MSc WINE & SPIRITS MANAGEMENT

INCOTERMS
What are incoterms ?
Incoterms are both rules and tools which allow
a firm understanding between sellers and
buyers.

INCOTERMS
The first version of INternational COmmerce TERMS
appeared in 1936 with the International Chamber of
Commerce in Paris. Reviewed in 1953,1967,1976
and every 10 years. The last version from 2020 now
boasts with eleven frequently used terms.

INCOTERMS
 What are Incoterms for?

SELLER

TRANSFER OF TRANSFER TRANSFER OF DOCUMENTS

RISKS OF COSTS AND INFORMATION

BUYER
 What is not covered by incoterms

Incoterms do not regulate anything related

to the payment of the goods, and insurance
is not their primary concern. Furthermore,
they do not participate in the passage of
ownership title.

The passage of ownership title is normally

based on the the full payment rule with a
retention title clause. You are the owner of
the goods as far you ACHETEUR
have paid 100% value
INCOTERMS ARE NOT WITH AN OBLIGATORY USE
BUT EVERYONE INVOLVED IN AN INTERNATIONAL
SALES PROCESS SHOULD UNDERSTAND AND USE
THESE TERMS– NOT JUST SUPPLIERS AND BUYERS !

THOSE INCLUDE CUSTOMS ADMINISTRATION,

CUSTOMS BROKERS, FREIGHT FORWARDERS, BANKS,
INSURERS, CARRIERS AND EVERYONE ELSE WHO
COMES IN CONTACT WITH THE SALES CONTRACT AND/
OR THE GOODS. ACHETEUR
 THIS IS THE REASON WHY WE MEET
INCOTERMS IN MORE THAN 90% OF
SALES CONTRACTS

ACHETEUR
 IN A CONTEXT OF A TREMENDOUS
INCREASE OF THE INTERNATIONAL
TRADE SINCE 70 YEARS

1948: 59 billions US$

1963: 157 billions US$
1983: 1’838 billions US$
2003: 7’380 billions US$
2014: 18’500 billions US$
ACHETEUR
2021: 22’000 billions US$
 HOW TO USE THE INCOTERMS ?

BECAUSE THEY ARE USED WORLDWIDE, IT

IS NECESSARY FIRST TO CLEARLY INDICATE
WHICH VERSION YOU EXPECT TO USE 2010
OR 2020.

USING FOR EXAMPLE THE FOLLOWING:

THE VERSION WE DECIDED TO USE IS
« Incoterms ® 2010 » or « Incoterms ® 2020 »

OTHERWISE, MISTAKES CAN HAPPEN

ACHETEUR
 HOW TO USE THE INCOTERMS ?

IT IS ALSO VITAL FOR BOTH PARTIES TO PUT A

GEOGRAPHIC PLACE AFTER ANY INCOTERM.

EXAMPLE : « Incoterms ® 2020 FCA Paris »

IT ALSO PREVENTS ANY MISUNDERSTANDINGS

THAT MIGHT OCCUR.
IN THE 2010 VERSION THERE ARE 2 CATEGORIES
WHICH HELP US DIFFERENTIATE THE ELEVEN
INCOTERMS BASED ON THE MODE OF TRANSPORT

 The first one is for multimodal transport including

7 incoterms: EXW, FCA, CPT, CIP, DAT, DAP and DDP

 The second one is for sea and waterways transport

including 4 incoterms: FAS, FOB, CFR and CIF

Incoterms based on the mode of transport
 EXWORKS (EXW or Départ usine)

The buyer decides of the mode of transport and of the carrier. The loading at plant
is operated by the seller on the basis of a special convention with the buyer.

SELLER BUYER
CUSTOMS
CUSTOMS
MAIN TRANSPORT

RISKS

COSTS
 FREE CARRIER (FCA or Franco transporteur)
Delivery of the goods by the seller at the freight terminal of the carrier.
This incoterms makes sense for small shipments to bé shipped in groupage trailers
(LTL) or containers (LCL). The unloading charges at terminal are for the account of
the buyer.

Warehouse or terminal of the carrier

not unloaded

TRANSPORT
RISKS

COSTS
 CARRIAGE PAID TO (CPT or Port payé jusqu’à…)

The seller decides of the mode of transport and carrier.

