Under Incoterms 2020, EXW leaves export clearance to the buyer and risk passes at the named place. FCA and FOB put export clearance on the seller, with no insurance duty. CIF adds freight and insurance paid by the seller, yet risk still passes on board. Not legal, customs or tax advice.
Not legal, customs or tax advice. Check the ICC text. This video and page give general information only. Confirm every obligation in the ICC text and with your forwarder or accountant.
Chapters
Transcript
Full text of the video
- Incoterms 2020 are trade terms published by the International Chamber of Commerce (ICC). This video covers four common rules: EXW, FCA, FOB and CIF. They are not law: they apply only if the contract names them [INC, ICC].
- EXW (Ex Works): any mode of transport. The buyer clears the goods for export; the seller has no duty to clear export. There is no insurance duty in the rule. Risk passes at the named place of delivery, which may or may not be the seller's premises [INC, ICCA].
- FCA (Free Carrier): any mode of transport. The seller clears the goods for export. There is no insurance duty in the rule. Risk passes on delivery: on loading onto the buyer's vehicle, or at the named place ready for unloading [INC, ICCA].
- FOB (Free on Board): sea and inland waterway only. The seller clears the goods for export. The rule sets no insurance duty, and risk is the buyer's from loading, so the buyer normally arranges own cover. Risk passes when the goods are loaded on board the vessel at the named port [INC, ICCS].
- CIF (Cost, Insurance and Freight): sea and inland waterway only. The seller clears the goods for export, pays freight to the destination port and insures, at least Institute Cargo Clauses C. Risk still passes when the goods are on board at the port of shipment [INC, ICCS].
- Name the rule, the named place and the edition in the contract. Import duty and import clearance are on the buyer's side. Not legal, customs or tax advice: the guides differ slightly on some points, so confirm each obligation against the ICC text [INC, ICC].
What each rule means
- EXW: Any mode; buyer clears export; no insurance duty; risk passes at the named place of delivery
- FCA: Any mode; seller clears export; no insurance duty; risk passes on delivery to the carrier or named place
- FOB: Sea and inland waterway only; seller clears export; no insurance duty; risk passes when loaded on board
- CIF: Sea and inland waterway only; seller clears export, pays freight and insures (at least Clauses C); risk passes on board at the port of shipment
- Status: Incoterms are not law: they apply only if the contract names them
- Notice: Not legal, customs or tax advice
Questions
Who clears export under EXW?
The buyer. Under EXW the seller has no duty to clear the goods for export, and risk passes at the named place of delivery.
Does the seller have to insure under FOB?
No. The FOB rule sets no insurance duty and risk is the buyer's from loading, so the buyer normally arranges its own cover.
Under CIF, who carries the risk on the sea leg?
Under CIF the seller pays freight and insures, but risk still passes to the buyer once the goods are on board at the port of shipment.