Incoterms

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TheIncotermsrulesorInternationalCommercialTermsareaseriesofpredefinedcommercialtermspublishedbytheInternational
ChamberofCommerce(ICC).TheyarewidelyusedinInternationalcommercialtransactionsorprocurementprocesses.Aseriesofthreeletter
tradetermsrelatedtocommoncontractualsalespractices,theIncotermsrulesareintendedprimarilytoclearlycommunicatethetasks,costs,and
risksassociatedwiththetransportationanddeliveryofgoods.
TheIncotermsrulesareacceptedbygovernments,legalauthorities,andpractitionersworldwidefortheinterpretationofmostcommonlyused
termsininternationaltrade.Theyareintendedtoreduceorremovealtogetheruncertaintiesarisingfromdifferentinterpretationoftherulesin
differentcountries.Assuchtheyareregularlyincorporatedintosalescontracts[1]worldwide.
Firstpublishedin1936,theIncotermsruleshavebeenperiodicallyupdated,withtheeighthversionof2010[2]'havingbeenpublishedon
January1,2011.

Contents
1 Incoterms2010
2 IncotermsinGovernmentRegulations
3 Rulesforanymodeoftransport
3.1 EXWExWorks(namedplaceofdelivery)
3.2 FCAFreeCarrier(namedplaceofdelivery)
3.3 CPTCarriagePaidTo(namedplaceofdestination)
3.4 CIPCarriageandInsurancePaidto(namedplaceofdestination)
3.5 DATDeliveredAtTerminal(namedterminalatportorplaceof
destination)
3.6 DAPDeliveredAtPlace(namedplaceofdestination)
3.7 DDPDeliveredDutyPaid(namedplaceofdestination)
4 Rulesforseaandinlandwaterwaytransport
4.1 FASFreeAlongsideShip(namedportofshipment)
4.2 FOBFreeonBoard(namedportofshipment)
4.3 CFRCostandFreight(namedportofdestination)
4.4 CIFCost,Insurance&Freight(namedportofdestination)
5 Allocationsofcoststobuyer/selleraccordingtoIncoterms2010
6 PrevioustermsfromIncoterms2000eliminatedfromIncoterms2010
6.1 DAFDeliveredatFrontier(namedplaceofdelivery)
6.2 DESDeliveredExShip
6.3 DEQDeliveredExQuay(namedportofdelivery)
6.4 DDUDeliveredDutyUnpaid(namedplaceofdestination)
7 Seealso
8 References
9 Externallinks

Incoterms2010

NationalIncotermschambers.

Incoterms2010istheeighthsetofpredefinedinternationalcontracttermspublishedbytheInternationalChamberofCommerce,withthefirst
sethavingbeenpublishedin1936.Incoterms2010defines11rules,downfromthe13rulesdefinedbyIncoterms2000.[3]Fourrulesofthe2000
version("DeliveredatFrontier",DAF"DeliveredExShip",DES"DeliveredExQuay",DEQ"DeliveredDutyUnpaid",DDU).[4]arereplaced
bytwonewrules("DeliveredatTerminal",DAT"DeliveredatPlace",DAP)inthe2010rules.
Inthepriorversion,therulesweredividedintofourcategories,butthe11predefinedtermsofIncoterms2010aresubdividedintotwo
categoriesbasedonlyonmethodofdelivery.Thelargergroupofsevenrulesmaybeusedregardlessofthemethodoftransport,withthesmaller
groupoffourbeingapplicableonlytosalesthatsolelyinvolvetransportationbywaterwheretheconditionofthegoodscanbeverifiedatthe
pointofloadingonboardship.Theyarethereforenottobeusedforcontainerizedfreight,othercombinedtransportmethods,orfortransportby
road,airorrail.

IncotermsinGovernmentRegulations
Insomejurisdictions,thedutycostsofthegoodsmaybecalculatedagainstaspecificIncoterm(forexampleinIndia,dutyiscalculatedagainst
theCIFvalueofthegoods,[5]andinSouthAfricathedutyiscalculatedagainsttheFOBvalueofthegoods[6]).Becauseofthisitiscommonfor
contractsforexportstothesecountriestousetheseIncoterms,evenwhentheyarenotsuitableforthechosenmodeoftransport.

