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Incoterms. For your Information.

International Commercial Terms (Incoterms) - a codification of international rules for the uniform interpretation of common contract clauses in export/import transactions developed and issued by the International Chamber of Commerce (ICC) Paris. 

The eleven Incoterms 2010 are (as guideline only, no responsibility is taken for correctness): 

 

C-terms

  • CFR - Cost and Freight
  • CIF - Cost, Insurance and Freight
  • CIP - Carriage and Insurance Paid To
  • CPT - Carriage Paid To

 

CFR - Cost And Freight (... named port of destination)

Seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment.

The CFR term requires the seller to clear the goods for export.

This term can only be used for sea and inland waterway transport. When the ship's rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the CPT term is more appropriate to use.

 

CIF - Cost, Insurence And Freight (... named port of destination)

Seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium.

The CIF term requires the seller to clear the goods for export. This term can only be used for sea and inland waterway transport. When the ship's rail serves no practical purposes such as in the case of roll-on/ roll-off or container traffic, the CIP term is more appropriate to use.

 

CIP - Carriage And Insurance Paid to (... named place of destination)

Seller has the same obligations as under CPT but with the addition that the seller has to procure cargo insurance against the buyer's risk of loss of or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium.

The buyer should note that under the CIP term the seller is only required to obtain insurance on minimum coverage. The CIP term requires the seller to clear the goods for export. This term may be used for any mode of transport including multimodal transport.

 

CPT - Carriage Paid To (... named place of destination)

Seller pays the freight for the carriage of the goods to the named destination. The risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered to the carrier, is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier.

"Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of' carriage, by rail, road, sea, air, inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier.

The CPT term requires the seller to clear the goods for export.

This term may be used for any mode of transport including multimodal transport.

 

D-terms

  • DAT - Delivered At Terminal
  • DAP - Delivered AT Place
  • DDP - Delivered Duty Paid

 

DAT - Delivered At Terminal (... named place of destination) (new term since January 2011, replaces former term DEQ)

Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. "Terminal" includes quay, warehouse, container yard or road, rail or air terminal. Both parties should agree the terminal and if possible a point within the terminal at which point the risks will transfer from the seller to the buyer of the goods. If it is intended that the seller is to bear all the costs and responsibilities from the terminal to another point, DAP or DDP may apply.

Responsibilities:

  • Seller is responsible for the costs and risks to bring the goods to the point specified in the contract
  • Seller should ensure that their forwarding contract mirrors the contract of sale
  • Seller is responsible for the export clearance procedures
  • Importer is responsible to clear the goods for import, arrange import customs formalities, and pay import duty
  • If the parties intend the seller to bear the risks and costs of taking the goods from the terminal to another place then the DAP term may apply
     

DAP - Delivered At Place (... named place of destination) (new term since January 2011, replaces former terms DAF, DES and DDU) 

 

Seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer. If the seller is responsible for clearing the goods, paying duties etc., consideration should be given to using the DDP term.
 
Responsibilities:

  • Seller bears the responsibility and risks to deliver the goods to the named place
  • Seller is advised to obtain contracts of carriage that match the contract of sale
  • Seller is required to clear the goods for export
  • If the seller incurs unloading costs at place of destination, unless previously agreed they are not entitled to recover any such costs
  • Importer is responsible for effecting customs clearance, and paying any customs duties

 

DDP - Delivered Duty Paid (... named place of destination)

Seller fulfills his obligation to deliver when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation. Whilst the DDU should be used.

If the parties wish to exclude from the seller's obligations some of the costs payable upon importation of the goods (such as value added tax (VAT)), this should be made clear by adding words to this effect: "Delivered duty paid, VAT unpaid (...named place of destination)".

This term may be used irrespective of the mode of transport.

 

E-terms

  • EXW - Ex Works

 

EXW - Ex Works (... named place) 

Seller fulfills his obligation to deliver when he has made the goods available at his premises (i.e. works, factory, warehouse, etc.) to the buyer. In particular, he is not responsible for loading the goods on the vehicle provided by the buyer or for clearing the goods for export, unless otherwise agreed. The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination. This term thus represents the minimum obligation for the seller. This term should not be used when the buyer cannot carry out directly or indirectly the export formalities. In such circumstances, the FCA term should be used.

 

F-terms

  • FAS - Free Alongside Ship
  • FCA - Free Carrier
  • FOB - Free On Board

 

FAS - Free Alongside Ship (... named port of shipment)

Seller fulfills his obligation to deliver when the goods have been placed alongside the vessel on the quay or in lighters at the named port of shipment.

This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the buyer to clear the goods for export. It should not be used when the buyer cannot carry out directly or indirectly the export formalities.

This term can only be used for sea or inland waterway transport.

 

FCA - Free Carrier (... named place) 

Seller fulfills his obligation to deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point. If no precise point is indicated by the buyer, the seller may choose within the place or range stipulated where the carrier shall take the goods into his charge. When, according to commercial practice, the seller's assistance is required in making the contract with the carrier (such as in rail or air transport) the seller may act at the buyer's risk and expense.

This term may be used for any mode of transport, including multimodal transport.

"Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of carriage by rail, road, sea, air, inland waterway or by a combination of such modes. If the buyer instructs the seller to deliver the cargo to a person, e.g. a freight forwarder who is not a "carrier", the seller is deemed to have fulfilled his obligation to deliver the goods when they are in the custody of that person.

"Transport terminal", means a railway terminal, a freight station, a container terminal or yard, a multi-purpose cargo terminal or any similar receiving point.

"Container" includes any equipment used to unitize cargo, e.g. all types of containers and/or flats, whether ISO accepted or not, trailers, swap bodies, ro-ro equipment, igloos, and applies to all modes of transport.

 

FOB - Free On Board (... named port of shipment)

Seller fulfills his obligation to deliver when the goods are on board the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.

The FOB term requires the seller to clear the goods for export.

This term can only be used for sea or inland waterway transport. When the ship's rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the FCA term is more appropriate to use.

 

Mode of Transport and the Appropriate Incoterm 2010

 

Suitable for Any Mode of Transport including Multimodal: 

  • EXW - Ex Works ( ... named place )
  • FCA - Free Carrier ( ... named place )
  • CPT - Carriage Paid To ( ... named place of destination )
  • CIP - Carriage and Insurance Paid To ( ... named place of destination )
  • DAT - Delivered At Terminal ( ... named place of destination )
  • DAP - Delivered At Place ( ... named place of destination )
  • DDP - Delivered Duty Paid ( ... named place of destination )

Suitable for Sea and Inland Waterway Transport: 

  • FAS - Free Alongside Ship ( ... named port of shipment )
  • FOB - Free On Board ( ... named port of shipment )
  • CFR - Cost and Freight ( ... named port of destination )
  • CIF - Cost, Insurance and Freight ( ... named port of destination )

 

 

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