Salihiya Cargo & Shipping Agency
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1.EXW Incoterms – Ex Works (named place of delivery)
This simple arrangement places the onus on the buyer to carry out the whole shipping process. The seller just makes the goods available at his factory or warehouse at the agreed date: if he physically loads them it is at the other party’s risk, unless specific wording is added to the contract to vary this term.
The buyer is responsible for loading, transportation, clearance and unloading.
‘Ex Works’ is also the typical basis of making initial quotations when the actual shipping costs at a given time are not known.
The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination.
2.FCA Incoterms – Free Carrier (named place of delivery)
The seller hands over the goods, cleared for export, to the first carrier with whom he has made the arrangements (even if that carrier has been chosen by the buyer). The buyer normally pays for carriage to the port of import, and risk passes to him when the goods are handed over to the first carrier, even though ‘delivery’ may not take place until the destination. The buyer also pays for insurance.
3.CPT Incoterms – Carriage Paid To (named place of destination)
The seller pays for carriage. The risk passes to the buyer when the goods are handed to the first carrier at the place of Importation. The seller also has to pay for cargo insurance, in the name of the buyer, when goods are in transit.
4.CIP Incoterms – Carriage and Insurance Paid to (named place of destination)
This is commonly used in road/rail or road/sea container shipments and is the multimodal equivalent of CIF. The seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the freight forwarder, who in practice supplies the insurance element.
5.DAT Incoterms – Delivered at Terminal (named terminal at port or place of destination)
In this system (new in Incoterms 2010) the seller pays for carriage to the arrival terminal, (excluding import clearance). Up to the point that goods are unloaded at the terminal, the risk remains with the seller.
6.DAP Incoterms – Delivered at Place (named place of destination)
Also new in Incoterms 2010, this is identical to DAT, except that the seller remains responsible for cost and risk (exc. import clearance) right up to the point that the goods are ready for unloading by buyer at his chosen destination.
7.DDP Incoterms – Delivered Duty Paid (named place of destination)
This is the polar opposite to EXW: here the seller assumes all costs, risks and obligations, including import duties, taxes, clearance fees etc., right up to the destination point, where the buyer is then responsible for unloading the shipment.
(You may also come across the unofficial phrase “Free In Store” – FIS – for this term).
Section B – Sea and inland waterway transport only
8.FAS Incoterms – Free Alongside Ship (named port of shipment)
This is revised in Incoterms 2010, where now the seller or, more typically, his shipper/freight forwarder, must clear the goods for export.
Note that this is not a multimodal term, but is used for heavy and bulk cargoes.
The seller’s forwarder puts the goods alongside the ship. It that point delivery is made: and thereafter the buyer’s forwarder is responsible for transport and insurance, at the buyer’s risk and cost.
9.FOB Incoterms – Free on Board (named port of shipment)
Be wary of the misleading nature of this common phrase and how it is often misused. It is to be used only for exclusively water transportation. Do not use it for road/rail/sea multimodal container transportation – use FCA instead.
In FOB, the seller clears the goods for export and loads the goods on the vessel and at the port that have been nominated by the buyer.
New for Incoterms 2010 is that cost and risk are divided when the goods are actually on board: but delivery occurs when the goods are on board ship.
10.CFR Incoterms – Cost and Freight (named port of destination)
Under this arrangement (previously known as C&F) the seller must pay the costs and freight to get the goods to their destination port, at which point delivery is achieved (but it is not the seller’s job to clear them through customs).
Actual risk passes to the buyer once the goods are loaded on the ship. Note that insurance for the goods is the responsibility of the buyer.
11.CIF Incoterms – Cost, Insurance and Freight (named port of destination)
CIF is a very common format and it is identical to CFR: the only difference is that the seller also pays to insure the merchandise.