THE INCOTERM RULES

Incoterms 2010  are the international rules accepted by the governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade.

Incoterms 2010  covers the rights and responsibilities of the parties involved in a commercial agreement as to the delivery of goods.

Each term of the Incoterms 2010 represents a three-letter abbreviation. 

National Incoterms chambers

National Incoterms chambers


Incoterms 2010

E-Category

Discharging

EXW Any modes of transport

EX Works

( … named place)

F-Category

Main Carriage Unpaid (by seller)

FCA Sea and Inland Waterway Transportation

Free Carrier

(…named place)

  FAS Sea and Inland Waterway Transportation

Free Alongside Ship

(… named port of shipment)

  FOB Sea and Inland Waterway Transportation

Free On Board

(… named port of shipment)

C-Category

Main Carriage Paid (by seller)

CFR Any modes of transport

Cost and Freight

(… named port of destination)

  CIF Any modes of transport

Cost, Insurance and Freight

(… named port of destination)

  CIP Any modes of transport

Carriage and Insurance Paid Тo

(… named place of destination)

  CPT Any modes of transport 

Carriage Paid To

 (… named place of destination)

D Category

Arrival

DAT Any modes of transport 

Delivered At Terminal

(… named terminal of destination) 

  DAP Any modes of transport 

Delivered At Piont

 (… named point of destination)

  DDP Any modes of transport 

 Delivered Duty Paid

(… named place of destination)

The rules came into force on 1.January, 2011

E-Terms — Departure:

EXW (Ex Works) is a term which means “self-delivery”. The seller fulfills his obligation when he has made the goods available at his premises (e.g. warehouse, shop). The seller is not responsible for the loading of the goods, and the byer bears all the costs involved in taking the goods from the seller’s premises, their transportation, and customs clearance. The term is usually followed by the indication of the location of the seller, e.g. EXW London.

F-Terms —Main Carriage Not Paid:

FCA (Free Carrier). This term is used with the name place of delivery. It means that the seller fulfills his obligation as to the delivery when he delivers the goods, cleared of customs charge for export, at a named place to the carrier nominated by the buyer. If delivery occurs at the seller’s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible.  

FAS (Free Alongside Ship) means that the seller bears the costs of delivery to the port of shipment. The obligations of the seller are fulfilled after the cargo is placed alongside the vessel in the dock or on lighters (at the named port of shipment). The byer bears the costs of loading, chartering, discharging, and transportation of cargo to the point of destination.  The risks pass at the moment of delivery to the dock of the port of shipment. 

FOB (Free On Board) is a term used to define the terms of delivery, decide which party will bear the costs of transportation, and determine the point of  transfer of responsibility for the cargo from the seller to the buyer.  Under FOB terms the seller is obliged to deliver the goods to the port and load them on a named vessel, the buyer pays for the delivery of cargo on board. 

C-Terms —Main Carriage Paid:

CFR (Cost and Freight) means that the seller pays for the delivery of cargo to the port, loading and chartering, and also arranges export clearance (including paying for charges). Risk of loss or damage, as well as all additional costs, transfers to buyer when the goods have been loaded on board the ship. 

CIF (Cost, Insurance and Freight) means that the obligations of the seller are fulfilled when the goods have been loaded on board the ship in the port of shipment, and the selling price includes the goods, chartering or transport expenses, and insurance.

CPT (Carriage Paid To) is an international trade term used for all shipping modes including inter/multimodal transportations. The seller pays for chartering and carriage of goods up to the named point of destination. The buyer covers the costs of insurance. Risks transfer to buyer upon handing goods over to the first carrier.  

CIP (Carriage and Insurance Paid to) is an international trade termm according to which the seller delivers the goods to the carrier nominated by the buyer. Apart from that, the seller is required to pay for transporting the goods to the named point of destination.  The seller fulfills his responsibility upon delivering the goods to the carrier. In case multiple carriers are engaged, he fulfills his responsibility upon delivering the goods to the first carrier. The buyer bears all the risks and any additional expenses after the goods have been delivered. 

D-Terms —Arrival:

DAT (Delivered At Terminal) is an international trade term that can be used for all modes of transport or in case more than one mode is involved. It means that the seller delivers the goods at the named terminal. The seller covers all the costs of transport to the named point of destination. The terminal can be a port, a container, air, road, or rail terminal, a warehouse. The seller assumes all the risk of delivery and unloading of the cargo. It is recommended that the parties define the terminal and, if possible, a certain point at the terminal. The obligations of the seller are fulfilled when the goods are delivered to this point.   

DAP (Delivered At Point) is an international trade term that can be applied for all modes of transport or in case more than one mode is involved. The term refers to the goods being placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.  The seller bears all the risks of delivering the goods to the named point of destination, which must be clearly defined since at this point the risk passes from the seller to the buyer. The seller must cover the expenses of delivering the goods to the named place of destination. Under DAP terms, all necessary legal formalities are completed by the seller, except for customs clearance in the importing country, which needs to be completed by the buyer at his own cost. If customs clearance cannot be carried by the buyer, it might be better to ship under DDP terms instead. 

DDP (Delivered, Duty Paid) is used with the named place of destination. It means that the responsibility of the seller is fulfilled on delivering the goods to the named place in the country of the buyer. Until then, the seller bears all the risks, costs (taxes, duties, etc.), responsibility for loss or damage of cargo. He is also responsible for customs clearance. The seller can be relieved of paying for additional formalities under the provisions of the contract

Incoterms 2010

Incoterms 2010

International commercial terms

For more information, click here: Incoterms 2010.