The World Trade Press Illustrated Guide to INCOTERMS 20101 A comprehensive guide to the 11 INCOTERMS 2010 Professional Industry Report
2 World Trade Press World Trade Press Illustrated Guide to Incoterms 2010* 800 Lindberg Lane, Suite 190 Petaluma, California 94952 USA Tel: +1 (707) 778-1124 x 3 Fax: +1 (707) 778-1329 www.worldtradepress.com sales@worldtradepress.com Copyright Notices World Trade Press Illustrated Guide to Incoterms 2010 Copyright 2000-2010 by World Trade Press. All Rights Reserved. Reproduction or translation of any part of this work without the express written permission of the copyright holder is unlawful. Requests for permissions and/or translation or electronic rights should be addressed to Publisher at the above address. Additional Copyright and Trademark Notices Incoterms is a registered trademark of the International Chamber of Commerce (ICC), Paris, France and is used here for informational purposes only. The text of Incoterms 2010 is 2010 by ICC Publishing S.A. The full text of Incoterms 2010 is contained in ICC publication No. 715, ISBN 978-92-8420080-1. In the USA contact ICC Publishing, Inc., 1212 Avenue of the Americas, 21st Floor, New York, New York 10036, Tel: +[1] (212) 703-5066, www.iccbooksusa.net. ICC HQ are ICC Publishing S.A., 38 Cours Albert, 1er, 75008 Paris, France, Tel: +[33] (1) 49 53 28 28, www.iccbooks.com. *This World Trade Press Illustrated Guide to Incoterms 2010 is independently authored and published and is not sponsored or endorsed by, or affiliated with, the ICC. CONTENTS Introduction to Incoterms 2010................... 3 Incoterm Groups............................... 4 Incoterm Classes............................... 4 Important Definitions........................... 4 Notes on Incoterms 2010........................ 5 E TERMS Departure Terms EXW Ex Works (... named place of delivery)..................... 6 F TERMS Main Carriage Unpaid Terms FCA Free Carrier (... named place of delivery)..................... 8 FAS Free Alongside Ship (... named port of shipment).................... 10 FOB Free (... named port of shipment).................... 12 C TERMS Main Carriage Paid Terms CFR Cost and Freight (... named port of destination).................. 14 CIF Cost, Insurance and Freight (... named port of destination)................... 16 CPT Carriage Paid To (... named place of destination).................. 18 CIP Carriage and Insurance Paid To (... named place of destination).................. 20 D TERMS Arrival Terms DAT Delivered At Terminal (... named terminal at port or place of destination).. 22 DAP Delivered At Place (... named place of destination).................. 24 DDP Delivered Duty Paid (... named place of destination).................. 26 Copyright 2004-2010 by World Trade Press. All Rights Reserved. www.worldtradepress.com
World Trade Press Illustrated Guide to Incoterms 2010 3 The World Trade Press Illustrated Guide to Incoterms 2010 1 While the terms of sale in international business sound similar to those used in domestic contracts, they often have different meanings. Confusion over these terms can result in diminished profits or lost sales. Incoterms By the 1920s, international traders had developed a set of trade terms to describe their rights and obligations with regard to the sale and transport of goods. These terms consisted of short abbreviations for lengthy contract provisions. Unfortunately, there was no uniform interpretation of these terms. To improve this aspect of international trade, the International Chamber of Commerce (ICC) in Paris developed Incoterms (INternational COmmercial TERMS), a set of uniform rules for the interpretation of terms defining the costs, risks, and obligations of buyers and sellers in international transactions. First published in 1936, these rules have been periodically revised to account for changing modes of transport, document delivery, and security. Incoterms 2010 In late 2010 the ICC issued its latest revision, Incoterms 2010. Please note: 1. The new rules enter into force on January 1, 2011. 2. Contracts are interpreted by the version of Incoterms referred to in the contract. Therefore, only a contract that refers to Incoterms 2010 will be governed by rules from that version. Incoterms 2010 vs. Incoterms 2000 Incoterms 2010 rules incorporate a number of changes from Incoterms 2000. Here are some key items: 1. Incoterms 2000 had 13 rules whereas Incoterms 2010 has 11 rules. For Incoterms 2010, four of the D rules: DAF, DES, DEQ, and DDU were dropped, and two new D rules were created: DAT and DAP 2. In Incoterms 2000, a number of rules, such as FOB, established that the seller delivers the goods when they pass the ship s rail. In Incoterms 2010 these rules require that the goods be delivered on board the vessel. 3. Incoterms 2000 established four groups of rules: E: Departure, F: Main Carriage Unpaid, C: Main Carriage Paid, and D: Arrival. Incoterms 2010, however, establishes two classes: 1) rules applicable for all modes of transport, and 2) rules applicable only for sea and inland waterway transport. See the next page for details. 4. Incoterms 2010 gives electronic communications the same status as paper communication so long as the parties agree. 5. Incoterms 2010 rules obligate both seller and buyer to give assistance in securing security clearances. 