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5 of the most common Incoterms used in shipping

What is an Incoterm?

An Incoterm is a globally recognised set of commercial terms that apply to sales and purchase of goods overseas.  Simply put, agreeing an Incoterm means all parties involved in the transaction understand their responsibilities to organise and pay for the shipment of the goods and whose risk the transportation is at any given time during the shipping.

5 of the most common Incoterms

At Mercator, these are the 5 Incoterms that we see most frequently when handling international shipments for our clients. 

EXW – Ex Works

The buyer is responsible for the transportation costs and risk from the seller’s location to the final destination.

FOB – Free on Board

The seller takes responsibility for costs and risk involved for the shipment up until the goods are loaded onto a vessel at the named port at origin.  The buyer is responsible for cost and risk of the shipment to the destination.

CFR – Cost and Freight

The seller pays the costs and freight to ship the goods to the destination port overseas.  The buyer is then responsible for the costs and risk from then on.

CIF – Cost Insurance and Freight

As CFR (above), but the seller also obtains and pays for the marine insurance.

DPU – Delivered at Place Unloaded

The seller organises the carriage and delivery of the goods, to be unloaded at the agreed place.  The seller arranges the unloading of the goods at the agreed place.  The seller also must organise the customs clearance at the importing country, and cover any customs duties and taxes.

This used to be referred to as DAT (Delivered at Terminal), however delivery can happen anywhere, not just at a terminal, so the term was updated in the Incoterms 2020.

There are 11 Incoterms, so if you cannot see the one you are looking for, have a look at this post here about Incoterms 2020.

If you are looking for a reputable freight forwarder to handle your international shipments, please get in touch for a quote.  Our team will be happy to help you.  Please email sales@mercatorcargo.co.uk or call (+44) 02392 756 575.

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