Incoterm 2010 ( full english)

INCOTERM

What is an Incoterm 2010?

The Incoterms 2010

Before considering shipping merchandise internationally, an important question must be answered: At which point are the risks and charges transferred to the buyer?

In 1936, for the first time, the International Chamber of Commerce (ICC), located in Paris, published under the name of Incoterms 1936 (INternational COmmercial TERMS), a series of international rules that answers this question.

In order to adapt these rules into the most recent international trade practices, many amendments have been added to the rules of 1936 accomplishing what today is called “Incoterms 2010” which has replaced Incoterms 2000. The last modifications to be applied on January 1st 2011 will mainly eliminate four Incoterms – DEQ, DES, DAF and DDU – and introduce two new Incoterms “D”, DAT (Delivered at Terminal) and DAP (Delivered at Place of Destination).

Incoterms 2000 eliminated		New Incoterms 2010
DEQ: Delivered Ex Quay		DAT: Delivered at Terminal
DAF: Delivered At land Frontier		DAP: Delivered at Place of Destination
DES: Delivered Ex Ship
DDU: Delivered Duty Unpaid

Managing Risk Control

By making references in their contracts, using one of the Incoterms of the CCI, the buyer and the seller reduce the uncertain risks inherent in all international transactions: commercial practices and different interpretations from one country to the other. They specify their own respective responsibilities and obligations during the process of delivering the merchandise and the mandatory documentation that the vendor must supply. Also the INCOTERMS, even if they are optional, they are recognized as standardized clauses which will prevent any litigation by clearly distributing between the buyer and the vendor:

• the charges
• the risks

In addition, they dissociate the question of transferring risks from those of transferring ownership, this last issue remains under the control of the law that rules the contract. Concretely, Incoterms will clarify the following points:

1. Place the critical point of transferring the risks from the vendor to the buyer during the process of shipping the goods (loss, damage or theft of the merchandise) allowing the one who is liable for these risks to make his own dispositions, notably in terms of insurance;
2. Indicate which one, either the seller or the buyer, must underwrite the shipping contract;
3. Distribute among the two parties the logistic and administrative charges during the different stages of the process;
4. Specify who takes care of the packaging, labeling, handling operations, loading and unloading of goods or stuffing and stripping containers as well as inspection procedures;
5. Set up the individual obligations of each party in the process of accomplishing export and/or import formalities, legal regulations and duty taxes as well as providing all the documents required. There are 11 Incoterms being kept by the CCI, (original English acronym made up of three letters, ex: FOB) plus one specific location ex: "FOB Le Havre".

Getting to Know Incoterms 2010

Classification according to the increased level of obligations for the seller

English descriptions
code	Description
EXW	EX Works...named place
FCA	Free CArrier…named place
FAS	Free AlongSide ship…named port of shipment
FOB	Free On Board…named port of shipment
CFR	Cost and Freight …named port of destination
CPT	Carriage Paid To… named port of destination
CIF	Cost, Insurance, Freight...named port of destination
CIP	Carriage and Insurance Paid to...named place of destination
DAT	Delivered At Terminal... Named port of destination
DAP	Delivered at Place …named port of destination
DDP	Delivered Duty Paid...named place of destination

Table of equivalence, French source: international sales conditions

Classification of Incoterms assigned by type of transportation

Category	Incoterm
All types of transportation (including maritime)	EXW, FCA, CPT, CIP, DAT*, DAP*, DDP
Fluvial and maritime transportation	FAS, FOB, CFR, CIF

* DAT and DAP can be equally used for transactions that involve the use of one or several types of transportation

Sale on Departure, Sale on Arrival: a fundamental difference

Sale on Departure

A sale on departure means that the merchandise will be shipped at the risk and hazard of the buyer, which means:

• from the moment that the goods are placed at disposal at the vendor’s premises (EXW) ;
• from the moment that the goods are handed to the carrier in order to be shipped (FCA, FAS, FOB, CFR, CIF, CPT et CIP) ;

The Incoterms for a sale on departure assign to the buyer (in a more or less large amount) the costs and the risks linked to the shipping of the merchandise.

