Incoterms are the international rules recognized by governmental bodies, legal companies and traders around the world as the interpretation of the terms most applicable in the international trade. The scope of Incoterms applies to the rights and obligations of the parties under the contract of sale in terms of the delivery of goods (terms of delivery). Incoterms (Eng. Incoterms, International commerce terms) is a trademark of the International Chamber of Commerce (International Chamber of Commerce, ICC). ICC rules for the use of trade terms in national and international trade. Currently, the rules for the interpretation of trade terms Incoterms are valid in the edition of 2010, which are relevant for 2017.

Terms: EXW , FCA , FAS , FOB , CFR , CIF , CPT , CIP , DAT , DAP , DDP

 

EXW Incoterms delivery terms "ExWorks" (named place) - "Ex works" (named place) means that the seller is deemed fulfilled its obligations on delivery when it gives the goods to the buyer at its premises or in other specified location (e.g. at the plant, factory, warehouse, etc.). The seller shall not be liable either for loading the goods on the vehicle provided by the buyer or for payment of customs duties or for customs clearance of exported goods, unless specified in a special way. On the EXW delivery basis, the buyer shall bear all risks and all costs for movement of goods from the seller's premises to the specified destination.

 

EXW delivery basis imposes minimum obligations on the seller and the buyer shall bear all costs and risks in connection with the carriage of the goods from the seller's premises to destination place. However, if the parties wish the seller takes the responsibility of loading the goods at the place of shipment and bear all risks and expenses for such shipment, then it should be clearly stipulated in corresponding Supplement to the Contract of sale. EXW term should not be used when the buyer is not able to perform directly or indirectly the export formalities. In this case, FCA term should be used, provided that the seller agrees to bear the costs and risks for the shipment of goods.

The buyer of the goods should use EXW term with caution, because the seller has no the obligation to the buyer for loading the goods. If the seller actually performs the loading of the goods, it is done at the expense and risk of the buyer. If the seller carries out loading at its own risk and for its own account, it is advisable to use FCA term.

 

Also be aware that the seller shall only be obliged to provide the seller of the goods for export on EXW terms only with the assistance in customs clearance of goods for export, the seller shall not be obliged to organize the implementation of customs procedures for exportation of goods. Therefore, the buyer shall not be recommended to use EXW basis, if it cannot ensure the fulfillment of export customs formalities for exportation of goods.

 

FCA Incoterms delivery terms "Free Carrier" ("Free carrier" named place) means that the seller shall give the goods released under the customs regime of export, given by the buyer to the carrier at the named place. It should be noted that the selection of the place of delivery shall affect the obligations of loading and unloading goods at that location. If the delivery is carried out in the premises of the seller or at another agreed place, the seller shall be responsible for loading the goods. It is recommended to more clearly define the point of delivery, as the risk passes from the seller to the buyer at this point.

 

FCA term may be used at the transportation by any kind of transport including multimodal transportation. The word "Carrier" means any person who under the contract of carriage, undertakes to perform or provide the transportation of goods by rail, road, air, sea and inland water transport or by a combination of these kinds of transport. If the buyer trusts another person who is not a carrier to accept the goods, the seller is deemed fulfilled its obligation on delivery of goods from the moment of transfer to this person.

 

FCA Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during the importation.

 

FAS Incoterms delivery terms "Free Alongside Ship" ("Free alongside ship" the specified port of shipment) means that the seller has made the delivery when the goods are placed alongside the ship on the quay or in lighters at the named port of shipment. The risk of loss or damage to the goods shall pass from the seller, when the goods are alongside the ship, from that moment the buyer shall bear all costs. When placing goods in containers for the seller it is typical to transfer the goods to the carrier at the terminal, not by placing on the board, in such cases, the term FCA should be used.

 

FAS term can be used only for the carriage of goods by sea or inland water transport.

 

FAS Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during the importation. However, if the parties wish the buyer to bear the responsibilities for customs clearance of goods for export, it should be clearly stipulated in corresponding Supplement to the Contract of sale.

