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INCOTERMS

Incoterms are the International Commercial Terms applied to transport of goods. Exporting or importing is a physical relocation of goods. This relocation involves fees and risks. Therefore, it is important to determine precisely who must deal with these risks and fees, to know exactly from which point these risks are incurred by each party, and from which point transport fees and other fees are dealt with by one party or the other.

 

Therefore, Incoterms are a stipulation of the sales contract that sets the following modalities:

  • the delivery
  • the allocation of costs needed for conveyance
  • the risk transfer
  • the shipper’s and the consignee’s responsibilities when it comes to documents

  • There are 11 Incoterms: 7 that can be used with all modes of transport and 4 that are specific to river and sea transport.

     

    EXW ( Ex Works)

    This title defines the seller’s minimal obligation. He has the responsibility to put goods uncleared by customs at the buyer’s disposal on his own premises or in another agreed upon location. The buyer must, for his part, deal with all the fees and risks from pick-up on the seller’s premises.

     

    FCA ( Free Carrier)

    The seller must clear goods with customs for export and put them at the disposal of the carrier selected by the buyer in a specific location chosen in the country de departure. If loading is done on his premises, the seller will be held accountable at this stage. The buyer will assume all fees and responsibilities from the pre-conveyance stage until goods get to the main mode of transport.

     

    FAS ( Free Alongside Ship) – specific to river and sea transport

    The seller must deliver goods on the departure port quay, clear goods with customs for export and assume responsibilities and fees until this point. The buyer then deals with the risks and costs for the remainder of the transport process.

     

    FOB ( Free On Board) – specific to river and sea transport

    This title applies the same modalities and requirements than the FAS does, by taking the moment when goods are carried from the ship’s rail to the loading port as a tipping point of responsibilities and costs.

     

    CFR ( Cost and Freight) – specific to river and sea transport

    The seller takes charge of goods delivery and the risks attached to it until they have passed the ship’s rail to the loading port. However, he is still liable when it comes to fees and documents until the conveyance of goods at the agreed upon port of destination. The buyer, for his part, deals with loss and damage risks, as well as any additional fee stemming from events that can happen after passing the ship’s rail.

     

    CIF ( Cost, Insurance, Freight)

    Modalities are identical to the CFR title. However, the seller must provide an insurance for the buyer that covers loss and damage risks during main transport.

     

    CPT ( Carriage Paid To)

    The seller must put goods at the carrier’s disposal and clear them wit customs. He must however assume transport fees for conveyance until goods are unloaded at the main mode of transport at the port of destination. The buyer is responsible for every risk and every other fee from this delivery.

     

    CIP ( Carriage and Insurance Paid to)

    Modalities are identical to the CPT title. However, the seller must provide an insurance for the buyer that covers loss and damage risks during main transport.

     

    DAT ( Delivered At Terminal)

    The seller must take charge of conveyance of goods up to main mode of transport unloading, as well as all the related fees and risks. The buyer assumes risks and fees from the post-conveyance stage, especially customs clearance fees for import.

     

    DAP ( Delivered At Place)

    The seller must take charge of conveyance of goods to put them at the buyer’s disposal in the importing country. The point at which risks and fees are transferred is then specific to the contract between main transport unloading and post-conveyance. The buyer assumes risks and fees from this point, especially customs clearance fees for import.

     

    DDP ( Delivered Duty Paid)

    This title defines the seller’s maximum obligation. He is responsible for delivering the imported goods cleared at customs that has not yet been unloaded at the agreed upon destination location. The seller must assume all fees and risks of conveyance.

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