Departure point Agreed destination
point

TRANSPORT
MULTIMODAL

RISKS

COSTS
CARRIAGE & INSURANCE PAID TO
(CIP- Port payé, assurance comprise, jusqu’à)
The seller takes care of the transport insurance against
the risks of loss (missing items) and damage during the
transport.
Agreed point
TRANSPORT of destination
MULTIMODAL

RISKS

COSTS

INSURANCE
 DELIVERED AT TERMINAL (DAT or Rendu
à « port » de destination convenu)

PORT

TRANSPORT
MULTIMODAL

RISKS
ROAD
TERMINAL
COSTS

BECAREFUL THE GOODS ARE AT THE DISPOSAL OF THE BUYER BUT ALWAYS ON BOARD OF
THE EQUIPMENT, INSIDE NOT UNLOADED !
DELIVERED AT PLACE (DAP or Rendu au
lieu de destination convenu)

TRANSPORT POST
MULTIMODAL CARRIAGE

RISKS

COSTS

AGREED PLACE OF DELIVERY

GOODS NOT CLEARED AND NOT
UNLOADED !
DELIVERED DUTY PAID (DDP)
ou Rendu droits acquittés

TRANSPORT
PRE-CARRIAGE MULTIMODAL POST- CARRIAGE

RISKS

COSTS

AGREED PLACE OF DELIVERY, GOODS NOT UNLOADED

BUT THIS TIME CLEARED THROUGH THE CUSTOMS.
CUSTOMS DUTIES & TAXES DULY PAID !
 FREE ALONGSIDE SHIP or FAS
(Franco le long du navire au port d’embarquement
convenu)

QUAY SIDE OR WHARF

MARITIME TRANSPORT

RISKS

COSTS
 FREE ON BOARD or FOB (Franco à bord
au port d’embarquement convenu)

PORT OF
LOADING ON DESTINATION
BOARD VESSEL MARITIME
TRANSPORT

TRANSPORT TO THE PORT

RISKS

COSTS
BECAREFUL !!! IT MEANS THAT THE TRANSFER OF
RISKS IS INTO THE HOLD, THE GOODS BEING DULY
LOADED, LASHED AND SECURED
 COST AND FREIGHT PAID TO - CFR
Coût et Fret jusqu’au port de destination convenu

LOADING ON
BOARD VESSEL PORT DE
DESTINATION

MARITIME
TRANSPORT
RISKS
BECAREFUL
TO THE
LINER TERMS
COSTS
COST INSURANCE AND FREIGHT PAID TO - CIF
Coût Assurance et Fret jusqu’au port de
destination convenu

LOADING ON PORT OF
BOARD DESTINATION

MARITIME
TRANSPORT
RISKS
BECAREFUL
NOTIONS OF
LINER TERMS
COSTS

INSURANCE
 QUID ABOUT 2010 VERSION ?

BUYERS AND SELLERS CAN CONTINUE TO USE

BASED ON A COMMON AGREEMENT THE 2000
VERSION OF THE ICC.

BUT THEY HAVE TO DISCUSS IT DURING

NEGOTIATIONS AND INDICATE IT IN THE FUTURE
CONTRACT
 DELIVERED EX-SHIP or DES
Rendu bord navire au port de destination convenu

MARITIME
TRANSPORT

BECAREFUL
LINER TERMS
RISKS DETERMINING WHO
PAYS THE TERMINAL
HANDLING CHARGES
COSTS
 DELIVERED EX-QUAY or DEQ
Rendu à quai au point de destination convenu

PORT OF PORT OF
LOADING ARRIVAL
MARITIME
TRANSPORT

BECAREFUL
RISKS
LINER TERMS
COSTS QUAY for BULK
or LINER OUT for
CONTAINERS

DETERMINING WHO PAYS THE TERMINAL HANDLING CHARGES.

 DELIVERED DUTY UNPAID
(DDU) - Délivré droits de douane non acquittés

Post
Pre - carriage
carriage
TRANSPORT
INTERNATIONAL
MULTIMODAL

RISKS

COSTS AGREED PLACE OF DELIVERY

GOODS CLEARED THROUGH THE
CUSTOMS, BUT DUTIES & TAXES
UNPAID BY THE SELLER
 QUID ABOUT 2020 VERSION ?

