INCOTERMS FOR ANY MODE OF TRANSPORT

EXW – Ex Works
Under the EXW term, the seller is responsible for making the goods available at its
premises. The parties can also agree on another named place such as factory, office or
warehouse. At this point, the buyer gains ownership of the goods. Then, he handles all
costs and risk after the products are collected.
EXW is most favourable to the seller. He has no obligation to load the goods or to cover
freight costs once the goods have left the premises. This term can cause complications
for the buyer if products are for export.

FCA – Free Carrier

With FCA, the seller is responsible for delivering the goods to the buyer’s nominated
premises. He needs to load the stocks onto the buyer’s transportation. Then, the seller
organises the shipping, including export clearance and meeting security requirements.
The risk is transferred once the goods are loaded onto the buyer’s transportation. Thus,
any damage to the products when on board the vessel is the responsibility of the buyer.
The buyer pays the cost of freight, bill of lading fees and insurance. Also, he pays for
unloading and transportation costs to the final destination.
FCA is the term that has been most significantly changed under the Incoterms 2020
rules. Previously, the use of a transport intermediary meant the seller was unable to
obtain a bill of lading with onboard notation. The reason was that he did not present the
goods directly to the international shipper. Without the BL, the transacting bank would
not authorise payment to the seller. Under the new Incoterms 2020, FCA resolves this
problem. The buyer should instruct the carrier to issue a bill of lading with the onboard
notation to the seller. The parties specify this notation on the sale contract.

CPT – Carriage Paid To

CPT goes beyond FCA by specifying that the seller bears the costs of transportation to
the buyer’s place of destination. The seller clears the goods for export and delivers
them to the carrier or another person stipulated by the seller.
At the defined place of shipment is where the risk is transferred to the buyer. The seller
is responsible for the transportation costs associated with delivering goods. However,
he is not responsible for procuring insurance.
If the buyer requires the seller to obtain insurance, the parties should consider the
Incoterm CIP instead.

CIP – Carriage and Insurance Paid To

CIP is broadly similar to CPT. However, the seller is required to insure the goods in
transit and to pay the transportation itself.
The seller clears the goods for export and delivers them to the carrier or another person
stipulated by the seller. The seller is responsible for the transportation costs of the items
to the designated place of destination.
The risk is transferred to the buyer at the defined place of shipment.
In one of the most significant changes under Incoterms 2020, CIP requires the seller to
purchase a higher level of insurance. This level of coverage is appropriate for
containerised goods: 110% of the contract value under Institute Cargo Clauses (A) of
the Institute of London Underwriters. Previously the minimum insurance was applicable
under Institute Cargo Clauses (C).

DPU – Delivered at Place Unloaded

It was previously known as Delivered at Terminal (DAT). It has been renamed because
the buyer (or seller) may want to specify the delivery location rather than the terminal.
This term is often used for consolidated containers with multiple consignees. It is the
only term that tasks the seller with unloading the goods.
The seller covers all the costs of transportation (export fees and carriage). Also, at the
destination port, the seller pays the unloading from the carrier and the port charges. He
assumes all risks until arrival at the destination port or terminal.
The buyer is responsible for all costs and risks after unloading. It includes import duties,
taxes and customs clearance. Also, the buyer pays local transportation to the final
named place of destination.
If the seller is not able to organise unloading, he should consider shipping under DAP
terms instead.

DAP – Delivered At Place

The seller delivers the goods to a named place of destination but is not responsible for
unloading. His responsibilities include packing, export clearance, carriage expenses and
any terminal costs up to the agreed destination port.
DAP means the buyer is responsible for all costs, duties and taxes associated with
unloading the goods. He is also responsible for clearing customs to import the products
into the named country of destination.
The risk is transferred to the buyer at the final designated place of destination.

DDP – Delivered Duty Paid

DDP means the seller bears all risks and costs associated with clearing and delivering
the goods to the designated place.
The seller is liable for clearing the goods through customs in the buyer’s country. It
includes payment of both duties and taxes. Furthermore, he needs to obtain the
necessary authorisations and registrations from the authorities. However, the seller is
not responsible for unloading.
This term places the maximum obligations on the seller and minimum obligations on the
buyer. The buyer bears no risk or responsibility until the goods are at the final agreed
place.
Unless the seller has a profound understanding of the rules and regulations in the
buyer’s country, DDP terms can be a considerable risk both in terms of delays and in
unforeseen extra costs. Hence, DDP should be used with caution.

What rules apply for sea and inland waterway

transport?
The following four rules of international trade are for transportation of goods entirely by
sea or inland waterway.
Usually, the risk and responsibility are transferred when the goods are on board (apart
from FAS). As the condition of the items must be verified at this point, these terms are
only suitable for non-containerised goods, such as commodities.
Note: in previous editions of Incoterms, the risk passed between the seller and the
buyer at the point where the goods crossed the ship’s rail.

FAS – Free Alongside Ship

The seller delivers the goods alongside the buyer’s vessel at the named port of
shipment. It means that the buyer bears all costs and risks of loss or damage from that
moment.
The FAS term requires the seller to clear the goods for export (under previous
Incoterms, the buyer arranged export clearance).

FOB – Free On Board

Under FOB terms, the seller bears costs and risks until the goods are loaded on board
of the designated vessel.
The seller’s responsibility includes arranging export clearance. At the same time, the
buyer pays the cost of marine freight, bill of lading fees and insurance. He is also
responsible for unloading and local transportation costs from the port of arrival to the
final destination.
Any damage to the goods when on board the vessel is the responsibility of the buyer.
Since Incoterm FCA was introduced in 1980, FOB should be used only for non-
containerised sea freight and inland waterway transport.
However, FOB continues to be the most commonly – and incorrectly – term used for all
modes of transportation. Despite the contractual risk that can result (which include the
difficulty of checking goods if they are enclosed in a container).

CFR – Cost and Freight

CFR incurs more significant risk and responsibility for the seller who pays for the
carriage of the goods up to the named port of destination.
The risk is transferred to the buyer at the country of export. Specifically, when the goods
have been loaded on board the ship.
The shipper pays for export clearance and freight costs to the selected port.
Furthermore, he is responsible for any damage to the goods on board the ship until the
port of final destination.
The buyer pays for local delivery from the port to the final destination and is responsible
for purchasing insurance. If the buyer requires the seller to obtain insurance, the parties
should consider the Incoterm CIF instead.
CFR should only be used for non-containerised sea freight and inland waterway
transport. For all other modes of transportation – and for containerised goods – it should
be replaced with CPT, as specified in a critical change in Incoterms 2020.

CIF – Cost, Insurance & Freight

The seller clears the goods for export and delivers them when they are on board at the
port of shipment. The seller bears the cost of freight and insurance to the designated
port of destination. Also, he is responsible for any damage to the goods on board the
ship.
The seller needs to purchase the minimum level of insurance under Clause C of the
Institute Cargo Clauses. (This requirement is unchanged from Incoterms 2010.)
At the port of arrival, the seller must turn over three key documents – invoice, insurance
policy and bill of lading. Those documents represent the cost, insurance and freight of
CIF.
This Incoterm is similar to CFR. However, the seller needs to obtain insurance while the
goods are in transit.