Source: adapted from International Chamber of Commerce.
Selected International Commercial Terms (Incoterms)
International Commercial Terms, or Incoterms, are pre-defined commercial terms that are used to define the transport component and the share of costs and risks for international commercial transactions. They provide a consistent framework of the expected transport service to be provided, which removes uncertainty and define legally enforceable responsibilities across international jurisdictions. The most common Incoterms are:
  • EXW (Ex Works). The buyer virtually takes care of all the transport responsibilities and the only obligation of the seller is to have the cargo available at an agreed upon time and premise (factory, distribution center). It often refers to the factory price since it excludes all costs related to transportation, such as insurance and duties.
  • FCA (Free Carrier). The seller's responsibility is simply to provide the cargo that has been cleared for export (duties paid) at a specific delivery point. This is common for intermodal transport.
  • FAS (Free Alongside Ship). Usually used for maritime bulk cargo where the seller provides the cargo at the dock, which is ready to be loaded on a ship. For instance, a grain seller would make available bulk grain at a dockside grain elevator and it would be the buyer's responsibility to charter a bulk cargo ship and load the cargo.
  • FOB (Free On Board). The seller provides, transports and loads the cargo on board a vessel, which is usually selected by the buyer. Common for bulk cargo.
  • CFR (Cost and Freight). The seller brings and unloads the cargo at a port of destination, but the buyer assumes the risk as soon as the cargo is loaded at the port of origin. The buyer has the responsibility of picking up the cargo.
  • CIF (Cost, Insurance and Freight). Same as above, but the seller also provides insurance for the cargo up to the port of destination. It usually applies to bulk cargo.
  • CIP (Carriage and Insurance Paid). Common in intermodal transport chains where the seller takes the complete responsibility of bringing the cargo to the point of destination (e.g. the door of a distribution center) as well as providing insurance. The buyer is responsible to unload the cargo at the point of destination.
Although for many transactions it is either the seller or the buyer responsibility to carry the cargo, this task is often attributed to a shipper or a third party logistics provider that will act on their behalf.