International Trade Sales Contract Terms

Importer Pays Most for Ex-Works and Least for Delivered Duty Paid

Oct 21, 2008

INCOTERMS are an internationally accepted set of trade terms used in trade contracts to define exporter and importer responsibilities and liabilities.

The International Chamber of Commerce established INCOTERMS to clearly define the shipment and delivery details for an international trade contract. Each term specifies the costs, risks and obligations that the exporting and importing parties assume.

Below is a list of INCOTERMS and what they mean if they appear in an international trade contract.

Ex-Works (EXW)

Ex-Works applies to all modes of transportation including water, air, rail, truck and pipeline. The term means that the exporter must pay for packing, labor and storage charges typically at a warehouse from which the importer picks up and transports the product. The importer pays all other expenses.

Free Carrier (FCA)

Under Free Carrier, the exporter also pays for loading the merchandise from the warehouse into the transportation carrier plus freight charges incurred to bring the products to the place of shipment.

Free Alongside Ship (FOB)

This term is usually for ocean shipments. Free Alongside Ship means that the exporter also pays for delivering the goods in close proximity to a ship without loading onto the vessel. Products may need to be inspected, relabeled or grouped with other shipments and are then stored in a warehouse near the port.

Free On Board (FOB)

Free On Board is another ocean shipment term. Free on Board means that the exporter also pays for loading goods on ship and is responsible for clearing customs.

Cost, Insurance and Freight (CIF)

This ocean shipment term means that the exporter must pay for loading the merchandise onto the vessel as well as the cost of insurance and freight to the destination port. Title and responsibility for the shipment pass to the importer on delivery to the destination port.

Carriage Paid To (CPT)

Under Carriage Paid To, exporters pay all charges at place of destination except for insurance, duty, taxes, customs clearance and transportation from ship to final destination.

Carriage Insurance Paid To (CIPT)

Carriage Insurance Paid To mirrors CPT except that the exporter also covers insurance costs.

Delivered At Frontier (DAF)

Delivered At Frontier is a term usually involving truck transportation. The importer must ensure that the shipment clears customs in both the originating and destination country. Therefore, the importer pays charges on arrival at destination, duty, taxes, customs clearance plus delivery to destination.

Delivered Ex-Ship (DES)

Delivered Ex-Ship means that goods are made available to the importer on the vessel not at the port, where title can pass to the importer. The importer pays charges on arrival at destination, duty, taxes, customs clearance and delivery to the final destination.

Delivered Ex-Quay (DEQ)

Unlike DES, Delivered Ex-Quay requires the exporter to unload products so shipment title passes to the importer at the port of destination. Also, the exporter is responsible for charges on arrival at destination.

Deliver Duty Unpaid (DDU)

Another trucking term, this usually means that a bond must be filed for the shipment. The exporter must clear the originating country’s customs while the importer unloads the shipment and must pay duty at the destination country’s customs.

Deliver Duty Paid (DDP)

This trucking term means that the exporter must clear both the originating and destination country’s customs, pay pertinent duties and deliver the shipment at the named destination. The importer unloads the delivered goods and pays for insurance and freight.

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The copyright of the article International Trade Sales Contract Terms in International Business Regulations is owned by Daniel Workman. Permission to republish International Trade Sales Contract Terms in print or online must be granted by the author in writing.