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Incoterms stands for international delivery conditions. Incoterms are rules and rights for buying and selling products. It was first published in 1963 by the international chamber of commerce. Since it came out it has been updated 8 times, the last time being in 2020. The Incoterms get updated every 10 years.

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Incoterms were first published in 1963 by the international chamber of commerce. They were made to make international trading easier and avoid conflict and confusion during transport. It's an easy to understand set of rules that is available for anyone in any country so it should be clear to anyone purchasing or selling what the terms are.

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There are 4 Incoterms used specifically for maritime use, those are FAS, FOB, CFR, and CIF. The other Incoterms can be used for any mode of transportation including maritime. Incoterms also make clear where responsibility lies when something goes wrong during the process of transporting a product.

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The FAS Incoterm is one of the four Incoterms for maritime use only. With the FAS Incoterm, the seller delivers the goods when they are either placed alongside the ship/vessel selected by the buyer at the named port of shipment. When the goods are alongside the ship, the risk of loss or damage is transferred from the seller to the buyer. The seller promises that the goods will be cleared for export but has no obligation to clear them for import.

Example:
A vendor of litter box sand has sold 1000 kg of litter box sand to a pet store. The goods are placed in a container and after the container is placed beside the ship selected by the buyer the risk of damage or loss no longer falls onto the seller. The only responsibility the seller has after the goods are on the ship is to clear the goods for export.

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The FOB Incoterm is the second Incoterm used for maritime use only. The goods are deemed delivered by the seller to the buyer when they are delivered on board the ship selected by the buyer at the named port of shipment.  As a result, once the goods are loaded onto the ship, the risk of loss or damage to the goods is transferred to the buyer. Just like with the FAS Incoterm the seller only has to clear the goods for export not import.

Example:
so if we take the same example as with the FAS Incoterm. The vendor of litter box sand has placed the goods into the container and has placed the container onto the ship selected by the buyer. Once the container is on the ship the risk of damage or loss no longer falls onto the seller.

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This Incoterm is the most convenient for the seller because it has the least responsibility for them. The only thing the seller has to do is make sure the agreed-upon products are ready for the buyer to pick them up. The rest of the transportation is all the obligation of the buyer. This Incoterm is best used when trading domestically.

Example:
A vendor of firewood sells 10 pallets with firewood to a garden shop. The two parties agree that the vendor drops off the packed pallets of firewood at the closest port, the buyer (the garden shop) makes sure that there is transportation from the port to the port closest to the port. Because they used the EXW Incoterm they agreed that the seller has the least responsibility and only needs to drop the product off at the agreed-upon location.

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The delivery of goods under the FCA Incoterm is as follows, the seller and buyer agree upon a location for the drop off of the products. If this location is on the property of the seller the goods are no longer his responsibility when the products are loaded onto a truck or another form of transportation. If the products will be dropped off at another location the products are his responsibility until they are loaded onto the buyer's truck.

Example:
A vendor of TVs sold 100 TVs to an electronic wholesaler, they agree to drop off the TVs at an airport where the buyer has arranged for the TVs to be picked up. From the moment that the TVs are loaded onto the plane, they are no longer the seller's responsibility, and if anything happens it's the responsibility of the buyer.

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For this Incoterm, the same rules apply as for the CPT Incoterm with the addition that the seller has to insure the products. So that if something happens to the products the responsibility doesn't fall onto the buyer.

Example:
so if we take the same example as for the CPT Incoterm, if the seller is transporting the products to the agreed-upon point but the cargo container with couches and tables falls off of the cargo ship then the insurance should be able to cover that instead of the buyer.

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The CFR Incoterm is the third Incoterm that is used for maritime use only. The seller delivers the goods to the buyer by loading them onto the ship. As a result, the risk of loss or damage is shifted onto the buyer when the goods are loaded onto a vessel at the port of delivery, rather than the port of destination as in the FOB Incoterm. Regardless of the risk being transferred at the point of delivery, the seller is required to clear the goods for export and is responsible for all the costs related to unloading the goods at the port of destination.

Example:
A furniture seller has sold some chairs and couches to a furniture wholesaler. The goods have been placed in a container and on a ship. The risk of loss or damage is transferred to the buyer as soon as the goods are placed upon the ship at the port of delivery closest to the seller. But the seller has to pay for all costs until the goods are unloaded at the port of destination, from there on the buyer has to pay for transporting the goods to their warehouse.

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The CIF Incoterm is the last Incoterm that is only used for maritime transport. The rules of the CIF Incoterm are basically the same as those of the CFR Incoterm, the only difference is that here the seller insures the goods in case of loss or damage.

Example:
so taking the same example from the CFR Incoterm. The goods are placed in a container and on a ship. The seller has an insurance for the goods in case something happens to them during the transportation to the port of destination. If the container with goods falls off of the ship during a heavy storm the risk doesn't fall onto the buyer directly because the seller has insured the products.

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When using this Incoterm the delivery goes like this, the seller of the goods will make sure the goods are clear for export and that everything is arranged for the goods to arrive at the agreed-upon location. However, the seller doesn't have any responsibility as soon as the goods leave their property. That means that most of the costs will be with the seller but the risk and responsibility are with the buyer.

Example:
A furniture manufacturer is delivering 10 couches and 10 dining tables to a furniture store. The two parties agreed that the goods would be delivered to the port closest to the buyer's warehouse. From there the buyer will transport them to their warehouse. The buyer carries all of the responsibility but almost none of the costs.

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When the Incoterms were updated in 2020 the DPU Incoterm replaces the DAT Incoterm that replaced the DEQ Incoterm when the list was updated in 2010. According to the DPU Incoterm, the seller delivers the goods to the buyer when the goods are unloaded from the transportation vehicle and placed at the buyer's disposal at the destination or at the agreed point. It's the only Incoterm that says the seller has to unload the goods at the final destination. As a result, the seller is responsible for the risk until the goods are unloaded at the destination.

Example:
if we take the same example as from the DDP Incoterm. The seller has placed the packaged jewelry on a truck going to the buyer. The seller has the responsibility for the products until the goods are unloaded from the truck at the buyer's warehouse or another agreed-upon location.

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The goods are deemed to be delivered by the seller to the buyer if they are placed at the buyer's disposal, cleared for import, on the arriving transportation vehicle, ready for unloading at the place of destination or an agreed point. Because it is the only Incoterm requiring import clearance by the seller, the DDP Incoterm places the highest amount of responsibility on the seller.

Example:
A vendor of high-quality jewelry has sold some necklaces, rings, and bracelets to a high-end wholesaler. The seller places the packed items in some boxes and the boxes go onto a truck. The seller has the responsibility for the damage or loss of the items until they have arrived at the buyer's disposal. The seller also needs to clear the products for export and import.

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This Incoterm is typically used when the parties do not want the seller to be responsible for the risk and cost of unloading. The goods are deemed delivered to the buyer under the DAP Incoterm when they are placed at the buyer's disposal on the transportation vehicle, ready for unloading at the place of destination or an agreed point. As a result, the seller bears the risk until the goods are placed at the buyer's disposal at the destination. Except for the costs of import customs clearance, the seller pays for transportation to the specified location. Furthermore, before the goods are ready for unloading by the buyer, the seller assumes all risks.

Example:
Once again taking the example from the DDP Incoterm. The seller has placed their packaged jewelry on a truck heading towards the buyer. The products are delivered when they are ready for unloading at the place of destination which could be the buyer's warehouse or another agreed-upon place. The seller is only responsible for clearing the goods for export.