INCOTERMS 2010
by the International Chamber of Commerce
International Business Transactions
SSL MSG IB 2013/2014
Monika Grottel PhD
INCOTERMS 2010
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What the ICC is?
INCOTERMS – what does it mean?
The history of INCOTERMS
How to use the INCOTERMS?
Main features of INCOTERMS rules
Rules for any mode(s) of transport
Rules for sea and inland waterway
transport
Customs, habits, rules?
Do we often identify
customs and habits with rules?
THE HABIT, THE CUSTOM
• something that you do often or regulary
• something that someone usually does in a
particular situations or a particular time
THE RULE
Is it law, regulation or
optional convention?
THE RULE
• the course of action that you should take in
order to do something – GUIDELINE
• the way of behaving or taking part in
something – CONVENTION
• is right
• acceptable
• most people agree with it
What the ICC is?
• The International Chamber of Commerce
(ICC)
• the largest, most representative business
organization in the world
• a world network of national committees keeps
the ICC International Secretariat in Paris
INCOTERMS
what does it mean?
• International Commercial Terms
• a series of pre-defined commercial terms
published by the International Chamber of
Commerce (ICC)
• widely used in international commercial
transactions
INCOTERMS
what does it mean?
• a set of three-letters trade terms reflecting
bussiness –to-bussines practice in contracts for
the sale of goods
• the Incoterms rules describe mainly the tasks,
costs and risks involved in the delivery of
goods from sellers to buyers
The history of INCOTERMS
• 1921 – the Incoterms rules began development
with the forming of the idea by the
International Chamber of Commerce
• 1936 – the first set of the Incoterms rules was
published
• the first set remained in use for almost 20
years
The history of INCOTERMS
• 1953 – the second publication
• additional amendments and expansions
followed in 1967, 1976, 1980, 1990 and 2000
• January 1, 2011 – the eighth and current
version of the Incoterms rules – Incoterms
2010 – was published
How to use the INCOTERMS?
• if we want the Incoterms 2010 to apply to our
contract of sale, we have to make it clear in the
contract, through such words: „CIF Hamburg,
Incoterms 2010”
• the chosen Incoterms rule can work only, if the
parties of contract name a place or port and specify
this place or port as precisley as possible:
„FCA 38 Cours Albert1er, Paris, France Incoterms
2010”
How to chose the appropriate
INCOTERMS rule?
The chosen Incoterms rule has to be appropriate:
• to the goods,
• to the means of their transport
• to whether the parties intend to put additional
obligations, such as obligation to organize carriage or
insurance, on the seller or on the buyer
How to use the INCOTERMS?
Remember that Incoterms rules dont give
you a complete contract of sale!
INCOTERMS rules do say!
• which party to the sales contract has the
obligation to make carriage or insurance
arrangements
• when the seller delivers the goods to the buyer
• which costs each party is responsible for
INCOTERMS rules say nothing
about!
• the price to be paid and the method of the
payment
• transfer of ownership of the goods
• consequences of a breach of contract
Main features of INCOTERMS rules
• the 11 Incoterms rules are presented in two
classes:
– rules for any modes of transport
– rules for sea and inland waterway transport
Main features of INCOTERMS rules
• Incoterms rules have been used in international
sale contracts, where goods pass across
national borders
• in various areas of the world have made border
formalities between different countries less
significant
Main features of INCOTERMS rules
• traders use Incoterms rules for domestic sale
contracts
• in the USA in domestic trade Incoterms are
used rather than the former Uniform
Commercial Code shipment and delivery terms
Main features of INCOTERMS rules
• Guidance Notes
• before each Incoterms rule you will find a
Guidance Note
• Guidance Notes explain the fundamentals of
each Incoterms rule: when it should be used,
when risk passes, how costs are allocated
between seller and buyer
Variants of INCOTERMS rules
• sometimes the parties want to alter an
Incoterms rule
• Incoterms 2010 rules don’t prohibit such
alteration
• there are dangers in so doing
• in order to avoid any unwelcome surprises, the
parties of contract would need to make the
indended effect of such alterations extremely
clear in their contract
Terms used in the INCOTERMS 2010
• the seller’s obligations and the buyer’s
obligations can be carried out personally by
the seller or by the buyer, or sometimes
through intermediaries such as carriers, freight
forwarders or other persons nominated by the
seller or the buyer for a specific purpose
Terms used in the INCOTERMS 2010
• CARRIER – the party with whom carriage is
contracted
• CUSTOMS FORMALITIES – may include
documentary, security, information or physical
inspection obligations
• DELIVERY – this concept is used to indicate
where the risk of loss of or damage to the
goods passes from the seller to the buyer
Terms used in the INCOTERMS 2010
• DELIVERY DOCUMENT – a document used
to prove that the delivery has occured: a
transport document or corresponding
electronic record
• PACKAGING:
– the packaging of the goods to comply with any
requirements under the contract of sale
– the packaging of the goods so that they are fit for
transportation
Rules
for any mode(s) of transport
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EXW
FCA
CPT
CIP
• DAT
• DAP
• DDP
EXW
Ex Works (named place of delivery)
• the seller delivers, when it places the goods at
the disposal of the buyer at the seller’s
premises or at another named place (works,
factory, warehouse..)
