Incoterms® 2020
Rules for Any Mode of Transport
Ex-Work or Ex-Warehouse
The seller makes the goods available at their premises, or delivers when it place the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e. works, factory, warehouse, etc). This term places the maximum obligation on the buyer and minimum obligations on the seller. The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable. It is often used while making an initial quotation for the sale of goosd withou any costs included.
FCA – Free Carrier
The seller delivers the goods,cleared for export to the carrier or another person nomicated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point. If delivery occurs at the seller’s premises, or at any other location that is under the seller’s control, the seller is responsible for loading the goods on to the buyer’s carrier. However, if delivery occurs at any other place, the seller is deemed to have delivered the goods once their transport has arrived at the named place; the buyer is responsible for both unloading the goods and loading them onto their own carrier.
CPT – Carriage Paid To
The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.The goods are considered to be delivered when the goods have been handed over to the first or main carrier, so that the risk transfers to buyer upon handing goods over to that carrier at the place of shipment in the country of Export.
DAP – Delivered At Place
The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The risk passes from seller to buyer from the point of destination mentioned in the contract of delivery. The customs clearance in the importing country needs to be completed by the buyer when the shipment arrived at the place.
DPU – Delivered At Place Unloaded
The seller delivers the goods, unloaded, at the named place of destination. The seller bears all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and all risk until arrival at the named place of destination.
CIP – Carriage And Insurance Paid To
The seller delivers the goods to the carrier or another person nominated by the seller at an afreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.The seller also contract for insurance cover against the buyer’s risk of loss of damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
DDP – Delivered Duty Paid
The seller respobsible for delivering the goods when the goods at the named place of the buyer. The seller bears all the cost and risks involved in bringing the goods to the place of destination including clearing the goods through customs in the buyer’s country, both paying the duties and taxes, and obtaining the necessary authorizations and registrations from the authorities in that country. Unless the rules and regulations in the buyer’s country are very well understood
Rules for Sea and Inland Waterway of Transport
FAS – Free Alongside Ship
The seller delivers when the goods are placed alongside the buyer’s vessel at the named port of shipment. The risk of loss or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs and risks from that moment onwards. The buyer have to adding explicit wording to eusure the buyer to clear the goods for export in the contract of sale. This term only used only for non-containerized seafreight and inland waterway transport.
FOB – Free On Board
The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards. The seller will pay cost of marine freight transporation, bill og lading fees, insurance, unloading and transporation cost from the arrival port to destination. It is only be used for non – containerized seafreight and inland waterway transport.
CIF – Cost, Insurance and Freight
The seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of
destination.The seller’s obligation ends when the documents are handed over to the buyer. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The seller is required to obtain insurance for the goods while in transit, which insure the goods for 110% of the contract value under Institute Cargo Clauses or any similar set of clauses, unless specifically agreed by both parties. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover.
CFR – Cost and Freight
The seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination including export clearance and freight costs for carriage to named port. The shipper is not responsible for delivery to the final destination from the port (generally the buyer’s facilities), or for buying insurance. If the buyer requires the seller to obtain insurance, the Incoterm CIF should be considered. CFR should only be used for non-containerized seafreight and inland waterway transport; for all other modes of transport it should be replaced with CPT.
What is “Freight Collect” and “Freight Prepaid”?
The term “Freight” refers to the shipping charges to be paid for transporting the goods from the shipper to the receiver. In the old days, the terms meant just what they seem to mean.
Freight prepaid meant that the shipper paid the freight charges at the time of carriage before the shipment gets loaded for shipment took place. In the FOB Origin, the buyer takes the responsibility for the cost and safety of the shipment when picked up by the carrier. For FOB Destination, the seller maintains ownership of the shipment throughout the shipping process and is reponsible for the cost and risks of the shipment until delivery.
Freight Collect meant that the receiver paid the freight charges upon delivery or at the destination. In reality charges will be collected before delivery of the cargo at destination. Usually buyer pays in this case. For FOB Origin the buyer or reiceiver of the shipment takes ownership as soon as it is picked up by the carrier at the origin pick-up location. The buyer is also responsible for the cost and risks of the shipment until arrival. For FOB Destination, the seller maintains ownership of the shipment throughout the shipment process, and would be responsible if something were to happen to the shipment. However, the buyer is responsible for the cost of the shipment.
The two terms are not nearly so clearly defined in modern practice, where there are many variations on payment of freight charges for domestic shipments.