Incoterms 2010
The Incoterms® rules are issued by the privately organised International Chamber of Commerce (ICC) and are regularly updated to reflect current developments.
The Incoterms® clauses (International Commercial Terms) are a set of international rules defining specified commercial terms in foreign trade. The Incoterms® regulate the essential buyer and seller obligations, especially in cross-border transactions. In this way, contracting parties obtain an internationally uniform interpretation of certain obligations of buyers and sellers. This helps to avoid misunderstandings and legal disputes.
Business people from all countries have been using the Incoterms® rules for more than seven decades. First published by the ICC in Paris in 1936, the seventh revision of this set of rules was published in September 2010. They have been revised by experts and practitioners from the international and national ICC membership base. The new version will come into force on 1 January and will thus replace the Incoterms® 2000.
The ICC Incoterms® rules are now universally recognised at international level and endorsed by the United Nations Commission on International Trade Law (UNCITRAL). They are recognised by the respective national courts. However, they do not have the status of law, i.e. they must be explicitly included in the respective contract to ensure their validity. In the USA, too, the Incoterms® clauses are increasingly being used; here, people had relied on their own rules for many years.
“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
The parties are well advised to designate the point within the named place of delivery as precisely as possible, as the seller must bear the costs and risks up to this point. The buyer shall bear all costs and risks incurred, if any, in collecting the goods at the agreed place at the designated place of delivery.
EXW represents the minimum obligation for the seller. The clause should be used with caution because:
a. the seller has no obligation to the buyer to load the goods, even if in practice the seller would be better able to do so. If the seller loads the goods, it does so at the risk and expense of the buyer. In cases where the seller is in a better position to load the goods, it usually makes more sense to use the FCA clause, as it obliges the seller to load at its risk and expense.
b. a buyer purchasing from a seller on an EXW basis for export should be aware that the seller is under no obligation to the buyer to clear the goods for export. He is only obliged to support the buyer in such a way that the latter can carry out the export. Buyers are therefore well advised not to use EXW if it is not possible for them to carry out export clearance directly or indirectly.
c. the buyer has only a limited obligation to the seller to provide the seller with information regarding the export of the goods, although the seller may need this information, for example, for tax reasons or due to reporting obligations.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the EXW clause, Copyright ICC
“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
If the parties intend to deliver the goods at the seller’s premises, they are required to specify the seller’s address as the named place of delivery. If, on the other hand, the parties intend for the goods to be delivered at another place, they must specify this other place of delivery.
FCA requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities.
Source: Incoterms® 2000 Publication, Introduction text on the FCA clause, Copyright ICC
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
If the CPT, CIP, CFR or CIF clauses are used, the seller fulfils its delivery obligation as soon as it hands over the goods to the carrier and not when the goods reach their destination.
This clause contains two critical points, as the transfer of risk and cost take place at different locations. The parties are well advised to specify as precisely as possible in the contract both the place of delivery at which the risk passes to the buyer and the named place of destination to which the seller must complete the contract of carriage. If several carriers are used for the carriage to the agreed place of destination and the parties do not agree on a specific place of delivery, the risk shall always pass when the goods have been handed over to the first carrier. In such cases, the choice of the place where delivery is to be made is entirely at the discretion of the seller, while the buyer has no influence over it. If the parties wish a later transfer of risk (for example in a sea port or airport), then they must specify this in their contract of sale.
The parties are also well advised to indicate the place as precisely as possible within the agreed place of destination, as the costs up to this place are to be borne by the seller. The seller is advised to procure contracts of carriage exactly in accordance with this choice. If the seller incurs costs in connection with unloading at the named place of destination in accordance with its contract of carriage, then the seller is not entitled to recover these costs from the buyer, unless otherwise agreed between the parties.
CPT requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the CPT clause, Copyright ICC
“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
If the CPT, CIP, CFR or CIF clauses are used, the seller fulfils its delivery obligation as soon as it hands over the goods to the carrier and not when the goods reach their destination.
This clause contains two critical points, as the transfer of risk and cost take place at different locations. The parties are well advised to specify as precisely as possible in the contract both the place of delivery at which the risk passes to the buyer and the named place of destination to which the seller must complete the contract of carriage. If several carriers are used for the carriage to the agreed place of destination and the parties do not agree on a specific place of delivery, the risk shall always pass when the goods have been handed over to the first carrier. In such cases, the choice of the place where delivery is to be made is entirely at the discretion of the seller, while the buyer has no influence over it. If the parties wish a later transfer of risk (for example in a sea port or airport), then they must specify this in their contract of sale.
The parties are also well advised to indicate the place as precisely as possible within the agreed place of destination, as the costs up to this place are to be borne by the seller. The seller is advised to procure contracts of carriage exactly in accordance with this choice. If the seller incurs costs in connection with unloading at the named place of destination in accordance with its contract of carriage, then the seller is not entitled to recover these costs from the buyer, unless otherwise agreed between the parties.
CIP requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the CIP clause, Copyright ICC
“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
The parties are well advised to designate the terminal and, if possible, a specific point within the terminal at the named port or place of destination as precisely as possible, as the risk up to this point is borne by the seller. The seller is advised to procure a contract of carriage exactly in accordance with this choice.
