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Incoterms is a widely recognized set of international rules of purchase and sale conditions. Published in 1936, the rules constitute a set of 11 rules defining who is responsible for what in international transactions. They set out the scope of all activities, risks and costs of transactions between the seller and the buyer. Currently, the version applicable of Incoterms® is the 2020.

Set of incoterms 2020 rules:

  • EXW(EX Works),
  • FCA(Free Carrier),
  • CPT (Carriage Paid To),
  • CIP(Carriage and Insurance Paid To),
  • DPU(Delivered at Place Unloaded),
  • DAP(Delivered at Place),
  • DDP(Delivered Duty Paid),
  • FAS(Free Alongside Ship),
  • FOB(Free On Board),
  • CFR (Cost and Freight),
  • CIF(Cost Insurance and Freight).

EXW:

This rule represents the minimum obligation for the seller and maximum obligations for the buyer. It is the buyer who bears all the costs and organizes the transport. The risks are transferred to the buyer when the goods have been made available at the seller’s warehouse.

Seller:

– placing goods at the buyer’s disposal at a time and place agreed,
– issuing and sending commercial invoices,
– notifying the buyer of the time and place of the goods placed at their disposal,
– quality control, measurement, weighing and counting,
– packing and marking the goods.

Buyer:

– collecting the goods once they are delivered by the seller (at a time and place agreed),
– the risk of loss or damage to the goods and additional costs incurred upon the delivery of the goods by the seller,
– purchasing the goods,
– handling license and customs formalities in the country of import, export and transit,
– additional costs linked to the failure to collect the goods,
– customs duties, taxes and other fees.

FCA:

The seller delivers the goods to the first carrier nominated by the buyer at a designated place and bears the cost of the delivery of goods to the designated place. The goods are cleared for export. The risk is passed on upon the goods handover by the nominated carrier.

Buyer:

– purchasing goods,
– loading at the port of destination and unloading at the home port,
– freight,
– notifying the seller of the time and place of delivery of goods to the carrier,
– costs from the moment of placing the goods at the carrier’s disposal (customs, tax, customs formalities, insurance and other fees)
– costs resulting from failing to nominate a carrier or collect the goods thereby,
– costs of pre-shipment inspection of goods,
– costs of obtaining documents required for import or transit of goods.

Seller:

– costs of delivery of goods to a carrier nominated by the buyer,
– costs of issuing and sending commercial invoices,
– costs of obtaining export license, authorizations, costs of tax, customs and other official export related fees,
– costs of notifying the buyer that the goods have been delivered to the carrier or not collected thereby at the time agreed,
– costs of providing proof of delivery of goods,
– costs of quality control, measurement, weighing and counting,
– costs of packing and marking required for shipment.

CPT:

The seller delivers the goods to a nominated carrier and bears the costs of transport to the designated place of destination. The buyer bears the costs upon goods delivery to the designated place of destination. However, the risk is passed on to the buyer upon the goods handover to the first carrier.

Seller:

– delivering goods to the carrier,
– issuing and sending commercial invoices,
– obtaining export license, permits,
– costs of tax, customs and other official export-related fees, costs of export formalities
– notifying the buyer that the goods have been delivered and entrusted to the carrier,
– contracting for carriage, freight, loading the goods and fees for unloading at the place of destination,
– providing the transport document,
– quality control, measurement, weighing and counting,
– costs of packing and marking required for shipment.

Buyer:

– purchasing goods,
– notifying the seller of the time of shipping and place of destination,
– obtaining the export license, authorizations, customs formalities,
– customs fees, taxes and other transit and import related fees,
– pre-shipment inspection of goods,
– obtaining documents required for import or transit of goods.

CIP:

Goods are deemed to be delivered upon their delivery to the first carrier, however all the transport services and insurance are to be paid by the seller. Comparing to CPT formula, the scope of seller’s duties is extended to the duty of contracting for insurance and bearing the cost connected with it. The risk is passed on upon the goods handover by the nominated carrier.

Seller:

– delivering goods to the carrier,
– issuing and sending commercial invoices,
– obtaining export license, authorizations, costs of tax, customs and other official export-related fees,
– contracting for the shipment of goods to the place of destination and insurance,
– unloading at the place of destination
– notifying the buyer that the goods have been delivered to the carrier,
– providing the transport document,
– quality control, measurement, weighing and counting,
– costs of packing and marking.

Buyer:

– purchasing goods,
– notifying the seller of the time of shipping and place of destination,
– obtaining the export license, authorizations, customs formalities,- costs related to goods not included in the freight upon their delivery onboard
– pre-shipment inspection of goods,
– cost of obtaining documents required for import of goods.

DPU:

The seller is liable for the goods until they are unloaded and assumes all risks regarding the export of goods and their delivery to the agreed place of destination. The seller delivers the goods while the risk is passed to the buyer. DPU is the only Incoterms rule which requires the seller to unload the goods at the place of delivery.

Seller:

– delivering goods along with the commercial invoice as stipulated by the contract of sale and other related documents,
– unloading goods,
– making available to the buyer all documents necessary to take over the goods at their cost,
– packing and marking the goods,
– notifying the buyer of all matters related to the collection of goods,
-unloading goods at the place of delivery.

Buyer:

– paying for and managing customs clearance,
– notifying of all transport-related requirements, vessel’s name, loading point and feasible delivery date at the time frame set forth in the contract.

DAP:

The seller covers all fees related to the delivery of goods to the designated place of destination apart from import fees and assumes all risks until the goods are ready for unloading by the buyer.

