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INCOTERMS

Incoterms, or Terms of Sale, stand for International Commercial Terms and define the terms of shipment and delivery as well as the transfer of risk between the buyer and seller. In proper use the Incoterm must be stated with a specific place. The named place is where the seller’s cost ends. Delivery is the point where the risk transfers from seller to buyer and is defined for each Incoterm.

 

Incoterms are regularly updated to keep pace with the ever-changing world of international trade.   The latest edition is the Incoterms 2010.

 

THE FOUR GENERAL GROUPS OF TERMS

“E” Term:

Seller’s obligation and control of shipment is at its minimum

“F” Terms:

Require the buyer to arrange for main carriage

“C” Terms:

Require the seller to arrange for main carriage

“D” Terms:

Seller’s obligation and control is at its maximum

INCOTERMS AND MODE OF TRANSPORT

ANY MODE:

EXW, FCA, CPT, CIP, DAT, DAP, DDP

VESSEL ONLY:

FAS, FOB, CFR, CIF

 

EXW – Ex-Works:

  • The seller’s obligation is fulfilled when the buyer has been notified and the goods

(suitably packed for export) are available to the buyer at the named place within the tine specified.

  • The buyer is responsible for all coss and risks, including the loading of the goods fron the named point.
  • The buyer is responsible to arrange the entire contract of carriage of the goods (pre-carriage, main carriage, on-carriage)
  • The buyer is responsible for the export clearance of the goods. This term should not be used when the buyer cannot carry out the export formalities directly or indirectly. U.S. exporters should note that they are still responsible for export compliance with selling Ex-works.
  • The buyer is responsible for the import clearance of the goods at destination.

 

FCA – Free Carrier:

 

  • The seller’s risk, cost and responsibility end when he delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. The named place could be the seller’s premises or another place named for delivery on the seller’s side.
  • The buyer must contract at his own expense the carriage of the goods from the named place.
  • The buyer is responsible for the import clearance of the goods.

 

CPT – Carriage Paid To:

 

  • The seller’s risk and responsibility for the condition of the cargo end when the goods are delivered to the first carrier. The seller must bear all transportation costs to the named destination on the buyer’s side.
  • The seller is responsible for the export clearance of the goods.
  • The buyer is responsible for the import clearance of the goods.

 

CIP – Carriage and Insurance Paid To:

 

  • The seller’s risk and responsibility for the condition of the cargo end when the goods are delivered to the first carrier. The seller must bear all transportation costs to the named destination on the buyer’s side.
  • The seller is responsible for the export clearance of the goods.
  • The seller is responsible to provide insurance.
  • The buyer is responsible for the import clearance of the goods.

 

DAT – Delivered At Terminal:

 

  • The seller’s obligation ends when he has delivered to goods to the disposal of the buyer, unloaded from the arriving carrier at the named destination terminal cleared for export, but not cleared for import.
  • The buyer is responsible for the import clearance of the goods.
  • If the seller is also to be responsible for delivering the goods past the terminal to another place, then DAP or DDP terms should be used.

 

DAP – Delivered At Place:

 

  • The seller’s obligation ends when he has delivered the goods to the disposal of the buyer at the named destination place, cleared for export, but not cleared for import. The seller and buyer should agree which party will be responsible for unloading.
  • The buyer is responsible for the import clearance of the goods.

 

DDP – Delivered Duty Paid:

 

  • The seller’s obligation is fulfilled when the goods have been made available to the buyer at the named place of destination, cleared for import.
  • The buyer is responsible to take delivery of the goods at the named place of destination.
  • The seller is required to arrange for the entire contract of carriage to the named place of destination.
  • The seller is responsible for the export clearance of the goods.
  • The seller is required to arrange for the import clearance of the goods, including the payment of any applicable duties, taxes, and fees.

 

FAS – Free Alongside Ship:

  • The seller’s obligation is to deliver the goods alongside the vessel at the named port of shipment.
  • The seller is responsible for the export clearance of the goods.
  • The buyer is responsible for all costs and risks to load and transport the goods to their final destination once the cargo is delivered alongside the vessel.
  • The buyer is responsible for the import clearance of the goods.
  • This term is most commonly used for vessel charter shipments FCA would be more appropriate for containerized cargo.

 

FOB – Free On Board:

 

  • The seller’s obligation is fulfilled once the goods have been placed on board the vessel at the named port.
  • The buyer is responsible for all costs and risks associated with the goods after they have been loaded on board the ship at the named port.
  • The buyer is responsible to arrange for the carriage of the goods from the named port of shipment
  • The seller is responsible for the export clearance of the goods
  • The buyer is responsible for the import clearance of the goods
  • If the cargo is delivered to the carrier by the seller before the goods are loaded on board the vessel, then FCA would be more appropriate.

 

CFR – Cost and Freight:

 

  • The seller’s risk and responsibility for the condition of the cargo end when the goods are placed on board the vessel. The seller must bear all transportation costs to the named port on the buyer’s side.
  • The seller is responsible to arrange for the pre-carriage and main-carriage of the goods.
  • The seller is responsible for the export clearance of the goods
  • The buyer is responsible for the import clearance of the goods.

 

CIF – Cost, Insurance and Freight:

 

  • The seller’s risk and responsibility for the condition of the cargo end when the goods are placed on board the vessel. The seller must bear all transportation costs to the named port on the buyer’s side.
  • The seller is responsible to arrange for the pre-carriage and main-carriage of the goods.
  • The seller is responsible for the export clearance of the goods
  • The seller is responsible to provide insurance.
  • The buyer is responsible for the import clearance of the goods.