Rulesforanymodeoftransport
EXWExWorks(namedplaceofdelivery)
Thesellermakesthegoodsavailableattheirpremises.Thistermplacesthemaximumobligationonthebuyerandminimumobligationsonthe
seller.TheExWorkstermisoftenusedwhenmakinganinitialquotationforthesaleofgoodswithoutanycostsincluded.EXWmeansthata
buyerincurstherisksforbringingthegoodstotheirfinaldestination.Eitherthesellerdoesnotloadthegoodsoncollectingvehiclesanddoes
notclearthemforexport,orifthesellerdoesloadthegoods,hedoessoatbuyer'sriskandcost.Ifthepartiesagreethatthesellershouldbe
responsiblefortheloadingofthegoodsondepartureandtobeartheriskandallcostsofsuchloading,thismustbemadeclearbyadding
explicitwordingtothiseffectinthecontractofsale.
Thebuyerarrangesthecollectionofthefreightfromthesupplier'sdesignatedshipsite,andisresponsibleforclearingthegoodsthrough
Customs.Thebuyerisalsoresponsibleforcompletingalltheexportdocumentation,althoughthesellerdoeshaveanobligationtoprovide
informationrelatingtothegoodsonrequest.
Thesedocumentaryrequirementsmayresultintwoprincipalissues.Firstly,thestipulationforthebuyertocompletetheexportdeclarationcan
beanissueincertainjurisdictions(notleasttheEuropeanUnion)wherethecustomsregulationsrequirethedeclaranttobeeitheranindividual
orcorporationresidentwithinthejurisdiction.Ifthebuyerisbasedoutsideofthecustomsjurisdictiontheywillbeunabletoclearthegoodsfor
export,meaningthatthegoodsmaybedeclaredinthenameoftheseller,inbreachoftheEXWterm.
Secondly,mostjurisdictionsrequirecompaniestoprovideproofofexportfortaxpurposes.InanEXWshipment,thebuyerisunderno
obligationtoprovidesuchprooftotheseller,orindeedtoevenexportthegoods.InacustomsjurisdictionsuchastheEuropeanUnion,this
wouldleavethesellerliabletoasalestaxbillasifthegoodsweresoldtoadomesticcustomer.Itisthereforeofutmostimportancethatthese
mattersarediscussedwiththebuyerbeforethecontractisagreed.ItmaywellbethatanotherIncoterm,suchasFCAseller'spremises,maybe
moresuitable,sincethisputstheonusfordeclaringthegoodsforexportontotheseller,whichprovidesformorecontrolovertheexport
process.

FCAFreeCarrier(namedplaceofdelivery)
Thesellerdeliversthegoods,clearedforexport,atanamedplace.Thiscanbetoacarriernominatedbythebuyer,ortoanotherparty
nominatedbythebuyer.
Itshouldbenotedthatthechosenplaceofdeliveryhasanimpactontheobligationsofloadingandunloadingthegoodsatthatplace.Ifdelivery
occursattheseller'spremises,thesellerisresponsibleforloadingthegoodsontothebuyer'scarrier.However,ifdeliveryoccursatanyother
place,thesellerisdeemedtohavedeliveredthegoodsoncetheirtransporthasarrivedatthenamedplacethebuyerisresponsibleforboth
unloadingthegoodsandloadingthemontotheirowncarrier.

CPTCarriagePaidTo(namedplaceofdestination)
CPTreplacesthevenerableC&F(costandfreight)andCFRtermsforallshippingmodesoutsideofnoncontainerisedseafreight.
Thesellerpaysforthecarriageofthegoodsuptothenamedplaceofdestination.Risktransferstobuyeruponhandinggoodsovertothefirst
carrierattheplaceofshipmentinthecountryofExport.Thesellerisresponsiblefororigincostsincludingexportclearanceandfreightcostsfor
carriagetonamedplaceofdestination(eitherfinaldestinationsuchasbuyer'sfacilitiesorportofdestinationhastobeagreedbysellerand
buyer,however,namedplaceofdestinationisgenerallypickedduetocostimpacts).Ifthebuyerdoesrequirethesellertoobtaininsurance,the
IncotermCIPshouldbeconsidered.

