Practicas Incoterms

Practical Guide to INCOTERMS
OLEGARIO LLAMAZARES
Practical
Guide to
INCOTERM
S
Place of delivery
Transfer of risks
Documents and customs
Allocation of logistics costs
Transport insurance
Methods of payment
PRACTICAL GUIDE TO INCOTERMS
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ISBN: 978-84-92570-83-6
Composition and design: Rubn Snchez
INDEX
WHAT ARE INCOTERMS RULES?................................................................................ 6
Classification of Incoterms 2010.................................................... 8
Main changes in Incoterms 2010......................................................... 9
Aspects of foreign trade that Incoterms do not regulate..............13
Variants of Incoterms................................................................... 14
WHAT ARE INCOTERMS USED FOR?....................................................................... 15
The place of delivery.................................................................... 16
Documents and customs procedures.................................................19
Transfer of risks in transport........................................................ 21
Allocation of logistics costs.......................................................... 22
OBLIGATIONS OF THE SELLER AND THE BUYER..................................................27
EXW Ex Works............................................................................. 28
FCA Free Carrier.........................................................................35
FAS Free Alongside Ship............................................................42
FOB Free On Board.....................................................................49
CPT Carriage Paid To..................................................................56
CFR Cost and Freight.................................................................63
CIP Carriage and Insurance Paid to.............................................70
CIF Cost, Insurance and Freight..................................................78
DAT Delivered At Terminal.........................................................86
DAP Delivered At Place...............................................................93
DDP Delivered Duty Paid..........................................................100
TEN KEYS FOR THE PROFESSIONAL USE OF INCOTERMS............................... 107

WHAT ARE INCOTERMS
RULES?
7 WHAT ARE INCOTERMS RULES?
What are Incoterms rules?
Incoterms (INternational COmmerce TERMS) rules are a total of

eleven terms published by the International Chamber of
Commerce (ICC) based in Paris, which define the conditions of
supply of goods in international sales transactions. fte
first edition was published in 1936 and subsequently have
been making continuous revisions and updates (usually every
ten years) to the one currently in force (Incoterms 2010).
fte Incoterms 2010 rules are contained in Publication No. 715

of the International Chamber of Commerce in bilingual English-
French edition. A copy of this publication can be acquired, in
both hard copy and e-book format, on the website www.
iccbooks.com.
fte writing of Incoterms rules is carried out by a group of

experts belonging to different professions and activities, but
most of them come from the legal field. fte description of
each Incoterm includes a guidance note which provide
guidelines for better use. fte following sets out the
obligations of each of the parties (seller and buyer) in ten
sections that include, among others: delivery, transport and
insurance contracts, transfer of risks, allocation of logistics
costs, inspection of goods, notices, etc.
Incoterms are private law rules and are not supported by the
laws of any country or by a supranational organization. ftey
are rules set by businesses (exporters and importers)
within the International Chamber of Commerce in order to
regulate some aspects of foreign trade operations.
Incoterms do not have the force of law and therefore is not

obliged to use them in international trade operations; their
use will be conditioned on the acceptance of the parties
(seller and buyer) in the sale contract. fte strength of the
Incoterms is that are widely known and used by different
actors in foreign trade (exporters, importers, carriers,
freight forwarders, customs brokers, banks and insurance
companies, etc.). ftat is very useful for sellers and buyers
to agree on terms of delivery of the goods and that the
agreement conforms to rules that are universally known.
Incoterms can be classified according to three criteria that

all have to do with transport: mode of transport used,
payment for the main (international) transport and transfer
8 WHAT ARE INCOTERMS RULES?
of risks in transport. In the classification of Incoterms
2010, the prevailing approach is the mode of transport used.
Classification of Incoterms 2010
Mode of transport used (Incoterms for any mode of transport and sea
Incoterms)
fte first criterion is the mode of transport used. In the

version of Incoterms 2010, there are seven Incoterms that can
be used with any mode of transport (surface, air or sea) or
multiple modes (multimodal). On the contrary, there are four
Incoterms that can only be used with sea transport and inland
waterways (canals, rivers, lakes).
Incoterms for any mode of transport and multimodal transport: EXW,

FCA, CPT, CIP, DAT, DAP and DDP.
Incoterms, uniquely for sea and inland waterways transport: FAS, FOB,
CFR and CIF.
Payment for the main transport (seller or buyer)
fte second criterion of classification is the payment of

main transport which is the international transport between
the country of origin and the country of destination. fte
Incoterms distinguish between those terms in which the main
transport payment is made by the buyer (importer) and those
where it is made by the seller (exporter).
Incoterms in which the main transport is paid by the buyer (importer):

EXW, FCA, FAS and FOB.
Incoterms in which the main transport is paid by the seller (exporter):
CPT, CFR, CIP, CIF, DAT, DAP and DDP.
Transfer of risks in transporting the goods (at origin or destination)
Finally, we should distinguish between those Incoterms in

which the obligation to deliver the goods by the seller and,
therefore, the transfer of risks in transport occurs in the
country of origin, while in others Incoterms the obligation
of delivery occurs in the country of destination.
Incoterms with transfer of risks in the country of origin: EXW, FCA,

FAS, FOB, CPT, CFR, CIP and CIP.
Incoterms with transfer of risks in the country of destination: DAT, DAP
and DDP.
In the case of Incoterms in C (CPT, CFR, CIP and CIF)
should be noted that, although the seller will be paying
international transport to the country of destination,
the risks of transport are transferred in the country of
origin when the goods are loaded on the means of transport.
Hence in the Incoterms CIF and CIP, which incorporate a
compulsory insurance transport, it is the seller who hires
and pays the insurance, although, the beneficiary of
insurance is the buyer who bears the risks of transport.
Classification of Incoterms 2010
Paym Transfe
Mode
Acrony Incote ent of r of
of
ms rm main risks in
transp
transp transpor
ort
EXW Ex Works Any Bu Origin
mode ye
r
FCA Free Carrier Any Bu Origin
mode ye
r
CPT Carriage Paid To Any Se Origin
mode lle
r
CIP Carriage and Insurance Any Se Origin
Paid To mode lle
r
DAT Delivered At Terminal Any Se Destin
mode lle ation
r
DAP Delivered At Place Any Se Destin
mode lle ation
r
DDP Delivered Duty Paid Any Se Destin
mode lle ation
r
FAS Free Alongside Ship Sea Bu Origin

ye
FOB Free On Board Sea Bu Origin

ye
r
CFR Cost and Freight Sea Se Origin
lle
r
CIF Cost, Insurance and Sea Se Origin
Freight lle
r
Main changes in Incoterms 2010
fte Incoterms 2010 have made some significant changes in

relation to the previous version of Incoterms 2000. ftese
changes include both the elimination and creation of new
terms, modification of certain uses in the existing terms and
adapting the rules to the operational logistics, Internet
communications and security procedures that have been
implemented at the borders of countries.
Below, we offer a brief description of the major changes. fte
effects of such changes on foreign trade operations are
discussed in detail in the sections devoted to each Incoterm.
Reduction from 13 to 11 terms
In relation to the Incoterms 2000, the 2010 version

eliminated four terms: DES (De- livered Ex Ship), DEQ
(Delivered Ex Quay), DAF (Delivered At Frontier) and DDU
(Delivered Duty Unpaid). ftese Incoterms had little use: in
the case of DES and DEQ for certain sales of bulk goods that
are delivered to the ports of destination; DAF in
deliveries at frontiers with some difficulty, where is better
that the buyer takes over of import procedures; and in the
case of DDU what has actually occurred is a renaming, because
the new DAP Incoterm establishes obligations very similar to
DDU. However, it should be noted that the four Incoterms
that have been eliminated can still be used by exporters
and importers since the Incoterms 2010 rules do not repeal
Incoterms 2000 rules. Moreover, if a company prefer to use
Incoterms 2000, they should refer to this version in the
sale contract, mentioning the expression Incoterms 2000 after
the place of delivery (e.g. DAF USA/Mexico border at Laredo,
Texas, USA, Incoterms 2000).
New terms in Incoterms 2010
DAT replaces DES, DEQ y

DAF DAP replaces
DDU
Incoterms 2010 created two new Incoterms: DAT (Delivered At

Terminal) and DAP (Delivered At Place). fte first replaces
the three Incoterms DES, DEQ, and DAF, when the merchandise
is delivered to the destination country in a terminal or
transportation infrastructure (port, airport). DAP has a
function very similar to DDU, as noted above.
Priority for Incoterms used with any mode of transport in comparison

with sea Incoterms
fte new classification of Incoterms 2010 do not take into

account the main criterion of the distribution of costs
between seller and buyer, but the mode of transport used:
Incoterms for any mode of transport against sea Incoterms.
fte Incoterms 2010 rules give priority to the Incoterms for
any mode of transport because they fit better with the
reality of international logistics.
Goods in containers only for Incoterms for any mode of transport but not
for sea Incoterms.
ftis is perhaps the most significant change in Incoterms

2010. If the goods are loaded into a container, the Incoterms
2010 clearly state that sea terms should not be used,
even if the delivery takes place in a port. fte reason is
that containers are delivered to the port terminals, before
being placed on board of the ships. When the goods are
transport in containers should not be used FOB, CFR or CIF,
but their equivalents for multimodal transport, which are
respectively FCA, CPT and CIP.
ftis is a big change from the uses and habits that came into
force until now. We must remember that the FOB and CIF
Incoterms are the oldest and most widely used in foreign
trade since a large proportion of goods are transported by
ship and it is also common that deliveries be made in ports.
fterefore, it is expected that the adaptation of exporters,
importers, carriers, freight forwarders, etc., to their
modification of Incoterms 2010 will be slow, and for a time
will be common to use FOB, CFR or CIF even when goods travel
in containers. In the event that the seller or buyer use sea
Incoterms with container transport it is advisable to ask
about switching to any mode of transport Incoterm (such as
FCA, CPT or CIP) to match what is the right used according to
Incoterms 2010 rules.
Transfer of risks on board in Incoterms FOB, CFR and CIF
In Incoterms 2010, when using the sea terms FOB, CFR and CIF,
the transfer of risks occurs when the goods are placed on
board in the port of shipment. However, in Incoterms 2000,
the risk passes when the goods pass the ships rail.
While the version of Incoterms 2010 is not so clear, it is

understood that on board includes only the load (up the
goods to the ship). fte other two operations required to
place goods in a ship: stowage (place the goods in the ships
hold or deck) and lashing (tying to impede the goods from
moving during the journey) are on the account of the buyer.
Although Incoterms 2010 do not mention it explicitly, it
could be interpreted that risks of loading is bear by the
seller while the risks of stowage and lashing are bear by the
buyer.
Delivery by procuring the goods so delivered for sales that occur

during shipping
In the foreign trade of certain products (bulk, commodities,

fuel) sometimes the sale of goods take place during the journey
of the ship, from the shipment port to the destination port,
once the goods have been shipped. To cover these situations,
Incoterms 2010, only in sea Incoterms FOB, CFR and CIF state
that the delivery can be made on board or by procuring the
goods so delivered, i.e. once it has been shipped.
For example, in a sale contract which has established itself as

the place of delivery CIF port Lagos, Nigeria - Incoterms
2010, the buyer can sell the goods to a third party during the
journey between the port of shipment and the port of
destination. Although the buyer has not shipped the merchandise,
it fulfills the obligation to deliver by procuring the goods so
delivered to the new buyer.
Allocation of terminal costs
When using Incoterms in which the seller pays the main

transport such as CPT, CFR, CIP or CIF, the seller
includes in the purchase price the cost of transport to
destination including the costs of terminal what is known
as THC (Terminal Han- dling Charges). However, it happens
that most of the transport companies carry the cost of
terminal, in particular the discharge of goods on the buyer
and, therefore, they pay twice for the same service. To avoid
this duplication, Incoterms 2010 establish that the terminal
costs should be allocated according to the stipulations of
the transport contract. ftey also state that if the seller
bears the costs of discharge at destination port, according
to the stipulations in the transport contract, they shall not
be entitled to demand the buyer the return of the costs
unless otherwise agreed.
Transport insurance coverage in CIP and CIF
In Incoterms CIP and CIF in which the seller is obliged to

contract a transport insurance of goods from the place of
delivery to destination, the Incoterms 2010 refer to the
latest version of the coverage Insurance of Institute Cargo
Clause in London. ftese covers are the result of the
agreement IUA / LMA (Underwriting International Asso- ciation
of London and Lloyds Market Association) which came into
force in January 2009. ftere are three types of coverage:
Clause C (minimum), Clause B and Clause A besides, Clauses
of War and Strike can be added within the Clauses. According
to Incoterms 2010, in Incoterms CIP and CIF, the seller is
required to hire only minimal coverage (Clause C). If the
buyer wanted a larger coverage, he shall require the seller
to contract it, but its cost will be borne by the buyer. In
the rest of the Incoterms, neither party is obliged to take
out transport insurance, but are required to provide to the
other party the necessary information for obtaining the
insurance.
Security-related information
Since the attacks of September 11, 2001 various measures to

ensure the safe transport of passengers and goods were put
in place. Following these practices, Incoterms 2010 version
establishes the obligation of the seller to assist the buyer
to obtain all information concerning the safety of the goods
or their transportation to their final destination. However,
Incoterms 2010 states that any costs resulting from obtaining
such information will be borne by the buyer.
Validity of electronic messages and documents
Incoterms 2010 granted the same validity to the messages and

documents transmitted electronically to those that are
supported on paper, if it is agreed by the parties or is a
common practice. fte use of electronic means facilitate the
obligation to notify the parties with different information
(place of delivery or receipt, date, name of carrier, etc.)
and the transmission of documents relating to export and
import formalities.
Main changes in Incoterms 2010
International and national use
Although Incoterms are in the peculiarities of foreign trade,

the 2010 version refers to its use also for domestic trade.
ftis new approach regarding the scope has two justifications:
first, there are areas of economic integration (such as the EU)
that have the consideration of domestic market when customs
disappeared. On the other hand, the internal regulations in
the U.S. terms of trade known as RAFTD (Revised American
Foreign Trade Definitions), no longer in force, are expected
to be replaced by Incoterms, both in internal operations between
U.S. companies and in foreign trade operations between U.S.
companies and companies in other countries.
Aspects of foreign trade that Incoterms do not regulate
Although Incoterms regulate many aspects of foreign trade, there

are others on which they do not have influence. Among them:
trade in services, ownership of the goods or the payment
deadline:
Trade in services: Incoterms are only used in international

sales of goods (tan- gible products) and do not apply to
trade in services (intangibles) as in this activity there is
no physical delivery, or need for logistics and customs
clearance; therefore Incoterms rules do not apply.
Ownership of the merchandise: the transfer of ownership of
goods is gov- erned by the contract of sale and performed
normally on payment of the price; therefore, is not affected
by Incoterms rules. fte text of Incoterms 2010 never
used the expression transfer the ownership of the products
when defining the obligations of delivery of the goods by
the seller, Incoterms rules use expressions such as deliver
the goods or made available to . fte Obligations of
the buyer section explicitly mentions that the buyer must
pay the price established in the sale contract.
Deadline for payment: the payment period is also established in

the international sale contract and may be paid in advance
(before delivery), payment in cash (co- inciding with the
delivery) or payment on credit (after delivery). In this
sense, neither of these three alternative is affected by
the Incoterms agreed upon.
In addition to these three aspects, Incoterms do not deal
with other issues such as warranties, grounds for termination
of the contract or sue for damages that should be resolved
through the sale contract and according to the law to which
the contract is submitted.
Variants of Incoterms
fte practice of foreign trade has meant that sometimes the

exporters and importers add a term or expression to Incoterms in
order to clarify the distribution of costs and risks between the
parties. It should be noted that the Incoterms 2010, unlike
previous versions, do not mention any of these variants.
However, it remains appropriate in certain circumstances of
international operations to mention three variants that should
eventually be used:
EXW loaded: the loading and therefore the risks of the

goods in the first transport (usually truck) that are paid
by the seller. Normally, when using EXW it is the seller who
makes the load on the first transport and therefore, this
variant corresponds more to reality than the rule EXW in
which the costs and risks of loading in the first transport
are borne by the buyer.
CIF maximum cover: for the benefit of the buyer, the seller
contracts insurance coverage of international transportation
with Clause A of the Institute Cargo Clauses (ICC), plus a
Strike Clause and a War Clause. fte cost of this additional
coverage is not very significant in relation to the risks
they cover, so in some high- risk countries, it is advisable
to hire them.
DDP VAT unpaid or DDP VAT excluded: the seller bears the
costs of import clearance but without accounting for VAT.
Incoterms 2010 specifically mentions this possibility
because of difficulties in recovering the amount that the
seller has to pay in concept of VAT on the value of the
goods at the destination country.
In any case, when using some variant of Incoterms rules should
be clearly specified in the sale contract how the costs and
risks covered by the variant are allocated between buyer and
seller.
WHAT ARE INCOTERMS USED FOR?
1 WHAT ARE INCOTERMS USED FOR?
6
What are Incoterms used for?
Incoterms arise from the need for exporters and importers to

