Incoterms 2000 describe the responsibilities of seller and buyer in international trade. The 13 Incoterms are:
- 1. EXW EX WORKS (… named place)
“Ex-works” means the seller’s only responsibility is to make the goods available at the seller’s premises, i.e., the works or factory. The seller is not responsible for loading the goods on the vehicle provided by the buyer unless otherwise agreed. The buyer bears the full costs and risk involved in bringing the goods from there to the desired destination. Ex-works represents the minimum obligation of the seller.
- 2. FCA FREE CARRIER (… named place)
This term has been designed to meet the requirements of multimodal transport, such as container or roll-on, roll-off traffic by trailers and ferries. It is based on the same name principle as F.O.B. (free on board), except the seller fulfills its obligations when the goods are delivered to the custody of the carrier at the named place. If no precise place can be named at the time of the contract of sale, the parties should refer to the place where the carrier should take the goods into its charge. The risk of loss or damage to the goods is transferred from seller to buyer at that time and not at the ship’s rail. The term “carrier” means any person by whom or in whose name a contract of carriage by road, rail, air, sea, or a combination of modes has been made. When a seller has been furnished a bill of lading, waybill or carrier’s receipt, the seller duly fulfills its obligation by presenting such a document issued by a carrier.
- 3. FAS FREE ALONGSIDE SHIP (… named port of shipment)
“F.A.S.” or “free alongside ship” requires the seller to deliver the goods alongside the ship on the quay. From that point on, the buyer bears all costs and risks of loss and damage to the goods. Unlike F.O.B., F.A.S. requires the buyer to clear the goods for export and pay the cost of loading the goods.
- 4. FOB FREE ON BOARD (… named port of shipment)
Under “F.O.B.” or “free on board,” the goods are placed on board the ship by the seller at a port of shipment named in the sales agreement. The risk of loss of or damage to the goods is transferred to the buyer when the goods pass the ship’s rail (i.e., off the dock and placed on the ship). The seller pays the cost of loading the goods.
- 5. CFR COST AND FREIGHT (… named port of destination)
“CFR” requires the seller to pay the costs and freight necessary to bring the goods to the named destination, but the risk of loss or damage to the goods, as well as any cost increases, are transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. Insurance is the buyer’s responsibility.
6. CIF COST, INSURANCE AND FREIGHT (… named port of destination)
“CIF” is CFR with the additional requirement that the seller procures transport insurance against the risk of loss or damage to goods. The seller must contract with the insurer and pay the insurance premium. Insurance is generally more important in international shipping than domestic shipping because U.S. laws generally hold a common carrier to be liable for lost or damaged goods.
- 7. CPT CARRIAGE PAID TO (… named place of destination)
This term means the seller pays the freight for the carriage of the goods to the named destination. The risk of loss or damage to the goods and any cost increases transfers from the seller to the buyer when the goods have been delivered to the custody of the first carrier, and not at the ship’s rail. Accordingly, “freight/carriage paid to” can be used for all modes of transportation, including container or roll-on roll-off traffic by trailers and ferries. When the seller is required to furnish a bill of lading, waybill, or carrier receipt, the seller duly fulfills its obligation by presenting such a document issued by the person contracted with for carriage to the main destination.
- 8. CIP CARRIAGE AND INSURANCE PAID TO (… named place of destination)
This term is the same as “freight/carriage paid to (CPT)” but with the additional requirement that the seller has to procure transport insurance against the risk of loss or damage to the goods during the carriage. The seller contracts with the insurer and pays the insurance premium.
- 9. DAF DELIVERED AT FRONTIER (… named place)
“Delivered at frontier” means that the seller’s obligations are fulfilled when the goods have arrived at the frontier but before the customs border of the country named in the sales contract. The term is primarily used when goods are carried by rail or truck. The seller bears the full cost and risk in delivering the goods up to this point, but the buyer must arrange and pay for the goods to clear customs.
- 10. DES DELIVERED EX SHIP (… named port of destination)
Means the seller shall make the goods available to the buyer on board the ship at the place named in the sales contract. The seller bears the full cost and risk involved in bringing the goods there. The cost of unloading the goods and any customs duties must be paid by the buyer.
- 11. DEQ DELIVERED EX QUAY (… named port of destination)
Means the seller has agreed to make the goods available to the buyer on the quay or the wharf at the place named in the sales contract. The seller bears the full cost and risks in delivering the goods to that point including unloading.
- 12. DDU DELIVERED DUTY UNPAID (… named place of destination)
Under these terms, the seller fulfills his obligation to deliver when the goods have been available to the buyer uncleared for import at the point or place of the named destination. The seller bears all costs and risks involved in bringing the goods to the point or place of named destination. There is no obligation for import clearance.
- 13. DDP DELIVERED DUTY PAID (… named place of destination)
Represents the seller’s maximum obligation. The term “DDP.” is generally followed by words indicating the buyer’s premises. It notes that the seller bears all risks and all costs until the goods are delivered. This term can be used irrespective of the mode of transport. If the parties wish to make clear that the seller is not responsible for certain costs, additional word should be added (for example, “delivered duty paid exclusive of VAT and/or taxes”).