What and Why:<\/b><\/p>\n
INCOTERMS were created in 1936 by the International Chamber of Commerce in an effort to simplify communications in foreign trade.\u00a0 \u00a0With 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.\u00a0 These terms have changed over the years and you should refer to the most recent IncoTerms.<\/p>\n
IncoTerms 2010<\/b><\/p>\n
There are 11 different Incoterms in the 2010 Incoterms revision.\u00a0\u00a0 Some are applicable to all modes of transportation while others are specific to Ocean Freight.<\/p>\n
What helped me get a better understanding of these terms was to understand the letters for each term.\u00a0 Each incoterm begins with a letter that puts into a category listed below.<\/p>\n
C = Seller pays for Shipping<\/i><\/b><\/i><\/p>\n
F = Buyer pays for Shipping.<\/i><\/b><\/i><\/p>\n
E = Seller\u2019s Responsibilities are fulfilled when good are ready to leave their facility.<\/i><\/b><\/i><\/p>\n
D = Seller\u2019s Responsibilities end when goods arrive at a specific point.<\/i><\/b><\/i><\/p>\n
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EXW (EX-Works)<\/b><\/p>\n E = Seller\u2019s Responsibilities are fulfilled when goods are ready to leave their facility.<\/i><\/p>\n The Seller makes the goods available to the buyer at a named placed.\u00a0 Often this is the seller\u2019s place of business, but not always.\u00a0 So there needs to be a named place with this term.\u00a0 i.e. EXW 1234 Sellers business, City, Country.<\/p>\n This term places the minimum obligations on the seller and greatest responsibility on the buyer.<\/p>\n Or, Buyer is paying the freight, duties, clearance, and holds the liability.<\/p>\n Applies to all Modes of Transportation.<\/p>\n \u00a0<\/b><\/p>\n FOB (Free On Board)<\/b><\/p>\n F = Buyer pays for Shipping.<\/i><\/p>\n The Seller clears the goods for export to the named port.\u00a0 The Buyer then pays the costs from when the goods are placed on the ship and holds the responsibility and liability.<\/p>\n The port has to be named, i.e.\u00a0 FOB \u00a0port xyz, country<\/p>\n Applies to only in Ocean and inland waterway transportation.<\/p>\n \u00a0 FCA (Free Carrier)<\/b><\/p>\n F = Buyer pays for Shipping.<\/i><\/p>\n The Seller clears the goods for export and delivers to named place.\u00a0 This named place can be a terminal, port, place of business or a Freight Forwarder.\u00a0 The Seller is not responsible for unloading.\u00a0 The buyer pays for freight from that point on.<\/p>\n FCA delivery address, City Country.<\/p>\n Applies to All Modes of Transportation<\/p>\n \u00a0<\/b><\/p>\n FAS (Free Alongside Ship)\u00a0\u00a0<\/b>(change since 2000 incoterms)<\/i><\/p>\n F = Buyer pays for Shipping.<\/i><\/p>\n Just like it says\u2026\u00a0 The Seller prepares the goods for export and delivers goods alongside ship. (at the port).\u00a0 The Buyer takes responsibilities and pays from that point on.<\/p>\n The specific location should be specified at the port, i.e.\u00a0 Dock #.<\/p>\n i.e.\u00a0 FAS port name, dock#, City, Country<\/p>\n Applies only to Ocean and Inland Waterways transportation.<\/p>\n \u00a0<\/i><\/p>\n CFR (Cost and Freight)<\/b><\/p>\n C = Seller pays for Shipping<\/i><\/p>\n 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.<\/p>\n Destination Port has to be specified.\u00a0 I.e\u00a0 CFR Port name, City, Country.<\/p>\n Applies only to Ocean and Inland Waterways transportation.<\/p>\n \u00a0<\/b><\/p>\n CIF (Cost, Insurance and Freight)<\/b><\/p>\n C = Seller pays for Shipping<\/i><\/p>\n The Seller prepares goods for export, pays to load goods and transportation of goods to destination port.\u00a0 Seller ALSO pays for minimal insurance on the goods to destination port.\u00a0 The destination port needs to be named.\u00a0 I.e.\u00a0 CIF port name, City, Country.<\/p>\n Applies only to Ocean and Inland Waterways transportation.<\/p>\n \u00a0<\/b><\/p>\n CPT (Carriage Paid To)<\/b><\/p>\n C = Seller pays for Shipping<\/i><\/p>\n The Seller prepares goods for export, pays to load goods and transportation of goods to \u201cnamed place of destination\u201d.\u00a0 The named destination is not the final destination.\u00a0 The risk passes to the buyer at port of origination but Seller pays for transportation to \u201cnamed place of destination\u201d.\u00a0 Obviously the destination needs to be specified.\u00a0 i.e.\u00a0 CPT railyard name, City, Country.<\/p>\n Applies to All modes of transportation.<\/p>\n \u00a0<\/b><\/p>\n CIP (Carriage and Insurance Paid To)<\/b><\/p>\n C = Seller pays for Shipping<\/i><\/p>\n The Seller prepares the goods for exports, pays to load goods and transportation to \u201cnamed place of destination\u201d.\u00a0 The named destination is not the final destination.\u00a0 The risk passes from the Seller to the Buyer at the \u201cnamed place of destination\u201d.<\/p>\n The Seller is responsible for transportation costs and minimal insurance costs to \u201cnamed place of destination\u201d.<\/p>\n The destination needs to be specified with the term.\u00a0 i.e. Rail Terminal, City, Country.<\/p>\n Applies to All modes of transportation.<\/p>\n \u00a0<\/b><\/p>\n DAT (Delivered At Terminal)<\/b><\/p>\n D = Seller\u2019s Responsibilities end when goods arrive at a specific point.<\/i><\/p>\n The Seller prepares the goods for export, pays to load goods and transportation costs to \u201cnamed place of destination\u201d.\u00a0 The risks and costs are held by seller up to the \u201cnamed place of destination\u201d, then they become the Buyer\u2019s responsibility.<\/p>\n Named Place of Destination must be specified.\u00a0\u00a0 DAT Airport Terminal, City, Country.<\/p>\n Applies to All modes of transportation.<\/p>\n \u00a0<\/b><\/p>\n DAP (Delivered At Place)<\/b><\/p>\n D = Seller\u2019s Responsibilities end when goods arrive at a specific point.<\/i><\/p>\n The Seller prepares the goods for export, pays to load goods and transportation costs to \u201cnamed place of destination\u201d.\u00a0 The Seller holds the risks costs up to \u201cnamed place of destination\u201d.\u00a0 The \u201cnamed place of destination\u201d needs to be specified:\u00a0 i.e. DAP Customs Warehouse, Port of xyz, Country.<\/p>\n Applies to All modes of transportation.<\/p>\n \u00a0<\/b><\/p>\n![\"EXW](\"http:\/\/supfrt.com\/news\/wp-content\/uploads\/2013\/03\/EXW-SUPFRT-INCOTERM-CHART.png\")
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