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Incoterms
The Incoterms rules or International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of
Commerce (ICC) that are widely used in International commercial
transactions or Procurement processes.
The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries.
As such they are generally incorporated into our sales contracts.
Please see text herebelow.
Incoterms 2010
The eighth published set of pre-defined terms, Incoterms 2010
defines 11 rules, reducing the 13 used in Incoterms 2000 by
introducing two new rules ("Delivered at Terminal", DAT;
"Delivered at Place", DAP) that replace four rules of the prior
version ("Delivered at Frontier", DAF; "Delivered Ex Ship", DES;
"Delivered Ex Quay", DEQ; "Delivered Duty Unpaid", DDU).
In the prior version, the rules were divided into four categories,
but the 11 pre-defined terms of Incoterms 2010 are
subdivided into two categories based only on method of
delivery. The larger group of seven rules applies regardless
of the method of transport, with the smaller group of four being
applicable only to sales that solely involve transportation over
water.
EXW –
Ex Works (named place of delivery)
The seller makes the goods available at his/her premises. The
buyer is responsible for uploading. This term places the maximum
obligation on the buyer and minimum obligations on the seller. The
Ex Works term is often used when making an initial quotation for
the sale of goods without any costs included. EXW means that a
buyer incurs the risks for bringing the goods to their final
destination. The seller does not load the goods on collecting
vehicles and does not clear them for export. If the seller does
load the goods, he does so at buyer's risk and cost. If parties
wish seller to be responsible for the loading of the goods on
departure and to bear the risk and all costs of such loading, this
must be made clear by adding explicit wording to this effect in
the contract of sale.
The buyer, arranges the pick up of the freight from the
supplier's designated ship site, owns the in-transit freight, and
is responsible for clearing the goods through Customs. The
supplier is responsible for completing all the export
documentation. Cost of goods sold transfers from the seller to the
buyer at this time also.In this matter the buyer need to take
responsible for bring the material from the seller..
CPT
– Carriage Paid To (named place of destination)
The seller pays for carriage. Risk transfers to buyer upon
handing goods over to the first carrier at place of shipment in
the country of import.
This term is used for all kind of shipments.
CIP
– Carriage and Insurance Paid to (named place of destination)
The containerized transport/multimodal equivalent of CIF. Seller
pays for carriage and insurance to the named destination point,
but risk passes when the goods are handed over to the first
carrier.
DAT
– Delivered at Terminal (named terminal at port or place of
destination)
The Seller delivers when the goods, once unloaded from the
arriving means of transport, are placed at the Buyer's disposal at
a named terminal at the named port or place of destination.
"Terminal" includes any place, whether covered or not, such as a
quay, warehouse, container yard or road, rail or air cargo
terminal. The Seller bears all risks involved in bringing the
goods to and unloading them at the terminal at the named port or
place of destination.
DAP
– Delivered at Place (named place of destination)
Can be used for any transport mode, or where there is more than
one transport mode. The seller is responsible for arranging
carriage and for delivering the goods, ready for unloading from
the arriving conveyance, at the named place. Duties is not paid
under this term (An important difference from Delivered At
Terminal DAT, where the seller is responsible for unloading.)
DDP
– Delivered Duty Paid (named place of destination)
Seller is responsible for delivering the goods to the named place
in the country of the buyer, and pays all costs in bringing the
goods to the destination including import duties and taxes. The
seller is not responsible for unloading. This term is often used
in place of the non-Incoterm "Free In Store (FIS)". This term
places the maximum obligations on the seller and minimum
obligations on the buyer.
Sea
and inland waterway transport
To determine if a location qualifies for these four rules, please
refer to 'United Nations Code for Trade and Transport Locations
(UN/LOCODE)'. [Link below]
The four rules defined by Incoterms 2010 for international trade
where transportation is entirely conducted by water are:
FAS
– Free Alongside Ship (named port of shipment)
The seller must place the goods alongside the ship at the named
port. The seller must clear the goods for export. Suitable only
for maritime transport but NOT for multimodal sea
transport in containers (see Incoterms 2010,
ICC publication 715). This term is typically used for heavy-lift
or bulk cargo.
FOB
– Free on Board (named port of shipment)
The buyer must advance government tax in the country of origin as
commitment to load the goods on board a vessel designated by the
buyer. Cost and risk are divided when the goods are actually on
board of the vessel. The buyer must clear the goods for export
because he did not pay for the goods in the country of origin. The
term is applicable for maritime and inland waterway transport only
but NOT for multimodal sea transport in containers (see Incoterms
2010, ICC publication 715). The seller must instruct the
buyer the details of the vessel and the port where the goods are
to be loaded, and there is no reference to, or provision for, the
use of a carrier or forwarder. This term has been greatly misused
over the last three decades ever since Incoterms 1980
explained that FCA should be used for container shipments.
It means the seller pays for transportation of goods to the port
of shipment, loading cost. The buyer pays cost of marine freight
transportation, insurance, uploading and transportation cost from
the arrival port to destination. The passing of risk occurs when
the goods are in buyer account.
CFR
– Cost and Freight (named port of destination)
Seller must pay the costs and freight to bring the goods to the
port of destination. However, risk is transferred to the buyer
once the goods are loaded on the vessel. Insurance for the goods
is NOT included. This term is formerly known as CNF
(C&F, or C+F).
CIF
– Cost, Insurance and Freight (named port of destination)
Exactly the same as CFR except that the seller must in addition
procure and pay for the insurance. Maritime transport only.
The
seller responsibilities based on Incoterms 2010
| EXW |
No |
No |
No |
No |
No |
No |
No |
No |
No |
No |
No |
No |
| FCA1 |
Yes |
Yes |
No |
No |
No |
No |
No |
No |
No |
No |
No |
No |
| FAS |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
No |
No |
No |
No |
No |
| FOB |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
No |
No |
No |
No |
| CFR |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
No |
No |
No |
| CIF |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
No |
No |
Yes |
| DAT |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
No |
No |
| DAP |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
| CPT |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
No |
| CIP |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |
No |
Yes |
| DDP |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
No |