INCOTERMS 2010
A Guide
2
Contents
INCOTERMS
DEFINITION
3
HISTORY
3
PURPOSE OF INCOTERMS
3
CONTRACTS IN FOREIGN TRADE
3
THE LEGAL STATUS OF THE INCOTERMS
3
WHAT DO INCOTERMS REGULATE?
4
WHAT DO INCOTERMS NOT REGULATE?
4
WHAT INCOTERMS SHOULD BE USED?
4
DESCRIPTION OF INCOTERMS
4
IMPORTANT DISTINCTION
4
THE APPLICATION OF INCOTERMS 2010
4
THE NEW INCOTERMS – DETAILS (EXCERPTS)
5
INCOTERMS FOR ALL MODES OF TRANSPORT
(INCLUDING MULTIMODAL TRANSPORT)
EXW – ex works (... named place)
6
FCA – free carrier (... named place)
6
CPT – carriage paid to (... named place of destination)
6
CIP – carriage and insurance paid to (... named place of destination)
6
DAT – delivered at terminal (... named port/place of destination)
7
DAP – delivered at place (... named place of destination)
7
DDP – delivered duty paid (... named place of destination)
7
INCOTERMS FOR SEA AND INLAND WATERWAY TRANSPORT
FAS – free alongside ship (... named port of shipment)
8
FOB – free on board (... named port of shipment)
8
CFR – cost and freight (... named port of destination)
8
CIF – cost, insurance and freight (... named port of destination)
9
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INCOTERMS
Definition
INCOTERMS (International Commercial Terms – ICC Rules
for the Use of Domestic and International Trade Terms) deal
with the transfer of risks and costs from seller to buyer as
well as with the main responsibilities of the parties in
connection with the shipment of goods.
History
 1919: International Chamber of Commerce (ICC)
established in Paris
 1936: A uniform interpretation of contract clauses
published
 Revisions 1953, 1967, 1976, 1980, 1990, 2000, 2010
Purpose of INCOTERMS
 To lay down internationally accepted rules for the
interpretation of trade terms in national and
international trade contracts.
 To avoid misunderstandings as a result of different
commercial practices.
Please note:
 INCOTERMS do not apply to contracts of carriage or
other contracts connected with the transport of goods.
 INCOTERMS do not cover all obligations which the
parties to a sales contract might wish to set down.
Contracts in Foreign Trade
 Sales contract (relevant for INCOTERMS)
 Insurance contract
 Contract of carriage
 Financing contract
But: The use of certain INCOTERMS clauses affects other
contracts: e.g. CFR or CIF require carriage by sea or inland
waterway.
The legal status of the INCOTERMS
INCOTERMS constitute a recommendation, not a law.
Express reference to “INCOTERMS 2010” must be made in
the sales contract for them to be applicable. It is advisable
to state the relevant INCOTERM completely in the sales
contract, e.g. FCA Frankfurt/Main Airport INCOTERMS 2010.
In legal disputes INCOTERMS are regarded as common
commercial practice.
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What do INCOTERMS regulate?
 The principal duties of the seller
 The principal duties of the buyer
 Transfer of risks – place and point in time
 Allocation of all costs incurred from dispatch to arrival
at the place or port of destination
 Formalities (e.g. customs formalities) for import, export
or transit
What do INCOTERMS not regulate?
 Questions of ownership
 Breach of contract and the legal consequences
 Declarations of indemnity
 Delivery options
 Modes of payment
 Applicable Law
What INCOTERMS should be used?
Four groups:
 E – COLLECTION TERM ( EXW )
Minimum obligation for seller
 F – DELIVERY TERMS ( FCA, FAS, FOB )
Buyer bears costs of main transport
 C – DISPATCH TERMS ( CFR, CIF, CPT, CIP )
Seller bears costs of main transport
 D – ARRIVAL TERMS ( DAT, DAP, DDP)
Maximum obligation for seller
Description of INCOTERMS
 E: The seller must merely place the goods at the
disposal of the buyer at the seller’s premises.
 F: The seller must deliver the goods to a carrier
nominated by the buyer. At that time the risk and costs
for the goods pass from the seller to the buyer.
 C: The seller must contract for carriage at his own
expense but is not liable for loss of or damage to the
goods or additional costs resulting from events after
shipment/dispatch.
 D: The seller bears all costs and risks until the goods
arrive at their place of destination.
Important distinction
SINGLE-POINT TERM
Both costs and risks are transferred from the seller to the
buyer at the same point in time (E, F and D terms).
