Incoterms are the commercial terms defined by the International Chamber of Commerce (ICC). Incoterms define the role and responsibilities of importer and exporter in international shipments. It defines who is liable for what at a given stage of the shipment. Governments, courts, and professionals all throughout the world recognize the Incoterms guidelines as the standard for interpreting the terms that are most frequently used in international trade.

Some terms defined by Incoterms

• Delivery: It is the point in the transaction that the buyer assumes the risk of the items being lost or damaged, as opposed to the seller.


• Arrival: The address specified in the Incoterm where transportation has been paid for.


• Free: Delivery of the products to a designated location for transfer to a carrier is the seller's responsibility.


• Carrier: Anybody who agrees to perform or acquire the performance of transportation by rail, road, air, sea, inland canal, or by a combination of such means is a carrier under a contract of carriage.


• Freight Forwarder: A company that arranges cargo or helps with the arranging is known as a freight forwarder.


• Terminal: Any location, covered or not, such as a road, rail, or air freight terminal; docks, warehouses, container yards, etc.



Modes of Transports


Ex Works - EXW When products are sold ex works, the buyer has all liability for transporting them to their intended location. Either the seller loads the products at the buyer's expense and risk, or the vendor loads the goods on collection vehicles without clearing them for export. The buyer may sell the items to a third party for pickup from the original seller's warehouse; the seller is not required to organize a carriage contract. Accordingly, the buyer is likewise not required to make one. Generally speaking, though, the buyer makes arrangements for the freight to be picked up from the specified place and handles customs clearance. While the seller is required to gather information and documents at the buyer's request and expense, the buyer has the responsibility for completing all export documentation.

Carriage Paid To - CPT CPT is similar to C&F (Cost and Freight). The seller bears the cost of origin, which includes export clearance and freight to the specified destination. The goods' transportation costs up to the specified location are covered by the vendor. On the other hand, the products are deemed delivered once they are given to the primary carrier, meaning that the buyer assumes all risk upon giving the items to that carrier at the export destination.

Free Carrier - FCA FCA is similar to FOB (Free On Board). The seller delivers the items to a designated location. The seller is in charge of loading the items onto the buyer's carrier. The buyer may designate another party to receive the goods, or the buyer may designate a carrier. The responsibilities for loading and unloading the products at the delivery location depend on the location that is selected.

Carriage and Insurance Paid to - CIP CIP is similar to CPT with addition of insurance of goods during the transportation by the seller. The minimum amount of the insurance should 110% of the goods value and allow both the seller and the buyer to make the claim. The key point is that the currency of the insurance and the goods purchase should be the same. Unlike Cost Insurance and Freight (CIF), CIP can be used for all modes of transport.

Delivered at Place - DAP According to DAP terms, the point of destination specified in the delivery contract is when the risk transfers from the supplier to the buyer. When the items are prepared for shipping, the seller packs them as necessary to ensure they arrive at their destination undamaged at their own expense. To clear the items for export, the seller must fulfill all legal requirements in the exporting nation at their own expense and risk. The buyer must finish the customs clearance process in the importing country following the items' arrival in the destination country.

Delivered at Place Unloaded - DAU The seller accepts all risk up until arrival at the destination port or terminal and pays all transportation expenses, including export fees, carriage, unloading from the main carrier at the destination port, and destination port taxes. The terminal needs to be a building that can accept shipments; it can be an airport, port, or inland freight interchange. The seller ought to think about shipping on DAP terms if they are unable to arrange for unloading. After unloading, the customer is responsible for paying all fees (such as import duty, taxes, customs, and on-carriage). However, the seller will often be responsible for any delays or demurrage fees at the terminal.
-- Demurrage: money that must be paid when a chartered (= rented) ship is used for longer than agreed, or when goods are collected later than the agreed time after being taken off a chartered ship. (Cambridge Dictionary).

Delivered Duty Paid - DDP DDP is similar to FIS (Free in Store). Delivering the items to the buyer's designated location within their own nation is the seller's responsibility. The seller also covers any transportation expenses, such as import taxes and tariffs. Unloading is not the seller's responsibility. When it comes to DDP terms, the most crucial thing to keep in mind is that the seller has the responsibility of getting the products cleared through customs in the buyer's country, which includes paying the applicable taxes and duties and securing the required permissions and registrations from local authorities.