6. Incoterms 2010 now acknowledges the existence of string sales, where goods in transit may be sold multiple times before arrival, by giving the seller the option to procure goods shipped. Use of Incoterms Incoterms are not laws enacted by governments. Rather, they are rules agreed to by parties to a contract. Also, Incoterms are not implied into contracts for the sale of goods. If you desire to use Incoterms, you must specifically include them in your contract. Your contract should expressly refer to a specific version of Incoterms. For example: CIF Oakland, California, USA, Incoterms 2010 Incoterms Do... Incoterms 2010 may be included in a sales contract if the parties desire the following: 1. To complete a sale of goods. 2. To indicate each contracting party s costs, risks, and obligations concerning these aspects of delivery: a. When is the delivery completed? b. How does a party ensure that the other party has met the standard of performance? c. Which party must obtain requisite licenses and comply with government-imposed import/export formalities? d. What are the modes and terms of carriage? e. What are the delivery terms? f. When is the risk of loss transferred from the seller to the buyer? g. How will transport and other costs be divided between the parties? h. What notices are the parties required to give to each other regarding the transport and transfer of the goods? 3. To establish basic terms of transport and delivery in a short format. Incoterms Do Not... Incoterms 2010 are not sufficient on their own to express the full intent of the parties. They do not: 1. Apply to con tracts for services. 2. Define contractual rights and obligations other than for delivery. 3. Specify details of the transfer, transport, and delivery of the goods. 4. Determine how title to the goods will be transferred. 5. Protect a party from risk of loss. 6. Define the remedies for breach of contract. Illustrated Guide to Incoterms 2010 The World Trade Press Illustrated Guide to Incoterms 2010 was designed to give a graphic representation of the buyer s and seller s risks and costs under each of the 11 Incoterms. The material on each facing page gives a summary of seller and buyer responsibilities. 1. Incoterms is a registered trademark of the International Chamber of Commerce (ICC), and is used here for informational purposes only. This illustrated guide is independently authored and published and is not sponsored or endorsed by, or affiliated with the ICC. The full text of Incoterms 2010 (117 pages) is contained in ICC publication No. 715, ISBN 978-92-8420080-1. Contact ICC Publishing, Inc., 1212 Avenue of the Americas, 21st Floor, New York, NY 10036 USA, Tel: +[1] (212) 703-5066, www.iccbooksusa.net, or ICC Publishing S.A., 38 Cours Albert, 1 er, 75008 Paris, France, Tel: +[33] (1) 49 53 28 28, www.iccbooks.com. The World Trade Press Illustrated Guide to Incoterms 2010 is 2000-2010 by World Trade Press. Copyright 2004-2010 by World Trade Press. All Rights Reserved. www.worldtradepress.com
4 World Trade Press Illustrated Guide to Incoterms 2010 Incoterms Groups In the past, Incoterms were arranged into four groups: E (Departure), F (Main carriage unpaid), C (Main carriage paid), and D (Arrival). Traders, however, were mistakenly picking ocean transport terms (like FOB) for shipments by air. Incoterms 2010 classifies terms by mode of transport, but the four original groupings remain valid: Incoterms 2010 Groups Incoterms Classes As mentioned, picking an inappropriate term can present problems. The pages describing individual Incoterms will assist you in making the right choice, but for the moment, you should know that some terms are applicable for all modes of transport, while others are applicable only for sea and inland waterway transport. Incoterms 2010 Classes Group E Departure Group F Main Carriage Unpaid EXW FCA FAS EX Works (...named place of delivery) Free CArrier (...named place of delivery) Free Alongside Ship (...named port of shipment) All modes of transport including multimodal EXW FCA CPT EX Works (...named place of delivery) Free CArrier (...named place of delivery) Carriage Paid To (...named place of destination) FOB Free (...named port of shipment) CIP Carriage and Insurance Paid To (...named place of destination) Group C Main Carriage Paid Group D Arrival CFR CIF CPT CIP DAT Cost and FReight (...named port of destination) Cost Insurance and Freight (...named port of destination) Carriage Paid To (...named place of destination) Carriage and Insurance Paid To (...named place of destination) Delivered At Terminal (...named terminal at port or place of destination) Sea and inland waterway transport only DAT DAP DDP FAS FOB Delivered at Terminal (...named terminal at port or place of destination) Delivered At Place (...named place of destination) Delivered Duty Paid (...named place of destination) Free Alongside Ship (...named port of shipment) Free (...named port of shipment) DAP Delivered At Place (...named place of destination) CFR Cost and FReight (...named port of destination) DDP Delivered Duty Paid (...named place of destination) CIF Cost Insurance and Freight (...named port of destination) delivery In common usage, delivery is the act of delivering something, while the place of delivery is often the buyer s place of business. In Incoterms 2010, however, delivery is the point where the risk of loss or damage passes from the seller to the buyer. This is often the named port or place but not necessarily the buyer s place of business. pre-carriage The initial transport of goods from the seller s premises to the main port or place where main carriage begins. Usually by truck, rail, or inland waterway. main carriage The primary transport of goods, generally for the longest part of the journey and generally from one country to another. Usually by sea vessel or by