agree on a number of issues related to international
operations. Hence, the International Chamber of Commerce has
developed rules that govern the obligations in regard to the
delivery terms in an international sale.
Specifically, the purpose of Incoterms is to define with
precision:
Where the goods are delivered.
fte documents and customs formalities necessary for

export and import procedures.
fte transmission risks in transporting the goods.
fte allocation of logistics costs between seller and
buyer.
The place of delivery
fte first function of Incoterms is to define precisely the

place of delivery of the goods and if it comes loaded or
ready for discharge from the transport vehicle (truck, plane,
ship, train).
Following the three initials in capital letters of each Incoterm

must be included as accurately as possible:
fte specific location where the goods are delivered:

address of the seller or buyer, the center of
transportation, logistics platform, terminal, pier, port,
airport, etc.
fte town (province, state) where the goods are delivered.
fte country where the goods are delivered.
It is important to mention the town and the country of

delivery as the worlds geography is so vast and is not
always easy to locate a town in a country.
According to Incoterms 2010, in the event that a specific

location for delivery of the goods were not designated and
there are several possible for example a company with
1 WHAT ARE INCOTERMS USED FOR?
7
different locations in a same town the seller may choose the
one that suits him better. After de country, must be included
the expression Incoterms 2010 to reflect that the latest
version published by the International Chamber of Commerce is
being used.
When choosing the place of delivery it is necessary to take into
account the correct and most common of each Incoterm,
distinguishing between Incoterms for any mode of transport
(including multimodal transport) and those that can only be used
with sea transport.
In EXW, normally the place of delivery is the sellers premises

so it is advisable to include the exact address to which refer
to the carrier (usually truck) that sends the buyer to collect
the goods.
In FCA delivery may be in the sellers premises or, more

commonly, in a facility or transport infrastructure such as a
transportation hub, logistics platform, airport or port,
always in the sellers country. If it is a multimodal transport
in which the goods travel in containers is advisable to
identify the place of delivery as the container terminal at
the logistics facility.
For CPT and CIP Incoterms delivery locations are varied, always
in the buyers country, once the international voyage has
been made. Could be the buyers premises in the case of a
country that does not need to pass customs or a facility or
transport infrastructure. If the goods travel by ship and
container, the most common practice is that the goods will be
delivered at the ports container terminal in the country of
destination. In that case, the costs of unloading the goods
from de ship, usually are bear by de seller.
Where Incoterms in D are used, the place of delivery is the

buyers country. In the case of DAT, a terminal of a
transportation center, airport, port, and in the case of DAP and
DDP, usually the buyers premises; in DAP without making customs
clearance and in DDP with customs clearance performed.
In sea Incoterms the place of delivery is always a port. It

can the port of shipment (FAS and FOB) or the port of
destination (CFR and CIF). In the case of FAS the delivery is
on the dock of the port, so if advisable to include the
number or name of the dock. In Incoterms FOB, CFR and CIF
delivery is made once the goods are placed on board of the
ship so it is sufficient to name the port of shipment (in
FOB) or destination (CFR or CIF).
In addition to the place of delivery, Incoterms also regulate

how to deliver the goods. ftere are three alternatives:
Ready for download in the place of delivery (e.g. FCA).
Loaded in the transport medium (e.g. CIP).
Unloading from the transport medium (e.g. DAT).
Full information on the obligations of loading and unloading

of goods in Incoterm is available in the section devoted to
each of them.
Examples of correct use of Incoterms 2010
INCOTERMS FOR ANY MODE OF TRANSPORT
EXW Ridge Manufacturing Inc., Chicago, United States,

Incoterms 2010 EXW 31 Constitution Hill, Birmingham,
Great Britain, Incoterms 2010
FCA Logistics Platform of Lyon, France, Incoterms 2010

FCA Cargo Terminal, Frankfurt-Hahn Airport, Germany,
Incoterms 2010 FCA Delta Terminal, Rotterdam Port,
Netherlands, Incoterms 2010
CPT Budapest Logistic Center, Hungary, Incoterms

2010
CPT Container Terminal, port of Tampico, Mexico,
Incoterms 2010 CPT Delmonte Srl. Warehouse,
Milan, Italy, Incoterms 2010
CIP Air Cargo Terminal, Tianjin Airport, China,

Incoterms 2010 CIP Container Terminal, Port of
Santos, Brazil, Incoterms 2010 CIP Baupart
GmbH Factory, Munich, Germany, Incoterms
2010
DAT Logistics Platform Bursa, Turkey,

Incoterms 2010 DAT Cargo terminal, Toronto
Airport, Canada Incoterms 2010
DAT Container Terminal 5, Hong Kong Port, China,
Incoterms 2010
SEA INCOTERMS
FAS port of Bremen, Germany,
Incoterms 2010 FOB port of Miami,
United States, Incoterms 2010 CFR port
of Saint Petersburg, Russia, Incoterms
2010
Documents and customs procedures
fte second function of Incoterms is to regulate who

(exporter or importer) shall get the documents that are
generated in the trade transaction. In these documents can be
distinguishes the document used to proof the delivery of
goods and any other documents necessary for customs
clearance.
Documents to proof the delivery of goods
fte seller must obtain a document that justify for commercial

purposes, legal compliance and payment, the obligation to
deliver goods to the buyer is what is called POD (Proof of
Delivery). It is really important to know what kind of
document shall be used to justify the delivery, especially if
the means of payment is a letter of credit and the payment is
made upon delivery of the documents required at the is- suing of
the letter.
ftere are basically two types of documents to justify
delivery:
Delivery receipts of the carrier: are used in Incoterms EXW, FCA,

DAT, DAP and DDP. Must be signed by the buyers carrier
(e.g. FCA) or by the buyer himself (e.g. DDP).
International transport documents: are used in Incoterms FOB,
CPT, CIP, CFR and CIF. fte document will depend on the
type of transport used:
Land: Consignment note CMR.
Sea: Bill of Lading B/L.
Air: Airway Bill AWB.
Train: Railway Bill of Lading CIM.
Multimodal: Multimodal bill of lading FBL.
Incoterms 2010 establish that the seller is obliged to provide
all necessary assistance to the buyer, upon request and on his
behalf, to obtain a transport document proving the delivery. When
this document is negotiable and issued in several originals
(e.g. Bill of Lading B/L) the seller must give the buyer a full
set of originals. In Incoterms CIP and CIF the seller is obliged
to obtain a transport insurance for the buyer. fterefore, to
justify the delivery, in addition to providing a transport
document, the seller must also give the buyer a copy of the
insurance policy or the certificate of transport.
Documents for customs clearance
Incoterms also regulate which of the parties (seller or

buyer) should obtain the documents for customs clearance in
the countries of origin and destination. ftese docu-
ments include: export and import SAD (Single Administrative
Document), Declara- tion of Value, licenses and
authorizations, certificates, etc.
fte following table shows who is responsible for obtaining
such documents for import and export and import. In EXW the
buyer has to make both of them, while in DDP the seller who
is responsible for both. In the rest of Incoterms, export
clearance is done by the seller and import clearance by the
buyer.
Customs procedures according to each Incoterm
Mode Expo Impo

Incote
of rm rt rt
Transp Cleara Cleara
EXW Buy Buy
er er
FCA Sell Buy
A
er er
CPT Sell Buy
N er er
CIP Sell Buy
er er
Y
DAT Sell Buy
er er
M
DAP Sell Buy
er er
O DDP Sell Sell
er er
FAS Sell Buy

er er
S FOB Sell Buy
er er
CFR Sell Buy
E
er er
CIF Sell Buy
A er er
In any case, regardless of who is responsible for carrying

out customs formalities, the other party must provide full
assistance at the risk and cost of the party that must
obtain the documents necessary for customs clearance.
ftus, for example in EXW, the seller must help the buyer
to obtain the documents necessary for export clearance,
while in the case of DDP the buyer is obliged to help the
seller getting the documents for import clearance.
Transfer of risks in transport
fte third function of Incoterms is to determine where the risk

is transferred from seller to buyer. It must be clarified that
his is the risk of transport due to damage, loss, strikes, war,
etc., during the transport of goods, not the commercial or
payment risk that has to do with the transmission of ownership
of the goods and payment, issues not regulated by the
Incoterms.
ftere are two possibilities: transfer the risk in the country

of origin (sellers country) or in the destination country
(buyers country):
Transfer of risks in origin: in EXW, Incoterms in F (FCA, FAS

and FOB) and Incoterms C (CPT, CIP, CFR and CIP) the risk
are transferred where the seller delivers the goods to the
first carrier in the chain (Incoterms for any mode of trans-
port) or in the port of shipment (sea Incoterms) always in the
country of origin.
Transfer of risks at destination: in Incoterms in D (DAT, DAP and
DDP), the risk are transferred when the seller delivers
goods at the designated place
normally logistics infrastructure (DAT ) or buyers premises
(DAP or DDP) in the country of destination.
Transfer of risks in transport according to each Incoterm
Mode
Incote Transfer of
of rm risks
Transp
EXW Origin
A FCA Origin
CPT Origin
N
CIP Origin
Y
DAT Destinatio
n
M DAP Destinatio
n
DDP Destinatio
O n
FAS Origin
S FOB Origin
CFR Origin
E CIF Origin
Allocation of logistics costs
In addition to these functions, the fundamental objective of

Incoterms is to define cost sharing between seller and buyer
in an international sale, in particular the rules on
Incoterms 2010 define precisely who bears the costs of each
of the logistical operations both in origin and
destination.
To understand the distribution of logistics costs it is

necessary to take into account that the rules of Incoterms
are made from the sellers point of view. When progress is
made through the classification of Incoterms, costs borne by
the seller increase in relation with those supported bay de
buyer. For example, in EXW the seller assumes only the costs
of packaging and checking he goods, while in DDP assume all
costs except unloading the goods at the place of destination.
Costs can be divided into 11 concepts, 5 of them in origin, 2

international and 4 at destination.
Sequence in allocation costs between seller and buyer
Place Conc
ept
1. Packaging and checking
2. Loading in sellers premises
Country of 3. Transport in country of origin (pre-carriage)
origin 4. Customs clearance (export)
5. Terminal charges in origin
6. Main transport
International
7. Transport insurance
8. Terminal charges at destination

Country 9. Customs clearance (import)
of 10. Transport in country of destination (on-carriage)
destinati 11. Unloading is buyers premises
on
Package and checking
In all Incoterms costs of packaging and checking are supported

by the seller. ftus, prior to quote, the seller should ask
the buyer if the goods have to take some special packaging
due to weather issues, resistance to certain forms of
transport, etc. If that were the case, the seller must
include the additional cost of such packaging in the price.
Package defects are the leading cause of loss in the
international trade and are not covered by transport
insurance.
Loading in origin and unloading at destination
fte load of the goods in origin and the uploading at

destination are concepts that carriers do not usually listed
separately in groupage operations, but only when it comes to
full loads or general cargo.
Typically, the load in origin is made by the seller, though that

practice goes against the Incoterm EXW in which the goods are
delivered ready for loading. In groupage, truck drivers may have
some means to load the cargo (boxes, pallet) to the truck but
when it is a full container the driver has no means to upload it
to the truck. So if the seller prefers to do the load on the
first carrier is preferred to use FCA rather than EXW.
As for the unloading at destination, is normally made by the

buyer in accordance with Incoterm DDP in which the goods are
delivered ready for unloading.
Transport in country of origin and destination
Transport in the country of origin (pre-carriage) includes

transportation of goods from the sellers premises to the place
of delivery in the country of origin that can be a
transportation hub, port, airport, etc. Some companies have
their own means of transport (trucks, vans) and do it for
themselves, although it is usually to outsource pre-carriage
to a transport company. Although there are not great
distances and therefore the cost is not very high, when
preparing a quotation in any Incoterm, except EXW, the seller
has to include the costs of pre-carriage in the price and,
therefore, must request a quote to transport companies.
Transport in the country of destination (on-carriage)

consists in bringing the goods from the place where
international transport delivers then to the buyers premises.
For doing that, the seller must hire and pay for services of
a transport company in the country of destination and
probably will have difficulties to recover indirect taxes on
contract logistics services, having no tax resident in the
country.
Terminal charges in countries of origin and destination
fte costs of handling the goods, both at origin and

destination, will depend on the transport contract. ftese
costs are called THC (Terminal Handling Charges) and may be
important, especially when using sea transport.
To avoid duplication in the charge of these costs i.e. not

charged them to the buyer and seller simultaneously it is
necessary to make a contract of carriage that fits the Incoterms
agreed in the sale contract.
As regards the costs of cargo handling in the country of

origin, in the case of FCA these costs should be incorporated
into the price the buyer pays for the freight of
international transport. In the case of FOB are borne by the
seller because the goods are placed on board.
As for the costs of handling at destination, when using

Incoterms in C (CPT, CFR, CIP or CIF) is the seller who pays
the freight and, therefore, who should include or not
handling costs at the port of destination.
To determine who bears the costs of handling at origin and

destination are different forms of freight services ranging
from FIO (Free In and Out) that does not include expenses or
load or unload, until Liner Terms (Berth to Berth) where the
loading/ stowage (at the port of loading) and
unstowage/unloading (in the port of destination) are included
in the freight.
Types of freight services
FIO (Free In and Out): freight cost does not include loading or unloading.
FILO (Free In, Out Liner): the loading and stowage are for the account of the
goods and the unloading and unstowage for the account of the carrier.
Most appropriate option for FOB.
LIFO (Liner In, Free Out): the loading and unstowage are borne by the
carrier and unloading and unstowage by the account of the goods
account. Most appropriate option for C terms (CPT, CFR, CIP and CIF)
when the goods are delivered at destination port without unloading.
LINER TERMS (Berth to Berth): the loading, stowage, unloading and

unstowage are included in the freight. Most appropriate option for the terms
C and DAT when you the seller want to deliver the goods unloaded at
Main transport
Main transport is the one that takes place between the place of
delivery in the country of origin and the country of destination
and usually is the most important logistical costs of all
governing Incoterms. fterefore, the parties should request
quotes and explore various alternatives with different carriers
and freights forwarders to see which of them is getting more
competitive prices.
In Incoterms EXW and F international transport is hired by

the buyer, while in the Incoterms in C and D is hired by
the seller. It is usual for parties to request quotes to their
carriers, both in origin (EXW or F) or at destination (C
or D) in order to evaluate the different offers they receive
and choose the best suited at that time and for that particular
operation.
Customs clearance (export and import)
Among the costs regulated by Incoterms are the export

clearance in the customs of country of origin and the import
clearance at the point of entry in the country that imports
the goods.
Incoterms EXW is the only one in which both, export and

import clearances are made by the buyer. In contrast, DDP is
the only Incoterm in which both clearance are performed by
the seller. In the rest of Incoterms, export clearance is
carried out by the seller and import clearance by the buyer.
fte cost of these procedures include customs clearance and

the payment of taxes on imports, mainly tariffs. It also
includes the payment of VAT.
Tariffs are taxes levied on the value of the goods through

customs in the importing country. Usually they are Ad
Valorem, i.e. a percentage of the value of the goods. In most
of the customs laws that value includes the cost of
transport to the country of entry, that is tariffs are
applied to Incoterms in C (cost of goods + freight to the
destination country). ftere are also specific duties that
involve the payment of a fee for each unit (kilos, tons,
liters, hectoliters, square footage, etc.) that is imported
(i.e.
1.5 per liter or 250 per ton).
Transport insurance of goods
Only in Incoterms CIP an CIF the seller is obliged to

purchase insurance for the buyer to transport the goods from
the place of delivery to the destination. In the rest of the
Incoterms neither party is obligated to purchase insurance,
although they are obliged to provide the other party the
information to purchase it.
Whether or not required to purchase insurance in the agreed

conditions, it is advisable that the party assuming the risk
in the international transport do it. Purchase can be done
through ones own carrier or forwarder, or directly with an
insurance company that offers transport insurance policies.
fte cost of the policy depends on the type of transport,
goods and, destination country but normally do not exceed a
low percentage of the value of goods, about 0,5%.
To confirm that the insurer has contracted the insurance, seller
or buyer should apply for a certificate of insurance including
data of the operation such as insure and the insureds name,
goods, insured value, voyage, coverage and premium.
Incoterms 2010: Allocation of costs between seller (S) and buyer (B)
26
INCOTERM Trans Transp Unloa

Packa Load Custo Term Termin Custo
port Mai Trans ort to ding
Mode of ging ing ms inal al ms
destina
in n port Buyer
transport and selle
origin
cleara char
trans insura
charge clear
tion on- s
checki rs nce ges s ance
(pre- port nce carriage premis
ng premi expor origi destina impo
carria es
rt
EXW
Any mode S B B B B B b B B B B
FCA
Any mode S S S S B B b B B B B
FAS
Only sea S S S S B B b B B B B
FOB
Only sea S S S S S B b B B B B
CPT
Any mode S S S S S S b B B B B
CFR
Only sea S S S S S S b B B B B
CIP
Any mode S S S S S S S B B B B W
H
A
CIF
Only sea S S S S S S S B B B B T
A
R
DAT E
Any mode S S S S S S s S B B B IN
C
DAP O
Any mode S S S S S S s S B S B T
E
R
DDP M
Any mode S S S S S S s S S S B S
U
S: Seller s: no obligation to obtain an insurance contract, though the risks are
bear by de seller B: Buyer b: no obligation to obtain an insurance contract, though
the risks are bear by de seller
OBLIGATIONS
OF THE SELLER AND THE BUYER
2 OBLIGATIONS OF THE SELLER AND THE BUYER
8
EXW
Ex Works (named place of delivery)
Costs Risks Docs.
HOW TO USE EXW

