INCOTERMS 2010

A Guide
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Contents
INCOTERMS
DEFINITION 3
HISTORY 3
PURPOSE OF INCOTERMS 3
CONTRACTS IN FOREIGN TRADE 3
THE LEGAL STATUS OF THE INCOTERMS 3
WHAT DO INCOTERMS REGULATE? 4
WHAT DO INCOTERMS NOT REGULATE? 4
WHAT INCOTERMS SHOULD BE USED? 4
DESCRIPTION OF INCOTERMS 4
IMPORTANT DISTINCTION 4
THE APPLICATION OF INCOTERMS 2010 4
THE NEW INCOTERMS DETAILS (EXCERPTS) 5
INCOTERMS FOR ALL MODES OF TRANSPORT
(INCLUDING MULTIMODAL TRANSPORT)
EXW ex works (... named place) 6
FCA free carrier (... named place) 6
CPT carriage paid to (... named place of destination) 6
CIP carriage and insurance paid to (... named place of destination) 6
DAT delivered at terminal (... named port/place of destination) 7
DAP delivered at place (... named place of destination) 7
DDP delivered duty paid (... named place of destination) 7
INCOTERMS FOR SEA AND INLAND WATERWAY TRANSPORT
FAS free alongside ship (... named port of shipment) 8
FOB free on board (... named port of shipment) 8
CFR cost and freight (... named port of destination) 8
CIF cost, insurance and freight (... named port of destination) 9
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INCOTERMS

Definition The legal status of the INCOTERMS

INCOTERMS (International Commercial Terms ICC Rules INCOTERMS constitute a recommendation, not a law.
for the Use of Domestic and International Trade Terms) deal Express reference to INCOTERMS 2010 must be made in
with the transfer of risks and costs from seller to buyer as the sales contract for them to be applicable. It is advisable
well as with the main responsibilities of the parties in to state the relevant INCOTERM completely in the sales
connection with the shipment of goods. contract, e.g. FCA Frankfurt/Main Airport INCOTERMS 2010.
In legal disputes INCOTERMS are regarded as common
History commercial practice.
1919: International Chamber of Commerce (ICC)
established in Paris
1936: A uniform interpretation of contract clauses
published
Revisions 1953, 1967, 1976, 1980, 1990, 2000, 2010

Purpose of INCOTERMS
To lay down internationally accepted rules for the
interpretation of trade terms in national and
international trade contracts.
To avoid misunderstandings as a result of different
commercial practices.

Please note:
INCOTERMS do not apply to contracts of carriage or
other contracts connected with the transport of goods.
INCOTERMS do not cover all obligations which the
parties to a sales contract might wish to set down.

Contracts in Foreign Trade

Sales contract (relevant for INCOTERMS)
Insurance contract
Contract of carriage
Financing contract

But: The use of certain INCOTERMS clauses affects other

contracts: e.g. CFR or CIF require carriage by sea or inland
waterway.
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What do INCOTERMS regulate?
The principal duties of the seller
The principal duties of the buyer
Transfer of risks place and point in time
Allocation of all costs incurred from dispatch to arrival
at the place or port of destination
Formalities (e.g. customs formalities) for import, export
or transit
What do INCOTERMS not regulate?
Questions of ownership
Breach of contract and the legal consequences
Declarations of indemnity
Delivery options
Modes of payment
Applicable Law
What INCOTERMS should be used?
Four groups:
E COLLECTION TERM ( EXW )
Minimum obligation for seller
F DELIVERY TERMS ( FCA, FAS, FOB )
Buyer bears costs of main transport
C DISPATCH TERMS ( CFR, CIF, CPT, CIP )
Seller bears costs of main transport
D ARRIVAL TERMS ( DAT, DAP, DDP)
Maximum obligation for seller
Description of INCOTERMS
E: The seller must merely place the goods at the
disposal of the buyer at the sellers premises.
F: The seller must deliver the goods to a carrier
nominated by the buyer. At that time the risk and costs
for the goods pass from the seller to the buyer.
C: The seller must contract for carriage at his own
expense but is not liable for loss of or damage to the
goods or additional costs resulting from events after
shipment/dispatch.
D: The seller bears all costs and risks until the goods
arrive at their place of destination.
Important distinction
SINGLE-POINT TERM
Both costs and risks are transferred from the seller to the
buyer at the same point in time (E, F and D terms).
TWO-POINT TERM
Costs and risks are transferred from the seller to the buyer
at different points in time (risks before costs) (C terms).
The 11 INCOTERMS 2010 clauses are divided into two major
categories:
The first category includes clauses that are intended for use
irrespective of the mode of transport selected. The second
category encompasses those clauses which are intended for
use solely when the goods are transported by sea or inland
waterway.
CLAUSES FOR ALL TRANSPORT MODES
EXW Ex Works
FCA Free Carrier
CPT Carriage Paid to
CIP Carriage and Insurance Paid to
DAT Delivered at Terminal
DAP Delivered at Place
DDP Delivered Duty Paid
These clauses can be used for all modes of transport
including mulitmodal transport (even if transport by ship for
part of the journey is effected).
CLAUSES FOR TRANSPORT BY SEA AND INLAND
WATERWAY
FAS Free Alongside Ship
FOB Free on Board
CFR Cost and Freight
CIF Cost, Insurance and Freight
These clauses are intended for use only when shipment is
effected from port to port by ship.
The application of INCOTERMS 2010
The determination which INCOTERM-clause is appropriate
for a certain transaction depends to a great extent on the
type of goods, the intended transport route and the desired
mode of transportation. Furthermore, the INCOTERM-clause
must correctly reflect the agreed allocation of costs, risks
and responsibilities as set down in the sales contract, e.g.
which party is responsible for concluding the contract of
carriage (and any contract of insurance) at its expense,
when and where does the risk of loss of or damage to the
goods during transport pass from the seller to the buyer etc.
It is also important to consider whether the respective party
is capable of fulfilling its obligations under the intended
INCOTERM-clause. For example, DDP should only be agreed
if the seller is actually able to carry out the customs
formalities in the importing country. If that is not the case
then DAP would be the more appropriate clause.
The guidance note preceding each INCOTERM-clause in the
brochure INCOTERMS 2010 contains valuable information

