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The 13 Incoterms are international rules that are accepted by governments, legal authorities, shipping agents etc. throughout much of the world for the interpretation of commonly used terms in foreign trade. Thus, the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced.
Although this page gives a brief description of each, you should not rely on this description in a contract. Full definitions can be obtained from the International Chamber of Commerce website.
There are 4 groups of terms; namely E, F, C, and D terms.
Group E. Under Group E terms The seller minimises their risk by only making the goods available at his own premises.
EXW - Ex Works. Loading of the goods and carriage is arranged by the buyer. Risk transfers from the seller to the buyer when the goods are at the disposal of the buyer.
Group F. Under Group F terms, and under FCA Unless otherwise agreed, the seller arranges and pays for the pre-carriage in the country of export.
FCA - Free Carrier. Carriage is arranged by the buyer or by the seller on the buyer's behalf. Risk transfers from the seller to the buyer when the goods have been delivered to the carrier at the named place.
FAS - Free Alongside Ship. Carriage to be arranged by the buyer. Risk transfers from the seller to the buyer when the goods have been placed alongside the ship.
FOB - Free On Board. Carriage to be arranged by the buyer. Risk transfers from the seller to the buyer when the goods pass the ship's rail.
Group C. Under Group C terms the seller arranges and pays for the main carriage but without assuming the risk of the main carriage.
CFR - Cost And Freight. Carriage arranged by seller. Risk transfers from the seller to the buyer when the goods pass the ship's rail.
CIF - Cost, Insurance and Freight. Carriage and Insurance to be arranged by seller. Risk transfers from the seller to the buyer when the goods pass the ship's rail.
CPT - Carriage Paid To. Carriage arranged by seller. Risk transfers from the seller to the buyer when the goods have been delivered to the carrier.
CIP - Carriage and Insurance Paid to. Carriage and Insurance to be arranged by seller. Risk transfers from the seller to the buyer when the goods have been delivered to the carrier.
Group D. Under Group D terms the seller's cost and risk is maximised because they must make the goods available on arrival at the agreed destination.
DAF - Delivered At Frontier. Carriage to be arranged by the seller. Risk transfers from the seller to the buyer when the goods have been delivered at the frontier.
DES - Delivered Ex Ship. Carriage to be arranged by the seller. Risk transfers from the seller to the buyer when the goods are placed at the disposal of the buyer on board the ship.
DEQ - Delivered Ex Quay. Carriage to be arranged by the seller. Risk transfers from the seller to the buyer when the goods are placed at the disposal of the buyer on the quay.
DDU - Delivered Duty Unpaid. Carriage to be arranged by the seller. Risk transfers from the seller to the buyer when the goods are placed at the disposal of the buyer.
DDP - Delivered Durty Paid. Carriage to be arranged by the seller. Risk transfers from the seller to the buyer when the goods are placed at the disposal of the buyer.
Note: to avoid any confusion, an IncoTerm must be accompanied by a "named place"e.g. FOB "Aberdeen", EXW "Birmingham".
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