Incoterms [ edit ] National Incoterms chambers Incoterms is the ninth set of international contract terms published by the International Chamber of Commerce , with the first set having been published in Incoterms defines 11 rules, the same number as defined by Incoterms In prior versions, the rules were divided into four categories, but the 11 pre-defined terms of Incoterms are subdivided into two categories based only on method of delivery. The larger group of seven rules may be used regardless of the method of transport, with the smaller group of four being applicable only to sales that solely involve transportation by water where the condition of the goods can be verified at the point of loading on board ship. They are therefore not to be used for containerized freight, other combined transport methods, or for transport by road, air or rail. Incoterms also formally defines delivery.
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Incoterms [ edit ] National Incoterms chambers Incoterms is the ninth set of international contract terms published by the International Chamber of Commerce , with the first set having been published in Incoterms defines 11 rules, the same number as defined by Incoterms In prior versions, the rules were divided into four categories, but the 11 pre-defined terms of Incoterms are subdivided into two categories based only on method of delivery.
The larger group of seven rules may be used regardless of the method of transport, with the smaller group of four being applicable only to sales that solely involve transportation by water where the condition of the goods can be verified at the point of loading on board ship. They are therefore not to be used for containerized freight, other combined transport methods, or for transport by road, air or rail.
Incoterms also formally defines delivery. Previously, the term had been defined informally but it is now defined as the point in the transaction where "the risk of loss or damage [to the goods] passes from the seller to the buyer. If this is the case then great care must be exercised to ensure that the points at which costs and risks pass are clarified with the customer.
The desire of the parties should be expressed clearly and casual adoption should be refrained. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used while making an initial quotation for the sale of goods without any costs included. EXW means that a buyer incurs the risks for bringing the goods to their final destination.
If the parties agree that the seller should be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale. However, in common practice the buyer arranges the collection of the freight from the designated location, and is responsible for clearing the goods through Customs.
These documentary requirements may result in two principal issues. Firstly, the stipulation for the buyer to complete the export declaration can be an issue in certain jurisdictions not least the European Union where the customs regulations require the declarant to be either an individual or corporation resident within the jurisdiction. In an EXW shipment, the buyer is under no obligation to provide such proof to the seller, or indeed to even export the goods.
In a customs jurisdiction such as the European Union, this would leave the seller liable to a sales tax bill as if the goods were sold to a domestic customer. It is therefore of utmost importance that these matters are discussed with the buyer before the contract is agreed. The goods can be delivered to a carrier nominated by the buyer, or to another party nominated by the buyer.
In many respects this Incoterm has replaced FOB in modern usage, although the critical point at which the risk passes moves from loading aboard the vessel to the named place. The chosen place of delivery affects the obligations of loading and unloading the goods at that place. However, if delivery occurs at any other place, the seller is deemed to have delivered the goods once their transport has arrived at the named place; the buyer is responsible for both unloading the goods and loading them onto their own carrier.
The seller pays for the carriage of the goods up to the named place of destination. However, the goods are considered to be delivered when the goods have been handed over to the first or main carrier, so that the risk transfers to buyer upon handing goods over to that carrier at the place of shipment in the country of Export.
This has to be agreed to by seller and buyer, however. If the buyer requires the seller to obtain insurance, the Incoterm CIP should be considered instead. CIP — Carriage and Insurance Paid to named place of destination [ edit ] This term is broadly similar to the above CPT term, with the exception that the seller is required to obtain insurance for the goods while in transit.
The policy should be in the same currency as the contract, and should allow the buyer, the seller, and anyone else with an insurable interest in the goods to be able to make a claim. CIP can be used for all modes of transport, whereas the Incoterm CIF should only be used for non-containerized sea-freight.
DPU — Delivered At Place Unloaded named place of destination [ edit ] This Incoterm requires that the seller delivers the goods, unloaded, at the named place of destination. The seller covers all the costs of transport export fees, carriage, unloading from main carrier at destination port and destination port charges and assumes all risk until arrival at the destination port or terminal.
The terminal can be a Port, Airport, or inland freight interchange, but must be a facility with the capability to receive the shipment. If the seller is not able to organize unloading, they should consider shipping under DAP terms instead.
All charges after unloading for example, Import duty, taxes, customs and on-carriage are to be borne by buyer. Under DAP terms, the risk passes from seller to buyer from the point of destination mentioned in the contract of delivery. Once goods are ready for shipment, the necessary packing is carried out by the seller at his own cost, so that the goods reach their final destination safely.
All necessary legal formalities in the exporting country are completed by the seller at his own cost and risk to clear the goods for export. After arrival of the goods in the country of destination, the customs clearance in the importing country needs to be completed by the buyer, e. Under DAP terms, all carriage expenses with any terminal expenses are paid by seller up to the agreed destination point.
The necessary unloading cost at final destination has to be borne by buyer under DAP terms. The seller is not responsible for unloading.
This term places the maximum obligations on the seller and minimum obligations on the buyer. No risk or responsibility is transferred to the buyer until delivery of the goods at the named place of destination. It is important to note that these terms are generally not suitable for shipments in shipping containers; the point at which risk and responsibility for the goods passes is when the goods are loaded on board the ship, and if the goods are sealed into a shipping container it is impossible to verify the condition of the goods at this point.
This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export, which is a reversal from previous Incoterms versions that required the buyer to arrange for export clearance.
However, if the parties wish the buyer to clear the goods for export, this should be made clear by adding explicit wording to this effect in the contract of sale. This term should be used only for non-containerized seafreight and inland waterway transport.
In this case, the seller must also arrange for export clearance. On the other hand, the buyer pays cost of marine freight transportation, bill of lading fees, insurance, unloading and transportation cost from the arrival port to destination. However, FOB is commonly used incorrectly for all modes of transport despite the contractual risks that this can introduce. In some common law countries such as the United States of America , FOB is not only connected with the carriage of goods by sea but also used for inland carriage aboard any "vessel, car or other vehicle.
Risk transfers to buyer when the goods have been loaded on board the ship in the country of Export. The Shipper is responsible for origin costs including export clearance and freight costs for carriage to named port. If the buyer requires the seller to obtain insurance, the Incoterm CIF should be considered. CFR should only be used for non-containerized seafreight and inland waterway transport; for all other modes of transport it should be replaced with CPT. The policy should be in the same currency as the contract.
The seller must also turn over documents necessary, to obtain the goods from the carrier or to assert claim against an insurer to the buyer. The documents include as a minimum the invoice, the insurance policy, and the bill of lading. These three documents represent the cost, insurance, and freight of CIF.
Then, the buyer has to pay at the agreed price. Another point to consider is that CIF should only be used for non-containerized sea freight; for all other modes of transport it should be replaced with CIP.
Incoterms 2010 Wallchart
They are incorporated in contracts for the delivery of goods worldwide and provide guidance to importers, exporters, lawyers, transporters, insurers and students of international trade. This information should be read in the context of the full official text of the rules, which can be obtained from ICC Knowledge 2 Go. These extracts may be reproduced, provided that the source is cited and a link to the ICC e-commerce platform is mentioned. The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
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Incoterms® 2010 - Wallchart
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