Trucking - Shipping Terms: What are Incoterms?

Shipping Terms

What are Incoterms?

Incoterms are a standard set of terminology, first created by the International Chamber of Commerce (ICC) in 1936, used universally, defining the key parts of freight forwarding for traders, buyers, sellers and banks.

In 1936 the ICC first defined the INternational COmmerce Terminology (INCO Terms), and we have summarized the 11 most commonly used terms below. Incoterms is a registered trademark of the International Chamber of Commerce.

Who uses incoterms?

Incoterms 2010 are used today by practitioners and traders, anyone involved in the supply chain of delivering goods overseas will probably come across incoterms, including:


  • Traders
  • Producers
  • Buyers
  • Sellers
  • Governments
  • Banks

What do incoterms cover?

The language that was agreed by incoterms guidance covers the following areas of international commerce and trade:

  • Tasks involved in shipping
  • Which parties hold contract
  • Responsibility of risk
  • Delivery of goods (buyers and sellers)
  • Insurance duties
  • Customs and taxes

WHY CHOOSE TRUCKING

  • EXW – Ex Works

    Delivery of goods at which the seller takes on the least risk

  • FCA – Free Carrier

    Buyers organise shipping of goods and exportdocumentation

  • CPT – Carriage Paid To

    Like FCA, but where goods are delivered to a defined destination

  • CIP – Carriage and Insurance Paid To

    Seller required to purchase minimum insurance required, and transport

  • DAT – Delivered At Terminal

    Seller needs to deliver goods (and insure them) to a defined terminal

  • DAP – Delivered At Place

    Multimodal incoterm for seller to deliver goods to a defined destination

  • DDP – Delivered Duty Paid

    Multimodal incoterm extending on DAT, to deliver goods at named destination

  • FAS – Free Alongside Ship

    Non-containerised incoterm where it’s acceptable to ship with other goods

  • FOB – Free on Board

    Common incoterm where the seller delivers to port but buyer responsible for insurance

  • CFR – Cost and Freight

    Seller delivers goods to destination and is responsible for all transport insurance

  • DDU – Delivery Duty Unpaid

    Consignee takes responsibility of cost, and delivery, once shipment signed for

  • CIF – Cost, Insurance & Freight

    Seller pays for transport insurance and delivery of goods up until end port

Rules for all modes of transport

  • 1. EXW Ex Works

    Ex Works (EXW) is the term used to describe the delivery of goods to an available designation at their place of business, normally in their factory, offices or warehouse. The seller does not need to then load items onto a truck or ship, and the remainder of the shipment is the responsibility of the buyer (e.g. overseas shipment and customs duty). EXW is therefore more favourable to the seller as they do not need to worry about the freight once it has left their premises.

  • 2. FCA Free Carrier

    Unlike EXW, Free Carrier pushes the responsibility of delivering the goods to the buyers nominated premises onto the seller, so they have to organise shipping and various export documents.

  • 3. CPT Carriage Paid To

    “Carriage Paid To”, or CPT, goes into a little more detail than FCA, specifying that the seller bears the costs for transporting the goods to the nominated place that the buyer requests. Carriage Paid To can be used in any transport mode, and the risk transfers from the seller to the buyer as soon as the goods reach the nominated destination and the carrier takes charge of these.

  • 4. CIP Carriage And Insurance Paid To

    “Carriage and Insurance Paid to”, or CPI, specifies that the seller needs to pay the costs of transport as well as the insurance cover for the goods in transit (by any transport mode) to the destination named by the buyer. In terms of level of insurance, the cover level can be minimum, defined by the ICC’s INCO Terms, and should they request a higher level of insurance, this would need to be agreed on the contract. The risk is then transferred from the seller onto the buyer once the goods reach the nominated point.

  • 5. DAT Delivered At Terminal

    “Delivered at Terminal”, or DAT, means that all of the costs up until the point of delivery to a nominated terminal (e.g. a port or a quay) need to be covered. As in the table above, the buyer would need to arrange Duties and Taxes and clearing goods through customs. With DAT, the seller is also responsible for unloading the goods at the terminal. It’s advisable to ensure the terminal, hub or port is clearly specified, given the size of many terminals.

  • 6. DAP Delivered At Place

    “Delivered at Place”, or DAP, can also be used for any mode of transport. An extension of DAT, the seller delivers the goods at a named destination, specified by the buyer, although under the ICC rules, the unloading of the goods are the responsibility of the buyer. The buyer is also required to sort out duties and taxes, as well as clearing the goods through customs.

  • 7. DDP Delivered Duty Paid

    “Delivered Duty Paid”, or DPP, can be used for any mode of transport. In this case, the seller is responsible for delivering the goods at a place specified by the buyer, up to the point of unloading. Unlike DAP rules, the seller is also required to pay for all Duties and Taxes, clear the goods for import and pay relevant taxes.DPP is often complex as shipment of goods intomarket are often best left to local experts (e.g. the in-market buyer), so it’s a less commonly used INCO Term.