airplane, but also by truck, rail, or inland waterway. onward carriage Transport from the port, terminal, or place of arrival in the country of destination to the buyer s premises. Usually by truck, rail, or inland waterway. Definitions multimodal Use of more than one mode of transport (road, rail, sea, air) to transport goods (or people) from origin to final destination. carrier In common usage, a carrier is a firm that transports goods or passengers for hire, rather than simply arranging for such transport. In Incoterms, however, the carrier can be any person or firm who by contract undertakes to perform or procure such services. The buyer nominates the carrier and the seller need only accept the nomination for the term to work. string sale The sale, and successive resale, of a single shipment of goods while en route from place of shipment to final destination. This is common in the commodity trade, where oil, grain, and ore shipments are sold and resold before the vessel arrives in port. A number of Incoterms now take this practice into account by giving the seller the option to procure goods already so delivered. Copyright 2004-2010 by World Trade Press. All Rights Reserved. www.worldtradepress.com
World Trade Press Illustrated Guide to Incoterms 2010 5 1. Underlying Contract Incoterms were designed to be used within the context of a written contract for the sale of goods (not services). Incoterms, therefore, refer to the contract of sale, rather than the contract of carriage of the goods. Buyers and sellers should specify that their contract be governed by Incoterms 2010. 2. Two Components Each Incoterm has two components: the term name, and a named place, port, or terminal. For example: EXW, Seller s warehouse located at. Or, DDP, Buyer s warehouse located at. An Incoterm is incomplete without both components. 3. Precise Point of Delivery In addition to a specific named port, place, or terminal, it may be necessary to name a precise point of delivery. For example, the original terms of sale may state CFR Port of Rotterdam. The Port of Rotterdam, however, is huge. The buyer who prefers a particular point within the port should name the specific point in the sales contract and in the trade term. This may be an important issue in situations where the buyer is responsible for unloading, storage, and other charges once the goods have been made available at the named place. In some cases it may not be possible for the buyer to name the precise point of delivery at the time of contract. However, if the buyer does not do so in a timely manner, the seller may make delivery within a range of places that is within the terms of the contract, but inconvenient for the buyer. 4. EXW and FCA The buyer who purchases on Ex Works (EXW) or Free Carrier (FCA) terms will need to arrange for the contract of carriage. Also, since the seller will not receive a bill of lading, using a letter of credit requiring a bill of lading will not be possible. 5. EDI: Electronic Data Interchange It is increasingly common for sellers to prepare and transmit documents electronically. Incoterms provide for EDI and electronic documents so long as buyers and sellers agree on their use in the sales contract. 6. Insurable Interest In most cases, neither the buyer nor the seller is obligated to provide insurance. In fact, only two Incoterms mention insurance: CIP and CIF. In both cases the seller is obligated to secure insurance for the buyer, but only for minimum coverage. The seller and buyer, however, may have insurable interest in the goods, and prudence may dictate purchase of insurance coverage or additional insurance coverage. 7. Customs of the Port or Trade Incoterms are an attempt to standardize trade terms for all nations and all trades. However, different ports and different trades have their own customs and practices. It is best if such practices are specified in the sales contract. 8. Export/Import Customs Clearance It is usually desirable that export customs formalities be handled by the seller and import customs formalities be handled by the buyer. However, some trade terms (such as EXW) require that the buyer handle export formalities, while others, such as DDP, require that the seller handle import formalities. In each case, the buyer and seller will Notes on Incoterms have to assume risks and costs associated with export and import formalities and duties. In some cases, foreign exporters may not be able to obtain import licenses in the country of import. Parties should research the pertinent local trade laws before using such terms. 9. Variants of Incoterms (Added Wording) Incoterms give no guidance regarding the addition of words to individual terms. In practice, the seller and buyer may agree to added wording. For example, if the seller agrees to DDP terms, agreeing to pay for customs formalities and import duties but not for VAT (value added tax), the term DDP VAT Unpaid may be used. Adding wording to an Incoterm, however, may present a risk if the wording contradicts the fundamental meaning of the Incoterm itself. For example, if the seller agrees to CIF, seller responsible for unloading the aircraft, there is an inherent problem, because CIF can only be used for transport by sea or inland waterway. Use additional wording only if you are certain that it is consistent with the meaning of the term used. 10. Packing It is the responsibility of the seller to provide packaging unless the goods shipped are conventionally shipped unpackaged (commodities such as oil or grain). In most situations it is best if the buyer and seller agree in the sales contract on the type and extent of packing required. However, it may not be possible to know beforehand the type or duration of transport. As a result, it is the responsibility of the seller to provide for safe and appropriate packaging, but only to the extent that the buyer has made the circumstances of the transport known beforehand. If the seller is responsible for packing goods in an ocean or air freight container, their responsibility includes stuffing the container properly to withstand shipment. 