Incoterms
Incoterms determine who arranges the transport, who bears the costs and where the risk passes. They appear on virtually every commercial invoice and help determine what belongs in the customs value. Every term from Incoterms 2020 is explained here, with what it means for the declaration.
- CFRCFR, Cost and Freight, means the seller pays the sea freight to the port of destination, but the risk already passes once the goods are on board at the port of shipment. CFR applies only to sea and inland waterway.
- CIFCIF, Cost Insurance and Freight, means the seller pays sea freight and insurance to the port of destination, while the risk already passes once the goods are on board. CIF applies only to sea and inland waterway.
- CIPCIP, Carriage and Insurance Paid To, is CPT with an insurance obligation. The seller pays freight and insurance to the destination, while the risk already passes at the first carrier.
- CPTCPT, Carriage Paid To, means the seller pays carriage to the named destination, but the risk has already passed earlier: on handover to the first carrier. Under CPT, cost and risk therefore pass at different moments.
- DAPDAP, Delivered at Place, means the seller delivers the goods at the agreed place, ready for unloading, and bears the risk until then. Import formalities, duties and VAT are for the buyer.
- DDPDDP, Delivered Duty Paid, means the seller arranges and pays everything up to and including import: carriage, export declaration, import declaration, import duties and VAT. It is the Incoterm with the most obligations for the seller.
- DPUDPU, Delivered at Place Unloaded, means the seller delivers and unloads the goods at the agreed place. It is the only Incoterm under which the seller has an unloading obligation.
- EXWEXW, Ex Works, means the seller makes the goods available at their own premises and arranges nothing further. From that moment the buyer bears all costs and all risk, including loading.
- FASFAS, Free Alongside Ship, means the seller delivers the goods, export-cleared, alongside the ship at the port of shipment. From that moment costs and risk are for the buyer. FAS applies only to sea and inland waterway.
- FCAFCA, Free Carrier, means the seller delivers the goods, export-cleared, to a carrier nominated by the buyer. The risk passes as soon as the goods have been handed over there.
- FOBFOB, Free on Board, means the seller brings the goods, export-cleared, on board the ship. Once they are on board, costs and risk pass to the buyer. FOB applies only to sea and inland waterway.
Frequently asked questions about incoterms
What are Incoterms?
Incoterms are eleven standard rules from the International Chamber of Commerce that set out who arranges the transport, who bears the costs and at what moment the risk passes from seller to buyer. They do not govern ownership and they do not govern payment.
Which Incoterms are there in 2020?
The Incoterms 2020 are EXW, FCA, CPT, CIP, DAP, DPU and DDP for all modes of transport, plus FAS, FOB, CFR and CIF, which apply only to sea and inland waterway transport. DAT from 2010 is now called DPU.
Who makes the customs declaration under which Incoterm?
Under EXW and FCA the buyer does not arrange the export declaration; in practice that stays with the seller in the country of departure. Under DDP the seller makes both the export and the import declaration and pays the import duty and VAT.
What is the difference between DAP and DDP?
Under DAP the seller delivers the goods at the agreed place but the buyer pays the import duty and VAT. Under DDP the seller pays those as well. DDP therefore places the full import risk with the seller, including a VAT registration in the country of destination.
Which Incoterm should I use for sea freight in containers?
For containers, FCA is usually more suitable than FOB. Under FOB the risk only passes once the goods are on board, while in practice a container has already left the seller's hands at the terminal. FOB nevertheless remains widely used in practice.