Explanation of 13 trade terms

Master 13 crucial trade terms with our comprehensive guide. Elevate your expertise and navigate the business landscape with confidence.

The following is a classification and definition of the 13 trade terms in the International Chamber of Commerce (ICC) International Commercial Terms (Incoterms), which summarizes the evolution of terms and the latest adjustments in different versions (such as 1990, 2010, and 2020):

Departure term

EXW (Ex Works)

Explanation: The seller prepares the goods at a designated location, such as a factory or warehouse. The buyer bears all costs and risks from the time the goods are picked up (including loading and export customs clearance). The seller’s liability is minimal.

Applicable to: Any mode of transport.

Freight Unpaid Term

FCA (Free Carrier)

Explanation: Delivery occurs when the seller hands over the goods to the buyer’s designated carrier at the designated location. If delivery is at the seller’s premises, the seller is responsible for loading; otherwise, the seller is not responsible for unloading.

Applicable to: Any mode of transport.

FAS（Free Alongside Ship）

Explanation: The seller places the goods alongside the buyer’s designated vessel (e.g., dock or barge) at the port of shipment. The buyer assumes all subsequent risks and expenses (e.g., loading and export customs clearance).

Applicable: Sea or inland waterway transport.

FOB（Free on Board）

Explanation: The seller loads the goods onto the buyer’s designated vessel at the port of shipment. Risk passes when the goods pass the ship’s rail. The seller is responsible for customs clearance for export.

Applicable to: Sea or inland waterway transport.

Freight Paid Term

CFR（Cost and Freight）

Explanation: The seller pays the freight to the destination port, but the risk passes to the buyer once the goods are loaded on board the vessel at the port of shipment.

Applicable to: Sea or inland waterway transport.

CIF（Cost, Insurance and Freight）

Explanation: In addition to fulfilling CFR obligations, the seller must also purchase marine insurance for the goods (default minimum coverage).

Applicable to: Ocean or inland waterway transport.

CPT（Carriage Paid To）

Explanation: The seller pays the freight to the named destination. Risk passes when the goods are handed over to the first carrier.

Applicable: Any mode of transport.

CIP（Carriage and Insurance Paid To）

Explanation: In addition to fulfilling CPT obligations, the seller must also purchase transportation insurance (the 2020 version defaults to ICC(A) All Risks).

Applicable: Any mode of transport.

Arrival term

DAP（Delivered at Place）

Explanation: The seller delivers the goods to the named destination (no unloading required). Risk passes upon delivery. The buyer is responsible for import customs clearance.

Applicable to: Any mode of transport.

DPU（Delivered at Place Unloaded）

Explanation: The seller must deliver the goods after unloading at the destination (an alternative to the original DAT term) and bears the risks and expenses of unloading.

Applicable to: Any mode of transport.

DDP（Delivered Duty Paid）

Explanation: The seller bears all costs and risks (including import duties and customs clearance) to deliver the goods to the buyer’s designated location.

Applicable: Any mode of transport.

DES（Delivered Ex Ship）

Explanation: The seller delivers the goods to the vessel at the destination port (without unloading). Risk passes upon delivery at the destination port (incorporated into DAP after the 2010 edition).

Applicable: Sea or inland waterway transport.

DEQ（Delivered Ex Quay）

Explanation: The seller delivers the goods after unloading them at the destination port and bears the unloading costs (incorporated into DPU after the 2010 edition).

Applicable: Sea or inland waterway transport.

Selection suggestion: Choose the term according to the mode of transport (ocean/intermodal transport) and risk sharing requirements, such as FOB is suitable for ocean transport and DDP is suitable for the seller to include all costs.