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INCOTERMS 2010( WEF JANUARY 2011)

International Commercial Terms

Produced by the….

International Chambers of Commerce [ICC]

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Trade Terms [incoterms] deal with questions relating to delivery…

• Who should clear the goods for export or import

• Who should pay the costs of loading and discharging the goods

• How should the risk of loss or damage be divided

• Who should take out insurance to protect against risks

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Incoterms do NOT deal with breaches of contract….they deal

with responsibilities and decisions regarding delivery only

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History…

1936: first issued

1953: revised

1967: revised to take more account of ‘delivered’ terms

1976: air transport term added

1980: revised to take into account container traffic

1990: revised to account for increase in EDI

2000 : revised

2010 : revised

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Incoterms 2000

F terms

FCA

FAS

FOBMain carriage unpaid

C terms

CFR

CIF

CPT

CIPMain carriage paid

D terms

DAF

DES

DEQ

DDU

DDParrival

E terms

EXWdeparture

Incoterms 2010(wef January 2011)

Group One : For any mode of transport

1.EXW : Ex Works (Named Place)

2.FCA : Free Carrier (Named Place)

3. CPT : Carriage Paid To ( Named Destination)

4. CIP : Carriage & Insurance Paid To ( Named Destination)

5. DAT : Delivered at Terminal ( Agreed Destination)

6. DAP : Delivered at Place ( Agreed Place)

7. DDP : Delivered Duty Paid ( Named Destination)

Incoterms 2010(wef January 2011)

Group Two : Sea & Inland Water way Transport

8. FAS : Free Alongside Ship

( Named Port of Loading)

9. FOB : Free On Board ( Named Port of Loading)

10. CFR : Cost & Freight ( Named Destination Port)

11. CIF : Cost Insurance & Freight

( Named Destination Port)

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Any mode of Transport

EXW

FCA

CPT

CIP

DAT

DAP

DDP

Use of Incoterms

Sea & Inland Water

Way Transport

FAS

FOB

CFR

CIF

Comparative Analysis

Incoterms 20001.Total Incoterms : 13

2.Exclusions in Incoterms

2010 : 4

DAF, DES, DEQ, DDU

3.Number of Incoterms

Classifications: 4

( Group E, Group F,

Group C, Group D )

Incoterms 2010 11

Additions in Incoterms 2010 : 2

DAT : Delivered at Terminal

DAP : Delivered at Place

Number of Incoterms

Classifications : 2

Group One : Used for any mode of transport.

Group Two :Used for Sea & Inland Waterway Transport 9

Features incorporated in Incoterms 2010

•Applicable for Domestic and International sales

contracts.•The obligation for export /import formalities exists only

where applicable.•Electronic Documentation Procedures are given the

same effect as that of paper communications under

Articles A1/B1 in 2010.•Cargo Transit Insurance obligation is more specified

due to revision of Institute Cargo Clause in 2009.

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Features incorporated in Incoterms 2010•String Sales ( Chain of Custody) Information:•In the sale of commodities, cargo is often sold several times

during transit “ down a string ”.•When this happens, a seller is in the middle of the string, does

not “ ship” the goods because the goods have already been

shipped by the “ first seller” in the string.•Hence, the seller in the middle of the string performs to the buyer,

by “ procuring” goods that have been already been shipped. •Consequently, the obligations to “ procure goods shipped’’ as

an alternative to ship goods is incorporated in the relevant

Incoterms.11

Features incorporated in Incoterms 2010

•Security Related Clearances :

Incoterms 2010 also addresses duties as to who is

responsible for providing the information concerning

Importer Security Filings.•Avoidance of double billing of Terminal Handling

Charges at Port of Discharge.

Buyers and Sellers are being urged to contract

precisely “ Where delivery has to be made” and

“ What charges are covered”.

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Features incorporated in Incoterms 2010

•Reference to “ Ship’s Rail” for FOB Shipments have

been taken out to clarify that delivery means

“ On-Board” the vessel.

