Incoterms (International commercial terms) are shorthand expressions (such as EXW, FCA, CIF) which are internationally standardized and tell the buyer and seller what is included in the sales price regarding the transport costs, transfer of risks. Customs clearance and insurance. There is, however, one important are which is not governed by Incoterms 1990, and that is the transfer of property of goods.
Incoterms have been developed by the International Chamber of Commerce (ICC), The current valid version was published in 1990 and should be explicitly quoted as such in the contract (include the words:”Incoterms 1990”). There are 13 Incoterms in the 1990 version. The ICC is working on a new version which should be published in the year 2000, at the soonest.
Incoterms 1990 are used for the bulk of international trade in the world. However a parallel system of terms of delivery (using similar abbreviations to FOB, CIF etc.) Is used in the US. This American system does not give the same meaning to these abbreviations as Incoterms. It is for this reason that the exporters should specify the words Incoterms 1990 in referring to terms of delivery.
The 13 Incoterms currently in use are:
“E” – Terms
EXW – Ex Works: the seller makes the goods available at his premises.
“F” – Terms
FCA – Free Carrier: the seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road, and containerized / multi – modal transport.
FAS – Free Alongside ship: the seller must place the goods alongside the ship at the named port. The buyer must clear the goods for export. Suitable for maritime transport only.
FOB – Free On Board: the seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship’s rail. The seller must clear the goods for export. Maritime transport only.
“C” – Terms
CFR – Cost and Freight: 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. Maritime transport only.
CIF – Cost, Insurance and Freight: exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only.
CPT – Carriage Paid To: the general / containerized / multi modal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over the first carrier.
CIP – Carriage and Insurance Paid To: the containerized transport / multi modal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over the first carrier.
“D” – Terms
DAF – Delivered At Frontier: the seller makes the goods available, cleared for export, at the named place on the frontier. Suitable for rail / road transport.
DES – Delivered EX Ship: the seller makes the goods available to the buyer on board the ship at the port of destination, uncleared for import.
DEQ – Delivered Ex Quay: one step further than DES – the goods must be unloaded into the quay at the port of destination, and import clearance must be obtained by the seller.
DDU – Delivered Duty Unpaid: the seller must deliver the goods all the way to a named place in the country of destination. However, the buyer must clear the goods for import and pay the necessary duties.
DDP – Delivered Duty Paid: maximum obligation for the seller – seller pays for costs, charges, and official formalities up to destination.
reference:
TRADE
The Export Answer Book
reference:
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