Incoterms

We grouped together further below a number of international delivery terms repeatedly occurring in the air, sea, multimodal and road transport practice. To help the easier understanding of the bare rules and to give a better guidance, we didn’t just invoke the clauses here as they exactly appear in the latest “classical” INCOTERMS 2012, we rather used our own terms to interpret the day-to-day best practices.

 

EXW – Ex works 

The seller hands over the goods at its premises properly packed and invoiced and places it to the buyer’s/forwarder’s disposal. The seller doesn’t need to load the goods in any collecting vehicle, nor does it need to clear the goods for export, but on the buyer’s request, cost and risk it is bound to give assistance. The seller must provide all documents necessary for the export (certificate of origin, export licence, etc.). Cost and risk from the factory are borne by the buyer.

 

FCA – Free Carrier

The seller delivers the goods at its own cost and risk to the carrier nominated by the buyer to a given place. Cost and risk are passed to the buyer at the given geographical point after the goods have been transferred to the carrier.

Obligations of the seller: The seller ships the goods to the given point and places them to the nominated forwarder’s disposal. The seller obtains all documents necessary to the export and performs the export clearance.

Obligations of the buyer: The buyer shall inform the seller about the carrier’s name, the mode of transport, the date, time and place of delivery. All costs related to the export are covered by the buyer except for inland transport and export clearance.

 

FOB – Free on Board

The seller delivers the goods cleared for export at its own cost and risk at the named port or airport of shipment. All costs and risk are transferred to the buyer when the seller delivers the goods at the port or airport.

Obligations of the seller: The seller must deliver the goods cleared at the named port or airport of shipment to the forwarder nominated by the buyer. The seller is bound to notify the buyer about the delivery, and to issue the Bill of Lading or the Air Waybill.

Obligations of the buyer: The buyer contracts for the transport at its own cost from the named port or airport and notifies the seller about the place and time of delivery.

 

CFR – Cost and Freight

The seller is bound to deliver the goods at its own expense to the named port of destination, but the risk of loss or damage and the rights of ownership of the goods are already transferred to the buyer when the goods pass the ship’s rail at the port of shipment.

Obligations of the seller: The seller bears the freight and loading costs to the port of destination - landing and unloading charges should only be covered if they are included in the freight. The seller must provide the export licence and carry out the export clearance. The seller bears the risk of loss and damage until the goods have passed the ship’s rail at the port of shipment.

Obligations of the buyer: The buyer must pay the unloading charges unless they were included in the freight. It must also carry out all customs formalities for the import of the goods. Costs are transferred from the seller to the buyer at the port of destination. The risk and the ownership of goods are transferred from the seller to the buyer when the goods have passed the ship’s rail at the port of shipment.

 

CIF – Cost Insurance and Freight

Unlike the CFR term, the seller bears not only the costs incurring until the port of destination but also pays the insurance premium.

Insurance: The seller contracts for insurance at its own expense but in favour of the buyer. The insurance is only for the minimum cover. Additionally, the seller must provide the buyer with the insurance policy (the security).

 

CPT – Carriage Paid to …

The seller delivers the goods pays the freight to the named destination (port/airport). The risk of loss or damage to the goods is passed to the buyer when the seller delivers the goods to the first carrier. It is a risky term because the carrier is selected by the seller and the buyer bears all risks if anything happens to the goods.

Obligations of the seller: The seller concludes the transport contract and pays the freight and all export handling costs necessary to bring the goods to the named place of destination.

Obligations of the buyer: The buyer bears all customs duties, taxes and import charges payable to the authorities.

Costs are transferred from the seller to the buyer at the named place of destination.
The risk is transferred from the seller to the buyer when the goods are delivered to the first carrier.

 

CIP – Carriage Insurance Paid to…

The seller delivers the goods at its own expense to the place of destination (port/airport). The buyer bears all risks occurring after the goods have been delivered to the first carrier. The seller must contract for insurance cover. Unlike the CPT term, the seller bears not only the costs incurring until the port or airport of destination but also pays the insurance premium. The insurance is for the minimum cover.

 

DAP – Delivered at Place

The seller must deliver the goods at its own expense and risk to the place of destination stipulated in the contract. The seller bears all costs and risk except for customs duty, VAT on import and other public charges imposed by the authorities.

Obligations of the seller: The seller delivers the goods at the named place of destination and bears all risks and costs.

Obligations of the buyer: The buyer pays all fees and taxes related to the import.

Costs and risk are transferred from the seller to the buyer at the named place of destination in the importer’s country.

 

DDP – Delivered Duty Paid

The seller delivers the goods at its own expense and risk to the place of destination and bears all costs and risks including customs duty and other charges imposed by the authorities.

Obligations of the seller: The seller bears all costs and risk involved to the named place of destination including import duty.

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