11. Inspection There are several issues related to inspections: a) the seller is responsible for costs of inspection to make certain the quantity and quality of the shipment are in conformity with the sales contract; b) pre-shipment inspections as required by the export authority are the responsibility of the party responsible for export formalities; c) import inspections as required by the import authority are the responsibility of the party responsible for import formalities; and d) third-party inspections for independent verification of quality and quantity (if required) are generally the responsibility of the buyer. The buyer may require such an inspection and inspection document as a condition of payment. 12. Passing of Risks and Costs In all E, F, and D terms, both risks and costs pass from seller to buyer at the named place, port, or terminal. In all C terms, however, the transfer of risks occurs at a different point than the transfer of costs. Refer to each term for details. 13. Carrier In common usage, a carrier is a firm that transports goods or passengers for hire, rather than simply arranging for such transport. In Incoterms, however, carrier is the party with whom carriage is contracted and can be any person or firm. In practice, the buyer nominates the carrier and the seller need only accept the nomination. It is recommended that the carrier be named in the sales contract. Copyright 2004-2010 by World Trade Press. All Rights Reserved. www.worldtradepress.com
EXW Ex Works (... named place of delivery) Seller/ Exporter Named Place CARRIAGE RISKS COSTS Export and Fees Pre-Carriage to Named Place, Not Delivery at Named Place/Port, EXW, Ex Works (... named place of delivery) In Ex Works, the seller/exporter/manufacturer merely makes the goods available to the buyer at the seller s named place of delivery, which is commonly, but not necessarily, the seller s place of business. With EXW, the seller has no responsibility to load the goods onto a truck or other transport vehicle or to clear the goods for export. This trade term places the greatest responsibility on the buyer and minimum obligations on the seller. The parties to the transaction, however, may stipulate that the seller be responsible for loading the goods onto a transport vehicle at the risk and cost of the buyer. Such a stipulation is a variant and must be made within the contract of sale. When using the FCA term, it is advisable to clearly specify in Loading at Named Place/Port of Shipment Loaded Vessel Transport by Air, Rail, Road, Water, or Multimodal Vessel, Not Discharging (unloading) at Named Place/Port of Destination the contracts of sale and carriage the precise point of delivery. The EXW term is generally not recommended for international trade transactions, as loading the goods at the seller s named place and handling export formalities usually places too much of a burden upon the buyer. If the buyer cannot handle loading the goods or export formalities, the EXW term should not be used. In such a case, FCA is recommended. The EXW term is often used when making an initial quotation for the sale of goods. It represents the cost of the goods without any other costs included. The EXW term is commonly used in courier shipments when the courier picks up the shipment from client s premises and loads courier s own truck. Delivery at Named Place/ Terminal SELLER Onward Carriage to Not Payment terms for Ex Works transactions are generally cash in advance and open account. Examples EXW, ABC Factory, Full Address, Paris, France EXW, XYZ Printing Plant, Full Address, Singapore Modes of Transport Air Yes Rail Yes Road Yes Sea Yes Inland Waterway Yes Multimodal Yes BUYER Import and Duties Buyer/ Importer 6 World Trade Press Illustrated Guide to Incoterms 2010
EXW Ex Works (... named place of delivery) Incoterm Category EXW specifies that the seller/exporter/manufacturer merely makes the goods available to the buyer, not cleared for export, at the seller s named place of delivery, which is commonly, but not necessarily, the seller s place of business. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. Provide the buyer, at the buyer s risk and cost, assistance in securing any license, documents, authorizations, and security clearance required for the export of the goods. 3. Carriage and Insurance The seller has no obligation to provide for carriage of goods or for insurance. Provide the buyer, at the buyer s request and cost (if any), information required to obtain insurance. 4. Delivery Make the goods available to the buyer at the named place and point of delivery at the time stipulated in the sales contract. If the buyer has not stipulated a specific point at the named place of delivery, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been made available to the buyer at the named place of delivery, at the agreedupon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been made available to the buyer at the named place of delivery. 7. Notice to the Buyer Provide notice that enables the buyer to take delivery of the goods. 