INCOTERMS 2010 - International Commercial Terms (by ICC)
They are widely used in International commercial transactions or procurement processes as the use in international sales is encouraged by trade councils, courts and international lawyers. A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. Incoterms inform sales contract defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer. However, it does not constitute contract or govern law. Also it does not define where titles transfer and does not address the price payable, currency or credit items.
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 regularly incorporated into sales contracts worldwide.
The first work published by the ICC on international trade terms was issued in 1923, with the first edition known as Incoterms published in 1936. the Incoterms rules were amended in 1953, 1967, 1976, 1980, 1990, and 2000, with the eighth version— Incoterms 2010 — having been published on January 1, 2011. The ICC have begun consultations on a new revision of Incoterms, to be called Incoterms 2020."Incoterms" is a registered trademark of the ICC.
Rules for Sea and Inland Waterway Transport:
FAS - Free Alongside Ship: Risk passes to buyer, including payment of all transportation and insurance costs, once delivered alongside the ship (realistically at named port terminal) by the seller. The export clearance obligation rests with the seller.
FOB - Free On Board: Risk passes to buyer, including payment of all transportation and insurance costs, once delivered on board the ship by the seller. A step further than FAS.
CFR - Cost and Freight: Seller delivers goods and risk passes to buyer when on board the vessel. Seller arranges and pays cost and freight to the named destination port. A step further than FOB.
CIF - Cost, Insurance and Freight: Risk passes to buyer when delivered on board the ship. Seller arranges and pays cost, freight and insurance to destination port. Adds insurance costs to CFR.
Rules for Any Mode or Modes of Transportation:
EXW - Ex Works: Seller delivers (without loading) the goods at disposal of buyer at seller's premises. Long held as the most preferable term for those new-to-export because it represents the minimum liability to the seller. On these routed transactions, the buyer has limited obligation to provide export information to the seller.
FCA - Free Carrier: Seller delivers the goods to the carrier and may be responsible for clearing the goods for export (filing the EEI). More realistic than EXW because it includes loading at pick-up, which is commonly expected, and sellers are more concerned about export violations.
CPT - Carriage Paid To: Seller delivers goods to the carrier at an agreed place, shifting risk to the buyer, but seller must pay cost of carriage to the named place of destination.
CIP - Carriage and Insurance Paid To: Seller delivers goods to the carrier at an agreed place, shifting risk to the buyer, but seller pays carriage and insurance to the named place of destination.
DAT - Delivered at Terminal: Seller bears cost, risk and responsibility until goods are unloaded (delivered) at named quay, warehouse, yard, or terminal at destination. Demurrage or detention charges may apply to seller. Seller clears goods for export, not import. DAT replaces DEQ, DES.
DAP - Delivered at Place: Seller bears cost, risk and responsibility for goods until made available to buyer at named place of destination. Seller clears goods for export, not import. DAP replaces DAF, DDU.
DDP - Delivered Duty Paid: Seller bears cost, risk and responsibility for cleared goods at named place of destination at buyers disposal. Buyer is responsible for unloading. Seller is responsible for import clearance, duties and taxes so buyer is not “importer of record”.
INCOTERMS DO NOT...
EXW – EXWORKS: This term represents the seller’s minimum obligation, since he only has to place the goods at the disposal of the buyer. The buyer must carry out all tasks of export & import clearance. Carriage and insurance is to be arranged by the buyer.
FCA – FREE CARRIER (…NAMED PLACE): This term means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. Seller pays for carriage to the named place
FAS – FREE ALONGSIDE SHIP (…NAMED PORT OF SHIPMENT): This term means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. The seller is required to clear the goods for export. The buyer has to bear all costs and risks of loss or damage to the goods from that moment. This term can be used for sea transport only
FOB – FREE ON BOARD (…NAMED PORT OF SHIPMENT): This term means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means the buyer has to bear all costs and risks to the goods from that point. The seller must clear the goods for export. This term can only be used for sea transport. If the parties do not intend to deliver the goods across the ship’s rail, the FCA term should be used
CFR – COST & FREIGHT (…NAMED PORT OF DESTINATION): This term means the seller delivers when the goods pass the ship’s rail in port of shipment. Seller must pay the costs and freight necessary to bring the goods to the named port of destination, BUT the risks of loss or damage, as well as any additional costs due to events occurring after the time of delivery, are transferred from seller to buyer. Seller must clear goods for export. This term can only be used for sea transport
CIF – COST, INSURANCE & FREIGHT (…NAMED PORT OF DESTINATION): The seller delivers when the goods pass the ship’s rail in the port of shipment. Seller must pay the cost and freight necessary to bring goods to named port of destination. Risk of loss and damage are the same as CFR. Seller also has to procure marine insurance against buyer’s risk of loss/damage during the carriage. Seller must clear the goods for export. This term can only be used for sea transport.
CPT – CARRIAGE PAID TO (…NAMED PORT OF DESTINATION): This term means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all costs occurring after the goods have been so delivered. The seller must clear the goods for export. This term may be used irrespective of the mode of transport (including multimodal)
CIP – CARRIAGE & INSURANCE PAID TO (…NAMED PLACE OF DESTINATION: This term is the same as CPT with the exception that the seller also has to procure any mode of transportation
DAT – DELIVERED AT TERMINAL (…NAMED TERMINAL OF DESTINATION): This term means that the seller delivers when the goods once unladed from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at a 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 terminal at the named port or place of destination
DAP – DELIVERED AT PLACE (…NAMED PLACE OF DESTINATION): This rule may be used regardless of the mode of transport and may also be used where more than one mode of transport is utilized. DAP means the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of carriage ready for unloading at the names place of destination. The seller bears all risks involved in bring the goods to the named place
DDP – DELIVERED DUTY PAID (…NAMED PORT OF DESTINATION): This term represents maximum obligation to the seller. This term should not be used if the seller is unable to directly or indirectly obtain the import license. This term means the same as the DAP term with the exception that the seller also will bear all costs and risks of carrying out customs formalities including the payment of duties, taxes and customs fees.