Incoterms

Every international contract will contain what is referred to as an Incoterm (international commercial term). The Incoterm selected by the parties to the transaction will determine which party pays the cost of each segment of transport, who is responsible for loading & unloading of goods, and who bears the risk of loss at any given point during a given international shipment. Incoterms also influence Customs valuation basis of imported merchandise. Incoterms are overseen and administered by the International Chamber of Commerce in Paris and are adhered to by the major trading nations of the world. There are currently 13 Incoterms in use as follows.

Ex works – costs and risks to be accepted ex factory EXW
Free Carrier (named point) FCA
Free alongside ship FAS
Free on board FOB
Carriage and Insurance paid to CIP
Cost, insurance and freight CIF
Carriage paid to CPT
Cost and freight CFR
Delivered Duty Paid DDP
Delivered duty unpaid DDU
Delivered at frontier DAF
Delivered ex. quay DEQ
Delivered ex. ship DES
EXW
The seller makes the goods available at his premises. The buyer is responsible for all charges.
FCA
The seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road, and containerized / multi-modal transport.
FAS
The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export; this changed in the 2000 version of the Incoterms. Suitable for maritime transport only.
FOB
The seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship’s rail. The seller must clear the goods for export. Maritime transport only.
CIP
The containerised transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.
CIF
Seller must pay the costs insurance and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship’s rail. Maritime transport only
CPT
The general/containerised/multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier.
CFR
Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship’s rail. Maritime transport only.
DDP
the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term “Free Domicile”.
DDU
the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale.
DAF
This term can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier.
DEQ
the seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (wharf) at the named port of destination. The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharging the goods on the quay (wharf).The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import.
DES
Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals and where the seller either owns or has chartered, their own vessel.