INCOTERMS 2010
In order to better secure the rights
and obligations of sellers and buyers
operating in international trade, the
International Chamber of Commerce
in Paris, in the thirties, has codified
customs and uses developed by
international operators for the
delivery of goods. At the same time,
the United States federal law
defined the “Revised American
Foreign Trade Definitions”.
save for DAT, DAP and DDP which are sales at destination..
The Incoterms refer to 7 terms for intermodal transport (EXW- FCA- CPT- CIP- DATDAP- DDP) and 4 terms which are exclusively used from port to port deliveries (FAS
– FOB – CFR – CIF).They are defined as follows in English and in French:
In 2010, the latest version of the
INternational COmmercial TERMS or
11 Incoterms defined by a three
letter acronym, for international and
national deliveries of goods.
Incoterms are not mandatory for
international trade operations or
even local trade. However, as there
are widely used in Europe, Africa,
Asia and the Americas, there are
now reckoned to become a common
standard for global supply chains
and a legal standard for judges and
arbitrators worldwide.
Each Incoterm has three objectives:
(i) it is ascertaining the place of
delivery at a named place, (ii) the
respective obligations of the seller
and the buyer from shipment of
goods and (iii) allocating the costs
and risks for the seller and buyer for
each delivery of goods.
In order to include an Incoterm to a
sale contract, you should negotiate
this term with your commercial
offer, as the choice of an Incoterm
affects the price of the goods and
your liability over the goods.
Incoterms are classified into four
categories: E, F, C and D
corresponding to an increasing level
of obligations for the seller and
decreasing for the buyer. All
incoterms are for sales on shipment,
1
Information to all users : contrary to a common view, the seller retains at all
times, an obligation to package the goods, in order to allow their full protection
according to the mode of transport being used, and subject to the information
that he has effectively received from the buyer.
Under international law, packaging is part of the material conformity of goods.
Therefore, a faulty packaging is always for the seller’s liability under the rules of
the Incoterms but also entitles the buyer to reject the goods totally or in part
under the contract of sale. Should the packaging service be made by the seller
himself or by a contractor, a packaging service is never insignificant.
Some advice to make good use of the Incoterms: firstly, the transfer of risks over
the goods, marked by a red line in the following charts, is occurring at the same
time as the transfer of costs to the buyer, except for C terms; secondly, the
transfer of risks over the goods is made indifferently from the transfer of
ownership, which is not ruled by the Incoterms.
EXW Named place
Delivery: the seller delivers the
goods when placing the goods at the
disposal of the buyer at the seller’s
premises or another named placed
(i.e. works, factory, warehouse…).
Goods are not loaded nor cleared by
the seller.
Loading/unloading: the seller is not
liable for loading. But if the parties
agree that the seller shall load the
goods on the carrier, this should be
made clear by adding express
wording to the contract of sale and
increases the liability of the seller.
Transfer of risks: when goods are
collected by the buyer and marked
per red line.
EXW
Named place
Ex Works / à l’usine
Costs
Risks
Packing
Seller
Seller
Loading
Buyer
Buyer
Pre-shipment carriage
Buyer
Buyer
Loading main carriage
Buyer
Buyer
Customs clereance for export
Buyer
Buyer
Main carriage
Not mandatory B
Buyer
Insurance of main carriage
Not mandatory B
Buyer
Unloading main carriage
Buyer
Buyer
Customs clearance for import
Buyer
Buyer
Post-shipment carriage
Buyer
Buyer
Customs clearance: the seller does
not clear goods.
Costs and risks:
opposite chart.
FCA
please refer to
Named place
Delivery: the seller delivers the
goods to the carrier appointed by
the buyer at the seller’s premises or
at another named place.
Loading /unloading: if the delivery is
made at the seller’s place, the seller
is liable for loading. If delivery occurs
at another place, the buyer is
responsible for loading the goods.
Transfer of risks : when are loaded
on the carrier. Should delivery be
made at another place, the transfer
of risk occurs when goods are made
available to the buyer, i.e. unloaded.
Customs clearance: the seller clears
goods for export, not import.
Costs and risks: used for containers
and pallets. Pease refer to opposite
chart.
