Incoterms (International Commercial Terms) are international delivery terms accepted by participants in foreign trade activities; they regulate the transfer of risk of loss or destruction of goods and the distribution of the seller’s and buyer’s responsibility for transportation, loading, unloading, insurance, customs clearance, etc.
The Incoterms 2020 rules came into force on January 1, 2020, but you can continue to use the Incoterms 2010 delivery terms. When concluding the contract it is necessary to specify which version of Incoterms will be applied. In the new edition, only one delivery basis has had its name changed: DAT has been renamed to DPU.
EXW
EX Works ( … named place)/EX Works ( … named place)
The seller is obliged to: provide the goods
The buyer is obliged to: perform export and import customs clearance processes and deliver the goods
Transfer of risks: as of when the goods are handed over at the seller’s warehouse
Transportation: any means of transportation
The invoice price includes: only the final cost of the product, excluding export clearance and shipping costs
FCA
Free Carrier (…named place)/Free Carrier (…named place)
The seller is obliged to: perform the export customs clearance process and hand over the goods to the carrier appointed by the buyer
The buyer is obliged to: deliver the goods and perform the import customs clearance process
Transfer of risks: as of when the goods are handed over to the carrier
Transportation: any means of transportation
Following the adoption of the revised Incoterms 2020 rules, the application of the FCA terms of delivery allows the parties to the transaction to agree that the buyer may instruct the carrier to issue a sea bill of lading with the on-board record to the seller. This will allow the latter to fulfill the terms of the open letter of credit in a shorter space of time
The FCA Incoterms 2020 delivery basis has two possible places of dispatch: a place owned by the seller (warehouse, factory or store) and warehouses, terminals and ports outside the sender’s business. In the first case, shipment is deemed to have taken place when the goods are actually placed on the specified means of transport, and in the second case, when the goods are transferred to the carrier directly from the seller’s transport
The invoice price includes: cost of goods, export clearance, payment of export duties
FAS
Free Alongside Ship (… named port of shipment)/Free Alongside Ship (… named port of shipment)
The seller is obliged to: perform the export customs clearance process and place the goods at the port of shipment along the side of the vessel specified by the buyer
The buyer is obliged to: deliver the goods to the port of unloading, as well as perform the import customs clearance process
Transfer of risks: as of when the goods are placed along the side of the vessel
Transportation: sea and inland water transport
The invoice price includes: cost of goods, export clearance, payment of export duties, delivery to the port of shipment, cost of unloading to the berth. Ship loading and freight costs are not included in the price.
Currently rarely used, only when transporting heavy equipment and goods transported in bulk or in containers. Under the terms of FAS, the most important point in the shipment is the presence of the vessel at the port berth, in its absence, the goods cannot just be left. In this case, the terms will not be fulfilled, and the shipment will not be recognized as completed.
FОВ
Free On Board (… named port of shipment)/Free On Board (… named port of shipment)
The seller is obliged to: perform the export customs clearance process and place the goods at the port of shipment on board the vessel specified by the buyer
The buyer is obliged to: deliver the goods to the port of unloading, as well as perform the import customs clearance process
Transfer of risks: at the port once the goods are fully loaded on board the ship
Transportation: sea and inland water transport
The invoice price includes: cost of goods, export clearance, payment of export duties, delivery to the port of shipment and the cost of loading onto the ship. Freight costs are not included in the price
СFR
Cost and Freight (… named port of destination)/Cost and Freight (… named port of destination)
The seller is obliged to: perform the export customs clearance process, load the goods on board the vessel and deliver them to the port of unloading
The buyer is obliged to: accept the goods at the port of unloading, as well as perform the import customs clearance process
Transfer of risks: at the port of shipment once the goods are fully loaded on board the ship
Transportation: sea and inland water transport
The invoice price includes: cost of goods, export clearance, payment of export duties, delivery to the port of shipment, loading and freight costs. Unloading at the port of destination is not included
СIF
Cost, Insurance and Freight (… named port of destination)/Cost, Insurance and Freight (… named port of destination)
