Delivery terms in international trade
Incoterms delivery terms are brought together in 4 groups. There are 11 delivery terms in total: E, F, C and D.
Group E means the Ex group and refers to departure. The delivery terms concerning the departure of the goods begin with the letter E.
The important point in Group F delivery terms is that the freight is paid by the importer, not by the exporter. All delivery terms concerning this situation begin with the letter F.
Group C delivery terms indicate that the freight is paid by the exporter. All the related delivery terms begin with the letter C.
Group D, in turn, means that the focus is on the goods’ point of arrival. The relevant delivery terms begin with the letter D.
The delivery terms used for all modes of transport (road, air, sea, rail) are as follows.
EXW (Ex Works): Delivery at the exporter’s premises
This is the delivery term that puts the seller (exporter) to the least trouble. It is enough for the seller to prepare its product and leave it at its door (warehouse, factory). The rest of the process belongs to the importer. Collecting the goods from the door, having them carried by a transport company and dealing with the customs formalities in both countries are entirely the importer’s responsibility.
FCA (Free Carrier): Delivery to the carrier
Rather than the exporter delivering the goods from its own door, this is the delivery term in which delivery is made at a point agreed jointly with the carrier or at the carrier’s bonded warehouse. Until the goods pass into the carrier’s hands, the exporter is the party primarily responsible.
CPT (Carriage Paid To): Carriage-paid delivery
The exporter is responsible for preparing the goods and dealing with the freight arrangements. The exporter pays the freight up to the place of destination; however, the risk passes to the importer the moment the goods are handed over to the first carrier. The importer is obliged to complete the customs formalities and to carry out the unloading into its warehouse.
CIP (Carriage and Insurance Paid To): Delivery with insurance and carriage paid
It is used in exactly the same way as CPT. In addition, the exporter undertakes the insurance cover should anything happen to the goods during their carriage to the place of destination.
DDP (Delivered Duty Paid): Delivery with customs duties paid
This delivery term is used as the exact opposite of EXW. The exporter is responsible for preparing the goods and for handling the transport and the customs formalities in both countries. In this case, the importer is only responsible for taking delivery of the goods at the agreed place.
DAP (Delivered at Place): Delivery at the agreed place
The exporter loads the goods being traded, completes the customs formalities in its own country and brings them to the place agreed with the importer (bonded warehouse, terminal, port, importer’s warehouse), then leaves the unloading to the importer. Besides the unloading, the customs formalities in the buyer’s country and any costs that may arise also belong to the importer.
DPU (Delivered at Place Unloaded): Delivery unloaded at the agreed place
On closer inspection, the work done is almost the same as with DAP. The only difference is that the exporter takes on the unloading of the goods at the place of destination. The exporter is obliged to unload the goods into the relevant warehouse itself.
The delivery terms used for sea or inland waterway transport are as follows.
FAS (Free Alongside Ship): Delivery alongside the ship
The exporter prepares the goods, brings them to the port and leaves them alongside the ship. It does not load them onto the ship, and it handles the customs formalities. Loading the goods onto the ship, unloading them, the freight cost and the insurance cost thus fall to the importer.
FOB (Free on Board): Delivery on board the ship
The procedures are the same as with FAS; the only difference is that, under FOB, the cargo left at the port alongside the ship is placed on board the ship. The rest of the process is repeated as with FAS.
CFR (Cost and Freight): Freight-paid delivery
The action we described under CPT applies in exactly the same way. The only reason it has a separate name is that it is a delivery term used only in sea transport.
CIF (Cost, Insurance and Freight): Delivery with insurance, costs and freight paid
The CFR terms apply in exactly the same way. The only difference is that the exporter takes out marine insurance.