Sale on Arrival

A sale on arrival means that the merchandise will be shipped at the risk and hazard of the seller until it reaches the designated destination point or port. Three Incoterms are provided:

• until the end of its maritime transportation and its disembarkation (DAP) ;
• until its destination point (DAT, DDP).

Who covers the logistics charges?

Distribution of costs according to the Incoterm negotiated in the contract

SPECIFICATIONS	Departure from ware-house	Main transportation not paid by the seller			Main transportation paid by the seller				Shipping charges paid by the seller until reaching destination point
Incoterm / Cost	EXW	FCA	FAS	FOB	CFR	CIF	CPT	CIP	DAT	DAP	DDP
Packaging	S	S	S	S	S	S	S	S	S	S	S
Loading from warehouse	B	S	S	S	S	S	S	S	S	S	S
Pre-carriage	B	S	S	S	S	S	S	S	S	S	S
Export customs clearance	B	S	S	S	S	S	S	S	S	S	S
Handling at departure	B	B	B	S	S	S	S	S	S	S	S
Main transportation	B	B	B	B	S	S	S	S	S	S	S
Transportation insurance	B	B	B	B	B	S	B	S	S*	S	S
Handling at arrival	B	B	B	B	B	B	B	B	S	S	S
Import customs clearance	B	B	B	B	B	B	B	B	B	B	S
Post-carriage	B	B	B	B	B	B	B	B	B	B	S
Unloading into warehouse	B	B	B	B	B	B	B	B	B	B	S

S: Cost paid by the seller
B: Cost paid by the buyer
* Non-mandatory

Source: Transport-export.net (Publishing, Training, E-Learning, Consulting)

 

What do the different Incoterms mean?

The term Ex Works (EXW) / Departure from warehouse

Seller

The only responsibility of the seller is to prepare the merchandise for the buyer, at his own premises, suitably packed for export shipping purposes (in general, the price includes loading the merchandise in the pallet).

Buyer

The buyer is responsible for all the charges and risks involved in the shipment of the merchandise from the moment it leaves the seller’s warehouse until it reaches its destination place.

The term EXW represents a minimum obligation for the seller. However, if the parties agree that the vendor insures the loading of the merchandise at the point of departure “EXW Loaded”, and make the vendor responsible of these risks and charges, they have to precise this issue very clearly on an explicit clause included in the sales contract (ex: EXW Paris loaded, CCI 2010).

The seller is expected to provide for the buyer, at his request and at his charge and risks, all the assistance required to obtain an export license, insurance and provide the buyer with all the useful information in his possession which will allow the buyer to insure the export of his merchandise in full security.

Variant

« EXW Loaded ». 

The revised version of Incoterms 2000 introduced this concept of “EXW Loaded” which recognizes a frequently used practice: the seller takes care and responsibility of loading the merchandise into the buyer’s vehicle.

Specifications EXW	Charges	Risks
Packaging	S	S
Pre-carriage	B	B
Export customs	B	B
Loading into main carriage (handling)	B	B
Main transportation	B	B
Transportation insurance	B	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

the term FCA: (Free Carrier / point of delivery at named place)

Seller

If the delivery takes place at the seller’s premises, it is the seller, who handles the loading of the suitably packaged goods into the vehicle provided by the buyer, (specify “FCA seller’s premises”). Export customs clearance is the responsibility of the seller.

Buyer

The buyer has chosen the type of transportation and the carrier with whom he has signed a transportation contract and pays for the main transportation. The transfer of charges and risks takes place at the moment when the carrier picks up the merchandise. The parties must agree upon naming a place where to hand over the merchandise (the carrier’s terminal or the vendor’s premises).

The seller must, should the case arise, provide for the buyer, at the right time, all the assistance needed to obtain all the documents and information regarding the security requirements for the export and/or import of the merchandise and/or for its transportation to its final destination. The cost of the documents furnished and/or the assistance given are costs and risks paid by the buyer.

Variant

"FCA seller’s premises".
This Incoterm was officially added to the revised version of Incoterms 2000: it is the responsibility of the seller to load the merchandise.

Geographical precision

More than in any of the other Incoterms, in FCA, the “named place” agreed upon must be precise and indicated with care. FCA (Le Havre) is not enough if the buyer is located in Le Havre. Is it FCA (warehouse Le Havre) or FCA (in-transit bulking warehouse X Le Havre) or even FCA (dock No. X at the port of Le Havre)?