TWO-POINT TERM
Costs and risks are transferred from the seller to the buyer
at different points in time (risks before costs) (C terms).
The 11 INCOTERMS 2010 clauses are divided into two major
categories:
The first category includes clauses that are intended for use
irrespective of the mode of transport selected. The second
category encompasses those clauses which are intended for
use solely when the goods are transported by sea or inland
waterway.
CLAUSES FOR ALL TRANSPORT MODES
 EXW Ex Works
 FCA Free Carrier
 CPT Carriage Paid to
 CIP Carriage and Insurance Paid to
 DAT Delivered at Terminal
 DAP Delivered at Place
 DDP Delivered Duty Paid
These clauses can be used for all modes of transport
including mulitmodal transport (even if transport by ship for
part of the journey is effected).
CLAUSES FOR TRANSPORT BY SEA
WATERWAY
 FAS Free Alongside Ship
 FOB Free on Board
 CFR Cost and Freight
 CIF Cost, Insurance and Freight
AND
INLAND
These clauses are intended for use only when shipment is
effected from port to port by ship.
The application of INCOTERMS 2010
The determination which INCOTERM-clause is appropriate
for a certain transaction depends to a great extent on the
type of goods, the intended transport route and the desired
mode of transportation. Furthermore, the INCOTERM-clause
must correctly reflect the agreed allocation of costs, risks
and responsibilities as set down in the sales contract, e.g.
which party is responsible for concluding the contract of
carriage (and any contract of insurance) at its expense,
when and where does the risk of loss of or damage to the
goods during transport pass from the seller to the buyer etc.
It is also important to consider whether the respective party
is capable of fulfilling its obligations under the intended
INCOTERM-clause. For example, DDP should only be agreed
if the seller is actually able to carry out the customs
formalities in the importing country. If that is not the case
then DAP would be the more appropriate clause.
The guidance note preceding each INCOTERM-clause in the
brochure INCOTERMS 2010 contains valuable information
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that can help to identify the correct INCOTERM for a
particular type of transaction.
In this connection it should be remembered that the
INCOTERMS can best fulfill their function when the place of
delivery is stated as precisely as possible. In practice this
means stating not only a place in connection with the
INCOTERM-clause, but also a specific point at that place For
example: FCA Am Tucherpark 16, Munich, Germany.
If no specific point at the place of delivery is stated and
more than one point is available, the seller may select the
point at the place of delivery that best suits its purpose.
Modifications of the standard INCOTERM-clauses in the
sales contract should be avoided whenever possible, since
such modifications could jeopardize the internationally
accepted interpretations of the clauses and lead to
misunderstandings and disputes with uncertain results.
The new INCOTERMS – Details (Excerpts)
Group
Abbreviation
English term
German term
E term
Collection term, minimum
obligation for seller
EXW
(any mode of transport)
Ex Works
(named place)
Ab Werk
(benannter Ort)
F terms
Delivery terms, buyer bears
costs of main transport
FCA
(any mode of transport)
Free Carrier
(named place)
Frei Frachtführer
(benannter Ort)
FAS
(sea or inland waterway
transport only)
Free Alongside Ship
(named port of shipment)
Frei Längsseite Schiff
(benannter
Verschiffungshafen)
FOB
(sea or inland waterway
transport only)
Free On Board
(named port of shipment)
Frei an Bord
(benannter
Verschiffungshafen)
CFR
(sea or inland waterway
transport only)
Cost and Freight
(named port of destination)
Kosten und Fracht
(benannter
Bestimmungshafen)
CIF
(sea or inland waterway
transport only)
Cost, Insurance and Freight
(named port of destination)
Kosten, Versicherung und
Fracht
(benannter
Bestimmungshafen)
CPT
(any mode of transport)
Carriage Paid To
(named place of destination)
Frachtfrei
(benannter Bestimmungsort)
CIP
(any mode of transport)
Carriage and Insurance Paid to Frachtfrei versichert
(named place of destination) (benannter Bestimmungsort)
DAT
(any mode of transport)
Delivered At Terminal
(named Terminal at named
port/place of destination)
Geliefert Terminal
(benannter Terminal am
benannten
Bestimmungshafen/-ort)
DAP
(any mode of transport)
Delivered at Place
(named place of destination)
Geliefert Benannter Ort
(benannter Bestimmungsort)
DDP
(any mode of transport)
Delivered Duty Paid
(named place of destination)
Geliefert verzollt
(benannter Bestimmungsort)
C terms
Dispatch terms, seller bears
costs of main transport
D terms
Arrival terms, maximum
obligation for seller
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INCOTERMS FOR ALL MODES OF TRANSPORT
(INCLUDING MULTIMODAL TRANSPORT)
EXW – Ex Works (Named place)
EXW means that the seller delivers when it places the
goods at the disposal of the buyer at the seller’s premises.
