Who would have guessed that a collection of three-letter acronyms would have had such an impact on the development of international (and domestic) commercial transactions? A group of industrialists, financiers and traders determined to bring economic prosperity to a post-World War I era eventually founded the International Chamber of Commerce (ICC). With no global system of rules to govern trade, these businessmen created an industry standard that became known as the Incoterms® rules.
11 Rules from the Incoterms® 2010 Edition
- EXW (Ex Works): the seller only places goods at the buyer’s disposal at the seller’s premises. All export/import clearance, carriage and insurance is arranged by the buyer.
- FCA (Free Carrier): the seller delivers goods to a carrier nominated by the buyer at a named place. Risk passes to the buyer at that point.
- FAS (Free Alongside Ship): the seller delivers when goods are placed alongside the vessel at the named port. Ocean transport only.
- FOB (Free On Board): the seller delivers when goods pass the ship’s rail at the named port of shipment. Ocean transport only.
- CFR (Cost and Freight): seller pays cost and freight to the named port of destination; risk passes to the buyer once goods pass the ship’s rail. Ocean transport only.
- CIF (Cost, Insurance and Freight): as CFR, but the seller also contracts minimum marine insurance cover for the buyer’s risk during carriage.
- CPT (Carriage Paid To): the seller pays carriage to a named destination; risk passes to the buyer once goods are handed to the first carrier. Any transport mode.
- CIP (Carriage and Insurance Paid To): as CPT, but the seller also obtains minimum marine insurance cover.
- DAT (Delivered At Terminal): the seller delivers once goods, unloaded from the arriving transport, are placed at the buyer’s disposal at a named terminal.
- DAP (Delivered At Place): the seller delivers when goods are placed at the buyer’s disposal on the arriving transport, ready for unloading at the named destination.
- DDP (Delivered Duty Paid): the seller bears all costs and risks to deliver the goods, cleared for import, at the named destination — including duties, taxes and customs formalities.