, and for the subsequent costs and risks.
Group F: Main Carriage unpaid
FCA- Free Carrier/FOT- Free On Truck/ FOR- Free On Rail
The delivery of goods on truck, rail car or container at the specified point of departure, which is usually the seller’s premises or a named cargo terminal / railroad station, is at seller’s expense. Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks. This term is suitable for all modes of transport.
FAS- Free Alongside Ship
The seller must place the goods alongside the ship at the named port. Goods are loaded at his expense. The buyer is responsible for loading fee, main carriage/freight, cargo insurance and other costs risks. This Incoterm is suitable only for maritime transport.
FOB- Free On Board
The delivery of goods on board the vessel at the port of origin is at the seller’s expense. The buyer is responsible for loading fee, main carriage/freight, cargo insurance and other costs risks. It is used only for maritime transport.
In North America, FOB has other applications. In the USA and Canada, they use FOB Origin and FOB Destination. These terms are not used in international trade since they are not part of INCOTERMS.
Group C: Main Carriage Paid
CFR- Cost and Freight (formerly C&F)
The seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship’s rail. It is used only for maritime transport.
CIF- Cost, Insurance and Freight
It is used exactly the same way as CFR except that the seller must in addition procure and pay for insurance for the cargo insurance and delivery of goods to the port of destination. The buyer is responsible for the import customs clearance and other costs and risks. It is used only for maritime transport.
CPT- Carriage Paid To (+ destination)
The seller delivers the goods at the named place of destination at his expense. The buyer assumes the cargo insurance, import customs clearance, payment of customs duties and taxes, and other costs and risks. The risk is transferred at the delivery of goods.
CIP- Carriage and Insurance Paid To (+ destination)
The seller delivers the goods on the ship. On board, the risk is transferred to the buyer. The buyer is accountable for the import customs clearance, payment of customs duties and taxes, and other costs and risks until the final destination.
Group D: Arrival
DAF- Delivered At Frontier (+ point at frontier)
The delivery of goods is done at the specified point at the frontier at the seller's expense. The buyer is responsible for the import customs clearance, payment of customs duties and taxes. The transfer of risk is made at the frontier.
DES-Delivered Ex Ship (+ port of destination)
The seller assumes expenses linked to the delivery of goods to the port of destination. At the arrival of the ship, the risk is transferred to the buyer. The buyer is accountable for the unloading fee, import customs clearance, payment of customs duties and taxes, cargo insurance, and other costs.
DEQ- Delivered Ex Quay (+ port of destination)
The delivery of goods is done to the quay of the port of destination at the seller's expense. He is also responsible for the import customs clearance and payment of customs duties and taxes at the buyer's end. The buyer assumes the cargo insurance and other costs and risks.
DDU- Delivered Duty Unpaid (+ point at frontier)
The delivery of goods and the cargo insurance to the final destination, which is often the project site or buyer's premises, is done at the seller's expense. The buyer is responsible for the import customs clearance and payment of customs duties and taxes.
DDP- Delivered Duty Paid (+ point at frontier)
The seller is responsible for most of the expenses, which include the cargo insurance, import customs clearance, and payment of customs duties and taxes at the buyer's end, and the delivery of goods to the final point at destination, which is often the project site or the buyer's premises. It is a “door to door” delivery. The risk is transferred when the goods are delivered.
It is important to define the geographical points where the transfers of risks and expenses will take place.
The medium of transport of the goods has also to be specified and written in all letters in the contract, since it will condition the way of packing / conditioning the goods and thus their safety during transport.
If provisions relative to the use of the particular trade, port or a given profession are registered in the contract, they will override the Incoterms.
Internet recourse
| File | Description | File size |
|---|---|---|
 Incoterms 2000 (RU) | INCO Terms | 657 Kb |
| International Commercial Terms | INCO Terms | 131 Kb |
