Shipping Terms: The Big 8

Shipping terms, formally known as Incoterms® (International Commercial Terms), are a set of standardized rules published by the International Chamber of Commerce (ICC) that govern global trade contracts. These terms act as a universal language for logistics, clearly defining the division of responsibilities, costs, and risk transfer between the seller and the buyer. By establishing exactly where the "point of delivery" occurs, they prevent misunderstandings regarding who pays for freight, insurance, and customs clearance, ensuring both parties know exactly when the responsibility for the goods changes hands.

Comparison Matrix: The "Big 8"

This table provides a high-level view of who handles what. "Seller" handles the task if marked; otherwise, it is the buyer’s responsibility.

*Note: FOB and CIF are restricted to sea/inland waterway transport. All others are multi-modal.

Category Overview

Group E (Departure)

• EXW (Ex Works): The seller makes goods available at their factory. The buyer manages everything. High risk for the buyer, particularly with export clearance.

Group F (Main Carriage Unpaid)

• FCA (Free Carrier): The modern standard. Seller clears export and delivers to the carrier. Best for containerized freight.
• FOB (Free on Board): Seller delivers on board the vessel. Sea/Waterway only.

Group C (Main Carriage Paid)

• CPT (Carriage Paid To): Seller pays freight to destination, but risk transfers to the buyer when the first carrier receives the goods.
• CIP (Carriage and Insurance Paid To): Same as CPT, but the seller must provide "All-Risk" insurance coverage.
• CIF (Cost, Insurance, and Freight): Seller provides freight and minimum insurance. Sea/Waterway only.

Group D (Arrival)

• DAP (Delivered at Place): Seller pays freight to the destination. Buyer clears import customs and pays duties.
• DDP (Delivered Duty Paid): The "all-inclusive" option. The seller handles everything, including import duties and taxes.

Which one should you choose?

• Total Control: Use FCA or EXW. You manage your own forwarder and choose the most cost-effective route.
• Balanced Convenience: Use CPT/CIP (if you have your own agent at the destination) or DAP (if you want door-to-door delivery without the customs headache).
• Hands-Off Experience: Use DDP. It is the easiest for the buyer but typically includes a cost buffer for the supplier's risk and administrative effort.