Incoterms® (the International Chamber of Commerce's official set of rules for interpreting national and international trade provisions) regulate buyers' and sellers' responsibilities for costs, risks, and freight insurance. It was established in 1936 by the International Chamber of Commerce (ICC) to regulate international trade in goods between companies.
Rules for any mode or modes of transport:
EXW: Ex Works The seller must only have the goods ready for collection. It's the buyer's job to load into the vehicle and handle the rest of the shipment.
FCA: Free Carrier In case of export, the seller is responsible for delivering the goods to the port (for maritime transport) or the cargo terminal (for air transport) and for carrying out export customs clearance. International shipping and importing to the destination country is the buyer's job.
In domestic transportation, it is sufficient for the seller to load the goods on the buyer's vehicle. It is the buyer's responsibility to organize the shipping.
CPT: Carriage Paid To The seller takes care of the organization of the shipping business and the paperwork required for export. However, the risk of loss, theft, or damage during transportation belongs to the buyer.
CIP: Carriage and Insurance Paid To The difference between CPT and CIP is that the seller bears the insurance costs for the cargo.
DAP: Delivered at Place This clause indicates that the buyer is responsible for paying customs clearance in the country of importation and the buyer's responsibility to arrange for unloading goods at the destination. The seller does everything else.
DPU: Delivered at Place Unloaded Here the seller handles the logistics of the movement of goods. All the buyer has to do is pay the customs fees and taxes.
DDP: Delivered Duty Paid The seller takes care of everything from import/export documents and fees for shipping and unloading. The buyer has no obligation until the goods are at their premises. Before the contract, it must be checked whether there is an obstacle for the seller to import.
Rules for sea and inland waterway transport:
FAS: Free Alongside Ship The seller must deliver the goods to the port, ready to be loaded on the ship, together with the export documents. The following process from here belongs to the buyer.
FOB: Free on Board Here the seller must ensure that the goods are loaded on the ship designated by the buyer. Goods are at risk of damage while in port, and when stored safely on board, the buyer is responsible for all risks.
CFR: Cost and Freight When the ship reaches its destination, it is the buyer's responsibility. The seller undertakes the sea transportation. The buyer ensures that customs fees are paid, the goods are unloaded at the port, the necessary documents are collected, and the goods reach the final destination.
CIF: Cost Insurance and Freight The main difference between CIF from CFR is that the seller must arrange insurance for the goods to cover all risks up to the destination port.