Good things are happening in British business
Find out how some of our customers have evolved their businesses in innovative ways.
Read time: 8 mins Added: 06/10/2023
INCOTERMS (International Commercial Terms) are a set of trade term definitions developed by the International Chamber of Commerce (ICC) and recognised internationally.
INCOTERMS are the language you’ll need when you’re trading abroad, defining the trade contract responsibilities and liabilities between a buyer and a seller. They cover who is responsible for paying freight costs, insuring goods in transit and covering any import/export duties, for example. They are invaluable as, once importer and exporter have agreed on an INCOTERM, they can trade without discussing responsibilities for the costs and risks covered by the term.
Here is a list of the commonly used INCOTERMS you'll need when trading internationally. Full details of all the INCOTERMS and their definitions are available from the International Chamber of Commerce.
The seller makes the goods available at his or her premises. The buyer is responsible for loading. This applies to any mode of transport, but should only be used for domestic transactions, because the seller only has to 'provide the buyer' assistance in obtaining any export licence, or other official authorisation. The seller also has no obligation to load the goods. In addition the buyer has limited obligations to provide the seller with proof of export. For international trade, FCA, below, is more appropriate.
The seller must 'deliver the goods to the carrier ... nominated by the buyer ... at the named place'. This term is suited for international sales with minimum obligations for the seller. Its advantage over EXW is that the seller is responsible for any export licensing and Customs export clearance, which eases the problem of proof of export, and the seller must load the goods (which is usually the case).
There is a new focus on 'FCA ... seller's premises' as the appropriate term for international sales when the seller wants to limit their obligations to the loading of the goods and export clearance.
(… named place of destination). The seller pays for carriage. This term is used for all kinds of shipments. Risk is transferred from the seller to the buyer upon handing over of the goods to the first carrier at the place of shipment in the country of export.
(named place of destination) - any mode of transport. The seller must 'deliver to the first carrier at the named place'. It’s strongly recommended that the parties define the place of delivery (in the seller's country) as well as the place of destination (in the buyer's country) due to the fact that risk passes to the buyer at the named place of delivery in the seller's country.
When CPT or CIP terms are used, the seller fulfils their obligation to deliver when they hand the goods over to the carrier, and not when the goods reach the place of destination. So these are 'shipment contracts' not 'arrival contracts'. Therefore, it is strongly recommended that the place of delivery, in the seller's country, is identified as precisely as possible in the contract.
(…named terminal at destination). The seller pays for carriage to a nominated ‘terminal’ or ‘point’, except for costs related to import clearance. The seller also assumes all risks up to the point that the goods are unloaded at the terminal.
DAP would be inappropriate in these circumstances as the seller has only to place the goods 'ready for unloading’.
(…named place of destination). This is appropriate for both domestic and international sales.
The seller delivers when 'the goods are placed at the disposal of the buyer ready for unloading by the buyer ... at the named place'. All import Customs formalities and costs are the responsibility of the buyer.
(…named place of destination). This applies to any mode of transport. The seller must deliver the goods to the buyer, cleared for import, and not unloaded at the named place of destination.
The seller must deliver the goods by 'placing them on board the vessel'. Where the goods are handed over to the carrier before they are on board the vessel – goods in containers, for example, the CPT or CIP term should be used.
When CFR or CIF terms are used, the seller fulfils its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination. So it’s important that the port of shipment is identified as precisely as possible in the contract.
The decision to start buying or selling overseas may seem like a big one, but growing your business in other countries can be just as easy as growing your business at home.
Practical guides to support you in developing your business - from starting-up and managing it day to day, to growing and trading internationally.
Lloyds Bank is a trading name of Lloyds Bank plc, Bank of Scotland plc, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH.
Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278, 169628 and 763256 respectively.
Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is a wholly-owned subsidiary of Lloyds Bank Corporate Markets plc. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH has its registered office at Thurn-und-Taxis Platz 6, 60313 Frankfurt, Germany. The company is registered with the Amtsgericht Frankfurt am Main, HRB 111650. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.
While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.