8. Delivery and Transport Document(s) The seller has no obligation to provide the buyer with a delivery document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, with assistance in securing information and documents, including security information, the buyer requires for export, transport, and import of the goods to the final destination. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. Obtain any export and import licenses or authorizations, and handle all export and import customs formalities. 3. Carriage and Insurance Buyer has no obligation to seller for carriage or insurance. Provide for carriage of the goods from the named place of delivery to the buyer s destination. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered (made available) at the named place of delivery as provided in the sales contract. Assume all risk of loss or damage if the goods are not picked up at the agreed-upon time and place. 6. Costs Pay all costs from the time the goods have been delivered (made available) at the named place of delivery. Pay all costs related to carriage of the goods from the named place of delivery to the buyer s final destination. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to export and import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller If, according to the sales contract, the buyer is entitled to specify a time for taking delivery or the point of taking delivery at the named place of delivery, to give seller sufficient notice. 8. Proof of Delivery Provide the seller with evidence of taking delivery. 9. Inspection(s) Pay for pre-shipment inspections including those required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, the buyer requires for export and import formalities, security clearance, and transport of the goods to the final destination. World Trade Press Illustrated Guide to Incoterms 2010 7
FCA Free Carrier (... named place of delivery) Seller/ Exporter Named Place CARRIAGE RISKS COSTS Export and Fees Pre-Carriage to Named Place, Not Delivery at Named Place/Port, FCA, Free Carrier (... named place of delivery) In Free Carrier, the seller/exporter/manufacturer clears the goods for export and delivers them to the carrier specified by the buyer at the named place of delivery. If the named place of delivery is the seller s place of business, the seller is responsible for loading the goods onto the transport vehicle. If the named place is any other location, such as the loading dock of the carrier, the seller is not responsible for unloading. When using the FCA term, it is advisable to clearly specify in the contracts of sale and carriage the precise point of delivery. Carrier has a special meaning. Technically, a carrier is a firm that itself transports goods or passengers for hire, rather than simply arranging for such transport. Examples are a shipping line, airline, trucking firm, or railway. Loading at Named Place/Port of Shipment Loaded Vessel Transport by Air, Rail, Road, Water, or Multimodal Vessel, Not Discharging (unloading) at Named Place/Port of Destination In the FCA term, however, the carrier can be any person who by contract undertakes to perform or procure such services by any of the above methods of transport including multimodal. Therefore, a person, such as a freight forwarder, can act as a carrier. With the FCA term, the buyer nominates the carrier, and the seller need only accept the nomination for the term to work. The FCA term may be used for any mode of transport including multimodal. With FCA, the named place of delivery is domestic to the buyer. The FCA term is often used when making an initial quotation for the sale of goods. Delivery at Named Place/ Terminal SELLER Onward Carriage to Not Examples FCA, ABC Shipping, Door 4, Full Address, Hamburg, Germany FCA, XYZ Airlines Cargo Terminal, San Francisco International Airport (SFO), USA Modes of Transport Air Yes Rail Yes Road Yes Sea Yes Inland Waterway Yes Multimodal Yes Import and Duties BUYER Buyer/ Importer 8 World Trade Press Illustrated Guide to Incoterms 2010
FCA Free Carrier (... named place of delivery) Incoterm Category FCA is an F term specifying that the seller/exporter/ manufacturer is responsible for delivering the goods to the carrier, export cleared, at the named place of delivery, but does not bear risk or costs afterwards. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered All modes of transport including multimodal. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance The seller has no obligation to provide for carriage of goods or for insurance. At the request of the buyer, the seller may contract for carriage on standard industry terms at the buyer s risk and cost. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods to the carrier at the named place of delivery at the time stipulated in the sales contract. If the named place of delivery is the seller s place of business, the seller is responsible for loading the goods onto the transport vehicle. If the named place is any other location, such as the loading dock of the carrier, the seller is not responsible for unloading. If the buyer has not stipulated a specific point at the named place of delivery, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risk of loss or damage to the goods until they have been delivered to the carrier at the named place of delivery, within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered to the carrier at the named place of delivery. Pay all costs relating to export, including customs formalities, duties, and taxes. 