Answer
Incoterms = International Commercial Terms, published by the International Chamber of Commerce (ICC). They define the buyer’s and seller’s responsibilities for delivery, cost, transport, insurance, customs clearance and transfer of risk in international trade.
Four common Incoterms are:
- FOB – Free on Board: Seller delivers the goods on board the vessel at the named port of shipment. Risk transfers to the buyer once the goods are on board.
- CIF – Cost, Insurance and Freight: Seller pays the cost, marine insurance and freight up to the named destination port, but risk transfers when the goods are loaded on board at the shipment port.
- CFR – Cost and Freight: Seller pays freight to the destination port, but insurance is for the buyer. Risk transfers when goods are on board at the shipment port.
- EXW – Ex Works: Seller makes the goods available at his premises. Buyer bears almost all transport, clearance, cost and risk from that point onward.
One useful point: FOB, CFR and CIF are intended for sea/inland-waterway transport, while EXW can be used for any mode.