Utility INCOTermsIndex

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What are INCO terms?

The terms of sale for International business are more complex than those used in domestic contracts so in the 1920's international traders developed a set of trade terms to describe their rights and obligations with regard to the sale and transport of goods. These terms consisted of short abbreviations for lengthy contract provisions. Unfortunately there was no uniform interpretation of these terms so to improve this the International Chamber of Commerce (ICC) developed INCO terms (INternational COmmercial Terms). First published in 1936 these rules have been periodically revised to account for changing modes of transport, document delivery and security.

The latest revision INCO terms 2020 came into force on January 1st 2020

INCO term Groups

There are 4 groups

• E- Departure – Seller merely makes goods available to the buyer and the seller is not responsible for the carriage, risks or cost of transportation. The only INCO term in this group is EXW.

• F- Main Carriage Unpaid – Seller has full responsibility (carriage, risk and cost) to get the goods to the point where the main transportation starts. Typically this means to a ship or a port. In SkySuite transport chains we call this the handover point. INCO terms in this group are FCA, FAS and FOB.

• C- Main Carriage Paid – very similar to Group F except that the seller is responsible for some elements (Cost and/or risk) during the main transportation. INCO terms in this group are CPT, CIP, CFR and CIF.

• D- Arrival – Seller is responsible for some elements beyond the completion of the main transportation. INCO terms in this group are DAP, DPU and DDP.

EXW - Ex Works

Under EXW terms the seller merely makes the goods available to the buyer at the "named place of delivery". This is commonly, but not necessarily the seller's place of business. With EXW the seller has no responsibility to load the goods onto a truck or other transport vehicle or to clear the goods for export. This term places the greatest responsibility on the buyer and the least on the seller.

In SkySuite the transport chain for EXW Inco terms would likely have a handover point matching the place where the supplier is warehousing his goods and the transport time to that handover point will be zero.

FCA - Free Carrier

Under FCA terms the seller clears the goods for export and delivers them to the carrier specified by the buyer at the "named place of delivery" If the named place of delivery is where the supplier is warehousing his goods, the seller is responsible for loading the goods onto the transport vehicle. If the named place of delivery is any other location, the seller delivers by making the goods available for unloading from the sellers means of transport at the named place of delivery.

In SkySuite the transport chain for FCA INCO terms would have a handover point matching the named place of delivery and the transport time to that handover point will be the time it takes the seller to load and transport the goods to that location.

FAS - Free Alongside Ship

Under FAS terms the seller clears the goods for export and places them alongside the ship (as on a quay or barge) at the named port of shipment. FAS terms only apply if the mode of transport is Sea or Inland Waterway and not to other modes such as Air, Rail, Road or Multimodal.

In SkySuite the transport chain for FAS INCO terms would have a handover point matching the named port and the transport time to that handover point will be the time it takes the seller to load and transport the goods to that location plus the time to place them alongside the ship.

FOB - Free On Board

Under FOB terms the seller clears the goods for export and delivers them on board the vessel at the named port of shipment. FOB terms only apply if the mode of transport is Sea or Inland Waterway and not to other modes such as Air, Rail, Road or Multimodal.

In SkySuite the transport chain for FOB INCO terms would have a handover point matching the named vessel and port and the transport time to that handover point will be the time it takes the seller to load and transport the goods to that location plus the time to load the vessel.

CPT - Carriage paid To

Under CPT terms the seller clears the goods for export and delivers them to the carrier for transport and this is where the risk passes from seller to buyer. The seller is however, responsible for contracting and paying the costs associated with the transportation (but not insurance) to the named place of destination. It is important to note that the transfer of risk from seller to buyer happens at a different point than the transfer of costs

In SkySuite the transport chain for CPT INCO terms would have a handover point matching the named place of destination and the transport time to that handover point will be the time it takes the seller to load and transport the goods to that location. Any Transport order raised in SkySuite would be to move the goods from the named place of destination to the final (ultimate destination. plus the time to load the vessel.

CIP - Carriage and Insurance paid To

Essentially CIP terms are the same as CPT except that the Seller is responsible for insurance as well as transportation cost to the named place of destination.