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Incoterms Definitions Part 1: EXW, FCA, FAS, FOB

  
  
  

IncotermsLast week we posted the introduction of this blog series on Incoterms. There you'll find a general explanation of the form and function of these beauties. Now we are on to the meat of it – a list of the first 4 Incoterms, along with an expansion of the abbreviation and a detailed explanation of who pays and who assumes risk.

These first 4 are arranged in order of increasing cost and risk to the seller. These 4 terms cover 2 groups: Group E – Departure and Group F - Main carriage not paid by seller.

Group E abbreviations start with E and cover departure of goods. Group F abbreviations all start with an F and are characterized by the main costs being covered by the buyer.

Click here for an incoterms quick reference guide from your friends here at UCM, but then head on back to this page for the detailed explanation of the terms.

1. EXW: Ex (Latin for out of or from) Works; i.e. goods available from the place of production.

Definition: EXW is usually followed by a place name[1], such as EXW Portland and means essentially that the seller will make the goods available to the buyer at a specified place, i.e. the seller’s premises/warehouse/works/factory, and at a specified time. This fulfills the seller’s obligations – leaving the buyer to load the goods onto whatever transportation has been arranged, clear the goods for export, and bear all the risk during transport.

Caveat: Alternate arrangements can be made, such as the seller agreeing to load the goods and assume the risks of such loading, etc. Any such deviation must be made explicit in the contract.

Note:  When getting an initial price quote for goods, you are usually quoted the price for an Ex Works arrangement, that is, the price of the goods not including shipping, loading, insurance or any of the other costs likely to apply.[2]  Therefore, Ex Works translates into the arrangement carrying the minimum obligation and risk for the seller and the maximum obligation and risk assumption for the buyer. Ex Works applies exclusively to air, rail, road, and containerized/multimodal transport.[3]

2. FCA: Free Carrier

Definition: FCA is usually followed by a place name – the initial destination of the goods, FCA Anchorage for example. Not surprisingly, this term is also referred to as “named place delivery”.  Under the terms of FCA, it is the seller’s obligation to hand the goods over to the first carrier at the named place once they have been cleared for export. Using our earlier example, the seller would have fulfilled their obligation once the goods had been cleared for export and delivered from the seller’s warehouse (let’s say) to the carrier waiting at the port of Anchorage. At this point the buyer assumes the risks and costs of any further transport executed by the first carrier.

Note: Sometimes, no specific place of delivery is where the goods will change hands and be delivered into the hands of the carrier within the range specified in the contract.[4] FCA represents an incremental increase in the cost and obligation to the seller over the EXW arrangement. Because the seller owns the good right up to delivery, FCA arrangements allow the seller to resell the goods to someone else while the goods are still in transit. Free Carrier applies exclusively to air, rail, road, and containerized/multimodal transport.[5]

3.FAS: Free Alongside Ship

Definition: Free Alongside Ship means what it sounds like, that the seller must transport the goods all the way to the dock, close enough to be reached by the crane of the ship it will be transported in.[6] Also it is the seller’s responsibility to clear the goods for export (this is an innovation from the 2000 version of Incoterms, when buyers had to take care of port fees)[7]. FAS is usually followed by a place name, for example FAS San Francisco. The place name indicates the port where the goods are to be delivered on the quay beside the carrier ship.

Note: Not surprisingly, FAS applies exclusively to maritime and inland waterway shipping. However it does not apply to goods packaged in shipping containers. FAS is instead usually used for goods sold as bulk cargo, such as petroleum products or grain.[8]

4. FOB: Free Onboard Vessel

Definition: Free Onboard Vessel is sort of a hybrid, where the seller is obligated to bring the goods all the way to the port, clear the goods for export, AND see that they are loaded onto the ship nominated by the buyer. Once the goods clear the railing of the vessel the buyer assumes the risk.[9] FOB is often followed by the named loading port thus: FOB Long Beach, meaning the seller delivers the goods, pays the port fees, and sees the goods loaded onto the ship docked (in this case) at the port of Long Beach.

Note: This Incoterm is used exclusively for maritime and inland waterway transport but not for container shipping.[10]

Well, that’s all for now. Next time we will continue with group C Incoterms – Main carriage paid by seller!

