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The 13 Incoterms - FAQs about the basics

Why Incoterms?
Incoterms are international rules that are accepted by governments, legal authorities and practitioners
worldwide for the interpretation of the most commonly used terms in international trade. They either
reduce or remove altogether uncertainties arising from differing interpretations of such terms in different

What do they cover?
The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the
contract of sale with respect to the delivery of goods sold, but excluding "intangibles" like computer

What are the 13 Incoterms?
Each Incoterm is referred to by a three-letter abbreviation. Here is a complete list, with the meanings
spelled out. Click on any of the 13 terms listed below and read a concise definition from the Preambles to
Incoterms 2000. Several of the Preambles, marked below with an *, include a footnote referring to the
Introduction. Click anywhere on those pages to view the relevant part of the Introduction.

EXW EX WORKS (named place)*

FCA FREE CARRIER (named place)

FAS FREE ALONGSIDE SHIP (named port of shipment)*

FOB FREE ON BOARD (named port of shipment)

CFR COST AND FREIGHT (named port of destination)

CIF COST, INSURANCE AND FREIGHT (named port of destination)*

CPT CARRIAGE PAID TO (named place of destination)

CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)*


DES DELIVERED EX SHIP (named port of destination)

DEQ DELIVERED EX QUAY (named port of destination)*

DDU DELIVERED DUTY UNPAID (named place of destination)*

DDP DELIVERED DUTY PAID (named place of destination)*

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What does it take to use Incoterms correctly?
ICC recommends that "Incoterms 2000" be referred to specifically whenever the terms are used, together
with a location. For example, the term "Delivered at Frontier (DAF)" should always be accompanied by a
reference to an exact place and the frontier to which delivery is to be made. To prevent
misunderstandings, variations of the three-letter Incoterms should be strictly avoided.

which required the buyer to arrange for export clearance. Increased use of FCA (Free Carrier) prompted ICC to simplify delivery obligations under this term. The respective obligations of both parties have been grouped under up to 10 headings where each heading on the seller's side "mirrors" the equivalent position of the buyer. Can you name some main innovations in Incoterms 2000? They take account of international traders' growing reliance on intermodal transport. • Under the "E"-term (EXW). DEQ.Here are three examples of correct use of Incoterms: FCA Kuala Lumpur Incoterms 2000 FOB Liverpool Incoterms 2000 DDU Frankfurt Schmidt GmbH Warehouse 4 Incoterms 2000 Why do Incoterms need revising periodically? The main reason is the need to adapt Incoterms to contemporary commercial practice. duties. FAS and FOB). Examples are: Delivery. like its immediate predecessor. the seller only makes the goods available to the buyer at the seller's own premises. All terms list the Seller's and the Buyer's obligations. the seller has to bear all costs and risks needed to bring the goods to the place of destination. the seller has to contract for carriage. Division of costs. • Under the "C"-terms (CFR. DES. CPT and CIP). This is a reversal from previous Incoterms versions. • Under the "D"-terms (DAF. This is a reversal from previous Incoterms versions. I keep reading about "E"-terms and "C"-terms. For instance. which required the seller to arrange for import clearance. the seller is called upon to deliver the goods to a carrier appointed by the buyer. Transfer of risks. taxes and other charges upon import. • Under the "F"-terms (FCA. DDU and DDP). groups the terms in four categories denoted by the first letter in the three-letter abbreviation. A further advantage of the new Incoterms is that they clearly allocate the loading and unloading requirements of both buyer and seller. What does that mean? Incoterms 2000. It is the only one of that category. . This layout helps the user to compare the parties' respective obligations under each Incoterm. the clauses dealing with the seller's obligation to provide proof of delivery allowed paper documentation to be replaced by e-mail for t hat purpose for the first time. in the 1990 version. CIF. but without assuming the risk of loss or damage to the goods or additional costs due to events occurring after shipment or dispatch. Two other changes are worth mentioning: Under FAS (FREE ALONGSIDE SHIP) the seller is required to clear the goods for export. Under DEQ (DELIVERED EX QUAY) the buyer is required to clear the goods for import and to pay for all formalities.