| WORLD TRADE DOCUMENTATION: Incoterms 2010
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INCOTERMS 2010 (INCO2010)
ICC (International Chamber of Commerce) effective from January 1, 2011
Incoterms (International Commecial Terms) make international trade easier and
help traders in different countries to understand one another. These standard
trade definitions that are most commonly used in international contracts are
protected by ICC copyright.
To assist traders to understand the areas that the Incoterms cover and
how each one works, the official ICC website now publishes the Preambles
to each term in read-only format, together with basic information and
background. The Preambles do not spell out the obligations of buyer and
seller, which are essential to correct use of Incoterms. This information
may be obtained by consulting the full published texts of the Incoterms,
available from ICC Publishing and ICC national committees throughout the world.
© ICC - «Incoterms» is a trademark of ICC
| EXW (EX WORKS) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Ex works" means that the seller delivers when he places the goods at the disposal of the buyer
at the seller's premises or another named place (i.e. works, factory, warehouse,
etc.) not cleared for export and not loaded on any collecting vehicle.
This term thus represents the minimum obligation for the seller, and the buyer
has to bear all costs and risks involved in taking the goods from the seller's
premises.
However, if the parties wish the seller to be responsible for the loading of
the goods on departure and to bear the risks and all the costs of such loading,
this should be made clear by adding explicit wording to this effect in the contract
of sale. This term should not be used when the buyer cannot carry out the export
formalities directly or indirectly. In such circumstances, the FCA term should
be used, provided the seller agrees that he will load at this cost and risk.
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The seller makes the goods available at its premises. This term places the maximum
obligation on the buyer and minimum obligations on the seller. The Ex Works term is
often used when making an initial quotation for the sale of goods without any costs
included.
EXW means that a seller has the goods ready for collection at his premises
(works, factory, warehouse, plant) on the date agreed upon. The buyer pays all
transportation costs and also bears the risks for bringing the goods to their final
destination. The seller doesn't load the goods on collecting vehicles and doesn't
clear them for export. If the seller does load the good, he does so at buyer's risk
and cost.
If parties wish seller to be responsible for the loading of the goods
on departure and to bear the risk and all costs of such loading, this must
be made clear by adding explicit wording to this effect in the contract of sale.
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| FCA (FREE CARRIER) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Free
carrier" means that the seller delivers the goods, cleared for export, to the
carrier nominated by the buyer at the named place. It should be noted that the
chosen place of delivery has an impact on the obligations of loading and unloading
the goods at that place. If delivery occurs at the seller's premises, the seller
is responsible for unloading.
This term may be used irrespective of the mode of transport, including multimodal
transport.
"Carrier" means any person who, in a contract of carriage, undertakes
to perform or to procure the performance of transport by rail, road
air, sea, inland waterway or by combination of such modes.
If the buyer nominates a person other than a carrier to receive the goods, the
seller is deemed to have fulfilled his obligation to deliver the goods when they
are delivered to that person.
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Under this term, the seller delivers the goods cleared for export, on the agreed
date or within the agreed period to the carrier or person nominated by the
buyer at the named place. The chosen place of delivery has an impact on the
obligations of loading and unloading the goods at that place.
If no precise point can be mentioned at the time of the contract of sale,
the parties should refer to the place or range where the carrier or the person
nominated by the buyer should take delivery of the goods.
Carriage is to be arrange by the buyer or by the seller on behalf of the
buyer. When the seller has to furnish a bill of lading, waybill or carrier's
receipt, he duly fulfills this obligation by presenting A "Received
for Shipment" Bill of Lading issued by a person so defined.
This term may be used irrespective of the mode of transport (e.g. Ship,
Air, Rail, etc.), including, “multi-modal” transport as container
or "roll on - roll off" traffic trailers and ferries.
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| FAS (FREE ALONGSIDE SHIP) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Free alongside ship" means that the seller delivers when the goods are placed
alongside the vessel at the named port of shipment. This means that the buyer
has to bear all costs and risks of loss of or damage to the goods from that moment.
The FAS term requires the seller to clear the goods for export.
THIS IS A REVERSAL FROM PRECIOUS INCOTERMS VERSIONS WHICH REQUIRED THE BUYER
TO ARRANGE FOR EXPORT CLEARANCE.
However, if the parties wish the buyer to clear the goods for export, this should
be made clear by adding explicit wording to this effect in the contract of sale.