CIPCarriageandInsurancePaidto(namedplaceofdestination)
ThistermisbroadlysimilartotheaboveCPTterm,withtheexceptionthatthesellerisrequiredtoobtaininsuranceforthegoodswhilein
transit.CIPrequiresthesellertoinsurethegoodsfor110%oftheirvalueunderatleasttheminimumcoveroftheInstituteCargoClausesofthe
InstituteofLondonUnderwriters(whichwouldbeInstituteCargoClauses(C)),oranysimilarsetofclauses.Thepolicyshouldbeinthesame

currencyasthecontract.
CIPcanbeusedforallmodesoftransport,whereastheequivalenttermCIFcanonlybeusedfornoncontainerisedseafreight.

DATDeliveredAtTerminal(namedterminalatportorplaceofdestination)
Thistermmeansthatthesellercoversallthecostsoftransport(exportfees,carriage,unloadingfrommaincarrieratdestinationportand
destinationportcharges)andassumesallriskuntildestinationportorterminal.TheterminalcanbeaPort,Airport,orinlandfreight
interchange.Importduty/taxes/customscostsaretobebornebyBuyer.

DAPDeliveredAtPlace(namedplaceofdestination)
Incoterms2010definesDAPasDeliveredatPlacethesellerdeliverswhenthegoodsareplacedatthedisposalofthebuyeronthearriving
meansoftransportreadyforunloadingatthenamedplaceofdestination.UnderDAPterms,theriskpassesfromsellertobuyerfromthepoint
ofdestinationmentionedinthecontractofdelivery.
Oncegoodsarereadyforshipment,thenecessarypackingiscarriedoutbythesellerathisowncost,sothatthegoodsreachtheirfinal
destinationsafely.Allnecessarylegalformalitiesintheexportingcountryarecompletedbythesellerathisowncostandrisktoclearthegoods
forexport.
Afterarrivalofthegoodsinthecountryofdestination,thecustomsclearanceintheimportingcountryneedstobecompletedbythebuyerathis
owncostandrisk,includingallcustomsdutiesandtaxes.
UnderDAPterms,allcarriageexpenseswithanyterminalexpensesarepaidbyselleruptotheagreeddestinationpoint.Thenecessary
unloadingcostatfinaldestinationhastobebornebysellerunderDAPterms.Ifunloadingcannotbecarriedoutbytheseller,itmightbebetter
toshipunderDAT(DeliveredAtTerminal)termsinstead.

DDPDeliveredDutyPaid(namedplaceofdestination)
Sellerisresponsiblefordeliveringthegoodstothenamedplaceinthecountryofthebuyer,andpaysallcostsinbringingthegoodstothe
destinationincludingimportdutiesandtaxes.Thesellerisnotresponsibleforunloading.ThistermisoftenusedinplaceofthenonIncoterm
"FreeInStore(FIS)".Thistermplacesthemaximumobligationsonthesellerandminimumobligationsonthebuyer.Withthedeliveryatthe
namedplaceofdestinationalltherisksandresponsibilitiesaretransferredtothebuyeranditisconsideredthatthesellerhascompletedhis
obligations[7]

Rulesforseaandinlandwaterwaytransport
Todetermineifalocationqualifiesforthesefourrules,pleasereferto'UnitedNationsCodeforTradeandTransportLocations
(UN/LOCODE)'.[8]
ThefourrulesdefinedbyIncoterms2010forinternationaltradewheretransportationisentirelyconductedbywaterareasperthebelow.Itis
importanttonotethatthesetermsaregenerallynotsuitableforshipmentsinshippingcontainersthepointatwhichriskandresponsibilityfor
thegoodspassesiswhenthegoodsareloadedonboardtheship,andifthegoodsaresealedintoashippingcontaineritisimpossibletoverify
theconditionofthegoodsatthispoint.
AlsoofnoteisthatthepointatwhichriskpassesunderthesetermshasshiftedfrompreviouseditionsofIncoterms,wheretheriskpassedatthe
ship'srail.