BUYERS AND SELLERS CAN CONTINUE TO USE WITH

A COMMON AGREEMENT ALTERNATIVELY THE 2020
OR THE 2010 VERSIONS OF THE ICC.

BUT THEY NEED TO INFORM THIS IMMEDIATELY

DURING THE NEGOCIATIONS AND PUT IT VERY
CLEARLY INSIDE THE CONTRACT
 A NEW ONE: DPU !

DPU (DELIVERED AT PLACE UNLOADED) WOULD BE

INTENDED TO FILL A GAP BETWEEN DAP AND DDP,
WITH TRANSFER OF RISK FROM THE SELLER TO THE
BUYER AT THE TIME THE GOODS ARE DELIVERED
UNLOADED FROM THE MEANS OF TRANSPORT IN THE
AGREED PLACE AND ON THE AGREED DATE.

THE BUYER SHALL BEAR ALL RISKS OF LOSS OR

DAMAGE FROM DELIVERY.
MANY AMBIGUITIES TO FEAR …
DELIVERED AT PLACE UNLOADED (DPU ou
Rendu au lieu de destination déchargé)

POST
TRANSPORT CARRIAGE

RISKS

COSTS

AGREED PLACE OF DELIVERY

GOODS NOT CLEARED BUT
UNLOADED !
 COMMON MISTAKES THAT INVOLVE
INCOTERMS AND THEIR USE

USING DDP WITHOUT KNOWLEDGE OF IMPORT REGULATIONS.

THERE IS A SLIM CHANCE THAT SELLERS KNOW ALL THE IMPORT

FORMALITIES, CUSTOMS DUTIES & TAXES IN THE BUYER’S
COUNTRY.

THEREFORE, MISTAKES CAN HAPPEN WITH CORRUPTED

COUNTRIES.

SINCE 1993 THERE IS NO BORDER AS WELL AS CUSTOMS DUTIES

AND TAXES INSIDE E.U. CONSEQUENTLY, THE INCOTERMS DDP IS
NO LONGER VALID FOR INTRA EUROPEAN CONTRACTS
 COMMON MISTAKES THAT INVOLVE
INCOTERMS AND THEIR USE

 CIF AND CIP MISUNDERSTANDINGS.

THESE ARE THE ONLY TWO INCOTERMS THAT HAVE RULES

ABOUT THE INSURANCE. HOWEVER, SOMETIMES BOTH THE
BUYER AND THE SELLER GET CONFUSED ABOUT THEM, AND
THE PACKAGE ITSELF MIGHT END UP WITHOUT INSURANCE.
WHEN USING THESE RULES, THE SELLER ARRANGES THE
COVERAGE IN THE BUYER’S NAME. FURTHERMORE, IT HAS TO
COVER A MINIMUM OF 110% OF THE TOTAL SHIPMENT VALUE.

 USING THE WRONG INCOTERMS.

FOR EXAMPLE, USING SEA OR WATERWAYS INCOTERMS TO
DELIVER CONTAINERIZED GOODS. BETTER TO USE CIP
 INSURANCE for CIP and CIF

EXCEPT SPECIAL REASONS THE SELLER MUST TAKE

CARE OF A TRANSPORT INSURANCE COVERAGE AND
PAY THE COST OF IT:

- COVERAGE ACCORDING TO CLAUSES (C)

OF THE INSTITUTE CARGO CLAUSES;

- THE COVERAGE IS TO BE DONE IN THE CONTRACT

CURRENCY WITH THE MINIMUM PRICE OF IT + 10%

- IF THE BUYER REQUIRES IT SELLER MUST PROVIDE ANY

ADDITIONAL COVERAGE (WAR RISKS FOR EXAMPLE) AT
BUYER’S EXPENSE
 INSTITUTE CARGO CLAUSES

THESE CLAUSES COVER:

- LOSS AND DAMAGE TO GOODS;

- COMMON DAMAGE AND RESCUE COSTS;

- LITIGATION AND CONVICTION FOR COLLISION AND

COLLISION.

