The Incoterms 2000’s Terms of Delivery

In the international trade transactions, the prerequisite of terms of delivery from the seller to the buyer is very important. It aims to avoid misunderstandings and disputes in the process of goods delivery. This is very important since it comes to the matters of COST and RISK. By determining the terms of delivery in the clear way, it will also make clear the break down of costs and risks of each party.

The term of delivery which has been agreed to should be included in the sales contract between seller and buyer. It is subsequently applied to the delivery of goods and borne on the transport documents, e.g. in the bill of lading (B/L) when using ships, airway bill (AWB) when using an aircraft, or Delivery Note when using land vehicles.

In the general practices of international trade, the clauses in the sales contract on terms of delivery refer to the International Commercial Terms 2000 (Incoterms 2000) as a uniform interpretation of the implementation of the delivery terms, the risk reassignment, and costs from the seller to the buyer based on the means of transportation used.

By the way, are you acquainted with the Incoterms? If not, please read the article "Getting to Know the Incoterms".

Incoterms 2000 divides the terms of delivery in 13 terms which are grouped into 4 categories, each based on their initial letters:


1. Term "E" for EXW

The seller dispatches the goods in his own place (e.g. in the factory or warehouse). The buyer should arrange by himself the carriage out of the seller’s country.

2. Term "F" for FCA, FAS, FOB

The seller is only obliged to deliver goods to transportation modes designated by the buyer.

3. Term "C" for CFR, CIF, CPT, CIP

The seller must bear the transportation costs, and he therefore is obliged to make a contract of carriage. However the seller is not liable for the risk of loss or damage to the goods, and also does not bear the additional costs that may arise after shipment and release of goods (dispatch).

4. Term "D" for DAF, DES, DEQ, DDU, DDP

The seller is obliged to bear all the costs and risks of shipping goods to the port of destination.


As we have acquainted with the 4 categories of terms of delivery, now we'll get to know the break down in details for each delivery term of goods according to the Incoterms 2000, concerning who bears the cost of transportation, distribution of risk goods, customs clearance:


1. EXW => Ex Works (... name of place)

= Delivery of goods and reassignment of risk from the seller to the buyer take place on the seller’s place.

= The seller’s liability is only on providing goods at his place (factory/ warehouse). While the buyer is obliged to arrange the carriage.

=> The cost of transportation, customs clearance in the countries of the seller and buyer (export-import clearance), and the risk since the goods is transported from the seller’s factory/ warehouse to the buyer’s is for the account of buyer.


2. FCA => Free Carrier At (... name of place)

= Delivery of goods and reassignment of risk from the seller to the buyer take place when goods is delivered to the carrier nominated by the buyer.

= The seller is liable to arrange the carriage on behalf of the seller. While the buyer’s duty is to designate the carrier and to set up the contract of carriage.

=> Custom clearance in seller’s territory (export clearance) is the responsibility of the seller. While transportation costs and risks since the goods is delivered by the seller to the carrier up to the buyer will be for buyer’s account.


3. FAS => Free Alongside Ship (... name of loading port)

= Delivery of goods and reassignment of risk from seller to buyer take place when the goods is placed beside the vessel.

= The seller is obliged to place the goods alongside the vessel. While the buyer’s obligation is to designate carrier and to make the contract of carriage.

=> Custom clearance in seller’s territory (export clearance) is the responsibility of the seller. While transportation costs and risks since the goods is placed alongside the vessel by the seller to the buyer’s place, and the import clearance is the responsibility of the buyer.


4. FOB => Free On Board (... name of loading port)

= Delivery of goods and reassignment of risk from seller to the buyer take place when the goods has been loaded on the ship (on board).

= The seller’s liability is to load goods on the ship and to bear loading costs. While buyer’s obligation is to designate carrier, arrange the contract of carriage, and bear the cost of transportation and unloading costs.

=> Export clearance and the cost of loading on board are for seller’s account. While transportation costs and risks since the goods is loaded on the ship by the seller to the buyer’s place, and import clearance are for the buyer's account.


5. CFR => Cost and Freight (... name of destination port)

= Also known as CNF, C&F, C and F, or C+F. Anyway the standardized use according to Incoterms 2000 is the CFR.

= Delivery of goods and reassignment of risk from seller to buyer take place when the goods has been loaded on the ship (on board).

= The seller is obliged to designate the carrier, arrange a contract of carriage, store the goods on the ship, bear loading costs and freight to the port of destination. While the buyer’s obligation is to bear the cost outside seller’s area as stipulated in the contract of carriage.

=> Export clearance and transportation costs are borne by the seller, while the risk since the goods is loaded on the ship by the seller to the destination port and import clearance are the responsibility of the buyer.


6. CIF => Cost Insurance and Freight (... name of destination port)

= Delivery of goods and reassignment of risk from seller to the buyer take place when the goods carried has been loaded on the ship (on board).

= The seller’s liability is to designate carrier, a contract of carriage, put the goods on the ship, bear loading costs, freight, and the unloading costs at the port of destination, and insurance costs. While the buyer obligation is to bear the costs of outside seller as stipulated in the contract of carriage.

