🚚 ✈ 🚢🚆🚚✈🚢🚆

What are Incoterms? Using international commercial terms ensure properly written contracts

• These rules are accepted by governments and legal authorities around the world. Understanding Incoterms is a vital part of International Trade because they clearly state which tasks, costs and risks are associated with the buyer and the seller.
• The Incoterm states when the seller’s costs and risks are transferred onto the buyer. Transport by all modes of transport (road, rail, air and sea) covers FCA, CPT, CIP, DAP, DPU (replaces DAT) and DDP.  Sea/Inland waterway transport (Sea) covers FAS, FOB, CFR and CIF, which we explain below.

 

Why are Incoterms vital in International Trade?

• Incoterms are a set of internationally recognized 3-letter trade terms. They are a set of rules published by the International Chamber of Commerce (ICC), which relate to International Commercial Law, and updated periodically to reflect changing trade practices.

EXW – Ex-Works or Ex-Warehouse

• Ex works is when the seller places the goods at the disposal of the buyer at the seller’s location or at another named place (i.e., works, factory, warehouse, etc.).
• The seller does not need to load the goods on any collecting vehicle. Nor does it need to clear them for export, the buyer can take over all the transportation costs and also bears the risks of bringing the goods to their final destination. DGRPco

 

FCA – Free Carrier

• The seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place.
• Responsibility for cost and risk then passes to the buyer.

FAS – Free Alongside Ship

• The seller delivers the goods alongside the ship at nominated port of shipment the buyer named.
• The risk of loss of or damage to the goods passes when the products are alongside the ship. The buyer bears all costs from that moment onwards.

FOB – Free on Board

• The seller delivers the goods on board the ship nominated by the buyer at the named port of shipment or procures the goods already so delivered. Once goods have been loaded, the buyer is responsible for any costs and risks involved in the onward shipment.

CFR – Cost and Freight

• The seller delivers the goods on board the vessel or procures the goods already so delivered.
• The risk of loss of or damage to the goods passes when the products are on board the vessel.
• The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

CIF – Cost, Insurance and Freight

• This is the same as CFR However, the seller must also obtain and pay for the insurance.
• The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
• The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
• The default level of insurance cover under CIF is Institute Cargo Clauses (C). This applies to both 2010 and 2020 Incoterms. DGRPco

 

CPT – Carriage Paid To

• The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such site is agreed between parties).
• The seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

 

CIP – Carriage And Insurance Paid To

• The seller has the same responsibilities as CPT, the seller pays for the carriage and insurance to the named overseas destination point but risk passes when the goods are handed over to the first carrier, but risk passes when the goods are handed over to the first carrier.,

 

• DAP – Delivered At Place

• 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.DGRPco
• The seller bears all risks involved in bringing the goods to the named place.

DPU – Delivered At Place Unloaded (replaces Incoterm® 2010 DAT)

• The seller delivers when the goods, once unloaded are placed at the disposal of the buyer at a named place of destination.

• The seller bears all risks involved in bringing the goods to, and unloading them at the named place of destination. After the goods’ arrival, the customs clearance in the importing country needs to be completed by the buyer at his own cost and risk, including payment of all customs duties and taxes.

DDP – Delivered Duty Paid

• The seller delivers the goods at the named place in the country of the buyer.
• The seller bears all the costs and risks involved in bringing the goods to the place of destination.  They must clear the products not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

 

 DGRPco