Incoterms

What are the incoterms?

Incoterms are a set of international rules, governed by the International Chamber of Commerce, which determine the scope of the commercial clauses included in the international sales contract.

Incoterms 2010

The Incoterms are also referred to as price clauses, as each term determines the elements that compose it. Incoterm selection influences the cost of the contract.

The purpose of Incoterms is the provide a rule group International for the interpretation of the terms most used in international trade.

The Incoterms determine:

  • The scope of the price.
  • At that time and which produces the risk transfer of the goods from the seller to the buyer.
  • The place of delivery of the goods.
  • Who hires and pays transport
  • Who hires and pays the insurance
  • Documents processed each part and its cost.

CFR (Cost and Freight) – cost and freight (named port of destination)

For the seller reaches are the same as the FOB quotation with the only difference that the company must make the hold of the boat hire and pay the freight to destination.

The risk of loss or damage to the goods as well as any additional costs due to events occurring after the time of delivery, are transmitted from the seller to the buyer

The CFR term requires the seller ship goods for export.

This term can be used only for transport by sea or inland waterways.

Obligations of the seller.

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • (Place of export to the place of importation) freight

Obligations of the buyer.

  • Payment of the goods
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Delays

CIF (Cost, Insurance and Freight) – cost, insurance and freight (named port of destination)

It means that the seller delivers the goods when it exceeds the gunwale of the ship at the port of embarkation agreed.

The seller must pay the costs and freight necessary to drive the goods to the named port of destination.

On conditions CIF the seller must also take out insurance and to pay the premium, in order to cover the risks of loss or damage suffered by the goods during transport.

The buyer has to observe that the seller is required to obtain insurance only with minimum coverage. If the buyer wants more coverage you need to expressly agree with the seller either arrange their own additional insurance.

The CIF term requires the seller ship goods for export.

This term can be used only for transport by sea or inland waterways.

Obligations of the seller.

  • Deliver the goods and necessary documents packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • Freight and insurance (in place of export to the place of importation)

Obligations of the buyer.

  • Payment of the goods
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Delays

CIP (Carriage and Insurance Paid to)-transport and insurance payment up to (place of destination)

The seller delivers the goods to the carrier nominated by him but must also pay the transportation costs necessary to bring the goods to the agreed destination. The seller should also get an insurance against risk, which supports the buyer from loss or damage to the goods during transport.

The buyer assumes all risks and with any other incurred costs once the goods have been so delivered.

The CPT requires the seller to clear the goods for export.

This term may be used irrespective of the mode of transport, including multimodal transport.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • Freight and insurance (in place of export to the place of importation)
  • Expenses of import “Partial” (maneuvers, storage, agents)

Obligations of the buyer

  • Payment of the goods
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Expenses of import “Partial” (maneuvers, storage, agents)
  • Delays

CPT (Carriage Paid To) – paid to (place of destination)

The seller delivers the goods to the carrier nominated by him but must also pay the transportation costs necessary to bring the goods to the agreed destination.

The buyer assumes all risks and with any other incurred costs once the goods have been so delivered.

The CPT requires the seller to clear the goods for export.

This term may be used irrespective of the mode of transport, including multimodal transport.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • (Place of export to the place of importation) freight
  • Expenses of import “Partial” (maneuvers, storage, agents)

Obligations of the buyer

  • Payment of the goods
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Expenses of import “Partial” (maneuvers, storage, agents)
  • Delays

DAF (Delivered At Frontier) – delivered at frontier (named place)

It means that the seller has fulfilled his obligation to deliver when he has the goods cleared customs for export where the agreed border but before the customs border of the buyer country and place.

This term may be used irrespective of the mode of transport when the goods must be delivered in a land border.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • (Place of export to the place of importation) freight (partial)
  • Insurance (partial)

Obligations of the buyer

  • Payment of the goods
  • (Place of export to the place of importation) freight (partial)
  • Insurance (partial)
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Delays

DDP (Delivered Duty Paid) – delivered rights paid (place of destination)

It means that the seller delivers the goods to buyer, released for import, and not unloaded from the means of transport used at the agreed destination.