2
FCA
Named place
Free carrier/ Franco transporteur
Costs
Risks
Packing
Seller
Loading
Seller
Seller
Pre-shipment transport
Seller
Seller
Loading main transport
Seller
Customs clereance for export
Buyer
Seller
S
Out
S
Buyer
Main transport
Mandatory B
Buyer
Insurance of main transport
Not mandatory B
Buyer
Unloading main transport
Buyer
Buyer
Customs clearance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
CPT Named place
Delivery: the seller delivers the goods
loaded to the carrier or another person
designated on shipment at an agreed
place. The seller appoints a carrier and
pay for the costs of carriage to bring the
goods at a named destination.
Loading /unloading: loading and
unloading are for the seller if
mentioned in the contract of
carriage.
Transfer of risks: when goods are
handed over to the buyer, on shipment.
In case many carriers are used, and there
is no agreement, risks pass to the 1st
carrier.
Custom clearance: the seller has to clear
goods for export, not import.
Costs and risks: used for containers and
pallets. Refer to opposite chart.
CPT
Named place at
destination
Carriage paid to / Port payé jusqu’à
Packing
Costs
Risks
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Buyer
Loading main carriage
Seller
Buyer
Customs clereance for export
Seller
Buyer
Main carriage
Mandatory S
Buyer
Insurance of main carriage
Not
Mandatory S
Buyer
Not mandatory
B
Buyer
Customs clearance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
Unloading main carriage
CIP Place at destination
Delivery: the seller delivers the goods to
a named carrier, on shipment, loaded on
carrier or to any third party on shipment.
Loading /unloading: loading and
unloading is for the seller or buyer if
in the contract of carriage.
Transfer of risks: risks pass when goods
are at disposal of carrier appointed for
transport, or in default to the first
carrier.
Insurance: seller has to provide and pay
for covering the buyer’s risks of loss or
damage to the goods during the main
transport, but only for a minimum cover,
under clause C of Cargo Clauses, unless
the buyer asks for a full cover including
loss of profits or additional hazards.
Custom clearance: the seller has to clear
goods for export, not import.
Costs and risks: the seller must pay for
the cost of carriage up to the named
place of destination. Used for containers
and pallets. Countries in Maghreb and in
Africa and Central America, require an
insurance cover for the main transport,
issued in their own country, and not in
the country of shipment.
3
CIP
Named place at
destination
Carriage and Insurance Paid / Port
payé assurance comprise jusqu’à
Costs
Risks
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Buyer
Loading main carriage
Seller
Buyer
Customs clereance for export
Seller
Buyer
Main carriage
Mandatory S
Buyer
Insurance of main carriage
Mandatory S
Buyer
Unloading main carriage
Buyer
Buyer
Customs clearance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
DAT Terminal at destination
Delivery: the seller delivers the goods at
terminal once unloaded from main
transport and at disposal of buyer at the
defined terminal. Please detail where
the goods are due to be delivered inside
the terminal.
DAT
Loading /unloading: loading and
unloading charges from main transport is
for the seller.
Delivered at Terminal/ Rendu
Terminal
Transfer of risks : when goods are at
disposal of buyer inside the terminal.
Packing
Seller
Seller
At terminal
Costs
Risks
Loading
Seller
Seller
Customs clearance: the seller has to
clear the goods for exporting, but not for
importing the goods.
Pre-shipment carriage
Seller
Seller
Loading main carriage
Seller
Seller
Seller
Seller
Costs and risks: used for bulk deliveries,
containers or unusual packaging. Please
refer to opposite chart.
Main carriage
Mandatory S
Seller
Insurance of main carriage
Not
mandatory S
Buyer
Seller
Buyer
Customs clearance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
Customs clereance for export
Unloading main carriage
DAP Named place at
destination
Delivery : when the goods are placed at
the disposal of the buyer on the carrier,
ready for unloading.
Loading /unloading: loading charges on
main transport is for the seller but
unloading at named place is for the
buyer.
Transfer of risks: when the goods are at
disposal of buyer for unloading at the
named place at destination. The seller
and the buyer need to be clear about the
place of delivery as the seller bears all
risks up to this place.
Customs clearance: goods are cleared
for export, not for import.