 

FOB Incoterms delivery terms "Free On Board" ("Free on Board" the specified port of shipment) means that the seller has made the delivery when the goods passed the ship's rail (on the ship board) at the named port of shipment. The risk of loss or damage to the goods shall pass from the seller, when the goods are on the ship board, from this moment the buyer shall bear all costs. When placing goods in containers for the seller it is typical to transfer the goods to the carrier at the terminal, not by placing on the board, in such cases, the term FCA should be used.

 

FOB term can be used only for the carriage of goods by sea or inland water transport.

 

FOB Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures at import.

 

CFR Incoterms terms of delivery "Cost and Freight" ("Cost and freight" the specified port of destination) means that the seller has made the delivery when the goods passed the ship's rail (on the ship board) at the port of shipment. The seller shall be obliged to 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 and any additional costs shall be transferred from seller to buyer after the placing of the goods on the ship board at the port of shipment. When placing goods in containers for the seller it is typical to transfer the goods to the carrier at the terminal, not by placing on the board, in such cases, the term FCA should be used.

According to CFR delivery basis the buyer shall assume all risks of loss or damage to the goods, and any other costs after the transfer of goods by the seller to the carrier, but not when the goods reach the destination. CFR term contains two critical points because the risk and costs shall be transferred into two different places.

 

CFR term can be used only for the carriage of goods by sea or inland water transport.

 

CFR Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during importation.

 

CFR Incoterms term can be used only during the carriage of goods by sea or inland water transport. If the parties do not intend to deliver the goods across the ship's rail, the term CPT should be used.

 

CFR Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures

during the importation.

 

CIF Incoterms delivery terms - "Cost, Insurance and Freight" ("Cost, insurance and freight" named destination port) means that the seller has made the delivery when the goods passed the ship's rail (on the ship board) at the port of shipment. The seller shall be obliged to 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 and any additional expenses arising after shipment of the goods shall pass from the seller to the buyer.

 

CIF delivery basis imposes on the seller also the obligation to procure marine insurance in favor of the buyer against risk of loss or damage to the goods during transportation. Consequently, the seller shall be obliged to conclude insurance agreement and pay insurance premiums. The buyer should take into consideration that according to the terms of CIF delivery, the seller shall be required to obtain insurance only with minimum cover. In case the buyer wishes to have insurance with greater coverage it should specially negotiate this with the seller, either take steps itself to conclude the additional insurance agreement.

 

CIF term can be used only for the carriage of goods by sea or inland water transport. If the parties do not intend to deliver the goods the ship board the term CIP should be used.

 

CIF Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during the importation.

 

CPT Incoterms delivery terms- "Carriage Paid To" ("Carriage paid to" the named place of destination) means that the seller shall give the goods released under the customs regime of export, to the carrier named. In addition, the seller shall be obliged to pay the costs associated with the transportation of the goods to the named place of destination. It means that the buyer shall bear all risks of loss or damage to the goods, and any other costs after the transfer of goods by the seller to the carrier, but not when the goods reach the destination place. CPT term has two critical points because the risk and costs shall be transferred into two different places.

 

CPT term may be used at the transportation by any kind of transport including multimodal transportation. The word "Carrier" means any person who under the contract of carriage, undertakes to perform or provide the transportation of goods by rail, road, air, sea and inland water transport or by a combination of these kinds of transport. In the case the transportation is carried out to the agreed destination point by several carriers, the transition of risk shall happen at the time of delivery of goods to the first carrier.

 

CPT Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import customs duties or perform other customs procedures during the importation.

 

CIP Incoterms delivery terms "Carriage and Insurance Paid to" ("Freight/carriage and insurance paid to" the named place of destination) means that the seller shall give the goods released under the customs regime of export, to the carrier named. In addition, the seller shall be obliged to pay the costs associated with the transportation of the goods to the named place of destination. It means that the buyer shall bear all risks and any additional costs after delivery of the goods by the seller to the carrier, but not when the goods reach the destination place. However, according to CIP delivery basis the seller also has to procure insurance against risks of loss or damage to the goods during transportation in favor of the buyer. Consequently, the seller shall conclude the contract for insurance and pay the insurance premiums. The buyer should take into consideration that according to the terms of CIP delivery, the seller shall be required to obtain insurance only with minimum cover. In case the buyer wishes to have insurance with greater coverage it should specially negotiate this with the seller, either take steps itself to conclude the additional insurance agreement. CIP term has two critical points because the risk and costs shall be transferred into two different places.