If the delivery is going to be done at a place other than the vendor’s premises, for example: handing it over at a transportation terminal –truck, rail, air, maritime – the vendor will be in charge of transporting the merchandise up to this named terminal but he will not be responsible for unloading the vehicle. The unloading will be handled by the one in charge of receiving the merchandise at the transportation terminal. Prefer FCA instead of FOB if the transportation is done in containers or by roll-on roll-off ship.

Specifications FCA	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	B	B
Main transportation	B	B
Transportation insurance	B	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

The term FAS: Free Alongside Ship / named port of shipment

Seller

The obligations of the seller are henceforth fulfilled when the merchandise is placed, after customs clearance, alongside the ship at the dock or at the lading of the designated port of shipment.

Buyer

From this moment on, the buyer is responsible for all charges and risks of loss or damages, from the moment that the merchandise is delivered alongside the ship, especially in the case of a ship’s schedule delay or the cancellation of a port of call. The buyer designates the carrier, arranges the transportation contract and pays for the freight.

Obligations of place and moment

The seller does not deliver FAS if the vessel is not at the dock. It is a responsibility of time and moment (From Marseilles to Anvers, where every company offers at least one weekly departure, bringing the delivery eight days before the date of the departure of the ship chosen by the buyer is too premature).

License acquisition

The acquisition of an export license or any other official authorization is at the charge and risk of the seller. In the same way, the buyer is responsible for the import license. The buyer must provide the vendor with all the information regarding the name of the vessel, the loading place and the time chosen to deliver the merchandise within the period accorded.

Documents fees

The seller must, should the case arise, provide for the buyer, at the right time, all the assistance needed to obtain all the documents and information regarding the security requirements for the export and/or import of the merchandise and/or for its transportation to its final destination. The cost of the documents furnished and/or the assistance given are costs and risks paid by the buyer.

Specifications FAS	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	B	B
Main transportation	B	B
Transportation insurance	B	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

The term FOB: Free on Board / (named port of shipment)

Seller

He has to deliver the merchandise at the designated loading port, on board of the vessel chosen by the buyer and fulfill all the formalities of export customs clearance, if there are any.

Under a contract type FOB, the seller fulfills his delivery obligation when the merchandise is on board of the vessel at the designated loading port, or in the case of successive sales, the vendor obtains the merchandise and delivers it, as well, in order to have it all transported up to the designated destination place indicated in the sales contract.

Buyer

He selects the vessel, pays the maritime freight, the insurance and he takes care of the formalities at the arrival. He is also responsible for all the charges and risks of loss and damage that could arise to the merchandise from the moment it was delivered.

Variant

For information, the "ARRANGING FOB" is the term used by the freight brokers to indicate that the operations that take place prior to placing the merchandise aboard have been done and accomplished, as well as the export customs clearance operations, if needed. All these operations represent an extra cost, to be paid by the seller, which is sometimes called “fee of placing into FOB”.

The "FOB STOWED" and/or "FOB STOWED and TRIMMED" are variations. The seller is responsible for the total charges incurred by the merchandise at the loading port. However, it has to be stipulated in the contract at which point the transfer of risks takes place.

The seller must, should the case arise, provide for the buyer, at the right time, all the assistance needed to obtain all the documents and information regarding the security requirements for the export and/or import of the merchandise and/or for its transportation to its final destination. The cost of the documents furnished and/or the assistance given are costs and risks paid by the buyer.

The American FOB

The American FOB is different. In the United States, the Incoterm FOB (Free on Board) does not refer to a shipment in a boat or to a port but to an American destination, at the border. In the United States there could be, mainly, four types of FOB:

• FOB/Point of departure: The buyer pays for everything;
• FOB/Border: The manufacturer pays for the charges up to the border without clearing the merchandise through customs;
• FOB/Point of Sale: The merchandise arrives to a designated American city. It is then, the supplier, who pays for customs clearance. The chosen free port must always be marked, in general, the city;
• FOB/Destination Customs Clearance: In this case, the manufacturer takes care of everything, without the cooperation of the buyer. It is also called DDP/Delivery duty paid. Most of the sales into the United States are done on this basis.

