Incoterms: which one to choose?
INCOTERMS are a set of standard three-letter trade terms that are most commonly used in international contracts for the sale of goods . It is essential that you know your trade terms.
INCOTERMS MULTIMODAL TRANSPORT 2020
Applicable to all modes of transport, they can also be used when the contract involves several modes, which is particularly the case when goods are transported by container.
EXW : EX Works (at the factory)
The seller shall make the goods available at a designated location, which may or may not be the seller’s premises.
The seller shall not be responsible for loading the goods for collection or for customs clearance for export.
The buyer shall bear all costs and risks associated with transport.
FCA : Free Carrier
The seller delivers the goods cleared through customs and loaded to the carrier specified by the customer.
The location may be the supplier’s warehouse, but it may also be a delivery point where the buyer can take delivery.
Regardless of the chosen delivery location, this location determines where the risk is transferred to the buyer and when the costs become the responsibility of the buyer.
CPT – Carriage Paid
The seller delivers the goods and transfers the risk to the buyer by handing them over to the carrier chosen by the seller or by delivering them by his own means. The seller must hand over the goods to the carrier at the agreed place and by the most appropriate means of transport. Once the goods have been delivered to the buyer, the seller is no longer responsible for the integrity of the goods and the smooth running of the transport. This is due to the transfer of risk from the seller to the buyer; the goods are delivered to the buyer when they are handed over to the carrier. The seller must nevertheless deliver the goods to the agreed place of collection.
CIP – Carriage and Insurance Paid to
The seller delivers the goods and transfers the risk to the buyer by handing them over to the carrier chosen by the seller or by delivering them by his own means. The seller must hand over the goods to the carrier at the agreed place and by the most appropriate means of transport. Once the goods have been delivered to the buyer, the seller is no longer responsible for the integrity of the goods and the smooth running of the transport. This is due to the transfer of risk from the seller to the buyer; the goods are delivered to the buyer when they are handed over to the carrier. The seller must nevertheless deliver the goods to the agreed place of delivery. Unlike CPT, the seller must take out insurance covering the risks associated with the transport of the goods to the place of destination.
DAP – Delivered At Place
The seller delivers the goods and transfers the risks to the buyer when the goods are made available to the buyer on the means of transport used. The goods are ready for unloading at the designated destination. The seller bears all risks associated with transporting the goods to the agreed destination. In this Incoterms rule, the places of delivery and final destination are the same.
DPU – Delivered at Place Unloaded
The seller delivers the goods and transfers the risks to the buyer when the goods, once unloaded from the means of transport, are made available to the buyer at an agreed destination. The seller bears all risks associated with the carriage of the goods and their unloading at the agreed destination. In this Incoterms rule, the places of delivery and final destination are the same. The DPU rule is the only Incoterms rule that requires the seller to unload the goods at the destination. The seller must therefore ensure that they are able to arrange for unloading at the specified location. If the parties do not want the seller to bear the risks and costs of unloading, the DPU rule should be avoided and the DAP rule should be used instead.
DDP – Delivered Duty Paid
The seller delivers the goods to the buyer when the goods are made available to the buyer, cleared through customs and on the means of transport used, ready to be unloaded at the designated place of destination. The seller bears all risks associated with transporting the goods to the agreed place of destination. In this Incoterms® rule, the places of delivery and final destination are the same.
MARITIME OR INLAND WATERWAY INCOTERMS
Maritime Incoterms are reserved for the transport of bulk goods and conventional maritime transport, with container transport being specifically governed by multimodal Incoterms.
FAS – Free Alongside Ship
The seller delivers the goods to the buyer alongside the vessel (on a quay or barge) designated by the buyer at the agreed port of departure. Once the goods are alongside the vessel, the risk of loss or damage, as well as the costs, are borne by the buyer.
FOB – Free On Board
The seller delivers the goods to the buyer on board the ship and at the port of departure selected by the buyer. Once the goods are on board the ship, the risk of loss, damage and costs are borne by the buyer.
CFR – Cost and Freight
The seller delivers the goods to the buyer on board the ship at the port of destination. The risk of loss or damage to the goods is transferred when they are on board the ship, so that the seller fulfils their obligation as soon as the goods arrive at their destination in good condition and in the specified quantity. For CFR, the seller has no obligation to the buyer to take out insurance: it is advisable for the buyer to take out insurance themselves.
CIF – Cost Insurance and Freight
The seller delivers the goods to the buyer on board the ship at the port of destination. The risk of loss or damage to the goods is transferred when they are on board the ship, so that the seller fulfils their obligation as soon as the goods arrive at their destination in good condition and in the specified quantity.