Practical Use

Incoterms® 2020 are a set of international trade rules that define the responsibilities and obligations of the seller and the buyer in international commercial transactions.

TERMS FOR EACH TYPE OF TRANSPORT

These rules can be used regardless of the mode of transport chosen and even if more than one mode of transport is used.

EXW – Ex Works
“Ex Works” means that the seller makes delivery by making the goods available to the buyer at his premises or other agreed place (factory, factory, warehouse, etc.). The seller has no obligation to load the goods on the pickup vehicle or to clear them for export, if such customs clearance is provided.
EXW implies the minimum level of obligations for the seller. FCA – Free Carrier
“Free Carrier”: the seller makes delivery by remitting the goods to the carrier or other person designated by the buyer at its premises or other agreed place.
FCA requires the seller, if provided, to clear the goods for export, but not for import into the country of destination, which is the buyer’s obligation as well as the obligation to pay any import duties or to complete any customs formalities upon importation.
FCA requires the buyer, if provided, to instruct the carrier to issue a bill of lading to the seller.
FCA is the recommended term for container delivery. CPT – Carriage Paid To
“Carriage Paid To” means that the seller makes the delivery by remitting the goods to the carrier or other person designated by the seller at an agreed place (if such a place has been agreed upon by the parties) and that the seller must enter into the contract of carriage and bear the expenses involved in sending the goods to the agreed place of destination.
When CPT, CIP, CFR or CIF are used, the seller fulfills his obligation to make delivery when he remits the goods to the carrier and not when the goods arrive at the place of destination. CIP – Carriage And Insurance Paid To
“Carriage and Insurance Paid To”: the seller makes delivery by remitting the goods to the carrier or other person designated by the seller at an agreed place (if such a place has been agreed between the parties). This place is the point at which risk passes to the buyer, although it is the seller’s responsibility to enter into the contract of carriage and to bear the necessary costs of sending the goods to the agreed place of destination.
The seller also provides insurance cover against the buyer’s risk of loss of or damage to the goods during carriage. The buyer should note that under the CIP rule the seller is obliged to obtain insurance coverage covering “all risks” except those explicitly excluded. The parties are, however, free to agree on a different, and therefore less extensive, level of insurance coverage.
CIP requires the seller, if applicable, to clear the goods for export, but not for import into the country of destination, an obligation that falls to the buyer as well as to pay any import duties or complete any customs formalities upon importation.

DPU – Delivered at Place Unloaded
“Delivered at Place Unloaded”: the seller makes delivery by making the unloaded goods available to the buyer at the agreed port or place. Such port or place includes any space, covered or uncovered, such as a dock, warehouse, container yard, road, rail, or airport terminal. The seller bears all risks associated with the transportation and unloading of the goods at the agreed port or place of destination.
DPU requires the seller, if applicable, to clear the goods for export, but not for import into the country of destination, an obligation that rests with the buyer as well as that of paying any import duties or completing any customs formalities upon import. DAP – Delivered At Place
“Delivered at the Place of Destination” means that the seller makes delivery by making the goods available to the buyer on the arriving means of transport ready for unloading at the agreed place of destination. The seller bears all the risks involved in transporting the goods to the agreed place of destination.
If the seller incurs expenses provided for in his contract of carriage relating to unloading at the place of destination, he is not entitled to recover those expenses from the buyer, unless otherwise agreed by the parties.
DAP requires the seller, where appropriate, to clear the goods for export. However, the seller has no obligation to clear the goods for import, pay any import duties, or complete any customs formalities upon import. DDP – Delivered Duty Paid
“Delivered Duty Paid” means that the seller makes delivery by placing the goods at the buyer’s disposal, cleared for import, on the arriving means of transport ready for unloading at the agreed place of destination. The seller bears all the costs and risks involved in transporting the goods to the place of destination and is obligated to clear the goods not only for export but also for import, pay any fees for both export and import, and complete all customs formalities. If the seller incurs expenses provided for in his contract of carriage relating to unloading at the place of destination, he is not entitled to recover such expenses from the buyer, unless otherwise agreed by the parties. VAT or other similar taxes payable on importation shall be borne by the seller unless otherwise explicitly agreed in the sales contract. The DDP carries the maximum level of obligation for the seller.

TERMS FOR TRANSPORTATION BY SEA

The following rules can only be used when transporting by sea or inland waterways.

FAS – Free Alongside Ship
“Free Alongside Ship” means that the seller makes delivery by placing the goods alongside the ship (e.g., on a dock or over a barge) designated by the buyer at the agreed port of embarkation. The risk of loss or damage to the goods passes when the goods are alongside the ship and the buyer bears all costs from that time forward.
The seller must arrange for delivery of the goods alongside the ship or procure the goods already so delivered for shipment. The reference to “procure” here pertains to so-called multiple chain sales.
FAS requires the seller, if applicable, to clear the goods for export. However, the seller has no obligation to clear import goods, pay any import duties, or complete any customs formalities upon importation. FOB – Free On Board
“Free On Board” means that the seller makes delivery by placing the goods on board the buyer’s designated vessel at the named port of embarkation or procuring the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are aboard the ship and the buyer bears all costs from that time forward.
The seller must arrange for delivery of the goods aboard the ship or procure the goods already so delivered for shipment. The reference to “procure” here relates to so-called multiple chain sales.
FOB requires the seller, if applicable, to clear the goods for export. However, the seller has no obligation to clear the goods for import, pay any import duties, or complete any customs formalities upon import. CFR – Cost and Freight
“Cost and Freight” means that the seller makes delivery by placing the goods on board the ship or procuring the goods already so delivered. The risk of loss or damage to the goods passes when the goods are on board the ship. The seller must enter into the contract of carriage and bear the expenses involved in sending the goods to the agreed port of destination.
This rule has two critical points, because the passing of risk and the transfer of expenses occur in different places. While the contract will always specify a port of destination, it may not specify the port of embarkation, where the risk passes to the buyer. If the port of embarkation is of particular interest to the buyer, it is recommended that the parties specify it as clearly as possible in the contract.
If the seller incurs expenses provided for in his contract of carriage relating to unloading at a specific point at the port of destination, he is not entitled to recover those expenses from the buyer, unless the parties agree otherwise. CIF – Cost, Insurance and Freight
“Cost, Insurance and Freight” means that the seller makes delivery by placing the goods on board the ship or procuring the goods already so delivered. The risk of loss or damage to the goods passes when the goods are on board the ship.

The seller must enter into the contract of carriage and bear the necessary costs of sending the goods to the agreed port of destination.
The seller also provides insurance coverage against the buyer’s risk of loss or damage to the goods during transportation. The buyer should note that under the CIF rule the seller is only obligated to obtain minimum insurance coverage. Where the buyer wishes to have broader insurance protection, he will have to agree expressly with the seller or arrange for supplementary insurance directly.
This rule has two critical points, because the passing of risk and the transfer of expenses occur in different places. While the contract will always specify a port of destination, it may not specify the port of embarkation, where the risk passes to the buyer.