Incoterms

What are these?

“Incoterms” is the abbreviation for International Commercial Terms. Published for the first time in 1936, it is in fact a set of 11 rules that define responsibility in international transactions.

Why are they so important?

Because they are known and accepted from Austin to Zanzibar. A requirement for each commercial invoice, which substantially reduces the risk of potential costs due to misunderstandings.

What does these requirements cover?

Incoterms conditions cover all the activities, risks and costs involved in the transaction of goods, from seller to buyer.

EXW (Ex-Works)

– The product and risks are transferred to the buyer, including the payment of the transport and the cost of insurance at the gate of the vendor’s factory.

FOB (Free On Board)

– the seller fulfills his delivery obligation when the goods have passed the ship’s rail in the agreed port of loading. The costs and risks of loss and damage to the goods are incurred by the buyer at that time. The term FOB involves the seller’s obligation to clear the goods for export. This term can only be used for sea or inland waterway transport. If the ship’s railing is not relevant, such as roll-on / roll-off or containerized traffic, it is more appropriate to use the term FCA.

FCA (Free Carrier)

– Franco Caruso – the seller fulfills his delivery obligation when he handed the goods for export, in the care of the carrier designated by the buyer at the agreed place or point. If the buyer does not specify an exact point, the seller may choose the point from the place or the said territory where the carrier is to take over the cargo in his custody. If commercial practice requires support from the seller for concluding the contract with the carrier (as is the case with CFR or air transport). The seller acts on the buyer’s risk and expense.

DAP (Delivery at Place)

– the seller delivers the goods in the appropriate means of transport at the place established with the buyer. The seller covers all costs for delivering and unloading the goods at the established terminal. It is recommended that the concept of Terminal be very well specified. If the seller pays the costs of unloading the goods at destination, he / she is not entitled to re-invoice these costs to the buyer. It is recommended that the notion of place is very well defined. The DAP covers export formalities but does not include the cost of customs clearance formalities.

DDP (Delivered Duty Paid)

– the seller fulfills the delivery obligation when the goods were made available to the buyer at the agreed place in the importing country. The seller must bear all costs and risks associated with bringing the goods to this place including customs duties, other taxes and official duties payable on import, as well as the costs and risks of customs formalities. This term can be used irrespective of the mode of transport.

FAS (Free Alongside Ship)

– the seller fulfills the delivery obligation when the merchandise was placed along the vessel, on keys or on slings, barges or on the ferry, at the agreed port of call. This means that all costs and risks of loss or deterioration of the goods are borne from that time by the buyer. The term FAS involves the obligation of the buyer to clear the goods for export and should not be used if the buyer can not directly or indirectly fulfill the export formalities. This term can only be used for sea or inland waterway transport.

C.F.R. (Cost & Freight)

– the seller must pay the freight and the costs necessary to bring the cargo to the agreed port of destination but the risk of loss or damage to the cargo and any additional costs caused by events that occurred after the goods were delivered aboard the ship transfer from the seller to the buyer as soon as the goods pass through the ship’s balustrade in the port of loading. The term C.F.R implies the obligation of the vendor to clear the goods for export. If the ship’s railing is not relevant, as in the case of roll-on / roll-off or containerized traffic, it is more appropriate to use the term CPT.

CIF (Cost, Insurance and Freight)

–  the seller has the same obligations as the CFR term but additionally he has to carry out maritime insurance to cover the buyer’s risk of loss or damage to the cargo during shipping. The seller terminates and pays the insurance contracts and pays the insurance premium. The buyer notes that for the CIF term, the seller is required to obtain the minimum coverage insurance. The CIF term implies the obligation of the vendor to clear the goods for export. If the vessel’s railing is not relevant, as in the case of roll-on / roll-off or containerized traffic, it is more appropriate to use the term CIP.

CPT (CARRIAGE PAID TO)

– the seller pays the cost of transporting the goods at the agreed destination. The risks of loss of or deterioration of the cargo as well as any other additional expenses caused by events that took place after the goods were handed over to the carrier pass from the seller to the buyer at the time the goods were handed over to the carrier. If successive carriages are used for the carriage of goods, the risks pass from the seller to the buyer when the cargo was handed over to the first carrier. The term CPT implies the obligation of the vendor to clear the goods for export. This term can be used for all modes of transport, including multimodal transport.

CIP (Carriage and Insurance Paid)

– the seller has the same obligations as the CPT term but additionally he must also cover insurance against the risk of loss or damage to the goods during transport. The seller concludes the contract and pays the insurance premium. The buyer must note that in the case of CIP, the seller is required to obtain the insurance premium for minimum coverage. The term CIP implies the obligation of the vendor to clear the goods for export. This term can be used for all modes of transport, including multimodal transport.

DAT (Delivered at Terminal)

– the seller delivers and discharges from the means of transport to the terminal (from the port or place) established with the buyer. Terminal means any place such as: keys, warehouse, street, terminal cargo, CFR terminal. The seller covers all costs for delivering and unloading the goods at the established terminal. It is recommended that the concept of Terminal be very well specified. The DAT covers export formalities but does not include the cost of customs clearance on import.