Specifications FOB	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	S	S
Main transportation	B	B
Transportation insurance	B	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

 

The term CFR: Cost and Freight / Named port of destination

Seller

He chooses the transportation, contracts and pays for the freight up to the named port of destination; the unloading of the merchandise is not included. The loading of the merchandise after customs clearance into the vessel is his responsibility as well as the shipping formalities. However, the transfer of risk is the same as in FOB.

Buyer

He is responsible for the risk of transportation from the moment that the merchandise is delivered alongside the ship at the loading port; he receives the carrier and picks up the merchandise delivered at the designated destination port.

Documents fees

The seller must, at his own expense, furnish the buyer with a customary transportation document to be used until the merchandise reaches the designated port of destination, covering the contractual merchandise which serves him as a guarantee (ex: claims of merchandise to the carrier, sale of merchandise while in transit, etc.). He also has to provide all the information required in order to take proper measures in receiving the merchandise.
The information and documents related to the security that the buyer needs in order to export and/or import and/or for the transportation of the merchandise until its final destination must be furnished by the seller, following the buyer’s request, and at his own expense and risks.

Specifications CFR	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	S	S
Main transportation	S	B
Transportation insurance	B	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

 

The term CIF: Cost Insurance Freight / Named port of destination

Seller

It is a term identical to CFR, but with the supplementary obligation for the seller to provide maritime insurance against the risk of loss or damage caused to the merchandise. The vendor pays the insurance premium. The insurance must be done according to the “minimum guarantee” clauses stipulated by the faculties of the Institute of London Underwriters or any other series with similar clauses. It has to cover the minimum anticipated price in the contract plus a surcharge of 10% and it has to be drawn up in the same currency of the contract. It is an insurance FPA (free of particular average) for 110% of its value. It is possible to add a surcharge of 20% without justification. A greater surcharge could be authorized by the insurance company if it is justified. This surcharge over the value serves to cover the expenses that can result from damage (cost of filing and following suit, correspondence, etc.) and the financial loss (interest) between the time of the loss and the indemnification by the insurance company. The seller pays the premium for this insurance.

Buyer

He is responsible for the cost and risk of transportation from the moment that the merchandise is delivered alongside the ship at the loading port. He receives and takes the merchandise from the carrier at the named destination port.

The buyers appreciate this Incoterm because they are released from logistics formalities.

Documents fees

The information and documents related to the security that the buyer needs in order to export and/or import and/or for the transportation of the merchandise up to its final destination must be furnished by the seller following the buyer’s request and at his own expense and risks.

Specifications CIF	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	S	S/B
Main transportation	S	B
Transportation insurance	S	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

 

the term CPT: Carriage Paid To / Named port of destination

Seller

The seller controls the logistic chain. After having taken care of export customs clearance, he chooses the cargo carrier and pays the charges up to the designated place.

Buyer

The risk of damage or loss is borne by the buyer from the moment that the merchandise is loaded into the first carrier. After that, the buyer takes care of the import customs clearance and the unloading expenses.

Unloading fees

It is important to clarify the concept of who is responsible for the unloading charges into the frame of the transportation contract. Normally, the buyer must be responsible for these charges unless they are included in the transportation fee. In this case, they are charged to the vendor. The vendor must clarify this question with the buyer in order to prevent finding himself in a situation where the receiver refuses to pay and the cargo carrier turns back to the provider (the seller) to demand his part of the payment for the unloading charges as well as the eventual fees for the vehicle’s immobilization while waiting for the problem to be solved.

Geographical precisions

Under the rule CPT, there are transfers of risks and charges in different places. It is recommended that the parties involved specify clearly in their contract the delivery place where the risk is transferred to the buyer and the named destination up to which the seller is required to arrange a transportation contract.

Documents fees

The information and documents related to security, that the buyer needs for the export/import of merchandise and/or for the transportation up to its final destination must be provided by the seller at the request of the buyer and at its own charge and risks.

