Incoterms are eleven rules from the International Chamber of Commerce that define, in an international sale, which costs each party bears and at which point risk passes from seller to buyer. They do not regulate ownership or payment: only logistics and risk. The current version is 2020.
The seven terms for any mode of transport
| Term | The seller delivers… | You take over from… |
|---|---|---|
| EXW Ex Works | At their warehouse, unloaded onto nothing. | Loading at origin, the whole transport and export clearance. |
| FCA Free Carrier | To the carrier you nominate, export-cleared. | The main carriage. |
| CPT Carriage Paid To | Pays carriage to destination, but risk passes on handover to the first carrier. | Risk in transit, even though freight is paid. |
| CIP Carriage and Insurance Paid | As CPT, plus broad-cover insurance. | Risk in transit, with insurance in your favour. |
| DAP Delivered at Place | At the agreed place, ready for unloading. | Unloading and import (duties and customs). |
| DPU Delivered at Place Unloaded | At the agreed place, unloaded. | Import (duties and customs). |
| DDP Delivered Duty Paid | At your warehouse, import duties paid. | Only unloading. |
The four sea-only terms
| Term | The seller delivers… | You take over from… |
|---|---|---|
| FAS Free Alongside Ship | On the quay, alongside the vessel. | Loading on board and freight. |
| FOB Free On Board | On board the vessel at the port of origin. | Ocean freight, insurance and everything else. |
| CFR Cost and Freight | Pays freight to Puerto Cortés; risk passes on loading at origin. | Risk from origin and insurance. |
| CIF Cost, Insurance and Freight | As CFR, plus minimum-cover insurance. | Risk from origin, with basic insurance in your favour. |
What a Honduran importer should know
- CIF does not mean “delivered to your warehouse”. The seller covers freight and minimum insurance to the destination port. Unloading, terminal charges, customs, duties and transport to your warehouse are still yours.
- FOB or FCA give you control. By arranging freight yourself, you choose the carrier, the route and the agent coordinating customs at destination. It is the most common option for regular importers.
- EXW looks cheap and is not. The price is lower because it includes nothing; it also forces you to handle export clearance in a country where you may have no one to do it.
- DDP requires the seller to know Honduran customs. Few foreign suppliers can do it well; in practice they subcontract a local agent and add the cost to the price.
- For containers, use FCA instead of FOB. Under FOB risk passes on loading on board, but you handed the container to the terminal days earlier. FCA covers that gap.
Not sure which term to negotiate with your supplier? Request an advisory and we decide it on the landed cost of each option.
