An authoritative guide to international trade terms, cost allocation, risk transfer points, and buyer-seller compliance obligations for overseas importers.
Incoterms (International Commercial Terms) published by the International Chamber of Commerce (ICC) determine the exact legal boundaries of buyer and seller responsibilities in cross-border trade. Choosing the right rule dictates who books international carriage, who bears financial loss during marine transit, and who handles customs entry clearance with U.S. Customs and Border Protection (CBP).
| Incoterm | Transport Mode | Export Clearance | Main Carriage | Insurance Obligation | Import Clearance & Duty | Point of Risk Transfer |
|---|---|---|---|---|---|---|
| EXW (Ex Works) | Any Mode | Buyer | Buyer | None | Buyer | At seller's premises before loading. |
| FCA (Free Carrier) | Any Mode | Seller | Buyer | None | Buyer | Upon handover to buyer’s designated carrier. |
| FAS (Free Alongside Ship) | Ocean/Waterway | Seller | Buyer | None | Buyer | Placed alongside vessel at origin port. |
| FOB (Free On Board) | Ocean/Waterway | Seller | Buyer | None | Buyer | Loaded safely on board the ocean vessel. |
| CFR (Cost and Freight) | Ocean/Waterway | Seller | Seller | None | Buyer | Loaded on board vessel (risk passes at origin). |
| CIF (Cost, Insurance & Freight) | Ocean/Waterway | Seller | Seller | Seller (Clause C - Basic) | Buyer | Loaded on board vessel (risk passes at origin). |
| CPT (Carriage Paid To) | Any Mode | Seller | Seller | None | Buyer | Handover to first carrier at origin. |
| CIP (Carriage & Insurance Paid To) | Any Mode | Seller | Seller | Seller (Clause A - All-Risks) | Buyer | Handover to first carrier at origin. |
| DAP (Delivered at Place) | Any Mode | Seller | Seller | None | Buyer | At destination place, ready for unloading. |
| DPU (Delivered at Place Unloaded) | Any Mode | Seller | Seller | None | Buyer | Unloaded at destination terminal/facility. |
| DDP (Delivered Duty Paid) | Any Mode | Seller | Seller | None | Seller | Delivered to buyer destination, duties cleared. |
Drawing from 25+ years of licensed NVOCC operations between Asia and North America, Airlift USA highlights vital operational nuances buyers must evaluate prior to issuing sales contracts.
Under C-Terms, the seller pays international freight to the destination port, but legal risk transfers at origin as soon as the cargo is loaded onto the vessel or handed to the first carrier. Buyers must maintain cargo insurance for ocean transit despite seller freight payments.
FOB was engineered for non-containerized breakbulk cargo checked over ship rails. In modern container logistics, containers are delivered to port terminals days before vessel loading. FCA transfers risk at gate-in, preventing sellers from carrying uninsured risk inside container terminals.
DDP forces the seller to act as the Importer of Record in the United States, requiring U.S. customs entry filings, customs bonds, HTS classification responsibility, and tariff payments (such as Section 301 duties). DAP with broker assistance is highly recommended for foreign sellers without U.S. corporate entities.
Incoterms rules do NOT govern the transfer of title or property ownership, nor do they define payment mechanics or breach remedies. Ownership terms must be distinctly specified in your commercial bill of sale or purchase order contract.
In-depth operational specifications, risk allocation, insurance defaults, and recommended logistics applications for every trade term.
The seller makes goods available at their facility. The buyer assumes total responsibility for loading, export clearance customs, ocean/air main freight, and import clearance duties.
The seller clears goods for export and delivers them to the buyer's appointed carrier at the named origin facility or port terminal. Ideal for containerized freight (FCL/LCL).
The seller clears goods for export and places cargo alongside the vessel at the named origin port. The buyer bears all costs and risks of loading cargo onto the vessel.
The seller delivers cargo cleared for export and ensures it is safely loaded on board the vessel nominated by the buyer at the origin port.
The seller arranges and pays main ocean freight to the destination port. However, risk transfers to the buyer as soon as goods are loaded on board at origin.
The seller pays ocean carriage to destination and must obtain minimum marine insurance cover (Institute Cargo Clauses C) for 110% of contract value in favor of the buyer.
The seller pays freight for transport to the named destination place. Risk shifts to the buyer immediately upon handover to the first international carrier.
The seller pays freight to destination and must secure comprehensive All-Risks cargo insurance (Institute Cargo Clauses A) for 110% of contract value benefiting the buyer.
The seller delivers cargo to the buyer's named destination place, bearing all risks and costs up to the door. The buyer handles import clearance entry, taxes, and unloading.
The seller manages door transport and bears the obligation to unload cargo at the destination terminal or facility. Replaces former DAT (Delivered at Terminal) rules.
Maximum obligation on the seller. The seller manages end-to-end transport, export/import clearance, customs bond filings, tariffs, taxes, and delivery to the buyer's door.
Direct answers from our licensed customs brokers and freight operations team.
The 11 rules are divided into two main categories: 7 rules for Any Mode of Transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and 4 rules strictly for Ocean and Inland Waterway Transport (FAS, FOB, CFR, CIF).
Under FOB, risk passes only when goods are on board the vessel, even though containerized cargo is delivered to port terminals days in advance. FCA establishes delivery where physical custody changes hands at the origin container yard or terminal, protecting sellers from uninsured port delays.
Only CIF and CIP explicitly require sellers to purchase cargo insurance. CIP mandates comprehensive All-Risks cover (Institute Cargo Clauses A), while CIF specifies minimum basic cover (Institute Cargo Clauses C).
The buyer acts as the Importer of Record and pays all import duties, harbor maintenance fees (HMF), merchandise processing fees (MPF), and Section 301 tariffs under 10 of the 11 rules. DDP is the single rule assigning customs entry and duty payment to the seller.
No. Incoterms govern risk transfer, cost allocation, and delivery points. Ownership rights, legal title transfer, currency of payment, and breach of contract terms must be explicitly defined in your sales purchase contract.
Consult with Airlift USA's licensed logistics specialists to select the safest Incoterms rule, structure optimal marine insurance, and clear U.S. customs seamlessly.