Go to Part 2 for definitions of Group C Incoterms.

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Comments

Dear Sir/Madam, 
 
Please advise whether incoterms (FCA) can be apply for local use example in Singapore or overseas.also advise who will bear the responsibility. 
Awaiting for your prompt reply. 
 
Regards, 
Amy 
Posted @ Wednesday, November 13, 2013 8:15 PM by amy
Can ther incoterms FOB and CIF be used for air shipments? If not, what can be used?
Posted @ Wednesday, May 07, 2014 3:37 PM by Miriam Callejas
Hi Miriam! 
 
FOB and CIF are only for ocean freight. For a deal or agreement that is like FOB but for air, you could use the Incoterm FCA -- Free Carrier.
Posted @ Wednesday, May 07, 2014 4:44 PM by Jared Vineyard
what does the Incoterm CIF mean as used on Ocean freihgt and when is it used.
Posted @ Thursday, October 30, 2014 3:06 AM by romeo
Hi Romeo, 
 
CIF: Cost Insurance and Freight 
 
Definition: This term is identical to the one preceding it – with exception for the insurance portion. With a CIF arrangement, the seller (not the buyer) assumes the risk (and therefore is responsible for purchasing insurance) for the goods during transit from origin to the port of destination.  
 
Note: This term too applies solely to maritime and inland waterway trade. However, CIF may 
not be appropriate where the goods are handed over to the carrier before they are loaded on the vessel - the usual 
container scenario. 
 
There's a link at the end of this blog above that goes to Part 2 covering Group C Incoterms. 
 
Thanks!
Posted @ Thursday, October 30, 2014 3:52 AM by Jared Vineyard
Hello, 
I have some questions : 
- are these incoterms like 2014? 
- can we use it for all kind of transportations (air/road/vessel/ship) or its words changed based on manner of shipment? 
 
Regards, 
Ehsan
Posted @ Monday, November 17, 2014 2:14 AM by ٍEhsan Safari
who will bear the custom clearance the charges in FCA terms
Posted @ Tuesday, December 02, 2014 1:47 AM by Devkinandan
who will bear the custom clearance the charges in FCA terms
Posted @ Tuesday, December 02, 2014 2:18 AM by Devkinandan
Hello 
 
Please kindly advise the difference between the delivery Terms of 
1- DDP & EX-WAREHOUSE 
 
YOUR PROMPT REPLY WILL BE HIGHLY APPRECIATED 
 
Have a wonderful Safe Christmas 
 
samy
Posted @ Monday, December 22, 2014 2:04 PM by SAMY W.ELKHOLY
Hi Samy, 
 
If you're referring to the incoterm EXW, it actually stands for Ex Works, but if the seller has a warehouse, that would fit quite nicely. 
 
EXW and DDP are basically opposites. 
 
With EXW, the seller makes the goods available at their warehouse or place of production and then the buyer is responsible for everything after that. 
 
With DDP, the seller assumes all the risks and costs of shipping instead of the buyer who assumes it all with EXW. 
 
Thanks!
Posted @ Monday, December 22, 2014 3:15 PM by Jared Vineyard
I want to know in case of CIF who Wii bear the insurance cost.
Posted @ Thursday, December 25, 2014 8:44 PM by Abdur Rahman
could u please explain me the numerical numbers like 1,2,3,4,5 mentioned in between the incoterms is stands for what ??
Posted @ Monday, December 29, 2014 5:16 AM by BETSY JOSEPH
Those are footnote numbers, Betsy, to give reference links.
Posted @ Tuesday, December 30, 2014 12:45 AM by Jared Vineyard
Hey Abdur, 
 
In CIF, the seller will take care of insurance. 
 
