Incoterms

Incoterms is a set of international rules which originated in 1936 in Paris in order to eliminate problems related to differences in commercial codes of individual countries.

The latest Incoterms version came into force on January 1, 2011. The individual rules in the modified version are described in greater detail, some rules have been abolished (DAF, DES, DEQ and DDU), two brand new rules (DAT and DAP) have been introduced.

The INCOTERMS rules are not a precept of law and are binding only if the parties of a sales contract refer them explicitly in the text of the contract.

The Incoterms clauses regulate primarily:

  • the method, place and time of handover of goods to the buyer
  • the method, place and time of transfer of costs and risks from the seller to the buyer
  • other obligations of the parties regarding transportation, accompanying documents, inspections, insurance, customs clearance etc.

The Incoterms rules state which of the contracting parties is obliged to arrange for transportation or insurance, when the seller shall hand goods over to the buyer and which party bears which costs. The Incoterms rules do not include any information regarding price or payment methods. They also do not deal with ownership transition of goods or with consequences of breach of contract.

Rules appropriate for any transportation method

EX WORKS

EXW (named place of delivery) Incoterms® 2010 = Ex Works
"Ex Works" means that the goods are considered to be delivered by the seller once the seller makes the goods available to the buyer at the seller’s premises or another place (e.g. factory, plant, warehouse etc.). The seller is not obliged to load the goods on the vehicle or to declare the goods for export, provided that such declaration is applicable. The EXW rule means that the seller has only minimal obligations; it should only be used after careful consideration.

FREE CARRIER

FCA (named place of delivery) Incoterms® 2010 = Free Carrier
"Free Carrier" means that the seller shall hand the goods over to the haulier or to another person nominated by the buyer at the premises of the seller or at another stated place. It is recommended that the parties specify the named place of delivery in detail as it is at this point that risks pass from the seller to the buyer. If applicable, the FCA rule requires that the seller shall clear the goods for export. However, the seller has no obligation regarding import customs clearance of the goods, they do not have to pay the import duty or perform any import-related customs formalities.

CARRIAGE PAID TO

CPT (named place of destination) Incoterms® 2010 = Carriage Paid To
"Carriage Paid To" means that the seller shall deliver the goods to a haulier or another person nominated by the buyer at an agreed location (if such location has been agreed on by the parties) and that the seller is obliged to arrange for transportation and to pay the cost related to the transportation of the goods to the named destination. This rule has two critical points, as risks and costs pass to the other party at two different places. If applicable, CPT requires that the seller shall clear the goods for export, but the seller has no obligation regarding import customs clearance of the goods, it does not have to pay the import duty or perform any import related customs formalities.

CARRIAGE AND INSURANCE PAID TO

CIP (named place of destination) Incoterms® 2010 = Carriage and Insurance Paid to
"Carriage an Insurance Paid To" means that the seller shall deliver the goods to a haulier or another person nominated by the buyer at an agreed location (if such location has been agreed on by the parties) and that the seller is obliged to arrange for transportation and to bear the costs related to the transportation of the goods to the named destination. The seller is also obliged to arrange for insurance that should cover the buyer's risk of the goods being lost or damaged during the transportation. This rule has two critical points, as risks and costs pass to the other party at two different places. If applicable, CIP requires that the seller shall clear the goods for export but the seller has no obligation regarding import customs clearance of the goods, it does not have to pay the import duty or perform any import-related customs formalities.

DELIVERED AT TERMINAL

DAT (named terminal at port or place of destination) Incoterms® 2010 = Delivered At Terminal
"Delivered At Terminal" means that the seller has met its obligation once the goods are unloaded from incoming carrier and made available to the buyer at the named terminal, named port or place of destination. The term "terminal" can describe any indoor or outdoor place, such as wharf, warehouse, container depot or road, railway or air terminal. The seller is obliged to bear all risks related to the delivery of the goods and to their unloading at the terminal, the named port or place of destination. If applicable, the DAT rule requires that the seller shall clear the goods for export.

DELIVERED AT PLACE

DAP (named place of destination) Incoterms® 2010 = Delivered At Place
"Delivered At Place" means that the seller has met its obligation once the goods are made available to the buyer at an incoming carrier ready to be unloaded at the place of destination. The seller shall bear all risks related to delivery of the goods to the named destination. If applicable, the DAP rule requires that the seller shall clear the goods for export. However, the seller has no obligation regarding customs clearance of imported goods, it is not obliged to make any import-related payments or to clear the goods through customs for import.

DELIVERED DUTY PAID

DDP (named place of destination) Incoterms® 2010 = Delivered Duty Paid
"Delivered Duty Paid" means that the seller has met its obligation once the goods are made available to the buyer at an incoming carrier ready to be unloaded at the place of destination, the goods must be cleared for import. The seller shall bear all costs and risks related to delivery of the goods to this place and it is also obliged to clear the goods through customs not only for export but also for import and to pay both export and import duty including clearing the goods through the respective customs. The DDP rule means maximum obligations for the seller.