Delivery Terms in International Trade (Incoterms)

While talking about a price of a certain good, it becomes an important detail what are included in this price. So, one should be aware in which delivery term agreement was reached. International Trade Chamber defined commonly used delivery conditions with standard codes. These are accepted as reference for international trade & trade laws.

Ex-Works (EXW)
In frame of  Ex-Works delivery, supplier prepares the goods in his plant. Buyer arranges the forwarder and picks up the goods by supplier’s plant. All other costs such as insurance, customs formalities etc belongs to buyer.

Forexample: In delivery term of “Ex-Works Milano”, supplier produces goods in their plant in Milano and make them packed, ready for transportation.
 
Cost-Insurance-Freight (CIF)
In this type of delivery, supplier arranges transportation till the final harbour. Insurance cost till this point is also paid by supplier. Buyer receives the goods in the harbour close to his premises and have them cleared out of customs. Finally, buyer have them carried to his own plant/warehouse. Cost occurs after the final harbour is under buyer’s responsibility.

Forexample: In CIF-Haydarpaşa delivery, supplier prepares and delivers the goods till Haydarpasa harbour. Freight and insurance is paid by supplier till Haydarpasa. Buyer receives the goods, clears out of customs and brings them to his plant/warehouse afterwards. Costs occur in this second step is covered by buyer.

Carriage Insurance Paid (CIP)
This delivery term indicates that final destination is a customs for a motorway transportation. It could be understood that goods will not be carried by ship. It also means a faster and smoother delivery. Supplier sends the goods till the mentioned final destination (customs). As in CIF delivery, insurance and freight is paid by supplier. Buyer clears the goods and brings them to his premises.
Forexample: If delivery term is CIP-Erenköy, goods are carried by truck till Erenköy motorway customs. It is arranged by supplier including insurance. Buyer clears the goods here and brings them to his plant.

Free On Board (FOB)
In this type of delivery, supplier prepares the goods and brings them to a ship at the departure harbour. Remaining procedures and costs belongs to buyer.
Forexample: In FOB-Hamburg delivery, supplier brings the goods to a ship in Hamburg harbour. After this point all the procedures and costs (freight + insurance + custom clearance) belongs to buyer.

Free On Carrier (FCA)
It is more or less motorway version of FOB delivery. Supplier prepares and brings goods to a origin city. It is handed over to buyer’s forwarder there and rest is under buyer’s responsibility.

Delivered Duty Unpaid (DDU)
Here, supplier brings goods till buyer’s premises/warehouse in the final destination. All freight, insurance costs are taken upon by supplier. Buyer is only responsible for customs formalities.
Forexample: In DDU-Pendik delivery, goods are prepared and brought to Pendik. Buyer only arranges the customs clearance.
 
Delivered Duty Paid (DDP)
Here supplier gives all the service i.e. prepares goods brings them to final destination, completes customs formalities and hand over to buyer. There is no additional cost for buyer. This type of delivery is chosen in small volume deliveries such as spare parts. Since customs formalities for higher volume imports are a bit complicated, forwarders and suppliers does not prefer to take this responsibility.
Forexample: In DDP-Samsun delivery goods arrives in buyer’s premises without any additional fee.