Inco Terms

Inco Terms or Trade Terms are part of the contract of sale and dictate who is responsible in respect of carriage and other charges when buying or selling goods. There are 11 Inco Terms used in the latest edition (2010) and each term shows the risks involved

If buying goods, we recommend Free on Board (FOB) terms as it puts the buyer in control of costs and leaves the supplier with the risks and costs for things like Export Licensing, Customs Inspection and Storage. Particularly by sea a lot of suppliers will offer to move your goods for free up to the port of arrival, whilst this seems like a good idea it puts the buyer at risk of getting a large bill from the company controlling the unpacking of container at the arrival port. The best practice is to pay a reasonable amount of freight in return for lower arrival costs.

Ex Works (EXW) – Seller has minimum obligations and the buyer is responsible for all charges from the supplier’s door up to the delivery point

Free Carrier (FCA) – The Seller hands over the goods cleared for Export to the carrier nominated by the buyer at a named place – buyer is responsible for all costs from this point

Free Alongside Ship (FAS) – The Seller delivers the goods (cleared for Export) to the named port of export (does not include the local terminal or warehouse cost) – buyer is responsible for all costs from this point (This can only be used for Ocean/Sea Transport)

Free on Board (FOB) – The Seller delivers the goods (cleared for Export) and when they pass the ships rail (local terminal or warehouse costs included) the buyer takes responsibility for all costs from this point (This can only be used for Ocean/Sea Transport)

Cost and Freight (CFR) – The seller delivers the goods up to a named port of arrival – the buyer takes responsibility for all costs from this point (This can only be used for Ocean/Sea Transport)

Cost, Insurance & Freight (CIF) – As CFR but includes insurance for the goods (This can only be used for Ocean/Sea Transport)

Carriage Paid To (CPT) – The seller delivers the goods (cleared for export) to a carrier nominated by him up to a point the buyer takes responsibility for all costs from this point

Carriage and Insurance Paid (CIP) – As CPT but includes the insurance

Delivered at Terminal (DAT) – Supplier pays all costs (except Import Clearance, Door Delivery, Vat & Duty) up to the terminal which is usually the arrival place.

Delivered at Place (DAP) – Supplier pays all costs (except Import Clearance, Vat & Duty) up to a named place (usually the buyer door)

Delivered Duty Paid (DDP) – Maximum obligation to the seller, seller pay all costs (Except Vat) up the buyer’s door/delivery address.

*** buyers should note that unless the goods are insured you are only going to be covered by the carriers limited liability insurance which is unlikely to cover the value of the goods