The International Chamber of Commerce (ICC ) has published revisions to its International Commercial Terms, also known as INCOTERMS®, that take effect on January 1, 2011.
The revised rules, designated "INCOTERMS 2010", contain a series of changes, such as a reduction in the number of terms to 11 from 13. The DAF, DES, DEQ, and DDU designations have been eliminated, while two new terms, Deliv ered at Terminal (DAT) and Delivered at Place (DAP), have been added. INCOTERMS 2010 also attempt to better take into account the roles cargo security and electronic data interchange now play in international trade
The two main categories of Incoterms® 2010
are now organized by modes of transport. Used in international as well
as in domestic contracts for the first time, the new groups aim to
simplify the drafting of contracts and help avoid misunderstandings by
clearly stipulating the obligations of buyers and sellers.
Group 1. Incoterms® that apply to any mode of transport are:
- EXW Ex Works
- FCA Free Carrier
- CPT Carriage Paid To
- CIP Carriage and Insurance Paid To
- DAT Delivered at Terminal
- DAP Delivered at Place
- DDP Delivered Duty Paid
Group 2. Incoterms® that apply to sea and inland waterway transport only:
- FAS Free Alongside Ship
- FOB Free on Board
- CFR Cost and Freight
- CIF Cost, Insurance, and Freight
Group 1.
EXW - EX WORKS (... named place of delivery)
Means that the seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller’s premises.
FCA - FREE CARRIER (... named place of delivery)
Means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. The buyer must contract at his own expense the carriage of the goods from the named place.
CPT - CARRIAGE PAID TO (... named place of destination)
Means that
the seller delivers the goods to the carrier nominated by him but the
seller must also pay the cost of carriage necessary to bring the goods
to the named destination. This means that the buyer bears all risks and
any other costs occurring after the goods have been so delivered. If
multiple carriers are used for the carriage to the agreed destination,
the risk passes when the goods have been delivered to the first carrier.
The CPT term requires the seller to clear the goods for export.
CIP - CARRIAGE AND INSURANCE PAID TO (... named place of destination)
Means
that the seller delivers the goods to the carrier nominated by him but
the seller must also pay the cost of carriage necessary to bring the
goods to the named place of destination. This means that the buyer bears
all risks and any additional costs occurring after the goods have been
so delivered. However, in CIP the seller also has to procure insurance
against the buyer’s risk of loss of or damage to the goods during the
carriage. Consequently, the seller contracts for insurance and pays the
insurance premium. If multiple carriers are used for the carriage to the
agreed destination, the risk passes when the goods have been delivered
to the first carrier. The CIP term requires the seller to clear the
goods for export.
DAT - DELIVERED AT TERMINAL (... named terminal at port or place of destination)
Means
that the seller delivers the goods to the named terminal at the named
port or place of destination, unloaded from the delivering carrier.
“Terminal” may have multiple meanings and thus should be specified as
clearly as possible. The DAT term requires the seller to clear the goods
for export and the buyer to clear the goods for import. If the seller
is also responsible to arrange transport beyond the terminal, then the
DAP or DDP term should be used.
DAP - DELIVERED AT PLACE (... named place of destination)
Means that
the seller’s obligation ends when the goods are delivered to the
disposal of the buyer at the named destination place. The DAP term
specifies the buyer bears the risk and is responsible for unloading. The
DAP term requires the seller to clear the goods for export and the
buyer to clear the goods for import. If the seller is to be responsible
for import clearance, then the DDP term should be used.
DDP - DELIVERED DUTY PAID (... named place)
Means
that the seller delivers the goods to the buyer, cleared for import,
and not unloaded from any arriving means of transport at the named place
of destination. The seller has to bear all the costs and risks involved
in bringing the goods thereto including, where applicable, any “duty”
(which term includes the responsibility for the risk of the carrying out
of customs formalities and the payment of formali- ties, Customs
duties, taxes and other charges) for import in the country of
destination. If the parties wish the buyer to bear all risks and costs
of the import, the DAP term should be used.
Group 2.
FAS - FREE ALONGSIDE SHIP (... named port of shipment)
Means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export. This term is valid for vessel shipments only.
FOB - FREE ON BOARD (... named port of shipment)
Means that the seller delivers when the goods are loaded on board a vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for ex- port. This term is valid for vessel shipments only. If the cargo is delivered to the carrier by the seller before the goods are loaded on board the vessel, then the FCA term should be used.
CFR - COST AND FREIGHT (... named port of destination)
Means that the seller delivers when the goods are loaded on board a vessel at the named port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer when the goods are loaded onto the vessel. The CFR term requires the seller to clear the goods for export. This term is valid for vessel shipments only. If the cargo is delivered to the carrier by the seller before the goods are loaded on board the vessel, then the CPT term should be used.
CIF - COST INSURANCE AND FREIGHT (... named port of destination)
Means that the seller delivers when the goods are loaded on board a vessel at the named port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer when the goods are loaded onto the vessel. The CIF term requires the seller to clear the goods for export and to provide minimum insurance cover. This term is valid for vessel shipments only. If the cargo is delivered to the carrier by the seller before the goods are loaded on board the vessel, then the CIP term should be used.
- Incoterms must always be accompanied by a “named place” including city, province/state and country. The International Chamber of Commerce updates Incoterms every ten years, most recently in 2010. Because the implications and interpretations differ between publications, the year of the revised publication should also be stated. Example of correct Inco statement: “FOB Surabaya, Jawa Timur, INDONESIA, Incoterms 2010.”
- Incoterms identify risk and cost to the seller and buyer, but do not identify title transference.
- All reference to the cost of “Customs clearance” includes not only duty and /or other government levy but also the administrative cost associated with fulfilling that process.
- The exporter and/or importer may or may not be the seller or buyer. Exporter and importer status are specifically governed by the particular laws of the country of export and country of import.
