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John Kingsley 66 3 23
Incoterms Explained and Applied for Various mode of Transport
Incoterms 2017 EXW | FCA | FAS | FOB |

CFR | CIF | CPT | CIP | DAF | DES | DEQ |
DDU
Published on September 14, 2017
Incoterms (International Commercial Terms)
What are Incoterms?
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10/17/2017 (1) Incoterms 2017 EXW | FCA | FAS | FOB | CFR | CIF | CPT | CIP | DAF | DES | DEQ | DDU | LinkedIn
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THROUGHOUT THE YEARS, AS INTERNATIONAL COMMERCE WAS PROGRESSING,

THE NEED FOR COMMON CODES OF CONDUCT AND CONTRACT CREATED THE
INCOTERMS RULES.
Since 1923, the International Chamber of Commerce (ICC) has been publishing these
rules, creating the framework in which a deal is executed, and determining the
obligations, costs and risks between the seller and the buyer. Ever since then, one has to
search real hard to find a commercial invoice between two parties that doesn’t have
those distinct three letter codes that determine who is responsible for payment and risk
throughout the cargo’s journey from origin to destination.
The international chamber of commerce first published in 1936 a set of international

rules for the international rules for the interpretation of trade terms. These rules were
known as Incoterms 1936. Amendments and additions were later made as 1953, 1967,
1990 and 2000 to bring the standards in line with current international trade practices.
The Incoterms rules were amended with the eighth version— Incoterms 2010 having
been published on January 1, 2011. The ICC have begun consultations on a new
revision of Incoterms, to be called Incoterms 2020
The Incoterms rules focus on these two key aspects of the transaction:
Which party – buyer or seller – is responsible for arranging and paying for
transport (and associated activities such as loading or unloading), import and export
procedures, insuring the goods etc.?
At what point in the journey does responsibility for the consignment transfer from
seller to buyer? This becomes important if the goods are lost or damaged in transit
By agreeing to use an Incoterms rule, the buyer and seller achieve precision and clarity
in defining their obligations and responsibilities.
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agreement – there are important matters such as transfer of title and how the goods are
John
to be paid Kingsley
for, on which the Incoterms rules are silent. 66 3 23
When the parties have agreed on an Incoterms rule to govern the transaction, it is
incorporated into the commercial agreement by way of a reference such as the
following:
The following are the Incoterms
1)EXW ex-works
1. a) Carriage to be arranged by the buyer.
2. b) Risk transfer from the seller to the buyer when the goods are at the disposal of the
purchaser.
3. c) Cost of assignment from the vendor to the buyer when the goods are at the
disposal of the buyer.
2) FCA free carrier
1. a) Carriage has to arranged by the buyer or either by the seller on the behalf or the
buyer.
2. b) Risk transfer from the vendor to the buyer when the goods have been delivered to
the carrier at the named place.
3. c) Cost transfer from the seller to the buyer when the goods have been delivered to
the carrier at the named place.
3) FAS free alongside ship
1. a) Carriage to be arranged by the buyer.
2. b) Risk transfer from the seller to the buyer when the goods have been placed
alongside the ship.
3. c) Cost transfer from the vendor to the buyer when the goods have been placed
alongside the ship.
4) FOB free on board
1. a) Carriage to be arranged by the purchaser.
2. b) Risk transfer from the seller to the buyer when the goods pass the ship’s rail.
3. c) Cost transfer from the vendor to the buyer when the goods have been placed
alongside the ship.
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5) CFR cost and freight 1 Try Premium
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1. a) Carriage and insurance have to be arranged by the seller.

