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Incoterms
FromWikipedia,thefreeencyclopedia

TheIncotermsrulesorInternationalCommercialTermsareaseriesofpredefinedcommercialtermspublishedbytheInternationalChamber
ofCommerce(ICC).TheyarewidelyusedinInternationalcommercialtransactionsorprocurementprocesses.Aseriesofthreelettertrade
termsrelatedtocommoncontractualsalespractices,theIncotermsrulesareintendedprimarilytoclearlycommunicatethetasks,costs,andrisks
associatedwiththetransportationanddeliveryofgoods.
TheIncotermsrulesareacceptedbygovernments,legalauthorities,andpractitionersworldwidefortheinterpretationofmostcommonlyused
termsininternationaltrade.Theyareintendedtoreduceorremovealtogetheruncertaintiesarisingfromdifferentinterpretationoftherulesin
differentcountries.Assuchtheyareregularlyincorporatedintosalescontracts[1]worldwide.
Firstpublishedin1936,theIncotermsruleshavebeenperiodicallyupdated,withtheeighthversionIncoterms2010[2]'havingbeen
publishedonJanuary1,2011."Incoterms"isaregisteredtrademarkoftheICC.

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

NationalIncotermschambers.

Incoterms2010
Incoterms2010istheeighthsetofpredefinedinternationalcontracttermspublishedbytheInternationalChamberofCommerce,withthefirst
sethavingbeenpublishedin1936.Incoterms2010defines11rules,downfromthe13rulesdefinedbyIncoterms2000.[3]Fourrulesofthe2000
version("DeliveredatFrontier",DAF"DeliveredExShip",DES"DeliveredExQuay",DEQ"DeliveredDutyUnpaid",DDU).[4]arereplaced
bytwonewrules("DeliveredatTerminal",DAT"DeliveredatPlace",DAP)inthe2010rules.
Inthepriorversion,therulesweredividedintofourcategories,butthe11predefinedtermsofIncoterms2010aresubdividedintotwo
categoriesbasedonlyonmethodofdelivery.Thelargergroupofsevenrulesmaybeusedregardlessofthemethodoftransport,withthesmaller
groupoffourbeingapplicableonlytosalesthatsolelyinvolvetransportationbywaterwheretheconditionofthegoodscanbeverifiedatthe
pointofloadingonboardship.Theyarethereforenottobeusedforcontainerizedfreight,othercombinedtransportmethods,orfortransportby
road,airorrail.

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

Rulesforanymodeoftransport
EXWExWorks(namedplaceofdelivery)
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Thesellermakesthegoodsavailableattheirpremises,oratanothernamedplace.Thistermplacesthemaximumobligationonthebuyerand
minimumobligationsontheseller.TheExWorkstermisoftenusedwhenmakinganinitialquotationforthesaleofgoodswithoutanycosts
included.
EXWmeansthatabuyerincurstherisksforbringingthegoodstotheirfinaldestination.Eitherthesellerdoesnotloadthegoodsoncollecting
vehiclesanddoesnotclearthemforexport,orifthesellerdoesloadthegoods,hedoessoatbuyer'sriskandcost.Ifthepartiesagreethatthe
sellershouldberesponsiblefortheloadingofthegoodsondepartureandtobeartheriskandallcostsofsuchloading,thismustbemadeclear
byaddingexplicitwordingtothiseffectinthecontractofsale.
Thereisnoobligationforthesellertomakeacontractofcarriage,butthereisalsonoobligationforthebuyertoarrangeoneeitherthebuyer
maysellthegoodsontotheirowncustomerforcollectionfromtheoriginalseller'swarehouse.Howeverincommonpracticethebuyerarranges
thecollectionofthefreightfromthedesignatedlocation,andisresponsibleforclearingthegoodsthroughCustoms.Thebuyerisalso
responsibleforcompletingalltheexportdocumentation,althoughthesellerdoeshaveanobligationtoobtaininformationanddocumentsatthe
buyer'srequestandcost.
Thesedocumentaryrequirementsmayresultintwoprincipalissues.Firstly,thestipulationforthebuyertocompletetheexportdeclarationcan
beanissueincertainjurisdictions(notleasttheEuropeanUnion)wherethecustomsregulationsrequirethedeclaranttobeeitheranindividual
orcorporationresidentwithinthejurisdiction.Ifthebuyerisbasedoutsideofthecustomsjurisdictiontheywillbeunabletoclearthegoodsfor
export,meaningthatthegoodsmaybedeclaredinthenameoftheseller,inbreachoftheEXWterm.
Secondly,mostjurisdictionsrequirecompaniestoprovideproofofexportfortaxpurposes.InanEXWshipment,thebuyerisunderno
obligationtoprovidesuchprooftotheseller,orindeedtoevenexportthegoods.InacustomsjurisdictionsuchastheEuropeanUnion,this
wouldleavethesellerliabletoasalestaxbillasifthegoodsweresoldtoadomesticcustomer.Itisthereforeofutmostimportancethatthese
mattersarediscussedwiththebuyerbeforethecontractisagreed.ItmaywellbethatanotherIncoterm,suchasFCAseller'spremises,maybe
moresuitable,sincethisputstheonusfordeclaringthegoodsforexportontotheseller,whichprovidesformorecontrolovertheexportprocess.

