INCOTERMS
American Shipping
(INTERNATIONAL COMMERCIAL PRACTICES COMMISSION)
Sending goods from one country to another, as part of a commercial transaction, can be a risky business. If they are lost or damaged, or if delivery does not take place for some other reason, the climate of confidence between parties may degenerate to the point where a lawsuit is brought. However, above all, sellers and buyers in international contracts want their deals to be successfully completed. If, when drawing up their contract, buyer and seller specifically refer to one of the ICC Incoterms, they can be sure of defining their respective responsibilities, simply and safely. In so doing they eliminate any possibility of misunderstanding and subsequent dispute.
The eighth published set of predefined terms, Incoterms 2010 defines 11 rules, reducing the 13 used in Incoterms 2000 by introducing two new rules ("Delivered at Terminal", DAT; "Delivered at Place", DAP) that replace four rules of the prior version ("Delivered at Frontier", DAF; "Delivered Ex Ship", DES; "Delivered Ex Quay", DEQ; "Delivered Duty Unpaid", DDU). In the prior version, the rules were divided into four categories, but the 11 pre-defined terms of Incoterms 2010 are subdivided into two categories based only on method of delivery. The larger group of seven rules applies regardless of the method of transport, with the smaller group of four being applicable only to sales that solely involve transportation over water.
Rules for Any Mode(s) of Transport
The Seven Rules defined by Incoterms 2010 for any mode(s) of transportation are:
| Term | Description |
|---|---|
| EXW (Ex Works) | The seller makes the goods available at its premises. The buyer pays all transportation costs and bears all risks. |
| FCA (Free Carrier) | The seller hands over the goods, cleared for export, to the first carrier named by the buyer at the named place. |
| CPT (Carriage Paid To) | The seller pays for carriage. Risk transfers to the buyer upon handing goods over to the first carrier. |
| CIP (Carriage and Insurance Paid To) | The seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier. |
| DAT (Delivered at Terminal) | The seller pays for carriage to the terminal and assumes all risks up to the point that the goods are unloaded at the terminal. |
| DDP (Delivered Duty Paid) | The seller is responsible for delivering the goods to the named place in the buyer's country, and pays all costs, including import duties and taxes. |
| DAP (Delivered at Place) | The seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks up to the point that the goods are ready for unloading by the buyer. |
| Rules for Water Transport | |
| FAS (Free Alongside Ship) | The seller must place the goods alongside the ship at the named port. Suitable only for maritime transport. |
| CFR (Cost and Freight) | The seller pays for costs and freight to the port of destination. Risk transfers to the buyer once the goods are loaded on the vessel. |
| FOB (Free On Board) | The seller must load the goods on board the vessel nominated by the buyer. Risk transfers once the goods are on board. |
| CIF (Cost, Insurance and Freight) | Same as CFR, but the seller must also procure and pay for insurance. |