You can find more details here: http://www.universalcargo.com/blog/bid/94644/Incoterms-Definitions-Part-2-CFR-CIF-CPT-CIP 
 
Thanks, 
Raymond
Posted @ Friday, January 02, 2015 3:54 PM by Raymond Rau
Hello dears, 
 
three questions regarding FOB basis.  
Shipper (nominated by a seller) refused to pay detention fee because he considers this detention fee for an unexpected expense (other shipping lines offer longer "free time"). For that reason booking was on hold. Shipper asked to extend "free time" because of the long way to the plant/factory and back to the harbour. However shipping line (nominated by a buyer) refused to extend this "free time". 
1. Can shipper refuse pay detention fee (charged by shipping line) because of a short detention free period? If so who must pay this fee? 
2. Has shipper (nominated by buyer) to follow all instructions of shipping line (nominated by seller)? 
3. Can shipper ask buyer (through seller) for another shipping that offers longer detention free time? If so, is it the obligation of the buyer to comply with requirement of the shipper/seller? 
 
Thank you very much 
Richard 
Posted @ Friday, January 23, 2015 2:27 PM by Richard
Dear friends, 
I'm very sorry for my mistake in qestion shown above. 
The correct 2nd/3rd question is the following: 
2. Has shipper (nominated by seller) to follow all instructions of shipping line (nominated by buyer)?  
3. Can shipper ask buyer (through seller) for another shipping line that offers longer detention free time? 
 
Thank you very much 
Richard
Posted @ Saturday, January 24, 2015 5:00 AM by Richard
Hello Richard, 
 
You pose a very good question in a very grey area. 
 
You may need to get a lawyer involved who specializes in this field as the information I respond below are of my opinion and not legally binding. 
 
1. Anyone can refuse to pay any charge given by the shipping line. However, in turn the shipping line can refuse to load your carrier. You can dispute any charge but for the most part the shipping line will win. I believe the shipper/supplier is truly responsible for this charge because FOB terms state that it is in their care until the container is loaded onto the vessel. 
 
2. In FOB terms, shipper/supplier is to follow instructions given by the consignee/buyer. It is the consignee/buyer's right to select whichever shipping company they choose and the shipper/supplier must use what is elected. Unless arrangements different than these were discussed during the buying process, this is the standard FOB terms. 
 
3. The shipper/supplier may make any request they like to the consignee/buyer. However, the consignee/buyer does not have to grant any such requests under FOB terms. However, during the buying process if the shipper/supplier advises of such requests with reasons why and charges they cannot pay and consignee/buyer ignores such details and proceeds anyways, shipper/supplier may have recourse to not pay such charges they advised upon during the buying process. 
 
All in all, each order between a shipper/supplier and a consignee/buyer is negotiated between the two parties. If you have not discussed any special circumstances, the order should follow the incoterms which are agreed upon on the order. 
 
Thanks, 
Raymond
Posted @ Monday, January 26, 2015 12:34 PM by Raymond
I work for a bank.One of my client imports goods from China.My client is located in a city(Hyderabad) while the goods reach a sea port (Chennai).From that sea port my client bears the inland haulage charges i.e., domestic freight chgs.In such a condition what should be the incoterm used. 
 
Thanks 
Jhansi K
Posted @ Wednesday, February 04, 2015 8:41 PM by Jhansi K
can you please explain to me what FCA, CA means? 
Thanks
Posted @ Tuesday, February 17, 2015 10:27 AM by Evelyn
if you write incoterms,what are the instructions you follw to write it.
Posted @ Monday, March 02, 2015 5:25 AM by kayonga
dear Sir/Madam, 
we export maize seed to our neighbouring countries by road and we pay for transport and insurance kindly advise the correct intercom to use.the second one we pay for insurance but not transport. also advise the correct intercom. we have been using CIF on our invoices.. is correct or wrong intercom
Posted @ Thursday, March 05, 2015 7:53 AM by Ignatius
we have an FOB shipment from Germany to KSA. Here my concern is as we require the Certificate of Origin in KSA & the Certificate of Origin will cost $100 for the COO. As a buyer, are we responsible to pay this amount or the seller is responsible to pay this amount 
 
Awaiting for your advice 
 
Thanks & Kind Regards, 
 
Mubarak Ummer 
Posted @ Monday, April 06, 2015 4:51 AM by mubarak
kindly advise me the correct intercom to use when exporting within the region (Africa)by road.
Posted @ Friday, April 10, 2015 7:30 AM by Ignatius Muhandu
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