The Incoterms (International Commercial Terms) are a set of internationally recognized trade terms issued by the International Chamber of Commerce (ICC). They serve to define the rights and obligations of buyers and sellers in international trade with regard to the delivery of goods. In particular, the Incoterms regulate who bears the costs and risk at what point in the transportation process.
Clarity in responsibility: FOB gives both parties clarity about the time and place of handover. This reduces the risk of misunderstandings and disputes.
EXW (Ex Works)
The seller shall make the goods available at his premises. The buyer bears all transportation costs and risks from the time the goods are made available.
FCA (Free Carrier)
The seller delivers the goods to a location specified by the buyer (often a transportation hub). From this point, the buyer assumes the costs and risks.
CPT (Carriage Paid To)
The seller pays for the transportation of the goods to the named destination. However, the risk is transferred as soon as the goods are handed over to the first carrier.
CIP (Carriage and Insurance Paid to)
Similar to CPT, but the seller must also take out transport insurance for the goods to the named place of destination.
DAP (Delivered at Place)
The seller bears all costs and risks until the goods are delivered to a named place in the country of destination. The buyer is responsible for import clearance.
DPU (Delivered at Place Unloaded)
This is the only Incoterm clause that requires the seller to unload the goods at destination. The seller bears all risks and costs until the goods are unloaded.
DDP (Delivered Duty Paid)
The seller bears all costs and risks, including duties, taxes and other charges, until the goods are delivered and made available at the named place in the importing country.
FAS (Free Alongside Ship)
The seller delivers the goods alongside the ship at the named port of shipment. From this point on, the buyer assumes all costs and risks.
FOB (Free on Board)
The seller bears the costs and risks until the goods have reached the ship at the port of shipment. As soon as the goods are on board, the risk is transferred to the buyer.
CFR (Cost and Freight)
The seller pays the costs and freight to bring the goods to the port of destination. The risk is transferred as soon as the goods leave the ship at the port of shipment.
CIF (Cost, Insurance, and Freight)
Similar to CFR, but the seller must also take out insurance for the goods during transportation by sea.
Choosing the right Incoterm clause depends on many factors, including the type of goods, the mode of transportation chosen and the risk appetite of the parties to the contract. It is important that both buyers and sellers fully understand the meanings of Incoterms to ensure that their contracts accurately reflect their intentions and to avoid unexpected costs or risks.
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