Incoterms 2010
The Incoterms rules, developed by specialists of the International Chamber of Commerce for participants in foreign economic activity, were originally adopted in 1936. Incoterms is a simple and straightforward tool for resolving various issues of foreign trade relations. The use of the delivery terms described in Incoterms allows achieving mutual understanding between the seller and the buyer in a process of goods transferring, to distribute responsibility for the safety of the goods and fulfillment of obligations in case of damage or destruction of goods.
Incoterms 2010 rules are effective from January 2011; the next revision will appear in 2020.
The terms in Incoterms are three-letter abbreviations in which the first letter sets the point of obligations and possible risks transfer from the seller to the buyer.
Delivery conditions in Incoterms are divided into four groups:
Group E — responsibility for the goods passes to the buyer at the place of dispatch. The seller provides the buyer with the goods already ready for shipment. This case is called self-pickup. This group includes one condition: EXW.
Group F — responsibility for the goods ends after the transfer of the goods to the carrier. The buyer pays for carrier services. This group includes three conditions: FCA, FAS, FOB.
Group C — responsibility for the goods ends after the transfer of the goods to the carrier. The seller pays for the carrier’s services. This group includes conditions: CFR, CIF, CPT and CIP.
Group D — the seller is responsible for the safety of the goods until the goods are handed over to the buyer in the country of destination. In such cases, the seller fully covers the delivery of the goods and independently transfers the goods to the buyer. These delivery terms include: DAT, DAP, DDP.
List of delivery conditions in Incoterms 2010
There are 11 conditions of delivery considered in Incoterms. Seven of them are used for the goods delivery by vehicles of any type and purpose.
7 delivery conditions for any type of transport:
EXW — Ex Works, means that the seller delivers and then places the goods at the disposal of the buyer at the seller’s premises or at another named place (works, factory, warehouse). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
FCA— Free Carrier, means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
CPT— Carriage Paid to, means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
CIP — Carriage and Insurance Paid, this condition is almost identical to CPT. Carriage and Insurance Paid to — means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
DAT— Delivered at Terminal means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. «Terminal» includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
DAP — Delivered at Place means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
DDP— Delivered Duty Paid means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
The international trade rules — Incoterms 2010 also contain conditions of delivery applicable only to sea and water transport.
For conditions of delivery used for sea and water transport:
FAS — продавец должен реализовать таможенное оформление товар и доставить его в пункт погрузки указанного покупателем порта для размещения на судне, после этого ответственность за сохранность груза переходит к покупателю. Оплата перевалки, страховка, перевозка и таможенная очистка товара ложится на покупателя.
FAS — Free Alongside Ship means that the seller delivers when the goods are placed alongside the vessel (on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
FOB — Free On Board means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
CFR — Cost and Freight means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
CIF — Cost, Insurance and Freight, similar to CFR, means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.