Logistics Encyclopedia

The Incoterms rules, developed by experts of the International Chamber of Commerce for participants in foreign trade activity, were first adopted in 1936. Incoterms is a simple and clear tool for settling a wide variety of issues in foreign trade relations. Using the delivery terms described in Incoterms makes it possible to reach a mutual understanding between seller and buyer when handing over cargo, and to allocate responsibility for the safety of the goods and the fulfillment of obligations in the event of damage or loss.

The 2010 edition of the Incoterms rules has been in force since January 2011. The next edition appeared in 2020, but this does not cancel the effect of the rules of previous editions.

Incoterms terms are three-letter abbreviations in which the first letter establishes the point at which obligations and possible risks are transferred from the seller to the buyer.

The delivery terms in Incoterms 2010 are divided into 4 groups:

Group E - responsibility for the goods passes to the buyer at the place of dispatch. The seller provides the buyer with goods ready for shipment. This case is known as pickup. This group includes one term: EXW.

Group F - responsibility for the goods ends once the cargo has been handed over to the carrier. The carrier's services are paid for by the buyer. This group includes three terms: FCA, FAS, FOB.

Group C - responsibility for the goods ends once the cargo has been handed over to the carrier. The carrier's services are paid for by the seller. This group includes the following terms: CFR, CIF, CPT, CIP.

Group D - responsibility for the safety of the goods remains with the seller until the goods are handed over to the buyer in the destination country. In this case, the seller pays for delivery in full and hands the goods over to the buyer personally. Delivery terms of this kind include: DAT, DAP, DDP.

List of Incoterms 2010 delivery terms

In total, Incoterms covers 11 delivery terms. Seven of them apply when cargo is delivered by vehicles of any type and purpose.

7 delivery terms for any mode of transport:

EXW - the buyer collects the goods from the seller's warehouse; this term is known as "pickup" (ex works). Once the seller has provided the buyer with goods prepared for shipment, responsibility passes to the buyer. Customs clearance, loading, delivery, and unloading are carried out by the buyer.

FCA - the seller completes customs clearance of the goods and hands them over to the carrier, after which responsibility for the safety of the goods passes to the buyer. The carrier's services and customs clearance of the goods are paid for by the buyer.

CPT - the seller completes customs clearance of the goods and loads them onto the carrier's transport. Once the cargo has been handed over to the carrier, the seller's responsibility for its safety passes to the buyer, while the carrier's services are paid for by the seller. Insurance and customs clearance of the goods are the buyer's responsibility.

CIP - this term is practically identical in meaning to CPT, except that insurance of the main carriage falls to the seller. Note: the mandatory insurance policy provides coverage for minimum risks only.

DAT - the seller completes customs clearance of the cargo, transports it, and unloads it at the terminal, after which responsibility for the cargo passes to the buyer. Cargo insurance is not among the seller's obligations.

DAP - the goods are delivered to the buyer's place of destination. In this case, all transportation, clearance, and insurance costs are paid by the seller.

DDP - full delivery, which includes: customs formalities, delivery to the place specified by the buyer, customs clearance, insurance, and handover of the goods to the buyer. The seller's responsibility remains until the goods are handed over to the buyer.

The Incoterms 2010 international trade rules also contain delivery terms applicable only to carriage by water transport.

4 delivery terms used for sea and inland waterway transport:

FAS - the seller must complete customs formalities for the goods and deliver them to the loading point of the port specified by the buyer for placement on board the vessel, after which responsibility for the safety of the cargo passes to the buyer. Payment for stevedoring, insurance, carriage, and customs clearance of the goods falls to the buyer.

FOB - the seller arranges customs clearance of the goods and places them on the vessel specified by the buyer, after which responsibility for the safety of the goods passes to the buyer. Payment for carriage, insurance, unloading, and customs clearance of the cargo is the buyer's responsibility.

CFR - the seller must complete customs formalities and deliver the goods to the vessel specified by the buyer, after which responsibility for the safety of the goods passes to the buyer. In this case, the seller must pay all transport costs up to delivery of the goods to the port of destination. Payment for unloading, insurance, and customs clearance falls to the buyer.

CIF - this term is practically identical to CFR; the only difference is that in this case the main carriage is insured by the seller.