• represents the minimum obligation for the
seller
EXW
the seller’s obligations
• to provide the goods and the commercial invoice in
confirmity with the contract of sale
• to deliver the goods by placing them at the disposal of
the buyer at the agreed point, at the named place of
delivery, not loaded on any collecting vehicle, on the
agreed date
• no obligation to make a contract of carriage and a
contract of insurance
EXW
the seller’s obligations
• to bear the risks of loss of or damage to the goods
until they have been delivered to the agreed point
• to pay all costs relating to the goods until they have
been delivered
• at its own expense, to package the goods
• to provide the buyer , at the buyer’s request, risk and
expense, assistance in obtaining any export licence,
other official authorization necessary for the export of
the goods
EXW
the buyer’s obligations
• to pay the price of the goods as provided in the
contract of sale
• to take the delivery of the goods if it has been
complied with the contract of sale
• to pay all costs relating to the goods from the time
they have been delivered
EXW
the buyer’s obligations
• to obtain any export and import licences and other
official authorization and carry out all customs
formalities for the export of the goods
• to pay all duties, taxes and other charges, costs of
carrying out customs formalities payable upon export
• to bear all risks of loss of or damage to the goods
from the time they have been delivered
FCA
Free Carrier (named place of delivery)
• the seller hands over the goods, cleared for
export, into the disposal of the first carrier
(named by the buyer) at the named place
• the seller pays for carriage to the named point
of delivery
• risk passes when the goods are handed over to
the first carrier
FCA
the seller’s obligations
• to delivere the goods to the carrier or another person
nominated by the buyer at the agreed point and at the
agreed date
• to obtain, at its own risk and costs, any export licence
and other official authorization and carry out all
customs formalities necessary for the export of goods
FCA
the seller’s obligations
• no obligation to make contract of carriage
• no obligation to make a contract of insurance
• to bear all risks of loss of or damage to the goods
until they have been delivered to the first carrier
nominated by the buyer
• to pay all costs relating to the goods until they have
been delivered
FCA
the buyer’s obligations
• to pay the price of the goods
• to obtain, at its own risk and costs, any import licence
and other official authorization and carry out all
customs formalities necessary for the import of goods
and for their transport through any country
FCA
the buyer’s obligations
• to contract at its own expense for the carriage of the
goods from the named place of delivery
• to bear all risks of loss of or damage to the goods
from the time they have been delivered
• to pay all costs relating to the goods from the time
they have been delivered
CPT
Carriage Paid To (named place of
destination)
• the seller pays for carriage
• risk transfers to buyer upon handing goods
over to the first carrier and NOT when the
goods reach the place of destination
CPT
the seller’s obligations
• to contract, on its expense, for the carriage of the
goods from the agreed point of delivery to the named
place of destination
• no obligation to make a contract of insurance
• to deliver the goods by handing them over to the
contracted carrier
CPT
the seller’s obligations
• to bear all risks of loss of or damage to the goods
until they have been delivered to the first carrier
• to pay all costs relating to the goods until they have
been delivered
• to pay the freight, including costs of loading the
goods and any charges for unloading at the place of
destination, costs of customs formalities necessary for
export
CPT
the buyer’s obligations
• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the first
carrier
CIP
Carriage and Insurance Paid To (named
place of destination)
• seller pays for carriage and insurance to the
named destination point
• seller contracts for insurance cover against the
buyer’s risk of loss of or damage to the goods
during the carriage
CIP
• seller is required to obtain insurance only on
minimum cover
• risk passes when the goods are handed over to
the first carrier
CIP
the seller’s obligations
• to deliver the goods by handing them over to the first
carrier
• to contract for the carriage of the goods to the named
place of destination
• to bear all risks of loss of or damage to the goods
until they have been delivered to the first carrier
CIP
the seller’s obligations
• must obtain at its own expense cargo insurance
• must provide the buyer with the insurance policy or
any other evidence of insurance cover
CIP
the buyer’s obligations
• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the first
carrier
DAT
Delivered At Terminal (named terminal at
port or place of destination)
• seller delivers when the goods are unloaded
from the arriving means of transport, are
placed at the disposal of the buyer at a named
terminal of destination
DAT
• seller pays for carriage to the terminal, except
for costs related to import clearance
• seller assumes all risks up to the point that the
goods are unloaded at the terminal
DAT
the seller’s obligations
• to contract at its own expense for the carriage of the
goods to the named terminal at the agreed port or
place of destination
• must unload the goods from the arriving means of
transport and then deliver them by placing them at the
disposal of the buyer at the named terminal on the
agreed date
DAT
the seller’s obligations
• to bear all risks of loss of or damage to the goods
until they have been delivered to the agreed terminal
• to pay costs of customs formalities in export, all
duties, taxes, charges payable upon export and the
costs for their transport through any country
DAT
the buyer’s obligations
• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the agreed
terminal
• to pay costs of customs formalities in import, all
duties, taxes, charges payable upon import and the
costs for their transport through the country to the