This term can be used only for sea or inland waterway transport.
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Under this term, the seller is required to clear the goods for export. If, however,
parties wish the buyer to arrange for the clearance of the goods, this should
be made clear by adding explicit wording to this effect in the contract of
sale.
Seller’s obligation to deliver is fulfilled when the goods have been
placed alongside the ship, at the named port of shipment. In circumstances
where goods, are sold "down a string", the seller who is in the
middle of the string performs his obligation towards the buyer by procuring
the goods that have been shipped.
The risk of loss of or damage to the goods is transferred from the seller
to the buyer at that moment. The buyer has to bear all costs and risks of
loss or damage to the goods from that point forward.
This term applies to Non containerized shipments and may be used only for
sea, or inland waterway transport.
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| FOB (FREE ON BOARD) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Free on Board" means that the seller delivers when the goods pass the ship's rail at the named port
of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.
The FOB term requises the seller to clear the goods for export.
This term can be used only for sea or inland waterway transport. If the parties
do not intend to deliver the goods across the ship's rail, the FCA term should
be used. |
The seller must load the goods on board the vessel nominated by the buyer. Cost
and risk are divided when the goods are actually on board of the vessel.
The seller must clear the goods for export. The term is applicable
for maritime and inland waterway transport only but NOT for multimodal sea
transport in containers. The buyer must instruct the seller the details of the vessel
and the port where the goods are to be loaded, and there is no reference to,
or provision for, the use of a carrier or forwarder. This term has been greatly misused
over the last three decades ever since Incoterms 1980 explained that FCA should be used
for container shipments.
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| CFR (COST AND FREIGHT) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Cost and Freight" means that the seller delivers when the goods pass the ship's
rail in the port of shipment.
The seller must pay the costs and freight necessary to bring the goods to the
named port of destination BUT the risk of loss of or damage to the goods, as
well as any additional costs due to events occuring after the time of delivery,
are transferred from the seller to the buyer.
The CFR term requires the seller to clear the goods for export.
This term can be used only for sea and inland waterway transport. If the parties
do not intend to deliver the goods across the ship's rail, the CPT term should
be used.
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“Cost and Freight” means that 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 goods are on board the vessel. The seller
must contract for any pay the costs and freight necessary to bring the goods
to the named port of destination.
CFR may not be appropriate where goods are handed over to the carrier before
they are on board the vessel, for example goods in containers, which are typically
delivered at a terminal. In such circumstances, the CPT rule should be used.
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.
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| CIF (COST, INSURANCE AND FREIGHT) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Cost, insurance an Freight" means that the seller delivers when the goods pass
the ship's rail in the port of shipment.
The seller must pay the costs and freight necessary to bring the goods to the
named port of destination BUT the risk of loss of or damage to the goods, as
well as any additional costs due to events occuring after the time of delivery,
are transferred from the seller to the buyer. However, in CIF the seller also
has to procure marine insurance against the buyer's risk of loss of or damage
to the goods during the carriage.
Consequently, the seller contracts for insurance and pays the insurance premium.
The buyer should note that under the CIF term the seller is required to obtain
insurance only on minimum cover. Should the buyer wish to have the protection
of greater cover, he would either need to agree as much expressly with the seller
or to make his own extra insurance arrangments.
The CIF term requires the seller to clear the goods for export.
This term can be used only for sea and inland waterway transport. If the parties
do not intend to deliver the goods across the ship's rail, the CIP term should
be used.
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This rule is to be used only for sea or inland waterway transport.
“Cost, Insurance and Freight” means that the seller delivers
the goods on board the vessel or procures the goods already so delivered.
The risk of loss of or damange to the goods passes when the goods 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.
The seller also contracts for insurance cover against the buyer’s
risk of loss of or damage to the goods during the carriage. The buyer should
note that under CIF the seller is required to obtain insurance only on minimum
cover. Should the buyer wish to have more insurance protection, it will need
either to agree as much expressly with the seller or to make its own extra
insurance arrangements.
This rule has two critical points, because risk passes and costs are transferred
at different places. While the contract will always specify a destination
port, it might not specify the port of shipment, which is where risk passes
to the buyer. If the shipment port is of particular interest to the buyer,
the parties are well advised to identify it as precisely as possible in the
contract.
