The eleven rules are divided into two main groups
|Rules for any transport mode
• Ex Works EXW
• Free Carrier FCA
• Carriage Paid To CPT
• Carriage & Insurance Paid to CIP
• Delivered At Terminal DAT (***)
• Delivered At Place DAP
• Delivered Duty Paid DDP
|Rules for sea & inland waterway only
• Free Alongside Ship FAS
• Free On Board FOB
• Cost and Freight CFR
• Cost Insurance and Freight CIF
In general the “transport by sea or inland waterway only” rules should only be used for bulk cargos (e.g. oil, coal etc) and non-containerised goods, where the exporter can load the goods directly onto the vessel. Where the goods are containerised, the “any transport mode” rules are more appropriate.
A critical difference between the rules in these two groups is the point at which risk transfers from seller to buyer. For example, the “Free on Board” (FOB) rule specifies that risk transfers when the goods have been loaded on board the vessel. However the “Free Carrier” (FCA) rule specifies that risk transfers when the goods have been taken in charge by the carrier.
(***) In Incoterms 2020, Delivered At Terminal has been renamed Delivered at Place Unloaded
Another useful way of classifying the rules is by considering:
This gives us these four groups:
This last group of rules often surprises newcomers, because although the seller pays for transport to the named place, the risk transfers at an earlier point in the journey – see delivery.
Consider, for example, goods that are taken in charge at Felixstowe, UK, for transport to Long Beach, California, under the rule “CIP Long Beach, California, Incoterms 2010”. The seller will arrange and pay for freight to Long Beach, but risk will pass to the buyer upon delivery of the goods to the carrier at Felixstowe, before the main carriage.
This interactive on-line tool may be useful for seeing how a rule may be selected according to these principles.