The Incoterms (International Commercial Terms) are the foundation for international trading. The seller and the buyers make arrangements about the delivery conditions and in this context the Incoterm determines when the costs for transport and the risk of transport are transferred from the seller to the buyer. This concerns the responsibility for loading, transport, customs clearance and insurance. The Incoterms have been internationally established and ensure that each party knows which aspects it is responsible for. Based on these arrangements, parties may be held accountable if a shipment goes wrong. This gives them legal liability in an international context.
An Incoterm only has official validity in combination with a place name. E.g. FOB Rotterdam means that the seller is responsible for delivery up until the shipment arrives at the vessel in Rotterdam, for without this place name it is not clear up to which point the supplier is supposed to deliver.
Below is a short explanation per Incoterm is given, and what it means for both the buying / importing party and for the selling / exporting party.
Explanation: Ex works, or ex-factory, means that the costs and the risk of the transport fall to the buyer entirely. This means that the buying party is responsible for the loading of goods, transportation, customs clearance and the taking out of transport insurance.
In case of import / buying: In case of important subject to EXW you, as an importer/buyer are entirely responsible for the loading of the goods, transportation, customs clearance and insurance.
In case of export / selling: If you are the selling party, you don't have to make any arrangements in case of EXW and you only have to state when the goods are ready. Please note, if the goods leave the EU and the customer requests an invoice with 0% VAT, the selling party must be able to demonstrate that the goods have left the EU. This means that a confirmation of export has to be requested from the buyer.
FCA means that the seller puts the goods in the vehicle of carrier who collects it on behalf of the buyer. All costs and risks are then transferred onto the buyer. FCA is often confused with EXW because the goods are nearly always already being loaded by the seller and EXW does not require this to be the case.
In case of import / buying: In case if import subject to FCA the importer/buyer is entirely responsible for: transportation, customs clearance and insurance, but not for loading.
In case of export / selling: If you are the selling party, you will load the goods into the vehicle of the transporter who comes to collect the goods. After that, you have no further responsibilities. It is important, however, to be able to submit a picture, for example, as evidence that the loading was done correctly.
FAS is only used in case of seafreight, which does not occur frequently. It means that the selling party places the goods alongside the buyer's vessel at the port of shipment before these are loaded. The seller's risk this ends on the quay.
In case of import / buying: The goods are transferred onto you as a buyer/importer alongside the vessel, after which you will be fully responsible for the shipment.
In case of export / selling: As an exporter you will make sure that the goods are placed alongside the vessel. In practice this does not really happen, as the goods are in fact placed on board the vessel, but the responsibility does stop before that happens.
Like FAS, FOB is only used in case of sea freight. It means that the goods are hoisted on board and that the risk and costs fall to the seller up to the point. Also, the customs clearance has to be arranged by the selling party. The transport, inward clearance and insurance fall to the buyer from that point.
In case of import / buying: As an importer you are responsible for the transport from the port of departure. You are also responsible for the insurance and inwards clearance in the country of destination.
In case of export / selling: The exporter delivers the goods to the port of departure, including loading and customs clearance. Then, the risk and costs are transferred to the importer.
CFR in combination with the port of destination means that all costs until the port of destination fall to the seller. Next, the buying party takes over. Local costs, e.g. unloading, fall to the buying party. What is important in case of CFR is that the insurance and the risk are already transferred to the buyer as soon as the goods are loaded onto the ship in the port of departure. The clearance must also be handled by the seller.
In case of import / buying: In case of CFR you, as an importer, may collect the goods in the port of arrival. You are responsible for the insurance from the port of departure and you bear the risk. As an importer you must also pay the local port fees, e.g. for the unloading of the goods. In addition, you will of course be responsible for the subsequent transport and customs clearance of the shipment.
In case of export / selling: For the exporter, CFR goes one step beyond FOB, meaning that the costs of shipment must be paid up until the port of destination. The insurance and the risk do stop at the port of departure. You are also responsible for clearance.
CIF is almost the same as CFR. The only difference is that the costs for insurance up to the port of arrival fall to the selling party.
In case of import / buying: As an importer you take over the costs and the insurance from the moment the goods have arrived at the port of destination. This means that any local port fees, e.g. unloading of goods, still must be paid for, as must any subsequent transport and clearance.
In case of export / selling: CIF is nearly the same thing as CFR, only in case of CIF you, as an exporter, are also responsible for the insurance up to the port of destination.
In case of CPT all costs up to the port/airport have been paid for. The subsequent transport, clearance and insurance fall to the buyer.
In case of import / buying: As an importer/buyer, all costs up to the port/airport as specified in the Incoterm, have been paid, including local costs up to that port/airport. This is, in fact, the difference with CIF, where the local costs are not included.
In case of export / selling: All costs up until the port of destination, including all local costs and the clearance in your own country must be paid by the selling / exporting party.
For CIP the same conditions apply as for CPT only the insurance must be paid by the seller, in this case.
In case of import / buying: In case of CIP the same rules apply as with CPT only here the goods are in fact insured up until the port/airport of destination.
In case of export / selling: In addition to all costs as with CPT the seller here also has to arrange for transport insurance up until the port/airport of destination.
DAT is used often in case of airfreight, where the selling party delivers until the terminal at the airport in the country of destination.
In case of import / buying: The importing party can collect the goods from the terminal at the airport of destination and only needs to arrange for the customs clearance and subsequent transport to the final destination. However, it may be that the airport charges local costs for processing the freight.
In case of export / selling: With DAT the exporting party has to deliver up until the terminal of the airport in the country of destination. Clearance and subsequent transport are not included here.
Delivered at place means that the selling party delivers the goods up to the place that is called following the Incoterm. Usually, this is the receiving address. Customs clearance and duties and taxes do still fall to the buying party.
In case of import / buying: As an importer, you get the goods delivered at the place that is named following the Incoterm. Often this will be your own warehouse. In this case you only need to arrange for customs clearance in collaboration with your Customs Coordinator and pay any import duties and taxes.
In case of export / selling: As an exporter, you deliver up to the place mentioned following the Incoterm including any insurance if this has been agreed. Customs clearance and the costs of import duties and taxes fall to the importer / buyer.
In case of DDP all costs and responsibilities up until the delivery address fall to the selling party.
In case of import / buying: In case of import under the Incoterm DDP the buying party does not have to make any arrangements and only has to sign for receipt.
In case of export / selling: The exporting party has to make all arrangements. From transport, insurance, customs clearance up to payment of duties and taxes.
*Terms only apply to Sea freight.
For your import and export, carefully consider which part of the transaction you want to be responsible for and which part you wish to arrange yourself. Also consider factors such as customer friendliness and service. You may want to sell under the condition EXW, but if your customer has no knowledge of transport, they could just go to the competitor because it does take handle transport.
In practice, that everything is usually outsourced to a carrier whose core business this is. You deliver a packing slip and commercial invoice and they take care of the rest.
Whether you have import of export, Intervracht can handle everything in accordance with the Incoterm you have agreed on with your client. We work in close collaboration with your client's carrier or call on our own office or our own local agent to pick up shipments from your suppliers, for example. Please contact us to discuss your best option.
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