7. Notice to the Buyer At buyer s risk and cost, provide notice to the buyer that the goods have been delivered to the carrier, or that the carrier did not take possession of the goods at the agreed-upon time. 8. Delivery and Transport Document(s) Provide the buyer with a proof of delivery. At the buyer s request, if the proof of delivery is not a transport document, help the buyer obtain a transport document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, the buyer requires for transport and import of the goods to the final destination. Reimburse the buyer for buyer s costs related to securing information and documents, including security information the seller requires for export formalities and security clearance of the goods. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Provide for carriage of the goods from the named place of delivery. Buyer has no obligation to the seller for insurance. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered to the carrier at the named place of delivery. Assume all risk of loss or damage and other costs if the buyer s carrier fails to take delivery at the agreed-upon time and place. 6. Costs Pay all costs for carriage and insurance from the time the goods have been delivered to the carrier at the named place of delivery. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller Give sufficient notice to the seller of the name of the carrier, the delivery point, the time or period for delivery, and the mode of transport. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final destination. Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named place of delivery. World Trade Press Illustrated Guide to Incoterms 2010 9
FAS Free Alongside Ship (... named port of shipment) Seller/ Exporter Named Place CARRIAGE RISKS COSTS Export and Fees Pre-Carriage to Named Place, Not Delivery at Named Place/Port, Loading at Named Place/Port of Shipment Loaded Vessel Transport by Sea or Inland Waterway Only Vessel, Not Discharging (unloading) at Named Place/Port of Destination FAS, Free Alongside Ship (... named port of shipment) In Free Alongside Ship, the seller/exporter/manufacturer during transport, as is common in the commodity trade. clears the goods for export and places them alongside the The FAS term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore. ship (on a dock or barge) at the named port of shipment. If the shipment is containerized or to be containerized, When using the FAS term, it is advisable to clearly specify common practice is to deliver the shipment to the carrier in the contract of sale, and in contracts of carriage, not only at a terminal and not alongside a ship. In such situations, the named port of shipment, but also the precise loading the FCA term is recommended. point at or within the named port of shipment. This is particularly the case when the named port of shipment is used only for ocean or inland waterway transport. The named place in FAS is a port, and therefore the term is large and options abound for delivery points. With FAS, the named port of shipment is domestic to the With FAS, the seller has the option to deliver the goods seller. alongside the ship, or to procure goods already so delivered. This is a reference to so-called string sales vance and open account, but letters of credit are also Usual payment terms for FAS transactions are cash in ad- where a single shipment might be resold multiple times used. Delivery at Named Place/ Terminal SELLER Onward Carriage to Not Examples FAS, ABC Shipping Line, Dock #2, Port Elizabeth, South Africa FAS, XYZ Shipping Line, Quay #4, Le Havre, France Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No Import and Duties BUYER Buyer/ Importer 10 World Trade Press Illustrated Guide to Incoterms 2010
FAS Free Alongside Ship (... named port of shipment) Incoterm Category FAS is an F term specifying that the seller/exporter is responsible for delivering the goods, export cleared, alongside the ship, but does not bear risk or costs afterwards. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered Used only for ocean or inland waterway transport. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance The seller has no obligation to provide for main carriage of goods or for insurance. At the request of the buyer, the seller may contract for carriage on standard industry terms at the buyer s risk and cost. No obligation to provide insurance. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods alongside the ship at the named port of shipment, or procure the goods so delivered, within the agreed-upon time stipulated in the sales contract. If the buyer has not stipulated a specific loading point at the named port of shipment, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered alongside the ship at the named port of shipment within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered alongside the ship at the named port of shipment. Pay all costs relating to export, including customs formalities, duties, and taxes. 7. Notice to the Buyer At buyer s risk and cost, provide notice to the buyer that the goods have been delivered alongside the ship at the named port of shipment, or that the ship did not take possession of the goods at the agreed-upon time. 8. Delivery and Transport Document(s) Provide the buyer with a proof of delivery that the goods have been delivered alongside the ship at the named port of shipment. At the buyer s request, if the proof of delivery is not a transport document, help the buyer obtain a transport document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for transport and import of the goods to the final destination. Reimburse the buyer for buyer s costs related to securing information and documents, including security information, the seller requires for export formalities and security clearance of the goods to the named port of shipment. