Incoterms : Are a set of three-letter trade terms which reflect business-to-business practice in contracts for the sale of goods. Are rules NOT law. Describe obligations for clearance for export and import, packing of goods, arranging and paying for carriage and insurance, delivering and taking delivery of the goods, packaging, loading and unloading of the goods. Do not deal with transfer of ownership (title), breaches of contract, exemptions from liability etc. Should be incorporated into the contract, and it is important to specify the place or port as precisely as possible. Commonly used terms for vegetable export: Air freight: FCA Free Carrier CPT Carriage Paid to CIP Carriage and Insurance Paid Sea freight: FCA Free Carrier CPT Carriage Paid to CIP Carriage and Insurance Paid What you might see: Incoterms have been in use since 1936, with the latest updates and amendments in 2010. The latest edition has reduced the number of terms from 13 to 11 with the below replacements. DAF DES DEQ DDU Replaced with DAT & DAP FOB, CFR and CIF are common, yet sometimes inappropriately used, as they pertain to historical use in sea and inland waterway transport. If you see these terms used it is advised you replace them with the modern term; FOB with FCA, CFR with CPT and CIF with CIP. FOB FCA CFR CPT CIF CIP Historical Modern It is important you understand your responsibilities under these terms and use the correct Incoterm for your contract.
EXW* FCA CPT CIP DAT DAT DDP Packaging Export clearance & taxes Loading on truck Delivery to port Unloading at domestic port Loading at domestic port Carriage to port of import Unloading at Import clearance port of import & taxes Loading at port of import Goods Risk Cost Goods Risk buyer/seller buyer/seller Cost buyer/seller buyer/seller Goods Risk buyer/seller buyer/seller Carriage to Cost buyer/seller buyer/seller buyer/seller Goods Risk buyer/seller buyer/seller Cost buyer/seller buyer/seller buyer/seller Goods Risk Cost Goods Risk Cost Goods Risk Cost * Not suitable for vegetable exports, as the clearance for export for restricted items such as vegetables cannot be done by the buyer s responsibility s responsibility Responsibility depends on the named place of delivery
EXW Ex Works (named place) Not recommended. This term represents the least responsibility for the seller. The seller is only responsible for packing and making available the goods from the agreed named place. The buyer is responsible for all costs and risk after picking up the goods from the seller, this includes the clearance for export. Since vegetables are a restricted item this term cannot be used for the export of vegetables. FCA Free Carrier (named place) The seller must clear goods for export (and pay any export taxes or fees), the sellers obligations are fulfilled once they have delivered the goods to the first independent carrier. The buyer is responsible for the goods (cost and risk) once goods are received by the first independent carrier, including transport, insurance, and clearing for import. Make goods available for pick up from named place Pick up and load goods from named place Arrange and pay for all freight Deliver goods to the first independent carrier named by the buyer at the named place or point Nominate the carrier Contract for the carriage and pay the freight Cover freight insurance for Risk transfers: When goods are made available at named place Cost transfers: When goods are made available at named place
CPT Carriage paid to (named place of ) The seller must clear the goods for export and pay any associated taxes or fees. The sellers risk responsibility ends once the goods are delivered to the first independent carrier, however they must pay for the goods to be delivered to the name place of. The buyer accepts risk of the goods once they are delivered to the first independent carrier, and are responsible for insurance, any transport or handling beyond the name place of, and clearing the goods for import. CIP Carriage and Insurance paid to (named place of ) The seller must clear the goods for export and pay any associated taxes or fees. The sellers risk responsibility ends once the goods are delivered to the first independent carrier, however they must pay for the goods to be delivered to the name place of AND the insurance against the buyers risk during transport to the named place. The buyer accepts risk of the goods once they are delivered to the first independent carrier, and are responsible for any transport or handling beyond the name place of, and clearing the goods for import. named Deliver goods to the first carrier beyond the name place of when delivered to the first carrier named Deliver goods to the first carrier Obtain and pay for cargo insurance beyond the name place of when delivered to the first carrier Delivery of goods to the name place of
DAT Delivered at terminal (named terminal at port or place of ) The seller must cover all costs and risk until the goods arrive at the terminal. This includes clearing goods for export and all transport and insurance until the goods are unloaded at the named terminal ready for receival by the buyer. The buyer must arrange and pay for goods to be cleared for import, accept the goods from the named terminal, arrange and pay for any further transport. DAP Delivered at place (named place of ) The seller must cover all costs and risk until the goods arrive at the place. This seller must clear the goods for export and cover all transport and insurance to the place, this includes domestic transport in the country if the named place is outside of the port of arrival. The buyer must organise and pay for goods to be cleared for import and accept responsibility of the goods at the named place of. named terminal Unload goods from the arriving means of transport at terminal beyond the named terminal when unloaded at terminal named Obtain and pay for cargo insurance beyond the name place of when delivered to the first carrier Destination terminal once goods are unloaded Destination place once goods are unloaded Destination terminal once goods are unloaded Destination place once goods are unloaded
DDP Delivered duty paid (named place of ) This represents the highest level of cost and responsibility for the seller. The seller must arrange and pay for both export and import clearance, all freight and handling until the goods are at the disposal of the buyer at the named place of. The buyer is only responsible for receiving the goods at the named place of. named place of when delivered to named place of TIPS Incorporate Incoterms into sale contracts Recognise the valid Incoterms and what they mean Understand that Incoterms cover transfer of risk and costs between seller an buyer Be very specific with the place or port eg: FCA Qantas Cargo Terminal, Perth International Airport Delivery of goods to named place of Delivery of goods to named place of