Incoterms are a set of terms utilised in the field of imports and exports, valid throughout the world, which unambiguously and without the possibility of error define every right and duty assigned to the various legal entities involved in an operation transferring goods from one country to another.
“Ex-works”: The seller effectuates the delivery by making the goods available to the buyer at its premises or at another agreed-upon location (establishment, factory, warehouse, etc.). The seller is not obliged to load the goods onto the collection vehicle nor to clear them for export, should such customs clearance be envisaged.
EXW implies the minimum extent of the seller’s obligations.
“Free Carrier”: The seller effectuates delivery of the goods to the carrier or to another person so designated by the buyer, at the seller’s premises or at another determined location.
If foreseen, FCA requires the seller to clear the goods for export but not for import into the country of destination, which is to be borne by the buyer along with the obligation to pay any import duties or to complete any customs formalities upon importation.
If foreseen, FCA requires the seller to clear the goods for export but not for import into the country of destination, which is to be borne by the buyer along with the obligation to pay any import duties or to complete any customs formalities upon importation.
FCA is the recommended term for delivery of containers.
“Carriage Paid To”: the seller effectuates delivery of the goods to the carrier or another person so designated by the seller, at an established location (having been agreed upon between the parties). The seller must enter into the contract of carriage and bear the costs necessary to send the goods to the agreed destination.
When CPT, CIP, CFR or CIF are used, the seller fulfils its obligation to deliver upon handing over the goods to the carrier and not when the goods reach their destination.
“Carriage and Insurance Paid to”: the seller effectuates delivery of the goods to the carrier or another person so designated by the seller, at an established location (to a place that has been agreed upon between the parties). It is the seller’s responsibility to enter into the contract of carriage and to bear the costs necessary to send the goods to the agreed destination.
The seller also provides insurance coverage for any loss of or damage to the freight during transport. The buyer must bear in mind that, according to the CIP regulation, the seller is obliged to obtain insurance coverage covering “all risks”, except those explicitly excluded. Nonetheless, the parties are free to agree upon on a different, and thus less extensive, level of insurance coverage.
If the seller only clears the goods for export, it is the buyer’s obligation to take care of import customs clearance and to pay any import duties or complete any customs formalities.
“Delivered At Place”: the seller effectuates delivery by placing the goods at the buyer’s disposal on the incoming means of transport, ready for unloading at the determined destination. The seller bears all risks associated with the transport of the goods to the agreed location.
If the seller incurs costs foreseen in the contract of carriage in respect of unloading at the place of destination, they are not entitled to recover such costs from the buyer unless otherwise agreed upon by the parties.
If the seller only clears the goods for export, it is the buyer’s obligation to take care of import customs clearance and to pay any import duties or complete any customs formalities.
“Delivered at Place Unloaded”: the seller effectuates the delivery by placing the unloaded goods at the disposal of the buyer at the agreed upon port or location. Such a port or location includes any covered or uncovered space, such as a quay, warehouse, container yard or a road, rail or airport terminal. The seller bears all risks associated with the transport and unloading of the freight at the agreed upon port or location of destination.
If the seller only clears the goods for export, it is the buyer’s obligation to take care of import customs clearance and to pay any import duties or complete any customs formalities.
“Delivered Duty Paid”: the seller effectuates delivery by placing the freight at the disposal of the buyer, cleared for import, on the incoming means of transport ready for unloading at the determined destination. The seller bears all costs and risks involved in transporting the goods to the destination and is obliged to clear the goods not only for export but also for import, to pay any export and import duties and to complete all customs procedures.
If the seller incurs costs established in their contract of carriage for unloading at the destination, they are not entitled to recover such costs from the buyer unless otherwise agreed upon by the parties.
VAT or other similar taxes payable on importation shall be borne by the seller, unless otherwise expressly agreed upon in the sales contract.
The DDP sets the maximum extent of the seller’s obligations.
“Free Alongside Ship”: the seller effectuates delivery by positioning the goods alongside the vessel (such as on a quay or barge), designated by the buyer at the determined port of shipment. The risk of loss of or damage to the goods is transferred once the goods are alongside the ship, from which point forwards the buyer bears all costs.
The seller must deliver the goods alongside the ship or procure the goods already so delivered for the shipment. Here, “procure” is in reference to multiple chain sales.
If the seller clears the goods for export, they are not obliged to clear the goods for import, to pay any import duties nor complete any customs formalities upon import.
“Free On Board”: the seller effectuates delivery of the goods by placing them aboard the vessel designated by the buyer at the named port of shipment or by procuring the goods already so delivered. The risk of loss of or damage to the goods is transferred once the goods are on board the ship, from which point forwards the buyer bears all costs.
The seller must deliver the goods on board the ship or procure the goods already delivered so for the shipment.
Here, “procure” is in reference to multiple chain sales.
If the seller clears the goods for export, they are not obliged to clear the goods for import, to pay any import duties nor complete any customs formalities upon import.
“Cost and Freight”: the seller effectuates delivery by placing the goods on board the ship or by procuring the goods already delivered thus. The risk of loss of or damage to the goods is transferred once the goods are on board the ship. The seller must conclude the contract of carriage and bear the costs necessary to send the goods to the agreed port of destination.
This rule has two critical points, since passing on the risk and the transfer of expenses take place in different locations.
Whilst the contract will always specify a port of destination, it might not specify the port of embarkation, where the risk passes to the buyer. If the port of embarkation is of particular interest to the buyer, it is recommended that the parties specify such as clearly as possible in the contract.
If the seller incurs costs established in their contract of carriage in respect of unloading at a specific point of the port of destination, they are not entitled to recover such costs from the buyer unless otherwise agreed upon by the parties.
“Cost, Insurance and Freight”: the seller effectuates delivery by placing the goods on board the ship or by procuring the goods already delivered thus. The risk of loss of or damage to the goods is transferred once the goods are on board the ship. The seller must conclude the contract of carriage and bear the costs necessary to send the goods to the agreed port of destination.
The seller also provides insurance coverage for any loss of or damage to the freight during transport. The buyer should bear in mind that under the CIF regulation, the seller is obliged to obtain only minimum insurance coverage. If the buyer wishes to have more extensive insurance protection, they must expressly agree upon such with the seller or arrange supplementary insurance directly.
This rule has two critical points, since passing on the risk and the transfer of expenses take place in different locations. Whilst the contract will always specify a port of destination, it might not specify the port of embarkation, where the risk passes to the buyer.