However, if the parties also intend for the seller to bear the risks and costs associated with the handling and onward transport of the goods from the terminal to another location, then the DAP or DDP clauses should be used.
DAT requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the DAT clause, Copyright ICC
“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
The parties are well advised to designate the place within the named place of destination as precisely as possible, as the risks up to this place are to be borne by the seller. The seller is advised to procure contracts of carriage exactly in accordance with this choice. If the seller incurs costs in connection with unloading at the place of destination in accordance with its contract of carriage, then the seller is not entitled to recover these costs from the buyer, unless otherwise agreed between the parties.
DAP requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities. If the parties wish the seller to clear the goods for import, pay import duties and complete import customs formalities, the DDP clause should be used.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the DAP clause, Copyright ICC
“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
DDP represents the maximum obligation for the seller.
The parties are well advised to designate the location within the named place of destination as precisely as possible, since the costs and risks up to this location are to be borne by the seller. The seller is advised to procure contracts of carriage exactly in accordance with this choice. If the seller incurs costs in connection with unloading at the place of destination in accordance with its contract of carriage, then the seller is not entitled to recover these costs from the buyer, unless otherwise agreed between the parties.
Parties are well advised not to use DDP if the seller is unable to directly or indirectly handle import clearance.
If the parties wish the buyer to bear all risks and costs of import clearance, the DAP clause should be used.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the DDP clause, Copyright ICC
“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g. on a quay or a barge) 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, and the buyer bears all costs from that moment onwards.
The FAS clause obliges the seller to clear the goods for export.
THIS IS THE OPPOSITE OF PREVIOUS VERSIONS OF INCOTERMS, WHICH REQUIRED THE BUYER TO TAKE CARE OF EXPORT CLEARANCE.
However, if the contracting parties wish the buyer to clear the goods for export, this should be made clear by an explicit additional text to this effect in the purchase contract.
This clause can only be used for sea or inland waterway transport.
Source: Incoterms® 2000 Publication, Introduction text on the FAS clause, Copyright ICC
“Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
If the CPT, CIP, CFR or CIF clauses are used, the seller fulfils its delivery obligation when it hands over the goods to the carrier in the manner determined in accordance with the chosen clause and not when the goods reach their destination.
This clause contains two critical points, as the transfer of risk and cost take place at different locations. While the contract always specifies a port of destination, it does not have to specify the port of shipment. However, this is where the risk is transferred to the buyer. If the port of shipment is of particular importance to the buyer, the parties are well advised to designate it as precisely as possible in the contract.
The parties are well advised to designate the place in the named port of destination as precisely as possible, as the costs up to this place are to be borne by the seller. The seller is advised to procure contracts of carriage exactly in accordance with this choice. If the seller incurs costs in connection with unloading at the specified place at the named port in accordance with its contract of carriage, then the seller is not entitled to recover these costs from the buyer, unless otherwise agreed between the parties.
The seller is required to either deliver the goods on board the ship or arrange for goods to already be so delivered for shipment to the place of destination. The seller is required to either deliver the goods on board the vessel or procure goods already so delivered for shipment to the place of destination. The meaning of “to procure” here refers to several sales connected in series in a sales chain (“string sales”), which occur in particular in commodity trading.
CFR may not be appropriate if the goods are handed over to the carrier before they are on the ship, e.g. containerised goods which are usually delivered at the terminal. In such cases, the CPT clause should be used.
CFR requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities.
Source: Incoterms® 2010 Publication, Introduction text on the CFR clause, Copyright ICC
“Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
If the CPT, CIP, CFR or CIF clauses are used, the seller fulfils its delivery obligation when it hands over the goods to the carrier in the manner determined in accordance with the chosen clause and not when the goods reach their destination.
This clause contains two critical points, as the transfer of risk and cost take place at different locations. While the contract always specifies the port of destination, it does not have to specify the port of shipment. However, this is where the risk is transferred to the buyer. If the port of shipment is of particular importance to the buyer, the parties are well advised to designate it as precisely as possible in the contract.
The parties are well advised to designate the place in the named port of destination as precisely as possible, as the costs up to this place are to be borne by the seller. The seller is advised to procure contracts of carriage exactly in accordance with this choice. If the seller incurs costs in connection with unloading at the specified place at the named port in accordance with its contract of carriage, then the seller is not entitled to recover these costs from the buyer, unless otherwise agreed between the parties.
The seller is required to either deliver the goods on board the ship or arrange for goods to already be so delivered for shipment to the place of destination. The seller is required to either deliver the goods on board the vessel or procure goods already so delivered for shipment to the place of destination. The meaning of “to procure” here refers to several sales connected in series in a sales chain (“string sales”), which occur in particular in commodity trading. CIF may not be appropriate if the goods are handed over to the carrier before they are on the ship, e.g. containerised goods which are usually delivered at the terminal. In such cases, the CIP clause should be used.
CIF requires the seller to clear the goods for export, if applicable. However, the seller has no obligation to clear the goods for import, pay import duties or complete import customs formalities.
Source: Incoterms® 2010 Publication, English-German, Introduction text on the CIF clause, Copyright ICC