Incoterms

Reference to an Incoterms 2010 in a sale contract clearly defines the parties’ respective obligations for risks and costs involved in the delivery of goods from sellers to buyers.
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What are incoterms?

Incoterms are standard trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade.
Among the best-known Incoterms are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), and DAP (Delivered at Place – replaces DDU), and FCA (Fee Carrier).
ICC introduced the first version of Incoterms – short for “International Commercial Terms” – in 1936.
The chosen Incoterms rule can only work if the parties name a place or port and specify the version of the Incoterm. (ICC- International Chamber of Commerce, January 1, 2011)

Example: « FCA 38 Cours Albert 1er, Paris, France Incoterms 2010 »

Versions of Incoterms preceding the 2010 edition may still be incorporated into future contracts if the parties so agree. However, this is course is not recommended because the latest version is designed to bring Incoterms into line with the latest developments in commercial practice.

Two Distinctions to be made Delivery location vs Carriage Paid To:

1. The named place is the place where goods are delivered by the seller and where risk transfers from the seller to the buyer: EXW, FCA, DAT, DAP, DDP, FAS, FOB
2. The named place differs from the place of delivery by the seller. Under these four Incoterms the named place is the place of destination to which carriage is paid to: CPT, CIP, CFR, CIF.

(https://www.searates.com/reference/incoterms)

Rules for Any Mode or Modes of Transportation:

EXW – Ex Works
FCA – Free Carrier
CPT – Carriage Paid To
CIP – Carriage and Insurance Paid To
DAT – Delivered at Terminal
DAP – Delivered at Place
DDP – Delivered Duty Paid

Rules for Sea and Inland Waterway Transport:

FAS – Free Alongside Ship
FOB – Free On Board
CFR – Cost and Freight
CIF – Cost, Insurance and Freight

Incoterms 2010

Group E - Departure
  • EXW
    Ex-Works (insert named place of delivery)

    Carriage to be arranged by the buyer from the seller’s door. Goods are not cleared for export. Export charges are the responsibility of the consignee. This is the minimum obligation for the seller.

Group F - Main carriage not paid by seller
  • FCA
    Free Carrier (insert named place of delivery)

    Carriage to be arranged by the seller on the buyer’s behalf to named place.  Seller delivers goods to the carrier nominated by the seller.  FCA requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  • FAS
    Free Alongside Ship (insert named port of shipment)

    Seller delivers the goods alongside the vessel only.  Buyer bears all costs and risks from that moment onward.  FAS requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  • FOB
    Free on Board (insert named port of shipment)

    Carriage to be arranged by the buyer from port of departure. Only used for ocean or inland waterway transport.  The risk of loss or damage to the goods passes when the goods are on board the vessel.  The buyer bears all costs from that moment onwards.  The FCA rule should be used for containers.  FOB requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

Group C - Main carriage paid by seller
  • CFR
    Cost and Freight (insert named port of destination)

    Carriage to be arranged by the seller. Only used for ocean or inland waterway transport. Risk transfers from seller to buyer once goods on board vessel.  The seller must contract for and pay the costs of freight to bring the goods to the named port of destination.  CFR requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  • CIF
    Cost, Insurance and Freight (insert named port of destination)

    Carriage and insurance to be arranged by the seller. Only used for ocean or inland waterway transport.  Risk transfers from seller to buyer once goods on board vessel. The seller must procure marine insurance for minimum coverage.  The seller must contract for and pay the costs of freight & insurance to bring the goods to the named port of destination.  CIF requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  • CPT
    Carriage Paid To (insert named place of destination)

    Carriage to be arranged by the seller. Risk transfers from seller to buyer once goods have been delivered to the first carrier (if more than one is utilized).  CPT requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  • CIP
    Carriage and Insurance Paid (insert named place of destination)

    Carriage and insurance to be paid by seller. Risk transfers from seller to buyer once goods have been delivered to the carrier. The seller contracts for insurance and pays the insurance premium. CIP is only required to give minimum insurance coverage.  CIP requires the seller to clear the goods for export, where applicable.  However, he seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

Group D - Arrival
  • DAP
    Delivered at Place (insert named place of destination)

    Carriage to be paid by the seller to named place of destination for unloading.  The seller bears all risks to named place of unloading.  DAP requires the seller to clear the goods for export, where applicable.  However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.  If the parties wish the seller to clear the goods for import and pay any import duties, the DDP term should be used.

  • DAT
    Delivered at Terminal (insert named terminal at port or place of destination)

    Carriage to be paid by the seller to named terminal at the named port of unloading.  “Terminal” includes a quay, warehouse, container yard or road/rail/air terminal.  DAT requires the seller to clear the goods for export.  However, the seller as has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  • DDP
    Delivered Duty Paid (insert named port of destination)

    Carriage to be arranged by seller. Risk transfers from buyer to seller once goods are placed at the disposal of the buyer.  Seller delivers the goods cleared for import to the consignee’s door. DDP represents the maximum obligation for the seller.  If the parties wish the buyer to bear all risks and costs of import clearance, the DAP rule should be used.

ICC- International Chamber of Commerce. (January 1, 2011). Incoterms 2010. France: ICC Services Publication.