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Incoterms at a glance

December 11th, 2011 Leave a comment Go to comments

The Incoterms rules or International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international commercial transactions.

A series of three-letter trade terms related to common sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs and risks associated with the transportation and delivery of goods.

The Incoterms rules are accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries.

As an overview, we’ve taken the incoterms and simplified them. Call it a cheat sheet for anyone less familiar with international trade!

Rules for Any Mode(s) of Transport

EXW – Ex Works: Goods are made available at the seller’s premises, with no additional costs/delivery included. This places maximum obligation on buyer and minimum obligation on the seller.

FCA – Free Carrier: The seller carries the goods to named point of delivery and then passes all risk to the first carrier named by buyer.

CPT – Carriage Paid To: The seller pays for carriage. Risk transfers to the buyer upon handing goods over to the first carrier.

CIP – Carriage and Insurance Paid to: The seller pays carriage & insurance to a named destination point. Risk  then passes when the goods are handed to the first carrier.

DAT – Delivered at Terminal: The seller pays for carriage to the terminal, except import clearance fees and assumes all risks up to the goods being unloaded at terminal.

DAP – Delivered at Place: The seller pays for carriage to named place, except import clearance fees and assumes all risks up to goods being made ready for unloading.

DDP – Delivered Duty Paid: The seller is responsible for all costs, duties and taxes to deliver goods to the country of the buyer. This places maximum obligation on seller.

Rules for Sea and Inland Waterway Transport

FAS – Free Alongside Ship: The seller places the goods alongside the ship at a named port and clears them for export. This typically applies to heavy-lift & bulk cargo.

FOB – Free On Board: The seller loads the goods onto a vessel nominated by the buyer and clears them for export. The buyer instructs which vessel and port where goods are loaded.

CFR – Cost and Freight: The seller pays all costs and freight to bring goods to port of destination. Risk is transferred to buyer once the goods are loaded.

CIF – Cost, Insurance and Freight: Exactly the same as CFR except that the seller must in addition procure and pay for the insurance.

I hope this information helps. If you are unsure about the obligations, risks and costs involved in importing your goods, feel free to contact us for clarification.

References:
International Chamber of Commerce
Institute of the International Trade of Ireland




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