International Commercial Terms (Incoterms) also known as freight terms issued and published by the International Chamber of Commerce (ICC) are globally used mercantile terms for import and export trades.

Freight terms were first published in 1936. With periodic updates, the ninth version of Incoterms rules is being followed right now which was published on 1st January 2020.

These terms are widely used for international trading. The main purpose behind the creation of these terms is to ensure smooth communication throughout the trading and transport process. Freight terms are accepted by the governments, legal authorities, associations and are used to reduce uncertainties emerging from different rules of variegated countries.

The latest version of Freight terms are listed below:

If you are in the shipment business, you need to have a good understanding of these freight terms to ensure that your transport, shipment, loading, delivery, etc are not facing any complexities. Here is a list of some important freight terms:

EXW – Ex Works (named place of delivery)

This term represents the commitment of the buyer and puts less burden on the seller. EXW signifies that the buyer carries all the risk till the product reaches its final destination. The seller does not take the responsibility of loading the product and clearing it for export. If the seller agrees to bear the risk and responsibility of the shipment, it needs to be explicitly mentioned in the contract.

FCA – Free Carrier (named place of delivery)

The seller delivers the goods by carrier or to a third party recommended by the buyer, but the product has to be delivered at a named place (which can also be the seller’s site). The seller is also responsible for the product to be delivered to the buyer’s carrier if the delivery happens at the buyer’s premises or any other which are owned by the buyer.

CPT – Carriage Paid To (named place of destination)

Cost and Freight are replaced in the CPT scenario. The seller is obliged to pay for export clearance and the freight cost of the product until it reaches the named destination point. After that, the risk of the product is transferred to the buyer.

CIP – Carriage and Insurance Paid to (named place of destination)

This term is similar to the above-mentioned (CPT) term, but it follows an exception. In this case, the seller needs to acquire insurance while transporting the goods. All modes of transport can use CIP.

DAT – Delivered At Terminal (named terminal at port or place of destination)

This freight term requires the seller to unload the product at the named terminus. The landing point can be an airport, port, or an inland freight exchange with the condition of the facility being capable of receiving the shipment. Payment of charges like import duty, customs, taxes is the buyer’s responsibility.

DAP – Delivered At Place (named place of destination)

The 2010 Incoterms elucidates the term DAP as “Delivered at Place”. It means that the risk of the product transport is transferred to the buyer from the seller when the destined delivery place is mentioned in the contract.

FAS – Free Alongside Ship (named port of shipment)

This Incoterm states that the buyer is going to take all the responsibility of the product, except that of export clearance. The seller is only responsible for exporting the goods. If the buyer wants to transfer this responsibility, it needs to be explicitly mentioned in the contract of both litigants.

FOB – Free on Board (named port of shipment)

FOB suggests that the seller is responsible for the product until it reaches the vessel. Maritime freight transportation, insurance, bill of loading, unloading, transportation cost, etc. are the responsibility of the buyer.

There are lots of freight terms one needs to grasp for a systematic execution transportation business. Thus, it is necessary to possess a fine knowledge of Incoterms. Click here for more information on more such freight terms.

International Commercial Terms (Incoterms) also known as freight terms issued and published by the International Chamber of Commerce (ICC) are globally used mercantile terms for import and export trades.

Freight terms were first published in 1936. With periodic updates, the ninth version of Incoterms rules is being followed right now which was published on 1st January 2020.

These terms are widely used for international trading. The main purpose behind the creation of these terms is to ensure smooth communication throughout the trading and transport process. Freight terms are accepted by the governments, legal authorities, associations and are used to reduce uncertainties emerging from different rules of variegated countries.

The latest version of Freight terms are listed below:

If you are in the shipment business, you need to have a good understanding of these freight terms to ensure that your transport, shipment, loading, delivery, etc are not facing any complexities. Here is a list of some important freight terms:

EXW – Ex Works (named place of delivery)

This term represents the commitment of the buyer and puts less burden on the seller. EXW signifies that the buyer carries all the risk till the product reaches its final destination. The seller does not take the responsibility of loading the product and clearing it for export. If the seller agrees to bear the risk and responsibility of the shipment, it needs to be explicitly mentioned in the contract.

FCA – Free Carrier (named place of delivery)

The seller delivers the goods by carrier or to a third party recommended by the buyer, but the product has to be delivered at a named place (which can also be the seller’s site). The seller is also responsible for the product to be delivered to the buyer’s carrier if the delivery happens at the buyer’s premises or any other which are owned by the buyer.

CPT – Carriage Paid To (named place of destination)

Cost and Freight are replaced in the CPT scenario. The seller is obliged to pay for export clearance and the freight cost of the product until it reaches the named destination point. After that, the risk of the product is transferred to the buyer.

CIP – Carriage and Insurance Paid to (named place of destination)

This term is similar to the above-mentioned (CPT) term, but it follows an exception. In this case, the seller needs to acquire insurance while transporting the goods. All modes of transport can use CIP.

DAT – Delivered At Terminal (named terminal at port or place of destination)

This freight term requires the seller to unload the product at the named terminus. The landing point can be an airport, port, or an inland freight exchange with the condition of the facility being capable of receiving the shipment. Payment of charges like import duty, customs, taxes is the buyer’s responsibility.

DAP – Delivered At Place (named place of destination)

The 2010 Incoterms elucidates the term DAP as “Delivered at Place”. It means that the risk of the product transport is transferred to the buyer from the seller when the destined delivery place is mentioned in the contract.

FAS – Free Alongside Ship (named port of shipment)

This Incoterm states that the buyer is going to take all the responsibility of the product, except that of export clearance. The seller is only responsible for exporting the goods. If the buyer wants to transfer this responsibility, it needs to be explicitly mentioned in the contract of both litigants.

FOB – Free on Board (named port of shipment)

FOB suggests that the seller is responsible for the product until it reaches the vessel. Maritime freight transportation, insurance, bill of loading, unloading, transportation cost, etc. are the responsibility of the buyer.

There are lots of freight terms one needs to grasp for a systematic execution transportation business. Thus, it is necessary to possess a fine knowledge of Incoterms. Click here for more information on more such freight terms.