Incoterms 2000 (INternational COmmercial TERMS)

Incoterms 2000 are divided into four basic groups :

Trade Terms defined by Incoterms:

E-terms

EXW- Ex Works

F-terms

FCA- Free Carrier 

FAS- Free Alongside Ship 

FOB- Free On Board

C-terms

CFR- Cost and Freight 

CIF- Cost, Insurance and Freight 

CPT- Carriage Paid To 

CIP- Carriage and Insurance Paid To

D-terms 

DAF- Delivered At Frontier 

DES- Delivered Ex Ship 

DEQ- Delivered Ex Quay 

DDU- Delivered Duty Unpaid 

DDP- Delivered Duty Paid 

 
Incoterms 2000 CFR, "mirrored" correlative obligations of buyer and seller.
Grouped under the following 10 heads. 
Under Incoterms 2000 all obligations related to a given trade term are grouped under 10 headings, with the obligations for the seller and buyer under each heading stated and mirrored with respect to the same subject matter.
A The Seller Must B The Buyer Must
A1 Provision of Goods in Conformity with the Contract B1  Payment of the Price
A2  Licences, Authorisations and Formalities B2  Licences, Authorisations and Formalities
A3  Contract of Carriage and Insurance

(a) Contract of carriage 

(b) Contract of insurance 

B3  Contract of Carriage
A4  Delivery B4  Taking Delivery
A5  Transfer of Risks B5  Transfer of Risks
A6  Division of Costs B6  Division of Costs
A7  Notice to the Buyer B7  Notice to the Seller
A8  Proof of Delivery, Transport Document or Equivalent Electronic Message B8  Proof of Delivery, Transport Document or Equivalent Electronic Message
A9  Checking - Packaging - Marking B9  Inspection of Goods
A10  Other Obligations B10  Other Obligations
 
The 13 Incoterms, 

The 13 terms are grouped into four basically different categories:

Group E: Departure term.

Where the seller makes the goods available to the buyer at the seller's own premises, (EXW). 

Group F: Shipment terms - Main carriage unpaid.

Where the seller is called on to deliver the goods to a carrier named by the buyer, (FCAFAS and FOB). These are shipment contracts with the shipment point named, and carriage unpaid by the seller.

Group C: Shipment terms - Main carriage paid.

Where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch, (CFRCIFCPT and CIP). These are shipment contracts with the destination point named, and carriage paid by the seller. There are two critical division points, one for the division of costs, the other for the division of risk. Costs being assumed by the seller until the destination point; risk being transferred to the buyer at the point of shipment. CIF and CIP are the only Incoterms related directly to insurance cover. In these the seller arranges the contract of carriage and payment of freight and is regarded as being in a better position than the buyer to arrange insurance.

 
Mode of Transport and the Appropriate Incoterm 2000

Suitable for Any Mode of Transport including Multimodal:

EXW- Ex Works ( ... named place ) 

FCA- Free Carrier ( ... named place ) 

CPT- Carriage Paid To ( ... named place of destination ) 

CIP- Carriage and Insurance Paid To ( ... named place of destination ) 

DAF- Delivered At Frontier ( ... named place of destination ) 

DDU- Delivered Duty Unpaid ( ... named place of destination ) 

DDP- Delivered Duty Paid ( ... named place of destination )

Suitable for Air Transport:

FCA- Free Carrier ( ... named place )

Suitable for Rail Transport:

FCA - Free Carrier ( ... named place )

Suitable for Sea and Inland Waterway Transport:

FAS- Free Alongside Ship ( ... named port of shipment )

FOB- Free On Board ( ... named port of shipment )

CFR- Cost and Freight ( ... named port of destination )

CIF- Cost, Insurance and Freight ( ... named port of destination )

DES- Delivered Ex Ship ( ... named port of destination )

DEQ- Delivered Ex Quay ( ... named port of destination )

 
EXW - EX WORKS (... named place)

"Ex works" means that the seller delivers when he places the goods at the disposal of the buyer at the seller's premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle.

This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller's premises. 

However, if the parties wish  the seller to be responsible for the loading of the goods on departure and the bear the risk and all the costs of such loading, this should be made clear by adding explicit wording to this effect in the contract of sales. This term should not be used when the buyer cannot carry out the export formalities directly or indirectly. In such circumstances, the FCA term should be used, provided the seller agrees that he will load at his cost and risk.

FCA - FREE CARRIER (... named place)

"Free Carrier" means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery accurst at the seller's premises, the seller is responsible for loading. If delivery accurst at any other place, the seller is not responsible for unloading.

This term may be used irrespective of the mode of transport, including multimodal transport.

"Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes. 

If the buyer nominates a person other than a carrier to receive the goods, the seller is deemed to have fulfilled his obligation to deliver the goods when they are delivered to that person. 

FAS - FREE ALONGSIDE SHIP (... named port of shipment)

"Free Alongside Ship" means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of losse of or damage to the goods from that moment.

The FAS term requires the seller to clear the goods for export.

This is a reversal from previous Incoterms versions which required the buyer to arrange for export clearance.

However, if the parties wish the buyer to clear the goods for export, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term can only be used only for sea or inland waterway transport.