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| CIP (CARRIAGE AND INSURANCE PAID TO) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Carriage and Insurance paid to..." means that the seller delivers the goods
to the carrier nominated by him, but the seller must in addition pay the cost
of carriage necessary to bring the goods to the named destination. This means
that the buyer bears all risks and any additional costs occuring after the goods
have been so delivered. However, in CIP the seller also has to procure insurance
against the buyer's risk of loss of or damage to the goods during the carriage.
Consequently, the seller contracts for insurance and pays the insurance premium.
The buyer should note that under the CIP term the seller is required to obtain
insurance only on minimum cover, he would either need to agree as much expressly
with the seller or to make his own extra insurance arrangements.
"Carrier" means any person who, in a contract of carriage, undertakes
to perform or to procure the performance of transport, by rail, road,
air, sea, inland waterway or by a combination of such modes.
If subsequent carriers are used for the carriage to the agreed destination, the
risk passes when the goods have been delivered to the first carrier.
The CIP term requires the seller to clear the goods for export.
This term may be used irrespective of the mode of transport, including multimodal
transport
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This rule may be used irrespective of the mode of transport selected and may
also be used where more than one mode of transport is employed.
“Carriage and Insurance Paid to” means that the seller delivers
the goods to the carrier or another person nominated by the seller at an
agreed place (if any such place is agreed between the parties) and that the
seller must contract for and pay the costs of carriage necessary to bring
the goods to the named place 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 buyer should
note that under CIP the seller is required to obtain insurance only on minimum
cover. Should the buyer wish to have more insurance protection, it will need
either to agree as much expressly with the seller or to make its own extra
insurance arrangements.
This rule has two critical points, because risk passes and costs are transferred
at different places. The parties are well advised to identify as precisely
as possible in the contract both the place of delivery, where the risk passes
to the buyer, and the named place of destination to which the seller must
contract for carriage. If several carriers are used for the carriage to the
agreed destination and the parties do not agree on a specific point of delivery,
the default position is that risk passes when the goods have been delivered
to the first carrier at a point entirely of the seller’s choosing and
over which the buyer has no control.
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| CPT (CARRIER PAID TO) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Carriage paid to..." means that the seller delivers the goods to the carrier
nominated by him but the seller must in addition pay the cost of carriage necessary
to bring the goods to the named destination. This means that the buyer bears
all risks and any other costs occuring after the goods have been so delivered.
"Carrier" means any person who, in a contract of carriage, undertakes
to perform or to procure the performance of transport, by rail, road,
air, sea ,inland waterway or by a combination of such modes.
If subsequent carriers are used for the carriage to the agreed destination, the
risk passes when the goods have been delivered to the first carrier.
The CPT term requires the seller to clear the goods for export.
This term may be used irrespective of the mode of transport including multimodal
transport.
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This rule may be used irrespective of the mode of transport selected and may
also be used where more than one mode of transport is employed.
“Carriage Paid to” means that the seller delivers the goods
to the carrier or another person nominated by the seller at an agreed place
(if any such place is agreed between the parties) and that the seller must
contract for and pay the costs of carriage necessary to bring the goods to
the named place of destination.
This rule has two critical points, because risk passes and costs are transferred
at different places. The parties are well advised to identify as precisely
as possible in the contract both the place of delivery, where the risk passes
to the buyer, and the named place of destination to which the seller must
contract for the carriage. The parties are also well advised to identify as precisely as possible the
point within the agreed place of destination, as the costs to that point
are for the account of the seller.
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.
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| DAT (DELIVERED AT TERMINAL) new |
| INCOTERMS 2000 |
INCOTERMS 2010 |
(DEQ / DELIVERED EX QUAY) Means that the seller delivers when the goods are placed
at the disposal of the buyer not cleared for import on the quay(wharf) at the
named port of destination. The seller has to bear costs and risks involded in
bringing the goods to the named port of destination and discharging the goods
on the quay(wharf). The DEQ term requires the buyer to clear the goods for import
and to pay for all formalities, duties, taxes and other charges upon import.
THIS IS A REVERSAL FROM PREVIOUS INCOTERMS VERSIONS WHICH REQUIRED THE SELLER
TO ARRANGE FOR IMPORT CLEARANCE.
If the parties wish to include in the seller's obligations all or part of the
costs payable upon import of the goods, this should be made clear by adding explicit
wording to this effect in the contract of sale.
