INCOTERMS

 

 

The purpose of Incoterms ®

 

INCOTERMS® : a contraction of "INternational COmmercial TERMS", incoterms define the reciprocal obligations of seller and buyer under an international contract of sale and purchase.

    • Incoterms specify the respective responsibilities of the parties, but do not specify the point at which title is transferred.
    • Incoterms set out how the associated costs and risks are apportioned.

 

The customs representation of Incoterms ® "in France"

  

  • 4 alphanumeric characters :

  • 3 letters referring to the incoterm adopted in the contract.

  • 1 figure referring to the location of the transport contract:

      • 1 : location in France.
      • 2 : location in another European Union member state.
      • 3 : location outside the European Union

 

The two groups of Incoterms

 

 

The 2010 Incoterms ® take into account evolutions in international trade practices, the emergence of questions surrounding security (post-9/11 attacks) and the adoption of the SAFE Framework of Standards (concerning trade security and facilitation norms).

There are 11 Incoterms whish are divided into two distinct groups:

    • Rules associated with all modes of transport: EXW - FCA - CPT - CIP - DAT - DAP - DDP
    • Rules which apply to maritime transport and inland waterway transport : FAS - FOB - CFR - CIF

1. APPLICABLE TO ALL TRANSPORT MODES  

  • EXW : 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 : 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 : 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 : 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 : 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 : 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 : 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. APPLICABLE ONLY TO SEA OR INLAND WATERWAY TRANSPORT :

  

  • FAS : 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 :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 : 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 : 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.

 

 

An essential distinction (departure/arrival)


  

7 Multimodal Incoterms  and 4 maritime Incoterms


Sales on departure are covered by 8 incoterms : These place most of the risks of carriage on the buyer

  • Incoterms multimodaux – Sale on departure: EXW / FCA / CPT / CIP
  •  Incoterms maritimes – Sale on departure : FAS / FOB / CFR / CIF

 Sales on arrival are covered by 3 incoterms:  These place most of the risks of carriage on the seller.

  • Multipurpose incoterms  Sale on arrival: DAT / DAP / DDP

 

 

Incoterms® from 2000 to 2010

  • DEQ was replaced by DAT

  • DAF / DES / DDU were replaced by DAP


 

VIDEOS

 

They take into account evolutions in international trade practices, the emergence of questions surrounding security

(post-9/11 attacks) and the adoption of the SAFE Framework of Standards (concerning trade security and facilitation norms).

Discover an expert’s point of view on video

(Source : lemoci.com Michel Abgrall-Levy Consultant and trainer in international Transport and Logistics) : 


 

incoterms-videos

playWhy must the seller favour the DAP?

 

playWhich incoterm should be used, notably with a Credoc?

 

playWhy should the buyer prefer FCA and not FOB?

 

playDoes FCA cover risk to goods?

 

playWhy advise against CIP and CPT?