INCOTERMS

What are Incoterms?

The international terms of sale are known as Incoterms
Developed by the International Chamber of Commerce, these are internationally
accepted rules defining trade terms
Define the responsibilities of both the buyer and seller in any international contract
Responsibilities delineated
Export packing cost Inland transportation Export clearance Vessel or plane
loading
Responsibilities delineated Main transportation cost Cargo insurance
Customs duties
Risk of loss or damage in transit

E Terms
Only one E term : Ex Works
In this contract, the seller’s responsibility is to make the shipment available at its facility
Buyer takes possession of the shipment at the point of origin and to bear all the cost
and risk of transportation

F Terms
The three F terms obligate the seller to incur the cost of delivering the shipment
cleared for export to the carrier designated by the buyer
The buyer selects and incurs the cost of main transportation, insurance and customs
clearance

FCA (Free Carrier)

Can be used with any mode of transportation
Risk of damage is transferred to the buyer when the seller delivers the goods to the
carrier nominated by the buyer
FAS ( Free Alongside Ship)
Used for water transportation shipments only
The risk of damage is transferred to the buyer when the goods are delivered
alongside the ship
The buyer must pay the cost of ‘lifting’ the cargo or container on board the vessel
FOB (Free On Board)
Used only for water transportation shipments
The risk of damage is transferred to the buyer when the shipment crosses the ship’s
rail i.e. when the goods are actually loaded on the vessel
The seller pays the lifting charge
C Terms
Total of four C terms
These obligate the seller to obtain and pay for the main carriage and /or cargo
insurance to the named destination
CFR ( Cost and Freight)
Obligates the seller to select and pay for main carriage to the named destination
Used only for water transportation
Risk of damage passes to the buyer when the goods pass the ship’s rail
CPT (Carriage Paid To)
Obligates the seller to select and pay for main carriage to the named destination
(Same as CFR)
Used for any mode
Risk of damage passes to the buyer when the goods are delivered to the main
carrier
CIF (Cost, Insurance and Freight)
Requires the seller to pay both for main carriage and cargo insurance
Other conditions and responsibilities similar to CFR ( Cost and Freight)
CIP (Carriage and Insurance Paid To)
Requires the seller to to pay both for main carriage and cargo insurance
Other conditions and responsibilities similar to CPT (Carriage Paid To)
D Terms
A total of five D terms
Obligate the seller to incur all costs related to delivery of the shipment to the foreign
destination
Two apply to water transportation and three to any mode used
DAF ( Delivered At Frontier)
Seller is responsible for transportation and incurs risk of damage to the named point
at the place of delivery at the frontier of the destination country
DAF, Wagah, Punjab, indicates the seller is responsible for making the goods
available at the Wagah border with Pakistan
Buyer is responsible for customs duties and clearance into Pakistan
Valid for all modes
DES( Delivered Ex Ship)
Used for shipments by water transportation
Seller pays for the main carriage and insurance
Risk of damage transferred to buyer when goods are made available on board the
ship uncleared for import at the port of destination
Buyer responsible for customs clearance

DEQ ( Delivered Ex Quay)

All conditions similar to DES ( Delivered Ex Ship) except place of transference of
risk of damage to buyer
Here risk of damage is transferred to the buyer when the goods cleared for
import are unloaded onto the quay(wharf) at the named port of destination
DDU (Delivered Duty Unpaid)
Available for all modes
Requires the seller to incur all costs, except import duties, to the named
destination
Risk of damage passes to the buyer when the goods are made available, duties
unpaid, at the named place
DDP (Delivered Duty Paid)
Imposes the same responsibilities on the seller as DDU (Delivered Duty Unpaid) with
one exception
In DDP, the seller has the additional responsibility of clearing the goods for import
and paying the customs duties
Similar to DEQ where also import duties are paid before the risk of damage passes
to the buyer on the quay