FASFreeAlongsideShip(namedportofshipment)
Thesellerdeliverswhenthegoodsareplacedalongsidethebuyer'svesselatthenamedportofshipment.Thismeansthatthebuyerhastobear
allcostsandrisksoflossofordamagetothegoodsfromthatmoment.TheFAStermrequiresthesellertoclearthegoodsforexport,whichisa
reversalfrompreviousIncotermsversionsthatrequiredthebuyertoarrangeforexportclearance.However,ifthepartieswishthebuyertoclear
thegoodsforexport,thisshouldbemadeclearbyaddingexplicitwordingtothiseffectinthecontractofsale.Thistermshouldbeusedonlyfor
noncontainerisedseafreightandinlandwaterwaytransport.

FOBFreeonBoard(namedportofshipment)
Seealso:FOB(Shipping)
UnderFOBtermsthesellerbearsallcostsandrisksuptothepointthegoodsareloadedonboardthevessel.Thesellermustalsoarrangefor
exportclearance.Thebuyerpayscostofmarinefreighttransportation,billofladingfees,insurance,unloadingandtransportationcostfromthe
arrivalporttodestination.SinceIncoterms1980introducedtheFCAincoterm,FOBshouldonlybeusedfornoncontainerisedseafreightand
inlandwaterwaytransport.However,FOBisstillusedforallmodesoftransportdespitethecontractualrisksthatthiscanintroduce.

CFRCostandFreight(namedportofdestination)
Thesellerpaysforthecarriageofthegoodsuptothenamedportofdestination.Risktransferstobuyerwhenthegoodshavebeenloadedon
boardtheshipinthecountryofExport.TheShipperisresponsiblefororigincostsincludingexportclearanceandfreightcostsforcarriageto
namedport.Theshipperisnotresponsiblefordeliverytothefinaldestinationfromtheport(generallythebuyer'sfacilities),orforbuying

insurance.Ifthebuyerdoesrequirethesellertoobtaininsurance,theIncotermCIFshouldbeconsidered.CFRshouldonlybeusedfornon
containerizedseafreightandinlandwaterwaytransportforallothermodesoftransportitshouldbereplacedwithCPT.

CIFCost,Insurance&Freight(namedportofdestination)
ThistermisbroadlysimilartotheaboveCFRterm,withtheexceptionthatthesellerisrequiredtoobtaininsuranceforthegoodswhilein
transittothenamedportofdestination.CIFrequiresthesellertoinsurethegoodsfor110%oftheirvalueunderatleasttheminimumcoverof
theInstituteCargoClausesoftheInstituteofLondonUnderwriters(whichwouldbeInstituteCargoClauses(C)),oranysimilarsetofclauses.
Thepolicyshouldbeinthesamecurrencyasthecontract.CIFcanbeusedbyanytransportbyseaandairnotlimitedtocontainerizedornon
containerizedcargoandincludesallchargesuptotheport/terminalofentrance.CIPcoversadditionalchargesattheport/terminalofentrance.

Allocationsofcoststobuyer/selleraccordingtoIncoterms2010
Incoterm
2010

Carriage Unloading Loadingon Carriage

Export
toport oftruckin vessel/airplane (Sea/Air)
customs
of
portof
inportof
toportof
declaration
export
export
export
import

Insurance

Unloading Loadingon Carriage Import

Import
inportof truckinport toplaceof customs
taxes
import
ofimport destination clearance

EXW

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

FCA

Seller

Seller

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

FAS

Seller

Seller

Seller

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

FOB

Seller

Seller

Seller

Seller

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

CPT

Seller

Seller

Seller

Seller

Seller

Buyer

Seller

Buyer/Seller

Seller

Buyer

Buyer

CFR(CNF)

