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Incoterms

International Commercial Terms, known as Incoterms, are internationally accepted terms defining the responsibilities of exporters and importers in the arrangement of shipments and the transfer of liability involved at various stages of the transaction. Incoterms do not cover ownership or the transfer of title of goods. It is crucial to agree on an Incoterm at the start of a negotiation/quotation of a sale, as it will affect the costs and responsibilities involved in shipping, insurance and tariffs.
The new Incoterms 2010 rules were revised by the International Chamber of Commerce and became effective January 1, 2011. Four terms were eliminated (DAF, DEQ, DES, DDU) and two were added: Delivered at Place (DAP) and Delivered at Terminal (DAT).
The modifications affect obligations, risk transfer, and cost sharing for the seller and buyer, resulting in better clarification and application of the eleven (11) Incoterms, and consistent with the way global trade is actually conducted since the last update in 2000. In any sales transaction, it is important for the seller and buyer to agree on the terms of sale and know precisely what is included in the sale price. Expanded summary.expanded sumary

 

Incoterms 2010

 

Incoterms 2010 expanded summary

Note: an Incoterm must be accompanied by a "named place" ex. "FOB Sydney", "EXW Tahiti"

Jump to: EXW FCA CPT CIP DAT DAP DDP FAS FOB CFR CIF

EXW
(Ex Works)
The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination. The seller's obligation is to make the goods available at his premises (works, factory, warehouse). This term represents minimum obligation for the seller. This term can be used across all modes of transport.   top
FCA
(Free Carrier)
The seller's obligation is to hand 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 the seller's assistance is required in making the contract with the carrier the seller may act at the buyers risk and expense. This term can be used across all modes of transport.   top
CPT
(Carriage Paid To)
The seller pays the freight for the carriage of goods to the named destination. The risk of loss or damage to the goods occurring after the delivery has been made to the carrier is transferred from the seller to the buyer. This term requires the seller to clear the goods for export and can be used across all modes of transport.   top
CIP
(Carriage & insurance Paid to)
The seller has the same obligations as under CPT but has the responsibility of obtaining insurance against the buyer's risk of loss or damage of goods during the carriage. The seller is required to clear the goods for export however is only required to obtain insurance on minimum coverage. This term requires the seller to clear the goods for export and can be used across all modes of transport.   top
DAT
(Delivered At Terminal)

New Term - May be used for all transport modes
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    top
DAP
(Delivered At Place)

New Term - May be used for all transport modes
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    top
DDP
(Delivered Duty Paid)
The seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes duties, taxes and customs formalities. This term may be used irrespective of the mode of transport.   top
FAS
(Free Alongside Ship)
The seller has fulfilled his obligation when goods have been placed alongside the vessel at the port of shipment. The buyer is responsible for all costs and risks of loss or damage to the goods from that moment. The buyer is also required to clear the goods for export. This term should only be used for sea or inland waterway transport.   top
FOB
(Free On Board)
Once the goods have passed over the ship's rail at the port of export the buyer is responsible for all costs and risks of loss or damage to the goods from that point. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.   top
CFR
(Cost and FReight)
The seller must pay the costs and freight required in bringing the goods to the named port of destination. The risk of loss or damage is transferred from seller to buyer when the goods pass over the ship's rail in the port of shipment. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.   top
CIF
(Cost, Insurance & Freight)
The seller has the same obligations as under CFR however he is also required to provide insurance against the buyer's risk of loss or damage to the goods during transit. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.   top

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