Many may raise question in last part which INCO terms would be considered as the best version, or else most comprehensive and easiest understanding version. As the matter of fact, each version clearly explains each term at its most understanding point because complication would harm some benefit of importer or exporter.
However, as per author’s point of view, the best version ever of INCO term could be INCO term 2000, or so-called Millennium version, because this particular version has sorted out into clear category after no categorize was made throughout many past decades.
INCO term 2020 consists of 4 categories, total 13 terms, comprising Category E / F / C and D with following details :-
- Category E consists of 1 term which is EXW
- Category F consists of 3 terms which are FOB FAS and FCA
- Category C consists of 4 terms which are CFR CIF CPT and CIP
- Category D consists of 5 terms which are DAF DES DEQ DDU and DDP
Definition of each term as follows :-
- EXW = Ex Work, means price of the goods cover only the cost of goods itself, excluding all other expenses elsewhere. However, trader should always ensure that such price also covers packaging that would always worth or suitable for each mode of transportation, so there will be no dispute regarding this issue.
- FOB = Free On Board, means price of the goods cover the cost of goods plus all other expenses and charges incurred at the country of origin up to taking the goods onboard the vessel at the designated port.
- FAS = Free Along Ship, means price of the goods cover the cost of goods plus all other expenses and charges incurred at the country of origin up to laying the goods along the ship’s side at the designated port.
- FCA = Free Carriage, means price of the goods cover the cost of goods plus all other expenses up to delivery the goods to designated place nominated by the buyer (in case shipment is made by sea freight) or to designated airport of origin (in case shipment is made by air freight)
- CFR = Cost and Freight, means price of goods as per above FOB definition plus sea freight charge up to arrival at port of destination.
- CIF = Cost + Insurance + Freight, means price of goods as per above FOB definition plus sea freight and insurance up to arrival at port of destination.
- CPT = Carriage Paid To, means price of goods as per above FCA definition plus carriage or transportation charges (by either surface/ road or air freight) up to arrival at designated place or airport of destination.
- CIP = Carriage and Insurance Paid To, means price of goods as per above CPT definition plus insurance premium
- DAF = Deliver At Frontier, means price of goods cover all charges up to delivery at designated frontier or border
- DES = Deliver Ex Ship, means price of goods covers all charges up to arrival at port of destination an uplift the goods off the carrying vessel.
- DEQ = Deliver Ex Quay, mean price of goods covers all charges as per DES definition plus bringing the goods out of port (or quay) area.
- DDU = Deliver Duty Unpaid, means price of goods covers all charges up to delivery to consignee’s door, except import duty and taxes.
- DDP = Deliver Duty Paid, means price of goods covers all charges up to delivery to consignee’s door including import duty.
Please also read the following remarks well :-
- With EXW term, it should be clear as to where the goods will be put ready for pickup, different places will result different charges of some kind of expenses.
- With FOB and FAS term, port of origin should be indicated, this should be name of the port, not country because some countries may consist of so many ports which reflect different charges.
- With FCA term, place of receipt should be indicated, in case shipment is made by sea or road (which normally be nominated warehouse). In case shipment is made by air freight, airport of origin should be indicated. Ensure to show name of airport, not country because one single country may operate too many airports, and expense for each airport may differ among one another.
- With CFR, CIF, DES and DEQ term, port of destination should always be indicated.
- With CPT and CIP term, place or airport of destination should always be indicated.
- With DDU and DDP terms, address of delivery place must always be indicated.
- Theoretically, terms FOB, FAS, CFR, CIF, DES and DEQ are used with sea freight shipments only.
- FCA term is also yielded to use for all modes of transportation, regardless of surface / sea or air as per mutual agreement between buyer and seller. In case of air freight shipment, its definition will be the same as FOB
- CPT and CIP terms will be used for airfreight shipment only, considering CPT equal to CFR and CIP equal to CIF with just different mode of main transportation.
But why does the author think INCO term 2000 is the best among others, this will be revealed in next part.