FOB - FREE ON BOARD (... named port of shipment)

"Free on Board" means that the seller delivers when the goods pass the ship's rail at the named port of shipment. this means that the buyer has to bear all costs and risk of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship's rail, the FCA term should be used.

CFR - COST AND FREIGHT (... named port of destination)

"Cost and Freight" means that the seller delivers when the goods pass the ship's rail in the port of shipment.

The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT risk of loss of or damage to the goods, as well as any additional costs due to events occuring after the time of delivery, are transferred from the seller to the buyer.

The CFR term requires the seller to clear the goods for export.

This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship's rail, the CPT term should be used.

CIF - COST, INSURANCE AND FREIGHT (... named port of destination)

"Cost, Insurance and Freight" means that the seller delivers when the goods pass the ship's rail in the port of shipment.

The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occuring after the time of delivery, are transferred from the seller to the buyer. However, in CIF the seller also has to procure marine insurance against the buyer's risk of loss of or damage to the goods during carriage.

Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that under the CIF term  the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements.

The CIF term requires the seller to clear the goods for ecport.

The term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship's rail, the CIP term should be used.

CPT - CARRIAGE PAID TO (... named place of destination)

"Carriage paid to... " means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any other costs occuring after the goods have been so delivered.

"Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of' transport, by rail, road, air, sea, inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier.

The CPT term requires the seller to clear the goods for export.

This term may be used irrespective of the mode of transport including multimodal transport. 

CIP - CARRIAGE AND INSURANCE PAID TO (... named place of destination)

"Carriage and insurance paid to..." means that the seller delivers the goods to the carrier nominated by him, but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any other costs occuring after the goods have been so delivered. However, in CIP the seller also has to produce insurance against the buyer's risk of loss of or damage to the goods during the carriage.

Consequently, the seller contracts for insurance and pays the insurance premium. 

The buyer should note that under the CIP term the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements.

"Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of' transport, by rail, road, air, sea, inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier.

The CIP term requires the seller to clear the goods for export. 

This term may be used irrespective of the mode of transport,   including multimodal transport

DAF - DELIVERED AT FRONTIER (... named place)

"Delivered at Frontier" means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country. The term "frontier" may be used for any frontier including that of the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term. 

However, if the parties wish the seller to be responsible for the unloading of the goods from the arriving means of transport and to bear the risks and costs of unloading, this should be made clear by adding explicit wording to this effect in the contract of sales.

This term may be used irrespective of the mode of transport when goods are to be delivered at a land frontier. When delivery is to take place in the port of destination, on board a vessel or on a quay (wharf), the DES or DEQ terms should be used.

DES - DELIVERED EX SHIP (... named port of destination)

"Ex Ship" means that the seller delivers when the goods are placed at the disposal of the buyer on board the ship not cleared for import at the named port of destination. The seller has to bear all the costs and risk involved in bringing the goods to the named port of destination before discharging. If the parties wish the seller to bear the costs and risk of discharging the goods, then the DEQ term should be used.

This term can be used only when goods are to be delivered by sea or inland waterway or multimodal transport on a vessel in the port of destination.

DEQ - DELIVERED EX QUAY (DUTY PAID) (... named port of destination)

"Delivered Ex Quay " means that the seller delivers when the goods are placed at the disposal of the buyer  not cleared for import on the quay (wharf)  at the named port of destination. The seller has to bear costs and risks involved in bringing the goods to the named port of destination and discharing the goods on the quay (wharf). The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import.

This is a very reversal from previous Incoterms versions which required the seller to arrange for import clearance.

If the parties wish to include in the seller's obligations all or part of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term can be used only when goods are to be delivered by sea or inland waterway or multimodal transport on discharging from a vessel onto the quay (wharf) in the port of destination. However if the parties wish to include in the seller's obligations the risks and costs of the handling of the goods from the quay to another place (warehouse, terminal, transport station, etc.) in or outside the port, the DDU or DDP terms should be used.

DDU - DELIVERED DUTY UNPAID (... named place of destination)

"Delivered duty unpaid" means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto, other than, where applicable, any "duty" (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Such "duty" has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time.

However, if the parties wish the seller to carry out customs formalities and bear the costs and risks resulting therefrom as well as some of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sale.

This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or the quay (wharf), the DES or DEQ terms should be used.

DDP - DELIVERED Duty PAID (... named place of destination)

"Delivered duty paid" means that the seller delivers the goods to the buyer, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable, any "duty" (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination.

Whilst the EXW terms represents the minimum obligation for the seller, DDP represents the maximum obligation.

This term should not be used if the seller is unable directly or indirectly to obtain the import licence.

However, if the parties wish to exclude from the seller's obligations some of the costs payable upon import of goods (such as value-added tax : VAT), this should be made clear by adding explicit wording to this effect in the contract of sale.

If the parties wish the buyer to bear all risks and costs of the import, the DDU term should be used.

This term may be used irrespective of the mode of transport but when delivery is to take place in the port of destination on board the vessel or the quay (wharf), the DES or DEQ terms should be used.


 

© Tous droits réservés 2002 Bernard BOUCHET