Incoterms are standard trade terms published by the International Chamber of Commerce. The current edition is Incoterms 2020. A quotation that states an Incoterm and a named place tells you which costs are included and where responsibility for the goods passes from seller to buyer.
The terms you are most likely to see
| Term | Meaning | Who arranges main carriage |
|---|---|---|
| EXW (Ex Works) | Goods are made available at the seller's premises. The buyer handles loading, export clearance and all transport. | Buyer |
| FOB (Free On Board) | Seller delivers the goods on board the vessel at the named port of shipment. Sea and inland waterway only. | Buyer |
| CFR (Cost and Freight) | Seller pays sea freight to the named destination port. Risk passes when goods are loaded at origin. | Seller |
| CIF (Cost, Insurance and Freight) | As CFR, and the seller also buys minimum insurance cover for the buyer. | Seller |
| DAP (Delivered at Place) | Seller delivers to the named place, ready for unloading. Buyer handles import clearance and duties. | Seller |
| DDP (Delivered Duty Paid) | Seller delivers to the named place and pays import duties and taxes. | Seller |
Points to watch
- Under CFR and CIF, risk passes at the port of origin even though the seller pays the freight. Check your insurance.
- FOB, CFR and CIF are intended for goods loaded directly onto a ship. Containerised cargo is often better quoted on FCA, CPT or CIP terms.
- Always compare quotations on the same Incoterm and named place, for example CIF Durban, so the costs line up.
- Import duty, VAT and clearance charges are usually outside CFR and CIF prices. Ask for them separately.