The seller is obliged to: perform services for export customs clearance, insure the goods, load the goods on board the vessel and deliver them to the port of unloading
The buyer is obliged to: accept the goods at the port of unloading, as well as perform the import customs clearance process
Transfer of risks: at the port of shipment once the goods are fully loaded on board the ship
Transportation: sea and inland water transport
The invoice price includes: cost of goods, export clearance, payment of export duties, insurance of goods, delivery to the port of shipment, loading and freight costs. Unloading at the port of destination is not included
СIP
Carriage and Insurance Paid to)/Carriage and Insurance Paid to
The seller is obliged to: Perform services for export customs clearance, insure and deliver the cargo to the agreed destination
The buyer is obliged to: receive the goods and complete the import customs clearance process
Transfer of risks: at the moment of transfer to the carrier at the seller’s warehouse
Transportation: any means of transportation
The invoice price includes: the cost of goods, export clearance, payment of export duties, delivery to destination and insurance costs. Unloading cost is not included
СPT
Carriage Paid To (… named place of destination)/Carriage Paid To (… named place of destination)
The seller is obliged to: Perform services for export customs clearance, insure and deliver the cargo to the agreed destination
The buyer is obliged to: receive the goods and complete the import customs clearance process
Transfer of risks: at the moment of transfer to the carrier at the seller’s warehouse
Transportation: any means of transportation
The invoice price includes: cost of goods, export clearance, payment of export duties, delivery to the destination. Unloading cost is not included
DAP
Delivered At Point (… named point of destination)/Delivered At Point (… named point of destination)
The seller is obliged to: perform the export customs clearance process and deliver the cargo to the agreed destination
The buyer is obliged to: receive the goods and complete the import customs clearance process
Transfer of risks: at destination
Transportation: any means of transportation
The invoice price includes: сcost of goods, export clearance, payment of export duties, delivery to the destination. Unloading cost is not included
In the foreign trade contract, it is important to specify the possible situation where the goods cannot be transferred due to delays in import customs clearance, which lies within the responsibility of the buyer. If customs clearance is not possible within the time limit established in the contract, the risk of loss and damage to the product must be transferred to the buyer.
The main difference between CPT and DAP terms is in the moment of risk transfer from one party to the other. In the first case, the risk is transferred to the buyer after the carrier receives the goods from the seller. In the second case, the buyer assumes all risks only after the seller has delivered the goods to the place agreed upon by the parties
DAT (Incoterms 2010)
Delivered At Terminal (… named terminal of destination)/Delivered At Terminal (… named terminal of destination)
The seller is obliged to: Perform the export customs clearance process and deliver the cargo to the terminal
The buyer is obliged to: receive the goods and complete the import customs clearance process
Transfer of risks: at the terminal
Transportation: any means of transportation
The invoice price includes: cost of goods, export clearance, payment of export duties, delivery to the destination, unloading at the terminal
DPU (Incoterms 2020)
«Delivered Named Place Unloaded» named place of destination ‘Delivered Named Place Unloaded’ named place of destination
The seller is obliged to: perform export customs clearance processes, deliver the goods to their destination and unload them
The buyer is obliged to: receive the goods and complete the import customs clearance process
Transfer of risks: at the destination after full unloading
Transportation: any means of transportation
The invoice price includes: cost of goods, export clearance, payment of export duties, delivery to the destination and unloading
The DPU delivery term is the ‘youngest’ Incoterm and first appears in the latest version of Incoterms 2020, replacing the conditions of DAT (which assumed delivery to the terminal only, not to any place as is the case for DPU)
DDP
Delivered Duty Paid (… named place of destination)/Delivered Duty Paid (… named place of destination)
The seller is obliged to: perform the export customs clearance process, deliver the cargo to the agreed destination and perform the import customs clearance process with payment of duties
The buyer is obliged to: accept the goods
Transfer of risks: at destination
Transportation: any means of transportation
The invoice price includes: cost of goods, customs clearance, payment of all duties and taxes, costs of delivery of goods to the destination point