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Provide for loading and carriage of the goods from the named port of shipment. Buyer has no obligation to the seller for insurance. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered alongside the ship at the named port of shipment as provided in the sales contract. If the buyer nominates the ship, assume all risk of loss or damage and costs if the named ship does not arrive on time, or if the ship fails to take the goods, or if sufficient notice is not given to seller regarding ship name, loading point, and time. 6. Costs Pay all costs for carriage and insurance from the time the goods have been delivered alongside the ship at the named port of shipment. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller If the buyer nominates the ship, give sufficient notice to the seller of the name of the ship, the loading point, and the time or period for delivery. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final destination. Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named port of shipment. World Trade Press Illustrated Guide to Incoterms 2010 11
FOB Free (... named port of shipment) Seller/ Exporter Named Place CARRIAGE RISKS COSTS Export and Fees Pre-Carriage to Named Place, Not Delivery at Named Place/Port, Loading at Named Place/Port of Shipment Loaded Vessel Transport by Sea or Inland Waterway Only Vessel, Not Discharging (unloading) at Named Place/Port of Destination FOB, Free (... named port of shipment) In Free, the seller/exporter/manufacturer clears If the shipment is containerized or to be containerized, the goods for export and delivers them on board the common practice is to deliver the shipment to the carrier named vessel at the named port of shipment. at a terminal and not on board a ship. In such situations, This is a change from Incoterms 2000, where the seller was the FCA term is recommended. responsible only to deliver the goods past the ship s rail. The FOB term is commonly used in the sale of bulk With FOB, the seller has the option to deliver the goods commodity cargo such as oil, grains, and ore. on board the vessel, or to procure goods already so delivered. This is a reference to so-called string sales, Bill of Lading. The key document in FOB transactions is the where a single shipment might be resold multiple times The named place in FOB is a port, and therefore the term is during transport, as is common in the commodity trade. used only for ocean or inland waterway transport. The named place in FOB is a port and therefore the term is Sellers and buyers often misuse the FOB term. FOB does used only for ocean or inland waterway transport. not mean loading goods onto a truck or train at the seller s With FOB, the named port of shipment is domestic to the place of business. FOB is used only in reference to delivering the goods on board a ship in ocean or inland seller. waterway Delivery at Named Place/ Terminal SELLER Onward Carriage to Not transport. The FCA term, on the other hand, is applicable to all modes of transport. Examples FOB, ABC Shipping Line, Vessel XYZ, Buenos Aires, Argentina FOB, DEF Shipping Line, Vessel UVW, Gdansk, Poland Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No BUYER Import and Duties Buyer/ Importer 12 World Trade Press Illustrated Guide to Incoterms 2010
FOB Free on Board (... named port of shipment) Incoterm Category FOB is an F term specifying that the seller/exporter is responsible for delivering the goods, export cleared, on board a ship, but does not bear risk or costs afterwards. Note: Documents may be paper or electronic, as customary or as agreed to by the parties to the transaction. Modes of Transport Covered Used only for ocean or inland waterway transport. Seller s Responsibilities (summary) 1. Goods Provide the goods, commercial invoice, and other documentation as required by the sales contract. Obtain at own risk and cost all required export licenses, documents, and authorizations and carry out export formalities and procedures. 3. Carriage and Insurance The seller has no obligation to provide for main carriage of goods or for insurance. At the request and cost of the buyer, the seller may contract for carriage on standard industry terms at the buyer s risk and cost. No obligation to provide insurance. Provide information to enable the buyer to obtain insurance. 4. Delivery Deliver the goods on board the named vessel at the named port of shipment at the time stipulated in the sales contract, or procure the goods so delivered. If the buyer has not stipulated a specific loading point at the named port of shipment, the seller may pick one that suits seller s purposes. 5. Risk Transfer Assume all risks of loss or damage to the goods until they have been delivered on board the ship at the named port of shipment, within the agreed-upon time stipulated in the sales contract. 6. Costs Pay all costs until the goods have been delivered on board the vessel at the named port of shipment. Pay all costs relating to export, including customs formalities, duties, and taxes. 7. Notice to the Buyer At buyer s risk and cost, provide notice to the buyer that the goods have been delivered on board the ship at the named port of shipment, or that the ship did not take possession of the goods at the agreed-upon time. 8. Delivery and Transport Document(s) Provide the buyer with a proof of delivery that the goods have been delivered on board the ship at the named port of shipment. At the buyer s request, if the proof of delivery is not a transport document, help the buyer obtain a transport document. 