INCO terms define the responsibilities of buyers and sellers in international commercial transactions. They specify which party is responsible for costs such as transportation, loading, unloading, insurance, and customs clearance and duties. The document then defines and explains 15 common INCO terms - EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU, and DDP - that specify the point and terms of delivery and the division of costs and risks between buyer and seller.
2. INCO terms are internationally accepted commercial terms
defining the respective roles of the buyer and seller in the
arrangement of transportation and other responsibilities.
EXW (+ the named place)
Ex Works – Ex means from, works means factory, warehouse,
which is seller’s premises. EXW applies to goods available only at
the seller’s premises. Buyer is responsible for loading the goods
on truck or container at the seller’s premises and for the
subsequent costs and risks. In practice, it is not uncommon that
the seller loads the goods on truck or container at the seller’s
premises without charging loading fee.
The term EXW is commonly used between the manufacturer
(seller) and the export trader (buyer). Some manufacturers may
use the term Ex factory which is same as Ex Works
3. FCA (+ Named point of departure)
Free Carrier – the delivery of goods on truck, rail car or container
at the specified point of departure, which is usually a named
railroad station or a named cargo terminal or into the custody of
the carrier, at seller’s expense, cleared for exports. Buyer
responsible for the main carriage / freight, cargo insurance and
other costs and risks.
FAS (+Named port of origin)
Free Alongside Ship – goods are placed in the dock shed or at the
side of the ship, within the reach of its loading equipment so that
they can be loaded aboard the ship, at seller’s expense. Buyer is
responsible for the loading fee, main carriage / freight, cargo
insurance and other costs and risks.
4. FOB (+Named port of origin)
Free On Board – the delivery of goods on board the vessel at the
named port of origin, at seller’s expense. Buyer is responsible for
the main carriage / freight, cargo insurance and other costs and
risks. Under the rules of INCO terms 1990 the term FOB is used
for ocean transport only. However, many still use it for air freight
also.
CFR (+Named port of destination)
Cost and Freight – the delivery of goods to the named port of
destination at the seller’s expense. Buyer is responsible for cargo
insurance and other costs and risks. This term also to be used for
ocean transport only. CFR was formerly written as C&F and many
still use it.
5. CIF (+Named port of destination)
Cost, Insurance and Freight – the cargo insurance and delivery of
goods to the named port of destination at the seller’s expense.
Buyer is responsible for import customs clearance and other costs
and risks. As per 1990 INCO terms this is applicable to ocean
freight only.
CPT (Named place of destination)
Carriage Paid To – the delivery of goods to the named place of
destination at seller’s expense. Buyer assumes the cargo
insurance, import customs clearance, payment of customs duties
and taxes, and other costs and risks.
Used for any mode of transportation.
6. CIP (+Named place of destination)
Carriage and Insurance Paid To – the delivery of goods and the
cargo insurance to the named place of destination at seller’s
expense. Buyer assumes import customs clearance, payment of
customs duties and taxes and other costs and risks.
Used for any mode of transportation.
DAF (+Named point at frontier)
Delivered At Frontier – Delivery of goods to the specified point at
the frontier at seller’s expense. Buyer is responsible for import
customs clearance, payment of customs duties and taxes and
other costs and risks.
Used for any mode of transportation
7. DES (+ Named port of destination)
Delivered Ex Ship – The delivery of goods on board at the named
port of destination, at seller’s expense. Buyer assumes the
unloading fee, import customs clearance, payment of customs
duties and taxes, cargo insurance and other costs and other costs
and risks.
DEQ (+ Named port of destination)
Delivered Ex Quay
The delivery of goods to the quay (the port) at destination at
seller’s expense. Seller is responsible for import customs
clearance and payment of customs duties and taxes at buyers
end. Buyer assumes cargo insurance and other costs and risks
Used for sea and inland waterway transportation
8. DDU (+ Named point of destination)
Delivered Duty Unpaid – The delivery of goods and the cargo
insurance to the final point at destination. Buyer assumes the
unloading fee, import customs clearance, payment of customs
duties and taxes.
Used for any mode of transportation
DDP (+ Named point of destination)
Delivered Duty Paid – the seller is responsible for most of the
expenses, which include the cargo insurance, import customs
clearance, and payment of customs duties and taxes at the
buyer’s end, and delivery of goods to the final point at destination.
Used for any mode of transportation