that can help to identify the correct INCOTERM for a
particular type of transaction.
In this connection it should be remembered that the
INCOTERMS can best fulfill their function when the place of
delivery is stated as precisely as possible. In practice this
means stating not only a place in connection with the
INCOTERM-clause, but also a specific point at that place For
example: FCA Am Tucherpark 16, Munich, Germany.
The new INCOTERMS Details (Excerpts)
Group Abbreviation
E term EXW
Collection term, minimum (any mode of transport)
obligation for seller
F terms FCA
Delivery terms, buyer bears (any mode of transport)
costs of main transport FAS
(sea or inland waterway
transport only)
FOB
(sea or inland waterway
transport only)
C terms CFR
Dispatch terms, seller bears (sea or inland waterway
costs of main transport transport only)
CIF
(sea or inland waterway
transport only)
CPT
(any mode of transport)
CIP
(any mode of transport)
D terms DAT
Arrival terms, maximum (any mode of transport)
obligation for seller
DAP
(any mode of transport)
DDP
(any mode of transport)
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If no specific point at the place of delivery is stated and
more than one point is available, the seller may select the
point at the place of delivery that best suits its purpose.
Modifications of the standard INCOTERM-clauses in the
sales contract should be avoided whenever possible, since
such modifications could jeopardize the internationally
accepted interpretations of the clauses and lead to
misunderstandings and disputes with uncertain results.
English term German term
Ex Works Ab Werk
(named place) (benannter Ort)
Free Carrier Frei Frachtfhrer
(named place) (benannter Ort)
Free Alongside Ship Frei Lngsseite Schiff
(named port of shipment) (benannter
Verschiffungshafen)
Free On Board Frei an Bord
(named port of shipment) (benannter
Verschiffungshafen)
Cost and Freight Kosten und Fracht
(named port of destination) (benannter
Bestimmungshafen)
Cost, Insurance and Freight Kosten, Versicherung und
(named port of destination) Fracht
(benannter
Bestimmungshafen)
Carriage Paid To Frachtfrei
(named place of destination) (benannter Bestimmungsort)
Carriage and Insurance Paid to Frachtfrei versichert
(named place of destination) (benannter Bestimmungsort)
Delivered At Terminal Geliefert Terminal
(named Terminal at named (benannter Terminal am
port/place of destination) benannten
Bestimmungshafen/-ort)
Delivered at Place Geliefert Benannter Ort
(named place of destination) (benannter Bestimmungsort)
Delivered Duty Paid Geliefert verzollt
(named place of destination) (benannter Bestimmungsort)
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INCOTERMS FOR ALL MODES OF TRANSPORT

(INCLUDING MULTIMODAL TRANSPORT)