EXW
EXW is the Incoterm that represents the minimum obligations,

costs and risks for the seller, as he delivers the goods at his
own premises (factory or warehouse) in his country. Not even the
seller is responsible for loading the goods onto the first
carrier (usually truck) that sends the buyer to pick them up. It
is the only Incoterm in which the seller does not clear the
goods for export, when such clearance is applicable.
On the contrary, with EXW, the seller offers the lowest service
of all Incoterms and represents a loss of competitiveness in
comparison with other companies that assume part of
international logistics.
ftis term is suitable for exporting firms with little

international experience and who make groupage operations
(boxes, pallets) in which the buyer sends a truck to collect
the goods at the sellers premises. When sending full
containers, it is better to use FCA, as usually the seller
makes the loading of the container on the truck sent by the
buyer to the sellers premises.
It is not advisable to use EXW regularly because when the seller

delivers the goods in its own country, normally it is preferable
to use FCA.
EXW MAIN CHARACTERISTICS
Mode of transport
EXW can be used with any mode of transport (land, sea, air) and
specially with multimodal transport (containers).
Place of delivery and reception of goods
Normally when using this Incoterm, the place of delivery of the

goods are the sellers premises (factory or warehouse). If the
seller has several places in different locations he should
specify in which of them will the goods be delivered. If the
sales contract has not established a specific place and there
are several possible points of delivery, the seller can choose
the one that suits him better.
fte buyer is required to collect the goods at the agreed

place and date, if the seller has properly notified him in
due time.
EXW
Loading/unloading of goods
fte seller delivers the goods to the buyer at the named

place of delivery, but without being loaded into the first
carrier (usually truck). fterefore, the loading on the first
carrier is at the risk of the buyer.
Delivery document
fte seller has no obligation to justify the delivery of

goods to the buyer with any type of document, as it is the
buyer who sends a transport (usually truck) to collect the
goods at sellers premises.
fte delivery document used is a delivery note of the carrier

who has been sent by the buyer to the sellers premises or in
the case of multimodal transport, a FCR FIATA certificate
issued by the forwarder, hired for the buyer, with
information that has been previously provided by the seller.
Documents for export/import procedures
fte seller has only the obligation to provide the buyer with the
commercial documents accompanying the goods (invoice and packing
list). However, the seller should help the buyer to obtain other
documents necessary for the export operation such as licenses,
permits, certificates, etc.; the cost of obtaining these
documents is borne by the buyer.
Furthermore, the seller must provide the buyer with any

information and help in obtaining any documents necessary to
complete the formalities for import into the
country of destination and also those documents relating to
security in the transport of the goods from the delivery
place to the final destination. fte buyer must pay the
seller for expenses made to obtain such information and
documents.
Transport documents (carriage of goods by road CMR, bill of

lading B/L, air waybill AWB, railway bill of lading CIM and
FIATA bill of lading FBL) shall be obtained by the buyer.
If the parties agree or if it was normal practice, the seller

can provide the documents to the buyer using electronic
procedures.
Transport contract
Neither party has the obligation to the other to make a

contract of transport. In any case, transportation, either by
their own means or by contract, is done by the buyer who is
the one that bears the costs and risks of transporting the
goods from the place of delivery at the sellers country to the
final destination.
EXW
fte risk in transporting the goods is transferred from

seller to buyer at the time of delivery, i.e., before the
goods are loaded on the first carrier (usually truck). ftere-
fore, the risk in the operation of loading the goods on the
first carrier is assumed by the buyer.
To transfer the risk, it is necessary that the goods transported

can be identified and individualized as the goods object of the
sale contract. Also, the seller must notify the buyer in a
reliable way that he has put the goods at his disposal at the
place of delivery.
Insurance contract
Neither party has the obligation to make a contract of

insurance for transporting the goods. However, it is
advisable that the buyer hires insurance transport, at least
to cover the international transport of goods. In this sense,
the seller must provide the buyer with any information
necessary to enable him to hire the insurance he needs.
Inspection of goods in the country of origin
fte costs of any mandatory inspection of the goods prior to

shipment are paid by the buyer, even when such inspection is
required by regulations or institutions in the country of the
seller.
Export and import customs clearance
All procedures, costs and taxes of both, export and import

clearance, are borne by the buyer.
Allocation of costs between seller and buyer
fte seller assumes only the cost of packaging, checking and

marking of goods, according to usual practices in
international trade. He also assumes any specific
requirements on the packaging that have been included in the
sale contract.
All other operating and logistics costs are borne by the buyer:
Loading of the goods at the first carrier.
Inland transportation (pre-carriage) to transport center,

port, airport, in sellers country.
Costs and taxes of export clearance.
EXW
Terminal costs (warehousing, handling, loading) in

transport center, port, airport, in sellers country.
Main transport to the country of destination.
Insurance transport (if it is hired).
Terminal costs (unloading, handling, warehousing) in

transport center, port or airport, in buyers country.
Costs and taxes of import clearance.
Inland transportation (on-carriage) from the transport

center, port, airport, to the buyers premises.
Unloading of goods on buyers premises.
Methods of payment
EXW shall be used with no documentary methods of payment such

as payment in advance, cash on delivery, open account or
check. Is not suitable for documentary methods (letter of
credit or documentary credit) because the seller does not
have a transport document (CMR, B/L AWB, FBL) that justify
the delivery of the goods at the agreed conditions and
therefore be included as documentation of the letter of
credit.
Moreover, if the letter of credit requires a transport document
to justify delivery and the buyer does not send a carrier to
collect the goods from the sellers premises, the seller will
not be able to make effective the credit because he will not
have the required delivery document.
When using documentary methods of payment (letter of credit or

documentary credit) it is better use Incoterms in F or C.
PRACTICAL ADVICE TO USE EXW
EXW is the first Incoterm out of the eleven and the one that
implies fewer obligations to the seller; he only has to deliver
the goods at his own premises and the buyer will send a carrier
to collect them.
EXW allows the seller to give the lowest price quotation and not
assume the costs and risks in international operations
management. In this sense, the seller may quote prices
immediately, without having to make any calculations about the
costs of the export operation: it is like a sale in the local
market.
EXW
In contrast, EXW means the less service given by the seller and
requires the buyer to assume full logistics management. Sellers
commercial offers will lose competitiveness in relation to those
of other providers that includes international logistics
management among the services offered.
In EXW, companies with a certain volume of international

business, will not get certain discounts and preferential
rates in hiring of international transport. ftese discounts
can represent an additional source of income if they are not
applied to final prices, or make the offers more
competitive when they are translated to a reduced final
price.
As for loading the goods, in the first mode of transportation

(usually truck), it must be taken into account that according
to the EXW the loading shall be done by the buyer. However,
in most cases, the daily experience shows that it is the
seller who assumes the cost and risk of loading because the
trucks normally do not have means to upload the goods. When
the buyer is unwilling to assume, either the cost or the risk
of the load on the first carrier, it is better to use other
Incoterms, for example, FCA.
EXW is the only Incoterm in which the exporter does not carry
out customs formalities for the export of goods. In this
sense, the seller does not have any document that serves
to justify the export of goods. ftus, for purposes of
taxation (VAT) or other regulations, the buyer must ask to
the customs broker or forwarding agent of the buyer for a
copy of the SAD (Single Administrative Documents, issue n 3)
which is the document that demonstrates that the export
clearance has been made; the seller can also ask for a
transport document (CMR, B/L, SWB, AWB, FBL) as evidence
that the goods are exported. If it is an integrated
economic area (e.g. the EU) where
there is free movement of goods and no customs clearance, to
justify the exit of goods from the national territory for VAT
purposes, it will be sufficient with a transport document or
a carriers delivery note signed and sealed by the consignee of
the goods in the destination country.
EXW is useful for the following types of international
operations:
First exports of companies that have very short experience

and knowledge of international trade.
International sales between subsidiaries belonging to the same
multinational group in which there is full transparency and
confidence in the way of operating.
Sales in an integrated economic area (e.g. the EU), where
there is free movement of goods without customs clearance.
Groupage operations of small volumes where the buyer sends
a carrier to the sellers premises to collect and load the
goods in the truck (pallets, boxes) with very little costs
and risks.
EXW
Full load operations (full container or truck) in which there

is a single transport document for the whole journey, and
where it is not necessary to carry out customs clearance
since the goods are sent to a zone of countries (e.g. the EU)
in which there is a system of free movement of goods.
However, in the cases where the goods are loaded by the
seller on a truck sent by the buyer, it is preferable to use
FCA.
KEYS TO EXW
Any type of transport (land, air, sea),

Mode of transport
including multimodal transport (containers).
Delivery place On the premises (factory or warehouse) of

the seller.
Loading/unloading of Properly packaged and marked, ready to be

the goods loaded into the first carrier (usually truck).
Delivery note or FIATA FCR certificate if

Delivery document
multimodal transport is used.
Type of cargo Any type of cargo, except bulk and heavy

loads.
EXW
Contract of main Buyer.

transport
There is no obligation on either party.

Contract of However, it is advisable that the buyer
insurance purchases insurance because he assumes
the risks.
At the time of delivery, before the goods are

Transfer of risks in
transport loaded on the first carrier in the sellers
premises.
Pre-shipment Buyer.
inspection
Export customs Buyer.

clearance
Import customs Buyer.

clearance
Payment in advance, cash on delivery, open

Methods of payment account, bank transfer, check. It is not
suitable for documentary methods (letter of
credit or documentary credit).
FCA
Free Carrier (Lugar de entrega)
Costs Risks
Documents
CMO UTILIZAR FCA

FCA
FCA es un Incoterm muy flexible ya que permite la entrega de las

mercancas, tanto en los locales del vendedor y en varios puntos
como centros de transportes, puertos, aeropuertos, terminales de
contenedores, etc., que se encuentran en el pas del vendedor.
La reforma, al usar este Incoterm, es muy importante especificar
claramente el lugar de entrega.
FCA puede ser utilizado para cualquier tipo de carga (carga

general, carga completa, grupo de edad) y con diferentes
medios de pago (abrir una cuenta, transferencia bancaria,
carta de crdito, etctera).
En la FCA Incoterm, el vendedor debe completar y asumir los

costos de despacho de exportacin y, por lo tanto, es
responsable de obtener los documentos necesarios para ello.
Las formalidades de despacho de aduana son realizadas por el
comprador.
Cuando las mercancas se transportan en contenedores y el

lugar de entrega es el puerto de embarque, las reglas
Incoterms 2010 recomiendan para utilizar FCA en vez del FOB,
ya que los contenedores se entregan regularmente en la
terminal de contenedores del puerto y no cargado en la nave.
FCA es uno de los Incoterms ms utilizados en el comercio

internacional y probablemente reemplacen EXW para la mayora
de las ventas donde el vendedor entrega las mercancas en su
propio pas y no quiere administrar la logstica
internacional.
FCA MAIN CHARACTERISTICS
Modo de transporte
FCA puede ser utilizado con cualquier modo de

transporte (tierra, mar, aire) y especialmente con
multimodal transporte (contenedores).
Lugar de entrega y recepcin de mercancas
El vendedor entrega la mercanca al

comprador en dos posibles ubicaciones:
Locales del vendedor (fbrica o
almacn).
Somewhere (transport center, terminal, port, airport,
containers terminal) in the sellers country.
Esta segunda alternativa es ms habitual. Si el vendedor no ha
establecido un lugar especfico y hay varios puntos de posible
entrega, el comprador puede elegir el ms conveniente para l.
FCA
El comprador est obligado a recoger la mercanca en el

lugar y fecha acordada, si el vendedor le notifica
correctamente a su debido tiempo.
Carga y descarga de mercancas
Cuando las mercancas se entregan en las instalaciones del

vendedor (fbrica o almacn), el vendedor debe cargar la
mercanca en el primer portador (generalmente el camin). Si
la mercanca se entrega en algn otro punto (centro de
transporte, puerto, aeropuerto), el vendedor debe entregar la
lista de bienes para la descarga y entrega al transportista
que haya sido designado por el comprador para el transporte
internacional.
Delivery document
El vendedor debe proporcionar al comprador un documento que

acredite la entrega de las mercancas en las condiciones
acordadas. Este documento es normalmente la nota de entrega de
los bienes de la compaa contratada por el vendedor al
transportista internacional o al transportista contratado por el
comprador. El vendedor tambin debe ayudar al comprador con el
fin de obtener los documentos de transporte internacional.
Cuando las mercancas se entregan en las instalaciones de seller
s, la entrega de documentos es usu-aliado un recibo del
transportista enviado por el comprador en los locales del
vendedor. En el caso de transporte multimodal FIATA FCR, un
certificado es emitido por el transportista con la informacin
previamente proporcionada por el vendedor.
fte seller is obliged to provide the buyer with the

commercial documents accompanying the goods (commercial
invoice and packing list). He also has to get all the
documents required for export clearance (export SAD,
certificates, licenses and authorizations, etc.).

complete the formalities for import into the country of
destination; and also those documents relating to security in
the transport of the goods from the delivery place to the
final destination. fte buyer must pay the seller for
expenses made to obtain such information and documents.

FIATA bill of lading FBL) shall be obtained by the buyer.

procedures.
FCA
Transport contract
It is the buyer who must hire transportation from the place

of delivery (in the sellers country) to the final
destination of the goods. However the buyer can ask the
seller to hire the carriage on usual conditions, at the risk
of the buyer. fte seller may reject the request and in this
case, he should inform the buyer as soon as possible.
fte risk in transporting the goods is transferred from

seller to buyer at the time of delivery: there are two
possibilities:
If the goods are delivered to the buyer on the sellers

premises (factory or warehouse) the risk is transferred when the
goods have been loaded in the first carrier (usually truck).
If the goods are delivered elsewhere (transport center, port,
airport) in the country of the seller, the risk is transferred
before the goods are unloaded from the first carrier for
delivery to the carrier named by the buyer.
fte buyer bears all risks of transport from the moment the
goods have been delivered at the agreed place and time if:
Does not notify the seller the name of the carrier that will
pick up the goods.
fte carrier named by the buyer fails to take the goods on
the date or deadline agreed.
In either of these circumstances, the buyer bears all costs
(storage) and risk (loss or damage) in transporting the goods
from the agreed delivery date or, if there is no specific date,
from completion of the agreed delivery period.

can be identified and individualized as the goods object of the
place of delivery.
Insurance contract


shipment are paid by the buyer, except when such inspection
FCA
is required by regulations or institutions in the country of

the seller; in this case the costs are borne by the seller.
All procedures, costs and taxes of export clearance are

borne by the seller. All procedures, costs and taxes of
import clearance are borne by the buyer.
fte seller assumes the following operational costs:
Packaging, checking and marking of goods.

Loading the goods at the first carrier.

port, airport, in sellers country.
For its part, the buyer assumes the following operational
costs:



Methods of payment
FCA can be used with any payment methods (payment in advance,

cash on delivery, open account, bank transfer or check) and
also with documentary methods (letter of credit or
documentary credit). In the case of documentary methods, the
FCA
seller must ensure to obtain the transport document that

justifies the delivery of the goods because it is the buyer
who contracts the main transport. For this, the seller must
request the carrier or the forwarder hire by the buyer a copy
of the international transport document that has been used
(CMR, B/L, SWB, AWB or FBL). ftis document, is usually
required to collect the credit as proof of delivery of the
goods.
PRACTICAL ADVICE TO USE FCA
FCA is a term that requires more involvement by the seller that

EXW, as the seller manages logistics in their own country and
performs export clearance; however, both activities do not
present excessive complexity and, therefore, any exporting
company must be offering quotations, at least, in FCA.
Moreover, FCA is a very flexible Incoterm because it allows

different places of delivery of the goods depending on the
type of transport used. It is also very suitable for multimodal
transport.
ftere are several alternatives to use FCA, whose election
depends on the place of delivery:
FCA factory or wareftouse: it is recommended using this

alternative to full load truck or container) as an
alternative to EXW. Delivery takes place once the goods
have been loaded on the truck, in the sellers premises,
and at his own risk.
FCA transport center: it is use mainly for groupage. fte
seller pays the inland transportation (pre-carriage) till
delivered the goods to the carrier that has been
designated by the buyer at a terminal or transport center.
Delivery of goods oc-
curs when the truck is located in the loading dock of the
international carrier designated by the buyer.
FCA port or port terminal: it is the most appropriate

Incoterm, substituting FOB, when using full containers.
fte seller is responsible for the transport of the
container from its premises to the container terminal at
the designated port. fte delivery takes place when the
truck carrying the goods arrive at the ports container
terminal. All handling operations at the terminal, which
are known as THC (Terminal Handling Charges) are borne by
the buyer.
FCA airport: the seller bears the cost of transport from his
premises to the airport that has been designated to deliver
the goods. It is understood that the goods have been
delivered when the vehicle is parked in the loading dock of
the assigned terminal. Any further handling will be paid by
the buyer.
FCA railroad: the delivery of goods occurs when the inland
carrier that has been hired by the seller puts the truck in
the loading dock of the rail terminal.
Incoterm FCA is suitable for companies that have their own
transport vehicles (trucks, vans) and export using groupage
FCA
services; this situations involves little cost and risk to

transport the goods (in boxes or pallets) to the place of
delivery (transportation terminal, port, airport). Generally,
the place of delivery will not be far away from the sellers
premises.
FCA is useful for the following types of international
operations:
Companies that do not have too much experience in foreign

markets and do not want to manage international logistics
to deliver the goods in the destination country.
Exports of full loads (trucks, containers) in which it is
preferable that the seller perform the load on the first
carrier (usually truck) in its own facilities.
Exports in groupage for which the seller uses their own
transport vehicles to deliver the goods somewhere
(transport center, port, airport) in their own country,
usually near his premises.
Sales in a integrated economic area (e.g. the EU), where
there is a free movement of goods and therefore is not
necessary clear the goods for export or import.
Sales to customers in EU countries, but in which the goods
will be sent to a third country (a country outside the EU)
so it is advisable, for tax purposes, that the seller
obtains the documents that justify the exit of goods from
the EU.
In short, FCA is a very flexible Incoterm, increasingly used,
that will probably replace EXW for most exports in which the
seller delivers the goods in their own country and prefers
not to manage international logistics.
KEYS TO FCA
Any type of transport (land, air, sea) and,

Mode of transport
specially, multimodal transport (containers).
a) In sellers premises (factory or warehouse).