Costs and risks: if post shipment is
necessary, the seller cannot recover its
costs unless agreed in the contract of
sale. Used for bulking, containers and
unusual packaging. Otherwise, please
refer to opposite chart.
4
DAP Named place
Delivered at Place /Rendu lieu
Costs
Risks
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment transport
Seller
Seller
Loading main transport
Seller
Seller
Customs clereance for export
Seller
Seller
Main transport
Insurance of main transport
Unloading main transport
Customs clearance for import
Post shipment carriage
Mandatory S
Seller
Not mandatory S
mandatorySV
Buyer
Buyer
Seller
Buyer
Buyer
Buyer
Buyer
DDP Place at destination
Delivery: the seller delivers the goods to
the buyer, when goods are ready for
unloading on any type of transport at
the named place of destination and
cleared for customs export and import.
Loading /unloading: loading charges on
main transport is for the seller and
unloading if indicated in the contract of
carriage.
Transfer of risks: when goods are at the
disposal of buyer at destination.
Customs clearance: both export and
import clearances are charged to the
seller. This term should not be used when
the seller is unable to clear the goods as
non - resident in the country of import or
cannot obtain any required license.
Costs and risks:
this incoterm
represents the maximum obligations for
the seller. Otherwise, please refer to
opposite chart. Should the parties
exclude some of the formalities or costs,
like payment of local sales taxes or VAT,
then they should mention it in their
contract of sale.
DDP Named place
Delivery duty paid / Rendu
droits acquittés
Coûts
Risques
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Seller
Loading main carriage
Seller
Seller
Customs clereance for export
Seller
Seller
Main carriage
Obligatoire S
Seller
Insurance of main carriage
Non
obligatoire S
Seller
Seller
Customs clearance for import
Seller
Seller
Post shipment carriage
Seller
Seller
Unloading main carriage
Seller
THE
FOLLOWING
TERMS
SHOULD BE USED EXCLUSIVELY
FOR DELIVERY BY SEA AND
INLAND WATERWAYS.
FAS Port of shipment
Delivery: the seller delivers the goods
when placed alongside the quay or the
barge chartered by the buyer at the port
of shipment indicated by the buyer. This
term is appropriate for bulking.
Loading / Unloading : the loading costs
on carrier are to the buyer. Be careful
with local uses in port not defined by
Incoterms.
Transfer of risks: on the quay.
Customs clearance: goods are handed
over to the buyer cleared for export.
Costs and risks: this term is used for
commodity trade. It does not take into
account port customs which vary from
port to port. Be very careful when using
such term. Otherwise, please refer to
opposite chart.
5
FAS Port of shipment
Free Alongside Ship / Franco
le long du navire
Costs
Risks
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Seller
Customs clereance for export
Seller
Seller
Loading main carriage
Buyer
Buyer
Main carriage
Mandatory B
Buyer
Insurance of main carriage
Not
mandatory B
Buyer
Buyer
Customs clearance for import
Buyer
Buyer
Transport post acheminement
Buyer
Buyer
Unloading main carriage
Buyer
FOB Port of shipment
Delivery: the seller delivers the goods
when the goods are onboard the ship
nominated by the buyer, at the port of
shipment.
Loading / Unloading : the loading costs
on carrier are to the seller
Transfer of risks: The buyer has to bear
the costs and risks of loss and damage
up to the moment they are onboard the
ship.
Customs clearance: the seller has to
clear the goods for export, not import.
FOB Port of shipment
Free On Board / Franco Bord
Costs
Risks
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Seller
Loading main carriage
Seller
Seller
Customs clearance for export
Seller
Seller
Main carriage
Costs and risks: local uses in port are not
taken into account by Incoterm.
Otherwise refer to opposite chart.
Mandatory B
Buyer
Not mandatory
B
Buyer
Buyer
Customs clearance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
Costs
Risks
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Seller
Loading main carriage
Seller
Seller
Customs clereance for export
Seller
Seller
Mandatory S
Buyer
Not mandatory
B
Buyer
Buyer
Customs clearance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
Insurance of main carriage
Unloading main carriage
Buyer
CFR Port at destination
Delivery: the seller delivers the goods
when they are onboard the ship at the
port of shipment, not at port of
destination.
