Among the most crucial tools in international trade are Incoterms. These terms, established by the International Chamber of Commerce (ICC), define the responsibilities and costs between buyers and sellers in the exchange of goods on a global scale.

At Ocean Transport, we provide expert guidance to help you choose the most suitable Incoterms for your operations, as they are far more than mere clauses in commercial contracts. Their impact extends from cost allocation to logistics management and risk reduction, directly influencing the efficient flow of goods across borders.

What are Incoterms?

Before diving into the types of Incoterms, it’s essential to understand their definition. They are a set of rules established by the International Chamber of Commerce (ICC) that define the responsibilities and obligations of both buyers and sellers in international transactions. These terms specify who is responsible for transportation costs, insurance, customs duties, and other expenses related to the movement of goods.

Incoterm Groups

Incoterms are divided into four main groups, each representing a specific stage in the transport of goods:

Group E – Departure

In this group, the seller fulfills their obligations by making the goods available to the buyer at their premises or another agreed location. The buyer assumes all risks and costs related to transport and export from that point onward.

• EXW (Ex Works): The seller makes the goods available at their premises. The buyer bears all costs and risks from the seller’s location.

• Ex Ship: The seller delivers the goods on board the ship at the port of departure. The buyer assumes risks and costs from that point.

• Ex Quay: Similar to Ex Ship, but the goods are delivered at the quay (dock), and the buyer takes over responsibility there.

Group F – Main Carriage Unpaid

In Group F, the seller delivers the goods to a carrier designated by the buyer at a specified location. From that moment, risk transfers to the buyer, though the seller still handles export formalities.

• FCA (Free Carrier): The seller delivers the goods to the carrier at a named place. The buyer assumes risks and costs from that point.

• FAS (Free Alongside Ship): The goods are delivered alongside the ship at the port of shipment. From there, the buyer takes responsibility.

• FOB (Free On Board): The seller covers costs and risks until the goods are loaded onto the ship at the origin port. The buyer assumes responsibility thereafter.

Group C – Main Carriage Paid

Here, the seller assumes responsibility for transport costs and risks up to the agreed destination. After that point, responsibility transfers to the buyer.

• CIF (Cost, Insurance and Freight): The seller pays for costs, freight, and provides insurance up to the destination port.

• CPT (Carriage Paid To): The seller covers costs and risks until the goods are delivered to the agreed carrier location, but does not include insurance.

• CIP (Carriage and Insurance Paid To): Similar to CPT, but includes insurance provided by the seller.

Group D – Arrival

In Group D, the seller is responsible until the goods arrive at the agreed final destination. From that point, the buyer takes on the risk and cost.

• DAP (Delivered at Place): The seller bears all costs and risks until the goods reach the named place of destination.

• DAT (Delivered at Terminal): Similar to DAP, but delivery is at a designated terminal.

• DDP (Delivered Duty Paid): The seller handles all costs and risks, including duties and taxes, until delivery at the agreed location.

Incoterms in Maritime Transport

Maritime transport is one of the most used modes in international trade, and certain Incoterms are especially relevant:

• CFR (Cost and Freight): The seller is responsible for costs and risks until the goods reach the agreed destination port. The buyer takes responsibility afterward.

• FOB (Free On Board): The seller assumes responsibility until the goods are loaded onto the vessel at the port of origin; from there, the buyer assumes all obligations.

Incoterms in Air Transport

Air transport, though faster, presents unique logistical and cost-related challenges. Key Incoterms include:

• CIF (Cost, Insurance and Freight): The seller assumes the cost and risk until the goods arrive at the destination port, including maritime insurance.

• FAS (Free Alongside Ship): The seller delivers the goods next to the vessel at the port of shipment. From that point, the buyer assumes costs and risks.

Incoterms in Land Transport

Land transport, including road and rail, has its own Incoterm dynamics:

• FCA (Free Carrier): The seller delivers the goods to the carrier at the agreed place. From that moment on, the buyer assumes all transport risks and costs.

Incoterms are beacons guiding the way through the vast ocean of international trade. From purchase to final delivery, each term defines responsibilities and costs, directly impacting the efficiency and success of global transactions. At Ocean Transport, we assist you in every aspect of Incoterms so you can conduct successful negotiations and manage logistics effectively in the complex world of global commerce.