Delivery place b) In different locations (transport center, port,
airport) in the sellers country.
Loading/unloading of a) Load in the first carrier (usually truck).

the goods b) Prepared for the unloading in the delivery
place.
a) Receipt of the carrier sent by the buyer to

the sellers premises or FIATA FCR certificate
Delivery document
for multimodal transport.
b) Delivery note of goods from the carrier
FCA
hired by the seller to the international carrier

or forwarder hired by the buyer.
Type of cargo Any type of cargo (general cargo, complete
cargo, groupage).

transport
There is no obligation on either party. However,
Contract of it is advisable that the buyer purchases
insurance insurance because he assumes the risks.
a) Once the goods have been loaded in the first

carrier, at the sellers premises.
Transfer of risks in b) In the delivery place, before the goods are
transport unloaded from the first transport for delivery
to the carrier hired by the buyer.
Buyer, except when the inspection is required

Pre-shipment
by regulations or institutions in the country of
inspection
the seller.
Export customs Seller.
clearance

clearance
Methods of payment account, check. It is also suitable for
documentary methods (letter of credit or
documentary credit).
FAS
Free Alongside Ship (named port of shipment)
Costs Risks
Documents
HOW TO USE FAS

FAS
Incoterm FAS is used only for sea transport. fte seller

delivers the goods placing them alongside the ship named by
the buyer at the agreed port of shipment. fte export
clearance is done by the seller
ftis Incoterm is only used for certain commodities and

materials that are not packed and cannot be individualized, such
as grain, timber, minerals, steel products, etc.; delivery is
done in those ports that have specialized terminals for this
type of products. If the goods are carried in containers,
Incoterm FCA should be used as containers are delivered at port
terminals and not alongside ships.
fte export clearance must be done by the seller. Usually, it

is necessary to clear the goods before placing them alongside
the ship.
When using FAS, the buyer is responsible for loading the goods
on the ship. For this reason, the buyer must know very well the
practices in the port of shipment because in the case of
problems arise there.
FAS MAIN CHARACTERISTICS
Mode of transport
ftis Incoterm can only be used with sea or inland waterways

(rivers, canals, lakes) transport. When the goods are in
containers, FCA should be used as containers are delivered in
port terminals and not alongside ships.
fte seller must deliver the goods alongside the ship named
by the buyer in the dock of the designated port of shipment.
fte delivery should be made on the date or deadline agreed.
For those products (raw materials, commodities, etc.) that

can be sold during the transport of goods at sea (afloat),
the rules of this Incoterm state that the goods can be
delivered alongside ship or providing the goods so
delivered. fte latter expression refers to the merchandise
FAS
that can be delivered after the buyer placed the goods

alongside the ship, for example during the voyage to
destination port, so that the first buyer can sell the goods
to another buyer using the documentation of the first sale.
fte goods should be placed in the dock where the ship will
dock to perform international transport. fte choice of the
dock depends on the type of merchandise and the shipping line
that is to perform transportation. In this sense, the buyer
must notify the seller the name or number of the pier and the
name of the ship that will collect the goods at the
designated port. If within the port area, the buyer has not
indicated a specific place for the loading, the seller can
choose the most convenient for delivering the goods.
fte buyer is required to collect the goods in the port of

shipment and date agreed, if the seller properly notified him
in due time.
fte goods are delivered alongside the ship, properly

prepared to be loaded so that it is accessible to the media
(cranes, conveyors belts, etc.), available to the port or to
the ship for loading.
Delivery document
fte seller must provide the buyer with a document showing

the delivery of the goods at the agreed conditions. Normally,
this document is the dock receipt issued by the shipping
company stating that the goods have been received for
shipment. It also
can be used a mates receipt which is a document signed by the
First Officer which acknowledges receipt of the goods on board.


Shipping documents (Bill of Lading B/L or Seaway Bill) must

be paid by the buyer who is the one that hires sea transport.

FAS

procedures.
Transport contract
It is the buyer who must hire transportation from the port of

shipment to the final destination of the goods. However the
buyer can ask the seller to contract transport on usual
conditions, at the risk of the buyer. fte seller may reject
the request and in this case, he should inform the buyer as
soon as possible.
fte risk in transporting the goods is transferred from buyer

to seller at the time of delivery, i.e. when the goods are
placed alongside the ship, within reach of the media handling
of cargo.
fte buyer bears all risks of transport from the time the
merchandise is delivered in agreed time and place if:
Does not notify the seller the loading dock, the name of the
ship and the precise date of loading, within the agreed
period time.
fte ship named by the buyer does not come at the agreed
time or cannot take care of the goods.
(warehousing) and risks (loss
or damage) in transporting the goods from the agreed delivery
date or, if there is no specific date, from completion of the
agreed delivery period.
To transfer the risk, it is necessary that the goods

transported can be identified and individualized as the
goods object of the sale contract. Also, the seller must
notify the buyer in a reliable way that he has put the goods
at his disposal at the place of delivery.
Insurance contract


FAS


Inland transportation (pre-carriage) to shipment port in
sellers country.
Costs in the port of shipment (warehousing, handling).
costs:
Loading in the ship in the port of shipment.

Sea transport till the port of destination.
Terminal costs (unloading, handling, warehousing) in the
port of destination.
Inland transportation (on-carriage) from the port of

destination to the buyers premises.
Methods of payment
FAS can be used with any payment methods (payment in advance,

documentary credit). In the case of documentary methods, it
is advisable to use a bill of lading B/L on board (on-board
FAS
B/L) that confirms the shipment of the goods on the ship.

fte seller can include in the bill of lading the clause to
order thereby maintaining possession of the goods until
payment occurs. To justify the delivery can also be used a
Mates receipt.
On the other hand, by having the bill of lading B/L the

condition of title to the goods, the carrier or freight
forwarder that manages transportation (usually named by the
buyer) should give the seller a copy of the bill of landing
B/L since he is the owner of the goods. In that sense, the
seller will have no problem for presenting at the bank the
B/L as a document justifying the delivery and thereby
collecting the letter of credit.
PRACTICAL ADVICE TO USE FAS
FAS is an Incoterm that requires the use of sea or fluvial

transport and is really only used for international transport
of commodities and bulk. fte goods can be left on the quay
alongside the ship only when there is a specialized port
terminal.
When the goods are transported in container FCL (Full

Container Load) usually the seller delivers the goods to a
carrier at the ports container terminal and does not place
them alongside the ship. fterefore, in these cases the
Incoterm FCA should be used instead of FAS.
If the merchandise is grouped with other companies in a

container LCL (Less than Container Load), once the shipper has
consolidated the container with merchandise of several companies
is carried along with other containers to the side of the ship
and loaded onto the ship, so neither in these cases can be used
FAS, but FCA. fterefore,
most of the goods except bulk, cannot be left on a dock
alongside the ship. If the delivery place is the shipment port,
normally the Incoterm FCA is used and if the goods are delivered
on board of a ship the Incoterm to be used is FOB.
Sometimes it may happen that the load cannot be in the dock as

the ship hired by the buyer have too much depth to dock and is
necessary to use barges. In these circumstances, barges will
be paid by the seller or the buyer, depending on the customs of
the port.
When using FAS, the buyer is responsible for loading the goods
on the ship and for this reason must know very well the
practices in the port of shipment that is where, if any, there
may be problems.
FAS is used mainly for two types of operations:
Exports by shipping of products such as grain, timber,

minerals, fuels, steel products, building materials, etc.,
that are not packaged or individualized.
Exports by shipping of machinery and equipment being
transported by truck till the port. fte truck stands on
the dock alongside the ship, so that the machine is loaded
FAS
directly from the truck to the ship.

KEYS TO FAS
Only for sea or inland waterway transport. It is

Mode of transport
not advisable to use this Incoterm with
multimodal transport (containers).
Alongside the ship in the dock of the port of

Delivery place
shipment named by the buyer.
Loading/unloading of
Prepared for loading in the ship designated
the goods by the buyer.
Dock receipt or Mates receipt. When using

Delivery document
letters of credit Bill of Lading B/L with the
mention on-board.
FAS
Type of cargo Bulk, heavy loads and complex loads

(machinery).

transport

Once the goods have been placed a disposal

of the buyer in the dock of the port of
transport
shipment.

Pre-shipment
inspection
the seller.
clearance

clearance

FOB
Free On Board (named port of shipment)
Costs Risks
Documents
HOW TO USE FOB

FOB
FOB is the oldest Incoterm and together with CIF the most
widely used with sea transport. fte seller delivers the
goods by placing them on board the ship named by the buyer in
the port of shipment. fte terminal costs and export
clearance are borne by the seller.
ftis Incoterm should be used preferably with bulk, heavy loads

and general cargo. Also, in the case of complex goods (e.g.
machinery) whose loading on board the ship may involve some risk
so it is better that the seller assumes this risk till the
loading has been completed and the goods delivered.
When the goods are transported in containers and the place of

delivery is the port of shipment, Incoterms 2010 rules
advised to use FCA instead of FOB, because the containers are
delivered regularly in the ports container terminal and not
loaded on board the ship.
Although FOB has traditionally been one of the most commonly

used Incoterms the evolution of sea transport and the
importance of logistics as a sales strategy have diminished the
use of this Incoterm that is being gradually replaced by other
terms like CFR or CIF.
FOB MAIN CHARACTERISTICS
Mode of transport

(rivers, canals, lakes) transport. When the goods are carried
in containers, FCA should be used as containers are delivered
in port terminals and not on board of ships.
fte seller must deliver the goods on board the ship named by
the buyer in the port of shipment. fte delivery should be
made on the date or deadline agreed. If no specific loading
point has been indicated by the buyer, the seller may select
the point within the port of shipment that best suits him.
For those products (raw materials, commodities, etc.) that can

be sold during the transport of goods at sea (afloat), the rules
of this Incoterm state that the goods can be delivered on board
FOB
the vessel or providing the goods so delivered. fte latter

expression refers to the merchandise can also be delivered after
the buyer placed the goods alongside the vessel, for example
during the voyage to destination port, so that the first buyer
can sell the goods to another buyer using the documentation of
the first sale.
fte buyer is required to collect the goods in the port of

shipment and date agreed, if the seller properly notified him
in due time.
fte goods must be delivered on board of the ship; i.e. the

loading on the ship is borne by the seller. ftis is a relevant
difference with respect to the rules of Incoterms 2000, in which
the goods were delivered once had passed the ships rail, and
therefore, the costs and risks of loading on the ship were
shared by buyer and seller. According to Incoterms 2010, the
loading on the ship should be done entirely by the seller.
Delivery document
fte seller must provide the buyer with a document showing
the delivery of the goods at the agreed conditions, usually a
copy of the bill of lading B/L is used. A mates receipt can
also be used because is a document signed by the First
Officer which acknowledges receipt of the goods on board.
fte advantage of the latter is that the seller can obtain it
directly while in the case of bill of lading B/ L must ask
the carrier of the buyer. fte carrier is obliged to give the
seller a copy of the bill of lading B/ L because constitutes
title of the goods and the owner is the seller.


Shipping documents (bill of lading B/L or seaway bill of

lading SWB) must be obtain by the buyer who is the one that
hires sea transport.

procedures.
FOB
Transport contract
It is the buyer who must hire transportation from the port of

shipment to the final destination of the goods. However the
buyer can ask the seller to contract transport on usual
conditions, at the risk of the buyer. fte seller may reject
the request and in this case he should inform the buyer as
soon as possible.
fte risk in transporting the goods is transferred from buyer

to seller at the time of delivery, i.e. when the goods are
placed on board the ship named by the buyer in the port of
shipment.
fte buyer bears all risks of transport from the time the
merchandise is delivered in agreed time and place if:
Does not notify the seller the loading dock, the name of the
ship and the precise date of loading, within the agreed
period time.
fte ship named by the buyer does not come at the agreed
time or cannot take care of the goods.
(warehousing) and risks (loss or damage) in transporting the
goods from the agreed delivery date or, if there is no specific
date, from completion of the agreed delivery period.
place of delivery.
Insurance contract


FOB


sellers country.
Costs in the port of shipment (warehousing,
handling, loading). fte buyer assumes the

following operational costs:
Sea transport till the port of destination.

Methods of payment
FOB can be used with any payment methods (payment in advance,

documentary credit). In the case of documentary methods is
advisable to use a bill of lading B/L on board (on-board B/L)
that confirms the shipment of the goods on the ship. fte
seller can include in the bill of lading the clause to order
thereby maintaining possession of the goods until payment
occurs. To justify the delivery can also be used a Mates
receipt.
FOB
On the other hand, by having the bill of lading B/L the

condition of title to the goods, the carrier or freight
forwarder that manages transportation (usually named by the
buyer) should give the seller a copy of the bill of lading
B/L since he is the owner of the goods. In that sense, the
seller will have no problem for presenting at the bank the
B/L as a document justifying the delivery and thereby
collecting the letter of credit.
PRACTICAL ADVICE TO USE FOB
FOB is the oldest of all Incoterms. Its use is accredited by

English merchants in the early nineteenth century. It was create
only for sea transport at that time it was the only means of
international transport and today it also continues its
exclusive maritime use under rules of Incoterms 2010. However,
the extensive use of this Incoterm has led sometimes to use FOB
with international air transport and when the place of delivery
is an airport. ftis error may be particularly serious if the
payment method of the operation is a letter of credit and
discrepancies arise in the terms agree in the sale contract.
In this Incoterm, all costs of handling at the port of

shipment are borne by the seller. In the language of
international logistics this costs are known as THC (Terminal
Handling Costs). ftough in the THC are included the cost of
loading the goods on the ship, this cost is usually charged
jointly with the freight cost (paid by the buyer), so to
avoid duplication in their collection, buyer and seller
should agree on who bears the costs of loading the goods the
ship, although, according to Incoterms 2010 rules this cost
must be paid by the seller.
FOB do not fit well with sea transport operations in which the
goods are carried in containers, either in FCL (Full Container
Load containers with goods from one supplier) or LCL (Less
than Container Load when merchandise of several companies is
grouped in a container). When the goods are delivered to the
ports container terminal and then loaded together with other
containers Incoterms 2010 rules recommend the used of FCA
instead of FOB.
In ships type RO-RO (roll-on/roll-off) were the goods are not

really loaded on the ship as they enters directly into the ship
through a ramp is more appropriate to use other Incoterms as
FCA, CFR or CIF rather than FOB as the goods are not loaded on
board.
It is advisable to use FOB when the goods are of some added
value or delicate handling
such as the case of machinery because the risk in loading the
ship is higher and therefore it is preferable that the seller
controls the loading of goods. If goods are damaged before or
during the load on the ship, the seller will be responsible, but
if the goods are damaged once the loading has been done, the
buyer will bear the damage.
When using FOB, the risk of theft of goods in the port of

shipment and the risk of a workers strike are borne by the
FOB
seller; on the contrary warehousing costs of the goods at the

port of shipment due to a delay of the ship that comes to
collect them are assume by the buyer.
FOB is useful for the following types of international
operations:
Exports in which the seller has no experience in managing

sea transport operations and, therefore, it is preferable
that the negotiations and hiring of such transport is done
by the buyer.
Exports in which the buyer can get a price of shipping
(freight) cheaper than the seller because of its trading
volume or the transport route to be used.
General cargo operations or large volume of goods traveling
by ship but not in containers because in that case FCA should
be used.
Although FOB has traditionally been one of the most commonly
used Incoterms, the evolution of sea transport and the
importance of logistics as a sales strategy have diminished
the use of this Incoterm that is being replaced by other
terms in C like CFR or CIF. Also, due to the
recommendations made in Incoterms 2010 rules in order to
avoid the use of FOB when the merchandise travels in
containers has made that Incoterm FOB will gradually being
replaced by Incoterm FCA when delivery takes place in the
port of shipment.
KEYS TO FOB

Mode of transport
On board the ship in the port of shipment

Delivery place
chosen by the buyer.
On board the ship named by the buyer.
the goods
Bill of Lading B/L (with the mention on-board

Delivery document
when using letters of credit) or Mates receipt.
Type of cargo Heavy loads, complete loads or complex loads

FOB
(machinery).

transport

Once the goods have been placed a disposal

transport of the buyer on board of the ship in the port of
shipment.

