Incoterms

When goods cross borders, buyer and seller need to agree who arranges and pays for each part of the trip, and at what point the risk of loss or damage passes from one to the other. The International Chamber of Commerce publishes a set of standard three-letter terms for this, the Incoterms rules. The current set is Incoterms 2020.

At one end is EXW (Ex Works): the seller just makes the goods available at its own premises. The buyer does everything else: loading, export clearance, transport, insurance, import. It's the least work for the seller and the most for the buyer.

FCA (Free Carrier) has the seller hand the goods, cleared for export, to the buyer's carrier at an agreed place. For sea freight, FOB (Free On Board) is common: the seller pays to get the goods loaded onto the ship at the named port, and the risk passes to the buyer once they're on board. CIF (Cost, Insurance and Freight) goes further: the seller also pays the sea freight and minimum insurance to the destination port, but the risk still passes when the goods are loaded at the origin port.

DAP (Delivered at Place) has the seller deliver to the named destination, ready to unload, with the buyer handling import duties. At the far end, DDP (Delivered Duty Paid) puts everything on the seller: transport, risk all the way, import clearance and duties. It's the least work for the buyer.

An Incoterm is always written with a place, like "FOB Shanghai" or "DAP Rotterdam warehouse", because the place is where the responsibilities change hands. Incoterms don't cover the price, when payment is due or who owns the goods; the sales contract does that.