At this time the risk and costs for the goods pass from the
seller to the buyer.
Duties of seller
 Place the goods at the disposal of the buyer at the
agreed place
Duties of buyer
 Take delivery of the goods at the agreed place and
effect payment for the goods
 Clear the goods for export and import
Documents
Documents required:
 Commercial invoice
 Confirmation of receipt, receipt
Additional documents:
 Documents needed for export/import or transit cleara
FCA – Free Carrier (Named place)
FCA means that the seller delivers the goods to the carrier at
the seller's premises or another named place. At this time the
risk and costs for the goods pass from the seller to the buyer.
Duties of seller
 Deliver the goods to the named place
 Provide proof of hand-over of goods to carrier
 Clear the goods for export
Duties of buyer
 Nominate the carrier
 Contract for carriage
 Effect payment for the goods
 Clear the goods for import
Documents
Documents required:
 Commercial invoice
 Usual transport document providing proof of delivery of
goods to carrier
 Export licence if necessary
Additional documents:
 Documents needed for import or transit clearance
CPT – Carriage Paid To (Named place of destination)
CPT means that the seller delivers the goods to the carrier
at an agreed place (if any such place is agreed between the
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 risk of loss of or damage to the
goods passes from the seller to the buyer upon delivery of
the goods to the carrier (Two-point clause).
Duties of seller
 Contract for carriage
 Deliver the goods to the (first) carrier
 Procure usual and “clean” transport document
 Clear the goods for export
 Pay the freight costs for carriage of the goods to the
named place of destination
Duties of buyer
 Take delivery of goods from the carrier
 Pay the costs which according to the contract of
carriage are not borne by the seller
 Effect payment for the goods
 Clear the goods for import
Documents
Documents required:
 Commercial invoice
 Transport document
 Export licence if necessary
Additional documents:
 Documents needed for import or transit clearance
CIP – Carriage and Insurance Paid to (Named place of
destination)
CIP means that the seller delivers the goods to the carrier at
an agreed place (if any such place is agreed between the
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 at its expense
for insurance cover against the buyer's risk of loss of or
damage to the goods during the carriage.
The risk of loss of or damage to the goods passes from the
seller to the buyer upon delivery of the goods to the carrier
(Two-point clause).
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Duties of seller
 Contract for carriage and insurance
 Deliver the goods to the (first) carrier
 Procure usual and “clean” transport document and
transport insurance (policy or certificate)
 Clear the goods for export
 Pay the transport insurance premium and the freight costs
for carriage of the goods to the named place of destination
Duties of buyer
 Take delivery of the goods from the carrier
 Pay the costs which according to the contract of
carriage are not borne by the seller
 Effect payment for the goods
 Clear the goods for import
Documents
Documents required:
 Commercial invoice
 Transport document
 Export licence if necessary
 Insurance policy (certificate)
Additional documents:
 Documents needed for import or transit clearance
DAT – Delivered At Terminal (Named port/place of destination)
DAT 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 the named terminal at the
named port or place of destination. At this time the risk and
costs for the goods pass from the seller to the buyer.
Duties of seller
 Place the goods at the disposal of the buyer at the
named terminal
 Procure a document which enables the buyer to take
delivery of the goods at the terminal
 Clear the goods for export
Duties of buyer
 Take delivery of the goods at the named terminal and
arrange the onward transport
 Clear the goods for import
 Effect payment for the goods
Documents
Documents required:
 Commercial invoice
 Transport document
Additional documents:
 Documents needed for import or transit clearance
DAP – Delivered At Place (Named place of destination)
DAP 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. At this time the risk and costs for the goods
pass from the seller to the buyer.
Duties of seller
 Place the goods at the disposal of the buyer at the
named place
 Procure a document which enables the buyer to take
delivery of the goods at the named place
 Clear the goods for export
Duties of buyer
 Take delivery of the goods at the named place and
arrange the onward transport (if necessary)
 Clear the goods for import
 Effect payment for the goods
Documents
Documents required:
 Commercial invoice
 Transport document
Additional documents:
 Documents needed for import or transit clearance
DDP – Delivered Duty Paid (Named place of destination)
DDP 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. At this time
the risk and costs for the goods pass from the seller to the
buyer.