FCAFreeCarrier(namedplaceofdelivery)
Thesellerdeliversthegoods,clearedforexport,atanamedplace(possiblyincludingtheseller'sownpremises).Thegoodscanbedeliveredtoa
carriernominatedbythebuyer,ortoanotherpartynominatedbythebuyer.
InmanyrespectsthisIncotermhasreplacedFOBinmodernusage,althoughthecriticalpointatwhichtheriskpassesmovesfromloading
aboardthevesseltothenamedplace.Itshouldalsobenotedthatthechosenplaceofdeliveryhasanimpactontheobligationsofloadingand
unloadingthegoodsatthatplace.
Ifdeliveryoccursattheseller'spremises,oratanyotherlocationthatisundertheseller'scontrol,thesellerisresponsibleforloadingthegoods
ontothebuyer'scarrier.However,ifdeliveryoccursatanyotherplace,thesellerisdeemedtohavedeliveredthegoodsoncetheirtransporthas
arrivedatthenamedplacethebuyerisresponsibleforbothunloadingthegoodsandloadingthemontotheirowncarrier.

CPTCarriagePaidTo(namedplaceofdestination)
CPTreplacesthevenerableC&F(costandfreight)andCFRtermsforallshippingmodesoutsideofnoncontainerisedseafreight.
Thesellerpaysforthecarriageofthegoodsuptothenamedplaceofdestination.However,thegoodsareconsideredtobedeliveredwhenthe
goodshavebeenhandedovertothefirstormaincarrier,sothattherisktransferstobuyeruponhandinggoodsovertothatcarrierattheplaceof
shipmentinthecountryofExport.
Thesellerisresponsiblefororigincostsincludingexportclearanceandfreightcostsforcarriagetothenamedplaceofdestination(eitherthe
finaldestinationsuchasthebuyer'sfacilitiesoraportofdestination.Thishastobeagreedbysellerandbuyer,however).
Ifthebuyerrequiresthesellertoobtaininsurance,theIncotermCIPshouldbeconsideredinstead.

CIPCarriageandInsurancePaidto(namedplaceofdestination)
ThistermisbroadlysimilartotheaboveCPTterm,withtheexceptionthatthesellerisrequiredtoobtaininsuranceforthegoodswhilein
transit.CIPrequiresthesellertoinsurethegoodsfor110%ofthecontractvalueunderatleasttheminimumcoveroftheInstituteCargoClauses
oftheInstituteofLondonUnderwriters(whichwouldbeInstituteCargoClauses(C)),oranysimilarsetofclauses.Thepolicyshouldbeinthe
samecurrencyasthecontract,andshouldallowthebuyer,theseller,andanyoneelsewithaninsurableinterestinthegoodstobeabletomakea
claim.
CIPcanbeusedforallmodesoftransport,whereastheIncotermCIFshouldonlybeusedfornoncontainerisedseafreight.

DATDeliveredAtTerminal(namedterminalatportorplaceofdestination)
ThisIncotermrequiresthatthesellerdeliversthegoods,unloaded,atthenamedterminal.Thesellercoversallthecostsoftransport(export
fees,carriage,unloadingfrommaincarrieratdestinationportanddestinationportcharges)andassumesallriskuntilarrivalatthedestination
portorterminal.
TheterminalcanbeaPort,Airport,orinlandfreightinterchange,butmustbeafacilitywiththecapabilitytoreceivetheshipment.
Allchargesafterunloading(forexample,Importduty,taxes,customsandoncarriage)aretobebornebybuyer.However,itisimportanttonote
thatanydelayordemurragechargesattheterminalwillgenerallybefortheseller'saccount.
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DAPDeliveredAtPlace(namedplaceofdestination)
Incoterms2010definesDAPas'DeliveredatPlace'thesellerdeliverswhenthegoodsareplacedatthedisposalofthebuyeronthearriving
meansoftransportreadyforunloadingatthenamedplaceofdestination.UnderDAPterms,theriskpassesfromsellertobuyerfromthepoint
ofdestinationmentionedinthecontractofdelivery.
Oncegoodsarereadyforshipment,thenecessarypackingiscarriedoutbythesellerathisowncost,sothatthegoodsreachtheirfinal
destinationsafely.Allnecessarylegalformalitiesintheexportingcountryarecompletedbythesellerathisowncostandrisktoclearthegoods
forexport.
Afterarrivalofthegoodsinthecountryofdestination,thecustomsclearanceintheimportingcountryneedstobecompletedbythebuyerathis
owncostandrisk,includingallcustomsdutiesandtaxes.However,aswithDATtermsanydelayordemurragechargesaretobebornebythe
seller.
UnderDAPterms,allcarriageexpenseswithanyterminalexpensesarepaidbyselleruptotheagreeddestinationpoint.Thenecessary
unloadingcostatfinaldestinationhastobebornebysellerunderDAPterms.Ifunloadingcannotbecarriedoutbytheseller,itmightbebetter
toshipunderDAT(DeliveredAtTerminal)termsinstead.