The seller has to bear all costs and risks involved in carrying goods to that place, including customs formalities, and the payment of formalities, customs, taxes and other charges for import in the country of destination.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Cartage (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • (Place of export to the place of importation) freight
  • Insurance
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Hauling and insurance (place of importation to plant)
  • Delays

Obligation of the purchaser

  • Pay the goods

DDU (Delivered Duty Unpaid) – delivered rights not paid (place of destination)

It means that the seller fulfilled his obligation to deliver when it has put merchandise to the buyer at the agreed place of the importing country and the seller has to assume all costs and risks involved in taking the goods to that place (excluded duties, taxes and other official charges payable to import). As well as the costs and risks of carrying out customs formalities.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • Freight and insurance (in place of export to the place of importation)

Obligations of the buyer

  • Payment of the goods
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Delays

DEQ (delivered Ex-Quay) – delivered in spring (named port of destination)

It means that the seller delivers when there are goods available to the buyer, without shipment for import on the quay (wharf) at the port of destination agreed. The seller has to bear the costs and risks involved driving the goods to the agreed destination port and unloading the goods on the quay (wharf). The DEQ term requires the buyer to dispense the goods for import and to pay all the formalities, duties, taxes and other import charges.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • Freight and insurance (in place of export to the place of importation)
  • Customs (documents, permits, requirements, taxes)

Obligations of the buyer

  • Payment of the goods
  • Freight and insurance (place of importation to plant)
  • Expenses of import (maneuvers, warehousing, agents)
  • Delays

This term can be used only for transport by sea or inland waterway or multimodal transport

DES (Delivered Ex Ship) – delivered over ship (named port of destination)

It means that the seller delivers when they get the goods at the disposal of the buyer on board the ship not cleared for import, at the port of destination agreed.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • Freight and insurance (in place of export to the place of importation)

Obligations of the buyer

  • Payment of the goods
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Hauling and insurance (place of importation to plant)
  • Delays

EXW (ex-works) – in factory (named place)

It means that the seller delivers when the goods are at the disposal of the buyer in the establishment of the seller or at another agreed place (i.e., factory, warehouse, etc.).

This term represents, thus, the lesser obligation of seller, and the purchaser shall bear all costs and risks.

Obligations of the seller.

  • Delivery of the goods and documents necessary
  • Packing & crating

Obligations of the buyer.

  • Payment of the goods
  • Domestic freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)
  • International freight (in place of export to the place of importation)
  • Insurance
  • Expenses of import (maneuvers, warehousing, agents)
  • Shipping and insurance (place of importation to plant)

FAS (Free Along Ship) – free at the side of the ship (agreed port of loading)

It means that the seller’s responsibility ends once the merchandise is placed at the side of the ship at the port of embarkation agreed. This means that the buyer has to assume all the costs and risks of loss of or damage to the goods from that moment.

The FAS term requires the seller ship goods for export.

Obligations of the seller

  • Goods and documents required
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Export expenses (maneuvers, warehousing, agents)

Obligations of the buyer

  • Payment of the goods
  • Freight and insurance (in place of export to the place of importation)
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Insurance and freight (import plant site)
  • Delays

FCA (Free Carrier) – free carrier (named place)

It means that the seller delivers the goods for export to the carrier proposed by the buyer at the agreed place.

The chosen place of delivery influences the obligations of loading and unloading of parts. If the delivery takes place on the premises of the seller is responsible for the load. If the delivery takes place elsewhere, seller is not responsible for the download.

This term can be used in any means of transport including multimodal transport.

Obligations of the seller.

  • Delivery of the goods and documents necessary
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)

Obligations of the buyer

  • Payment of the goods
  • (Place of export to the place of importation) freight
  • Insurance
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Freight and insurance (place of importation to plant)
  • Delays

FOB (Free On Board) – free on Board (agreed port of loading)

The seller’s liability ends when goods exceed the gunwale of the ship at the port of embarkation agreed.

The buyer must bear all costs and risks of loss and damage of the goods from that point.

The FOB term requires the seller ship goods for export.

This term can be used only for transport by sea or inland waterways.

Obligations of the seller

  • Deliver the goods and necessary documents
  • Packing & crating
  • Freight (from factory to the place of export)
  • Customs (documents, permits, requirements, taxes)
  • Costs of export (maneuvers, warehousing, agents)

Obligations of the buyer

  • Payment of the goods
  • Freight and insurance (in place of export to the place of importation)
  • Expenses of import (maneuvers, warehousing, agents)
  • Customs (documents, permits, requirements, taxes)
  • Freight (import plant site)
  • Delays
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