2. b) Risk transfer from the vendor to the buyer when the goods pass the ship’s rail.
3. c) Cost transfer at the port of destination buyer, paying such fees as are not for the
sellers account under the carriage contract.
6) CIF (COST insurance and freight)
3. c) Cost transfer at the port of destination buyer, paying such costs as are not for the
7) CPT – Carriage Paid to (duty paid)
2. c) Cost transfer at the port of destination buyer , paying such costs as are not for the
8) CIP Carriage and Insurance paid to
3. c) Cost transfer at the port of destination buyer, paying such costs as are not for the
9) DAF (Delivered at Frontier)
1. a) Carriage to be arranged by the seller.
2. b) Risk transfer from the seller to the buyer when the goods have been de;covered at
the frontier.
3. c) Cost transfer from the seller to the buyer when the goods have been delivered at
the frontier.
10) DES (Delivered ex-ship)
2. b) Risk transfer from the seller to the buyer when the goods are placed at the
disposal of the buyer on the board of the ship.
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11) DEQ (Delivered EX quay)
1. A) Carriage to be arranged by the seller.
3. c) Cost transfer from the seller to the buyer when the goods are placed at the
disposal of the buyer on board of the ship.
12) DDU (delivered duty unpaid)
3. c) Cost transfer from the seller to the buyer when the goods are placed at the
Incoterms Explained Pictorally
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Incoterms for any mode of transportation:
EXW Ex Works
FCA Free Carrier
CPT Carriage Paid To
CIP Cost, Insurance and Freight
DAT Delivered At Terminal
DAP Delivered At Place
DDP Delivered Duty Paid
Incoterms for sea and inland waterway transport:
FAS Free Alongside Ship
FOB Free On Board
CFR Cost and Freight
CIF Cost, Insurance and Freight
Within this article, we will focus on the terms most commonly used for ocean
transportation of containerized cargo.
Ex-Works or EXW
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In this arrangement, the buyer is in control. They are responsible for arranging
everything after picking up the goods from the seller’s location. Documentation, export
licenses, and local charges at origin are all paid by the buyer, as well as transportation
costs for the truck to move from origin to the port, the ocean freight, and all other
charges at destination. The seller is only responsible for packing and having the cargo
ready at the agreed location.
Free On-Board or FOB
Follow Write an articl
The seller is responsible to deliver the cargo at POL, clear customs, and load the goods
on board the vessel nominated by the buyer. Cost and risk are divided when the goods
are actually on board of the vessel (this rule is new!) The buyer is responsible for any
other cost until the delivery at destination. FOB is the most misused incoterm, since it
was never intended for combined inland and ocean transportation in containers (see
Incoterms 2010, ICC publication 715), but only inland waterway and maritime
transport. The correct rule should be FCA.
Cost and Freight or CFR
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The seller is responsible for all costs, including the freight up until the cargo reaches the
port of destination. The risk, however, is transferred to the buyer, once the cargo is
loaded onto the vessel (this rule is new!) The only cost not covered by the seller up until
POD is maritime insurance, which is the only difference with our next incoterm rule,
CIF.
Cost, Insurance and Freight or CIF
Messaging
As already mentioned, this is exactly the same as CFR, but maritime insurance is also
covered by the buyer.
INCOTERMS WERE CREATED SO THAT THERE ARE NO MISUNDERSTANDINGS

BETWEEN TRADERS ALL THE WORLD.
They are a universal language for global commerce that every party in the chain of
transport needs to speak. The buyer, the seller, the customs officer, the customs broker,
the freight forwarder, the carrier’s employees, the warehouse manager, and even the
trucker in many cases – just to name the most common ones.
For a very simple and precise alternate source - https://en.wikipedia.org/wiki/Incoterms
Image Sources used in this article : https://internationalcommercialterms.guru/ and

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3 Comments
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Heraldo Guillermo Gimenez 1w

Soluciones en Construcción Industrial y Refrigeración - Arcelor Mittal / Lanik / Ingelyt / ...
Good article, thanks!

Like Reply 1 Like
Alfredo Madriz Morales 2d

Materials Quality Engineer at Kimberly-Clark
really helpful article! Easy understanding for people who do not usually work with purchasing
terms.
Like Reply 1 Like
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John Kingsley
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10/17/2017 (1) Incoterms 2017 EXW | FCA | FAS | FOB | CFR | CIF | CPT | CIP | DAF | DES | DEQ

CIP | DAF | DES | DEQ | DDU | LinkedIn

Incoterms Explained and Applied for Various mode of Transport

Incoterms 2017 EXW | FCA | FAS | FOB |

Incoterms (International Commercial Terms)

What are Incoterms?

THROUGHOUT THE YEARS, AS INTERNATIONAL COMMERCE WAS PROGRESSING,

The international chamber of commerce first published in 1936 a set of international

The following are the Incoterms

1. a) Carriage to be arranged by the buyer.

2) FCA free carrier

3) FAS free alongside ship

1. a) Carriage to be arranged by the buyer.

4) FOB free on board

1. a) Carriage to be arranged by the purchaser.

1. a) Carriage and insurance have to be arranged by the seller.

6) CIF (COST insurance and freight)

1. a) Carriage and insurance have to be arranged by the seller.

7) CPT – Carriage Paid to (duty paid)

8) CIP Carriage and Insurance paid to

1. a) Carriage and insurance have to be arranged by the seller.

9) DAF (Delivered at Frontier)

1. a) Carriage to be arranged by the seller.

10) DES (Delivered ex-ship)

1. a) Carriage to be arranged by the seller.

11) DEQ (Delivered EX quay)

1. A) Carriage to be arranged by the seller.

12) DDU (delivered duty unpaid)

1. a) Carriage to be arranged by the seller.

Incoterms Explained Pictorally

Incoterms for any mode of transportation:

FCA Free Carrier

CPT Carriage Paid To

CIP Cost, Insurance and Freight

DAT Delivered At Terminal

DAP Delivered At Place

DDP Delivered Duty Paid

Incoterms for sea and inland waterway transport:

FAS Free Alongside Ship

FOB Free On Board

CFR Cost and Freight

CIF Cost, Insurance and Freight

Free On-Board or FOB

Follow Write an articl

Cost and Freight or CFR

Cost, Insurance and Freight or CIF

INCOTERMS WERE CREATED SO THAT THERE ARE NO MISUNDERSTANDINGS

For a very simple and precise alternate source - https://en.wikipedia.org/wiki/Incoterms

Image Sources used in this article : https://internationalcommercialterms.guru/ and

Show previous comments

Heraldo Guillermo Gimenez 1w

Good article, thanks!

Alfredo Madriz Morales 2d

More from John Kingsley See all 162 articles

Questions? Select Language

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