The Incoterms


INCOTERMS is an abbreviation of International Commercial Terms, which were first published in 1936 by the International Chamber of Commerce (ICC) of Paris, France. With later publications in 1953, 1967, 1976, 1980, 1990 and 2000. Soon, the last version 2010. (1)(2)

They define exactly the responsibilities and risks of both the buyer and seller including while the merchandise is in transit.

The basic purpose of each INCOTERM is to clarify how functions, costs and risks are split between the buyer and seller in connection with the delivery of the goods as required by the sales contract. Delivery, risks and costs are known as the critical points. Each term clearly specifies the responsibilities of the seller and the buyer. The terms range from a situation in which everything is fundamentally the responsibility of the buyer to the other extreme where everything is fundamentally the responsibility of the seller.

The goal of the INCOTERMS is to reduce confusion over interpretations of shipping terms, by outlining exactly who is obligated to take control of and/or insure goods at a particular point in the shipping process.

The ICC has designed the names of the Incoterms so that they can be usefully grouped by their first letter:

E - EXW
It requires the buyer to take the delivery of goods at Seller’s facility.

F - FCA, FAS y FOB
This group requires the Seller to deliver the goods to a specific location for shipment

C - CFR, CIF, CPT y CIP
This group requires the Seller to contract for carriage of the goods but the risk of loss or damage to the goods, or additional costs caused by events in transit are borne by the Buyer.

D - DAF, DES, DEQ, DDU y DDP
This group requires the Seller to deliver the goods at a specific destination. Thus, the risks of loss or damage remain with the Seller until delivery is effected at the named destination.


Description





EXW (EX WORKS) (... named place)
Title and risk pass to buyer including payment of all transportation and insurance cost from the seller's door. Used for any mode of transportation.






FCA (FREE CARRIER) (... named place)
Title and risk pass to buyer including transportation and insurance cost when the seller delivers goods cleared for export to the carrier. Seller is obligated to load the goods on the Buyer's collecting vehicle; it is the Buyer's obligation to receive the Seller's arriving vehicle unloaded. This term can be used for any mode of transport.






FAS (FREE ALONGSIDE SHIP) (... named port of shipment)
Title and risk pass to buyer including payment of all transportation and insurance cost once delivered alongside ship by the seller. Used for sea or inland waterway transportation. The export clearance obligation rests with the seller.






FOB (FREE ON BOARD) (... named port of shipment)
Free On Board and risk pass to buyer including payment of all transportation and insurance cost once delivered on board the ship by the seller. Used for sea or inland waterway transportation.






CFR (COST AND FREIGHT) (... named port of destination)
Title, risk and insurance cost pass to buyer when delivered on board the ship by seller who pays the transportation cost to the destination port. Used for sea or inland waterway transportation.






CIF (COST, INSURANCE AND FREIGHT) (... named port of destination)
Title and risk pass to buyer when delivered on board the ship by seller who pays transportation and insurance cost to destination port. Used for sea or inland waterway transportation.






CPT (CARRIAGE PAID TO) (... named place of destination)
The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier. Used for any mode of transportation.






CIP (CARRIAGE, INSURANCE PAID TO) (... named place of destination)
The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier. Used for any mode of transportation.






DAF (DELIVERED AT FRONTIER) (... named place at frontier)
The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier. Used for any mode of transportation since 2000.






DDP (DELIVERED DUTY PAID) (... named place of destination)
This term means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty.






DDU (DELIVERED DUTY UNPAID) (... named place of destination)
This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination.






DES (DELIVERED EX SHIP) (... named port of destination)
Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also risk and title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals and where the seller either owns or has chartered, their own vessel.






DEQ (DELIVERED EX QUAY) (... named port of destination)
This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination.


Bibliography

- Commerce International. Ed. Foucher.
- Les Clés à l'Export. Ed. SEFI.
- fr.wikipedia.org - Les Incoterms
- en.wikipedia.org - The Incoterms
- es.wikipedia.org - Los Incoterms
- classe-export.com - Incoterms 2010 (1)
- cadre-export.fr - Los Incoterms 2010 (2)
- iccwbo.org - Chambre de Commerce Internationale (ICC)




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