This term can be used only when the goods are to be delivered by sea or inland
waterway or multimodal transport on discharging from a vessel onto the quay(wharf)
in the port of destination. However, if the parties wish to include in the seller's
obligations the risks and costs of the handling of the goods from the quay to
another place (warehouse, terminal, transport station, etc.) in or outside the
port, the DDU or DDP terms should be used.
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New Term (replaces DEQ Incoterms) - 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.
Seller:
- Is responsible for the costs and risks to bring the goods to the point
specified in the contract
- 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 thegoods from the terminal to another place then the DAP term may apply.
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| DAP (DELIVERED AT PLACE) new |
| INCOTERMS 2000 |
INCOTERMS 2010 |
(DAF / DELIVERED AT FRONTIER) Means that the seller delivers when the goods are placed at the disposal of the buyer
on the arriving means of transport not unloaded, cleared for export, but not
cleared for the import at he named point and place at the frontier, but before
the customs border of the adjoining country.
(DDU / DELIVERED DUTY UNPAID) Means that the seller delivers the goods to the buyer,
not cleared for import, and not unloaded from any arriving means of transport
at the named place of destination.
(DES / DELIVERED EX SHIP) Means that the seller delivers when the goods are placed
at the disposal of the buyer on board the ship not cleared for import at the
named port of destination. The seller has to bear all the costs and risks involded
in bringing the goods to the named port of destination before discharging.
If the parties wish the seller to bear the costs and risks of discharging the
goods, then the DEQ term should be used. This term can be used only when the goods are to be delivered by sea or inland
waterway or multimodal transport on a vessel in the port of destination. |
New term (Preplaces DAF, DDU and DES). This rule may be used irrespective of the mode of transport selected and may
also be used where more than one mode of transport is employed.
“Delivered at Place” means that 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. The seller bears all
risks involved in bringing the goods to the named place.
The parties are well advised to specify as clearly as possible the point
within the agreed place of destination, as the risks to that point are for
the account of the seller. The seller is advised to procure contracts of
carriage that match this choice precisely.
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, pay any import duty and carry
out any import customs formalities, the DDP term should be used.
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| DDP (DELIVERED DUTY PAID) |
| INCOTERMS 2000 |
INCOTERMS 2010 |
"Delivered duty paid" means that the seller delivers the goods to the buyer,
cleared for import, and not unloaded from any arriving means of transport at
the named place of destination. The seller has to bear all the costs and risks
involded in bringing the goods thereto including, where applicable, any " duty " (which
term includes the responsability for and the risk of the carrying out of customs
formalities and the payment of formalities, customs duties, taxes and other charges)
for import in the country of destination.
Whilst the EXW term represents the minimum obligation for the seller, DDP represents
the maximum obligation.
This term should not be used if the seller is unable directly or indirectly to
obtain the import licence.
However, if the parties wish to exclude from the seller's obligations some of
the costs payable upon import of the goods (such as value-added tax: VAT), this
should be made clear by adding explicit wording to this effect in the contract
of sale.
If the parties wish the buyer to bear all risks and costs of the import, the
DDU term should be used.
This term may be used irrespective of the mode of transport but when delivery
is to take place in the port of destination on board the vessel or on the quay
(wharf), the DES or DEQ terms should be used.
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This rule may be used irrespective of the mode of transport selected and may
also be used where more than one mode of transport is employed.
“Delivered Duty Paid” means that the seller delivers the goods
when the goods are placed at the disposal of the buyer, cleared for import
on the arriving means of transport ready for unloading at the named place
of destination. The seller bears all the costs and risks involved in bringing
the goods not only for export but also for import, to pay any duty for both
export and import and to carry out all customs formalities
DDP represents the maximum obligation for the seller.
The parties are well advised to specify as clearly as possible the point
within the agreed place of destination, as the costs and risks to that point
are for the account of the seller. The seller is advised to procure contracts
of carriage that match this choice precisely. If the seller incurs costs
under its contract of carriage related to unloading at the place of destination,
the seller is not entitled to recover such costs from the buyer unless otherwise
agreed between the parties.
The parties are well advised not to use DDP if the seller is unable directly
or indirectly to obtain import clearance.
If the parties wish the buyer to bear all risks and costs of import clearance,
the DAP rule should be used.
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