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INCOTERMS > DEFINITIONS
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INCOTERM DEFINITIONS
 
 
INCOTERMS are a set of rules for the interpretation of the most commonly used trade terms in international trade - International Commercial Terms. They were first published by the International Chamber of Commerce (ICC) in 1936 and since then have been updated in 1953, 1967, 1976, 1980, 1990 and the current revision 2000.
 
Parties to a contract are often unaware that there are different trading practices in their respective countries, for example FOB for an American company may have a different meaning to FOB for a UK trader. This can lead to misunderstanding and, in the worst scenario, costly litigation. INCOTERMS set out to avoid this problem by giving a set of standard rules that are recognised throughout the world.
 
The basic purpose of each INCOTERM is to clarify how functions, costs and risks are split between the buyer and seller in connection with the delivery of the goods as required by the sales contract. Delivery, risks and costs are known as the critical points. Each term clearly specifies the responsibilities of the seller and the buyer. The terms range from a situation in which everything is fundamentally the responsibility of the buyer to the other extreme where everything is fundamentally the responsibility of the seller.
 
INCOTERMS 2000 are internationally accepted commercial terms defining the respective roles of the buyer and seller in the arrangement of transportation and other responsibilities and clarify when the ownership of the merchandise takes place. They are used in conjunction with a sales agreement or other method of transacting the sale.
 
Recently the ICC changed basic aspects of the definitions of a number of INCOTERMS, buyers and sellers should be aware of this.
 
The thirteen INCOTERMS are split into four distinct groups:
  • Group E - where the goods are made available to the buyer at the seller's premises;
  • Group F - where the seller must deliver the goods to a carrier appointed by the buyer;
  • Group C - where the seller must contract for the carriage of the goods without assuming risk of loss of, or damage to the goods or additional costs due to events occurring after shipment;
  • Group D - where the seller has to bear all costs and risks required to bring the goods to the place of destination.

Group

Term

Stands For

E

EXW

Ex Works

F

FCA

Free Carrier

FAS

Free Alongside Ship

FOB

Free On Board

C

CFR

Cost and Freight

CIF

Cost, Insurance and Freight

CPT

Carriage Paid To

CIP

Carriage and Insurance Paid To

D

DAF

Delivered At Frontier

DES

Delivered Ex Ship

DEQ

Delivered Ex Quay

DDU

Delivery Duty Unpaid

DDP

Delivery Duty Paid

 Click the links below for detailed descriptions of each INCOTERM

EXW - Ex Works
FCA - Free Carrier
FAS - Free Alongside Ship
FOB - Free On Board
CFR - Cost and Freight
CIF - Cost, Insurance and Freight
CPT - Carriage Paid To
CIP - Carriage and Insurance Paid To
DAF - Delivered At Frontier
DES - Delivered Ex Ship
DEQ - Delivered Ex Quay
DDU - Delivery Duty Unpaid
DDP - Delivery Duty Paid
 

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