EXW Ex Works (Named place) CPT Carriage Paid To (Named place of destination)
EXW means that the seller delivers when it places the CPT means that the seller delivers the goods to the carrier
goods at the disposal of the buyer at the sellers premises. at an agreed place (if any such place is agreed between the
At this time the risk and costs for the goods pass from the parties) and that the seller must contract for and pay the
seller to the buyer. costs of carriage necessary to bring the goods to the named
place of destination. The risk of loss of or damage to the
Duties of seller
goods passes from the seller to the buyer upon delivery of
Place the goods at the disposal of the buyer at the
the goods to the carrier (Two-point clause).
agreed place
Duties of seller
Duties of buyer
Contract for carriage
Take delivery of the goods at the agreed place and
Deliver the goods to the (first) carrier
effect payment for the goods
Procure usual and clean transport document
Clear the goods for export and import
Clear the goods for export
Documents Pay the freight costs for carriage of the goods to the
Documents required: named place of destination
Commercial invoice
Duties of buyer
Confirmation of receipt, receipt
Take delivery of goods from the carrier
Additional documents: Pay the costs which according to the contract of
Documents needed for export/import or transit cleara carriage are not borne by the seller
Effect payment for the goods
FCA Free Carrier (Named place) Clear the goods for import
FCA means that the seller delivers the goods to the carrier at
Documents
the seller's premises or another named place. At this time the
Documents required:
risk and costs for the goods pass from the seller to the buyer.
Commercial invoice
Duties of seller Transport document
Deliver the goods to the named place Export licence if necessary
Provide proof of hand-over of goods to carrier
Additional documents:
Clear the goods for export
Documents needed for import or transit clearance
Duties of buyer
Nominate the carrier CIP Carriage and Insurance Paid to (Named place of
Contract for carriage destination)
Effect payment for the goods CIP means that the seller delivers the goods to the carrier at
Clear the goods for import an agreed place (if any such place is agreed between the
parties) and that the seller must contract for and pay the
Documents
costs of carriage necessary to bring the goods to the named
Documents required:
place of destination. The seller also contracts at its expense
Commercial invoice
for insurance cover against the buyer's risk of loss of or
Usual transport document providing proof of delivery of
damage to the goods during the carriage.
goods to carrier
The risk of loss of or damage to the goods passes from the
Export licence if necessary
seller to the buyer upon delivery of the goods to the carrier
Additional documents: (Two-point clause).
Documents needed for import or transit clearance
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Duties of seller DAP Delivered At Place (Named place of destination)

Contract for carriage and insurance DAP means that the seller delivers when the goods are
Deliver the goods to the (first) carrier placed at the disposal of the buyer on the arriving means of
Procure usual and clean transport document and transport ready for unloading at the named place of
transport insurance (policy or certificate) destination. At this time the risk and costs for the goods
Clear the goods for export pass from the seller to the buyer.
Pay the transport insurance premium and the freight costs
Duties of seller
for carriage of the goods to the named place of destination
Place the goods at the disposal of the buyer at the
Duties of buyer named place
Take delivery of the goods from the carrier Procure a document which enables the buyer to take
Pay the costs which according to the contract of delivery of the goods at the named place
carriage are not borne by the seller Clear the goods for export
Effect payment for the goods
Duties of buyer
Clear the goods for import
Take delivery of the goods at the named place and
Documents arrange the onward transport (if necessary)
Documents required: Clear the goods for import
Commercial invoice Effect payment for the goods
Transport document
Documents
Export licence if necessary
Documents required:
Insurance policy (certificate)
Commercial invoice
Additional documents: Transport document
Documents needed for import or transit clearance
Additional documents:
Documents needed for import or transit clearance
DAT Delivered At Terminal (Named port/place of destination)
DAT means that the seller delivers when the goods, once
DDP Delivered Duty Paid (Named place of destination)
unloaded from the arriving means of transport, are placed
DDP means that the seller delivers the goods when the
at the disposal of the buyer at the named terminal at the
goods are placed at the disposal of the buyer, cleared for
named port or place of destination. At this time the risk and
import on the arriving means of transport ready for
costs for the goods pass from the seller to the buyer.
unloading at the named place of destination. At this time
Duties of seller the risk and costs for the goods pass from the seller to the
Place the goods at the disposal of the buyer at the buyer.
named terminal
Duties of seller
Procure a document which enables the buyer to take
Place the goods at the disposal of the buyer at the
delivery of the goods at the terminal
named place of destination
Clear the goods for export
Procure the documents which will enable the buyer to
Duties of buyer take over the goods
Take delivery of the goods at the named terminal and Clear the goods for export and import
arrange the onward transport
Duties of buyer
Clear the goods for import
Take delivery of the goods at the named place of
Effect payment for the goods
destination
Documents Effect payment for the goods
Documents required:
Documents
Commercial invoice
Documents required:
Transport document
Commercial invoice
Additional documents: Transport document
Documents needed for import or transit clearance Import licence, if necessary
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INCOTERMS FOR SEA AND INLAND WATERWAY TRANSPORT

