EXW - Ex Works (... named place)

Under these terms, the vendor (exporter) concludes his participation in the negotiations once the merchandise is packed and ready for shipment (in a crate, bag, etc.) and made available at his own premises within the specified time frame.

It then falls to the foreign importer to collect the merchandise from the exporter’s premises and handle internal transportation, loading for overseas shipment, licensing, the contracting of international freight and insurance, etc.

EXW terms should not be used when the vendor is unable to obtain the necessary export documents, either directly or indirectly.

Thus the buyer assumes all the risks and costs involved in transporting the merchandise from the place of origin to its destination.

FCA - Free Carrier (... named place)

Under these terms, the vendor (exporter) concludes his obligations on delivery of the merchandise, cleared for export, to the international transporter indicated by the buyer at the specified location in the country of origin. It should be noted that the location chosen for delivery has an impact on the obligations for shipment to and discharge of the merchandise at the chosen location.

If delivery occurs at the vendor’s premises, the vendor is responsible for shipment. If delivery takes place at any other location, the vendor is not responsible for discharge of the goods.

It therefore falls to the buyer (importer) to contract freight procedures and international insurance.

These conditions can be adopted for any mode of transport.

FAS - Free Alongside Ship (... named port of shipment)

Under these terms, the vendor’s responsibility ends when the merchandise is delivered alongside the transport vessel, at the specified port of loading. The buyer is responsible for contracting international freight services and insurance.

The vendor is responsible for clearing the goods for export.

These terms may only be used for waterborne shipments (sea, river or lake).

FOB - Free on Board (... named port of shipment)

Under these terms, the vendor’s responsibility for the merchandise ends once it has crossed the ship’s rail, at the port of loading, even though placement of the merchandise on board ship is also, in principal, a task for which the vendor is responsible.

The vendor is responsible for clearing the goods for export.

It should be stressed that the international transporter is hired by the buyer (importer). Hence, for an FOB sale, the exporter needs to know what loading terms have been agreed upon by the buyer and the ship owner in order to verify which party should cover the merchandise loading expenses.

These terms may only be used for waterborne shipments (sea, river or lake).

CFR - Cost and Freight (... named port of destination)

Under these terms, the vendor assumes all of the costs prior to loading, plus the international freight contract for transporting the merchandise to the specified port of destination.

As with FOB, the responsibility for loss or damage of the goods is transferred from the vendor to the buyer while still at the port of loading. In this way, negotiations (strictly speaking, the sale) occur while still in the vendor’s country.

The vendor is responsible for clearing the goods for export.

These terms may only be used for waterborne shipments (sea, river or lake).

CIF - Cost, Insurance and Freight (... named port of destination)

The vendor has the same obligations as under the CFR system and must also take out marine insurance against damage and loss during transportation.

Since the business is still being negotiated in the exporter’s country (the ship’s rail at the port of loading is the point where the transfer of responsibility for the goods occurs), the buyer should be aware that, under CIF terms, the vendor is only obliged to take out  minimum cover insurance.

The vendor is responsible for clearing the goods for export.

These terms may only be used for waterborne shipments (sea, river or lake).

CPT - Carriage Paid to (... named place of destination)

Under these terms, the vendor hires the freight services for the transportation of the merchandise to the assigned location.

The responsibility for damage and loss of the merchandise, plus any additional cost incurred for events that occur after delivery of the merchandise to the transporter, is transferred by the vendor to the buyer once the merchandise is delivered into the hands of the transporter.

The vendor is responsible for clearing the goods for export.

These terms can be used for any mode of transportation, including multimodal.

CIP - Carriage and Insurance Paid to (...named place of destination)

Under these terms, the vendor has the same obligations as those defined for "CPT" and also bears the cost of insurance against damage and loss of the merchandise during international transportation.

The buyer should note that, under "CIP" terms, the vendor is only obliged to take out minimum cover insurance, given that the sale (transfer of responsibility for the merchandise) takes place in the vendor’s country.

The vendor is responsible for clearing the goods for export.

These terms can be used for any mode of transportation, including multimodal.

DAF - Delivered at Frontier (... named location)

Under these terms, the vendor has fulfilled his obligations when the merchandise is delivered, cleared for export, at a specified point on the frontier, described as precisely as possible. Delivery of the goods to the buyer shall occur at a point before the customs depot in the neighbouring country.

DAF terms can be used for any mode of transport. It is, however, most commonly used for overland transportation (road or rail).

DES - Delivered Ex Ship (... named port of destination)

Under these terms, the vendor has fulfilled his obligations when the merchandise is delivered, onboard ship, not cleared for export, to the buyer at the landing port. The vendor shall assume all costs and risks during the international voyage.

The buyer (importer) shall be responsible for unloading the goods and obtaining import  clearance.

DEQ - Delivered Ex Quay (... named port of destination)

Under these terms, the vendor "delivers" the merchandise when it is placed at the disposal of the buyer, cleared for export, but not cleared for importation, on the quayside of the specified destination port. The vendor is obliged to take the merchandise to the destination port and clear it on the quayside.

The risks and costs are transferred from the vendor to the buyer from the moment of "delivery" at the destination port quayside.

These terms may only be used when the merchandise is delivered via marine, inland waterway or multimodal transport, on discharge from the vessel at the quayside (berth) at the port of destination.

DDU - Delivered Duty Unpaid (... named place of destination)

Under these terms, the vendor will only have fulfilled his obligations when the merchandise is made available at the specified location in the destination country, not cleared for importation.

All responsibility for damage and loss of the merchandises shall be assumed by the vendor up to the point of delivery at the specified location, except for the duties, taxes and other official charges incurred on importation, plus the costs and risks related to customs clearance.

These terms can be used for any mode of transportation, including multimodal.

DDP - Delivered Duty Paid (... named place of destination)

Under these terms, the vendor shall only have fulfilled his obligations when the merchandise has been made available at the specified location in the final destination country, cleared for importation. The vendor shall assume all risks and costs, including duties and taxes and other import charges. Contrary to EXW terms, under which the vendor has minimal obligations, the DDP system places the maximum amount of risk on the vendor.

DDP terms should not be used when the vendor is unable to obtain the necessary import documents.

These terms can be used for any mode of transportation, including multimodal.

Comments:

The best procedure for the exporter is to carry out negotiations on delivery to the buyer’s  country, since he is thereby increasing his bargaining power. In other words, the exporter, on assuming responsibility for the negotiations, can increase his profit margin.

Nevertheless, there are more INCOTERMS in which the risks arising from international transportation are the responsibility of the buyer, rather than the vendor. The are two main reasons for this. Firstly, the present transportation difficulties tend to frighten off the vendor, so that he would rather relieve himself of the responsibility for the merchandise as quickly as possible; and, secondly, the vendor is in a less comfortable position vis-à-vis obtaining payment from the buyer once the goods have arrived at their destination.

Whenever the particular INCOTERM adopted determines that Brazilian traders must remit money abroad to pay for expenses under their responsibility, they should, in most cases, obtain approval for this remittance from the Foreign Trade Secretariat (SECEX).