The language of trade deals: understanding Incoterms
Author: bmpc
Definitions of the most widely-used incoterms.
The prevailing set of commercial terms is called Incoterms 2000 .
Incoterms are standard trade definitions commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they establish the contractual obligations of the seller and the buyer under the price quotation and sales agreement. They distinguish when the responsibility or risk of the shipment transfers from the supplier to the buyer and what obligations each party is responsible for.
Incoterms are standard trade definitions commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they establish the contractual obligations of the seller and the buyer under the price quotation and sales agreement. They distinguish when the responsibility or risk of the shipment transfers from the supplier to the buyer and what obligations each party is responsible for.
The table below lists the most widely used terms.
|
Multimodal transport
|
Air
|
Ocean
|
Rail
|
|
EXW
FCA CPJ CIP DAF DDU DDP |
FCA
|
FAS
FOB CFR CIF DES DEQ |
FCA
|
Below are definitions most commonly used:
|
Term
|
Definition
|
Risk
|
Cost
|
|
EXW
Ex Works |
Buyer arranges for pick up of goods at the seller's location. Seller is responsible for packing, labeling, and preparing goods for shipment on a specified date or time frame.
|
Buyer assumes all risk.
|
Buyer pays all transportation costs.
|
|
FCA
Free Carrier |
Seller is responsible for costs until the buyer's named freight carrier takes charge.
|
Seller and buyer
|
Split evenly
|
|
FAS
Free Alongside Ship (over water only) |
Buyer arranges for ocean transport. Seller is responsible for packing, labeling, preparing goods for shipment and delivering the goods to the dock.
|
Seller: until the goods reach the dock.
Buyer: from dock to destination. |
Buyer pays all ocean transport costs. Selleris responsible for costs associated with transporting the goods to the dock.
|
|
FOB
Free On Board (over water only) |
Seller arranges for ocean transport of the goods, preparing goods for shipment, and loading the goods onto the vessel.
|
Buyer: once the items are on board.
|
Seller pays wharfage (charges to load the goods onto the ship) and freight forwarder fees.
|
|
CFR
Cost and Freight (over water only) |
Seller has the same responsibilities as when shipping FOB, but shipping costs are prepaid by the seller.
|
Seller assumes risk until the shipment reaches the overseas dock.
|
Seller pays costs of freight fees up to destination.
|
|
CIF
Cost, Insurance, and Freight (over water only) |
Seller has the same responsibilities as when shipping CFR with the addition of including a marine insurance policy.
|
Seller assumes risk until the shipment reaches the overseas dock.
|
Seller pays insurance and freight forwarder fees.
|
To see a diagram of the transfer of obligation from Seller to Buyer, click here
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Related Comments
Re: Re: Re: The language of trade deals: understanding Incoterms
by tennmex on 25 Aug 2006 07:26
Replying to [Rizzob]:
Thank you!!!
Re: The language of trade deals: understanding Incoterms
by pirakas on 15 Sep 2006 01:18
Replying to [bmpc]:good info for business
Re: The language of trade deals: understanding Incoterms
by Deepali on 10 Nov 2006 23:26
Replying to [bmpc]:Very good information. Nice efforts , Keep it up.![[em19]](http://img.alibaba.com/images/eng/style/icon/emoticons_great.gif){kind=icon}
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