• Purpose

Are also referred to as Terms of Sale and are standardized trade definitions. Most commonly used in international contracts, thus reflected on the sales invoice. Ensure buyers and sellers understand each other's expectations and responsibilities. Were created by the ICC (International Chamber of Commerce, and are protected by ICC copyright. Are reviewed every 10 years and regularly updated to keep pace with the ever-changing world of international trade. Latest edition is the inco-terms 2000.

• Contract of Carriage

The Incoterm utilized in a transaction will dictate which party is responsible for each transportation segment and it's corresponding contract of carriage. The Incoterm that is utilized can affect the title passage in foreign trade.

As a general rule, Pre-Carriage, Main-Carriage and On-Carriage should be utilized in connection with the inco-terms.

• Contract of Carriage

Pre-Carriage: the transportation segment from the seller's location to the point where the cargo would leave from the seller's side. Example, to arrange for pre-carriage, you would contract with an inland carrier to make delivery to a port or airport.

Main-Carriage: the transportation segment from the seller's side to the buyer's side. Example, to arrange for main-carriage, you would contract for ocean or air carriage.

On-Carriage: the transportation segment from the point of arrival (on the buyer's side), to the designated ultimate receiver. Example, to arrange for on-carriage, you would contract with an inland carrier to make delivery from the port/airport of arrival to the ultimate receiver.

• EXW – Ex-Works or Ex-Warehouse

• Ex works is when the seller places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.).

• The seller does not need to load the goods on any collecting vehicle. Nor does it need to clear them for export, where such clearance is applicable.

• FCA – Free Carrier

• The seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place.

• The parties are well advised to specify as explicitly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

• FAS – Free Alongside Ship

• The seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.

• The risk of loss of or damage to the goods passes when the products are alongside the ship. The buyer bears all costs from that moment onwards.

• FOB – Free On Board

• The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.

• The risk of loss of or damage to the goods passes when the products are on board the vessel. The buyer bears all costs from that moment onwards.

• CFR – Cost and Freight

• The seller delivers the goods on board the vessel or procures the goods already so delivered.

• The risk of loss of or damage to the goods passes when the products are on board the vessel.

• The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

• CIF – Cost, Insurance and Freight

• The seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the products are on the ship.

• The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

• The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.

• The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

• CPT – Carriage Paid To

• The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such site is agreed between parties).

• The seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

• CIP – Carriage And Insurance Paid To

• The seller has the same responsibilities as CPT, but they also contract for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.

• The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

• DAP – Delivered At Place

• The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

• DPU – Delivered At Place Unloaded (replaces Incoterm® 2010 DAT)

• DPU replaces the former Incoterm® DAT (Delivered At Terminal). The seller delivers when the goods, once unloaded are placed at the disposal of the buyer at a named place of destination.

• The seller bears all risks involved in bringing the goods to, and unloading them at the named place of destination.

• DDP – Delivered Duty Paid

• The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.

• The seller bears all the costs and risks involved in bringing the goods to the place of destination. They must clear the products not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.