=> Export clearance, transportation costs, and insurance costs borne by the seller. While the import clearance is for buyer’s account.


7. CPT => Carriage Paid To (... name of destination)

= This term is used in the transportation of goods made using multimodal transport. The delivery of goods and reassignment of risk from seller to the buyer take place when the goods carried has been loaded on the first transport device.

= The seller is obliged to designate the carrier, a contract of carriage, hand over the goods to the first carrier, pay loading fees, freight, and the unloading costs at the destination. While the buyer is obliged to bear the cost of outside seller according to the contract of carriage.

=> Export clearance, fees, and transportation costs borne by the seller. While the risk since the goods is delivered to the first carrier by the seller until the destination and import clearance are for the buyer's account.


8. CIP => Carriage and Insurance Paid (... name of destination)

= This term is used in case of the goods transported by multimodal transport devices. The delivery of goods and reassignment of risk from seller to the buyer take place when the goods carried has been loaded on the first transport device.

= The seller is obliged to designate the carrier, arrange a contract of carriage, hand over the goods to the first carrier, pay loading fees, freight, unloading fees at the destination, and insurance costs. While the seller is obliged to pay the cost of outside the seller according to the contract of carriage.

=> Export clearance, fees, transportation costs, and insurance costs borne by the seller, while imports clearance is for buyer’s account.


9. DAF => Delivered At Frontier (... name of place)

= This term is used in case of the goods is transported by multimodal transport devices. The delivery of goods and reassignment of risk from seller to buyer are managed at some place on the border outside seller’s territory.

= The seller is obliged to designate the carrier, arrange a contract of carriage, bear loading fee, freight, unloading fees, and hand over the goods to the buyer at some place on the border outside seller’s territory. While the buyer is obliged to pay transportation costs and other costs outside the seller’ territory.

=> Export clearance, transportation costs, expenses, and the risks to somewhere outside the border are the responsibility of the seller. Meanwhile, import clearance, transportation expenses, costs, and risks outside the seller’s territory up to the destination are the responsibility of the buyer.


10. DES => Delivered Ex Ship (... name of destination port)

= Delivery of goods and reassignment of risk from seller to buyer take place on board of a vessel at the port of destination.

= The seller is obliged to designate the carrier, arrange a contract of carriage, bear loading fees, freight, hand over the goods on board to the buyer at the port of destination. While buyer’s obligation is to pay unloading costs at the port of destination.

=> Export clearance, transportation costs, the costs and risks to the port of destination are the responsibility of the seller. Meanwhile, import clearance, unloading costs at the port of destination, and the risk to the final destination are the responsibility of the buyer.


11. DEQ => Delivered At Quay (... name of destination port)

= Delivery of goods and reassignment of risk from seller to buyer take place on unloading place at destination.

= The seller is obliged to designate carriers, arrange a contract of carriage, bear loading fees, freight, unloading fees, and hand over the goods to the buyer at the unloading place of destination. While the buyer’s obligation is to accept goods at the unloading place at destination.

=> Export clearance, transportation costs, other costs and risks to the unloading place at destination are the responsibility of the seller. While the import clearance is for buyer’s account.


12. DDU => Delivered Duty Unpaid (... name of destination)

= Delivery of goods and reassignment of risk from seller to buyer take place at unloading place at the destination, without settlement of import clearance.

= The seller is obliged to designate carriers, arrange a contract of carriage, bear loading fees, freight, unloading fees, and hand over the goods to the buyer at the destination’s unloading place. While the buyer’s obligation is to accept the goods at the destination’s unloading place.

=> Export clearance, transportation expenses, other costs, and risks to the unloading place at destination are the responsibility of the seller. Meanwhile the buyer ought to bear the import clearance.


13. DDP => Delivered Duty Paid (... name of destination)

= Delivery of goods and reassignment of risk from seller to buyer take place at the destination’s unloading place, including the settlement of import clearance.

= The seller is obliged to designate carriers, arrange a contract of carriage, bear loading fees, freight, unloading fees, and hand over the goods to the buyer at the destination’s unloading place. While the buyer’s obligation is to accept the goods at the destination’s unloading place.

=> Export-import clearance, transportation expenses, other costs, and risks to the destination’s unloading location are the responsibility of the seller.



Terms of Incoterms 2000 based on transportation devices


The 13 terms of delivery of goods above explained can be classified another way according to the means of goods transportation stipulated by seller and buyer, namely the following:


=> Public transport device

+ Group E => EXW

+ Group F => FCA

+ Group C => CPT, CIP

+ Group D => DAF, DDU, DDP


=> Especially for sea and inland water transport device

+ Group F => FAS, FOB

+ Group C => CFR, CIF

+ Group D => DES, DEQ


In practice, not all the terms of delivery of Incoterms 2000 are used in international trade transactions, whether the transaction with the method of open account, advance payment, collection, or letter of credit (L/C). The most commonly used are the terms FOB, CFR, and CIF. All three in my opinion are the most moderate in the aspects of who bears the costs and risks of transporting goods during the voyage to final destination.


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