Pre-shipment
inspection
the seller.
clearance

clearance
CPT
Carriage Paid To (named place of destination)
Costs Risks
Documents
HOW TO USE CPT

CPT
In Incoterm CPT the delivery of goods occurs when the seller

makes them available to the carrier that he has hired to
perform international transport, although the seller also
manages and assumes the costs of international transport to
the place of destination. fterefore, the point where the
risk of transport is transferred (when the goods are delivered
to the carrier in the sellers country) is different from the
point till the seller bears the costs of transport (named
place of destination in the buyers country).
In the event that there are several successive carriers, such

as multimodal transport or truck-air or truck-ship, the
transport risk passes from the seller to the buyer when the
goods are delivered to the first carrier in the chain.
In CPT, unlike Incoterm CIP, the seller has no obligation to

hire insurance transport to cover the goods from the place of
delivery to destination.
In this Incoterm, the seller has to complete the formalities and

bear the costs of customs clearance for export, not the import
clearance that corresponds to the buyer.
CPT MAIN CHARACTERISTICS
Mode of transport
CPT can be used with any mode of transport (land, sea, air),
fte seller fulfills the obligation to deliver when he makes

the goods available to the carrier that he has hired in the
place he has chosen, usually in their own country. If seller
and buyer did not agree on a specific place of delivery, the
seller may choose the one that best suits them. fte delivery
should be made on the date or deadline.
If there were several successive carriers transporting goods

to the destination, it is understood that the obligation to
deliver is fulfilled when the goods have been delivered to
the first carrier in the chain.
CPT
fte buyer is required to collect the goods at the place and

date agreed, if the seller properly notified him in due time.
fte goods are delivered loaded in the first carrier who has
been hired by the seller. fterefore, all costs and risks of
unloading the goods at destination are borne by the buyer.
However, it is common that the carrier hired by the seller to

transport the goods to destination will be interested to have
their means of transport (trucks, ships, aircraft) free as
soon as possible so that the discharge is usually included in
the port (terminal discharge) paid by the seller. ftat is,
the unloading at destination, except in the case of sea
transport is usually paid by the seller, though according to
Incoterms rules shall be borne by the buyer. In the event
that, according to the contract of carriage, unloading costs
are borne by the seller, the buyer may not claim a refund,
unless both parties agree.
Delivery document
fte seller must give the buyer the usual transport document for
the type of transport to be hired like carriage of goods by road
CMR (land transport), bill of lading B/L (sea transport), airway
bill AWB (air transport), railway bill of lading CIM (train
transport) or FIATA bill of lading FBL (multimodal transport).
ftese documents are usually nominal, i.e. the goods are
consigned to a persons name or company.
In the case of the bill of lading B/L also can be to the
order, so that the holder of the original documents can
transmit the possession of the goods to another person or
company by endorsement.
fte transport document used to justify the delivery of goods

must meet the following requirements:
Include the contract goods.
Be dated within the period that has been established for
loading or shipping.
Allow the buyer claiming delivery of goods to the carrier
at destination.
Where agreed between the parties or if it was normal
business practice, the transport document must allow the
buyer to sell the goods to another buyer during the
transport, from the place of delivery to destination. To
this end, in the case of a negotiable document, such as a
bill of lading B/L the seller must provide the buyer with
a full set of originals so he can make the sale.

CPT


destination; and those documents relating to security in the
transport of the goods from the delivery place to the final
destination. fte buyer must pay the seller for expenses made
to obtain such information and documents.

FIATA bill of lading FBL) shall be obtained by the seller.

procedures.
Transport contract
It is the seller who must arrange transportation from the
place of delivery to the place of destination. When the
seller hires transportation will choose a common transport
route between the two places (delivery and destination) and a
means of transportation (truck, aircraft, ship) that is
appropriate for the type of goods being transported.
Transfer of risk in transport
fte risk in transporting the goods is transferred once the

goods have been delivered to the carrier that transport them
to destination in buyers country. If several carriers are
involved in transporting the goods, the risk is transferred
when the goods are delivered to the first carrier in the
chain. fterefore, the buyer bears all risks of transport,
including the risks that may occur during international
transport from the place of delivery to the place of
destination.

Insurance contract
Neither party has the obligation to hire transport insurance.
If the buyer wants to cover the goods with insurance for the
international transport he must hire the insurance or use
Incoterm CIP which is equivalent to CPT but with transport
CPT
insurance hired by the seller, though in the case of damage

the beneficiary of the insurance is the buyer.




port, airport in sellers country.


costs:


CPT
Methods of payment
CPT can be used with any method of payment. However, if the

goods have high value (e.g. machinery) the documentary
methods (letter of credit or documentary credit) will require
insurance to cover the international transport and in this
case Incoterm CIP should be used instead of CPT.
PRACTICAL ADVICE TO USE CPT
CPT is an Incoterm lesser used than CIP, except when it comes

to sales between nearby countries without no customs and the
value of goods is not very high so is not considered
necessary to hire insurance to cover international transport.
In these circumstances, CPT is quite favorable for the seller

because it allows him to deliver the goods at a place chosen by
the buyer in his own country, without the need for customs
clearance of export and import. Moreover, if the goods do not
have much value and the international transport implies few
risks, there will be no need for a transport insurance carrier.
In addition, the seller transfers the risk of transport when
loading the goods on the first means of transport (usually
truck) so any subsequent incidence is borne by the buyer.
Incoterm CPT is used sometimes with land transportation
(truck) between neighboring countries without customs to
deliver the goods at buyers premises and is the
buyer who bears the risk of transport to destination. In this
cases the cost of transport in the country of destination (on
carriage) is assumed by the seller.
For the buyer, Incoterm CPT is not too favorable from the
standpoint of risk in transport. Most of the times the
buyer will prefer to use other Incoterms as CIP, DAP or FCA;
in CIP the goods are covered by transport insurance paid by
the seller; in DAP the risk of transport is transfer in the
destination country; and in FCA, although the buyer has to
bear the risk of transport and the goods are delivered in its
own country origin, it is the buyer who makes the decisions
regarding the hiring of transport insurance and, therefore,
carries out a better control of the risks.
CPT is useful for the following types of international
operations:
When the seller wants to place the goods at the buyers

country, but without assuming the risk and the cost of
transport insurance.
In operations between neighboring countries, with no
customs so it is not necessary clear goods for export
and import, and the goods are to be delivered at the
buyers premises but without the seller assuming the risk of
transport.
CPT
For exports between developed countries where the risk of

transport is limited and is not considered essential to hire
a transport insurance.
In operations that due to the low value of the goods is
not necessary to hire a transport insurance.
KEYS TO CPT

Mode of transport
Different delivery places in buyers country

Delivery place
(transport centers, airports, ports, etc.).
Loaded in the international transport hired
the goods by the seller.
Delivery document Transport document (CMR, B/L, AWB).

cargo, groupage).
CPT
Contract of main Seller.

transport

When the goods are delivered to the first

transport carrier hired by the seller.

Pre-shipment
inspection by regulations or institutions in the country of
the seller.
clearance

clearance
account, check. It is also suitable for
Methods of payment
documentary credit), except for high value
goods that should be insured.
CFR
Cost and Freight (named port of destination)
Costs Risks
Documents
HOW TO USE CFR

CFR
In Incoterm CFR the seller delivers the goods on board of a

ship in the port of shipment, but he also manages and pays
the cost of freight to the port of destination. fterefore,
the point where the risk of transport is transmitted (port of
shipment) is different from the point to which the seller
bears the costs of transport (port of destination). fte
terminal costs and export clearance in the port of shipment
are borne by the seller.
fte only difference between Incoterms CFR and CIF is that

in CFR the seller is not obliged to hire an insurance
transport from the port of shipment to the port of
destination.
CFR is a sea transport Incoterm used mainly for general cargo

and large volumes of goods. When the goods are transported in
containers and the place of delivery is the port of
destination, Incoterms 2010 rules advised to use CPT instead
of CFR, because the containers are usually delivered at the
terminals of the ports, that is, before being placed on board
of the ships.
CFR MAIN CHARACTERISTICS
Mode of transport

(rivers, canals, lakes) transport. When the goods are
transported in containers and the place of delivery is the
port of destination, Incoterms 2010 rules advised to use CPT
instead of CFR, because the containers are delivered regularly
in the ports container terminal and not loaded on board the
ship.
fte seller must deliver the goods on board of the ship or

procuring the goods so delivered in the shipping port of his
choice. ftis last phrase procuring the goods so delivered
refers to the merchandise can also be delivered after its first
delivery to the buyer on board the ship, for example during
transport of goods at sea, so that the first buyer can sell
the goods to another buyer using the documents of the
CFR
operation that has already begun. ftis type of sale is used

in international trade of certain products like raw
materials, commodities, fuel, etc.
fte seller is responsible for choosing the port of shipment

and the ship that will transport the goods to the
designated port on the destination country. If the buyer was
interested in a certain port to ship the goods must be
specified in the sale contract.
fte delivery should be made on the date or deadline. If the

parties agree, the buyer is entitled to determine a date or
deadline for the shipment of goods as well as a specific
point to receive the goods at the port of destination.
fte buyer is obliged to collect the goods from the carrier

hired by the seller at the port of destination, provided that
the seller has duly notified him in a timely manner.
fte goods are delivered on board the ship and ready for
unloading. fterefore, all costs and risks of unloading the
goods at the port of destination are borne by the buyer,
unless the contract of carriage states that this costs are
borne by the seller. In that case, the seller cannot claim a
refund to the buyer, unless both parties agree.
Delivery document
fte document that justifies the obligation to deliver is the

bill of lading B/L marked with the mention freight prepaid,
which means that the selling price of the goods includes the
cost of freight.
fte transport document that justifies the delivery must meet
the following requirements:
shipment.

at the port of destination.
Allow the buyer, unless otherwise agreed, to sell the
goods to another buyer during the sea voyage from the
port of shipping to the port of destination. In this case,
as the bill of lading B/L is a negotiable document the
seller must provided the buyer with a full set of
originals so he could make the sale.

CFR

certificates, licenses and authorizations, etc.). fte
document of sea transport (bill of lading B/L) shall be
obtained by the seller.

destination, and those documents relating to security in the

procedures.
Transport contract

shipping port to destination port. When the seller hires
transportation will choose a common transport route between
the two ports and a type of ship that is appropriate for the
kind of goods being transported.

fte risk in transporting the goods is transferred after the
goods have been delivered on board the ship at the port of
shipment chosen by the seller. From that moment the buyer
bears all risks of transport, including the risks that may
occur during sea transport until the arrival of the goods at
the port of destination.
at his disposal in the port of destination.
Insurance contract
If the buyer wants to cover the goods with insurance for the
international transport he must hire the insurance or use
Incoterm CIF which is equivalent to CFR but with transport
insurance hired by the seller though in the case of damage
the beneficiary of the insurance is the buyer.

the seller; in this case the cost are borne by the seller.
CFR


sellers country.
Costs in the port of shipment (warehousing, handling,
loading).
Sea transport to the port of destination.
fte buyer assumes the following operational costs:


Methods of payment
CFR can be used with any method of payment. However, if the

goods have some value, usually the letter of credit will
required to have insurance to cover transport and in this case
should be used Incoterm CIF that is the equivalent of CFR, but
with insurance purchased by the seller in favor of the buyer.
When CFR is used in letters of credit, the bill of lading

B/L, besides being the contract of carriage, also serves to
transfer possession of the goods. In that cases, the seller
can enter in the bill of lading the clause to order, thereby
CFR
maintaining possession of the goods until payment is made.
PRACTICAL ADVICE TO USE CFR
ftere are former names of this Incoterm such as C&F or C+F

that are still used though are not correct. According to
Incoterms 2010 rules the term used should only CFR.
ftis Incoterm is used exclusively with sea transport and has

essential differences with other sea Incoterms like FOB and
CIF:
In relation to FOB: in CFR the seller assumes the cost of

shipping while in FOB is assumed by the buyer.
In relation to CIF: in CFR the seller is not obligated to
hire insurance transport while in CIF the seller must hire an
insurance whose beneficiary in case of damage is the buyer.
Moreover, in this three terms (FOB, CFR and CIF) the risk in
transporting the goods is transferred from seller to buyer in
the same place, i.e. once the goods have been placed on board
the ship at the shipping port in the selling country.
For the transport of goods in containers is not advisable to use

CFR as containers are not delivered loaded on board a ship but
in the container terminals in ports. Nor is suitable to use CFR
for bulk or commodities since there are other Incoterms such
as FAS more suited to the characteristics of such goods. In the
case of high value goods (e.g. machinery) would be preferable to
use a Incoterm requiring the hiring of insurance transport such
as CIF.
For the buyer, CFR has the disadvantage of not intervening in

the choice of carrier or the ship that will carry the load,
and in this sense, must be very aware of the contract of
transport.
It is advisable to use CFR:
For sea transport in which the seller wants to place the

goods in a port in the buyers country, but without
assuming the risk of transportation or the cost of hiring
a insurance transport.
In general cargo or large volumes of goods that travel by
ship but not in containers because in that case the
Incoterm that should be used is CPT.
For sea transport operations where there is the
possibility of selling the goods in transit to the port of
destination, while such goods are not insured because in
that case the Incoterm to be used is CIF.
CFR
KEYS TO CFR

Mode of transport

Delivery place
chosen by the seller.
On board the ship chosen by the seller.
the goods
Delivery document Bill of lading B/L with the mention freight

prepaid.
Type of cargo Mainly general cargo and complete cargo.

transport
CFR

Once the goods have been placed on board of

transport the ship in the port of shipment.

Pre-shipment
the seller.

clearance

clearance
account, check. It is also suitable for
Methods of payment
documentary credit), except for high value
goods that should be insured.
CIP
Carriage Insurence and Paid to (named place of destination
Costs Risks
Documents
HOW TO USE CIP

CIP
In the Incoterm CIP, the seller delivers the goods in their

own country when loading them in the first carrier hire by
himself, but he pays for costs of international transport to
bring the goods to their destination in the buyers country.
fte buyer assumes all the risks once the goods have been
delivered to the carrier in the country of the seller. If
subsequent carriers are used to bring the goods to the place
of destination, the risks are transferred from seller to
buyer when the goods have been delivered to the first
carrier.
Under Incoterm CIP the seller must hire insurance to cover

the risk borne by the buyer for loss or damage of goods
during international transport. Consequently, the seller
contracts for insurance and pays the premium, although the
beneficiary of the insurance is the buyer. However, the buyer
has to take into account that Incoterm CIP requires the
seller only an insurance with minimum coverage (Clause C of
the Institute Cargo Clauses). If the buyer wants a larger
coverage, he needs to agree with the seller to hire
additional insurance.
In this Incoterm, the seller has to complete the formalities and

CIP MAIN CHARACTERISTICS
Mode of transport
CIP can be used with any mode of transport (land, sea, air)
and especially with multimodal transport (containers).
fte seller fulfills the obligation to deliver when he makes

the goods available to the carrier that he has hired in the
place he has chosen, usually in his own country. If seller
and buyer did not agree on a specific place of delivery, the
seller may choose the one that best suits them. fte delivery
should be made on the date or deadline.
If there were several successive carriers transporting goods

to the destination, it is understood that the obligation to
deliver is fulfilled when the goods have been delivered to
the first carrier in the chain.
fte buyer is required to collect the goods at the place and

CIP
date agreed, if the seller properly notified him in due time.
fte goods are delivered loaded in the first carrier who has
been hired by the seller. fterefore, all costs and risks of
unloading the goods at the destination are borne by the buyer.
However, it is common that the carrier hired by the seller to

transport the goods to destination will be interested to have
their means of transport (trucks, ships, aircrafts) free as
soon as possible so that the discharge is usually included in
the port (terminal discharge) paid by the seller. ftat is,
the unloading at destination, except in the case of sea
transport is usually paid by the seller, though according to
Incoterms rules shall be borne by the buyer. In the event
that, according to the contract of carriage, unloading costs
are borne by the seller, the buyer may not claim a refund,
unless both parties agree.
Delivery document
fte delivery is justified by two documents:

Transport document: depending on the type of transport can
be carriage of goods by road CMR (land transport), bill of
lading B/L (sea transport), airway bill AWB (air
transport), railway bill of lading CIM (train transport)
or FIATA bill of lading FBL (multimodal transport).
Document of transport insurance: insurance policy or insurance
certificate.
fte transport document used to justify the delivery of goods
must meet the following requirements:
loading or shipping.
at destination.
Where agreed between the parties or if it was normal
business practice, the transport document must allow the
buyer to sell the goods to another buyer during the
transport from the place of delivery to destination. To
this end, in the case of a negotiable document, such as a
bill of lading B/L, the seller must provide the buyer with
a full set of originals so he can make the sale.