FAS Free Alongside Ship (Named port of shipment) Duties of buyer

FAS means that the seller delivers when the goods are Nominate the carrier
placed alongside the vessel (e.g. on a quay or a barge) Contract for carriage
nominated by the buyer at the named port of shipment. Pay all costs for the goods once they have been loaded
At this time the risk and costs for the goods pass from the on board the vessel in the named port of shipment
seller to the buyer. Effect payment for the goods
Clear the goods for import
Duties of seller
Deliver the goods alongside the vessel Documents
Procure proof of delivery Documents required:
Clear the goods for export Commercial invoice
Customs certification
Duties of buyer
Export licence if necessary
Nominate the ship, the place of loading, the delivery
Transport document (Bill of Lading)
time and the carrier
Contract for carriage Additional documents:
Effect payment for the goods Documents needed for import or transit clearance
Clear the goods for import
CFR Cost And Freight (Named port of destination)
Documents
CFR means that the seller delivers the goods on board the
Documents required:
vessel. The seller must contract for and pay the costs and
Commercial invoice
freight necessary to bring the goods to the named port of
Customs certification
destination. The risk of loss of or damage to the goods
Export licence, if necessary
passes from the seller to the buyer upon delivery of the
Proof of delivery (possibly transport document)
goods on board the vessel (Two-point clause).
Additional documents:
CFR may not be appropriate where goods are handed over
Documents needed for import or transit clearance
to the carrier before they are on board the vessel, for
example goods in containers, which are typically delivered
FOB Free On Board (Named port of shipment)
at a terminal. In such cases, the CPT rule should be used.
FOB means that the seller delivers the goods on board the
vessel nominated by the buyer at the named port of Duties of seller
shipment. At this time the risk and costs for the goods pass Contract for carriage
from the seller to the buyer. Load the goods on board
Procure a clean transport document
FOB may not be appropriate where goods are handed over
Clear the goods for export
to the carrier before they are on board the vessel, for
Pay costs and freight to the named port of destination
example goods in containers, which are typically delivered
at a terminal. In such cases, the FCA rule should be used. Duties of buyer
Take delivery of the goods from the carrier
Duties of seller
Pay the costs which according to the contract of
Deliver the goods on board
carriage are not borne by the seller
Procure the customary document (usually a clean,
Effect payment for the goods
negotiable bill of lading) proving delivery of the goods
Clear the goods for import
on board
Pay loading costs not included in the freight
Clear the goods for export
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Documents Duties of seller

Documents required: Contract for carriage and insurance
Commercial invoice Load the goods on board
Transport document (bill of lading, non-negotiable sea Procure a clean transport document and transport
waybill) insurance (policy or certificate)
Export licence if necessary Clear the goods for export
Pay the transport insurance premium, costs and freight
Additional documents:
to bring the goods to the named port of destination
Documents needed for import or transit clearance
Duties of buyer
CIF Cost, Insurance and Freight (Named port of destination Take delivery of the goods from the carrier
CIF means that the seller delivers the goods on board the Pay the costs which according to the contract of
vessel. The seller must contract for and pay the costs and carriage are not borne by the seller
freight necessary to bring the goods to the named port of Effect payment for the goods
destination. The seller also contracts for insurance at its Clear the goods for import
expense against the buyer's risk of loss of or damage to the
Documents
goods during the carriage.
Documents required:
The risk of loss of or damage to the goods passes from the
Commercial invoice
seller to the buyer upon delivery of the goods on board the
Transport document
vessel (Two-point clause).
Export licence if necessary
CIF may not be appropriate where goods are handed over to Insurance policy (certificate)
the carrier before they are on board the vessel, for example
Additional documents:
goods in containers, which are typically delivered at a
Documents needed for import or transit clearance
terminal. In such cases, the CIP rule should be used.
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Publisher
UniCredit Bank AG
Global Transaction Banking
Foreign Trade Services
FAH8PM
D 80311 Munich

Sources: INCOTERMS 2010 Brochure of the ICC,

Paris (Pub. 715)

The Information presented in this brochure is

correct to the best of our knowledge and is based
on the current legal status subject to any errors
which may have arisen and no claim to
completeness is made.
We accept no liability for possible translation
errors.
The text may be reproduced or copied only with
the approval of the author.