Incoterms

International Trade Rules

Purpose of Incoterms:

• Providing rules for interpretation.
  Incoterms provides a set of international rules for interpreting the chief terms used in foreign trade contracts, and for the optional use of businessmen who prefer the certainty of uniform international rules to the uncertainties of different interpretations of the same terms in different countries.
• Keeping pace with trade practices.
  Parties to a contract often are unaware of the differences between trading practices in their respective countries. The existing diversity of interpretation is a constant source of friction in international trade, leading to misunderstandings, disputes and references to the courts with all the waste of time and money that these entail. To help traders overcome this friction, the International Chamber of Commerce first published a set of international rules in 1936 for the interpretation of trade terms — known as Incoterms 1936. Amendments and additions were later made in 1953, 1967, 1976, 1980, 1990 and 2000 to provide an up-to-date set of rules that were broadly in line with current international trade practices.
• Overcoming barriers.
  The chief difficulties faced by importers and exporters are:
  • Uncertainty as to which country’s laws apply to their contracts
  • Difficulties arising from inadequate information
  • Difficulties arising from diversity in interpretation
  • These handicaps to trade can be much reduced by the use of Incoterms.

Distribution of Main Obligations between Seller and Buyer as per Incoterms 2000.

Buyer Fixes Contract of Carriage

EXW - Ex Works

• Delivery:
  • Named Place Seller’s Premises/placed at the disposal of buyer - not loaded onto/into means of transport
• Transfer of Risk & Costs:
  • Place of Delivery

FCA - Free Carrier

• Delivery:
  • Named Place of handing over or placing at the disposal of Carrier
• Transfer of Risk & Costs:
  • Place of Delivery

FAS - Free Alongside Ship

• Delivery:
  • Alongside vessel at named port of shipment/delivery
• Transfer of Risk & Costs:
  • Place of Delivery

FOB - Free on Board

• Delivery:
  • On Board the vessel at named Port of Shipment
• Transfer of Risk & Costs:
  • Passing Ship’s Rail

Seller Fixes Contract of Carriage

CFR - Cost and (C+F) Freight

• Delivery:
  • On Board the vessel at named Port of Shipment
• Transfer of Risk:
  • Passing Ship’s Rail
• Transfer of Costs:
  • Named Port of Destination

CIF - Cost, Insurance and Freight

• Delivery:
  • On Board at named Port of Shipment. Seller arranges insurance (minimum Cover Institute Cargo Clauses or equivalent)
• Transfer of Risk:
  • Passing Ship’s Rail
• Transfer of Costs:
  • Named Port of Destination

CPT - Carriage Paid To

• Delivery:
  • Named Place of handing over or placing at the disposal of the first Carrier
• Transfer of Risk:
  • Place of Delivery
• Transfer of Costs:
  • Named Place of Destination

CIP - Carriage and Insurance

• Delivery:
  • Named Place of handing over or placing at the disposal of the first Carrier. Seller arranges insurance (Minimum Cover Institute Cargo Clauses or equivalent)
• Transfer of Risk:
  • Place of Delivery
• Transfer of Costs:
  • Named Place of Destination

DAF - Delivered at Frontier

• Delivery:
  • Named Place at Frontier before the customs border of the adjoining country; not unloaded
• Transfer of Risk & Costs:
  • Place of Delivery

DES - Delivered Ex Ship

• Delivery:
  • Named Port of Discharge – not unloaded
• Transfer of Risk & Costs:
  • Place of Delivery

DEQ - Delivered Ex Quay

• Delivery:
  • Placed at the Disposal at named Port of Discharge
• Transfer of Risk & Costs:
  • Place of Delivery

DDU - Delivered Duty Unpaid

• Delivery:
  • Placed at the disposal at named Place of Destination – not unloaded
• Transfer of Risk & Costs:
  • Place of Delivery

DDP - Delivered Duty Paid

• Delivery:
  • Placed at the disposal at named Place of Destination – not unloaded
• Transfer of Risk & Costs:
  • Place of Delivery