CIP

certificates, licenses and authorizations, etc.).
fte seller must provide the buyer with a copy of the

transportation insurance policy or certificate of insurance
to have proof that insurance has been hired according to
agreed conditions.



procedures.
Transport contract

place of delivery to the place of destination. When the
seller hires transportation will choose a common transport
route between the two places (delivery and destination) and a
means of transportation (truck, aircraft, ship) that is
appropriate for the type of goods being transported.

goods have been delivered to the carrier that transport them
to destination in buyers country. If several carriers are
involved in transporting the goods, the risk is transferred
when the goods are delivered to the first carrier in the
chain. fterefore, the buyer bears all risks of transport,
including the risks that may occur during international
transport from the place of delivery to the place of
destination.

place of delivery.
Insurance contract
In Incoterm CIP, the seller has an obligation to the buyer to

CIP
hire an insurance policy covering transport, at least, transport

from the place of delivery to the place of destination.
However the seller is only required to purchase a policy with
minimum coverage, which is known as a C Clause in the
classification of policies of the Institute Cargo Clauses
(IUA/LMA). If the buyer wants additional coverage should agree
specifically with the seller or hire his own insurance policy.
fte insurance of transport made by the seller must fulfill

Cover at least the transport of goods from the place of

delivery to the place of destination.
Cover at least the sales contract price plus 10%, i.e. the
sum insured must be 110% of the contract price.
Cover at least the risks specified in Clause C of the
Institute Cargo Clauses (IUA/ LMA) or other similar terms.
Contract with an insurance company that has a good
reputation.
Contract in the same currency of the contract of sale.
Grant the insurance beneficiary (the buyer) or other
company or physical person having insurable interest in the
goods the right to claim directly to the insurer in case
of disaster.
If the buyers request it, the seller must hire, on the account
and risk of the buyer, an transport insurance policy that
provides coverage beyond those set out in the compulsory
insurance contract. ftese coverage can be provided by Clause A
or B, or others like the War Clause or the Strike Clause, all
issued by the Institute Cargo Clauses (IUA/ LMA).



CIP



transport center, port, airport in sellers country.
Main transport to the delivery place in the country of
destination.
Insurance transport (minimum coverage) from the place of


costs:

transport center, port, airport in sellers country.
transport center, port or
airport in buyers country.

Methods of payment
CIP can be used with any method of payment. It is useful for

the documentary methods (letter of credit and documentary
credit) as it is the seller who hires transportation and
therefore have the corresponding transport document (CMR,
B/L, AWB or FBL) that can provide the buyer with the rest of
documentation to meet the payment terms of credit. Moreover,
the transport contract made by the seller is to the place of
destination specify on the Incoterm, which is the same place
mentioned in the issue of the letter of credit.
CIP
PRACTICAL ADVICE TO USE CIP
Incoterm CIP is increasingly used as the trend nowadays is

that the seller offers a higher level of service to the buyer
and place the goods in the country of destination. On the
other hand, is very versatile and can be used with any means
of transport and type of cargo (general, complete or
groupage).
fte only difference between CPT and CIP is that in CIP the
seller is required to hire and pay for insurance transport of
goods to the destination, although the beneficiary of
insurance and the one that must claim compensation from the
insurance company in case of disaster is the buyer.
fterefore, before closing a transaction with Incoterm CIP the
buyer must require the seller to hire an insurance with a
well known insurance company and payable in the buyers
country.
According to Incoterms 2010 for CIP Incoterm the seller has

the obligation to hire minimum insurance coverage; this
coverage corresponds to Clause C of the Institute Cargo
Clauses of London (IUA/LMA). However, if the goods are of
some value indeed for all manufactured goods, the buyer
should be required to hire the maximum coverage (Clause A).
Normally, the buyer may require these conditions if a letter
of credit is used as payment. If seller and buyer do not
reach an agreement as to the insurance, the buyer always has
the option of hiring their own additional insurance.
One advantage for the seller of using CIP is that once he has
placed the goods at the buyers country he does not to clear
them for import; that is important because
in some countries customs is very complex. However, using this
Incoterm facilitates customs clearance in the country of
destination as the CIF value for sea transport (or its
equivalent for different means of transport) is used in most
customs to apply import taxes.
For the buyer, Incoterm CIP is also a very favorable because

it allows him to receive the goods at home and covered with
an insurance transport, though the risk of international
transport is assumed by him.
On the other hand, when the buyer uses Incoterm CIP and
payment is made at the same moment of the delivery of the
goods, the buyer must ensure that the seller cannot
instruct the carrier to change the destination of the goods.
For this, the transport documents (CMR, B/L, AWB) provide the
buyer with a duplicate original that it is used to prevent
the seller from giving new instructions to the carrier. In
the case of bill of lading B/L does not usually have this
preventive function, but allows for a disposal clause which
prevents the seller to order the carrier to deliver the goods
to a third party in a different place that stipulated.
It is advisable to use CIP:
CIP
When the seller wants to offer a good level of service to

the buyer by placing the goods in the country of
destination and covered with insurance transport.
In land transport operations (truck) between nearby countries
in which there are no customs and therefore is not necessary
to clear goods for export and import. In this case, using
CIP the seller can deliver the goods at buyers premises
(factory or warehouse). DAP would be equivalent with the
difference that in this Incoterm the risk of transport is
borne by the seller.
In air transport operations of some value and where there
is a risk that justifies the use of letter of credit as
payment method. fte seller delivers the goods docu-
mentation (including the airway bill) against payment of
the credit.
In multimodal transport operations in which the goods
travel in containers with a single transport document that
is the multimodal bill of lading FBL. In these situations,
if the destination is a port, the Incoterms 2010 advised
to use CIP instead of CIF.
KEYS TO CIP

Mode of transport
specially multimodal transport (containers).
Different delivery places in buyers country

Delivery place
(transport centers, airports, ports, etc.).
Loaded in the international transport hired
the goods by the seller.
Transport document (CMR, B/L, AWB)

Delivery document
and insurance document (policy or
certificate).
cargo, groupage).

transport
CIP
The seller is obliged to hire insurance

Contract of transport whose beneficiary is the buyer. Only
insurance requires a minimum insurance coverage
(Clause C of the Institute Cargo Clauses).
When the goods are delivered to the first

carrier hired by the seller.
transport

Pre-shipment
inspection
the seller.
clearance

clearance
Methods of payment account, check. It works very well with
CIF
Cost, Insurance and Freight (named port of destination)
Costs Risks
Documents
HOW TO USE CIF

CIF
CIF has historically been a widely used Incoterm because, in

addition to placing the goods at the port of destination in
the buyers country, the CIF value is used in most of the
customs to apply tariffs and import taxes, so using this
Incoterm facilitates to clear the goods for import.
In Incoterm CIF the seller delivers the goods on board of a

ship in the port of shipment, but he also manages and pays
the cost of freight to the port of destination. fterefore,
the point where the risk of transport is transferred (port of
shipment) is different from the point to which the seller
bears the costs of transport (port of destination).
fte costs of terminal in the port of shipment are borne by

the seller. Unlike Inco- term CFR, the seller is obliged to
hire insurance transport covering at least the way from the
port of shipping to the port of destination. fte insurance
shall cover the price of the contract plus 10% (i.e., 110%).
fte beneficiary of this insurance and, therefore, the one
that must apply to the insurer for compensation in case of
disaster is the buyer.
CIF is used only for sea transport and usually for general cargo
of both consumer products and industrial products of high value.
If the goods travel in containers Incoterms 2010 rules
recommends the use of Incoterm CIP.
CIF MAIN CHARACTERISTICS
Mode of transport

(rivers, canals, lakes) transport. When the goods are carried
in containers and the place of delivery is the port of
destination, Incoterms 2010 rules advised to use CIP instead
of CIF, because the containers are delivered usually in the
ports container terminal and not loaded on board the ship.
fte seller must deliver the goods on board of the ship or

procuring the goods so delivered in the shipping port of his
choice. ftis last phrase procuring the goods so delivered
refers to the merchandise can also be delivered after its first
delivery to the buyer on board the ship, for example during
transport of goods at sea, so that the first buyer can sell
the goods to another buyer using the documents of the
CIF
operation that has already begun. ftis type of sale is used

in international trade of certain products like raw
materials, commodities, fuel, etc.
fte seller is responsible for choosing the port of shipment

and the ship that will transport the goods to the designated
port on the destination country. If the buyer was interested
in a certain port to ship the goods must be specified in
the sale contract.
fte delivery should be made on the date or deadline. If the

parties agree, the buyer is entitled to determine a date or
deadline for the shipment of goods as well as a specific
point to receive the goods at the port of destination.

hired by the seller at the port of destination, provided that
the seller has duly notified him in a timely manner.
fte goods are delivered on board the ship and ready for
unloading. fterefore, all costs and risks of unloading the
goods at the port of destination are borne by the buyer,
unless the contract of carriage states that this costs are
borne by the seller. In that case, the seller cannot claim a
refund to the buyer, unless both parties agree.
Delivery document
fte obligation to deliver is justify by two documents: the

transport document and the insurance document. fte first is
the bill of lading B/L marked with the mention freight
prepaid, which means that the selling price of the goods
includes the cost
of freight. fte document of transport insurance can be the
insurance policy or a insurance certificate.
fte transport document that justifies the delivery must meet

shipment.

at the port of destination.
Allow the buyer, unless otherwise agreed, to sell the
goods to another buyer during the sea voyage from the
port of shipping to the port of destination. In this case,
as the bill of lading B/L is a negotiable document the
seller must provided the buyer with a full set of
originals so he could make the sale.
Documents for export/import procedure

CIF

certificates, licenses and authorizations, etc.). fte
document of sea transport (bill of lading B/L) shall be
obtained by the seller.
fte seller must provide the buyer with a copy of the

transportation insurance policy or certificate of insurance
to have proof that insurance has been hired according to
agreed conditions.


procedures.
Transport contract
shipping port to the destination port. When the seller
hires transportation will choose a common transport route
between the two ports and a type of ship that is appropriate
for the kind of goods being transported.

goods have been delivered on board the ship at the port of
shipment chosen by the seller. From that moment, the buyer
bears all risks of transport, including the risks that may
occur during sea transport until the arrival of the goods to

reliable way that he has put the goods at his disposal in the
Insurance contract
In Incoterm CIF, the seller has an obligation to the buyer to

hire an insurance policy covering transport, at least, from the
port of delivery to the port of destination. However, the
seller is only required to purchase a policy with minimum
coverage, which is known as a C Clause in the classification
of policies of the Institute Cargo Clauses (IUA/LMA). If the
CIF
buyer wants additional coverage should agree specifically with

the seller or hire his own insurance policy.
fte insurance of transport made by the seller must fulfill

Cover at least the transport of goods from the place of

Cover at least the sales contract price plus 10%, i.e. the
sum insured must be 110% of the contract price.
Cover at least the risks specified in Clause C of the
Institute Cargo Clauses (IUA/ LMA) or other similar terms.
Contract with an insurance company that has a good
reputation.
Contract in the same currency of the contract of sale.
Grant the insurance beneficiary (the buyer) or other

company or physical person having insurable interest in the
goods the right to claim directly to the insurer in case
of disaster.
If the buyers request it, the seller must hire, on the
account and risk of the buyer, a transport insurance policy
that provides coverage beyond those set out in the
compulsory insurance contract. ftese coverage can be provided
by Clause A or B, or others like the War Clause or the
Strike Clause, all issued by the Institute Cargo Clauses
(IUA/LMA).



CIF

sellers country.
Costs in the port of shipment (warehousing, handling,
loading).
Sea transport to the port of destination.
Insurance transport (minimum coverage) from the port of

shipment to the port of destination.
fte buyer assumes the following operational costs:


Methods of payment
CIF can be used with any method of payment. It is useful for

the documentary methods (letter of credit and documentary
credit) as it is the seller who hires sea transport and
therefore have the bill of lading B/L that can provide the
buyer along with the rest of the documentation to meet the
payment terms of credit. Besides, the transport contract made
by the seller is to the place of destination specify on the
Incoterm, which is the same place mentioned in the issue of
the letter of credit.
When CIF is used in letters of credit or documentary credits,

the bill of lading B/L, besides being the contract of
carriage, also serves to transfer possession of the goods. In
this sense, the seller can enter in the bill of lading the
clause to order, thereby maintaining possession of the goods
until payment is made.
PRACTICAL ADVICE TO USE CIF
In Incoterm CIF, the seller plays an important role in

international logistics since he assumes the cost and management
of sea transport to the port of destination in the buyers
CIF
country. On the other hand, if the seller normally exports

through maritime transport can benefit from lower rates or
volume discounts on contracting with freight forwarders and
logistics operators. ftese benefits can be transferred to
their prices which will improve the competitiveness of their
offers, or include them in his markup which will lead to
increased the profitability of exports.
Moreover, although the seller does not perform the import

clearance, somehow makes it easy since most of customs laws
apply tariffs and import taxes on CIF values already
calculated in the documentation (invoice) to be provide to
the buyer in order to make import procedures.
fte differential aspect of Incoterm CIF in relation to other

Incoterms is that, while is the seller who hires and pays the
insurance, the beneficiary in case of disaster is the buyer.
fterefore, before closing a transaction with Incoterm CIF the
buyer must asked the seller to hire insurance with a company
of good reputation and payable in the buyers country.
According to Incoterms 2010, when using CIP the seller has
the obligation to hire minimum insurance coverage; this
coverage corresponds to Clause C of the In- stitute Cargo
Clauses of London (IUA/LMA). However, if the goods are of
some value indeed for all manufactured goods, the buyer
should be required to hire the maximum coverage (Clause A).
Normally, the buyer may require these conditions if a letter
of credit is used as method of payment. If seller and buyer
do not reach an agreement as to the insurance, the buyer
always has the option of hiring their own additional
insurance.
Incoterm CIF is only for sea transport, normally for general
cargo products of consumer products and industrial products of
high value (e.g. machinery).
fte use of CIF is not recommended when goods are transported

in containers either in the form of FCL (Full Container Load)
or LCL (Less than Container Load) due that containers are
delivered in port terminals and not loaded onto ships. For
these cases the Incoterms 2010 recommends the use of CIP.
It is advisable to use CIF in the following cases:
Exports of companies that already have experience in sea

transport and, therefore, it is preferable that the hiring of
such transport is performed by the seller.
Exports in which the seller can get a price of shipping
(freight) cheaper than the buyer because of their annual
procurement volume or the transport route that will be
used.
Exports in which the value of goods or the buyers
requirements make necessary to obtain insurance covering
the transport of goods between the port of shipment and
CIF
Exports in which the seller wishes to place the goods at

a port in the buyers country but without assuming the
risk of transport and unloading at destination because in
this case Incoterm DAT must be used.
General cargo operations of large volume of goods traveling
by ship but not in containers because in that case Incoterm
CIP must be used.
KEYS TO CIF

Mode of transport

Delivery place
chosen by the seller.
On board the ship chosen by the seller.
the goods
Bill of lading B/L with the mention freight

Delivery document
prepaid and insurance document (policy or
certificate).
Type of cargo Mainly general cargo and complete cargo.

CIF
transport
The seller is obliged to hire insurance

Contract of transport whose beneficiary is the buyer. Only
insurance requires a minimum insurance coverage
(Clause C of the Institute Cargo Clauses).
Once the goods have been placed on board of

transport the ship in the port of shipment.

