Incoterms 2020*

Standard Trade Definitions Used in International Freight Transactions

For those involved in international freight transactions, the following explanations of international standard trade definitions are useful in outlining the risks, obligations and costs of buyers and sellers.

The International Chamber of Commerce has released the table of contents to the Incoterms 2020, organised into two categories:

Incoterms for any Mode or Modes of Transport:

• EXW – Ex Works (insert named place of delivery)

• FCA – Free Carrier (insert named place of delivery)

• CPT – Carriage Paid to (insert named place of destination)

• CIP – Carriage and Insurance Paid To (insert named place of destination)

• DAP – Delivered at Place (insert named place of destination)

• DPU – Delivered at Place Unloaded (insert named place of destination)

• DDP – Delivered Duty Paid (insert named place of destination)

Incoterms for Sea and Inland Waterway Transport:

• FAS – Free Alongside Ship (insert named port of shipment)

• FOB – Free on Board (insert named port of shipment)

• CFR – Cost and Freight (insert named port of destination)

• CIF – Cost, Insurance and Freight (insert named port of destination)

The following is a summary of the text of rules for Incoterms 2020*.  The “place or port” of delivery or destination must be stated to ensure the conditions of the Incoterm are met.

EXW Ex Works    The buyer bears all costs and risks involved in taking the goods from the seller’s premises to the desired destination.  The seller’s obligation is to make the goods available at his premises or designated place (works, factory, warehouse).  This term represents the minimum obligation for the seller and  can be used across all modes of transport.

FCA Free Carrier    The seller’s obligation is to hand over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point.  If no precise point is indicated by the buyer, the seller may choose within the place or range stipulated where the carrier shall take the goods into his charge.  When the seller’s assistance is required in making the contract with the carrier the seller may act at the buyer’s risk and expense.  This term can be used across all modes of transport.

CPT Carriage Paid to  The seller pays the freight for the carriage of goods to the named destination.  The risk of loss or damage to the goods occurring after the delivery has been made to the carrier, is transferred from the seller to the buyer.  This term requires the seller to clear the goods for export and can be used across all modes of transport.

CIP Carriage Insurance Paid to   The seller has the same obligations as CPT but has the responsibility of obtaining insurance against the buyer’s risk of loss or damage of goods during the carriage.  This term requires the seller to clear the goods for export and can be used across all modes of transport.

DAP Delivered at Place  The seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.  Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer.  If the seller is responsible for clearing the goods, paying duties etc., consideration should be given to using the DDP term.

DPU Delivered Place Unloaded The seller delivers the goods to the buyer once the goods are unloaded from the arriving means of transport at the named place of destination. The buyer must arrange and pay for import clearance, and any duties and taxes.

DDP Delivered Duty Paid   The seller is responsible for delivering the goods to the named place in the country of importation, and covering all costs and risks in bringing the goods to import destination.  This includes duties, taxes and customs formalities.  This term may be used irrespective of the mode of transport.

FAS Free Alongside Ship    The seller must place the goods alongside the ship at the named port.  The seller must clear the goods for export.  Suitable only for maritime transport but NOT for multimodal sea transport in containers.  This term is typically used for heavy-lift or bulk cargo.

FOB Free on Board    The seller must load the goods on board the vessel nominated by the buyer.  The seller must clear the goods for export.  The term is applicable for maritime and inland waterway transport only but NOT for multimodal sea transport in containers.  

CFR Cost and Freight  The seller must pay the costs and freight required in bringing the goods to the named port of destination.  The risk of loss or damage is transferred from seller to buyer when the goods pass over the ship’s rail at the port.  The seller is required to clear the goods for export.  This term should only be used for sea or inland waterway transport.

CIF Cost, Insurance & Freight   The seller has the same obligations as under CFR as well as  providing insurance against the buyer’s risk of loss or damage to the goods during transit.  The seller is required to clear the goods for export.

Please contact Felton Global Logistics if you wish to discuss your Purchasing Terms

Ph 61 2 83538700

124 Cathedral Street Woolloomooloo NSW 2011 Australia