own store
DAP
Delivered at Place (named place of
destination)
• seller delivers when the goods are on the arriving
means of transport, ready for unloading at a named
place of destination
• seller pays for carriage to the named place, except for
costs related to import clearance,
• seller assumes all risks prior to the point that the
goods are ready for unloading by the buyer
DAP
the seller’s obligations
• must deliver the goods by placing them at the
disposal of the buyer on the arriving means of
transport ready for unloading at the agreed point, at
the named place of destination on the agreed time
• must contract at its own expense for the carriage of
the goods to the named place of destination
DAP
the seller’s obligations
• to bear all risks of loss ofor damage to the goods until
they have been delivered to the named place
• to pay costs of customs formalities in export, all
duties, taxes, charges payable upon export and the
costs for their transport through any country
DAP
the buyer’s obligations
• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the place
• to pay all costs of unloading necessary to take
delivery of the goods from the arriving means of
transport at the named place of destination
DAP
the buyer’s obligations
• to pay costs of customs formalities in import, all
duties, taxes, charges payable upon import of the
goods
DDP
Delivered Duty Paid (named place of
destination)
• seller is responsible for delivering the goods to the
named place in the country of the buyer
• seller pays all costs in bringing the goods to the
destination including import duties and taxes
• DDP places maximum obligations on the seller and
minimum obligations on the buyer
DDP
the seller’s obligations
• must deliver the goods by placing them at the
disposal of the buyer on the arriving means of
transport ready for unloading at the agreed point, at
the named place of destination on the agreed time
DDP
the seller’s obligations
• to pay costs of customs formalities in export and
import, all duties, taxes, charges payable upon export
and import of the goods, and the costs for their
transport through any country
DDP
the buyer’s obligations
• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been delivered to the place
• to pay all costs of unloading necessary to take
delivery of the goods from the arriving means of
transport at the named place of destination
Rules
for sea and inland waterway transport
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FAS
FOB
CFR
CIF
FAS
Free Alongside Ship (named port of
shipment)
• seller must place the goods alongside the ship at the
named port and clear the goods for export
• suitable only for maritime transport but NOT for
multimodal sea transport in containers
• is typically used for heavy-lift or bulk cargo
FAS
the seller’s obligations
• to deliver the goods by placing them alongside the
ship nominated by the buyer at the loading point
• to bear all risks of loss of or damage to the goods
until they have been placed alonside the ship
• to pay costs of customs formalities in export, all
duties, taxes, charges payable upon export
FAS
the buyer’s obligations
• to pay the price of the goods
• must contract at its own expense for the carriage of
the goods from the named port of shipment
• to pay costs of customs formalities in import, all
duties, taxes, charges payable upon import of the
goods
FAS
the buyer’s obligations
• to bear all risks of loss of or damage to the goods
from the time they have been placed alongside the
ship nominated by the buyer at the loading point
FOB
Free on Board (named port of shipment)
• seller must load the goods on board the vessel
nominated by the buyer
• cost and risk are passes when the goods are
actually on board of the vessel (this rule is
new!) and the buyer bears all costs from that
moment
• the seller must clear the goods for export
FOB
the seller’s obligations
• to deliver the goods by placing them on board the
vessel nominated by the buyer at the loading point, at
the named port of shipment
• to bear all risks of loss of or damage to the goods
until they have been placed on board
• to pay costs of customs formalities in export, all
duties, taxes, charges payable upon export
FOB
the buyer’s obligations
• to pay the price of the goods
• must contract at its own expense for the carriage of
the goods from the named port of shipment
• to bear all risks of loss of or damage to the goods
from the time they have been placed on the board
FOB
the buyer’s obligations
• to pay costs of customs formalities in import, all
duties, taxes, charges payable upon import of the
goods
CFR
Coast and Freight (named port of
destination)
• seller must pay the costs and freight to bring
the goods to the port of destination
• risk is transferred to the buyer once the goods
are loaded on the vessel!!
• maritime transport only and insurance for the
goods is NOT included.
CFR
the seller’s obligations
• must deliver the goods by placing them on board the
vessel
• must contract for the carriage of the goods to the
named port of destination
• to bear all risks of loss of or damage to the goods
until they have been placed on board
CFR
the seller’s obligations
• to pay costs of customs formalities in export,
all duties, taxes, charges payable upon export
CFR
the buyer’s obligations
• to pay the price of the goods
• to bear all risks of loss of or damage to the goods
from the time they have been placed on the board
• to pay costs of customs formalities in import, all
duties, taxes, charges payable upon import of the
goods
CIF
Cost Insurance and Freight (named port of
destination)
• the same as CFR except that the seller must in
addition procure and pay for the insurance
• maritime transport only
How to use the INCOTERMS?
• EXW, FCA, DAT, DAP, DDP, FAS, FOB –
the named place is the place where delivery
takes place and where risk passes from the
seller to the buyer
• CPT, CIP, CFR, CIF – the named place differs
from the place of delivery. The named place is
the place of destination to which carriage is
paid
How to use the INCOTERMS?
„INCOTERMS”
is a registered trademark of the ICC,
registered in several countries
INCOTERMS 2010