Pre-shipment
inspection
the seller.

clearance

clearance
Methods of payment account, check. It works very well with
DAT
Delivered At Terminal (named terminal at port or place of des
Costs Risks
Documents
HOW TO USE DAT

DAT
In Incoterm DAT the seller delivers the goods unloaded at a

port terminal or another place of destination in the buyers
country. fte terminal concept is quite broad and includes
both terminals of transportation (land, air, sea) and
logistics infrastructure (ports, airports, railway stations)
or similar facilities as docks, warehouses and free zones.
Due to the different places of delivery that allows this

Incoterm is important to clearly mention the specific point
that seller and buyer have chosen for delivery so the con-
tract for international transport made by the seller conforms
to that choice.
When the seller carries the goods from the delivery terminal
to another point in the buyers country such as buyers
premises (factory or warehouse) Incoterm DAT should not be
used. fte Incoterms suitable for that situation are DAP or
DDP.
In Incoterm DAT, the seller has to complete the formalities and

DAT MAIN CHARACTERISTICS
Mode of transport
DAT can be used with any mode of transport (land, sea, air)
fte seller must deliver the goods at the port terminal or

place of destination. If the parties do not agree on a
specific terminal, the seller can choose the terminal at the
port or place of destination that suits him better. fte
delivery should be made on the date or deadline agreed.

hired by the seller at the terminal of the destination port
if the seller has duly notified in a timely manner.
DAT
fte seller delivers the goods unloaded from the

transportation that he has hired to carry the goods to the
port or place of destination.
Delivery document
fte seller must provide the buyer with a document that allows
him to collect the goods at the destination place. Normally,
this document is a delivery note of the carrier hired for the
seller that should be signed by the buyers carrier. When
delivery takes place in a port, the document used is a bill of
lading B/L with the reference discharge, meaning the cost of
unloading is included in the price.


procedures.
Transport contract
It is the seller who must arrange transportation to the

terminal at the port or place of destination. ftat includes
both the pre-carriage in the country of the seller and the
international transport to the destination terminal in buyers
country.
fte risk is transferred from buyer to seller once the goods

have been unloaded at the terminal in the port or place of
destination. fterefore, the risks of unloading in the place
of delivery are borne by the seller.
DAT

place of delivery.
Insurance contract

However, it is advisable that the seller hire a transport
insurance for international transport because he assumes
the risks. In this sense, the buyer must provide the seller,
upon request, with all information necessary to hire a




Terminal costs (warehousing, handling, loading) in sellers
country.
DAT
country.

costs:

Methods of payment
DAT as well as the two other Incoterms in which the goods are
delivered at destination (DAP and DDP) must not be used
with documentary methods of payment such as letter of credit.
In this case a transport document should be requested,
normally a carriers delivery note signed by the buyers
carrier, that serves as a proof of reception of goods at
destination. In that sense, the seller is dependent on the
effectiveness and speed of the carrier to obtain the document
in order to collect the credit. Moreover, in the case of sea
transport will be a delay of several weeks to complete the
necessary documentation to collect the credit.
On the other hand, if the letter of credit do not request a

document certifying receipt of goods at destination, the
seller may collect the credit only with documents generated
by himself (invoice, packing list, certificate of origin,
transport document, etc.), but if the goods do not arrive on
time at destination, the buyer would not be required
to pay the letter of credit and therefore a conflict would arise
once the seller would have already collect the credit.
In short, if the seller wants to use a letter of credit as

method of payment of exports is advisable to use Incoterms
CIP or CIF in which the seller controls the transport
document that serves to justify the delivery and also allows
to collect the credit once the goods have been delivered to
the international carrier in the country of origin.
PRACTICAL ADVICE TO USE DAT
ftis Incoterm was first created in the version of Incoterms

2010. It assumes the roles of Incoterms DAF (Delivered At
Frontier), DES (Delivered Ex Ship) and DEQ (Delivered Ex Quay)
that disappeared since they were very little used.
fte reason for this new Incoterm is the great number and
diversity of international logistics infrastructures that
exist nowadays and can be considered a terminal. fterefore,
when using this Incoterm is very important to specify the
DAT
place where delivery is made.
Initially, although DAT can be used with any mode of

transport, assuming the functions of DES and DEQ (both sea
Incoterms), seems more appropriate to use when goods are
delivered at a port in the buyers country.
In this Incoterm the seller has to hire freight from the port
of shipment to the port of destination and must do so in a
type of freight (known as liner terms) in which the cost of
unloading the goods are included in the price of freight,
because in Incoterm DAT the costs at the port of destination
are paid by the seller.
ftere are different alternatives to use DAT, whose choice

depends on the place of delivery:
DAT dock in tfte port of destination: it is recommend to use this

alternative for bulk cargo, heavy loads and complex loads
(machinery). Delivery takes place once the goods have been
placed in the dock at the port of destination. It would be
the equivalent to Incoterm DEQ (Delivered Ex Quay) included
in Incoterms 2000 that was eliminated in Incoterms 2010.
DAT terminal in tfte port of destination: it is suitable when the
seller wants to deliver containers unloaded at the port of
destination. fte seller assumes the risks and costs of
transport to the port of destination terminal.
DAT logistics zone in tfte country of destination: suitable for
goods that are delivered in free zones, free warehouses or
customs warehouses in order to un- dergo a transformation
and benefit from a favorable tax and customs system.
DAT transport ftub in tfte country of destination: suitable for goods
traveling in groupage by road and delivered in a
transportation hub in the country of destination, and
afterwards carried to buyers premises on his own account.
DAT air cargo center in tfte country of destination: for goods
traveling in groupage, by plane, and delivered in logistics
platforms specializing in the treat- ment of air cargo.
DAT rail terminal in tfte country of destination: for general cargo or
complete cargo (complete wagons) that are supplied unloaded
at the docks of railway terminals.
Regarding the other two Incoterms in which the goods are

delivered at destination, such as DAP and DDP, the main
differences with DAT are:
In DAT the goods are delivered unloaded while in DAP are

delivered ready for unloading.
In DAT import clearance is done by the buyer while in DDP is
done by seller.
DAT
In DAT transportation in the country of destination (on-

carriage) is assumed by the buyer, while in DAP and DDP is
assumed by the seller.
It is advisable to use DAT in the following type of exports:
Operation of heavy loads, bulk and complex goods

(machinery) in which the buyer wants to place the goods at
the dock of the port of destination. It would be the same
use as the old Incoterm DEQ, disappeared in Incoterms 2010
version.
Sales of complete containers delivered unloaded in the port
of destination.
Groupage operations in which the goods are delivered to
terminals and logistics platforms in buyers country, and
then carried to buyers premises in his own account.
Goods that are delivered on port logistics zones (free zones,
free warehouses or customs warehouses) in order to benefit
from a favorable tax and customs system.
Exports to countries at risk or with complex customs in
which it is desirable to deliver the goods in a
neighboring country that has a logistics center near the
customs office of destination country so the buyer can
collect the goods at that place and make import procedures
in the country. It would be a similar use to the old
Incoterm DAF (Delivered At Frontier) that was eliminated
in Incoterms 2010 version.
KEYS TO DAT

Mode of transport
In terminals (land, air, port) or other places

Delivery place
like docks, warehouses, free zones, in the
country of destination.
Loading/unloading of Unloaded from the means of transport hired

the goods for the seller to carry the goods to delivery
place in country of destination.
Delivery note of sellerss carrier signed by

Delivery document
buyers carrier or bill of lading B/L with the
mention discharged.
DAT

cargo, groupage).

transport

Contract of
it is advisable that the seller hires insurance
insurance
because he assumes the risks.
When the goods are unloaded from the means

transport of transport in the delivery place.

Pre-shipment
the seller.

clearance

clearance
DAP
Delivered At Place (named place of destination)
Costs Risks
Documents
HOW TO USE DAP

DAP
In Incoterm DAP the seller delivers the goods, without

unloading, at the place of destination in the buyers country.
fte transport risk is transferred from buyer to seller in the
same place where the goods are delivered.
fte place of delivery may be the buyers premises or a place

nearby, other than a transport terminal, in the country of
destination. If delivery occurs at a transport terminal or
transport infrastructure (port, airport, etc.) in the country
of destination Incoterm DAT should be used.
In this Incoterm the seller has to complete the formalities and

bear the costs of customs clearance of export, not the import
clearance that corresponds to the buyer. In the event that the
seller also clear goods for import Incoterm DDP should be
used.
ftis is a very useful Incoterm for sales between countries of

the same economic area (e.g. European Union) in which the
seller wants to deliver the goods at buyers premises but
is not necessary to clear goods for import as there are no
customs.
DAP MAIN CHARACTERISTICS
Mode of transport
DAP can be used with any mode of transport (land, sea, air)
fte seller must deliver the goods at agreed place of

destination, usually the buyers premises (factory or
warehouse) or a nearby place. If the parties do not agree on
a specific place, the seller can choose the place that suits
him better. fte delivery should be made on the date or
deadline agreed.

hired by the seller at the place of destination if the seller
has duly notified in a timely manner.
DAP
fte seller delivers the goods prepared for unloading from

the transportation that he has hired to carry them to the
place of destination. fterefore, all costs and risks of
unloading the goods in the place of destination are on the
account of the buyer.
If in the contract of carriage the unloading costs are on the

account of the seller, the seller may not claim a refund of
those, unless both parties agree.
Delivery document
fte seller must provide the buyer with a document that

allows him to collect the goods at the destination place.
Normally, this document is a delivery note of the carrier
hired for the seller signed by the buyer (if the goods are
delivered in buyers premises) or a delivery note signed by
the buyers carrier (if the goods are delivered in another
place in buyers country).


country of destination, and those documents relating to
documents.


procedures.
Transport contract
It is the seller who must arrange transportation to the place

of destination. ftat includes pre-carriage in the country of
the seller, international transport, and on- carriage to the
place of destination in buyers country.

DAP

have been delivered prepared for unloading at the place of
of delivery are borne by the buyer.

place of delivery.
Insurance contract


All procedures, costs and taxes of export clearance are borne by

the seller.
All procedures, costs and taxes of import clearance are borne by
the buyer.


country.
DAP

country.
Inland transportation (on carriage) to the place of
delivery in sellers country.

costs:
Inland transportation (on carriage), if it is hired, from

to the place of delivery in buyers country to his own
premises (factory or warehouse).
Methods of payment
DAP as well as the two other Incoterms in which the goods are
delivered at destination (DAT and DDP) must not be used
carrier, that serves a proof of reception of goods at
destination. In that sense the seller is dependent on the
and proceed to collect the credit. Moreover, in the case of
sea transport will be a delay of several weeks to complete
the documentation to collect the credit.
time at destination, the buyer would not be required to pay
the letter of credit and therefore a conflict would arise

method of payment of the export is advisable to use Incoterms
PRACTICAL ADVICE TO USE DAP
ftis Incoterm was first created in the version of Incoterms

2010. It assumes the functions of Incoterm DDU (Delivered
Duty Unpaid) that disappeared.
In DAP, goods are delivered at destination country, either on

DAP
buyers premises or at any point or nearby town that has good

transport links to the final destination of the goods.
As the delivery occurs at any point in the destination

country, it must be taken into account that the buyer must
performs customs formalities and pay import taxes in order
to meet the agreed delivery terms. fterefore, when exporting
to countries with difficult customs the seller must be
confident that the buyer will make the appropriate import
procedures so that there is no delay in delivery.
ftis Incoterm is more suitable for sales between countries

that belong to the same economic area so there are no customs
and therefore the buyer shall not clear goods for import. When
used in countries with customs there is the possibility of
delays in clearance and in that case the costs of warehousing
are on the account of the seller.
Also must be considered that if the seller hires logistics

services in the country of destination (transport, insurance,
warehousing, freight handling, etc.) it is likely that indirect
taxes (VAT) of these services cannot be deducted for tax
purposes or, in any case, its recovery will be expensive and
difficult.
Regarding the other two Incoterms in which the goods are

delivered at destination, such as DAT and DDP, the main
difference with DAP is that:
In DAP the goods are delivered prepared for unloading in

any point of destination country, except a transport
terminal, while in DAT the goods are delivered unloaded in
a transport terminal in destination country.
In DAP import clearance is done by the buyer while in DDP is
done by the seller.
It is advisable to use Incoterm DAP in the following cases:
Sales between countries without customs, preferably full

load (complete trucks or containers), in which the seller
wants to deliver the goods at the buyers premises but
without clearing goods for import.
Sales between countries without customs in which the
seller wants to deliver the goods at an inland point in
the country of destination other than a terminal or
transport infrastructure because in that case Incoterm DAT
should be used.
Sales between countries with customs but in which the
seller have experience and confidence that the buyer will
make import procedures properly and thus will not delay
the delivery of the goods at a point inside destination
country.
Exports of high value goods (e.g. jewelry, equipment,
turnkey plants) in which it is preferable that the seller
does not only hires insurance transport, but is the
DAP
beneficiary of insurance so in case of damage can manage

compensation, unlike what happens in Incoterm CIP where
the buyer assumes the risk of international transport and,
therefore, has to make the claim to the insurance company.
KEYS TO DAP

Mode of transport
a) At buyers premises (factory or warehouse)

in destination country.
Delivery place
b) In any other point in country of
destination, except in a transport terminal.
Loading/unloading of Unloaded from the means of transport hired

a) Delivery note of sellerss carrier signed by

Delivery document the buyer.
a) Delivery note of sellerss carrier signed
by the buyers carrier.
DAP

cargo, groupage).

transport

Contract of
it is advisable that the seller hires insurance
insurance
When the goods are delivered prepared for

unloading from the transportation in the
transport
delivery place.
Pre-shipment
inspection
the seller.
clearance

clearance
DDP
Delivered Duty Paid (named place of destination)
Costs Risks
Documents
HOW TO USE DDP

DDP
In Incoterm DDP the seller delivers the goods, without

unloading, at buyers premises or a nearby place in the
country of destination. fte transport risk is transferred
from buyer to seller in the same place where the goods are
delivered.
DDP is somewhat the reverse of Incoterm EXW; it represents the

greatest obligation for the seller because he assumes all costs
and risks of the operation, including import procedures, to
deliver the goods at the agreed place in the buyers country.
fte only cost do not assume by the seller is the unloading of
goods at delivery place.
Any import tax and specifically VAT, are paid by the seller,
unless the parties agree in the contract of sale that VAT or
other taxes are paid by the buyer. In that case a variant of
DDP, known as DDP VAT unpaid, should be used.
fte only difference between Incoterms DDP and DAP is that in

DDP all costs and taxes of import clearance are paid by the
seller while in DAP are paid by the buyer. In the event that the
seller has no capacity by himself or through his representatives
for doing import clearance, Incoterm DDP should not be used.
If between the country of origin and the country of

destination there is no customs (e.g. European Union) and the
goods are delivered at buyers premises, Incoterm DAP must be
used instead of DDP, because will not be necessary to clear
goods for import.
1
DDP MAIN CHARACTERISTICS
Mode of transport
DDP can be used with any mode of transport (land, sea, air)
fte seller must deliver the goods at agreed place of

destination, usually the buyers premises (factory or
warehouse) or a nearby place. If the parties do not agree on
a specific place, the seller can choose the place that suits
him better. fte delivery should be made on the date or
deadline agreed.

hired by the seller at the place of destination if the seller
has duly notified in a timely manner.
DDP
fte seller delivers the goods prepared for unloading from

the means of transport that he has hired to carry them to the
place of destination. fterefore, all costs and risks of
unloading the goods in the place of destination are on the
account of the buyer.
If in the contract of carriage the unloading costs are on the

account of the seller, the seller may not claim a refund of
those, unless both parties agree.
Delivery document
fte seller must provide the buyer with a document that

allows him to collect the goods at the destination place.
Normally, this document is a delivery note of the carrier
hired for the seller signed by the buyer (if the goods are
delivered in buyers premises) or a delivery note signed by
the buyers carrier (if the goods are delivered in another
place in buyers country).

2

country of destination; and those documents relating to
documents.


procedures.
Transport contract
It is the seller who must arrange transportation to the place

of destination. ftat includes pre-carriage in the country of
the seller, international transport, and on- carriage to the
place of destination in buyers country.
Transfer of risk in transport

DDP

have delivered prepared for unloading at the place of
of delivery are borne by the buyer.

