The Treasurer’s Guide to Trade Finance

Chapter 6 The use of documents in trade

which portion of the transportation process

they are responsible for, and which stages

they should arrange and insure. The use

of a particular Incoterm can be agreed by

both parties to a transaction and will then

be applied in the event of a dispute. (Most

countries recognise Incoterms, although a

small number do not.) The latest version of

Incoterms was launched in 2010, effective

1 January 2011, and is outlined below.

Core characteristics

The 11 different Incoterms can be divided

into four main groups, each of which relates

to a different point at which responsibility

for the goods transfers from the seller to the

buyer. Most of the Incoterms are suitable for

any mode of transport, although four (FAS,

FOB, CFR and CIF) are suitable for sea and

inland waterway transport only.

Group E – Departure Terms

Under the terms in this group, the buyer assumes responsibility for the transportation of the goods

from the seller’s warehouse. Correspondingly, the seller’s responsibility for the goods ends at the

point at which the buyer picks up the goods.

Term Seller Buyer

EXW

(Ex Works)

Required to to make the

goods available to the

buyer either at the seller’s

own warehouse or at

another place named in the

contract.

Responsible for loading and removing the goods

from the point of delivery.

Solely responsible for arranging all relevant

documentation, including import and similar

licences, for insuring the goods in transit and for

all transportation costs.

This is the only Incoterm which requires the buyer

to arrange for export clearance.

Group F – Main Carriage Unpaid

Under the terms in this group, the seller is responsible for delivering the goods to the buyer’s

shipping company. The buyer is therefore responsible, through the contract with the shipping

company, for the goods once they have been received by the shipping company. The buyer meets

the main costs of shipment.

Term Seller Buyer

FCA

(Free Carrier)

Used for

all forms of

transport.

Required to deliver the goods to a shipping

company named by the buyer at the place

named in the contract.

Responsible for delivery of the goods to the

named point.

Arranges export clearance.

Responsible for all other

documentation, for insuring

the goods in transit and for

all transportation costs from

the named point to the final

destination.

FAS

(Free Alongside

Ship)

Used only for

goods shipped

by water

(including inland

waterways).

Required to deliver the goods alongside

a ship at a port located in the seller’s own

country.

Responsible for delivery of the goods to the

named ship.

Usually responsible for arranging export

clearance.

Responsible for all further

transportation costs, from

the loading of the goods

onto the ship to the final

destination, for all other

documentation and for

insuring the goods in transit.