Seller:

– provides a commercial invoice and other required documents,
– delivers goods ready for unloading at the time and place agreed,
– bears liability for any loss or damage to the goods,
– contracts for transport of goods or organizes it at the designated place at their cost,
– manages and covers costs of all export and transit clearance, assists the buyer in import clearance,
– weighs, counts and packs goods,
– provides the buyer with the documents authorizing them to take over the goods,
–  the seller is not required to contract for insurance.

Buyer:

– pays the price for goods as per the contract of sale,
– takes delivery of goods,
– accepts documents provided by the seller (to collect the goods),
– assumes liability for any loss or damage to the goods following their delivery,
– manages import clearance, bears its cost as well as assists the seller in export clearance,
– notifies the seller of the designated port / delivery place, means of transport and delivery date,
– is not obligated to contract for insurance but, at the seller’s request, must provide information for such purpose.

DDP:

The rule places the greatest responsibility on the seller. It sets out the terms of delivery the cost and all risks thereof are borne by the seller. The seller also covers all customs fees and taxes including the ones arising in the buyer’s country.

Seller:

– delivers goods and all necessary documents to the agreed by both parties place of destination within the designated period of time,
– packs and marks goods accordingly,
– provides the buyer with all information/documents required to enable the buyer to take over the goods.

Buyer:

– collects the goods,
– is not obligated to contracts for insurance but must provide the seller with the information needed to obtain insurance,
– is obligated to assist the seller in obtaining the documents regarding import, export and transit,
– should both parties agree that the buyer is obligated to determine the time and place of delivery, they must notify the seller in good time.

FAS:

Responsibility for the delivery of the seller ends upon placing  the goods alongside the vessel at the designated port of shipment. The seller is liable for performing all formalities related to the carriage.  As of this date, all costs and risks regarding the goods are passed on to the buyer. The term should be used only with reference to sea transport.

Seller:

– delivers the goods along with the commercial invoice pursuant to the contract of sale and other related documents,
– delivers the goods alongside the vessel within priorly specified time limit and at the port named by the buyer.
– notifies the buyer that the goods have been delivered,
– provides proof of delivery of goods to the buyer at their own cost,
– assists the buyer, risk and expense, in obtaining documents required for import and transit,
– packs and marks the goods,
– adheres to all the transport-related requirements until the delivery of the goods to the buyer.

Buyer:

– contracts for carriage from the designated port of the vessel,
– assists the seller, risk and expense, in obtaining documents required for export,
– must notify the seller of any transport-related security requirements, vessel’s name, loading point and possible delivery date at a time specified in the contract.

FOB:

The responsibility for the delivery of the seller ends when the goods are loaded on board the vessel. Before this time, the seller bears all costs of loading and the risks. The seller must perform the formalities concerning the export. The term should be used only with reference to sea transport. When not applicable to sea transport, parties should use FCA.

Seller:

– provides both the goods and the invoice,
– assists in obtaining a transport document,
– nominates a person responsible for loading the goods to the buyer’s vehicle,
– is liable for preparing the goods for load,
– prepares the goods for export and bears the risks and costs connected with it.

Buyer:

– formalities related to import of goods and their transport,
– risk of loss or damage to the goods,
– contracting for carriage,
– transit formalities and preparing goods for import,
– arranging for transportation,
– picking up the delivery at a time specified in the contract.

CFR:

The delivery is deemed to be completed upon unloading of goods on the carrier’s ship named by the seller. The seller bears the cost of the delivery and freight to the designated place, the risk of loss or damage as well as any additional costs that may arise. Following the delivery, the risks are passed on to the buyer. The seller must perform formalities connected with the export. CFR should be used only with reference to sea transport.

Seller bears the following costs:

– loading at the place of departure,
– customs duties in the country where the transport starts,
– transport of the goods to the port,
– port fees in the port of departure,
– tax in the country where the product was manufactured,
– packing of goods,
– quality control, weighing, measuring and counting of goods,
– providing a transport document issued to the port of destination of the cargo and its electronic copy,
– risk until the goods are loaded on board of the vessel.

Buyer bears the following costs:

– fees in the home port,
– insurance during the transport,
– transport from the home port to the head office,
– unloading in the home port,
– customs duties in the country of destination,
– taxes in the country of destination,
– notification of the seller of the required shipping date of goods and the port of destination,
– obtaining import license required for transactions and costs of customs and import related activities,
– pre-shipment inspection of goods provided that it is not required in the country where the transport started.

CIF:

The delivery is deemed to be completed upon unloading of goods on board of the ship. The seller bears the cost of delivery and freight to the designated place of destination. The risk of loss or damage as under CFR. The seller is also liable for contracting and paying for the insurance of the goods against risk loss/damage for the buyer. The seller must perform formalities related to export. CIF should be used only with reference to sea transport.

Seller:

– is obligated to contract for carriage to the designated port of carriage at their cost,
– contracts for freight and pays therefor,
– is liable for loading the goods on board,
– is obligated to contract for insurance and deliver it to the buyer,
– is liable for managing export clearance and bearing its costs.

Buyer:

– is liable for any damage to the goods and theft when the loading of cargo on the ship has been completed,
– is obligated to bear the costs required to obtain the certificate of origin, consular documents and import customs duties,
– notifies the seller of the designated port, vessel’s name and delivery date,
– organizes import clearance and bears related costs,
– obtains documents or electronic transmissions which the buyer needs for import or transit of the goods.

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