Incoterms, International Commercial Terms

The Incoterms set out the reciprocal obligations of the seller and the buyer within the scope of an international sales/purchase...

The Incoterms set out the reciprocal obligations of the seller and the buyer within the scope of an international sales/purchase contract.
They indicate precisely their liabilities but do not define the moment when ownership is transferred.
Lastly, they set out the sharing of costs and the division of risks.
Incoterms 2010 have adapted to the evolution of practices in international trade, of the emergence of security issues (September 11 attacks) and of the adoption of the Safe framework (safety, security and trade facilitation standards).

There are 11 Incoterms falling into 2 distinct groups:

1/ RULES APPLYING TO ANY MODES OF TRANSPORT:

EXW : Ex works
The seller has fulfilled his obligation to deliver when the goods are made available on his own premises (workshop, factory, warehouse, etc.). The buyer bears all the costs and risks involved in transporting the goods from the seller’s premises to the desired destination. This term represents the minimum obligation for the seller.
FCA : Free Carrier
The seller has fulfilled his obligation to deliver when he has delivered the goods, cleared for export, to the carrier nominated by the buyer at the named place. The buyer chooses the transport method and carrier. He pays for the main transport. Costs and risks are transferred at the moment the carrier takes charge of the goods.
CPT : Carriage Paid To
The seller chooses the transport method and pays the cost of carriage for the goods to the named destination. He also clears the goods for export. The risks transfer from the seller to the buyer at the point where the goods are delivered to the first carrier.
CIP : Carriage and Insurance Paid to
The seller is bound by the same obligations as for CPT, but must also procure insurance against the risk of loss of or damage to the goods during carriage. The seller clears the goods for export.
DAT : Delivered At Terminal
The seller has accomplished the delivery when the goods, once unloaded from the arriving means of transport – whether vessel, aircraft, truck, train or pipeline – are placed at the disposal of the buyer at the specified terminal at the port or destination specified in the contract of sale. DAT requires the seller to clear the goods for export.
DAP : Delivered At Place
It is similar to DAT, except that delivery can be accomplished at any place mutually agreed upon. DAT requires the seller to clear the goods for export.
DDP : Delivered Duty Paid / Rendu droits acquittés
Whilst the EXW term represents the minimum obligation for the seller, DDP represents the maximum. The seller is responsible for everything, including import customs clearance and the payment of all applicable duties and taxes. Costs and risks are transferred at the moment of delivery to the buyer. The costs and risks of unloading are borne by the buyer.

2/ RULES APPLYING TO SEA AND INLAND WATERWAY TRANSPORT:

FAS : Free Alongside Ship
The seller has fulfilled his obligation to deliver when the goods have been placed alongside the vessel 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. The FAS term requires the seller to clear the goods for export.
FOB : Free On Board
The seller has fulfilled his obligation to deliver when the goods are on board the vessel nominated by the buyer at the named port of shipment. The seller clears the goods for export. . 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
The seller must choose the ship and pay the costs and freight necessary to bring the goods to the named port of destination. The export formalities are the responsibility of the seller. Risks are transferred at the same point as for FOB.
CIF : Cost Insurance and Freight
The seller is bound by the same obligations as for CFR, but must also procure marine insurance against the risk of loss of or damage to the goods during the carriage. The export formalities are the responsibility of the seller. The risk of loss of or damage to the goods passes when the goods are on board the vessel.

There exists a crucial difference between departure sales and arrival sales according to the various Incoterms:
7 multimodal Incoterms and 4 maritime Incoterms

Departure sales (DS) with 8 Incoterms: during the main transport, the goods are carried at the buyer’s own risk.

  • Multimodal Incoterms – departure sale: EXW / FCA / CPT / CIP
  • Maritime Incoterms – departure sale: FAS / FOB / CFR / CIF

Arrival sales (AS) with 3 Incoterms: during the main transport, the goods are carried at the seller’s own risk.

  • Multimodal Incoterms – arrival sale: DAT / DAP / DDP

Incoterms® 2000 to 2010: the DEQ Incoterms rule has been replaced by DAT.
The DAF / DES / DDU Incoterms have all been replaced by DAP.