Incoterms valid for any type of transport
EXW Ex Works
The obligations of the seller/exporter are to make available the buyer’s goods in its facilities or warehouses, freeing itself from all responsibility from that moment on.
- 1. The buyer/importer is the one who subsequently assumes the expenses and responsibilities on the loading of the goods and customs procedures or documents such as insurance, since he is the one who assumes the risk.
FCA Free Carrier
You can use FCA Factory or FCA Terminal (refers to ports, airports, etc.)
FCA Factory or Warehouse (place of seller):
- The seller must deliver and load the goods on the means of transport provided by the buyer, who assumes the costs and risks of transportation. This would replace the term EXW.
FCA Terminal (place designated by buyer):
- • The seller, who assumes the costs and risks during the internal transport and customs procedures, may only deliver the goods at the agreed place so that subsequently the responsibility for unloading and handling to another transport lies with the buyer.
CPT Carriage Paid To
- The seller must take care of all expenses, such as the main transport, that are generated until the delivery of goods at the agreed place.
- The buyer assumes the contracting of the insurance (optional) and the import procedures. Once the goods have been loaded to the transport contracted by the seller, it must be taken into account that the risk during the journey is the buyer’s.
CIP Carriage and Insurance Paid
The modifications in this Incoterm 2020 deal with insurance coverage, becoming mandatory for the seller and linked to Clauses A of the Institute Cargo Clauses, where the goods must be insured until delivered to the carrier at the agreed place.
- The seller is responsible for the expenses up to delivery at the destination, such as origin costs, freight, main transport, export clearance and insurance coverage (you must put the buyer as the beneficiary of the insurance).
- The buyer assumes the import procedures and the risks during the journey, from the time the goods leave the country of origin to the delivery to the main carrier.
DAP Delivered At Place
- During the operation, the seller is responsible for all costs and risks, except for import clearance and unloading at the given place.
- The buyer deals only with import clearance and unloading.
This Incoterm does not oblige to take out insurance, but if it does, the expenses would correspond to the seller.
* Given the seller’s responsibilities and risks, expenses can be difficult to control due to any setbacks in developing countries.
DPU Delivered at place Unloaded
This new Incoterm 2020 replaces the previous DAT, expanding the delivery options by terminal or any other agreed place.
- The seller assumes the risks and costs of origin, packaging, loading, export clearance, freight, unloading and delivery at the designated place. It is the only Incoterms rule where the seller must perform the unloading at the destination.
- The buyer is only responsible for the import clearance procedures
* This Incoterms is mainly used by companies with the intention of controlling logistics from origin to destination; however, given the extensive responsibilities of the seller (as in the Incoterm DAP) it is not recommended to use this rule in countries with their developing infrastructure, as they are more likely to suffer any kind of setbacks.
DDP Delivered Duty Paid
- The seller assumes the risks and expenses in full. From packaging and freight, export and import clearances, to insurance coverage if they have been taken out.
- The buyer should only be responsible for receiving the goods.
This rule is recommend for low-value goods, where the service provided can be fast and efficient for the customer. The urgency of the shipment would be more relevant than the cost.
* Incoterm contrary to the EXW, the seller is responsible for all expenses and risks.
Incoterms valid for sea transport
FAS Free Alongside Ship
- The seller assumes the costs, such as customs procedures, until delivering the goods to the loading dock of the port of origin. The responsibilities do not include getting the goods on board of the ship.
- The buyer manages the on-board cargo, stowage, freight and expenses until delivery at the agreed location. It also assumes the risks when the goods are placed at the loading dock and then loaded on the ship.
* This Incoterm is normally used for special goods with particular cargo requirements.
FOB Free On Board
- The seller is responsible for the expenses and risks, as well as the export clearance, until the goods are on board.
- The buyer must be responsible for contracting the means of transport, import procedures, freight costs, unloading and delivery at the designated destination, as well as as insurance if this is contracted. Once the goods are on board, the risks are the buyers.
CFR Cost and Freight
- The seller assumes all expenses until the goods arrive at the assigned port, including the main transport and unloading costs.
- The buyer assumes the risks as soon as the goods are on board and during their journey, taking care of the import and transport procedures. That is why it is recommended to take out insurance.
CIF Cost, Insurance and Freight
As well as the Incoterm CIP, for this rule, changes were made in terms of insurance coverage, being requested in a mandatory way to the seller. Clauses C of theInstitute Cargo Clauses must be taken into account, which determines that the insurance must cover until the arrival of goods at the port of destination
- The seller, as in the CFR rule, assumes all expenses until arrival at the assigned port. In addition to this, the seller must take out the insurance, even though the risks are responsibility of the buyer when the goods are on board the ship.
- The buyer assumes the risks during the journey and the costs of import and means of transport.
For more information on the rights and responsibilities of the proper use of incoterms, visit the official site https://iccwbo.org/
