What are Incoterms?
Incoterms are a standard set of terminology, created by the International Chamber
of Commerce (ICC), used universally, defining the key parts of freight forwarding. In
1936 the ICC first defined the INternational COmmerce Terminology (INCO Terms),
and we have summarised the 11 most commonly used terms below. Incoterms is a
registered trademark of the International Chamber of Commerce.
Who uses incoterms?
Incoterms 2010 are used today by practitioners and traders, anyone involved in the
supply chain of delivering goods overseas will probably come across incoterms,
including:
Traders
Producers
Buyers
Sellers
Governments
Banks
What do incoterms cover?
The language that was agreed by incoterms guidance covers the following areas of
international commerce and trade by the International Chambers of Commerce:
Tasks involved in shipping
Which parties hold contract
Responsibility of risk
Delivery of goods (buyers and sellers)
Insurance duties
Customs and taxes
RULES FOR ANY MODE OR MODES OF TRANSPORT
EXW Ex Works
“Ex Works” means that the seller delivers when it places the goods at the disposal of
the buyer at the seller’s premises 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 the goods for export, where such clearance is
applicable.
FCA Free Carrier
“Free Carrier” means that the seller delivers the goods to the carrier or another
person nominated by the buyer at the seller’s premises or another named place. The
parties are well advised to specify as clearly as possible the point within the named
place of delivery, as the risk passes to the buyer at that point.
CPT Carriage Paid To
“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 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.
CIP Carriage And Insurance Paid To
“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 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.”
DAT Delivered At Terminal
“Delivered at Terminal” means that the 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 a place, whether covered or not, such as a quay, warehouse, container yard
or road, rail or air cargo terminal. The seller bears all risks involved in bringing the
goods to and unloading them at the terminal at the named port or place of
destination.
DAP Delivered At Place
“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.
DDP Delivered Duty Paid
“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 to the place of destination and has
an obligation to clear 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.
RULES FOR SEA AND INLAND WATERWAY TRANSPORT
FAS Free Alongside Ship
“Free Alongside Ship” means that the seller delivers when the goods are placed
alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the
named port of shipment. The risk of loss of or damage to the goods passes when the
goods are alongside the ship, and the buyer bears all costs from that moment
onwards.
FOB Free On Board
“Free On Board” means that the seller delivers the goods on board the vessel
nominated by the buyer at the named port of shipment 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, and the buyer bears all costs from that moment
onwards.
CFR Cost and Freight
“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 and pay
the costs and freight necessary to bring the goods to the named port of destination.
CIF Cost, Insurance and Freight
“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 damage 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.”
