Toolbox

 

Use of the Incoterms

 

INCOTERMS is the contraction of “International Commercial TERMS”. Incoterms determine responsibilities between the vendor and the buyer within the frame of an international selling/purchasing agreement.

They allocate responsibilities but do not say when the transfer of ownership takes place.

Incoterms divide transaction costs and risks between the seller and the buyer.

INCOTERMS : 4 MAIN GROUPS

Group E : EX CN

 

EXW : The seller has fulfilled his delivery obligations once the goods have been made available to the buyer at the seller’s premises (workshop, factory, warehouse …). The buyer incurs all the costs and bears all the risks associated with the transportation of the goods from the seller’s premises until their final destination. This term represents the minimal obligation of the seller.

 

Group F : Free CN

 

FCA : The seller has fulfilled his delivery obligations once the goods have cleared customs and have been transferred to the carrier chosen by the buyer. The buyer chooses the means of transportation and the carrier. He pays for the main freight. The transfer of costs and risks takes place at the time the carrier lifts the goods.

FAS : The seller has fulfilled his delivery obligations once the goods have been placed alongside the ship, on the wharf at the agreed port of sailing. The buyer bears all the costs and risks associated with the potential loss and damage of the goods. FAS term requires the seller to clear the goods through customs for export. 

FOB : The seller has fulfilled his delivery obligations once the goods have been placed on board the ship at the agreed port of sailing. The seller clears the goods through customs for export. The buyer chooses the ship and pays for the sea freight.

Group C : Cost or Carriage CN

 

CFR : The seller chooses the ship and pays for the necessary freight and freight transportation charges until the agreed upon port of sailing. Export formalities are the responsibility of the seller. When the merchandise is delivered to the main carrier, the risk passes from seller to buyer.

CIF : The seller has the same obligations as in CFR but he must, in addition to these obligations, provide maritime insurance against the risk of loss and damage to the goods during transportation. Export formalities are the seller’s responsibility.

CPT : The seller chooses the mode of transportation and pays for the freight until the goods have been transported to the agreed upon destination. He clears the goods through customs for export. When the goods are transferred to the main carrier, the risks are transferred from the seller to the buyer.

CIP : The seller has the same obligations as in CPT, with the additional obligation to provide insurance against the risks of loss or damage to the goods during transportation. The seller clears the goods through customs for export.

Group D : Delivered CN

 

DEQ : The seller fulfills his obligation to deliver when the goods are placed, not cleared for import at the disposal of the buyer on discharged terminal agreed (port, rail, road, ...). The buyer to clear the goods for import. The transfer of costs and risks is made once goods are discharged on agreed terminal.

DAP : The seller delivers the goods, which have not been cleared through customs for import and not unloaded from the transportation vehicle upon arrival, to the buyer, at the agreed upon destination. The buyer is in charge of proceeding to and paying for the customs clearance for import of the goods and paying for the customs duties.

DDP : Is the opposite of the EXW factory term, DDP corresponds to the maximal obligation of the seller. The seller is in charge of everything, including customs clearance and the payment of customs duties. The transfer of costs and risks takes place upon delivery to the buyer’s premises. Unloading is under the responsibility of the buyer who organizes and pays for it.