Incoterms 2010

dMagoo_Incoterms

EXW (Ex Works)
EXW means that a buyer incurs the risks for bringing the goods to their final destination. Seller, only has to make the goods available, suitably packaged, at the specified place, usually at the seller’s factory or depot or another named place (factory, warehouse etc.). Buyer bears all risk and costs starting when he picks up the products at the seller’s location until the products are delivered to his location. The buyer is responsible for loading the goods onto a vehicle (even though the seller may be better placed to do this); for all export procedures; for onward transport and for all costs arising after collection of the goods. If the seller does load the goods, he does so at buyer's risk and cost. In many cross-border transactions, this rule can present practical difficulties. Specifically, the exporter may still need to be involved in export reporting and clearance processes, and cannot realistically leave these to the buyer. The buyer is also responsible for completing all the export documentation, although the seller does have an obligation to obtain information and documents at the buyer's request and cost.

FCA (Free Carrier)
The seller is responsible for delivery of the goods, cleared for export, at a named place (possibly including the seller's own premises). The goods can be delivered to a carrier nominated by the buyer, or to another party nominated by the buyer. Carrier/buyer is responsible for unloading after delivery and loading into own carrier.  Buyer assumes all risks and costs associated with delivery of goods to final destination including transportation after delivery to carrier and any customs fees to import the product into a foreign country. FCA(Free Carrier)In all cases, the seller is responsible for export clearance; the buyer assumes all risks and costs after the goods have been delivered at the named place. FCA is the rule of choice for containerized goods where the buyer arranges for the main carriage. If delivery occurs at the seller's premises, or at any other location that is under the seller's control, the seller is responsible for loading the goods on to the buyer's carrier. this is an important difference from Ex Works EXW.

CPT (Carriage Paid To)
Can be used for any transport mode, or where there is more than one transport mode.  The seller is responsible for origin costs including export clearance and freight costs for carriage up to the named place of destination (either the final destination such as the buyer's facilities or a port of destination. This has to be agreed by seller and buyer, however).  However, the goods are considered to be delivered when the goods have been handed over to the first or main carrier, so that the risk transfers to buyer upon handing goods over to that carrier at the place of shipment in the country of Export. CPT (Carriage Paid To) Terminal Handling Charges (THC) are charges made by the terminal operator. These charges may or may not be included by the carrier in their freight rates – the buyer should enquire whether the CPT price includes THC, so as to avoid surprises. By default, seller is not responsible for procuring insurance.  The buyer may wish to arrange insurance cover for the main carriage, starting from the point where the goods are taken in charge by the carrier – NB this will not be the place referred to in the Incoterms rule, but will be specified elsewhere within the commercial agreement  If the buyer requires the seller to obtain insurance, the Incoterm CIP should be considered instead.

CIP – Carriage and Insurance Paid to (named place of destination)
CIP – Carriage and Insurance Paid to (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 to the named place, and also for insuring the goods. Seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment. Seller is responsible for the transportation costs associated with delivering goods and procuring minimum insurance coverage to the named place of destination.

DAT – Delivered At Terminal (named terminal at port or place of destination)
‘Terminal’ (named place) can be any place – a quay, container yard, warehouse or transport hub. The seller covers all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and assumes all risk until arrival at the destination port or terminal.  The place for delivery should be specified as precisely as possible, as many ports and transport hubs are very large.  A useful rule, well suited to container operations where the seller bears responsibility for the main carriage. DAT – Delivered At Terminal (named terminal at port or place of destination) Risk transfers from seller to buyer when the goods have been unloaded.  The buyer is responsible for import clearance and any applicable local taxes or import duties and all charges after unloading (for example, Import duty, taxes, customs and on-carriage)  However, it is important to note that any delay or demurrage charges at the terminal will generally be for the seller's account.

DAP – Delivered At Place (named place of destination
Once goods are ready for shipment, the necessary packing is carried out by the seller at his own cost, so that the goods reach their final destination safely. All necessary legal formalities in the exporting country are completed by the seller at his own cost and risk to clear the goods for export.  The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Under DAP terms, the risk passes from seller to buyer from the point of destination mentioned in the contract of delivery. The seller is responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving conveyance, at the named place. (An important difference from Delivered At Terminal DAT, where the seller is responsible for unloading.) After arrival of the goods in the country of destination, the customs clearance in the importing country needs to be completed by the buyer at his own cost and risk, including all customs duties, taxes and unloading. However, as with DAT terms any delay or demurrage charges are to be borne by the seller.

DDP – Delivered Duty Paid (named place of destination)
This term means that the seller assumes all the risks and costs of transport (export fees, carriage, insurance, and destination port charges, delivery to the final destination) and pays all applicable taxes and import customs/duty. The buyer has only to unload the goods at the final destination. This rule places the maximum obligation on the seller, and is the only rule that requires the seller to take responsibility for import clearance and payment of taxes and/or import duty. These last requirements can be highly problematical for the seller. In some countries, import clearance procedures are complex and bureaucratic, and so best left to the buyer who has local knowledge.

FAS – Free Alongside Ship (named port of shipment)
The seller delivers when the goods (cleared for export) are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. Buyer assumes all risks/costs for goods from this point forward. The buyer is responsible for loading the goods and all costs thereafter. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. This term should be used only for non-containerized sea freight and inland waterway transport. Packaging: Seller’s responsibility and cost. Export Clearance & Security: Seller’s responsibility and cost

FOB – Free on Board (named port of shipment)
Seller delivers goods, cleared for export, loaded on board the vessel at the named port. Once the goods have been loaded on board, risk transfers to the buyer, who bears all costs thereafter. Under FOB terms the seller bears all costs and risks up to the point the goods are loaded on board the vessel. The seller must also arrange for export clearance. The buyer pays cost of marine freight transportation, bill of lading fees, insurance, unloading and transportation cost from the arrival port to destination. FOB should only be used for non-containerized sea freight and inland waterway transport. However, FOB is still used for all modes of transport despite the contractual risks that this can introduce.

CFR – Cost and Freight (named port of destination)
Seller arranges and pays for transport to named port. Seller delivers goods, cleared for export, loaded on board the vessel. However, risk transfers from seller to buyer once the goods have been loaded on board, i.e. before the main carriage takes place. Seller is not responsible for insuring the goods for the main carriage. The seller pays for the carriage of the goods up to the named port of destination. If the buyer does require the seller to obtain insurance, the Incoterm CIF should be considered. CFR should only be used for non-containerized sea freight and inland waterway transport; for all other modes of transport it should be replaced with CPT.

CIF – Cost, Insurance & Freight (named port of destination)
Seller clears the goods for export and delivers them when they are on- board the vessel at the port of shipment. Seller bears the cost of freight and insurance to the named port of destination. Seller’s insurance requirement is only for minimum cover. Buyer is responsible for all costs associated with unloading the goods at the named port of destination and clearing goods for import. Risk passes from seller to buyer once the goods are on-board the vessel at the port of shipment. CIF – Cost, Insurance & Freight (named port of destination) The insurance policy should be in the same currency as the contract. However, risk transfers from seller to buyer once the goods have been loaded on board, i.e. before the main carriage takes place.  However as with “Carriage and Insurance Paid To”, the rule only require a minimum level of cover, which may be commercially unrealistic (110%). Therefore, the level of cover may need to be addressed elsewhere in the commercial agreement. CIF – Cost, Insurance & Freight (named port of destination) In particular, CIF is the most common because there will be a stronger grasp on shipments. In this scenario, the seller takes responsibility for all costs until the cargo is loaded at the origin port, but the cost passes to the buyer at the specified discharge port.