Duties of seller
 Place the goods at the disposal of the buyer at the
named place of destination
 Procure the documents which will enable the buyer to
take over the goods
 Clear the goods for export and import
Duties of buyer
 Take delivery of the goods at the named place of
destination
 Effect payment for the goods
Documents
Documents required:
 Commercial invoice
 Transport document
 Import licence, if necessary
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INCOTERMS FOR SEA AND INLAND WATERWAY TRANSPORT
FAS – Free Alongside Ship (Named port of shipment)
FAS 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.
At this time the risk and costs for the goods pass from the
seller to the buyer.
Duties of seller
 Deliver the goods alongside the vessel
 Procure proof of delivery
 Clear the goods for export
Duties of buyer
 Nominate the ship, the place of loading, the delivery
time and the carrier
 Contract for carriage
 Effect payment for the goods
 Clear the goods for import
Documents
Documents required:
 Commercial invoice
 Customs certification
 Export licence, if necessary
 Proof of delivery (possibly transport document)
Additional documents:
 Documents needed for import or transit clearance
FOB – Free On Board (Named port of shipment)
FOB means that the seller delivers the goods on board the
vessel nominated by the buyer at the named port of
shipment. At this time the risk and costs for the goods pass
from the seller to the buyer.
FOB may not be appropriate where goods are handed over
to the carrier before they are on board the vessel, for
example goods in containers, which are typically delivered
at a terminal. In such cases, the FCA rule should be used.
Duties of seller
 Deliver the goods on board
 Procure the customary document (usually a “clean”,
negotiable bill of lading) proving delivery of the goods
on board
 Pay loading costs not included in the freight
 Clear the goods for export
Duties of buyer
 Nominate the carrier
 Contract for carriage
 Pay all costs for the goods once they have been loaded
on board the vessel in the named port of shipment
 Effect payment for the goods
 Clear the goods for import
Documents
Documents required:
 Commercial invoice
 Customs certification
 Export licence if necessary
 Transport document (Bill of Lading)
Additional documents:
 Documents needed for import or transit clearance
CFR – Cost And Freight (Named port of destination)
CFR means that the seller delivers the goods 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 risk of loss of or damage to the goods
passes from the seller to the buyer upon delivery of the
goods on board the vessel (Two-point clause).
CFR may not be appropriate where goods are handed over
to the carrier before they are on board the vessel, for
example goods in containers, which are typically delivered
at a terminal. In such cases, the CPT rule should be used.
Duties of seller
 Contract for carriage
 Load the goods on board
 Procure a “clean” transport document
 Clear the goods for export
 Pay costs and freight to the named port of destination
Duties of buyer
 Take delivery of the goods from the carrier
 Pay the costs which according to the contract of
carriage are not borne by the seller
 Effect payment for the goods
 Clear the goods for import
9
Documents
Documents required:
 Commercial invoice
 Transport document (bill of lading, non-negotiable sea
waybill)
 Export licence if necessary
Additional documents:
 Documents needed for import or transit clearance
CIF – Cost, Insurance and Freight (Named port of destination
CIF means that the seller delivers the goods 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 at its
expense against the buyer's risk of loss of or damage to the
goods during the carriage.
The risk of loss of or damage to the goods passes from the
seller to the buyer upon delivery of the goods on board the
vessel (Two-point clause).
CIF may not be appropriate where goods are handed over to
the carrier before they are on board the vessel, for example
goods in containers, which are typically delivered at a
terminal. In such cases, the CIP rule should be used.
Duties of seller
 Contract for carriage and insurance
 Load the goods on board
 Procure a “clean” transport document and transport
insurance (policy or certificate)
 Clear the goods for export
 Pay the transport insurance premium, costs and freight
to bring the goods to the named port of destination
Duties of buyer
 Take delivery of the goods from the carrier
 Pay the costs which according to the contract of
carriage are not borne by the seller
 Effect payment for the goods
 Clear the goods for import
Documents
Documents required:
 Commercial invoice
 Transport document
 Export licence if necessary
 Insurance policy (certificate)
Additional documents:
 Documents needed for import or transit clearance
10
Publisher
UniCredit Bank AG
Global Transaction Banking
Foreign Trade Services
FAH8PM
D – 80311 Munich
Sources: INCOTERMS 2010 Brochure of the ICC,
Paris (Pub. 715)
The Information presented in this brochure is
correct to the best of our knowledge and is based
on the current legal status – subject to any errors
which may have arisen – and no claim to
completeness is made.
We accept no liability for possible translation
errors.
The text may be reproduced or copied only with
the approval of the author.