CFR Port at
Loading / Unloading : the loading costs
on carrier are to the seller
Cost And Freight / Coût et Fret
Transfer of risks: when the goods are
placed onboard the ship, not at
destination. As the Buyer and Seller
negotiate the port of destination, do not
forget to mention the port of shipment
because risks pass at this point.
destination
Main carriage
Customs clearance: the seller has to
clear the goods for export, not for
import at destination.
Costs and risks: seller has to bear the
costs up to the port of destination.
Otherwise, please refer to opposite
chart.
6
Insurance of main carriage
Unloading main carriage
Buyer
CIF Port at destination
Delivery: the seller delivers when the
goods are onboard the ship at the port
of shipment, and not at port of
destination. Be careful in checking that
the port of destination can provide an
adequate type of unloading equipment in
presence of an unusual packaging.
Otherwise, the goods may return
unloaded at the costs of Buyer.
CIF Port at destination
Cost Insurance and Freight /
Coût Assurance et Fret
Costs
Risks
Transfer of risks: when the goods are
onboard the ship at the port of
shipment. Buyer and Seller negotiate the
port of destination, do not forget to
mention the port of shipment because
risks pass at this point.
Packing
Seller
Seller
Loading
Seller
Seller
Pre-shipment carriage
Seller
Seller
Loading main carriage
Seller
Seller
Customs clearance for export
Seller
Seller
Main carriage
Mandatory S
Buyer
Insurance: the seller must provide and
pay for covering the buyer’s risks of loss
or damage to the goods during the main
transport, but only for a minimum cover
(Clause C Cargo clauses), unless the
buyer wishes to have a better cover or
take up an extra insurance cover
according to other Cargo clauses. In
practice, the insurance policy is covering
110% of the value of the goods, and may
be agreed for loss of profits or additional
hazards. Some risks require additional
cover.
Insurance of main carriage
Not
Mandatory S
Buyer
Buyer
Customs clereance for import
Buyer
Buyer
Post shipment carriage
Buyer
Buyer
Unloading main carriage
Buyer
-
“FOB stowed and trimmed” : unclear as to each party’s liability;
-
“FOB stowed and trimmed but at the Buyer’s risks after delivery”: no increase in the
seller’s liability during transport
-
“FOB, Lille airport” is not valid, as a FOB incoterm is exclusively for maritime
transports.
Customs clearance: the seller has to
clear the goods for export, not import.
-
“FCA, Dunkirk, THC for seller’s account”: terminal handling charges are clearly for the
seller.
Costs and risks: the seller has to contract
and pay for the costs and freight has to
clear the goods for export, not import.
Otherwise, please refer to opposite
chart.
Please note that an Incoterm is not a contract of transport, nor a contract of sale. An
Incoterm may define whether the buyer or the seller, has to insure the goods during
transport .With the exception of CIP or CIF, it is at the end of negotiations or following the
terms of the contract of carriage, that each party will know who has to insure the goods.
------------To conclude, in day to day operations,
some variations to the Incoterms are
often found as these rules are deemed
to be adapted periodically as a result of
trade operators’ practices.
However operators should be very
careful as to the use, validity and
consequences of such changes. For
illustration:
-
-
7
“EX WORKS, loaded at the Buyer’s
risks “ : increases in the obligations
of the Buyer;
“EX WORKS loaded” : increases the
liability of the seller;
Regarding any default in conformity caused before shipment, the claim against the seller is
made exclusively according to the contract of sale. As to any damages occurring during
shipment, the parties will need to know whether the seller or the buyer, was responsible
for the goods according to the agreed Incoterm.
Furthermore, the claimant needs to have a judicial claim over the goods “easy to use”. This
is not the case when a public order rule in a country at destination requires that the goods
on the main carrier, should be insured in that country. In such case, litigation moves to the
country of destination, one way which is not the “easy way” for an exporter.
This short article is a summarized presentation of the Incoterms. Should you need the full
definitions of Incoterms or the relevant guide about Incoterms, please refer to the website
of ICC at: http://www.icc-france.fr
Marie-Luce Dixon, Enterprise Europe Network, Nord de France
ml.dixon@cci-international.net