Specifications CPT	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	S	S
Main transportation	S	B
Transportation insurance	B	B
Unloading from main carriage (handling)	B	B
Import customs	B	B
Post-carriage	B	B

 

The term CIP: Carriage and Insurance Paid To / Named place of destination

Seller

CIP is identical to CPT, but the seller must supply, in additional, a transportation insurance. The seller settles the transportation contract, pays the freight and the insurance premium.

Buyer

The risk of damage or loss is borne by the buyer from the moment that the merchandise is loaded into the first carrier. After that, the buyer takes care of the import customs clearance and the unloading expenses.

Insurance Coverage

According to the term CIP, the seller is not obliged to apply for insurance but for a minimum coverage. If the buyer wishes to protect himself by a superior coverage, under these circumstances, he would need to obtain the agreement of the seller or apply on his own for a complementary insurance.

Documents fees

The information and documents related to security, that the buyer needs for the export/import of merchandise and/or for the transportation up to its final destination must be provided by the seller at the request of the buyer and at his own charge and risks.

Specifications CIP	Charges	Risks
Packaging	V	V
Pre-carriage	V	V
Export customs	V	V
Loading into main carriage (handling)	V	V
Main transportation	V	A
Transportation insurance	V	A
Unloading from main carriage (handling)	A	A
Import customs	A	A
Post-carriage	A	A

 

The term DAT (Delivered at terminal, named port terminal or named place of destination)

Seller

He must deliver the merchandise, placing it at the buyer’s disposal at a designated terminal either at the port or at the place of destination on the date or within the time-limit period established. The seller has to obtain, at his own expense, a contract for the transportation of the merchandise up to the point where it reaches this terminal and unload the merchandise from the transportation carrier at its arrival. The seller has no obligation towards the buyer of obtaining an insurance contract. Nevertheless, he must provide the buyer, at his own expense, the documents that will allow him to pick up the merchandise delivered. The Incoterm DAT obliges the seller to take care of the export customs clearance. However, he is under no obligation of performing the import customs clearance.

Buyer

He must pick up the merchandise once it is delivered and pay the price agreed on the sales contract. The buyer has to request from the seller all the information related to the security which he will need for the export, import and transportation of the merchandise until its final destination. This Incoterm rule was created specifically for the transportation of containers. It is also adapted to conventional maritime transport when the seller wants to be responsible for the risks involved during the unloading process from the vessel at the port of destination. It is convenient in this case to specify the exact place where the merchandise will be placed at disposal (quay, hoist, etc.).

Specifications DAT	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	S	S
Main transportation	S	S
Transportation insurance	S*	S*
Unloading from main carriage (handling)	S	S
Import customs	B	B
Post-carriage	B	B

* non-mandatory

 

The term DAP (Delivered at named place of destination)

Seller

The seller has to deliver the merchandise and place it at the buyer’s disposal into the inland freight transportation carrier ready to be unloaded at the designated place of destination. He has to take care of the export customs clearance; however, he is under no obligation of performing the import customs clearance. The seller has to obtain at his own expense, a contract for the transportation of the merchandise up to the named destination and unload it from the transportation carrier at its arrival. The seller has no obligation towards the buyer of obtaining an insurance contract. Nevertheless, he must provide the buyer, at his own expense, the documents that will allow him to pick up the merchandise delivered.

Buyer

He has to pay the price of the merchandise as stipulated in the sales contract and he has to pick up the merchandise once it has been delivered.

Security

The buyer must request from the seller to furnish him with all the information required in relation to the security which he will need for the export, import and transportation of the merchandise until its final destination. This new rule replaces the DDU. It is advised to use it only in the countries where the means of transportation to a destination are under good control.

Specifications DAP	Charges	Risks
Packaging	S	S
Pre-carriage	S	S
Export customs	S	S
Loading into main carriage (handling)	S	S
Main transporta Dowload tài liệu BÀI VIẾT KHÁC Bản tin sản xuất và tiêu thụ nông sản trong nước tháng 5/2024 - June 06 - 21, 2024 Hợp đồng ủy thác xuất khẩu gạo - June 06 - 7, 2024 Hợp đồng xuất khẩu gạo - June 06 - 7, 2024 Tình hình xuất khẩu nông sản tháng 4 năm 2024 - May 05 - 8, 2024 PACKING VÚ SỮA - April 04 - 25, 2024