Seller

Seller

Seller

Seller

Seller

Buyer

Buyer/Seller

Buyer

Buyer

Buyer

Buyer

CIF

Seller

Seller

Seller

Seller

Seller

Seller

Buyer/Seller

Buyer

Buyer

Buyer

Buyer

CIP

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Buyer/Seller

Seller

Buyer

Buyer

DAT

Seller

Seller

Seller

Seller

Seller

Seller/Buyer

Seller

Buyer

Buyer

Buyer

Buyer

DAP

Seller

Seller

Seller

Seller

Seller

Seller/Buyer

Seller

Seller

Seller

Buyer

Buyer

DDP

Seller

Seller

Seller

Seller

Seller

Seller/Buyer

Seller

Seller

Seller

Seller

Seller

PrevioustermsfromIncoterms2000eliminatedfromIncoterms2010
WhilethesetermsdonotfeatureinthecurrentversionofIncotermsitispossiblethattheymaybeseeninsalesordercontracts.Caremustbe
takentoensurethatbothpartiesagreeontheirobligationsinthiscase.

DAFDeliveredatFrontier(namedplaceofdelivery)
Thistermcanbeusedwhenthegoodsaretransportedbyrailandroad.Thesellerpaysfortransportationtothenamedplaceofdeliveryatthe
frontier.Thebuyerarrangesforcustomsclearanceandpaysfortransportationfromthefrontiertohisfactory.Thepassingofriskoccursatthe
frontier.

DESDeliveredExShip
Wheregoodsaredeliveredexship,thepassingofriskdoesnotoccuruntiltheshiphasarrivedatthenamedportofdestinationandthegoods
madeavailableforunloadingtothebuyer.ThesellerpaysthesamefreightandinsurancecostsashewouldunderaCIFarrangement.Unlike
CFRandCIFterms,thesellerhasagreedtobearnotjustcost,butalsoRiskandTitleuptothearrivalofthevesselatthenamedport.Costsfor
unloadingthegoodsandanyduties,taxes,etc.arefortheBuyer.Acommonlyusedterminshippingbulkcommodities,suchascoal,grain,dry
chemicalsandwherethesellereitherownsorhaschartered,theirownvessel.

DEQDeliveredExQuay(namedportofdelivery)
ThisissimilartoDES,butthepassingofriskdoesnotoccuruntilthegoodshavebeenunloadedattheportofdischarge.

DDUDeliveredDutyUnpaid(namedplaceofdestination)
Thistermmeansthatthesellerdeliversthegoodstothebuyertothenamedplaceofdestinationinthecontractofsale.Atransactionin
internationaltradewherethesellerisresponsibleformakingasafedeliveryofgoodstoanameddestination,payingalltransportationexpenses
butnottheduty.Thesellerbearstherisksandcostsassociatedwithsupplyingthegoodstothedeliverylocation,wherethebuyerbecomes
responsibleforpayingthedutyandothercustomsclearingexpenses.

Seealso
Commerciallaw
Internationaltrade
Internationaltradelaw
UniformCommercialCode

UnitedNationsConventiononContractsfortheInternationalSaleofGoods
UnitedNationsCodeforTradeandTransportLocations(UN/LOCODE)(http://www.unece.org/cefact/locode/service/location.html)

References
1.
2.
3.
4.
5.
6.
7.
8.

"ICCGuidetoIncoterms2010".ICC.RetrievedMarch14,2014.
"Incoterms2010".ICC.RetrievedMarch14,2014.
"Incoterms2000".ICC.RetrievedMarch14,2014.
"FromtheintroductionofIncoterms2010".ICC.RetrievedMay16,2011.
BriefonCustomsValuation(http://www.dov.gov.in/newsite3/brief_on_customs_valuation.asp)DirectorateGeneralofValuation
Valuation(http://www.sars.gov.za/ClientSegments/CustomsExcise/Processing/Assessment/Pages/Valuation.aspx)
DeliveredDutyPaidIncotermsExplained(http://www.incotermsexplained.com/theincotermsrules/theelevenrulesinbrief/delivereddutypaid/)
UN/LOCODECodeListbyCountryTradeUNECE(http://www.unece.org/cefact/locode/service/location.html)

Externallinks
InternationalChamberofCommerceOfficialwebsite(http://www.iccwbo.org/incoterms)
Export.gov:Incoterms(http://export.gov/faq/eg_main_023922.asp)
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