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INCOTERMS
Classification of the 11
Incoterms® 2010 rules
1
EXW
6
DAP
10
CFR
2
FCA
7
DDP
11
CIF
3
CPT
8
FAS
4
CIP
9
FOB
5
DAT
Introduction
Incoterms is a set of international rules for the interpretation
of the most commonly used trade terms. Applying Incoterms
to sale and purchase contracts makes global trade easier and
helps partners in different countries understand one another.
The parties to the transaction select the Incoterms, which
determine who pays the cost of each transportation segment,
who is responsible for loading and unloading of goods, and
who bears the risk of loss at any given point during an
international shipment.
The ICC first published this set of international rules in 1936
as “INCOTERMS 1936.” Incoterms are amended every 10 years.
The 11 Incoterms® 2010 rules are presented in
two distinct classes:
RULES FOR ANY MODE OR MODES
OF TRANSPORT:
1. EXW EX WORKS
The buyer is responsible for all transportation costs,
duties, and insurance, and accepts risk of loss of goods
immediately after the goods are purchased and placed
outside the factory door.
2. FCA FREE CARRIER
The seller, or exporter, clears the goods for export and
delivers them to the carrier and place specified by the
buyer.
3. CPT CARRIAGE PAID TO
The seller, or exporter, clears the goods for export,
delivers them to the carrier, and is responsible for
carriage costs to the named place of destination.
4. CIP CARRIAGE AND INSURANCE PAID TO
The seller transports the goods to the port of export,
clears customs, and delivers them to the carrier. From
that point, risk of loss shifts to the buyer.
5. DAT DELIVERED AT TERMINAL
The seller delivering the goods, once unloaded from
the arriving means of transport. Goods are placed at the
disposal of the buyer at the named terminal, at the
named port or place of destination.
6. DAP DELIVERED AT PLACE
The seller is responsible for the costs of packing goods as well as for arranging the
delivery of the cargo at a place agreed with the buyer. The seller needs to ensure the
goods will arrive safely at the final destination or otherwise, he will need to support costs
for any sort of delays.
7. DDP DELIVERED DUTY PAID
The seller, or exporter, is responsible for all costs involved in delivering the goods to a
named place of destination and for clearing customs in the country of import.
RULES FOR SEA AND INLAND WATERWAY TRANSPORT:
8. FAS FREE ALONGSIDE SHIP
Sellers transport the goods from their place of business, clear the goods for export, and
place them alongside the vessel at the port of export, where the risk of loss shifts to the
buyer. The buyer is responsible for loading the goods onto the vessel, unless specified
otherwise, and for paying all costs involved in shipping goods to the final destination.
9. FOB FREE ON BOARD
11. CIF COST INSURANCE AND FREIGHT
The seller, or exporter, is responsible for delivering the
goods from its place of business and loading them onto
the vessel at the port of export, as well as clearing
customs in the country of export.
The seller, or exporter, is responsible for delivering the
goods onto the vessel of transport and clearing customs
in the country of export. The exporter also is responsible
for purchasing insurance, with the buyer (importer)
10. CFR COST AND FREIGHT
named as the beneficiary.
The seller, or exporter, is responsible for clearing the
goods for export, delivering the goods past the ships rail
at the port of shipment, and paying international freight
charges. The buyer assumes risk of loss once the goods
cross the ship’s rail, and must purchase insurance,
unload the goods, clear customs, and pay for transport
to deliver the goods to their final destination.
As of 2020 INCOTERMS
DAT IS NOW DPU
DPU (Delivery Place Unloaded)
replaces
DAT
(delivery
at
Terminal) in the incoterms 2020.
This is the only newly named term
in the guide, which is erectly
exactly the same, with clearer
language
and
rules.
The
obligations of the Buyer and Seller
are the same in both DP and DAT.
NEW INSURANCE RULES
FOR CIF AND CIP
There are changes to Cost
Insurance and Freight (CIF) and
Carriage and Insurance Paid To
(CIP), which are the only Incoterms
that define who is to pay for
insurance. For both CIF and CIP, the
insurance is to be paid by the
seller. Now, the seller has to
purchase
insurance
for
the
shipment to at least 110% of the
value of the goods.
As of 2020 INCOTERMS
FCA OPTION FOR ONBOARD NOTATION FOR
BILL OF LADING
GREATER CLARITY ON
WHO IS RESPONSIBLE FOR
WHAT
The new 2020 rules make it clear the
buyer should instruct the carrier or its
agent to release the Bill of
Lading(B/L) on the seller’s behalf. The
B/L will have the annotation of the
on-board, or Aboard that states, the
goods have been loaded on the
vessel. The Bill of Lading is one of the
most common documents used to
release payment if you pay by a letter
of credit.
The new rules were rewritten to
use less technical jargon and to be
easier to understand. It tried to
make the rules as clear as possible
while still being legally enforceable
in a multinational legal contract.
As of 2020 INCOTERMS
DIY TRANSPORT
OPTIONS
NEW SECURITY
REQUIREMENTS
For the first time, the new
incoterms now recognize that
both buyers and sellers can
transport the goods using their
vehicles.
This
means
they
recognize buyers can now pick up
god using their vehicle from a port
or terminal destination.
The new rules make it clear which
party is liable at two key points:
Transport from the country of origin
and customs clearance into the
destination country.
For the transport out of the country,
the seller is to assume liability for CPT,
CFR, CIP, CIF, DAP, DPU, and DDP, while
the buyer is liable if it is EXW, FCA, FAS,
and FOB. Customs clearance falls on
the party defined in the terms.
THANK YOU!