International Commercial Terms (INCOTERMS)

0
6688

When negotiating an international sales contract, both parties need to pay as much attention to the terms of sale as to the sales price.  To make it as clear as possible, an international set of trade terms (INCOTERMS) has been adopted by most countries that defines exactly the responsibilities and risks of both the buyer and seller including while the merchandise is in transit.

 

NOM DEFINITIONS
EXW 
Ex Works

Usage :

All modes of transportation

Title and risk pass to buyer including payment of all transportation and insurance cost from the seller’s door.

 

FCA 
Free Carrier

Usage : All modes of transportation

The delivery of goods on truck, rail car or container at the specified point (depot) of departure, which is usually the seller’s premises, or a named railroad station or a named cargo terminal or into the custody of the carrier, at seller’s expense. The point (depot) at origin may or may not be a customs clearance center. Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks.

In the air shipment, technically speaking, goods placed in the custody of an air carrier is considered as delivery on board the plane. In practice, many importers and exporters still use the term FOB in the air shipment.

The term FCA is also used in the RO/RO (roll on/roll off) services.

Some manufacturers may use the former terms FOT (Free On Truck) and FOR (Free On Rail) in selling to export-traders.

FAS 
Free Alongside Ship

Usage :

Only for sea or inland waterway transportation

Goods are placed in the dock shed or at the side of the ship, on the dock or lighter, within reach of its loading equipment so that they can be loaded aboard the ship, at seller’s expense. Buyer is responsible for the loading fee, main carriage/freight, cargo insurance, and other costs and risks.

In the export quotation, indicate the port of origin (loading) after the acronym FAS, for example FAS New York and FAS Bremen.

The FAS term is popular in the break-bulk shipments and with the importing countries using their own vessels

 

FOB 
Free On Board

Usage :

Only for sea or inland waterway transportation

Free On Board and risk pass to buyer including payment of all transportation and insurance cost once delivered on board the ship by the seller. Used for sea or inland waterway transportation.

CFR
Cost and Freight

Usage :

Only for sea or inland waterway transportation

Title, risk and insurance cost pass to buyer when delivered on board the ship by seller who pays the transportation cost to the destination port.

CIF
Cost, Insurance and Freight

Usage :

Only for sea or inland waterway transportation

Title and risk pass to buyer when delivered on board the ship by seller who pays transportation and insurance cost to destination port. Used for sea or inland waterway transportation.

CPT
Carriage Paid To

Usage :

All modes of transportation

The delivery of goods to the named place of destination (discharge) at seller’s expense. Buyer assumes the cargo insurance, import customs clearance, payment of customs duties and taxes, and other costs and risks.

CIP
Carriage and Insurance Paid

 

Usage :

All modes of transportation

The delivery of goods and the cargo insurance to the named place of destination (discharge) at seller’s expense. Buyer assumes the import customs clearance, payment of customs duties and taxes, and other costs and risks.

In the export quotation, indicate the place of destination (discharge) after the acronym CIP, for example CIP Paris and CIP Athens.

DAF
Delivered at Frontier

Usage :

All modes of transportation

The delivery of goods to the specified point at the frontier at seller’s expense. Buyer is responsible for the import customs clearance, payment of customs duties and taxes, and other costs and risks.

DES
Delivered Ex Ship

Usage :

Only for sea or inland waterway transportation

The delivery of goods on board the vessel at the named port of destination (discharge), at seller’s expense. Buyer assumes the unloading fee, import customs clearance, payment of customs duties and taxes, cargo insurance, and other costs and risks.

 

DEQ
Delivered Ex Quay

Usage :

Only for sea or inland waterway transportation

The delivery of goods to the quay (the port) at destination at seller’s expense. Seller is responsible for the import customs clearance and payment of customs duties and taxes at the buyer’s end. Buyer assumes the cargo insurance and other costs and risks.

 

DDU
Delivered Duty Unpaid

Usage : All modes of transportation

The delivery of goods and the cargo insurance to the final point at destination, which is often the project site or buyer’s premises, at seller’s expense. Buyer assumes the import customs clearance and payment of customs duties and taxes. The seller may opt not to insure the goods at his/her own risks.

 

DDP
Delivered Duty Paid

Usage :

All modes of transportation

The seller is responsible for most of the expenses, which include the cargo insurance, import customs clearance, and payment of customs duties and taxes at the buyer’s end, and the delivery of goods to the final point at destination, which is often the project site or buyer’s premises. The seller may opt not to insure the goods at his/her own risks.

Incoterms 2000 : Chart of Responsibility

The following chart summarizes the responsibilities of both the buyer and seller for each of the current 13 INCOTERMS.  In addition, a definition for each term is included at the bottom of the page.

 

EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP

SERVICES

Warehouse Storage Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Warehouse Labor Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Export Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Loading Charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Inland Freight Buyer Buyer/Seller* Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Terminal Charges Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Forwarder’s Fees Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
Loading On Vessel Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Ocean/Air Freight Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
Charges On  Arrival At Destination Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Buyer Buyer Seller Seller Seller
Duty, Taxes & Customs Clearance Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller
Delivery To Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller

* There are actually two FCA terms: FCA Seller’s Premises where the seller is responsible only for loading the goods and not responsible for inland freight; and FCA Named Place (International Carrier) where the seller is responsible for inland freight.

Books and documentation

Incoterms 2000: ICC Official Rules for the Interpretation of Trade Terms

Guide to Incoterms 2000

LAISSER UNE REPONSE

Please enter your comment!
Please enter your name here