ATTENTION TO EXCLUSIONS IN THE LAST VERSION

EFFECTIVE JANUARY 1, 2009
 2020 VERSION

 BECAREFUL TO FOREIGN COPIES OF INCOTERMS

WITH SEVERAL MISTAKES OF TRANSLATION

 THE OFFICIAL VERSION IS THE ENGLISH VERSION

AND ONLY ENGLISH ONE !
 TO CONCLUDE: STRATEGY

BECAREFUL! WHEN USING INCOTERMS IT IS

VITAL TO DECIDE A SPECIFIC INCOTERM VALID
FOR THE GOODS NATURE AND THE MODE OF
TRANSPORT.

BOTH PARTIES SHOULD AGREE ON IT AND

OUTLINE IT IN THE CONTRACT TO AVOID
COMPLICATIONS.
ACHETEUR
 SOME QUESTIONS IN ORDER TO SELECT A
CORRECT INCOTERM

 WHAT LEVEL OF FEES AND CASH DO I WANT SEE

INCLUDED IN MY SELLING PRICE

 WHAT IS THE LEVEL OF RESPONSIBILITY THAT I

WANT TO TAKE ?

 DO I HAVE THE MEANS IN AND THE KNOW HOW IN

MY COMPANY TO CONTROL MYSELF MY CONTRACTS
EVEN ARISING FROM TRANSPORT AND INSURANCE ?
ACHETEUR
 FOCUS ON FOB
Clear and Precise…Do not hesitate !

FOB Loading port ( Incoterms CCI 2020)

 FOCUS ON DAP
ATTENTION TO CUSTOMS FORMALITIES ON ARRIVAL
IF YOU ARE THE SELLER!

CONTRACTUALLY THE PURCHASER MUST PERFORM

AND PAY ALL IMPORT FORMALITIES.

IN THE HYPOTHESIS OF FAILURE OF THE PURCHASER

WHAT IS GOING ON?

THE ANSWER IS CLEAR BUT STILL DIFFICULT:

THE SELLER MUST ASSIST THE BUYER IN THE
LATTER’S COSTS AND RISKS!!
 FOCUS ON DPU

SAME SITUATION AS THE DAP BUT AGGRAVATED BY

THE OBLIGATION TO UNLOAD FOR THE SELLER.
SEVERAL SCENARIOS:

- SOLID AND LIQUID BULK BY SEA

SELLER ASSISTANCE AND OFFLOADING BY
THE MEANS OF THE EDGE (VESSEL)
- CONSIGNMENT OF CARGO OF LESS THAN 3 TONNES
FOR EXAMPLE AIRFREIGHT, OFFLOADING BY
THE DRIVER OF THE VEHICLE AT THE BUYER’S HOME
- BUT WHAT TO DO WITH A CARGO IN 1 X FCL SEA
CONTAINER OF WINES ?
 FOCUS ON DDP

PAY ATTENTION NOT ONLY TO CUSTOMS FORMALITIES

ON ARRIVAL BUT TO PAYMENT OF CUSTOMS DUTIES &
TAXES IF YOU ARE A SELLER!

THE SELLER MUST PERFORM THE CONTRACT

AND PAY ALL IMPORT DUTIES, TAXES AND VAT

IN THE HYPOTHESIS OF AN UNSTABLE AND/OR

CORRUPT DESTINATION COUNTRY WHAT HAPPENS?

THE ANSWER IS CLEAR: DO NOT HOLD DDP !!!

 CONCLUSION

FOR YOUR FUTURE IN THE BUSINESS OF WINES AND

SPIRITS MY RECOMMENDATIONS WOULD BE TO USE
A MAXIMUM OF 5 INCOTERMS IN YOUR CONTRACT :

EXW IF REALLY YOU HAVE NO OTHER ALTERNATIVES

FCA IN CASE OF GROUPAGE SHIPMENTS
FOB BECAUSE THIS A CLEAR AND PRECISE INCOTERM
CIP BECAUSE OF THE FLEXIBILITY AND THE
INSURANCE COVERAGE.
DAP IF YOU LIKE TO YOUR LEGS IN A DESTINATION
COUNTRY AND MORE CONTROL THE OPERATIONS
 BIBLIOGRAPHY

 40 EXERCICES EN DOUANE
and … INCOTERMS
Édition CELSE Paris

 50 EXERCICES EN LOGISTIQUE
and… INCOTERMS
Édition CELSE Paris

 INCOTERMS 2020 by ICC

ICC Books.com
or  00 33 1 49 53 29 23