There are quite a few International Commercial Terms pre-defined by the International Chamber of Commerce and used worldwide, and the terms we often come across are EXW, FOB, CFR and DAP.
EXW – Ex Works (named place of delivery)
EXW means that a seller has the goods ready for collection at his premises (works, factory, warehouse, plant) on the date agreed upon. You pay all transportation costs and also bear the risks for bringing the goods to final destination.
FOB – Free on Board (named port of shipment)
FOB means the seller pays for transportation of goods to the port of shipment and loading, and clears the goods for export; while you pay cost of marine freight transportation, insurance and transportation cost from the arrival port to destination. The passing of risk occurs when the goods pass the ship's rail at port of shipment.
This term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments.
CFR – Cost and Freight (named port of destination)
Seller pays the costs and freight to bring the goods to the port of destination. However, risk is transferred to you once the goods are loaded on the vessel. Insurance for the goods is not included.
DAP – Delivered at Place (named place of destination)
Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer. You pay cost of import customs clearance and import duty and taxes.
Allocation of buyer/seller costs according to Incoterms 2010