TIP: The importer should have a clear understanding of the shipping industry’s negotiated terms as they define the responsibilities for both parties for the complete shipping process.

The logistical responsibilities of both the buyer and seller involved in shipping goods internationally are defined in categories called Incoterms. The Incoterm selected by the two parties acts as a key definer of the terms and responsibilities of the commercial agreement and the letter of credit.

EXW – EX Works**

The exporter's minimum responsibility is to make the goods available at the specified location. The customer accepts all other risks and costs.

FCA – Free Carrier

The exporter delivers the goods into the custody of the carrier at a specific place. The buyer then assumes all risks and costs.

FAS – Free Alongside Ship**

The exporter’s obligations are fulfilled when the goods have been placed alongside the principal ship at the dock or specified port. The buyer then assumes all risks and costs.

FOB – Free on Board**

The exporter’s obligations are fulfilled when the goods are placed on board the ship. The buyer then assumes all risks and costs.

CFR – Cost and Freight

The exporter pays all costs necessary to transport the goods to the named destination. Risks are transferred to the buyer when the goods pass over the ship’s rails.

CIF – Cost Insurance Freight**

Same as CFR except the exporter also has to provide marine insurance.

CPT – Carriage Paid To

The exporter pays the freight to a named destination, at which point the buyer assumes all risks and costs.

CIP – Carriage and Insurance Paid To

Same as CPT except the exporter provides insurance.

DAF – Delivered At Frontier

The exporter’s obligations terminate when the goods are delivered to the specified frontier. The buyer is responsible for clearing Customs. The buyer assumes all risks and costs from this point on.

DES – Delivered Ex Ship

The exporter pays all transport costs to a named port but does not clear the goods through Customs. The buyer assumes all risks and costs from this point on.

DEQ – Delivered Ex Quay

The exporter pays all costs to the quay, including Customs clearance. The buyer then assumes all risks and costs.

DDU – Delivered Duty Unpaid

The exporter pays all costs to a named destination excluding duty clearances, at which point the buyer assumes all risks and costs.

DDP- Delivered Duty Paid

The exporter pays all costs, until the goods arrive at the customer's warehouse.

**Most commonly used terms.

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