DDPDeliveredDutyPaid(namedplaceofdestination)
Sellerisresponsiblefordeliveringthegoodstothenamedplaceinthecountryofthebuyer,andpaysallcostsinbringingthegoodstothe
destinationincludingimportdutiesandtaxes.Thesellerisnotresponsibleforunloading.ThistermisoftenusedinplaceofthenonIncoterm
"FreeInStore(FIS)".Thistermplacesthemaximumobligationsonthesellerandminimumobligationsonthebuyer.Noriskorresponsibilityis
transferredtothebuyeruntildeliveryofthegoodsatthenamedplaceofdestination.[7]
ThemostimportantconsiderationforDDPtermsisthatthesellerisresponsibleforclearingthegoodsthroughcustomsinthebuyer'scountry,
includingbothpayingthedutiesandtaxes,andobtainingthenecessaryauthorisationsandregistrationsfromtheauthoritiesinthatcountry.
Unlesstherulesandregulationsinthebuyer'scountryareverywellunderstoodDDPtermscanbeaverybigrisk,bothintermsofdelaysandin
unforeseenextracosts,andshouldbeusedwithcaution.

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

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

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

CFRCostandFreight(namedportofdestination)
Thesellerpaysforthecarriageofthegoodsuptothenamedportofdestination.Risktransferstobuyerwhenthegoodshavebeenloadedon
boardtheshipinthecountryofExport.TheShipperisresponsiblefororigincostsincludingexportclearanceandfreightcostsforcarriageto
namedport.Theshipperisnotresponsiblefordeliverytothefinaldestinationfromtheport(generallythebuyer'sfacilities),orforbuying
insurance.Ifthebuyerdoesrequirethesellertoobtaininsurance,theIncotermCIFshouldbeconsidered.CFRshouldonlybeusedfornon
containerizedseafreightandinlandwaterwaytransportforallothermodesoftransportitshouldbereplacedwithCPT.

CIFCost,Insurance&Freight(namedportofdestination)

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

Allocationsofcoststobuyer/selleraccordingtoIncoterms2010
Incoterm
2010

Carriage
Export
toport
customs
of
declaration
export

Unloading Loadingon Carriage

oftruckin vessel/airplane (Sea/Air)
portof
inportof
toportof
export
export
import

Insurance

Import
Unloading Loadingon Carriage Import
duties
inportof truckinport toplaceof customs
and
import
ofimport destination clearance
taxes

EXW

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

FCA

Seller

Seller

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

FAS

Seller

Seller

Seller

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

FOB

Seller

Seller

Seller

Seller

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

CPT

Seller

Seller

Seller

Seller

Seller

Buyer

Seller

Buyer/Seller

Seller

Buyer

Buyer

CFR(CNF)

Seller

Seller

Seller

Seller

Seller

Buyer

Buyer/Seller

Buyer

Buyer

Buyer

Buyer

CIF

Seller

Seller

Seller

Seller

Seller

Seller

Buyer/Seller

Buyer

Buyer

Buyer

Buyer

CIP

Seller

Seller

Seller

Seller

Seller

Seller

Seller

Buyer/Seller

Seller

Buyer

Buyer

DAT

Seller

Seller

Seller

Seller

Seller

Seller/Buyer

Seller

Buyer

Buyer

Buyer

Buyer

DAP

Seller

Seller

Seller

Seller

Seller

Seller/Buyer

Seller

Seller

Seller

Buyer

Buyer

DDP

Seller

Seller

Seller

Seller

Seller

Seller/Buyer

Seller

Seller

Seller

Seller

Seller

PrevioustermsfromIncoterms2000eliminatedfromIncoterms2010
WhilethesetermsdonotfeatureinthecurrentversionofIncotermsitispossiblethattheymaybeseeninsalesordercontracts.Caremustbe
takentoensurethatbothpartiesagreeontheirobligationsinthiscase.

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

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

DEQDeliveredExQuay(namedportofdelivery)
ThisissimilartoDES,butthepassingofriskdoesnotoccuruntilthegoodshavebeenunloadedattheportofdischarge.

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

Seealso
Commerciallaw
Internationaltrade
Internationaltradelaw
UniformCommercialCode
UnitedNationsConventiononContractsfortheInternationalSaleofGoods
UnitedNationsCodeforTradeandTransportLocations(UN/LOCODE)(http://www.unece.org/cefact/locode/service/location.html)

References
https://en.wikipedia.org/wiki/Incoterms

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

Externallinks
InternationalChamberofCommerceOfficialwebsite(http://www.iccwbo.org/incoterms)
Export.gov:Incoterms(http://export.gov/faq/eg_main_023922.asp)
Retrievedfrom"https://en.wikipedia.org/w/index.php?title=Incoterms&oldid=712484839"
Categories: Commercialitemtransportanddistribution Internationalcommerceterms Internationaltrade
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