Incoterm, or “International Commercial Terms” is a set of rules, which is international recognition to help in the global transport of goods. Each term has well-defined rules and regulations which both parties need to comply. The International Chamber of commerce publishes these rules. With Incoterm, language is never a barrier.
Incoterms and their definition
Free on board (FOB)
This term defines even split of price and responsibilities between buyer and seller.
EX Works (EXW)
This term puts the whole responsibility on the shoulder of the buyer, and the only responsibility that rests with the seller is that of making the goods available for pickup.
Costs and freights (CFR)
Under these terms, the seller must bear all costs up to the port of destination, for which the buyer is responsible.
Costs, insurances and freights (CIFR)
The terms are like those mentioned in CIF with the only difference that the buyer must include the costs incurred for insurance.
Free carrier (FCA)
Under this shipping term, the seller must deliver the goods to a location where the carrier operates along with clearing the goods for export from the country of origin. The costs and the sole risk of liability are borne by the buyer in accordance with this Incoterm.
Free alongside ship (FAS)
This term states it is the responsibility of the buyer to get the goods ready for loading alongside the ship besides customs, clearing it for export.
Delivered at terminal (DAT)
Under this term, the seller must bear all the responsibility including unloading the goods at the named terminal at the destination port. The buyer bears all the other costs incurred such as Customs clearance, import duties, taxes, and delivery costs.
Delivered duty paid (DDP)
This term states the seller must bear all the risks and costs such as duties, taxes and other charges of delivering the goods along with clearance for import. The maximum obligation rests with the seller under this term.