Incoterms 2010 Overview

INCOTERMS 2010

IncoTerms can be confusing for many, I know I had a difficult time understanding them when I got into the industry.   I am going to try to explain them  in a  way that helped me understand them, hopefully it will be helpful for you.

Do not take this in lieu of legal advice, this is just my best attempt at explaining these terms.

What and Why:

INCOTERMS were created in 1936 by the International Chamber of Commerce in an effort to simplify communications in foreign trade.   With differences in languages, international trade gets complicated. These terms are designed to clarify who is paying for the costs and who holds responsibility or liability.  These terms have changed over the years and you should refer to the most recent IncoTerms.

IncoTerms 2010

There are 11 different Incoterms in the 2010 Incoterms revision.   Some are applicable to all modes of transportation while others are specific to Ocean Freight.

What helped me get a better understanding of these terms was to understand the letters for each term.  Each incoterm begins with a letter that puts into a category listed below.

C = Seller pays for Shipping

F = Buyer pays for Shipping.

E = Seller’s Responsibilities are fulfilled when good are ready to leave their facility.

D = Seller’s Responsibilities end when goods arrive at a specific point.

 

 

EXW SUPFRT INCOTERM CHART

EXW (EX-Works)

E = Seller’s Responsibilities are fulfilled when goods are ready to leave their facility.

The Seller makes the goods available to the buyer at a named placed.  Often this is the seller’s place of business, but not always.  So there needs to be a named place with this term.  i.e. EXW 1234 Sellers business, City, Country.

This term places the minimum obligations on the seller and greatest responsibility on the buyer.

Or, Buyer is paying the freight, duties, clearance, and holds the liability.

Applies to all Modes of Transportation.

 

FOB SUPFRT INCOTERM CHART

FOB (Free On Board)

F = Buyer pays for Shipping.

The Seller clears the goods for export to the named port.  The Buyer then pays the costs from when the goods are placed on the ship and holds the responsibility and liability.

The port has to be named, i.e.  FOB  port xyz, country

Applies to only in Ocean and inland waterway transportation.

 FCA SUPFRT INCOTERM CHART

FCA (Free Carrier)

F = Buyer pays for Shipping.

The Seller clears the goods for export and delivers to named place.  This named place can be a terminal, port, place of business or a Freight Forwarder.  The Seller is not responsible for unloading.  The buyer pays for freight from that point on.

FCA delivery address, City Country.

Applies to All Modes of Transportation

 

FAS SUPFRT INCOTERM CHART

FAS (Free Alongside Ship)  (change since 2000 incoterms)

F = Buyer pays for Shipping.

Just like it says…  The Seller prepares the goods for export and delivers goods alongside ship. (at the port).  The Buyer takes responsibilities and pays from that point on.

The specific location should be specified at the port, i.e.  Dock #.

i.e.  FAS port name, dock#, City, Country

Applies only to Ocean and Inland Waterways transportation.

 

CFR SUPFRT INCOTERM CHART

CFR (Cost and Freight)

C = Seller pays for Shipping

The Seller prepares good for export, pays to load goods and transport goods to destination port. Buyer assumes risk at port of origin and pays from destination port on.

Destination Port has to be specified.  I.e  CFR Port name, City, Country.

Applies only to Ocean and Inland Waterways transportation.

 

CIF SUPFRT INCOTERM CHART

CIF (Cost, Insurance and Freight)

C = Seller pays for Shipping

The Seller prepares goods for export, pays to load goods and transportation of goods to destination port.  Seller ALSO pays for minimal insurance on the goods to destination port.  The destination port needs to be named.  I.e.  CIF port name, City, Country.

Applies only to Ocean and Inland Waterways transportation.

 

CPT SUPFRT INCOTERM CHART

CPT (Carriage Paid To)

C = Seller pays for Shipping

The Seller prepares goods for export, pays to load goods and transportation of goods to “named place of destination”.  The named destination is not the final destination.  The risk passes to the buyer at port of origination but Seller pays for transportation to “named place of destination”.  Obviously the destination needs to be specified.  i.e.  CPT railyard name, City, Country.

Applies to All modes of transportation.

 

CIP SUPFRT INCOTERM CHART

CIP (Carriage and Insurance Paid To)

C = Seller pays for Shipping

The Seller prepares the goods for exports, pays to load goods and transportation to “named place of destination”.  The named destination is not the final destination.  The risk passes from the Seller to the Buyer at the “named place of destination”.

The Seller is responsible for transportation costs and minimal insurance costs to “named place of destination”.

The destination needs to be specified with the term.  i.e. Rail Terminal, City, Country.

Applies to All modes of transportation.

 

DAT SUPFRT INCOTERM CHART

DAT (Delivered At Terminal)

D = Seller’s Responsibilities end when goods arrive at a specific point.

The Seller prepares the goods for export, pays to load goods and transportation costs to “named place of destination”.  The risks and costs are held by seller up to the “named place of destination”, then they become the Buyer’s responsibility.

Named Place of Destination must be specified.   DAT Airport Terminal, City, Country.

Applies to All modes of transportation.

 

DAP SUPFRT INCOTERM CHART

DAP (Delivered At Place)

D = Seller’s Responsibilities end when goods arrive at a specific point.

The Seller prepares the goods for export, pays to load goods and transportation costs to “named place of destination”.  The Seller holds the risks costs up to “named place of destination”.  The “named place of destination” needs to be specified:  i.e. DAP Customs Warehouse, Port of xyz, Country.

Applies to All modes of transportation.

 

DDP SUPFRT INCOTERM CHART

DDP (Delivered Duty Paid)

D = Seller’s Responsibilities end when goods arrive at a specific point.

The Seller prepares the goods for export, pays to load goods and transportation costs to “named place of destination” .   The Seller ALSO covers all import costs with customs at Country of destination including all duties, VAT, and other taxes.   The “named place of destination” needs to be specified: ie. DDP importer, warehouse, full address, City, State, Country.

Applies to All modes of transportation.

 

I hope this explanation helps you out a bit.  Again, this should not me taken as legal advice – this is just my attempt at explaining Incoterms in  a simple way.

The below Chart is a handy reference that I think you might find useful as well.

Incoterms 2010 Chart

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