•Gender neutral language is now used. •Allows Trade Exporters to choose the most suitable

Incoterm 2010, related to the mode of transport for each

transaction.

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EXW: Ex Works

The seller has fulfilled his obligations to deliver when he has made the goods available to the buyer at his premises without loading. Minimum liability to the seller.

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FCA: Free Carrier…[named place]

The seller has fulfilled his obligations to deliver when he has handed over the goods, cleared for export, into the charge of the carrier at a particular place and point as directed by the buyer

This is good for

any modes of

transport!

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FAS: Free Alongside Ship[…named port of shipment]

…Risk passes to buyer, including payment of all transportation and insurance costs, once delivered alongside the ship (realistically at named port terminal) by the seller. The export clearance obligation rests with the seller.

This term can only be used for sea or inlandWaterway forms of transport

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FOB: Free on Board[…named port of shipment]

…Risk passes to buyer, including payment of all transportation and insurance costs, once delivered on board the ship by the seller.

The seller is required to clear the goods for export

This term may only be used for sea andInland waterway transport

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CFR: Cost and Freight[…to named port of destination]

…means the seller must pay the costs and freight necessary to bring the goods to the named port of destination, but the risk of loss or damage to the goods is the buyer’s as soon as the goods pass over the ship’s rail

This term can only be used for sea or inlandWaterway forms of transport

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CIF: Cost, Insurance and Freight

…means that the seller has the same obligations as under CFR but with the addition that he has to provide marine insurance against the buyer’s risk of loss or damage to the goods during carriage

This term can only be used for sea or inlandWaterway forms of transport

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CPT: Carriage paid To…[…named place of destination]

…means the seller pays the freight for the carriage of the goods to the named destination. The risk of loss or damage and any costs incurred after delivery to the carrier pass to the buyer when the goods have been delivered to the first carrier

This term can be used for any mode of transport

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CIP: Carriage and Insurance Paid to…[…named place of destination]

…means the seller has the same obligations as under CPT but with the addition that he must provide cargo insurance against the buyer’s risk of loss or damage to the goods during the carriage

This term can be used for any modes of transport

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Delivered Duty Paid[…named place of destination]

…means the seller fulfils his obligation to deliver when the goods have been made available at the named place in the country of importation. The seller pays all the costs, incl. duties, taxes and any other charges cleared of all import requirements

This term can be used for any mode of transport

Delivered at Terminal

• Seller bears cost, risk and responsibility until goods are unloaded (delivered) at named quay, warehouse, yard, or terminal at destination.

• Both parties should agree the terminal and if possible a point within the terminal at which point the risks will transfer from the seller to the buyer of the goods.

• Demurrage or detention charges may apply to seller. Seller clears goods for export, not import. DAT replaces DEQ, DES.

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Responsibilities : Delivery at Terminal ( DAT )

• Seller is responsible for the costs and risks to bring the goods to the point specified in the contract

• Seller should ensure that their forwarding contract mirrors the contract of sale

• Seller is responsible for the export clearance procedures • Importer is responsible to clear the goods for import,

arrange import customs formalities, and pay import duty • If the parties intend the seller to bear the risks and costs of

taking the goods from the terminal to another place then the DAP term may apply    

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Delivered at Place

• Seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.

• Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer.

• Importer is responsible for Import Clearance and payment of customs duty.

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Responsibilities : Delivery at Place ( DAP )

• Seller bears the responsibility and risks to deliver the goods to the named place

• Seller is advised to obtain contracts of carriage that match the contract of sale

• Seller is required to clear the goods for export • If the seller incurs unloading costs at place of destination,

unless previously agreed they are not entitled to recover any such costs

• If the seller is responsible for clearing the goods, paying duties etc., consideration should be given for using the DDP term.

   

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Disclaimer

For more information or any clarification on Incoterms 2010, refer to :

http://www.iccwbo.org/incoterms

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