SAMPLE INCOTERMS: INTERNATIONAL COMMERCIAL TERMS

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1 INCOTERMS: INTERNATIONAL COMMERCIAL TERMS Incoterms are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contract. Incoterms are published by the International Chamber of Commerce and are widely used in international trade. Some of the widely used terms are: i. EXW - Ex-Works ii. FCA - Free Carrier iii. FAS - Free Along Ship iv. FOB - Free on Board v. CFR - Cost and Freight vi. CIF - Cost, Insurance and Freight vii. CPT - Carriage Paid To viii. CIP - Carriage and Insurance Paid to ix. DDP - Delivered Duty Paid x. DAF - Delivered at Frontier xi. DDU - Delivered Duty Unpaid xii. DEQ - Delivered Ex-Quay xiii. DAT - Delivered At Terminal xiv. DES - Delivered Ex-Ship xv. DAP - Delivered At Place

2 DEFINITIONS: 1. EXW: Ex-Works. Goods available from the place of production and clearly specify the place. This means that the seller will make available the goods from a specified place and that the buyer will have to bear all costs thereafter. It does not include local transport to the port, shipping, loading, freight and insurance, and any other costs thereof. All the risks lie with the buyer. 2. FCA: Free Carrier. The seller is responsible to put the cargo on the first carrier at a specific place after all clearances for export. FCA is also known as the named place-delivery. The buyer assumes all responsibilities and risk, once the cargo is onboard a carrier. 3. FAS: Free Along Ship. The seller has to bring the goods on the dock/quay close enough for the ship to collect same. The seller is responsible for all; clearances, approvals and permits for the export of the goods. The buyer will take charge from the docks. 4. FOB: Free on Board. This is a hybrid, where the seller is obliged to bring the cargo all the way to the port, clear the goods for export and ensure that they are loaded onto the nominated ship by the buyer. There after the buyer assumes all risk. 5. CFR: Cost and Freight Also known as C&F or CNF. The seller takes the risk and costs (excluding cost of insurance) of bring the goods to a designated port of destination.

3 6. CIF: Cost Insurance and Freight The seller covers all the costs of bringing the cargo to the port of destination. The buyer has no liability up to the goods reaching his port. 7. CPT: Carriage Paid To The seller assumes most of the cost of transportation of the goods including export fees, carriage charges, and fees at the port of destination. Although the seller pays all the costs, including insurance, his liability ends the moment the goods are loaded on the vessel. 8. CIP: Carriage and Insurance Paid Very similar to CPT, except that the seller has to buy insurance cover for the goods during the carriage. 9. DDP: Delivered Duty Paid The seller is to cover all the costs of carriage, insurance as well as the costs of all duties applicable on the products and including local transport on country of destination. 10. DAF: Delivered at Frontier Seller is to deliver the goods at the frontier/border of the country of destination. The buyer is responsible for local carriage and for paying duties. 11. DDU: Delivered Duty Unpaid The seller covers for the goods to reach the place of destination. However the buyer pays for the customs duties. 12. DEQ: Delivered ex-quay The seller delivers the goods at the designated quay and bears all the costs thereof, including the off-loading from the vessel. The buyer takes delivery on the quay and meets the costs thereon.

4 13. DAT: Delivered at Terminal Seller delivers the goods at the designated terminal, thereafter the buyer takes responsibility. 14. DES: Delivered ex-ship Seller has the obligations to deliver the cargo onboard the nominated vessel by the buyer. 15. DAP: Delivered at Place This is a door-to-door service, where the seller has to assume all costs and risks until the delivery of goods to the nominated place of the buyer (warehouse, shop, residence). NOTE: The incoterm defines the responsibilities of the two parties engaged in an export business.

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