9. Checking, Packing, Marking Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide preshipment inspections as required for export formalities. Package the goods, unless the goods are conventionally sold unpackaged. Package the goods as the seller deems appropriate for transport, unless the buyer has given specific requirements prior to the finalization of the sales contract. Provide marking appropriate to the packaging. 10. Other Timely provide the buyer, at the buyer s request and cost, assistance in securing information and documents, including security information, required by the buyer for transport and import of the goods to the final destination. Reimburse the buyer for buyer s costs related to securing information and documents, including security information the seller requires for export formalities and security clearance of the goods to the ship at the named port of shipment. Buyer s Responsibilities (summary) 1. Payment Pay for the goods as provided in the sales contract. Obtain any import licenses or authorizations and handle all import customs formalities. 3. Carriage and Insurance Provide for carriage of the goods from the named port of shipment. Buyer has no obligation to the seller for insurance. 4. Taking Delivery Take delivery of the goods as provided in the sales contract. 5. Risk Transfer Assume all risk of loss or damage from the time the goods have been delivered on board the ship at the named port of shipment. If the buyer nominates the ship, assume all risk of loss or damage and costs if the named ship does not arrive on time, or if the ship fails to take the goods, or if sufficient notice is not given to seller regarding ship name, loading point, and time. 6. Costs Pay all costs for carriage and insurance from the time the goods have been delivered on board the ship at the named port of shipment. Pay all costs resulting from failure to take delivery at the named place and time. Pay all costs relating to import formalities, duties, fees, and taxes, and other charges including transshipment. 7. Notice to Seller If the buyer nominates the ship, give sufficient notice to the seller of the name of the vessel, the loading point, and the time or period for delivery. 8. Proof of Delivery Accept the seller s delivery document if it is in conformity with the sales contract. 9. Inspection(s) Pay for pre-shipment inspections unless such is required by the country of export. 10. Other Timely advise the seller of any security-related data requirements. Reimburse the seller for seller s costs related to securing information or documentation, including security information, that the buyer requires for import formalities, security clearance, and transport of the goods to the final destination. Timely provide the seller, at the seller s request and cost, with any documents and information required for export, transport, and security clearance of the goods to the named port of shipment. World Trade Press Illustrated Guide to Incoterms 2010 13
CFR Cost and Freight (... named port of destination) Seller/ Exporter Named Place CARRIAGE RISKS COSTS Export and Fees Pre-Carriage to Named Place, Not Delivery at Named Place/Port, Loading at Named Place/Port of Shipment Loaded Vessel Transport by Sea or Inland Waterway Only Vessel, Not Discharging (unloading) at Named Place/Port of Destination Delivery at Named Place/ Terminal SELLER Onward Carriage to Not CFR, Cost and Freight (... named port of destination) In Cost and Freight, the seller/exporter/manufacturer clears With CFR, the seller has the option to deliver the goods on the goods for export and delivers them on board the ship at board the vessel, or to procure goods already so delivered. This is a reference to so-called string sales where the port of shipment (not destination). This is where risk passes from seller to buyer. a single shipment might be resold multiple times during The seller, however, is responsible for contracting for and transport, as is common in the commodity trade. paying the costs associated with transport of the goods to the The named destination in CFR is a port, and therefore the named port of destination. This is where costs transfer term is used only for ocean or inland waterway transport. from seller to buyer. If the shipment is containerized or to be containerized, It is important to note that the transfer of risk from seller to common practice is to deliver the shipment to the carrier buyer occurs at a different point than the transfer of costs. at a terminal and not on board a ship. In such situations, When using the CFR term, it is advisable to clearly specify the CPT term is recommended. in the contract of sale, and in contracts of carriage, not only With CFR, the named port of destination is domestic to the named port of destination, but also the precise point at the buyer. or within the named port of destination. The CFR term is commonly used the sale of a) bulk commodity cargo such as oil, grains, and ore, b) oversize and overweight cargo that will not fit into an ocean container, and c) cargo that exceeds the weight limitations of ocean containers. Examples CFR, Terminal 2, Port of Oakland, California, USA CFR, ABC Terminal, Port of Tokyo, Japan Modes of Transport Air No Rail No Road No Sea Yes Inland Waterway Yes Multimodal No Import and Duties BUYER Buyer/ Importer 14 World Trade Press Illustrated Guide to Incoterms 2010