CIP may be used at the transportation by any kind of transport including multimodal transportation. The word "Carrier" means any person who under the contract of carriage, undertakes to perform or provide the transportation of goods by rail, road, air, sea and inland water transport or by a combination of these kinds of transport. In the case the transportation is carried out to the agreed destination point by several carriers, the transition of risk shall happen at the time of delivery of goods to the first carrier.

 

CIP Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during the importation.

 

DAT Incoterms delivery terms "Delivered At Terminal" ("Delivery at terminal" the specified named place of destination) means that the seller is deemed fulfilled its obligations when the goods released under the customs regime of export, have been unloaded from the arrived vehicle and placed at the disposal of the buyer at the agreed terminal of the named place of destination. The term "terminal" in the DAT delivery basis means any place, including air/car/rail cargo terminal, a quay, warehouse, etc. DAT delivery terms impose on the seller the obligation to bear all costs and risks associated with the transportation of goods to and unloading them at the terminal, including (where required) any fees to export from the country of destination.

 

DAT term may be used at the transportation by any kind of transport including multimodal transportation. The word "Carrier" means any person who under the contract of carriage, undertakes to perform or provide the transportation of goods by rail, road, air, sea and inland water transport or by a combination of these kinds of transport.

 

DAT Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during the importation.

 

DAP Incoterms delivery terms "Delivered At Point" ("Delivery point" specified named place of destination) means that the seller has fulfilled its obligation to deliver when it has provided the goods released under the customs regime of import and ready for unloading from the vehicle arrived at the specified destination. DAP delivery terms impose on the seller the obligation to bear all costs and risks associated with the transportation of the goods at the place of destination, including (where required) any fees to export from the country of destination.

DAP term may be used at the transportation by any kind of transport including multimodal transportation. The word "Carrier" means any person who under the contract of carriage, undertakes to perform or provide the transportation of goods by rail, road, air, sea and inland water transport or by a combination of these kinds of transport.

 

DAP Incoterms delivery basis imposes on the seller the obligation for fulfillment of export customs procedures for exportation of goods, but the seller shall not be obliged to carry out customs formalities for the import of goods, to pay import duties or perform other customs procedures during the importation. With the intention of the parties to fix the seller with the risks and costs for the implementation of customs formalities for the import of goods it is advisable to use DDP term.

 

DDP Incoterms delivery terms "Delivered Duty Paid" ("Delivered duty paid" the specified named place of destination) means that the seller shall provide goods passed export and import customs clearance, and ready for unloading from the arrived vehicle at the disposal of the buyer at the named place of destination. The seller shall be obliged to bear all costs and risks associated with the transportation of the goods, including any fees to export from the country of destination and for import into the country of destination. The word "fees" means responsibility and risk for the customs clearance and payment of customs formalities, customs duties, taxes and other charges.

DDP term may be used at the transportation by any kind of transport including multimodal transportation. The word "Carrier" means any person who under the contract of carriage, undertakes to perform or provide the transportation of goods by rail, road, air, sea and inland water transport or by a combination of these kinds of transport.

 

DDP delivery terms may not apply if the seller, directly or indirectly, cannot ensure implementation of the import customs procedures for the import of goods. If the parties agree on the exclusion of the seller's obligations some of the costs payable upon import (such as value added tax — VAT), it should be clearly defined in the Contract of sale.

While the EXW term imposes the seller the minimum obligations, the term of DDP delivery basis provides the maximum obligations of the seller. With the intention of the parties to fix the seller with the risks and costs for the implementation of customs formalities for the import of goods it is advisable to use DAP term.