incoterms

INCOTERMS: WHAT TRANSPORT TERMS ACCORDING TO INCOTERMS SHOULD I PUT ON THE INVOICE?

Every single coded abbreviation in the International Commercial Terms (Incoterms) clearly defines who is responsible for the cost of transporting the goods, including insurance, taxes and duties, where the goods should be picked up from and transported to, and who is responsible for the goods at each step of transportation.

An important part, which is often overlooked, is the indication following the abbreviation. This is the name of the geographical location, border, port or airport, which the abbreviation refers to.

The terms found in the Incoterms directory were written and approved by the International Chamber of Commerce (ICC) and were originally published in English, and subsequently translated into 31 foreign languages by the respective national Chambers of Commerce.

The current set of international commercial terms is Incoterms 2010.

 

EXW (Ex Works)

The term Ex Works is also known under the acronym of EXW. It is followed by the name of a town or city: the location of the seller’s premises. The seller makes the goods available to be collected at their premises and provides the documentation for export from the country of origin.

The buyer arranges for all export customs operations and is responsible for transport and all other risks and costs from that point onwards. If the buyer is unable to do this, the terms must be modified to FCA.

 

FCA

The term Free Carrier means that transport is not paid by the seller. FCA is followed by the name of a location. The seller prepares the goods, providing the necessary documentation for export from the country of origin. The seller then has the goods delivered on an agreed date to the shipping warehouse, or other place specified by the buyer, and is responsible for the payment of all customs export operations. The buyer is then responsible for getting it transported to the final destination and assumes all the costs involved.

 

FOB

The term Free on Board (FOB) is intended mainly for sea freight. It is used in conjunction with a port of loading. The seller is responsible for all transport costs up to the port of shipment, including loading costs. The seller is responsible for the costs of export customs operations, relative documentation for export from the country of origin, as well expenses incurred for obtaining licences and authorisations.

From the moment the goods are ready to leave port, all other costs are borne by the buyer, including insurance. The responsibility for the goods passes from the seller to the buyer the moment the goods pass the ship’s rail at the port of loading.

FOR (Free on Rail) and FOT (Free on Truck) are no longer considered correct. For road, air and rail transport the equivalent term is Free Carrier (FCA)

 

FAS (only for sea and inland waterway transport)

The term Free along Ship (FAS) is followed by the name of a port. The seller is responsible for all transport costs up to the port of shipment. The seller fulfils his obligation when the good have been placed alongside the quay or in lighters at the name port of shipment.

The seller is responsible for the costs of export customs operations, relative documentation for export from the country of origin, as well expenses incurred for obtaining licences and authorisations. From the moment the goods are ready to leave port, all other costs are borne by the buyer, including insurance. The responsibility for the goods passes from the seller to the buyer when the goods have been unloaded onto the quay. For container transport FCA should be used.

 

CFR

CFR or C&F, followed by the name of a port (e.g. CFR Barcelona), stands for Cost and Freight and is generally used for sea freight. The seller is responsible for all transport costs up to the named port of destination, including any charges for unloading which were agreed upon under the contract of carriage. The seller is responsible for the costs of export customs operations, relative documentation for export from the country of origin, as well as expenses incurred for obtaining licences and authorisations. Insurance costs are borne by the buyer. The seller must provide the buyer with timely details of the cargo so that he is able to stipulate an adequate insurance policy. The risk of loss of or damage to the goods, as well as any additional costs after the goods have been loaded onto the ship, is transferred from the seller to the buyer the moment the goods pass the ship’s rail at the port of loading. From the moment the goods have been unloaded at the port of destination all other costs are borne by the buyer, including import clearance.

 

CIF

The term Cost Insurance and Freight (e.g. CIF Trieste) is generally used for sea freight. CIF is followed by the name of a port. The seller is responsible for all transport costs up to the named port of destination, including any charges for unloading which were agreed upon under the contract of carriage. The seller is responsible for the costs of export customs operations, relative documentation for export from the country of origin, as well as expenses incurred for obtaining licences and authorisations. Insurance costs are borne by the seller. From the moment the goods have been unloaded at destination all other costs are borne by the buyer, including import clearance.

 

CPT

CPT, which stands for Carriage Paid To, is followed by the name of a location (e.g. CPT Milano) and is used for any kind of transport. The seller bears all transport costs up to the specified destination, including the costs of export customs operations, relative documentation for export from the country of origin, as well expenses incurred for obtaining licences and authorisations. The seller is also responsible for costs incurred transiting through other countries to the specified destination. From the moment the goods have been unloaded at destination all other costs are borne by the buyer, including import clearance and insurance.

 

CIP

The term CIP stands for Carriage and Insurance Paid To and is followed by the name of a location (e.g. CIP Torino) and is used for any kind of transport. The seller bears all transport costs up to the specified destination, including the costs of export customs operations, relative documentation for export from the country of origin, as well expenses incurred for obtaining licences and authorisations. The seller is also responsible for costs incurred transiting through other countries to the specified destination. CIP differs from CPT in the fact that under CIP insurance costs are borne by the seller. From the moment the goods have been unloaded at destination all other costs are borne by the buyer, including import clearance.

 

DAT

Delivered At Terminal (DAT) is followed by the name of an agreed location. The seller has the goods delivered to a place agreed upon with the buyer. The costs of unloading from the means of transport at destination are born by the seller. The word terminal does not necessarily have to be an airport terminal, seaport or rail terminal, but any indoor or outdoor place agreed upon between the buyer and the seller. It is important that the place is as specific as possible because once the goods have been unloaded responsibility passes from the seller to the buyer. Customs export formalities as well as export licences are the responsibility of the seller. All import formalities, customs duties and taxes, as well as import licences are the responsibility of the buyer.

 

DAP

Delivered At Place (DAP), followed by the name of a destination, is now used instead of DDU (Delivery Duty Unpaid). It can be used for any transport mode or where there is more than one transport mode involved. The seller is responsible for arranging carriage and for delivering the goods, ready for unloading, at a place agreed upon with the buyer. The seller is responsible for all customs export formalities as well as export licences. DAP differs from DAT in that the buyer is responsible for unloading under the term DAP. Risk is transferred from the seller to the buyer when the goods are available for unloading. The buyer is responsible for import formalities, import licences, clearance and any applicable local taxes or import duties.

 

DDP

Delivery Duty Paid (DDP) can be used for any transport mode or where there is more than one transport mode involved. The seller is responsible for arranging carriage and for delivering the goods at a place agreed upon with the buyer, as well as for all export formalities and licences. The seller is also responsible for costs incurred transiting through other countries to the specified destination. Under DDP the seller is responsible for import formalities, import licences, clearance and any applicable local taxes or import duties. It is usually agreed that the buyer pays the VAT, whereas customs duties and any other taxes are paid by the seller. DDP is followed by the name of a location (e.g. DDP Lugano excluding VAT)

 

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