Insurance contract


shipment are paid by the buyer, even when such inspection is
required by regulations or institutions in the country of the
seller.
All procedures, costs and taxes of both export and import

clearance are borne by the seller.
fte buyer only assumes the costs of unloading on buyers

premises. All other costs are borne by the seller:

country.
DDP

country.
Inland transportation (on carriage) to the place of
delivery in sellers country.
Inland transportation (on carriage), from terminal, port,

airport in buyers country to buyers premises (factory
or warehouse).
Methods of payment
DDP as well as the two other Incoterms in which the goods are
delivered at destination (DAT and DAP) must not be used
carrier, that serves as a proof of reception of goods at
destination. In that sense, the seller is dependent on the
in order to collect the credit. Moreover, in the case of sea
transport will be a delay of several weeks to complete the
necessary documentation to collect the credit.

time at destination, the buyer would not be required to pay
the letter of credit and therefore a conflict would arise
method of payment of exports is advisable to use Incoterms
PRACTICAL ADVICE TO USE DDP
DDP is the last of the eleven Incoterms, and somehow the

reverse of EXW: the seller pays all costs, expenses and
taxes, to place the goods at the agreed point in the
destination country. fte only cost not assumed by the seller
is the unloading of the goods at delivery place.
For the buyer, the Incoterm DDP is the most favorable

alternative since it has to assume the management, nor the
costs and risks of international operations. On the other
hand allows the buyer to compare the offer of the foreign
supplier (which includes all costs) with offerings from local
providers to see which is more competitive.
In this Incoterm usually the place of delivery are the buyers

DDP
premises (factory or warehouse) since in this way the buyer

offers a complete logistics service (which is known as door to
door). However, if the goods travel in groupage is customary
that the goods be delivered to a terminal or transportation
center. In this case the seller must use DDP carrier.
ftis Incoterm requires that the seller has experience in

managing international logistics because he will have to
carry out transport operations, customs and tax declara-
tions in countries that sometimes can become very complex.
fte seller will need local support to make the proceedings
in the best conditions of safety and speed.
Moreover, as the import clearance is done by the seller, any

change in customs regulations (e.g. an increase in tariffs
or the requirement of an import license) will mean a higher
cost of the export operation that will be difficult to
include in the price of the contract.
From the fiscal point of view, it must be taken into account

that if the seller hires transportation services in the
country of destination (handling of the goods at the
terminal, inland transportation, insurance, etc.), it is
likely that indirect taxes (e.g. VAT) of these services may
not be tax deductible or his recovery will be very costly and
difficult.
Besides, in DDP, import taxes and VAT are paid by the seller
and that could be a significant percentage of merchandise
value that will be difficult to recover. fterefore, these
taxes should be included in the price or agreed with the
buyer that VAT be on his account. In that case a variant of
DDP, known as DDP VAT unpaid, should be used.
fte only difference between DDP and DAP is that in DDP all
costs and taxes of import clearance are paid by the seller
while in DAP are paid by the buyer. In this sense, when two
countries have no customs (e.g. European Union) DDP should
not be used because clear goods for import will not be
necessary.
It is advisable to use this Incoterm is the following occasions:
Exports of companies with extensive experience and

knowledge of international trade and logistics that wish
to provide a complete service to its customers.
Sales transactions of companies that belong to the same
multinational group, in which the head office assumes all
costs and risks of sending the goods to their branch
offices abroad.
Exports to countries in which the seller has customs brokers
or freight forwarders that can take import procedures in an
speedy and safely way.
Exports of high cost goods (e.g. jewelry, medical equipment,
etc.) in which it is desirable that the seller owns the
control and possession of the goods throughout the complete
DDP
export process so if there is any problem the seller will

take the initiative to solve it or to make claims to the
carrier or the insurance company.
Urgent shipments (e.g. spare parts) through courier
companies, as these services are usually door to door and
the seller wants to prevent the client from doing any
customs proceeding or expending any money.
Despite the difficulties that may present this Incoterm, the
evolution of logistics and the need to provide a complete
service to customers, have made DDP an Incoterm increasingly
used.
KEYS TO DDP

Mode of transport
a) At buyers premises (factory or warehouse)

in destination country.
Delivery place
b) In any other point in country of
destination, except in a transport terminal.
Loading/unloading of Not unloaded from the means of transport hired

a) Delivery note of sellerss carrier signed by

Delivery document the buyer.
a) Delivery note of sellerss carrier signed
DDP
by the buyers carrier.
Type of cargo Complete cargo (complete trucks, containers)

and groupage.

transport

Contract of
insurance it is advisable that the seller hires insurance
When the goods are delivered prepared for

transport unloading from the transportation in the
delivery place.
Pre-shipment Seller.
inspection

clearance
Import customs Seller.

clearance
TEN KEYS FOR THE PROFESSIONAL
USE OF INCOTERMS
10 TEN KEYS FOR THE PROFESSIONAL USE OF INCOTERMS
8
Ten keys for the professional use of Incoterms
Incoterms are trade rules used in many documents such as sale

contracts, commercial invoices or letters of credit; so it is
important that exporters and importers use them in a proper
way. fte main purpose of Incoterms is to clearly convey the
conditions agreed between the parties in order to avoid
conflicts.
Here are ten basic tips that exporters and importers should
take into account when using Incoterms in international trade
transactions.
Specify precisely the place of delivery
fte first function of Incoterms is to define exactly the place

of delivery of the goods. To do so, following the Incoterm
should be included as accurately as possible the place of
delivery (sellers or buyers premises, transportation hub,
port, airport, etc.), the city, province and country where goods
are delivered. It is important to mention the city and country
where delivery takes place as the worlds geography is vast and
is not always easy to locate a city in a country.
Example of place of delivery in Incoterms
CIP Tianjin Airport, China, Incoterms 2010
A situation in which perhaps is better not to establish with

precision the place of delivery is when using letters of
credit as payment method and the goods are delivered at a
port in the country of origin. It may happen that at certain
times there is a saturation for shipping the goods to a port
on the destination country and finding a ship for the period
stipulated in the letter of credit is difficult. In these
situations it is better to mention such as place of delivery
port in the country of delivery (e.g. British port) rather
than a specific port (e.g. Plymouth or Southhampton) and
therefore have the option of loading the goods at different
ports.
10 TEN KEYS FOR THE PROFESSIONAL USE OF INCOTERMS
9Avoid using EXW
EXW really does not reflect the delivery conditions of an

international operation because all costs and risks, except
packaging, are borne and manage by the buyer, which sends a
transport vehicle (usually truck) to collect the goods from the
sellers premises.
ftis lack of involvement by the seller in international

logistics may cause various problems:
Uncertainty about the final destination of the goods: the seller is
not sure about who is the true recipient of the goods or the
place to be delivered to the destination country. ftis
could lead to distribution problems, if the goods are not
sent to the country that was expected or if the goods are
distributed through other channels. It could even be the
case that the goods are not exported and compete with the
goods of the seller at their own market.
No evidence of exit of the goods from the country: when goods are
sold outside the national territory the seller must have a
receipt as proof of the export of the goods because the
commercial invoices are issued without VAT. ftis proof may
be the international transport document (e.g. CMR, B/L or
AWB) or the SAD (Single Administrative Document), but when
exporters used the Incoterm EXW they do not have any of the
this documents since they do not hire international
transport, nor make export clearance either.
Incidents in the loading of the goods: in EXW load of goods in the
first means of transportation (usually truck) is made by the
buyer, but in practice it is the seller who load the
merchandise as the truck that comes to sellers premises don
not usually have lifting equipment to raise it, especially if
it is a full container load. So if there is problems on the
load (i.e. the goods fall and break down some boxes) the
buyer would not want to pay these products because he has not
made the load operation but according to the rules of EXW the
responsibility is theirs.
Difficulties using EXW with letters of credit: in EXW the seller
has no transport document justifying the delivery of the
goods at the agreed conditions, and also to meet the
delivery terms will depend on the buyer sending the truck
to collect the goods. Moreover, the buyer is not sure
about the sellers compliance with the terms of delivery.
fterefore it is uncommon to use EXW when the method of
payment is the letter of credit.
In addition to all these potential problems one should also
take into account that the Incoterm EXW involves the lowest
level of service from seller to buyer and in this sense,
exporters that make their offers on EXW conditions are less
competitive compared with those that place the product in the
destination country using Inco- terms in C or D.
FCA when goods are delivered in the country of origin
fte Incoterm FCA is very flexible and has many advantages if

the seller and buyer agree to deliver the goods at the sellers
country. Among others:
Different places of delivery: with FCA the goods can be delivered

at various points such as the sellers premises (FCA factory
or warehouse), a transportation center (FCA transport
center), a port (FCA port or terminal port), an airport (FCA
airport), etc.
Different types of cargo: FCA serves for both, full load and
groupage. In the first case it is usual that the goods are
delivered to the Sellers premises that is where the truck
comes to pick them; in groupage, the merchandise is usually
delivered in a transportation hub, port terminal or airport
that is where consoli- dation is done with the goods of other
carriers.
Adaptation to the multimodal transport: FCA is a Incoterm very
well suited to multimodal transport, especially when the
goods travel by ship in containers. In these cases the rules
Incoterms 2010 advised to use FCA instead of FOB, when the
goods are delivered in the port of shipment in sellers
country.
Documents justifying the export: in FCA the seller clear the
goods for export clearance and has to obtain the necessary
documents to justify for tax purposes (invoices without
VAT invoices) the exit of the goods from the country.
Compatibility with letters of credit: FCA can be used with
letters of credit. fte seller only has to request from
the buyer a copy of the international transport document
(CMR, B/L, AWB, etc.) or obtain a certificate FIATA FCR
in the case of multimodal transport.
In short, the Incoterm FCA is increasingly being used and
likely will replace EXW in most trade operations in which the
seller does not arrange international transport and delivers
the goods in their own country.
With containers use only Incoterms for any mode of transport
fte rules of the Incoterms 2010 clearly specifies that when

the goods travel in containers should not be used sea
Incoterms because containers are not delivered loaded on
ships but in port terminals; in these cases in instead of
using FOB, CFR or CIF should use FCA, CPT or CIP,
respectively.
However, this new use of Incoterms 2010 may enter in conflict

with the practice in international trade as a large part of
exports in container is done through the FOB and CIF
Incoterms that are the oldest and most widely used. It is
therefore expected that for some time exporters, importers,
carriers, freight forwarders, etc., continue to use sea
Incoterms when the goods travel in containers. In these
cases, it is advisable to ask the one that drafts the
contract (seller or buyer) to replace the sea Incoterm with
the adequate one, according to Incoterms 2010 to avoid
problems of interpretation in case of conflict.
Ten keys for the professional use of Incoterms
Use sea Incoterms only for goods load overboard
In Incoterms 2010 the use of sea terms is relegated in

comparison with Incoterms for any mode of transport. In fact,
the classification of Incoterms 2010 presents the first
obligations of sellers and buyers in the seven Incoterms for
any mode of transport Incoterms and then those of the four
sea Incoterms.
Incoterms for any mode of transport fit much better than sea
Incoterms with the current logistics applications, especially in
terms of loading and unloading in ports. In this sense, sea
Incoterms should be used only for goods loaded by the ships
rail as general cargo, bulk or large loads (e.g. heavy
machinery).
Control international transport: export in C and import en F
As a rule, the most experienced companies in international trade

try to control international transport. ftey have developed
logistics expertise or use the services of forwarding agents
from different geographical areas that allow them to manage
international logistics, placing the goods exported to the
countries of their customers and buying goods imported from the
countries of their suppliers; i.e. this companies export in
terms C and import in terms F.
International transport management provides several

advantages to exporters and importers:
Cost savings: if the company has a significant
international trade volume, hiring transportation will
give cheaper rate when negotiating with carriers,
forwarders or logistics providers. ftese savings will mean
greater profitability in their operations and also may be
apply to reduce their prices to be more competitive.
Meeting deadlines: international transport generates
uncertainty in time needed to deliver the goods,
especially in the case of intercontinental shipping. On
the other hand, delivery terms are really important for
companies that import raw materials or components that are
used in their production processes, and also for
importing consumer products resell in their local
market. In these circumstances, if the imports are made in
F (FCA or FOB) it will be easier because the seller
fulfils the delivery time when he places the goods at the
agreed place in his own country.
Documents control: documents of international trade are
complex and can be a barrier to ensure that goods reach
their destination. If the company controls the
international transport, it will be in a better position
to obtain the documents necessary for customs
clearance. Furthermore, in the case of any incident
occurring in transport will respond quickly, providing
the documents needed to prevent the operation is delayed.
Compliance with the conditions of letters of credit: in the case of
exports, if the seller uses a C term, they will have no
trouble getting the documents required in the letter of
credit, in particular, the document of international
transport that serves to proof the delivery of goods. In the
case of imports under F terms, the buyer may request an
inspection at the port of shipment as a document
requirement for the letter of credit payment.
Use Incoterms in D only for countries of low risk
Incoterms of delivery in the country of destination (Incoterms

in D) should only be used in low-risk countries in which the
seller has the means to control logistics. fte concept of
risk is broad and covers political risk (war, social
conflicts), commercial (customer default), logistic
(deficiencies in transport infrastructure) or administrative
risk (complex customs procedures). Any of these risks can
jeopardize international sale when seller and buyer agree to
deliver the goods in the country of destination, under D
terms.
Incoterms in D (DAT and DAP) are suitable for delivery in an

integrated economic area such as the EU where there are no
customs. When using DDP, it should be taken into account that
the seller pay the import clearance formalities on arrival and
that includes payment of all taxes (tariffs, taxes, VAT) which
will be difficult to recover, because normally the seller has no
fiscal residence in the country where the goods are delivered.
Insurance international transport with maximum coverage
For any goods manufactured, it is advisable to hire insurance

transport, especially for the international transport between
the country of origin and destination. fte cost of insurance
is not too expensive since it represents about 0.5% of the
goods value.
According to Incoterms 2010, only in terms CIF and CIP is

transport insurance required: it must be the seller who
hires the insurance and bear the costs while the beneficiary
of insurance is the buyer, who is the one that assumes the
risk.
Although not required, buyers and sellers should insure the

goods depending who takes the risks in international
transport. In Incoterms EXW and F, the international
transportation risk is assumed by the buyer and therefore, he
should hire the insurance. In Incoterms CPT an CFR he also
assumes the risk and hires the insurance. In Incoterms in
D is the seller who assumes the risk to delivery in the
country of destination and should hire transport insurance.
In Incoterms CIP and CIF the seller is only obliged to obtain

minimum insurance coverage (Section C of the London Institute
Cargo Clauses), but it is advisable to hire for international
transportation a maximum coverage that includes coverage
Clause A of the Institute Cargo Clauses (ICC) plus War Clause
and Strike Clause. fte cost of hiring these additional
coverage is not significant and is the closest to the concept
of all risk which does not really exist as such in
international transport insurance.
Maximum coverage insurance freight
Clause A of ICC + War Clause + Strike Clause
Do not use variant of Incoterms
Exporters and importers must adhere to the use of eleven

Incoterms published in the 2010 version, avoiding variations
that have been used in the past. In fact, in the Incoterms
2010, unlike previous versions, there is no mention to any
variant.
However, due to common use of some variants, three of them
should be taken into account and eventually may appear in
international operations:
EXW loaded: in this version of EXW, the costs of loading the

goods in the truck
and, therefore, the risks are on the account of the
seller. Normally when using EXW is the seller who makes the
load on the first carrier and, therefore, this variant
corresponds more to reality than the rule EXW in which the
costs and risks of the load are borne by the buyer.
CIF maximum coverage: the seller hires insurance coverage of
international
transportation with Clause A of the Institute Cargo Clauses
plus a Strike Clause and a War Clause.
DDP VAT unpaid: the seller bears the costs of import

clearance but without accounting for VAT. Incoterms 2010
specifically referred to this possibility because of the
difficulties faced by the seller to recover the VAT
applied over the value of the goods at the destination
country.
In any case, when using some variant of the Incoterms, it
should be clearly specified in the contract of sale how cost
and risks are allocated between buyer and seller according
to the variant.
Reference to Incoterms 2010 version
As mentioned at the beginning of this publication, the

importance of Incoterms is based on the widespread use made of
them in international trade. fterefore, whenever Incoterms
are used in certain documents offers, purchase orders, sales
contracts, pro forma invoices, etc. it is worth mentioning
that it refers to the latest version of Incoterms published by
International Chamber of Commerce. For that, it is sufficient
to include after the three acronym letters of the Incoterm
and the place of delivery the expression Incoterms 2010.
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Practical Guide to INCOTERMS

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Copyright Global Marketing

Strategies S.L., 2012 Ayala, 83,

WHAT ARE INCOTERMS RULES?................................................................................ 6

Classification of Incoterms 2010.................................................... 8

Main changes in Incoterms 2010......................................................... 9

Aspects of foreign trade that Incoterms do not regulate..............13

WHAT ARE INCOTERMS USED FOR?....................................................................... 15

The place of delivery.................................................................... 16

Documents and customs procedures.................................................19

Transfer of risks in transport........................................................ 21

Allocation of logistics costs.......................................................... 22

OBLIGATIONS OF THE SELLER AND THE BUYER..................................................27

FCA Free Carrier.........................................................................35

FAS Free Alongside Ship............................................................42

FOB Free On Board.....................................................................49

CPT Carriage Paid To..................................................................56

CFR Cost and Freight.................................................................63

CIP Carriage and Insurance Paid to.............................................70

CIF Cost, Insurance and Freight..................................................78

DAT Delivered At Terminal.........................................................86

DAP Delivered At Place...............................................................93

DDP Delivered Duty Paid..........................................................100

TEN KEYS FOR THE PROFESSIONAL USE OF INCOTERMS............................... 107

What are Incoterms rules?

Incoterms (INternational COmmerce TERMS) rules are a total of

fte Incoterms 2010 rules are contained in Publication No. 715

fte writing of Incoterms rules is carried out by a group of

Incoterms do not have the force of law and therefore is not

Incoterms can be classified according to three criteria that

fte first criterion is the mode of transport used. In the

Incoterms for any mode of transport and multimodal transport: EXW,

Payment for the main transport (seller or buyer)

fte second criterion of classification is the payment of

Incoterms in which the main transport is paid by the buyer (importer):

Transfer of risks in transporting the goods (at origin or destination)

Finally, we should distinguish between those Incoterms in

Incoterms with transfer of risks in the country of origin: EXW, FCA,

Classification of Incoterms 2010

FAS Free Alongside Ship Sea Bu Origin

FOB Free On Board Sea Bu Origin

Main changes in Incoterms 2010

fte Incoterms 2010 have made some significant changes in

Reduction from 13 to 11 terms

In relation to the Incoterms 2000, the 2010 version

New terms in Incoterms 2010

DAT replaces DES, DEQ y

Incoterms 2010 created two new Incoterms: DAT (Delivered At

Priority for Incoterms used with any mode of transport in comparison

fte new classification of Incoterms 2010 do not take into

ftis is perhaps the most significant change in Incoterms

Transfer of risks on board in Incoterms FOB, CFR and CIF

While the version of Incoterms 2010 is not so clear, it is

Delivery by procuring the goods so delivered for sales that occur

In the foreign trade of certain products (bulk, commodities,

For example, in a sale contract which has established itself as

When using Incoterms in which the seller pays the main

Transport insurance coverage in CIP and CIF

In Incoterms CIP and CIF in which the seller is obliged to

Since the attacks of September 11, 2001 various measures to

Validity of electronic messages and documents

Incoterms 2010 granted the same validity to the messages and